<PAGE> 1
REGISTRATION NO. 333-40421
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FORD CREDIT AUTO RECEIVABLES TWO L.P.
(Originator of the Trusts described herein)
(Exact Name of Registrant as Specified in Its Charter)
A Delaware Limited Partnership
IRS EMPLOYER NUMBER: 38-3295857
THE AMERICAN ROAD
DEARBORN, MICHIGAN 48121
(313) 322-3000
------------------------
R.P. CONRAD, ESQ.
FORD MOTOR CREDIT COMPANY
THE AMERICAN ROAD
DEARBORN, MICHIGAN 48121
(313) 594-7765
(Name and Address of Agent for Service)
COPY TO:
SUSAN M. CURTIS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE AGGREGATE PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Securities........... $6,800,000,000 100% $6,800,000,000 $2,006,000
- ------------------------------------------------------------------------------------------------------------------------------
Intermediary Trust Certificates... NA NA NA NA
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PURSUANT TO RULE 429 OF THE GENERAL RULES AND REGULATIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, THE PROSPECTUS WHICH IS A PART OF THIS
REGISTRATION STATEMENT IS A COMBINED PROSPECTUS RELATING ALSO TO REGISTRATION
STATEMENT NO. 333-01245 AND CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 333-01245.
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<PAGE> 2
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to
the offering of series of Asset Backed Notes and/or Asset Backed Certificates by
various Ford Credit Auto Trusts created from time to time by Ford Credit Auto
Receivables Two L.P. and (ii) two forms of Prospectus Supplement relating to the
offering by Ford Credit Auto Trust 199 of the particular series of Asset Backed
Certificates or of Asset Backed Notes and Asset Backed Certificates described
therein. Each form of Prospectus Supplement relates only to the securities
described therein and is a form which may be used, among others, by Ford Credit
Auto Receivables Two L.P. to offer Asset Backed Notes and/or Asset Backed
Certificates under this Registration Statement.
<PAGE> 3
SUBJECT TO COMPLETION DATED , 199
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 199
$
FORD CREDIT AUTO OWNER TRUST 199 -
$ % [CLASS A-1] ASSET BACKED NOTES
[$ FLOATING RATE CLASS A-2 ASSET BACKED NOTES]
[$ % CLASS A-3 ASSET BACKED NOTES]
[$ % ASSET BACKED CERTIFICATES]
FORD LOGO
FORD CREDIT AUTO RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
---------------------------
The Ford Credit Auto Owner Trust 199 - (the "Trust") will be governed
by an Amended and Restated Trust Agreement, to be dated as of ,
199 , between Ford Credit Auto Receivables Two L.P. (the "Seller") and
, as Owner Trustee. The Trust will issue $ aggregate initial
principal amount of [Class A-1] % Asset Backed Notes (the "[Class A-1]
Notes")[, $ aggregate initial principal amount of Class A-2 Floating Rate
Asset Backed Notes (the "Class A-2 Notes") and $
aggregate initial principal amount of Class A-3 % Asset Backed Notes (the
"Class A-3 Notes" and, together with the Class A-1 Notes and the Class A-2
Notes, the "Notes")] pursuant to an Indenture to be dated as of ,
199 , between the Trust and , as Indenture Trustee. The Trust
will also issue $ aggregate initial principal balance of % Asset Backed
Certificates (the "Certificates" and, together with the Notes, the
"Securities"). The assets of the Trust will include a pool of motor vehicle
retail installment sale contracts (the "Receivables") secured by security
interests in the motor vehicles financed thereby, including certain monies due
or received thereunder on or after the related Cutoff Date (as defined herein),
which will be purchased by the Trust from the Seller on or prior to the Closing
Date, [monies on deposit in a trust account (the "Pre-Funding Account") to be
established with the Indenture Trustee] and certain other property, as more
fully described herein. See "Summary -- The Trust Property" herein. [Additional
motor vehicle retail installment sale contracts (the "Subsequent Receivables")
will be purchased by the Trust from the Seller from time to time on or before
, 199 , from funds on deposit in the Pre-Funding Account.] The
Notes will be secured by the assets of the Trust pursuant to the Indenture.
(continued on following page)
---------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE S-19 HEREIN AND ON PAGE 12 OF THE
ACCOMPANYING PROSPECTUS.
---------------------------
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.
---------------------------
<TABLE>
<CAPTION>
PUBLIC TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT SELLER(1)(2)
------------------ ------------- ---------------
<S> <C> <C> <C>
Per [Class A-1] Note................................ % % %
[Per Class A-2 Note................................. % % %]
[Per Class A-3 Note................................. % % %]
[Per Certificate.................................... % % %]
Total............................................... $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
---------------------------
The Notes and the Certificates are offered by the Underwriters when, as and
if issued and accepted by the Underwriters and subject to their right to reject
orders in whole or in part. It is expected that delivery of the Notes and the
Certificates will be made in book-entry form only through the Same Day Funds
Settlement System of The Depository Trust Company, or through Cedel Bank,
societe anonyme or the Euroclear System, on or about the Closing Date.
---------------------------
The date of this Prospectus Supplement is , 199 .
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.
<PAGE> 4
(CONTINUED FROM PREVIOUS PAGE)
Interest on [the] [all classes of] Notes [other than the Class A-2 Notes]
will accrue at the fixed per annum interest rates specified above. [The Class
A-2 Notes will accrue interest at a rate of % per annum for the period from
the Closing Date through 199 . Thereafter, the Class A-2 Notes will accrue
interest at a per annum rate equal to LIBOR plus %.] Interest on the Notes
will generally be payable [quarterly] on the day of each [month]
[ , , and ] (each, a "[Distribution] [Payment] Date"),
commencing , 199 . Principal of the Notes will be payable on each
[Distribution] [Payment] Date to the extent described herein[; however, no
principal will be paid on the Class A-2 Notes until the Class A-1 Notes have
been paid in full and no principal will be paid on the Class A-3 Notes until the
Class A-2 Notes have been paid in full].
The Certificates will represent [fractional undivided] interests in the
Trust. Interest, to the extent of the Certificate Rate specified above, will be
distributed to the Certificateholders on [each Distribution Date] [the day
of each month (each, a "Distribution Date"), commencing , 199 ].
Principal, to the extent described herein, will be distributed to the
Certificateholders on each Distribution Date commencing with the later of (i)
the Distribution Date next succeeding the Distribution Date on which the [Class
A-1] Notes are paid in full and (ii) the , 199 Distribution Date.
Distributions of principal and interest on the Certificates will be subordinated
in priority to payments due on the Notes [to the extent] [as] described herein.
In addition, upon the occurrence and during the continuation of an Event of
Default which has resulted in an acceleration of the Notes or following an
Insolvency Event or a dissolution with respect to the Seller or Ford Credit Auto
Receivables Two, Inc., the general partner of the Seller (the "General
Partner"), distributions of any amounts on the Certificates will be subordinated
in priority of payment to payment in full of principal of the Notes. [Moreover,
upon any downgrading or withdrawal by any Rating Agency of its rating of any
class of Notes, no distributions of principal on the Certificates will be made
until all the Notes have been paid in full, unless such rating has been
restored.]
[The] [Class A-1] Notes will be payable in full on the [Payment]
[Distribution] Date[, the Class A-2 Notes will be payable in full on the
[Payment] [Distribution] Date and the Class A-3 Notes will be payable in full on
the [Payment] [Distribution] Date. The final scheduled Distribution Date with
respect to the Certificates will be the Distribution Date. However, payment in
full of [the] [a class of] Notes or of the Certificates could occur earlier or
later than such dates as described herein. In addition, the [Class A-3] Notes
will be subject to redemption in whole, but not in part, and the Certificates
will be subject to prepayment in whole, but not in part, on any Distribution
Date on which the Servicer exercises its option to purchase the Receivables. The
Servicer may purchase the Receivables when the aggregate principal balance of
the Receivables shall have declined to 10% or less of the initial aggregate
principal balance of the Receivables purchased by the Trust. [One or more
classes of the Notes will be subject to partial mandatory redemption and the
Certificates may be subject to partial mandatory prepayment, at a premium
described herein, in the event that funds remain in the Pre-Funding Account at
the end of the Funding Period (as defined herein).]
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED
IN THE PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR THE
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES AND THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 5
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
periodic and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of the Trust
only to Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC")
and registered holder of the Notes and the Certificates. See "Certain
Information Regarding the Securities -- Book-Entry Registration" and "-- Reports
to Securityholders" in the accompanying Prospectus (the "Prospectus"). Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. The Seller, as originator of the
Trust, will file with the Securities and Exchange Commission (the "Commission")
such periodic reports as are required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder. In addition, the Commission maintains a public access site on the
Internet through the World Wide Web at which site reports, information
statements and other information, including all electronic filings, may be
viewed. The Internet address of such World Wide Web site is http://www.sec.gov.
S-3
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
ISSUER........................ Ford Credit Auto Owner Trust 199 -- (the
"Trust" or the "Issuer"), a Delaware business
trust established pursuant to a trust
agreement (as amended and restated on the
Closing Date and as amended and supplemented
thereafter, the "Trust Agreement") dated as
of , 199 , among the Seller
and the Owner Trustee.
SELLER........................ Ford Credit Auto Receivables Two L.P., a
Delaware limited partnership (the "Seller").
SERVICER...................... Ford Motor Credit Company, a Delaware
corporation (the "Servicer" or "Ford
Credit").
INDENTURE TRUSTEE............. , as trustee under the Indenture
(the "Indenture Trustee").
OWNER TRUSTEE................. , as trustee under the Trust
Agreement (the "Owner Trustee").
THE NOTES..................... The Trust will issue [ %] Asset Backed Notes
(the "Notes") pursuant to an Indenture to be
dated as of , 199 (as amended
and supplemented from time to time, the
"Indenture"), between the Issuer and the
Indenture Trustee[, as follows: (1) Class A-1
% Asset-Backed Notes (the "Class A-1
Notes") in the aggregate initial principal
amount of $ ; (2) Class A-2 Floating
Rate Asset Backed Notes (the "Class A-2
Notes") in the aggregate initial principal
amount of $ ; and (3) Class A-3 %
Asset Backed Notes (the "Class A-3 Notes") in
the aggregate initial principal amount of
$ ].
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
The Notes will be available for purchase in
book entry form only in minimum denominations
of $1,000 and integral multiples thereof. No
person acquiring a beneficial ownership
interest in Notes (a "Note Owner") will be
entitled to receive Definitive Notes except
in the limited circumstances described
herein. See "Certain Information Regarding
the Securities -- Definitive Securities" in
the Prospectus.
THE CERTIFICATES.............. The Trust will issue % Asset-Backed
Certificates (the "Certificates" and,
together with the Notes, the "Securities")
with an aggregate initial Certificate Balance
of $ . The Certificates will
represent [fractional undivided] interests in
the Trust and will be issued pursuant to the
Trust Agreement.
S-4
<PAGE> 7
The Certificates will be available for purchase
in book entry form only in minimum
denominations of $1,000 and integral
multiples thereof. No person acquiring a
beneficial ownership interest in Certificates
(a "Certificate Owner") will be entitled to
receive Definitive Certificates, except in
the limited circumstances described herein.
See "Certain Information Regarding the
Securities -- Definitive Securities" in the
Prospectus. [Purchasers of Certificates and
their assignees must represent that they are
United States persons, and each must provide
a certification of non-foreign status under
penalties of perjury.]
The rights of the Certificateholders to receive
distributions with respect to the
Certificates will be subordinated to the
rights of the Noteholders to receive
principal and interest on the Notes [to the
extent] [as] described herein.
THE TRUST PROPERTY............ The property of the Trust will include (i) the
Receivables; (ii) with respect to Precomputed
Receivables, all monies due thereunder on or
after the related Cutoff Date and with
respect to Simple Interest Receivables, all
monies due or received thereunder on or after
the related Cutoff Date; (iii) security
interests in the Financed Vehicles and any
accessions thereto; (iv) the rights to
proceeds from claims on certain physical
damage, credit life, credit disability or
other insurance policies, if any, covering
the Financed Vehicles or the Obligors; (v)
any Dealer Recourse; (vi) the Seller's rights
to certain documents and instruments relating
to the Receivables; (vii) such amounts as
from time to time may be held in one or more
accounts maintained pursuant to the Sale and
Servicing Agreement, as described herein,
including the Reserve Account[, the Yield
Supplement Account] [and the Pre-Funding
Account]; (viii) certain rights under the
Sale and Servicing Agreement [and the Yield
Supplement Agreement]; (ix) certain rights
under the Purchase Agreement, including the
right of the Seller to cause Ford Credit to
repurchase Receivables from the Seller; (x)
certain payments and proceeds with respect to
the Receivables held by the Servicer; (xi)
certain rebates of premiums and other amounts
relating to certain insurance policies and
other items financed under the Receivables;
[(xii) the Interest Rate Cap;] [(xiii) the
Interest Rate Swap;] [(xiv) the Guaranteed
Rate Agreement;] and (xv) any and all
proceeds of the foregoing. The rights and
benefits with respect to such property will
be assigned by the Seller and the Owner
Trustee to the Indenture Trustee for the
benefit of the Securityholders. The property
of the Trust does not include the Payahead
Account.
THE RECEIVABLES............... On , 199 (the "Closing Date"),
the Trust will purchase Receivables (the
"[Initial] Receivables") having an aggregate
principal balance of approximately
$ as of , 199 (the
"[Initial] Cutoff
S-5
<PAGE> 8
Date") from the Seller pursuant to a Sale and
Servicing Agreement to be dated as of
, 199 (as amended and
supplemented from time to time, the "Sale and
Servicing Agreement"), among the Trust, the
Seller and the Servicer. As of the [Initial]
Cutoff Date, the weighted average annual
percentage rate ("APR") of the [Initial]
Receivables was approximately %, the
weighted average remaining maturity of the
[Initial] Receivables was approximately
months and the weighted average original
maturity of the [Initial] Receivables was
approximately months.
[On and following the Closing Date, pursuant to
the Sale and Servicing Agreement, the Seller
will be obligated, subject only to the
availability thereof, to sell, and the Trust
will be obligated to purchase, subject to the
satisfaction of certain conditions set forth
therein, additional Receivables (the
"Subsequent Receivables") from time to time
during the Funding Period having an aggregate
principal balance equal to approximately
$ (such amount being equal to an
amount on deposit in the Pre-Funding Account
(the "Pre-Funded Amount") on the Closing
Date). The Seller will designate as a cutoff
date (each a "Subsequent Cutoff Date") each
date as of which payments in respect of
particular Subsequent Receivables are
conveyed to the Trust. It is expected that
certain of the Subsequent Receivables arising
between the Initial Cutoff Date and the
Closing Date will be conveyed to the Trust on
the Closing Date and that other Subsequent
Receivables will be conveyed to the Trust as
frequently as daily thereafter on dates
specified by the Seller (each date on which
Subsequent Receivables are conveyed to the
Trust being referred to as a "Subsequent
Transfer Date") occurring during the Funding
Period. See "Description of the Transfer and
Servicing Agreements -- Sale and Assignment
of Receivables; Subsequent Receivables"
herein.] [Coincident with each such transfer
of Subsequent Receivables, the Yield
Supplement Agreement will require Ford Credit
to deposit into the Yield Supplement Account
an amount equal to the Additional Yield
Supplement Amount, if any, in respect of such
Subsequent Receivables. See "Description of
the Transfer and Servicing Agreements --
Yield Supplement Account; Yield Supplement
Agreement" herein.]
The [Initial] Receivables [and the Subsequent
Receivables] will be purchased by the Seller
from Ford Credit pursuant to a Purchase
Agreement between the Seller and Ford Credit
(as amended and supplemented from time to
time, the "Purchase Agreement"). The
[Initial] Receivables have been selected[,
and the Subsequent Receivables will be
selected,] from the contracts owned by Ford
Credit based on the criteria specified in the
Sale and Servicing Agreement and described
herein and in the Prospectus.
S-6
<PAGE> 9
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:
A. [DISTRIBUTION] [PAYMENT]
DATES...................... Payments of interest and principal on the Notes
will be made [quarterly] on the day of each
[month] [ , ,
and ] or, if any such day is not a
Business Day, on the next succeeding Business
Day (each, a "[Distribution] [Payment]
Date"), commencing , 199 .
[Under certain limited circumstances, such
payments will be made monthly rather than
quarterly.] Payments will be made to holders
of record of the Notes (the "Noteholders") as
of the day immediately preceding such
[Distribution] [Payment] Date or, if
Definitive Notes are issued, as of the day of
the preceding month [(a "Record Date")]. A
"Business Day" is a day other than a
Saturday, a Sunday or a day on which banking
institutions or trust companies in The City
of New York are authorized by law, regulation
or executive order to be closed.
B. NOTE INTEREST RATES........ The [Class A-1] Notes will bear interest at the
rate of % per annum (the ["Note Interest
Rate"] ["Class A-1 Rate"]) [and the Class A-3
Notes will bear interest at the rate of %
per annum (the "Class A-3 Rate"). The rate of
interest with respect to the Class A-2 Notes
(the
S-7
<PAGE> 10
"Class A-2 Rate" and, together with the Class
A-1 Rate and the Class A-3 Rate, the "Note
Interest Rates") will be % per annum for
the period from the Closing Date to but
excluding the first [Distribution] [Payment]
Date, and will be equal to LIBOR for the
applicable Interest Reset Period plus %
for each [Distribution] [Payment] Date
thereafter[; provided that the Class A-2 Rate
shall not exceed % per annum]].
C. INTEREST................... On each [Distribution] [Payment] Date, the
Indenture Trustee will distribute pro rata to
Noteholders [of each class of Notes] accrued
interest at the [applicable] Note Interest
Rate generally to the extent of funds
available following payment of the Servicing
Fee from the Available Funds and the Reserve
Account. Interest on the outstanding
principal amount of the Notes [of each class]
will accrue at the [applicable] Note Interest
Rate from and including the Closing Date (in
the case of the first [Distribution]
[Payment] Date) or from and including the
most recent [Distribution] [Payment] Date on
which interest has been paid to but excluding
the following [Distribution] [Payment] Date
(each an "Interest Period"). [Interest on the
Class A-1 Notes will be calculated on the
basis of actual days elapsed and a 365- or
366-day year, as applicable.] Interest on the
[[Class A-1 Notes and the] Class A-3] Notes
will be calculated on the basis of a 360-day
year of twelve 30-day months. [Interest on
the Class A-2 Notes will be calculated on the
basis of actual days elapsed and a 360-day
year.] See "Description of the Notes --
Payments of Interest" herein.
D. PRINCIPAL.................. Principal of the Notes will be payable
[quarterly] on each [Distribution] [Payment]
Date in an amount equal to [the sum of] the
Noteholders' Principal Payment Amount for
[each of] the [three] calendar month[s]
([the] [each, a] "Collection Period")
preceding such [Distribution] [Payment] Date
(in the case of the first [Distribution]
[Payment] Date, including the period from
, 199 to and including
, 199 ) to the extent of funds
available therefor. The "Noteholders'
Principal Payment Amount" [with respect to a
Collection Period] will generally be the sum
of (i) the Noteholders' Percentage of the
Regular Principal (such "Regular Principal"
being the sum of (a) all scheduled payments
of principal and the principal portion of all
prepayments in full (and certain partial
prepayments) collected with respect to
Precomputed Receivables (including amounts
withdrawn from the Payahead Account but
excluding amounts deposited into the Payahead
Account), (b) the principal portion of all
payments collected with respect to Simple
Interest Receivables, and (c) the principal
balance of each Receivable purchased by the
Servicer, repurchased by the Seller or
liquidated by the Servicer, each with respect
to [the preceding] [such] Collection Period)
plus (ii) % of
S-8
<PAGE> 11
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
S-9
<PAGE> 12
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
of all Subsequent Receivables added to the
Trust on or prior to such date as of their
respective Subsequent Cutoff Dates].
[F. MANDATORY REDEMPTION FROM
PRE-FUNDING ACCOUNT....... [The] [A Class or classes of] Notes then
outstanding will be redeemed in part on the
Distribution Date on or immediately following
the last day of the Funding Period in the
event that amounts remain on deposit in the
Pre-Funding Account after giving effect to
the purchase of all Receivables, including
any such purchase on such date (a "Mandatory
Redemption"). If the amount on deposit in the
Pre-Funding Account on such date is equal to
$ or less, then such amount will be
used to redeem the [Class A-1] Notes [up to
an amount not to exceed their outstanding
amount, with any remaining amount used to
redeem the Class A-2 Notes]. Otherwise the
amount on deposit in the Pre-Funding Account
on such date will be used to redeem [each
Class of] the Notes and the Certificates. The
aggregate principal amount of [each Class of]
the Notes to be redeemed will be an amount
equal to [the Notes'] [such class'] Pre-
Funded Percentage of the amount then on
deposit in the Pre-Funding Account. The
"Pre-Funded Percentage" with respect to [the]
[a Class of] Notes or the Certificates is the
percentage derived from the fraction, the
numerator of which is the initial principal
amount of [the] [such Class of] Notes or the
initial Certificate Balance, as the case may
be, and the denominator of which is the sum
of the initial principal amount of the Notes
and the initial Certificate Balance.]
[A limited recourse mandatory prepayment
premium (the "Note Prepayment Premium") will
be payable by the Trust to the Noteholders
pursuant to a Mandatory Redemption if the
amount on deposit in the Pre-Funding Account
exceeds $ . The Note Prepayment Premium [for
each Class of Notes] will equal the excess,
if any, discounted as described below, of (i)
the amount of interest that would accrue on
[the Notes'] [such class'] portion of any
remaining Pre-Funded Amount (the "Note
Prepayment Amount") at the Note Interest Rate
borne by [the] [such Class of] Notes during
the period commencing on and including the
Distribution Date on which such Note
prepayment amount is required to be
distributed to Noteholders [of such class] to
but excluding [, in the case
of the Class A-1 Notes, in the case of the
Class A-2 Notes and , in the
case of the Class A-3 Notes], over (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
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<PAGE> 13
to the bond equivalent yield to maturity on
the Determination Date preceding such
Distribution Date on the [, in
the case of the Class A-1 Notes, the
, in the case of the Class A-2
Notes, and the , in the case
of the Class A-3 Notes]. Such excess shall be
discounted to present value to such
Distribution Date at the applicable yield
described in clause (ii) above. Pursuant to
the Sale and Servicing Agreement, the Seller
will be obligated to pay the sum of the Note
Prepayment Premium [for each class of Notes]
and the Certificate Prepayment Premium to the
Trust as liquidated damages for the failure
to deliver Subsequent Receivables having an
aggregate principal balance equal to the
Pre-Funded Amount. The Trust's obligation to
pay the Note Prepayment Premium [for each
class of Notes] and the Certificate
Prepayment Premium will be limited to funds
received from the Seller pursuant to the
preceding sentence. In the event that such
funds are insufficient to pay the Note
Prepayment Premium [for each class of Notes]
and the Certificate Prepayment Premium in
full, Noteholders [of each class of Notes]
will receive their ratable share (based upon
the aggregate Note Prepayment Premium [for
such class]) of the aggregate amount
available to be distributed in respect of the
Note Prepayment Premium and the Certificate
Prepayment Premium. No other assets of the
Trust will be available for the purpose of
making such payment.]]
TERMS OF THE CERTIFICATES..... The principal terms of the Certificates will be
as described below:
A. DISTRIBUTION DATES......... Distributions with respect to the Certificates
will be made on [each Distribution Date] [the
day of each month or, if any such day is not
a Business Day, on the next succeeding
Business Day (each, a "Distribution Date")],
commencing , 199 .
Distributions will be made to holders of
record of the Certificates (the
"Certificateholders," and, together with the
Noteholders, the "Securityholders") as of the
[related Record Date (which will be the day
of the month if Definitive Certificates are
issued)] [as of the day immediately preceding
such Distribution Date or, if Definitive
Certificates are issued, as of the day of the
preceding month].
B. CERTIFICATE RATE........... % per annum (the "Certificate Rate").
C. INTEREST................... On each Distribution Date, the Owner Trustee
will distribute pro rata to
Certificateholders accrued interest at the
Certificate Rate on the outstanding
Certificate Balance generally to the extent
of funds available following payment of the
Servicing Fee and distributions in respect of
the Notes from the Available Funds and the
Reserve Account; provided, however, that upon
the occurrence and during the continuation of
an Event of Default which has resulted in an
acceleration of the Notes or following an
Insolvency
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<PAGE> 14
Event or a dissolution with respect to the
Seller or the General Partner, distributions
of any amounts on the Certificates will be
subordinated in priority of payment to
payment in full of principal of the Notes.
Interest in respect of a Distribution Date
will accrue from and including the Closing
Date (in the case of the first Distribution
Date) or from and including the most recent
Distribution Date on which interest has been
paid to but excluding the following
Distribution Date. Interest will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months.
D. PRINCIPAL.................. On each Distribution Date commencing on the
later of (i) the 199 Distribution Date
and (ii) the Distribution Date next
succeeding the Distribution Date on which the
[Class A-1] Notes are paid in full, principal
of the Certificates will be payable in an
amount generally equal to the
Certificateholders' Principal Distribution
Amount for the Collection Period preceding
such Distribution Date, to the extent of
funds available therefor following payment of
the Servicing Fee and payments of interest
and principal in respect of the Notes and the
distribution of interest in respect of the
Certificates; provided, however, that upon
the occurrence and during the continuation of
an Event of Default which has resulted in an
acceleration of the Notes or following an
Insolvency Event or a dissolution with
respect to the Seller or the General Partner,
distributions of any amounts on the
Certificates will be subordinated in priority
of payment to payment in full of principal of
the Notes[; and provided further that upon
any reduction or withdrawal by any Rating
Agency of its rating of [the] [any class of]
Notes, no distributions of principal on the
Certificates will be made until all the Notes
have been paid in full or until such rating
has been restored]. The Certificateholders'
Principal Distribution Amount will be based
on the Certificateholders' Percentage of the
Regular Principal, and will be calculated by
the Servicer in the manner described under
"Description of the Transfer and Servicing
Agreements -- Distributions" herein. The
outstanding principal balance, if any, of the
Certificates will be payable in full on
, 199 (the "Final Scheduled
Distribution Date").
E. OPTIONAL PREPAYMENT........ If the Servicer exercises its option to
purchase the Receivables, which can occur
after the Pool Balance declines to 10% or
less of the Initial Pool Balance, the
Certificateholders will receive an amount in
respect of the Certificates equal to the
Certificate Balance together with accrued
interest at the Certificate Rate, and the
Certificates will be retired. See
"Description of the Certificates -- Optional
Prepayment" herein.
[F. MANDATORY REPURCHASE FROM
PRE-FUNDING ACCOUNT....... The Certificates will be prepaid, in part, pro
rata on the basis of their initial principal
balances, on the Distribution Date on or
immediately following the last day of the
Funding
S-12
<PAGE> 15
Period in the event that the amount on
deposit in the Pre-Funding Account after
giving effect to the purchase of all
Receivables, including any such purchase on
such date exceeds $ (a "Mandatory
Repurchase"). The aggregate principal balance
of Certificates to be prepaid will be an
amount equal to the Certificates' Pre-Funded
Percentage of the amount then on deposit in
the Pre-Funding Account.
[A limited recourse mandatory prepayment
premium (the "Certificate Prepayment
Premium") will be payable by the Trust to the
Certificateholders at the time of any
prepayment of the Certificates pursuant to a
Mandatory Repurchase. The Certificate
Prepayment Premium will equal the excess, if
any, discounted as described below, of (i)
the amount of interest that would accrue 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. Pursuant to the Sale and
Servicing Agreement, the Seller will be
obligated to pay the sum of the Note
Prepayment Premium [for each class of Notes]
and the Certificate Prepayment Premium to the
Trust as liquidated damages for the failure
to deliver Subsequent Receivables having an
aggregate principal balance equal to the
Pre-Funded Amount. The Trust's obligation to
pay the Note Prepayment Premium [for each
class of Notes] and the Certificate
Prepayment Premium will be limited to funds
received from the Seller pursuant to the
preceding sentence. In the event that such
funds are insufficient to pay the Note
Prepayment Premium [for each class of Notes]
and the Certificate Prepayment Premium in
full, Certificateholders will receive their
ratable share (based upon the aggregate
Certificate Prepayment Premium) of the
aggregate amount available to be distributed
in respect of the Note Prepayment Premium and
the Certificate Prepayment Premium. No other
assets of the Trust will be available for the
purpose of making such payment.]]
[INTEREST RATE CAP............ On the Closing Date, the Seller will enter into
an Interest Rate Cap in respect of the Class
A-2 Notes with (the "Interest Rate
Cap Provider"). Pursuant to the Interest Rate
Cap, the Interest Rate Cap Provider will make
a payment to the Trust on each [Distribution]
[Payment] Date on which [the Class A-2 Rate]
[LIBOR] for the
S-13
<PAGE> 16
preceding [Distribution] [Payment] Date
exceeds the Cap Rate in an amount equal to
the product of (i) the difference between
[such Class A-2 Rate] [LIBOR] and the Cap
Rate, (ii) the Cap Notional Amount and (iii)
the actual number of days from and including
the preceding [Distribution] [Payment] Date
to but excluding such [Distribution]
[Payment] Date divided by 360. The Cap
Notional Amount on any [Distribution]
[Payment] Date will equal at least the
principal amount of the Class A-2 Notes as of
the close of the preceding [Distribution]
[Payment] Date. See "Description of the
Transfer and Servicing Agreements -- Interest
Rate Cap" herein. Payments received by the
Indenture Trustee pursuant to the Interest
Rate Cap will be deposited in the Collection
Account for the benefit of all
Securityholders.]
[INTEREST RATE SWAP........... On the Closing Date, the Indenture Trustee, on
behalf of the Trust, will enter into one or
more Interest Rate Swap Agreements
(collectively, the "Interest Rate Swap") with
(the "Swap Counterparty").
Pursuant to the Interest Rate Swap, the Swap
Counterparty will pay to the Trust, on each
[Distribution] [Payment] Date, interest at a
per annum rate equal to [the Class A-2 Rate]
[LIBOR] on the Swap Notional Amount. The Swap
Notional Amount on any [Distribution]
[Payment] Date will equal the principal
amount of the Class A-2 Notes as of the close
of the preceding [Distribution] [Payment]
Date. In exchange for such payments, the
Trust will pay to the Swap Counterparty, on
each [Distribution] [Payment] Date, interest
at a per annum rate equal to [the lesser of]
[ %] [and] [the Prime Rate less %],
on the outstanding principal amount of the
Class A-2 Notes as of the close of the
preceding [Distribution] [Payment] Date [,
which rate will be reset [on various dates
in] each [month] [Interest Period]]. With
respect to each [Distribution] [Payment]
Date, any difference between the [monthly]
[quarterly] payment by the Swap Counterparty
to the Trust and the [monthly] [quarterly]
payment by the Trust to the Swap Counterparty
will be referred to herein as the "Net Trust
Swap Receipt," if such difference is a
positive number, and the "Net Trust Swap
Payment," if such difference is a negative
number. Net Trust Swap Receipts, if any, will
be deposited in the Collection Account for
the benefit of all Securityholders and Net
Trust Swap Payments, if any, will be paid
from the Collection Account in the same
manner and priority as accrued and unpaid
interest on the Notes on each [Distribution]
[Payment] Date. See "Description of the
Transfer and Servicing Agreements -- Interest
Rate Swap" herein.]
[PRE-FUNDING ACCOUNT.......... During the period (the "Funding Period") from
and including the Closing Date until the
earliest of (a) the Determination Date on
which the amount on deposit in the
Pre-Funding Account is equal to $ or
less, (b) the occurrence of
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<PAGE> 17
an Event of Default under the Indenture or an
Event of Servicing Termination under the Sale
and Servicing Agreement, (c) the occurrence
of certain events of insolvency or
dissolution with respect to the Seller, the
General Partner or the Servicer and (d) the
Determination Date with respect to the
, 199 Distribution Date, the
Pre-Funded Amount will be maintained as an
account in the name of the Indenture Trustee
(the "Pre-Funding Account"). The Pre-Funded
Amount will initially equal approximately
$ , and, during the Funding Period,
will be reduced by the amount thereof used to
purchase Subsequent Receivables in accordance
with the Sale and Servicing Agreement and the
amount thereof deposited in the Reserve
Account in connection with the purchase of
such Subsequent Receivables. The Seller
expects that the Pre-Funded Amount will be
reduced to $ or less by the
Distribution Date. Any Pre-Funded Amount
remaining at the end of the Funding Period
will be payable to the Noteholders and
Certificateholders as described above.]
RESERVE ACCOUNT............... The Reserve Account will be created with an
initial deposit by the Seller on the Closing
Date of cash or Permitted Investments having
a value at least equal to % of the
[Initial Pool Balance] [Pool Balance as of
the Initial Cutoff Date] [plus an amount
attributable to the difference between the
anticipated investment earnings on the
Pre-Funded Amount and the weighted average
interest expense on the portion of the Notes
and Certificates represented by the
Pre-Funded Amount]. [On each Subsequent
Transfer Date, cash or Permitted Investments
having a value approximately equal to % of
the aggregate principal balance of the
Subsequent Receivables conveyed to the Trust
on such Subsequent Transfer Date will be
withdrawn from the Pre-Funding Account from
amounts otherwise distributable to the Seller
in 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
S-15
<PAGE> 18
that the Available Funds remaining after
payment of the Servicing Fee and the deposit
of the Noteholders' Payment Amount in the
Note Payment Account is less than the
Certificateholders' Distribution Amount and
will be deposited in the Certificate
Distribution Account for distribution to the
Certificateholders. [If funds applied in
accordance with the preceding sentence are
insufficient to distribute the interest due
on the Certificates, subject to certain
limitations, funds will be withdrawn from the
Reserve Account and applied to distribute
interest on the Certificates to the extent of
the Certificate Interest Reserve Amount.]
On each Distribution Date, the Reserve Account
will be reinstated up to the Specified
Reserve Balance to the extent, if any, of the
Available Funds remaining after payment of
the Servicing Fee, the deposit of the
Noteholders' Payment Amount into the Note
Payment Account and the deposit of the
Certificateholders' Distribution Amount into
the Certificate Distribution Account.
Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to all
distributions to be made on such Distribution
Date) in excess of the Specified Reserve
Balance for such Distribution Date will be
released to the Seller (except to the extent
described under "Description of the Transfer
and Servicing Agreements -- Reserve Account"
herein). Subject to reduction as described
below, the "Specified Reserve Balance" with
respect to any Distribution Date generally
will be equal to the sum of (i) % of the
[Initial Pool Balance] [Pool Balance as of
the Initial Cutoff Date] [, plus an amount
related to the difference between anticipated
investment earnings on the remaining
Pre-Funded Amount and the weighted average
interest expense on the portion of the Notes
and Certificates represented by the remaining
Pre-Funded Amount] and (ii) % of the Pool
Balance on the first day of the related
Collection Period. [However, so long as on
any Distribution Date (except the first
Distribution Date) the sum of (x) the
outstanding principal amount of the
Securities (after giving effect to
distributions made on the prior Distribution
Date) and (y) the aggregate amount of
Payaheads that have been collected but not
yet applied as payments under the related
Receivables as of the first day of the
related Collection Period is less than or
equal to [the sum of] % of [(a)] the Pool
Balance on the first day of the related
Collection Period [and (b) the Pre-Funded
Amount on such date], then the portion of the
Specified Reserve Balance set forth in clause
(i) above will be reduced to % of the
[Initial Pool Balance] [Pool Balance as of
the Initial Cutoff Date].] [In addition, so
long as on any Distribution Date (except the
first Distribution Date) the sum of (x) the
outstanding principal amount of the
Securities (after giving effect to
S-16
<PAGE> 19
distributions made on the prior Distribution
Date) and (y) the aggregate amount of
Payaheads that have been collected but not
yet applied as payments under the related
Receivables as of the first day of the
related Collection Period is less than or
equal to [the sum of] % of [(a)] the Pool
Balance on the first day of the related
Collection Period [and (b) the Pre-Funded
Amount on such day], then such portion of the
Specified Reserve Balance set forth in clause
(i) above will be reduced to % of the
[Initial Pool Balance] [Pool Balance as of
the Initial Cutoff Date].] [With respect to
the portion of the Specified Reserve Balance
set forth in clause (ii) above, so long as on
any Distribution Date (except the first
Distribution Date) the sum of (x) the
outstanding principal amount of the
Securities (after giving effect to
distributions made on the prior Distribution
Date) and (y) the aggregate amount of
Payaheads that have been collected but not
yet applied as payments under the related
Receivables as of the first day of the
related Collection Period is less than or
equal to [the sum of] % of [(a)] the Pool
Balance on the first day of the related
Collection Period [and (b) the Pre-Funded
Amount on such day], then such portion will
be reduced to an amount equal to the product
of (I) the Pool Balance on the first day of
the related Collection Period and (II) the
percentage (which shall not be greater than
% or less than zero) equal to (X) the
percentage derived from the fraction, the
numerator of which is the outstanding
principal amount of the Securities (after
giving effect to distributions made on the
prior Distribution Date) and the denominator
of which is such Pool Balance less (Y) %.]
[The Specified Reserve Balance is further
subject to adjustment in certain
circumstances described herein.]
[YIELD SUPPLEMENT ACCOUNT;
YIELD SUPPLEMENT AGREEMENT.... Ford Credit will establish a yield supplement
account with the Indenture Trustee for the
benefit of the Securityholders (the "Yield
Supplement Account"). The Yield Supplement
Account is designed solely to hold funds to
be applied to provide payments to the
Securityholders in respect of Receivables the
APR of which is less than the sum of (i) the
weighted average of the Note Interest Rates
and Certificate Rate and (ii) the Servicing
Fee Rate (the "Required Rate"). The Yield
Supplement Account will be created with an
initial deposit by Ford Credit (the "Yield
Supplement Initial Deposit") in an amount
(which amount may be discounted at a rate to
be specified in the Sale and Servicing
Agreement) equal to the aggregate amount by
which (i) interest on the principal balance
of each [Initial] Receivable for the period
commencing on the [Initial] Cutoff Date and
ending with the scheduled maturity of such
Receivable, assuming that payments on such
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<PAGE> 20
Receivables are made as scheduled and no
prepayments are made, at a rate equal to the
Required Rate, exceeds (ii) interest on such
principal balances at the APR of such
Receivable (the "Yield Supplement Amount"
and, with respect to all of the [Initial]
Receivables, the "Maximum [Initial] Yield
Supplement Amount").
[Ford Credit, the Seller and the Indenture
Trustee will enter into a Yield Supplement
Agreement (as amended and supplemented from
time to time, the "Yield Supplement
Agreement") pursuant to which, on each
Subsequent Transfer Date, Ford Credit will
deposit an amount (which amount may be
discounted at a rate to be specified in the
Sale and Servicing Agreement), if any, into
the Yield Supplement Account (the "Additional
Yield Supplement Amount") equal to the
aggregate Yield Supplement Amounts in respect
of the related Subsequent Receivables for the
period commencing with the related Subsequent
Cutoff Date and ending with the scheduled
maturity of each such Subsequent Receivable,
assuming that payments on such Receivables
are made as scheduled and no prepayments are
made. The aggregate of the Additional Yield
Supplement Amounts in respect of the
Subsequent Receivables is referred to herein
as the "Maximum Subsequent Yield Supplement
Amount" and, together with the Maximum
Initial Yield Supplement Amount, the "Maximum
Yield Supplement Amount." See "Description of
the Transfer and Servicing Agreements --
Yield Supplement Account; Yield Supplement
Agreement" herein.]]
COLLECTION ACCOUNT............ Except under certain conditions described
herein, the Servicer will be required to
remit collections received with respect to
the Receivables not later than the [ ]
Business Day after receipt to one or more
accounts in the name of the Indenture Trustee
(the "Collection Account"). Pursuant to the
Sale and Servicing Agreement, the Servicer
will have the power, revocable at the
discretion of the Indenture Trustee or at the
discretion of the Owner Trustee with the
consent of the Indenture Trustee, to instruct
the Indenture Trustee to withdraw funds on
deposit in the Collection Account and to
apply such funds on each Distribution Date to
the following (in the priority indicated):
(i) the Servicing Fee for the prior
Collection Period and any overdue Servicing
Fees to the Servicer, (ii) the Accrued Note
Interest and the Noteholders' Principal
Payment Amount into the Note Payment Account,
(iii) the Accrued Certificate Interest and,
commencing on the later of (a) the
199 Distribution Date and (b)
the Distribution Date next succeeding the
Distribution Date on which the [Class A-1]
Notes are paid in full, the
Certificateholders' Principal Distribution
Amount into the Certificate Distribution
Account and (iv) the remaining balance, if
any, to the Reserve Account; provided,
however, that on each Distribution Date
following the occurrence of an Event of
Default which has resulted in
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<PAGE> 21
acceleration of the Notes or following an
Insolvency Event with respect to the Seller
or the General Partner, the principal amount
of the Notes must be paid in full prior to
the distribution of any amounts on the
Certificates.
[GUARANTEED RATE AGREEMENT.... Amounts on deposit in the [Collection] [Note
Payment] Account will be invested from the
date of deposit to the related [Distribution]
[Payment] Date by the Indenture Trustee at
the direction of (the "Investment Provider")
in certain eligible investments pursuant to a
Guaranteed Rate Agreement, which provides
that the Investment Provider will guarantee a
rate of return on such amounts equal to the
weighted average of the Note Interest Rates
[and the Certificate Rate] and will be
entitled to receive any Investment Earnings
in excess of such guaranteed return. See
"Description of the Transfer and Servicing
Agreements -- Guaranteed Rate Agreement"
herein.]
SERVICER FEE.................. The Servicer will receive each month a fee for
servicing the Receivables equal to (a) the
product of one-twelfth of 1.00% (the
"Servicing Fee Rate") and the Pool Balance
outstanding at the beginning of the previous
month, plus (b) any late, prepayment, and
other administrative fees and expenses
collected during such month [plus (c)
reinvestment proceeds on any payments
received in respect of the Receivables].
MATURITY AND PREPAYMENT
CONSIDERATIONS............. The [Class A-2 Notes, the Class A-3 Notes and
the] Certificates will not receive any
principal payments until the [Class A-1]
Notes have been paid in full[, and the Class
A-3 Notes will not receive any principal
payments until the Class A-2 Notes have been
paid in full]. In addition, no principal
payments on the Certificates will be made
until the later of (i) the
199 Distribution Date and (ii) the
Distribution Date next
succeeding the Distribution Date on which the
[Class A-1] Notes are paid in full. As the
rate of payment of principal of [the] [each
class of] Notes and the Certificates depends
on the rate of payment (including
prepayments) of the principal balance of the
Receivables, final payment of [the] [any
class of] Notes and the final distribution in
respect of the Certificates could occur
significantly earlier than the respective
[Final Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution
Date]. In addition, the rate of payment of
principal of [the] [each Class of] Notes and
the Certificates will be affected by the
application of the Noteholders' Accelerated
Principal to pay the principal of the Notes.
Reinvestment risk associated with early
payment of the Notes and the Certificates
will be borne exclusively by the Noteholders
and the Certificateholders, respectively.
It is expected that final payment of [the]
[each class of] Notes and the final
distribution in respect of the
S-19
<PAGE> 22
Certificates will occur on or prior to the
respective [Final Scheduled Distribution
Dates] [final scheduled Payment Dates or
Distribution Date]. However, if sufficient
funds are not available to pay [the] [any
class of] Notes or the Certificates in full
on or prior to the respective [Final
Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution
Date], final payment of [the] [such class of]
Notes and the final distribution in respect
of the Certificates could occur later than
such dates.
All of the Receivables are prepayable at any
time. Prepayments that do not constitute
Payaheads will shorten the weighted average
remaining term of the 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 the
Certificateholders' Principal Distribution
Amount and will be payable to the
Securityholders as set forth in the priority
of distributions herein. See "Description of
the Transfer and Servicing Agreements --
Distributions" herein.
CLEARANCE AND SETTLEMENT...... Securityholders may elect to hold their Notes
or Certificates through any of DTC (in the
United States) or Cedel or Euroclear (in
Europe). Transfers within DTC, Cedel or
Euroclear, as the case may be, will be in
accordance with the usual rules and operation
procedures of the relevant system.
Cross-market transfers between persons
holding directly or indirectly through DTC,
on the one hand, and counterparties holding
directly or indirectly through Cedel or
Euroclear, on the other, will be effected in
DTC through the relevant Depositaries of
Cedel or Euroclear. See "Certain Information
Regarding the Securities -- Book-Entry
Registration" in the Prospectus.
TAX STATUS.................... In the opinion of ("Special Tax Counsel"), for
federal income tax purposes, the Notes will
be characterized as debt, and the Trust will
not be characterized as an association (or
publicly traded partnership) taxable as a
corporation. In the opinion of ("Michigan Tax
Counsel"), the same characterization will
apply for Michigan income and Single Business
Tax purposes. Each Noteholder, by the
acceptance of a Note, will agree to treat the
Notes as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate, will be deemed to agree to treat
the Trust as a partnership in which the
Certificateholders are partners for federal
income and Michigan income and Single
Business Tax purposes. Alternative
characterizations of the Trust and the
Certificates are possible, but would not
result in materially adverse tax consequences
to Certificateholders. Certificateholders may
be allocated income equal to the amount of
interest accruing on the Certificates at the
Certificate Rate even though the Trust may
not have sufficient cash to make current cash
distributions of such amount. See "Certain
Federal Income Tax Consequences" herein and
in the Prospectus and
S-20
<PAGE> 23
"Certain State Tax Consequences" herein for
additional information concerning the
application of federal income and Michigan
tax laws, respectively, to the Trust and the
Securities.
ERISA CONSIDERATIONS.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes may, in general, be
purchased by or on behalf of employee benefit
plans subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"). Any employee benefit plan
fiduciary considering a purchase of Notes
should, among other things, consult with
legal counsel regarding the availability of a
statutory or administrative exemption from
the prohibited transaction rules of ERISA and
the Internal Revenue Code of 1986, as amended
(the "Code").
The Certificates may not be acquired by an
employee benefit plan subject to the
fiduciary responsibility provisions of ERISA
or Section 4975 of the Code, or by an
individual retirement account. Any investor
considering the purchase of Certificates
should be aware that such purchase and
subsequent holding could, under certain
circumstances, be deemed to involve an
indirect prohibited transaction if a plan
with respect to which the investor is a
"party in interest" or "disqualified person"
purchases the Certificates without the
benefit of an exemption from the prohibited
transaction rules. See "ERISA Considerations"
herein and in the Prospectus.
[LEGAL INVESTMENT............. The [Class A-1] Notes will be eligible
securities for purchase by money market funds
under paragraph (a)(5) of Rule 2a-7 under the
Investment Company Act of 1940, as amended.]
RATING[S] OF THE NOTES........ It is a condition to the issuance of the [Class
A-1,] [Class A-2] [and Class A-3] Notes that
they be rated in the highest investment
rating category by at least two nationally
recognized rating agencies. [However, the
rating agencies do not evaluate, and the
rating does not address, the likelihood that
the Note Prepayment Premium will be paid.]
There can be no assurance that a rating will
not be lowered or withdrawn by a rating
agency if circumstances so warrant.
RATING OF THE CERTIFICATES.... It is condition of the issuance of the
Certificates that they be rated [at least]
" " or its equivalent by at least
two nationally recognized rating agencies.
[However, the rating agencies do not
evaluate, and the rating does not address,
the likelihood that the Certificate
Prepayment Premium will be paid.] There can
be no assurance that a rating will not be
lowered or withdrawn by a rating agency if
circumstances so warrant.
S-21
<PAGE> 24
RISK FACTORS
LIMITED LIQUIDITY
There is currently no secondary market for the Securities. Each Underwriter
currently intends to make a market in the Securities for which it is an
Underwriter, but it is under no obligation to do so. There can be no assurance
that a secondary market will develop or, if a secondary market does develop,
that it will provide the Securityholders with liquidity of investment or that it
will continue for the life of the Securities.
[THE SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT
On the Closing Date, the Seller will transfer to the Trust the
approximately $ of Initial Receivables and the approximately
$ Pre-Funded Amount on deposit in the Pre-Funding Account. If the
principal balance of eligible Receivables originated by Ford Credit during the
Funding Period is less than the Pre-Funded Amount, the Seller will have
insufficient Receivables to sell to the Trust on the Subsequent Transfer Dates,
thereby resulting in a prepayment of principal to the Noteholders and the
Certificateholders as described in the following paragraph. See "-- Trust's
Relationship to Ford and Ford Credit" below. In addition, any conveyance of
Subsequent Receivables is subject to the satisfaction, on or before the related
Subsequent Transfer Date, of the following conditions precedent, among others:
(i) each such Subsequent Receivable must satisfy the eligibility criteria
specified in the Sale and Servicing Agreement; (ii) the Seller will not select
such Subsequent Receivables in a manner that it believes is adverse to the
interests of the Noteholders or the Certificateholders; (iii) as of the related
Subsequent Cutoff Date, the Receivables in the Trust at that time, including the
Subsequent Receivables to be conveyed by the Seller as of such Subsequent Cutoff
Date, will satisfy the parameters described under "The Receivables Pool" herein
and under "The Receivables Pools" in the Prospectus; (iv) the applicable Reserve
Initial Deposit for such Subsequent Transfer Date shall have been made; and (v)
the Seller shall have executed and delivered to the Trust (with a copy to the
Indenture Trustee) a written assignment conveying such Subsequent Receivables to
the Trust (including a schedule identifying such Subsequent Receivables).
Moreover, any such conveyance of Subsequent Receivables made during any given
Collection Period will also be subject to the satisfaction, on or about the
fifteenth day of the month following such Collection Period, of the following
conditions subsequent, among others: (a) the Seller will deliver certain
opinions of counsel to the Owner Trustee, Indenture Trustee and the Rating
Agencies with respect to the validity of the conveyance of all such Subsequent
Receivables conveyed during such Collection Period; (b) the Trust and the
Indenture Trustee shall have received written confirmation from a firm of
independent certified public accountants that, as of the end of the preceding
Collection Period, the Receivables in the Trust at that time, including the
Subsequent Receivables conveyed by the Seller during such Collection Period,
satisfied the parameters described under "The Receivables Pool" herein and under
"The Receivables Pools" in the Prospectus; and (c) the Rating Agencies shall
have each notified the Seller in writing that, following the addition of all
such Subsequent Receivables, [each class of] the Notes and the Certificates will
be rated in the same rating category as they were rated by the Rating Agencies
on the Closing Date. The Seller will immediately repurchase any Subsequent
Receivable, at a price equal to the Purchase Amount thereof, upon the failure of
the Seller to satisfy any of the foregoing conditions subsequent with respect
thereto. Such confirmation of the ratings of the Notes and the Certificates may
depend on factors other than the characteristics of the Subsequent Receivables,
including the delinquency, repossession and net loss experience on the
automobile and light truck receivables in the portfolio serviced by Ford Credit.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the conveyance of Subsequent Receivables to the Trust by
the end of the Funding Period and such amount exceeds $ , the Noteholders
and the Certificateholders will receive, on the Distribution Date on or
immediately following the last day of the Funding Period, a prepayment of
principal in an
S-22
<PAGE> 25
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 not to exceed their
outstanding principal amount, with any remaining amount used to redeem the Class
A-2 Notes]. It is anticipated that the principal balance of Subsequent
Receivables sold to the Trust will not be exactly equal to the amount on deposit
in the Pre-Funding Account and that therefore there will be at least a nominal
amount of principal prepaid to the [Class A-1] Noteholders.
Each Subsequent Receivable must satisfy the eligibility criteria specified
in the Sale and Servicing Agreement and any additional criteria specified by the
Rating Agencies at the time of its addition. However, Subsequent Receivables may
have been originated by Ford Credit at a later date using credit criteria
different from those which were applied to the Initial Receivables and may be of
a different credit quality and seasoning. In addition, an increasing percentage
of the Subsequent Receivables may be Final Payment Receivables. Therefore,
following the transfer of Subsequent Receivables to the Trust, the
characteristics of the entire Receivables Pool included in the Trust may vary
significantly from those of the Initial Receivables. See "The Receivables Pool"
herein and "The Receivables Pools" in the Prospectus. The ability of Ford Credit
to generate Subsequent Receivables is largely dependent upon the level of retail
sales of automobiles and light trucks. The level of retail sales of automobiles
and light trucks may change as a result of a variety of social and economic
factors. Economic factors include interest rates, unemployment levels, the rate
of inflation and consumer perceptions of economic conditions generally. However,
the Seller is unable to determine and has no basis to predict whether or to what
extent economic or social factors will affect the level of vehicle sales.]
[TRUST'S RELATIONSHIP TO FORD AND FORD CREDIT
Neither the Seller nor Ford Credit is obligated to make any payments in
respect of the Notes, the Certificates or the Receivables. However, the ability
of the Seller to convey Subsequent Receivables on Subsequent Transfer Dates is
completely dependent upon the generation of additional receivables by Ford
Credit. The ability of Ford Credit to generate receivables is, in turn,
dependent to a large extent on the sales of automobiles and light trucks
manufactured or distributed by Ford Motor Company and its consolidated
subsidiaries ("Ford"). If, during the Funding Period, Ford were temporarily or
permanently no longer manufacturing or distributing vehicles, the rate of sales
of automobiles and light trucks manufactured by Ford would decrease, adversely
affecting the ability of the Seller to sell Subsequent Receivables to the Trust.
The use of incentive programs (e.g., manufacturers' rebate programs) also may
affect retail sales. There can be no assurance, therefore, that Ford Credit will
continue to generate receivables at the same rate as in prior years. In
addition, if Ford Credit were to cease acting as Servicer, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Securityholders.
Ford and Ford Credit are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports and other information with
the Commission. For further information regarding Ford and Ford Credit,
reference is made to such reports and other information which are available as
described under "Available Information" in the Prospectus.]
LIMITED ASSETS
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables[, the
Pre-Funding Account] [, the Yield Supplement Account] and the Reserve Account
[and the payments, if any, received pursuant to the [Interest Rate Cap,] [the
Interest Rate Swap] [and the] [Guaranteed Rate Agreement]]. Holders of the Notes
and the Certificates must rely for repayment upon payments on the Receivables
and, if and to the extent available, amounts on deposit in the [Pre-Funding
Account][, the Yield Supplement Account] [and
S-23
<PAGE> 26
the] Reserve Account [and the payments, if any, received pursuant to the
[Interest Rate Cap,] [the Interest Rate Swap] [and the] [Guaranteed Rate
Agreement]]. [The Pre-Funding Account will be available only during the Funding
Period and is designed solely to cover obligations of the Trust relating to a
portion of its funds not invested in Receivables and is not designed to cover
losses on the Receivables.] [The Yield Supplement Account is designed solely to
hold funds to be applied to provide payments to the Securityholders in respect
of Receivables the APR of which is less than the Required Rate.] Funds in the
Reserve Account will be available on each Distribution Date to cover shortfalls
in distributions of interest and principal on the Notes and the Certificates.
However, amounts to be deposited in the [Pre-Funding Account[, the Yield
Supplement Account] and the] Reserve Account are limited in amount. If the
[Pre-Funding Account[, the Yield Supplement Account] and the] Reserve Account is
[are] exhausted, the Trust will depend solely on current distributions on the
Receivables [and the payments, if any, received pursuant to the [Interest Rate
Cap,] [the Interest Rate Swap] [and the] [Guaranteed Rate Agreement]] to make
payments on the Notes and the Certificates. [Payments under [the Interest Rate
Cap,] [the Interest Rate Swap] [and the Guaranteed Rate Agreement] will be
received only under certain circumstances. See "Description of the Transfer and
Servicing Agreements[-- Interest Rate Cap,"] ["-- Interest Rate Swap"] [and "--
Guaranteed Rate Agreement" herein.]]
DEFICIENCIES FROM SALE UPON INSOLVENCY OR DISSOLUTION OF SELLER OR GENERAL
PARTNER
If an Insolvency Event or a dissolution occurs with respect to the Seller
or the General Partner while the Notes are outstanding, the Indenture Trustee is
required to promptly sell, dispose of or otherwise liquidate the Receivables
[and [the Interest Rate Cap,] [the Interest Rate Swap] [and the Guaranteed Rate
Agreement]] in a commercially reasonable manner on commercially reasonable
terms, unless (i) the Noteholders (other than the Seller, the Servicer or their
affiliates) of each class of Notes representing not less than a majority of the
aggregate unpaid principal amount of such class of the Notes and the right to
receive interest thereon, (ii) the Certificateholders (other than the Seller) of
Certificates representing not less than a majority of the aggregate Certificate
Balance and the right to receive interest thereon, and (iii) not less than a
majority of the holders (other than the Seller, the Servicer or their
affiliates) of certain interests, if any, in the Reserve Account disapprove of
such sale and in connection therewith, the Indenture Trustee (x) appoints an
entity acceptable to Ford Credit to acquire an interest in such Trust and to act
as a substitute "general partner" for federal income tax purposes and (y) an
opinion of counsel as to certain tax matters is delivered. The proceeds from any
such sale, disposition or liquidation of the Receivables will be treated as
collections on the Receivables and deposited in the Collection Account. The
proceeds from the liquidation of the Receivables [and [the Interest Rate Cap,]
[the Interest Rate Swap] [and the Guaranteed Rate Agreement]] and any amounts on
deposit in the Reserve Account, [the Pre-Funding Account,] [the Yield Supplement
Account,] the Note Payment Account and the Certificate Distribution Account will
be distributed first to Noteholders and then to Certificateholders in the
priority set forth in the Indenture. If such proceeds and amounts are not
sufficient to pay all the Notes in full, the amount of principal returned to
Noteholders will be reduced, no such proceeds or amounts will be distributed to
the Certificateholders, and the Noteholders and Certificateholders will incur a
loss on their investment. If such proceeds and amounts are sufficient to pay all
the Notes in full but are not sufficient to pay both the Notes and Certificates
in full, the amount of principal returned to Certificateholders will be reduced,
and the Certificateholders will incur a loss on their investment. See
"Description of the Transfer and Servicing Agreements -- Insolvency Event or
Dissolution" in the Prospectus.
SUBORDINATION
Distributions of interest and principal on the Certificates will be
subordinated in priority of payment to interest and principal due on the Notes.
Consequently, the Certificateholders will not receive any distributions with
respect to a Collection Period until the full amount of interest on and
principal of the Notes on such Distribution Date has been deposited in the Note
Payment Account.
S-24
<PAGE> 27
The Certificateholders will not receive any distributions of principal until
after the later to occur of (i) the Distribution Date next
succeeding the Distribution Date on which the [Class A-1] Notes were paid in
full and (ii) the Distribution Date. However, upon the occurrence
and during the continuation of an Event of Default which has resulted in an
acceleration of the Notes or following an Insolvency Event or a dissolution with
respect to the Seller or the General Partner, distributions of any amounts on
the Certificates will be subordinated in priority of payment to payment in full
of principal of principal of the Notes. [In addition, upon any reduction or
withdrawal by any Rating Agency of its rating of [the] [any class of] Notes (see
"-- Ratings of the Securities" below), the Certificateholders will not receive
any distributions of principal until after all the Notes have been paid in full
or until such rating has been restored].
If an Event of Default occurs, the Indenture Trustee or the holders of a
majority of the aggregate principal amount of all the Notes may declare the
principal of the Notes to be immediately due and payable, and the Indenture
Trustee may institute or be required to institute proceedings to collect amounts
due or exercise its remedies as a secured party (including foreclosure or sale
of the Receivables). In the event of a sale of Receivables by the Indenture
Trustee following an Event of Default or following an Insolvency Event or a
dissolution with respect to the Seller or the General Partner, there is no
assurance that the proceeds of such sale will be equal to or greater than the
aggregate outstanding principal amount of the Notes and the Certificate Balance
plus accrued interest. Because neither interest nor principal is distributed to
Certificateholders upon sale of the Receivables following an Event of Default
and acceleration of the Notes under the Indenture or following an Insolvency
Event or a dissolution with respect to the Seller or the General Partner until
all the Notes have been paid in full, the interests of Noteholders and the
Certificateholders may conflict, and the exercise by the Indenture Trustee of
its right to sell the Receivables or exercise other remedies under the Indenture
and applicable law may cause the Certificateholders to suffer a loss of all or
part of their investment. See "Description of the Notes -- The Indenture --
Events of Default; Rights upon Event of Default" and "Description of the
Transfer and Servicing Agreements -- Insolvency Event or Dissolution" in the
Prospectus.
In general, the Seller may, and in certain circumstances the
Certificateholders may, direct the Owner Trustee in the administration of the
Trust. However, because the Trust has pledged the property of the Trust to the
Indenture Trustee to secure the payment of the Notes, including in such pledge
certain rights of the Trust under the Sale and Servicing Agreement, the
Indenture Trustee and not the Seller or the Certificateholders has the power to
direct the Trust to take certain actions in connection with the administration
of the property of the Trust until the Notes have been paid in full and the lien
of the Indenture has been released. In addition, the Seller and
Certificateholders are not allowed to direct the Owner Trustee to take any
action which conflicts with the provisions of any of the Basic Documents. The
Indenture specifically prohibits the Owner Trustee from taking any action which
would impair the Indenture Trustee's security interest in the Trust and requires
the Owner Trustee to obtain the consent of the Indenture Trustee or the holders
of a majority of the aggregate principal amount of the Notes before modifying,
amending, supplementing, waiving or terminating any Basic Document or any
provision of any Basic Document. Therefore, until the Notes have been paid in
full, the ability to direct the Trust with respect to certain actions permitted
to be taken by it under the Basic Documents rests with the Indenture Trustee and
the Noteholders instead of the Seller or the Certificateholders.
If an Event of Servicing Termination were to occur, the holders of a
majority of the outstanding principal amount of the Notes, or the Indenture
Trustee acting on behalf of the Noteholders, and not the Seller or the
Certificateholders, would have the right to terminate the Servicer as the
servicer of the Receivables without consideration of the effect such termination
would have on Certificateholders. In addition, the holders of not less than a
majority of the outstanding principal amount of the Notes would have the right
to waive certain Events of Servicing Termination, without consideration of the
effect such waiver would have on Certificateholders. After all the Notes have
been paid in full and the lien of the Indenture has been released, upon the
occurrence of an Event of Servicing
S-25
<PAGE> 28
Termination, the holders of a majority of the outstanding Certificate Balance,
or the Owner Trustee acting on behalf of the Certificateholders, may terminate
the Servicer. See "Description of the Transfer and Servicing Agreements --
Events of Servicing Termination" and "-- Rights upon Event of Servicing
Termination" in the Prospectus.
MATURITY AND PREPAYMENT CONSIDERATIONS
The [Class A-2 Notes, the Class A-3 Notes and the] Certificates will not
receive any principal payments until the [Class A-1] Notes have been paid in
full[, and the Class A-3 Notes will not receive any principal payments until the
Class A-2 Notes have been paid in full]. In addition, no principal payments on
the Certificates will be made until the later of (i) the 199
Distribution Date and (ii) the Distribution Date next succeeding the
Distribution Date on which the [Class A-1] Notes are paid in full. As the rate
of payment of principal of [the] [each class of] Notes and the Certificates
depends on the rate of payment (including prepayments) of the principal balance
of the Receivables, final payment of [the] [any class of] Notes and the final
distribution in respect of the Certificates could occur significantly earlier
than the respective [Final Scheduled Distribution Dates] [final scheduled
Payment Dates or Distribution Date]. In addition, the rate of payment of
principal of [the] [each Class of] Notes and the Certificates will be affected
by the application of the Noteholders' Accelerated Principal to pay the
principal of the Notes. It is expected that final payment of [the] [each class
of] Notes and the final distribution in respect of the Certificates will occur
on or prior to the respective [Final Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution Date]. However, if sufficient funds are
not available to pay [the] [any class of] Notes or the Certificates in full on
or prior to the respective [Final Scheduled Distribution Dates] [final scheduled
Payment Dates or Distribution Date], final payment of [the] [such class of]
Notes and the final distribution in respect of the Certificates could occur
later than such dates. See "Maturity and Prepayment Considerations" herein and
in the Prospectus.
RATINGS OF THE SECURITIES
It is a condition to the issuance of [each class of] the Notes and of the
Certificates that [each class of] the Notes be rated in the highest rating
category, and the Certificates be rated [at least] " " or its equivalent,
by at least two nationally recognized rating agencies (the "Rating Agencies"). A
rating is not a recommendation to purchase, hold or sell Securities, inasmuch as
such rating does not comment as to market price or suitability for a particular
investor. The ratings of the Securities address the likelihood of the payment of
principal and interest on the Securities pursuant to their terms. [However, the
Rating Agencies do not evaluate, and the ratings of the Securities do not
address, the likelihood that the Note Prepayment Premium or the Certificate
Prepayment Premium will be paid.] There can be no assurance that a rating will
remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by a Rating Agency if in its judgment circumstances in the
future so warrant.
THE TRUST
GENERAL
The Issuer, Ford Credit Auto Owner Trust 199 , is a business trust formed
under the laws of the State of Delaware pursuant to the Trust Agreement for the
transactions described in this Prospectus Supplement. After its formation, the
Trust will not engage in any activity other than (i) acquiring, holding and
managing the Receivables and the other assets of the Trust and proceeds
therefrom, (ii) issuing the Notes and the Certificates, (iii) making payments on
the Notes and the Certificates and (iv) engaging in other activities that are
necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith.
The Trust will initially be capitalized with the Notes and the
Certificates. Certificates with an original principal balance of $ will be
retained by the Seller and the remaining Certificates will be sold to third
party investors that are expected to be unaffiliated with the Seller, the
Servicer or
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<PAGE> 29
their affiliates or the Trust. The proceeds from the issuance of the Notes and
the Certificates will be used by the Trust to purchase the [Initial] Receivables
from the Seller pursuant to the Sale and Servicing Agreement [, to fund the
deposit of the Pre-Funded Amount] and to fund the initial deposit into the
Reserve Account.
If the protection provided to the investment of the Securityholders by the
[Yield Supplement Account and the] Reserve Account is insufficient, the Trust
would have to look principally to the Obligors on the Receivables, the proceeds
from the repossession and sale of Financed Vehicles which secure defaulted
Receivables and the proceeds from any recourse against Dealers with respect to
the Receivables [and from the Pre-Funding Account]. In such event, certain
factors, such as the Trust's not having perfected security interests in the
Financed Vehicles in all states, may affect the Servicer's ability to repossess
and sell the collateral securing the Receivables, and thus may reduce the
proceeds to be distributed to the Securityholders. See "Description of the
Transfer and Servicing Agreements -- Distributions" [, "-- Yield Supplement
Account; Yield Supplement Agreement"] and "-- Reserve Account" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
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......................................... $
[Class A-2 Notes]......................................... [ ]
[Class A-3 Notes]......................................... [ ]
Certificates..............................................
-----------------
Total..................................................... $
=================
</TABLE>
THE OWNER TRUSTEE
is the Owner Trustee under the Trust Agreement. is
a Delaware and its principal offices are located at ,
Delaware. The Seller and its affiliates may maintain normal commercial banking
relations with the Owner Trustee and its affiliates.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include the [Initial]
Receivables purchased as of the [Initial] Cutoff Date [and will include any
Subsequent Receivables purchased as of the applicable Subsequent Cutoff Date
(the Initial Cutoff Date or any Subsequent Cutoff Date being individually
referred to herein as a "Cutoff Date")].
The [Initial] Receivables were purchased[, and the Subsequent Receivables
were or will be purchased,] by Ford Credit from Dealers in the ordinary course
of business in accordance with Ford Credit's underwriting standards, and were
[or will be] selected from Ford Credit's portfolio for inclusion in the
Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pools," as well as the following: each
Receivable (i) provides for level monthly payments which provide interest at the
APR and fully amortize the amount financed over an original term no greater than
months, (ii) is not more than days past due as of the [applicable]
Cutoff Date and has never been extended and (iii) was originated on or after
. As of the [applicable] Cutoff Date, no Obligor on any Receivable
was [or will have been] noted in the related records of the Servicer as being
the subject of a bankruptcy proceeding. No selection procedures believed by the
Seller to be adverse to the Noteholders or the Certificateholders were [or will
be used] in selecting the Receivables.
[The obligation of the Trust to purchase the Subsequent Receivables on a
Subsequent Transfer Date will be subject to the Receivables in the Trust,
including the Subsequent Receivables to be conveyed to the Trust on such
Subsequent Transfer Date, meeting the following criteria: (i) not
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<PAGE> 30
more than % of the principal balances of the Receivables in the Trust will
represent vehicles financed at Ford Credit's used vehicle rates; and (ii) the
weighted average APR of the Receivables in the Trust will not be less than %,
unless the Seller increases the Reserve Initial Deposit by the amounts, if any,
specified by the Rating Agencies to maintain the ratings of the Notes and the
Certificates. In addition, such obligation will be subject to the Receivables,
including the Subsequent Receivables to be transferred to the Trust on such
Subsequent Transfer Date, having a weighted average remaining term not greater
than months. Such criteria will be based on the characteristics of the
Initial Receivables on the Initial Cutoff Date and any Subsequent Receivables on
the related Subsequent Cutoff Dates.]
[The Initial Receivables will represent approximately % of the
aggregate initial principal amount of the Securities. However, except for the
criteria described in the preceding paragraphs and the criteria, if any,
specified by the Rating Agencies to maintain the ratings of the Notes and the
Certificates, there will be no required characteristics of the Subsequent
Receivables. Therefore, following the transfer of Subsequent Receivables to the
Trust, the aggregate characteristics of the entire Receivables Pool, including
the composition of the Receivables, the distribution by APR and the geographic
distribution described in the following tables, may vary significantly from
those of the Initial Receivables.]
Neither Ford Credit nor any of its affiliates maintains records adequate to
provide quantitative data regarding its prepayment experience on its portfolio
of U.S. retail installment sale contracts for either new or used vehicles.
However, Ford Credit (i) believes that the actual rate of prepayments will
result in a substantially shorter weighted average life than the scheduled
weighted average life and (ii) estimates that the actual weighted average life
of its portfolio of U.S. retail installment contracts for new and used
automobiles and light trucks ranges between 60% and 70% of their scheduled
weighted average life. See "Maturity and Prepayment Considerations" herein and
in the Prospectus.
The composition, geographical distribution, and distribution by annual
percentage rate of the [Initial] Receivables as of the [Initial] Cutoff Date are
set forth in the following tables.
COMPOSITION OF THE [INITIAL] RECEIVABLES POOL
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
<S> <C>
Aggregate Principal Balance................................. $
Number of Receivables
Average Principal Balance................................... $
$ to
(Range)................................................... $
Average Original Amount Financed............................ $
$ to
(Range)................................................... $
Weighted Average APR........................................ %
(Range)................................................... % to %
Weighted Average Original Term.............................. months
(Range)................................................... to months
Weighted Average Remaining Term............................. months
(Range)................................................... to months
Scheduled Weighted Average Life(1).......................... months
</TABLE>
- -------------------------
(1) Based on payments due on or after the [Initial] Cutoff Date, assuming that
no prepayments on the [Initial] Receivables are made after the [Initial]
Cutoff Date and that all payments on Simple Interest Receivables are
received on their respective due dates.
S-28
<PAGE> 31
GEOGRAPHIC DISTRIBUTION OF THE [INITIAL] RECEIVABLES POOL
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE(2)
-------- -------------------
<S> <C>
Alabama[(3)]................ %
Alaska......................
Arizona.....................
Arkansas....................
California..................
Colorado....................
Connecticut.................
Delaware....................
District of Columbia........
Florida.....................
Georgia.....................
Hawaii......................
Idaho.......................
Illinois....................
Indiana.....................
Iowa........................
Kansas......................
Kentucky....................
Louisiana...................
Maine.......................
Maryland....................
Massachusetts...............
Michigan....................
Minnesota...................
Mississippi.................
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE(2)
-------- -------------------
<S> <C>
Missouri.................... %
Montana.....................
Nebraska....................
Nevada......................
New Hampshire...............
New Jersey..................
New Mexico..................
New York....................
North Carolina..............
North Dakota................
Ohio........................
Oklahoma....................
Oregon......................
Pennsylvania[(3)]...........
Rhode Island................
South Carolina..............
South Dakota................
Tennessee...................
Texas.......................
Utah........................
Vermont.....................
Washington..................
West Virginia...............
Wisconsin...................
Wyoming.....................
</TABLE>
- -------------------------
(1) Based on the billing addresses of the Obligors on the [Initial] Receivables
as of the [Initial] Cutoff Date.
(2) Percentages may not add to 100.00% due to rounding. States showing 0.0% each
represent less than 0.05%.
[(3) Alabama and Pennsylvania were excluded for administrative reasons.]
S-29
<PAGE> 32
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.
By aggregate principal balance, approximately % of the [Initial]
Receivables constitute Precomputed Receivables, % of the [Initial]
Receivables constitute Simple Interest Receivables and % constitute Final
Payment Receivables. In addition, % of the [Initial] Receivables that are
Precomputed Receivables and % that are Simple Interest Receivables constitute
Final Payment Receivables. See "The Receivables Pools" in the Prospectus for a
further description of the characteristics of Precomputed Receivables, Simple
Interest Receivables and Final Payment Receivables.
Based on principal balance, less than % of the [Initial] Receivables
provide recourse to the Dealer which originated the Receivable. See "The
Receivables Pools" in the Prospectus for a further description of such recourse
provisions.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables are the same size and amortize at
the same rate and that each receivable in each month of its life will either be
paid as
S-30
<PAGE> 33
scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes and the
Certificates will depend on the rate of payment (including prepayments) of the
principal balance of the Receivables, final payment of any class of Notes and
the final distribution in respect of the Certificates could occur significantly
earlier than the respective [Final Scheduled Distribution Dates] [final
scheduled Payment Dates or Distribution Date]. Reinvestment risk associated with
early payment of the Notes and the Certificates will be borne exclusively by the
Noteholders and the Certificateholders, respectively.
The table captioned "Percent of Initial Note Principal Amount or Initial
Certificate Balance at Various ABS Percentages" (the "ABS Table") has been
prepared on the basis of the characteristics of the [Initial] Receivables [and
certain assumed characteristics with respect to the Subsequent Receivables]. The
ABS Table assumes that (i) the Receivables prepay in full at the specified
constant percentage of ABS monthly, with no defaults, losses or repurchases,
(ii) each scheduled monthly payment on the Receivables is made on the last day
of each month and each month has 30 days, (iii) payments on the Notes [are made
on each Payment Date] and distributions on the Certificates are made on each
Distribution Date (and each such date is assumed to be the day of [the month
in which such Payment Date or Distribution Date occurs] [each applicable
month]), (iv) the balance in the Reserve Account on each [Payment Date and]
Distribution Date is equal to the Specified Reserve Balance, and (v) the Seller
exercises its option to purchase the Receivables on the first Distribution Date
on which it is permitted to do so, as described herein. [State assumed
characteristics with respect to the Subsequent Receivables.] [And/or, state
other assumptions on which the ABS Table is based.] The pools have an assumed
cutoff date of , 199 . The ABS Table indicates the projected weighted
average life of each class of Notes and the Certificates and sets forth the
percent of the initial principal amount of each class of Notes and the percent
of the initial Certificate Balance that is projected to be outstanding after
each of the [Payment Dates or] Distribution Dates shown at various constant ABS
percentages.
The ABS Table also assumes that the [Initial] Receivables have been
aggregated into hypothetical pools with all of the [Initial] Receivables
within each such pool having the following characteristics and that the level
scheduled monthly payment for each of the pools (which is based on its
aggregate principal balance, APR, original term to maturity and remaining term
to maturity as of the [Initial] Cutoff Date) will be such that each pool will be
fully amortized by the end of its remaining term to maturity. [State assumed
characteristics with respect to hypothetical pools of Subsequent Receivables.]
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
---- ----------------- --- ------------- --------------
<S> <C> <C> <C> <C>
1................................... $ %
2...................................
3...................................
4...................................
-----------------
$
=================
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant
S-31
<PAGE> 34
percentages of ABS specified, even if the original and remaining terms to
maturity of the Receivables are as assumed. Any difference between such
assumptions and the actual characteristics and performance of the Receivables,
or actual prepayment experience, will affect the percentages of initial balances
outstanding over time and the weighted average lives of each class of Notes and
the Certificates.
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES CLASS A-3 NOTES
[PAYMENT] [DISTRIBUTION] ---------------------------------- ---------------------------------- ----------------
DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8% 0.5% 1.0%
------------------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/15/96.................. 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
07/15/96..................
08/15/96..................
09/15/96..................
10/15/96..................
11/15/96..................
12/15/96..................
01/15/97..................
02/15/97..................
03/15/97..................
04/15/97..................
05/15/97..................
06/15/97..................
07/15/97..................
08/15/97..................
09/15/97..................
10/15/97..................
11/15/97..................
12/15/97..................
01/15/98..................
02/15/98..................
03/15/98..................
04/15/98..................
05/15/98..................
06/15/98..................
07/15/98..................
08/15/98..................
09/15/98..................
10/15/98..................
11/15/98..................
12/15/98..................
01/15/99..................
02/15/99..................
03/15/99..................
04/15/99..................
05/15/99..................
06/15/99..................
07/15/99..................
Weighted Average Life
(years)(1)...............
<CAPTION>
CLASS A-3 NOTES
[PAYMENT] [DISTRIBUTION] ----------------
DATE 1.5% 1.8%
------------------------ ---- ----
<S> <C> <C>
06/15/96.................. 100.000 100.000
07/15/96..................
08/15/96..................
09/15/96..................
10/15/96..................
11/15/96..................
12/15/96..................
01/15/97..................
02/15/97..................
03/15/97..................
04/15/97..................
05/15/97..................
06/15/97..................
07/15/97..................
08/15/97..................
09/15/97..................
10/15/97..................
11/15/97..................
12/15/97..................
01/15/98..................
02/15/98..................
03/15/98..................
04/15/98..................
05/15/98..................
06/15/98..................
07/15/98..................
08/15/98..................
09/15/98..................
10/15/98..................
11/15/98..................
12/15/98..................
01/15/99..................
02/15/99..................
03/15/99..................
04/15/99..................
05/15/99..................
06/15/99..................
07/15/99..................
Weighted Average Life
(years)(1)...............
</TABLE>
- -------------------------
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, or Class A-3
Note is determined by (i) multiplying the amount of each principal payment
on a Note by the number of years from the date of the issuance of the Note
to the related [Payment] [Distribution] Date, (ii) adding the results and
(iii) dividing the sum by the related initial principal amount of the Note.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-32
<PAGE> 35
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CERTIFICATES
----------------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
06/15/96............................................. 100.000 100.000 100.000 100.000
07/15/96.............................................
08/15/96.............................................
09/15/96.............................................
10/15/96.............................................
11/15/96.............................................
12/15/96.............................................
01/15/97.............................................
02/15/97.............................................
03/15/97.............................................
04/15/97.............................................
05/15/97.............................................
06/15/97.............................................
07/15/97.............................................
08/15/97.............................................
09/15/97.............................................
10/15/97.............................................
11/15/97.............................................
12/15/97.............................................
01/15/98.............................................
02/15/98.............................................
03/15/98.............................................
04/15/98.............................................
05/15/98.............................................
06/15/98.............................................
07/15/98.............................................
08/15/98.............................................
09/15/98.............................................
10/15/98.............................................
11/15/98.............................................
12/15/98.............................................
01/15/99.............................................
02/15/99.............................................
03/15/99.............................................
04/15/99.............................................
05/15/99.............................................
06/15/99.............................................
07/15/99.............................................
Weighted Average Life (years)(1).....................
</TABLE>
- -------------------------
(1) The weighted average life of a Certificate is determined by (i) multiplying
the amount of each distribution in respect of the Certificate Balance of a
Certificate by the number of years from the date of the issuance of the
Certificate to the related Distribution Date, (ii) adding the results and
(iii) dividing the sum by the original Certificate Balance of the
Certificate.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCE
THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-33
<PAGE> 36
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning Ford Credit's experience
with respect to its portfolio of U.S. retail installment sale contracts for new
and used automobiles and light trucks (including previously sold contracts which
Ford Credit continues to service, but not including retail installment sale
contracts purchased by Ford Credit under certain special financing programs).
[Ford Credit began originating Final Payment Receivables in 19 .] There is no
assurance that the behavior of the Receivables will be comparable to Ford
Credit's experience shown in the following tables or that the trend in losses
and delinquencies will continue into the future.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts
Outstanding During the
Period........................ 3,572,022 3,610,904 3,612,265 3,438,699 3,430,145 3,398,797 3,388,214
Average Daily Delinquencies as a
Percent of Average Contracts
Outstanding
31-60 Days(2)................. 2.83% 2.44% 2.54% 2.21% 2.03% 2.02% 2.35%
61-90 Days(2)................. 0.32% 0.25% 0.26% 0.17% 0.15% 0.15% 0.20%
Over 90 Days(3)............... 0.10% 0.07% 0.08% 0.04% 0.03% 0.03% 0.04%
</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.
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding During
the Period (Millions)
Gross................................ $40,516 $40,098 $40,269 $35,699 $33,703 $31,205 $29,505
Net.................................. $34,062 $33,517 $33,647 $30,015 $28,526 $26,152 $24,637
Percent of Average Gross Portfolio
Outstanding During the Period
without Recourse to Dealers........ 99.5% 99.3% 99.4% 99.1% 98.6% 97.7% 96.4%
Repossessions as a Percent of Average
Number of Contracts Outstanding.... 2.70%(2) 2.84%(2) 3.01% 2.38% 2.15% 2.27% 2.74%
Net Losses as a Percent of Gross
Liquidations(3).................... 2.32% 1.91% 2.21% 1.43% 1.06% 1.16% 1.52%
Net Losses as a Percent of Average
Gross Portfolio Outstanding(3)..... 1.32%(2) 1.11%(2) 1.28% 0.82% 0.62% 0.69% 0.90%
Net Losses as a Percent of Average
Net Portfolio Outstanding(3)....... 1.55%(2) 1.33%(2) 1.33% 0.98% 0.73% 0.82% 1.08%
</TABLE>
- -------------------------
(1) All gross amounts and percentages are based on the gross amount scheduled to
be paid on each contract including unearned finance and other charges. All
net amounts and percentages are based on the net amount scheduled to be paid
on each contract excluding unearned finance and other charges. The
information in the table includes U.S. retail installment sale contracts for
new and used automobiles and light trucks and includes previously sold
contracts which Ford Credit continues to service; it does not include retail
installment sale contracts purchased by Ford Credit under certain special
financing programs.
(2) Annualized rate.
(3) "Net Losses" are equal to the aggregate balance of all contracts which are
determined to be uncollectible in the period less any recoveries on
contracts charged-off in the period or any prior periods. Effective January
1, 1993, net losses include expenses associated with outside collection
agencies. Other expenses associated with collection, repossession, and
disposition of the vehicle continue to be excluded. These other expenses are
not material to the data presented.
As shown above, credit losses have increased since the beginning of 1995
reversing a general trend of improvement that had begun in 1989. The increase
reflects an increase in losses per
S-34
<PAGE> 37
repossession and an increase in repossession rates. See "Description of the
Transfer and Servicing Agreements -- Servicing Procedures" in the Prospectus.
POOL FACTORS
The "Note Pool Factor" for [the] [each class of] Notes will be a
seven-digit decimal which the Servicer will compute prior to each distribution
with respect to [the] [such class of] Notes indicating the remaining outstanding
principal amount of [the] [such class of] Notes, as of the applicable
[Distribution] [Payment] Date (after giving effect to payments to be made on
such [Distribution] [Payment] Date), as a fraction of the initial outstanding
principal amount of [the] [such class of] Notes. The "Certificate Pool Factor"
for the Certificates will be a seven-digit decimal which the Servicer will
compute prior to each distribution with respect to the Certificates indicating
the remaining Certificate Balance, as of the applicable Distribution Date (after
giving effect to distributions to be made on such Distribution Date), as a
fraction of the initial Certificate Balance. [The] [Each] Note Pool Factor and
the Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal amount of the
[applicable class of] Notes, or the reduction of the Certificate Balance, as the
case may be, as a result of scheduled payments, prepayments and liquidations of
the Receivables [(and also as a result of a prepayment arising from application
of the Pre-Funding Account)]. [[The] [Each] Note Pool Factor and the Certificate
Pool Factor will not change as a result of the addition of Subsequent
Receivables.] A Noteholder's portion of the aggregate outstanding principal
amount of the [related class of] Notes is the product of (i) the original
denomination of such Noteholder's Note and (ii) the [applicable] Note Pool
Factor. A Certificateholder's portion of the aggregate outstanding Certificate
Balance for the Certificates is the product of (a) the original denomination of
such Certificateholder's Certificate and (b) the Certificate Pool Factor.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Maturity and Prepayment
Considerations" in the Prospectus. In addition, the [Class A-2 Notes, the Class
A-3 Notes and the] Certificates will not receive any principal payments until
the [Class A-1] Notes have been paid in full[, and the Class A-3 Notes will not
receive any principal payments until the Class A-2 Notes have been paid in
full]. In addition, no principal payments on the Certificates will be made until
the later of (i) the 199 Distribution Date and (ii) the Distribution
Date next succeeding the Distribution Date on which the [Class A-1] Notes are
paid in full. See "Description of the Notes -- Payments of Principal" and
"Description of the Certificates -- Distributions of Principal Payments" herein.
As the rate of payment of principal of [the] [each class of] Notes and the
Certificates depends on the rate of payment (including prepayments) of the
principal balance of the Receivables, final payment of [the] [any class of]
Notes and the final distribution in respect of the Certificates could occur
significantly earlier than the respective [Final Scheduled Distribution Dates]
[final scheduled Payment Dates or Distribution Date]. In addition, the rate of
payment of principal of [the] [each Class of] Notes and the Certificates will be
affected by the application of the Noteholders' Accelerated Principal to pay
principal of the Notes.
It is expected that final payment of [the] [each class of] Notes and the
final distribution in respect of the Certificates will occur on or prior to the
respective [Final Scheduled Distribution Dates] [final scheduled Payment Dates
or Distribution Date]. Failure to make final payment of [the] [any class of]
Notes on or prior to the respective Final Scheduled [Payment] [Distribution]
Dates would constitute an Event of Default under the Indenture. See "Description
of the Notes -- The Indenture -- Events of Default; Rights upon Event of
Default" in the Prospectus. In addition, the Sale and Servicing Agreement
requires that any remaining Certificate Balance be paid in full on the Final
Scheduled Distribution Date. However, no assurance can be given that sufficient
funds will be
S-35
<PAGE> 38
available to pay [the] [each class of] Notes and the Certificates in full on or
prior to the respective [Final Scheduled Distribution Dates] [final scheduled
Payment Dates or Distribution Date]. If sufficient funds are not available,
final payment of [the] [any class of] Notes and the final distribution in
respect of the Certificates could occur later than such dates.
The rate of prepayments of the Receivables may be influenced by a variety
of economic, social and other factors, and under certain circumstances relating
to breaches of representations, warranties or covenants, the Seller and/or the
Servicer will be obligated to repurchase Receivables from the Trust. See "The
Receivables Pool" herein and "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" in the Prospectus. A higher
than anticipated rate of prepayments will reduce the aggregate principal balance
of the Receivables more quickly than expected and thereby reduce anticipated
aggregate interest payments on the Securities. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of Receivables will be borne
entirely by the Noteholders and the Certificateholders as set forth in the
priority of distributions herein. Such reinvestment risks include the risk that
interest rates may be lower at the time such holders received payments from the
Trust than interest rates would otherwise have been had such prepayments not
been made or had such prepayments been made at a different time.
Holders of Securities should consider, in the case of Securities purchased
at a discount, the risk that a slower than anticipated rate of principal
payments on the Receivables could result in an actual yield that is less than
the anticipated yield and, in the case of Securities purchased at a premium, the
risk that a faster than anticipated rate of principal payments on the
Receivables could result in an actual yield that is less than the anticipated
yield.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Indenture will be filed with the Commission following the issuance of the
Securities. The following summary describes certain terms of the Notes and the
Indenture. The summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Notes and
the Indenture, which are hereby incorporated by reference. The following summary
supplements the description of the general terms and provisions of the Notes of
any given series and the related Indenture set forth under the headings
"Description of the Notes" and "Certain Information Regarding the Securities" in
the Prospectus, to which description reference is hereby made. , a
, will be the Indenture Trustee under the Indenture.
PAYMENTS OF INTEREST
[The] [Each class of] Notes [other than the Class A-2 Notes] will
constitute Fixed Rate Securities, as such term is defined under "Certain
Information Regarding the Securities -- Fixed Rate Securities" in the
Prospectus. [The Class A-2 Notes will constitute Floating Rate Securities which
are LIBOR Securities, as such terms are defined under "Certain Information
Regarding the Securities -- Floating Rate Securities" in the Prospectus.]
Interest on the principal amount[s] of the [classes of the] Notes will accrue at
the [respective] per annum Note Interest Rate[s] and will be payable to the
Noteholders [monthly] [quarterly] on each [Distribution] [Payment] Date
commencing , 199 . [However, if on any two consecutive Distribution
Dates any amount is withdrawn from the Reserve Account to cover shortfalls on
the Notes or the Certificates, then each following Distribution Date will
constitute a Payment Date, until the quarterly Payment Date following the first
Distribution Date on which (i) no amount is withdrawn from the Reserve Account
to cover shortfalls and (ii) the amount on deposit in the Reserve Account is
equal to the Specified Reserve Balance.] [However, if the commercial paper
rating or certificate of deposit rating of the Investment
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Provider is at any time reduced below A-1+ or P1 by the applicable Rating Agency
and the Servicer is unable to obtain a Replacement Guaranteed Rate Agreement or
a pledge of securities or otherwise satisfy the applicable Rating Agency within
60 days of receiving notice of such decline, then each following Distribution
Date will constitute a Payment Date. See "Description of the Transfer and
Servicing Agreements -- Guaranteed Rate Agreement" herein.] Interest will accrue
from and including the Closing Date (in the case of the first [Distribution]
[Payment] Date), or from the most recent [Distribution] [Payment] Date on which
interest has been paid to but excluding the following [Distribution] [Payment]
Date (each an "Interest Period"). [Interest on the Class A-1 Notes will be
calculated on the basis of actual days elapsed and a 365- or 366-day year, as
applicable.] Interest on the [[Class A-1 Notes and] Class A-3] Notes will be
calculated on the basis of a 360-day year of twelve 30-day months. [Interest on
the Class A-2 Notes will be calculated on the basis of actual days elapsed and a
360-day year.] Interest accrued as of any [Distribution] [Payment] Date but not
paid on such [Distribution] [Payment] Date will be due on the next
[Distribution] [Payment] Date, together with interest on such amount at the
[applicable] Note Interest Rate [plus 2.00%] (to the extent lawful). [With
respect to the Class A-2 Rate, the "Index Maturity" for LIBOR will be [one]
[three] month[s] [(in the case of quarterly Payment Dates) and one month (in the
case of monthly Payment Dates)] and the "Interest Reset Period" for such
calculation will be the Interest Period. See "Certain Information Regarding the
Securities -- Floating Rate Securities" in the Prospectus.] Interest payments on
the Notes will generally be derived from the Available Funds remaining after the
payment of the Servicing Fee and from the Reserve Account. See "Description of
the Transfer and Servicing Agreements -- Distributions" and "-- Reserve Account"
herein. [Interest payments to all classes of Noteholders will have the same
priority. Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Notes on any
[Distribution] [Payment] Date, in which case each class of Noteholders will
receive their ratable share (based upon the aggregate amount of interest due to
such class of Noteholders) of the aggregate amount available to be distributed
in respect of interest on the Notes.]
PAYMENTS OF PRINCIPAL
Principal payments will be made [quarterly] to the Noteholders on each
[Distribution] [Payment] Date in an amount generally equal to the sum [, for
each of the three Collection Periods preceding such Payment Date,] of (i) the
Noteholders' Percentage of the amount (such amount, the "Regular Principal")
equal to the sum of (a) all scheduled payments of principal and the principal
portion of all prepayments in full (and certain partial prepayments) collected
with respect to Precomputed Receivables (including amounts withdrawn from the
Payahead Account but excluding amounts deposited into the Payahead Account), (b)
the principal portion of all payments collected with respect to Simple Interest
Receivables, and (c) the principal balance of each Receivable purchased by the
Servicer, repurchased by the Seller or liquidated by the Servicer, each with
respect to [the preceding] [such] Collection Period, plus (ii) % of the
portion, if any, of the Available Funds for such Collection Period that remains
after payment of (a) the Servicing Fee, (b) the Accrued Note Interest, (c) the
portion of the Regular Principal allocated to the Noteholders pursuant to clause
(i), (d) the Accrued Certificate Interest, (e) the portion of the Regular
Principal distributed to Certificateholders as described under "Description of
the Certificates -- Distributions of Principal Payments" herein, and (f) the
amount, if any, required to be deposited in the Reserve Account on [such] [the
related] Distribution Date [plus the excess of the amount on deposit in the
Reserve Account on such Distribution Date (after giving effect to all deposits
or withdrawals therefrom on such Distribution Date) over the Specified Reserve
Balance)] (such percentage of the remaining portion of Available Funds [plus
such excess], the "Noteholders' Accelerated Principal"). [Principal] [Amounts
deposited in the Note Payment Account on each Distribution Date in respect of
principal] payments on the Notes generally will be derived from the Available
Funds and the amount, if any, in the Reserve Account up to the Available Reserve
Amount remaining after the payment of the Servicing Fee and the Accrued Note
Interest and, in the case of the Noteholders'
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Accelerated Principal, the Certificateholders' Distribution Amount and the
amount, if any, required to be deposited into the Reserve Account. See
"Description of the Transfer and Servicing Agreements -- Distributions" and "--
Reserve Account" herein.
On the Business Day immediately preceding each Distribution Date (a
"Determination Date") the Indenture Trustee will determine the amount in the
Collection Account allocable to interest and the amount allocable to principal
on the basis described under "Description of the Transfer and Servicing
Agreements -- Distributions" in the Prospectus, and payments to Securityholders
on the following Distribution Date will be based on such allocation.
[On each Distribution Date, the Indenture Trustee will deposit into the
Note Payment Account amounts set aside for the payment of principal and interest
on the Notes on the related Payment Date, as described under "Description of the
Transfer and Servicing Agreements -- Distributions" herein. Such amounts will be
invested from the date of deposit to the related Payment Date by the Indenture
Trustee in [Permitted Investments] [certain eligible investments pursuant to the
Guaranteed Rate Agreement]. [See "Description of the Transfer and Servicing
Agreements -- Guaranteed Rate Agreement" herein.]]
Principal payments on the Notes will be applied on each [Distribution]
[Payment] Date [, first,] to the principal amount of the [Class A-1] Notes until
such principal amount is reduced to zero[, then second, to the principal amount
of the Class A-2 Notes until such principal amount is reduced to zero and then
third, to the principal amount of the Class A-3 Notes until such principal
amount is reduced to zero]. The principal amount of the [Class A-1] Notes, to
the extent not previously paid, will be due on the [Class A-1] Final Scheduled
[Distribution] [Payment] Date[, the principal amount of the Class A-2 Notes, to
the extent not previously paid, will be due on the Class A-2 Final Scheduled
[Distribution] [Payment] Date, and the principal amount of the Class A-3 Notes,
to the extent not previously paid, will be due on the Class A-3 Final Scheduled
[Distribution] [Payment] Date]. The actual date on which the aggregate
outstanding principal amount of [the] [any class of] Notes is paid may be
earlier or later than the [respective] Final Scheduled [Distribution] [Payment]
Date[s] set forth above based on a variety of factors, including those described
under "Maturity and Prepayment Considerations" herein and in the Prospectus.
[MANDATORY REDEMPTION
[The] [A class or classes of] Notes will be redeemed in part on the
Distribution Date on or immediately following the last day of the Funding Period
in the event that amounts remain on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Receivables, including any such
purchase on such date (a "Mandatory Redemption"). If the amount on deposit in
the Pre-Funding Account is less than or equal to $ , then such amount will
be used to redeem the [Class A-1] Notes [up to an amount not to exceed their
outstanding principal amount and then to redeem the Class A-2 Notes]. Otherwise
the amount on deposit in the Pre-Funding Account on such date will be used to
redeem [each class of] the Notes and the Certificates, and the aggregate
principal amount of [each class of] the Notes to be redeemed will be an amount
equal to [the Notes'] [such class'] Pre-Funded Percentage of the amount then on
deposit in the Pre-Funding Account.
[The Note Prepayment Premium will be payable by the Trust to the
Noteholders pursuant to a Mandatory Redemption if the amount on deposit in the
Pre-Funding Account exceeds $ . The Note Prepayment Premium [for each
class of Notes] will equal the excess, if any, discounted as described below, of
(i) the amount of interest that would accrue on [the Notes'] [such class']
Pre-Funded Percentage of any remaining Pre-Funded Amount (the "Note Prepayment
Amount") at the Note Interest Rate borne by [the] [such class of] Notes during
the period commencing on and including the Distribution Date on which such Note
Prepayment Amount is required to be distributed to the Noteholders [of such
class] to but excluding [, in the case of the Class A-1 Notes,
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, in the case of the Class A-2 Notes and , in the case of the Class
A-3 Notes], over (ii) the amount of interest that would have accrued on such
Note Prepayment Amount over the same period at a per annum rate of interest
equal to the bond equivalent yield to maturity on the Determination Date
preceding such Distribution Date on the [, in the case of the Class A-1 Notes,
the , in the case of the Class A-2 Notes and the , in the case of
the Class A-3 Notes]. Such excess shall be discounted to present value to such
Distribution Date at the applicable yield described in clause (ii) above.
Pursuant to the Sale and Servicing Agreement, the Seller will be obligated to
pay the sum of the Note Prepayment Premium [for each class of Notes] and the
Certificate Prepayment Premium to the Trust as liquidated damages for the
failure to deliver Subsequent Receivables having an aggregate principal balance
equal to the Pre-Funded Amount. The Trust's obligation to pay the Note
Prepayment Premium [for each class of Notes] and the Certificate Prepayment
Premium will be limited to funds received from the Seller pursuant to the
preceding sentence. In the event that such funds are insufficient to pay the
Note Prepayment Premium [for each class of Notes] and the Certificate Prepayment
Premium in full, Noteholders [of each class of Notes] will receive their ratable
share (based upon the aggregate Note Prepayment Premium [for such class]) of the
aggregate amount available to be distributed in respect of the Note Prepayment
Premium and the Certificate Prepayment Premium. No other assets of the Seller or
the Trust will be available for the purpose of making such payment.]]
OPTIONAL REDEMPTION
The [Class A-3] Notes will be redeemed in whole, but not in part, on any
Distribution Date [after all the other classes of Notes have been paid in full]
on which the Servicer exercises its option to purchase the Receivables. The
Servicer may purchase the Receivables when the Pool Balance shall have declined
to 10% or less of the Initial Pool Balance, as described in the Prospectus under
"Description of the Transfer and Servicing 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 the description of the general terms and
provisions of the Certificates of any given series and the related Trust
Agreement set forth under the headings "Description of the Certificates,"
"Certain Information Regarding the Securities" and "Description of the Transfer
and Servicing Agreements" in the Prospectus, to which description reference is
hereby made.
DISTRIBUTIONS OF INTEREST INCOME
On each Distribution Date, commencing , 199 , the
Certificateholders will be entitled to distributions in an amount equal to the
amount of interest that would accrue on the Certificate Balance at the
Certificate Rate. The Certificates will constitute Fixed Rate Securities, as
such term is defined under "Certain Information Regarding the Securities --
Fixed Rate Securities" in the Prospectus. Interest in respect of a Distribution
Date will accrue from and including the Closing Date (in the case of the first
Distribution Date) or from and including the most recent Distribution Date on
which interest has been paid to but excluding the following Distribution Date,
and will be calculated on the basis of a 360-day year of twelve 30-day months.
Interest distributions due for any
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Distribution Date but not distributed on such Distribution Date will be due on
the next Distribution Date increased by an amount equal to interest on such
amount at the Certificate Rate (to the extent lawful). Interest distributions
with respect to the Certificates will generally be funded from the portion of
the Available Funds and the funds in the Reserve Account remaining after the
distribution of the Servicing Fee and the Noteholders' Payment Amount. Following
the occurrence of an Event of Default resulting in an acceleration of the Notes
or following an Insolvency Event or a dissolution with respect to the Seller or
the General Partner, the Noteholders will be entitled to be paid in full before
any distributions may be made on the Certificates. See "Description of the
Transfer and Servicing Agreements -- Distributions" and "-- Reserve Account"
herein.
DISTRIBUTIONS OF PRINCIPAL PAYMENTS
Certificateholders will be entitled to distributions on each Distribution
Date, commencing with the later of (i) the Distribution Date and (ii) the
Distribution Date next succeeding the Distribution Date on which the [Class
A-1] Notes are paid in full, in an amount generally equal to the
Certificateholders' Percentage of the Regular Principal. Distributions with
respect to principal payments will generally be funded from the portion of the
Available Funds and funds in the Reserve Account remaining after the
distribution of the Servicing Fee, the Noteholders' Payment Amount and the
Accrued Certificate Interest. See "Description of the Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" herein. However, following
the occurrence of an Event of Default resulting in an acceleration of the Notes
or following an Insolvency Event or a dissolution with respect to the Seller or
the General Partner, the Noteholders will be entitled to be paid in full before
any distributions may be made on the Certificates. [In addition, upon any
reduction or withdrawal by any Rating Agency of its rating of [any class of] the
Notes, then, with respect to each Distribution Date thereafter, the
Certificateholders will not receive any distributions of principal until all the
Notes have been paid in full or such rating has been restored. There can be no
assurance that a rating will remain for a given period of time or that a rating
will not be lowered or withdrawn entirely by a Rating Agency if in its judgment
circumstances in the future so warrant.]
[MANDATORY REPURCHASE
Cash distributions to Certificateholders will be made, on a pro rata basis,
on the Distribution Date on or immediately following the last day of the Funding
Period in the event that the amount on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Receivables, including any such
purchase on such date, exceeds $ (a "Mandatory Repurchase"). The aggregate
principal balance of the Certificates to be repurchased will be an amount equal
to the Certificates' Pre-Funded Percentage of the amount then on deposit in the
Pre-Funding Account.
[The Certificate Prepayment Premium will be payable by the Trust to the
Certificateholders at the time of any prepayment of the Certificates pursuant to
a Mandatory Repurchase. The Certificate Prepayment Premium for the Certificates
will equal the excess, if any, discounted as described below, of (i) the amount
of interest that would accrue on the Certificates' share of any remaining
Pre-Funded Amount (the "Certificate Prepayment Amount") at the Certificate Rate
during the period commencing on and including the Distribution Date on which
such Certificate Prepayment Amount is required to be distributed to
Certificateholders to but excluding , over (ii) the amount of interest
that would have accrued on such Certificate Prepayment Amount over the same
period at a per annum rate of interest equal to the bond equivalent yield to
maturity on the Determination Date preceding such Distribution Date on the
. Such excess shall be discounted to present value to such Distribution
Date at the yield described in clause (ii) above. Pursuant to the Sale and
Servicing Agreement, the Seller will be obligated to pay the sum of the Note
Prepayment Premium [for each class of Notes] and the Certificate Prepayment
Premium to the Trust as liquidated damages for the failure to deliver Subsequent
Receivables having an aggregate principal balance equal to the Pre-Funded
Amount. The Trust's obligation to pay the Note Prepayment Premium [for each
class of Notes] and the Certificate Prepayment Premium will be
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limited to funds received from the Seller pursuant to the preceding sentence. In
the event that such funds are insufficient to pay the Note Prepayment Premium
[for each class of Notes] and the Certificate Prepayment Premium in full,
Certificateholders will receive their ratable share (based upon the aggregate
Certificate Prepayment Premium) of the aggregate amount available to be
distributed in respect of the Note Prepayment Premium and the Certificate
Prepayment Premium. No other assets of the Trust will be available for the
purpose of making such payment.]]
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables when the
Pool Balance declines to 10% or less of the Initial Pool Balance,
Certificateholders will receive an amount in respect of the Certificates equal
to the outstanding Certificate Balance together with accrued interest at the
Certificate Rate, which distribution shall effect the early retirement of the
Certificates. See "Description of the Transfer and Servicing Agreements --
Termination" in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. A copy of
the Transfer and Servicing Agreements will be filed with the Commission
following the issuance of the Securities. The summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Transfer and Servicing Agreements. The following summary
supplements the description of the general terms and provisions of the Transfer
and Servicing Agreements set forth under the headings "Description of the
Transfer and Servicing Agreements" in the Prospectus, to which description
reference is hereby made.
[SALE AND ASSIGNMENT OF RECEIVABLES; SUBSEQUENT RECEIVABLES
Certain information with respect to the conveyance of the Initial
Receivables from the Seller to the Trust on the Closing Date pursuant to the
Sale and Servicing Agreement is set forth under "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables" in the Prospectus.
In addition, during the Funding Period, pursuant to the Sale and Servicing
Agreement, the Seller will be obligated to sell to the Trust Subsequent
Receivables having an aggregate principal balance equal to approximately
$ (such amount being equal to the initial Pre-Funded Amount) to the extent
that such Subsequent Receivables are available.
During the Funding Period on each Subsequent Transfer Date, subject to the
conditions described below, the Seller will sell and assign to the Trust,
without recourse, the Seller's entire interest in the Subsequent Receivables
designated by the Seller as of the related Subsequent Cutoff Date and identified
in a schedule attached to a subsequent transfer assignment relating to such
Subsequent Receivables executed on such date by the Seller. It is expected that
on the Closing Date, subject to the conditions described below, certain of the
Subsequent Receivables designated by the Seller and arising between the Initial
Cutoff Dates and the Closing Date will be conveyed to the Trust. Upon the
conveyance of Subsequent Receivables to the Trust on a Subsequent Transfer Date,
(i) the Pool Balance will increase in an amount equal to the aggregate principal
balances of the Subsequent Receivables, (ii) an amount equal to EEE% of the
aggregate principal balances of such Subsequent Receivables will be withdrawn
from the Pre-Funding Account and will be deposited in the Reserve Account and
(iii) an amount equal to the excess of the aggregate principal balances of such
Subsequent Receivables over the amount described in clause (ii) will be
withdrawn from the Pre-Funding Account and paid to the Seller.] [Coincident with
each such transfer of Subsequent Receivables, the Yield Supplement Agreement
will require Ford Credit to deposit into the Yield Supplement Account an amount
equal to the Additional Yield Supplement
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Amount, if any, in respect of such Subsequent Receivables. See "-- Yield
Supplement Account; Yield Supplement Agreement" herein.]
[Any conveyance of Subsequent Receivables is subject to the satisfaction,
on or before the related Subsequent Transfer Date, of the following conditions
precedent, among others: (i) each such Subsequent Receivable must satisfy the
eligibility criteria specified in the Sale and Servicing Agreement; (ii) the
Seller will not have selected such Subsequent Receivables in a manner that it
believes is adverse to the interests of the Noteholders or the
Certificateholders; (iii) as of the related Subsequent Cutoff Date, the
Receivables, including any Subsequent Receivables conveyed by the Seller as of
such Subsequent Cutoff Date, satisfy the criteria described under "The
Receivables Pool" herein and "The Receivables Pools" in the Prospectus; (iv) the
applicable Reserve Initial Deposit for such Subsequent Transfer Date shall have
been made; and (v) the Seller shall have executed and delivered to the Trust
(with a copy to the Indenture Trustee) a written assignment conveying such
Subsequent Receivables to the Trust (including a schedule identifying such
Subsequent Receivables). Moreover, any such conveyance of Subsequent Receivables
made during any given Collection Period will also be subject to the
satisfaction, on or before the fifteenth day of the month following the end of
such Collection Period, of the following conditions subsequent, among others:
(i) the Seller will have delivered certain opinions of counsel to the Owner
Trustee, the Indenture Trustee and the Rating Agencies with respect to the
validity of the conveyance of all such Subsequent Receivables conveyed during
such Collection Period; (ii) the Trust and the Indenture Trustee shall have
received written confirmation from a firm of independent certified public
accountants that, as of the end of the preceding Collection Period, the
Receivables in the Trust at that time, including the Subsequent Receivables
conveyed by the Seller during each Collection Period, satisfied the parameters
described under "The Receivables Pool" herein and under "The Receivables Pools"
in the Prospectus; and (iii) each of the Rating Agencies shall have notified the
Seller in writing that, following the addition of all such Subsequent
Receivables, each class of the Notes and the Certificates will be rated by the
Rating Agencies in the same rating category as they were rated by the Rating
Agencies on the Closing Date. The Seller will immediately repurchase any
Subsequent Receivable, at a price equal to the Purchase Amount thereof, upon the
failure of the Seller to satisfy any of the foregoing conditions subsequent with
respect thereto.]
[Subsequent Receivables may have been originated by Ford Credit at a later
date using credit criteria different from those which were applied to the
Initial Receivables. See "Risk Factors -- The Subsequent Receivables and the
Pre-Funding Account" and "The Receivables Pool" herein.]]
ACCOUNTS
In addition to the Accounts referred to under "Description of the Transfer
and Servicing Agreements -- Accounts" in the Prospectus, the Servicer will also
establish and will maintain with the Indenture Trustee [the Pre-Funding Account]
[the Yield Supplement Account] [and] the Reserve Account, in the name of the
Indenture Trustee on behalf of the Noteholders and the Certificateholders. The
Servicer will also establish and will maintain with the Indenture Trustee the
Payahead Account, in the name of the Indenture Trustee. The Payahead Account
will not be included in the property of the Trust.
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
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deposits made with respect to the Receivables]. See "Description of the Transfer
and Servicing Agreements -- Servicing Compensation and Expenses" in the
Prospectus.
DISTRIBUTIONS
Deposits to Collection Account. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Available
Funds to be deposited into the Collection Account. The "Available Funds" for a
Distribution Date shall be the sum of the Available Interest and the Available
Principal.
The "Available Interest" for a Distribution Date will generally be the sum
of the following amounts with respect to the preceding Collection Period: (i)
all scheduled payments of interest and the interest portion of all prepayments
in full (and certain partial prepayments) collected with respect to Precomputed
Receivables (including amounts withdrawn from the Payahead Account but excluding
amounts deposited into the Payahead Account) and the interest portion of all
payments collected with respect to Simple Interest Receivables; (ii) all
proceeds of the liquidation of defaulted Receivables ("Liquidated Receivables"),
net of expenses incurred by the Servicer in connection with such liquidation and
any amounts required by law to be remitted to the Obligor on such Liquidated
Receivables ("Liquidation Proceeds"), to the extent attributable to interest due
thereon in accordance with the Servicer's customary servicing procedures, and
all recoveries in respect of Liquidated Receivables which were written off in
prior Collection Periods; (iii) all Advances made by the Servicer of interest
due on the Receivables; [(iv) all advances, if any, of interest made by the
Servicer in respect of Receivables which were prepaid in full]; [and] (v) the
Purchase Amount of each Receivable that was repurchased by the Seller or
purchased by the Servicer under an obligation which arose during the related
Collection Period, to the extent attributable to accrued interest thereon[; (vi)
Investment Earnings for such Distribution Date][; (vii) the Yield Supplement
Deposit Amount for such Distribution Date] [(viii) the payments, if any,
received under the Interest Rate Cap for such Distribution Date;] [and (ix) the
Net Trust Swap Receipt, if any, for such Distribution Date]. The Available
Interest shall be determined on the related Determination Date based on the
methodology described under "Description of the Notes -- Payments of Principal"
herein and "Description of the Transfer and Servicing Agreements --
Distributions -- Allocations of Collections on Receivables" in the Prospectus.
The "Available Principal" for a Distribution Date will generally be the sum
of the following amounts with respect to the preceding Collection Period: (i)
all scheduled payments of principal and the principal portion of all prepayments
in full (and certain partial prepayments) collected with respect to Precomputed
Receivables (including amounts withdrawn from the Payahead Account but excluding
amounts deposited into the Payahead Account) and the principal portion of all
payments collected with respect to Simple Interest Receivables; (ii) all
Liquidation Proceeds attributable to the principal amount of Receivables which
became Liquidated Receivables during such Collection Period in accordance with
the Servicer's customary servicing procedures; (iii) all Precomputed Advances
made by the Servicer of principal due on the Precomputed Receivables; (iv) to
the extent attributable to principal, the Purchase Amount received with respect
to each Receivable repurchased by the Seller or purchased by the Servicer under
an obligation which arose during the related Collection Period; (v) partial
prepayments of any refunded item included in the principal balance of a
Receivable, such as extended warranty protection plan costs, or physical damage,
credit life, disability insurance premiums, or any partial prepayment which
causes a reduction in the Obligor's periodic payment to an amount below the
scheduled payment as of the Cutoff Date; and (vi) on the Final Scheduled
Distribution Date, any amounts advanced by the Servicer with respect to
principal on the Receivables. The Available Principal shall be determined on the
related Determination Date based on the methodology described under "Description
of the Notes -- Payments of Principal" herein and "Description of the Transfer
and Servicing Agreements -- Distributions -- Allocations of Collections on
Receivables" in the Prospectus.
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The Available Interest and the Available Principal on any Distribution Date
shall exclude the following: (i) amounts received on Precomputed Receivables to
the extent that the Servicer has previously made an unreimbursed Precomputed
Advance; (ii) Liquidation Proceeds with respect to a particular Precomputed
Receivable to the extent of any unreimbursed Precomputed Advances thereon; (iii)
all payments and proceeds (including Liquidation Proceeds) of any Receivables
the Purchase Amount of which has been included in the Available Funds in a prior
Collection Period; (iv) amounts received in respect of interest on Simple
Interest Receivables during the preceding Collection Period in excess of the
amount of interest that would have been due during the Collection Period on
Simple Interest Receivables at their respective APRs (assuming that a payment is
received on each Simple Interest Receivable on the due date thereof); [and] (v)
Liquidation Proceeds with respect to a Simple Interest Receivable attributable
to accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) but only to the extent of any unreimbursed Simple
Interest Advances[; and (vi) amounts released from the Pre-Funding Account.]
Monthly Withdrawals from Collection Account. On each Distribution Date, the
Servicer will allocate amounts on deposit in the Collection Account as described
under "Description of the Transfer and Servicing Agreements -- Distributions --
Allocation of Collections on Receivables" in the Prospectus and will instruct
the Indenture Trustee to make the following deposits and distributions, to the
extent of the amount then on deposit in the Collection Account, in the following
order of priority:
(i) to the Servicer, from the Available Interest (as so allocated),
the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
(ii) to the Note Payment Account, from the Available Funds remaining
after the application of clause (i), the Accrued Note Interest [and the Net
Trust Swap Payment, if any];
(iii) to the Note Payment Account, from the Available Funds remaining
after the application of clauses (i) and (ii), the Noteholders' Principal
Payment Amount;
(iv) to the Certificate Distribution Account, from the Available Funds
remaining after the application of clauses (i) through (iii), the Accrued
Certificate Interest;
(v) to the Certificate Distribution Account, from the Available Funds
remaining after the application of clauses (i) through (iv), the
Certificateholders' Principal Distribution Amount; and
(vi) to the Reserve Account, the Available Funds remaining after the
application of clauses (i) through (v).
Notwithstanding the foregoing, following the occurrence and during the
continuation of an Event of Default which has resulted in an acceleration of the
Notes or following an Insolvency Event with respect to the Seller or the General
Partner, the Available Funds remaining after the application of clauses (i) and
(ii) above will be deposited in the Note Payment Account to the extent necessary
to reduce the principal amount of all the Notes to zero, and the
Certificateholders will not receive any distributions until the principal amount
and accrued interest on the Notes has been paid in full.
On each Determination Date (other than the first Determination Date), the
Servicer will provide the Indenture Trustee with certain information with
respect to the Collection Period related to the prior Distribution Date,
including the amount of aggregate collections on the Receivables, the aggregate
amount of Receivables which were written off, 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.
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For purposes hereof, the following terms shall have the following meanings:
"Accrued Note Interest" means, with respect to any Distribution Date, the
sum of the Noteholders' Monthly Accrued Interest for such Distribution Date and
the Noteholders' Interest Carryover Shortfall for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Accrued Interest for
the preceding Distribution Date and any outstanding Noteholders' Interest
Carryover Shortfall on such preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Note Payment Account on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to Noteholders on the preceding [Distribution] [Payment] Date, to
the extent permitted by law, at the [respective] Note Interest Rate[s] borne by
[each class of] the Notes for the [related Interest Period] [period from and
including the prior Distribution Date to but excluding such Distribution Date]
[plus 2.00% per annum].
"Noteholders' Monthly Accrued Interest" means, with respect to any
Distribution Date, interest accrued for the [related Interest Period] [period
from and including the Closing Date (in the case of the first Distribution Date)
or from and including the prior Distribution Date to but excluding such
Distribution Date] on [the] [each class of] Notes at the [respective] Note
Interest Rate [for such class] on the outstanding principal amount of the Notes
[of such class] on the immediately preceding [Distribution] [Payment] Date after
giving effect to all payments of principal to the Noteholders [of such class] on
or prior to such [Distribution] [Payment] Date (or, in the case of the first
[Distribution] [Payment] Date, on the Closing Date).
"Noteholders' Monthly Principal" means, with respect to any Distribution
Date, the sum of (i) the Noteholders' Percentage of the Regular Principal and
(ii) the Noteholders' Accelerated Principal. [Or, state other formula for
determining the Noteholders' Monthly Principal.]
"Noteholders' Payment Amount" means, with respect to any Distribution Date,
the sum of the Noteholders' Principal Payment Amount and the Accrued Note
Interest.
"Noteholders' Percentage" means (i) 100% for each Distribution Date to and
including the later to occur of (x) the Distribution Date next succeeding the
Distribution Date on which the principal amount of the [Class A-1] Notes is
reduced to zero [and (y) the 199 Distribution Date], (ii) for each Distribution
Date thereafter to and including the Distribution Date on which the principal
amount of the [Class A-3] Notes is reduced to zero, the percentage equivalent of
a fraction, the numerator of which is the outstanding principal amount of the
Notes on the Distribution Date immediately preceding the Distribution Date for
which the Noteholders' Percentage is being calculated (after giving effect to
all distributions made on such immediately preceding Distribution Date) and the
denominator of which is the Pool[/Pre-Funding] Balance on the last day of the
Collection Period second preceding the Distribution Date for which the
Noteholders' Percentage is being calculated, [unless the Reserve Account balance
is less than [ % of] the Specified Reserve Balance, then the Noteholders'
Percentage shall be %,] and (iii) zero for each Distribution Date thereafter
[; provided, however, upon any reduction or withdrawal by any Rating Agency of
its rating of [the] [any class of] Notes, then, with respect to each
Distribution Date thereafter until the principal amount of all the Notes is paid
in full or such rating is restored, the Noteholders' Percentage shall mean
100%]. [Or, state other methods for determining the Noteholders' Percentage.]
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal and any
outstanding Noteholders' Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is actually
deposited in the Note Payment Account.
"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
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<PAGE> 48
Carryover Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Payment Amount shall not
exceed the outstanding principal amount of the Notes; and provided, further,
that (i) the Noteholders' Principal Payment Amount on the [Class A-1] Final
Scheduled [Distribution] [Payment] Date shall not be less than the amount that
is necessary (after giving effect to other amounts [on deposit and] to be
deposited in the Note Payment Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal amount of the [Class A-1] Notes
to zero[; (ii) the Noteholders' Principal Payment Amount on the Class A-2 Final
Scheduled [Distribution] [Payment] Date shall not be less than the amount that
is necessary (after giving effect to other amounts [on deposit and] to be
deposited in the Note Payment Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal amount of the Class A-2 Notes to
zero; and (iii) on the Class A-3 Final Scheduled [Distribution] [Payment] Date
the Noteholders' Principal Payment Amount shall not be less than the amount that
is necessary (after giving effect to other amounts [on deposit and] to be
deposited in the Note Payment Account on such Distribution Date and allocable to
principal) to reduce the outstanding principal amount of the Class A-3 Notes to
zero].
"Accrued Certificate Interest" means, with respect to any Distribution
Date, the sum of the Certificateholders' Monthly Accrued Interest for such
Distribution Date and the Certificateholders' Interest Carryover Shortfall for
such Distribution Date.
"Certificate Balance" equals, initially, $ and, thereafter, equals
the initial Certificate Balance, reduced by all amounts allocable to principal
previously distributed to Certificateholders.
"Certificateholders' Distribution Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distribution
Amount and the Accrued Certificate Interest.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly Accrued
Interest for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Distribution
Date, over the amount in respect of interest that is actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Certificate Rate
for the related Interest Period.
"Certificateholders' Monthly Accrued Interest" means, with respect to any
Distribution Date, 30 days of interest (or, in the case of the first
Distribution Date, interest accrued from and including the Closing Date to but
excluding such Distribution Date) at the Certificate Rate on the Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all payments allocable to the reduction of the Certificate Balance made on or
prior to such Distribution Date (or, in the case of the first Distribution Date,
on the Closing Date).
"Certificateholders' Monthly Principal" means, with respect to any
Distribution Date, the Certificateholders' Percentage of the Regular Principal.
[Or, state other method for determining the Certificateholders' Monthly
Principal.]
"Certificateholders' Percentage" means (i) for each Distribution Date to
and including the later to occur of (x) the Distribution Date next succeeding
the Distribution Date on which the principal amount of [all classes of] the
[Class A-1] Notes is reduced to zero [and (y) the 199 Distribution Date],
zero, and (ii) for each Distribution Date thereafter to and including the
Distribution Date on which the Certificate Balance is reduced to zero, the
percentage equivalent of a fraction, the numerator of which is the outstanding
Certificate Balance on the Distribution Date immediately preceding the
Distribution Date for which the Certificateholders' Percentage is being
calculated (after giving effect to all distributions made on such immediately
preceding Distribution Date) and the denominator of which is the
Pool[/Pre-Funding] Balance on the last day of the Collection Period second
preceding the Distribution Date for which the Certificateholders' Percentage is
being calculated, [unless the Reserve Account balance is less than [ % of] the
Specified Reserve Balance, then the Certificateholders' Percentage shall be %]
[; provided, however, upon
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<PAGE> 49
any reduction or withdrawal by any Rating Agency of its rating of [the] [any
class of] Notes, then, with respect to each Distribution Date thereafter until
the principal amount of all the Notes is paid in full or such rating is
restored, the Certificateholders' Percentage shall mean zero]. [Or, state other
methods for determining the Certificateholders' Percentage.]
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Monthly
Principal and any outstanding Certificateholders' Principal Carryover Shortfall
from the preceding Distribution Date, over the amount in respect of principal
that is actually deposited in the Certificate Distribution Account.
"Certificateholders' Principal Distribution Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal for
such Distribution Date and the Certificateholders' Principal Carryover Shortfall
as of the close of the preceding Distribution Date; provided, however, that the
Certificateholders' Principal Distribution Amount shall not exceed the
Certificate Balance. In addition, on the Final Scheduled Distribution Date, the
principal required to be distributed to Certificateholders will include the
lesser of (a) (i) any scheduled payments of principal due and remaining unpaid
on each Precomputed Receivable and (ii) any principal due and remaining unpaid
on each Simple Interest Receivable, in each case, in the Trust as of the Final
Scheduled Maturity Date or (b) the portion of the amount required to be advanced
under clause (a) above that is necessary (after giving effect to the other
amounts to be deposited in the Certificate Distribution Account on such
Distribution Date and allocable to principal) to reduce the Certificate Balance
to zero, and, in the case of clauses (a) and (b), remaining after any required
distribution in respect of the Notes.
On each [Distribution] [Payment] Date, all amounts on deposit in the Note
Payment Account [(other than [any] Investment Earnings [in excess of the
weighted average of the Note Interest Rates] [and the Certificate Rate])] will
be paid in the following order of priority:
(i) to the [applicable] Noteholders, accrued and unpaid interest on
the outstanding principal amount of the [applicable class of] Notes at the
[applicable] Note Interest Rate [and to the Swap Counterparty, the Net
Trust Swap Payment, if any, for such [Distribution] [Payment] Date, on a
pro rata basis with the amount[s] payable to the Noteholders pursuant to
this clause (i)]; [and]
(ii) to the Noteholders [of the Class A-1 Notes] in reduction of
principal until the principal amount of the [Class A-1] Notes has been
reduced to zero[;
(iii) to the Noteholders of the Class A-2 Notes in reduction of
principal until the principal amount of the Class A-2 Notes has been
reduced to zero; and
(iv) to the Noteholders of the Class A-3 Notes in reduction of
principal until the principal amount of the Class A-3 Notes has been
reduced to zero].
On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders.
RESERVE ACCOUNT
The rights of the Certificateholders to receive distributions with respect
to the Receivables generally will be subordinated to the rights of the
Noteholders in the event of defaults and delinquencies on the Receivables as
provided in the Sale and Servicing Agreement. The protection afforded to the
Noteholders through subordination will be effected both by the preferential
right of the Noteholders to receive current distributions with respect to the
Receivables and by the establishment of the Reserve Account. The Reserve Account
will be created with a deposit initially by the Seller on the Closing Date [and
thereafter with deposits from funds in the Pre-Funding Account that would
otherwise be payable to the Seller on each Subsequent Transfer Date] (such
deposit[s, collectively], the "Reserve Initial Deposit").
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<PAGE> 50
Subject to reduction as hereafter described, the "Specified Reserve
Balance" with respect to any Distribution Date means the sum of (i) [the sum of
(a)] % of the [Initial Pool Balance] [Pool Balance as of the Initial Cutoff
Date] [, plus (b) an amount related to the difference between anticipated
investment earnings on the remaining Pre-Funded Amount and the weighted average
interest expense on the portion of the Notes and Certificates represented by the
remaining Pre-Funded Amount] and (ii) % of the Pool Balance on the first day
of the related Collection Period. [However, so long as on any Distribution Date
(except the first Distribution Date) the sum of (x) the outstanding principal
amount of the Securities (after giving effect to distributions made on the prior
Distribution Date) and (y) the aggregate amount of Payaheads that have been
collected but not yet applied as payments under the related Receivables as of
the first day of the related Collection Period is less than or equal to [the sum
of] % of (a) the Pool Balance on the first day of the related Collection
Period [and (b) the Pre-Funded Amount on such date], then the portion of the
Specified Reserve Balance set forth in clause (i) above will be reduced to %
of the [Initial Pool Balance] [Pool Balance as of the Initial Cutoff Date].] [In
addition, so long as on any Distribution Date (except the first Distribution
Date) the sum of (x) the outstanding principal amount of the Securities (after
giving effect to distributions made on the prior Distribution Date) and (y) the
aggregate amount of Payaheads that have been collected but not yet applied as
payments under the related Receivables as of the first day of the related
Collection Period is less than or equal to [the sum of] % of [(a)] the Pool
Balance on the first day of the related Collection Period [and (b) the
Pre-Funded Amount on such day], then such portion of the Specified Reserve
Balance set forth in clause (i) above will be reduced to % of the [Initial
Pool Balance] [Pool Balance as of the Initial Cutoff Date].] [With respect to
the portion of the Specified Reserve Balance set forth in clause (ii) above, so
long as on any Distribution Date (except the first Distribution Date) the sum of
(x) the outstanding principal amount of the Securities (after giving effect to
distributions made on the prior Distribution Date) and (y) the aggregate amount
of Payaheads that have been collected but not yet applied as payments under the
related Receivables as of the first day of the related Collection Period is less
than or equal to [the sum of] % of [(a)] the Pool Balance on the first day of
the related Collection Period [and (b) the Pre-Funded Amount on such day], then
such portion will be reduced to an amount equal to the product of (I) the Pool
Balance on the first day of the related Collection Period and (II) the
percentage (which shall not be greater than % or less than zero) equal to (X)
the percentage derived from the fraction, the numerator of which is the
outstanding principal amount of the Securities (after giving effect to
distributions made on the prior Distribution Date) and the denominator of which
is such Pool Balance less (Y) %.] The portion of the Specified Reserve
Balance specified in clause (ii) above may be invested in motor vehicle sale
contracts originated by Ford Credit and secured by motor vehicles financed
thereby that are not included in the Pool Balance. [The Specified Reserve
Balance is further subject to adjustment in certain circumstances described
herein.]
[The Specified Reserve Balance would also be increased to the extent that
the Receivables in the Trust on a Subsequent Transfer Date, including the
Subsequent Receivables to be conveyed to the Trust on such Subsequent Transfer
Date, have a weighted average APR of less than EEE%. See "The Receivables Pool"
herein. In addition, subject to certain limitations, the Seller has the option
to increase the Specified Reserve Balance in connection with the addition of
Subsequent Receivables.]
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Balance for such
Distribution Date, except as described below and subject to certain limitations,
the Servicer will instruct the Indenture Trustee to [distribute such excess to
the Seller] [apply such excess as Noteholders' Accelerated Principal]. Upon any
distribution to the Seller of amounts from the Reserve Account, neither the
Noteholders nor the Certificateholders will have any rights in, or claims to,
such amounts. [Subsequent to any reduction or withdrawal by any Rating Agency of
its rating of [the] [any class of] Notes, unless such rating has been restored,
any such excess released from the Reserve Account on a Distribution Date will be
deposited in the Note
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<PAGE> 51
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
amount of the Securities, any funds remaining on deposit in the Reserve Account,
subject to certain limitations, will be paid to the Seller.
The Reserve Account is intended to enhance the likelihood of receipt by the
Noteholders and the Certificateholders of the full amount of principal and
interest due them and to decrease the likelihood that the Noteholders and the
Certificateholders will experience losses. In addition, the subordination of the
Certificates to the Notes is intended to enhance further the likelihood of
receipt by Noteholders of the full amount of principal and interest due them and
to decrease the likelihood that the Noteholders will experience losses. However,
in certain circumstances, the Reserve Account could be depleted. If the amount
required to be withdrawn from the Reserve Account to cover shortfalls in
collections on the Receivables exceeds the amount of available cash in the
Reserve Account, Noteholders or Certificateholders could incur losses or a
shortfall in the amounts distributed to the Noteholders or the
Certificateholders could result, which could, in turn, increase the average life
of the Notes or the Certificates.
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<PAGE> 52
[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 all
of the [Initial] Receivables, the "Maximum [Initial] Yield Supplement Amount").
On each Distribution Date, the Indenture Trustee will transfer to the
Collection Account from monies on deposit in the Yield Supplement Account an
amount equal to the Yield Supplement Deposit Amount in respect of the
Receivables for such Distribution Date. The "Yield Supplement Deposit Amount"
with respect to a Distribution Date is the aggregate Yield Supplement Amount, if
any, in respect of the Receivables for the related Collection Period. Amounts on
deposit on any Distribution Date in the Yield Supplement Account in excess of
the Maximum Yield Supplement Amount, after giving effect to all distributions to
be made on such Distribution Date, will be paid to the Seller. Monies on deposit
in the Yield Supplement Account may be invested in Permitted Investments under
the circumstances and in the manner described in the Sale and Servicing
Agreement. Any monies remaining on deposit in the Yield Supplement Account upon
the termination of the Trust will be paid to the Seller.
[Pursuant to the Yield Supplement Agreement, on each Subsequent Transfer
Date, Ford Credit will deposit into the Yield Supplement Account an amount equal
to the Additional Yield Supplement Amount. The aggregate of the Additional Yield
Supplement Amounts in respect of Subsequent Receivables, if any, is referred to
herein as the "Maximum Subsequent Yield Supplement Amount" and, together with
the Maximum Initial Yield Supplement Amount, the "Maximum Yield Supplement
Amount."]]
[INTEREST RATE CAP
With respect to the Class A-2 Notes, the Seller will enter into an Interest
Rate Cap, dated as of the Closing Date (the "Interest Rate Cap") with the
Interest Rate Cap Provider. The notional amount of the Interest Rate Cap on any
[Distribution] [Payment] Date (the "Cap Notional Amount") will be at least equal
to the outstanding principal amount of the Class A-2 Notes as of the close of
the preceding [Distribution] [Payment] Date. Pursuant to the Interest Rate Cap,
on each [Distribution] [Payment] Date on which [the Class A-2 Rate] [LIBOR] for
the preceding [Distribution] [Payment] Date exceeds % (the "Cap Rate"), the
Interest Rate Cap Provider will make a payment to the Indenture Trustee, on
behalf of the Trust, in an amount equal to the product of (i) the difference
between [such Class A-2 Rate] [LIBOR] and the Cap Rate, (ii) the Cap Notional
Amount and (iii) the actual number of days from and including the preceding
[Distribution] [Payment] Date to but excluding such [Distribution] [Payment]
Date divided by 360. The Interest Rate Cap will terminate on the Class A-2
Scheduled Final [Distribution] [Payment] Date. Payments received by the
Indenture Trustee pursuant to the Interest Rate Cap will be deposited in the
Collection Account for the benefit of all Securityholders.
The payment obligations of the Interest Rate Cap Provider under the
Interest Rate Cap constitute general unsecured obligations of the Interest Rate
Cap Provider. No assurance can be given that the Trust will receive the payments
due to be received under the Interest Rate Cap when due. A failure by the
Interest Rate Cap Provider to make such payments or to make such payments on a
timely basis would reduce amounts available for distributions to
Securityholders, and in such event Securityholders could incur a loss on their
investment. With respect to each Collection Period, any shortfall between
amounts due from the Interest Rate Cap Provider under the Interest Rate Cap
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<PAGE> 53
and amounts actually received from the Interest Rate Cap Provider during such
Collection Period will be reported in the statement delivered to Securityholders
on the following [Payment Date or] Distribution Date. See "Certain Information
Regarding the Securities -- Reports to Securityholders" in the Prospectus.
The Interest Rate Cap will be provided by (the "Interest Rate Cap
Provider"). The Interest Rate Cap Provider was incorporated in . The
Interest Rate Cap Provider is engaged in the business of . As of
, 199 , the Interest Rate Cap Provider had total consolidated assets
of $ , total consolidated liabilities of $ and total consolidated
stockholders' equity of $ .
THE INFORMATION SET FORTH IN THE PRECEDING PARAGRAPH HAS BEEN PROVIDED BY
THE INTEREST RATE CAP PROVIDER. THE SELLER MAKES NO REPRESENTATIONS AS TO THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.]
[INTEREST RATE SWAP
With respect to the Class A-2 Notes, the Indenture Trustee, on behalf of
the Trust, will enter into one or more Interest Rate Swap Agreements, dated as
of the Closing Date (collectively, the "Interest Rate Swap") with the Swap
Counterparty. The notional amount of the Interest Rate Swap on any
[Distribution] [Payment] Date (the "Swap Notional Amount") will equal the
outstanding principal amount of the Class A-2 Notes as of the close of the
preceding [Distribution] [Payment] Date. Pursuant to the terms of the Interest
Rate Swap, the Swap Counterparty will pay to the Trust, on each [Distribution]
[Payment] Date, interest at a per annum rate equal to [the Class A-2 Rate]
[LIBOR] on the Swap Notional Amount. In exchange for such payments, the Trust
will pay to the Swap Counterparty, on each [Distribution] [Payment] Date,
interest at a per annum rate equal to [the lesser of] [ %] [and] [the Prime
Rate less %], on the Swap Notional Amount[, which rate will be reset [on
various dates in] each [month] [Interest Period]]. With respect to each
[Distribution] [Payment] Date, any difference between the [monthly] [quarterly]
payment by the Swap Counterparty to the Trust and the [monthly] [quarterly]
payment by the Trust to the Swap Counterparty will be referred to herein as the
"Net Trust Swap Receipt," if such difference is a positive number, and the "Net
Trust Swap Payment," if such difference is a negative number. Net Trust Swap
Receipts, if any, will be deposited in the Collection Account for the benefit of
all Securityholders and Net Trust Swap Payments, if any, will be paid from the
Collection Account in the same manner and priority as accrued and unpaid
interest on the Notes on each [Distribution] [Payment] Date.
The payment obligations of the Swap Counterparty under the Interest Rate
Swap constitute general unsecured obligations of the Swap Counterparty. No
assurance can be given that the Trust will receive the payments due to be
received under the Interest Rate Swap when due. A failure by the Swap
Counterparty to make such payments or to make such payments on a timely basis
would reduce amounts available for distributions to Securityholders, and in such
event Securityholders could incur a loss on their investment. With respect to
each Collection Period, any shortfall between amounts due from the Swap
Counterparty under the Interest Rate Swap and amounts actually received from the
Swap Counterparty during such Collection Period will be reported in the
statement delivered to Securityholders on the following [Payment Date or]
Distribution Date. See "Certain Information Regarding the Securities -- Reports
to Securityholders" in the Prospectus.
The Interest Rate Swap will be provided by (the "Swap
Counterparty"). The Swap Counterparty was incorporated in .
The Swap Counterparty is engaged in the business of . As of
, 199 , the Swap Counterparty had total consolidated assets of
$ , total consolidated liabilities of $ and total consolidated
stockholders' equity of $ .
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<PAGE> 54
THE INFORMATION SET FORTH IN THE PRECEDING PARAGRAPH HAS BEEN PROVIDED BY
THE SWAP COUNTERPARTY. THE SELLER MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION.]
[GUARANTEED RATE AGREEMENT
The Seller will enter into an Guaranteed Rate Agreement, dated as of the
Closing Date (the "Guaranteed Rate Agreement") with the Investment Provider.
Pursuant to the Guaranteed Rate Agreement, amounts on deposit in the
[Collection] [Note Payment] Account will be invested from the date of deposit to
the related [Distribution] [Payment] Date by the Indenture Trustee at the
direction of the Investment Provider in certain eligible investments (which are
substantially similar to Permitted Investments). Amounts invested pursuant to
the Guaranteed Rate Agreement will continue to be held in the name of the
Indenture Trustee for the benefit of Securityholders and will remain assets of
the Trust for purposes of bankruptcy, tax and other applicable laws. The
Guaranteed Rate Agreement provides that the Investment Provider will guarantee a
rate of return on such amounts equal to the weighted average of the Note
Interest Rates [and the Certificate Rate] and will be entitled to receive any
Investment Earnings in excess of such guaranteed return.
If the commercial paper rating or certificate of deposit rating of the
Investment Provider is at any time reduced below A-1+ or P1 by the applicable
Rating Agency, within 60 days of receiving notice of such decline, the Servicer
will either (i) with the prior written assurance of each Rating Agency that such
action will not result in a reduction of the rating of any of the Notes or the
Certificates, cause the Investment Provider to pledge securities, in a manner
conferring on the Indenture Trustee a perfected first lien in such securities,
securing the Investment Provider's performance of its obligations under the
Guaranteed Rate Agreement, (ii) direct the Indenture Trustee to terminate the
Guaranteed Rate Agreement and to obtain a Replacement Guaranteed Rate Agreement
or (iii) establish any other arrangement satisfactory to each Rating Agency such
that such Rating Agency will not reduce the rating of any of the Notes or the
Certificates. A "Replacement Guaranteed Rate Agreement" means an agreement (i)
which is substantially similar to the original Guaranteed Rate Agreement, (ii)
the obligor of which is an insurance company, trust company, commercial bank or
other entity which has a commercial paper or certificate of deposit rating of no
less than A-1+ or P1 by the applicable Rating Agency and (iii) which provides
for either the payment of interest on funds invested pursuant thereto at a rate
per annum at least equal to the weighted average of the Note Interest Rates [and
the Certificate Rate]. If the Servicer is unable to obtain a Replacement
Guaranteed Rate Agreement or a pledge of securities or otherwise satisfy the
applicable Rating Agency within such 60-day period, then each following
Distribution Date will constitute a Payment Date and distributions in respect of
the Notes and the Certificates will be made monthly. See "Description of the
Notes--Payments of Interest" herein.
The payment obligations of the Investment Provider under the Guaranteed
Rate Agreement constitute general unsecured obligations of the Investment
Provider. No assurance can be given that the Trust will receive the payments due
to be received under the Guaranteed Rate Agreement when due. A failure by the
Investment Provider to make such payments or to make such payments on a timely
basis would reduce amounts available for distributions to Securityholders, and
in such event Securityholders could incur a loss on their investment. With
respect to each Collection Period, any shortfall between amounts due from the
Investment Provider under the Guaranteed Rate Agreement and amounts actually
received from the Investment Provider during such Collection Period will be
reported in the statement delivered to Securityholders on the following [Payment
Date or] Distribution Date. See "Certain Information Regarding the Securities --
Reports to Securityholders" in the Prospectus.
The Guaranteed Rate Agreement will be provided by (the
"Investment Provider"). The Investment Provider was incorporated in .
The Investment Provider is engaged in the business of . As
of , 199 , the Investment Provider had total
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consolidated assets of $ , total consolidated liabilities of
$ and total consolidated stockholders' equity of $ . The
Investment Provider is currently rated / .
THE INFORMATION SET FORTH IN THE PRECEDING PARAGRAPH HAS BEEN PROVIDED BY
THE INVESTMENT PROVIDER. THE SELLER MAKES NO REPRESENTATIONS AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment of
Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving both
debt instruments and equity interests issued by a trust with terms similar to
those of the Notes and the Certificates. As a result, the IRS may disagree with
all or a part of the discussion below. Prospective investors are urged to
consult their own tax advisors in determining the federal, state, local, foreign
and any other tax consequences to them of the purchase, ownership and
disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The Trust will be provided
with an opinion of Special Tax Counsel regarding certain federal income tax
matters discussed below. An opinion of Special Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed below
will be sought from the IRS.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel, will, upon issuance of the Notes
and Certificates deliver its opinion that the Trust will not be classified as an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. Further, with respect to the Notes, Special Tax
Counsel will advise the Trust that the Notes will be classified as debt for
federal income tax purposes.
In addition, Special Tax Counsel has prepared or reviewed the statements
under the heading "Summary -- Tax Status" as they relate to federal income tax
matters and under the heading "Certain Federal Income Tax Consequences" herein
and in the Prospectus and is of the opinion that such statements are correct in
all material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership for
federal income tax purposes on investors generally and of related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to the investor's specific tax
circumstances that would be provided by an investor's own tax adviser.
Accordingly, each investor is advised to consult its own tax advisers with
regard to the tax consequences to it of investing in the Notes and the
Certificates.
TAX CHARACTERIZATION OF THE TRUST
As set forth above, it is expected that Special Tax Counsel will deliver
its opinion that the Trust will not be classified as an association (or publicly
traded partnership) taxable as a corporation for federal income tax purposes.
This opinion will be based on the assumption that the terms of the Trust
Agreement and related documents will be complied with, and on counsel's
conclusions that (1) the Trust does not have certain characteristics necessary
for a business trust to be classified as an association taxable as a corporation
and (2) either the nature of the income of the Trust will
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exempt it from the provisions of the Code requiring certain publicly traded
partnerships to be taxed as corporations or the Trust will otherwise qualify for
an exemption from the rules governing publicly traded partnerships.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all of its income on the Receivables,
possibly reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce the amount of cash available to make payments on the
Notes and distributions on the Certificates, and Certificateholders could be
liable for any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Noteholders will agree by their
purchase of the Notes, to treat the Notes as debt for federal income tax
purposes. The discussion below assumes that this characterization of the Notes
is correct.
Original Issue Discount. A Note will be treated as issued with original
issue discount ("OID") if the excess of the Note's "stated redemption price at
maturity" over the issue price equals or exceeds a de minimis amount equal to
1/4 of 1 percent of the Note's stated redemption price at maturity multiplied by
the number of complete years (based on the anticipated weighted average life of
a Note) to its maturity.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Note and its issue price. A holder of a Note
must include such OID in gross income as ordinary interest income as it accrues
under a method taking into account an economic accrual of the discount. In
general, OID must be included in income in advance of the receipt of the cash
representing that income. The amount of OID on a Note will be considered to be
zero if it is less than a de minimis amount determined as described above.
However, the amount of any de minimis OID must be included in income as
principal payments are received on a Note, in the proportion that each such
payment bears to the original principal amount of the Note. The issue price of a
Note will generally be the initial offering price at which a substantial amount
of the Notes are sold. The Trust intends to treat the issue price as including,
in addition, the amount paid by the Noteholder for accrued interest that relates
to a period prior to the Closing Date. Under applicable Treasury regulations
governing the accrual of OID (the "OID Regulations"), the stated redemption
price at maturity is the sum of all payments on the Note other than any
"qualified stated interest" payments. Qualified stated interest is defined as
any one of a series of payments equal to the product of the outstanding
principal amount of the Note and a single fixed rate or certain variable rates
of interest that is unconditionally payable at least annually.
The holder of a Note issued with OID must include in gross income, for all
days during its taxable year on which it holds such Note, the sum of the "daily
portions" of such OID. Such daily portions are computed by allocating to each
day during a taxable year a pro rata portion of the OID that accrued during the
relevant accrual period(s). In the case of an obligation the principal on which
is subject to prepayment as a result of prepayments on the underlying collateral
(a "Prepayable Obligation"), such as the Notes, OID is computed by taking into
account the anticipated rate of prepayments assumed in pricing the debt
instrument (the "Prepayment Assumption"). The Prepayment Assumption that will be
used in determining the rate of accrual of OID, premium and market discount, if
any, is % ABS. The amount of OID that will accrue during an accrual period
(generally the period between interest payments or compounding dates) is the
excess (if any) of the sum of (a) the present value of all payments remaining to
be made on the Note as of the close of the accrual period and (b) the payments
during the accrual period of amounts included in the stated redemption price of
the Note, over the "adjusted issue price" of the Note at the beginning of the
accrual period. An "accrual period" is the period over which OID accrues, and
may be of any length, provided that each accrual period is no longer than one
year and
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each scheduled payment of interest or principal occurs on either the last day or
the first day of an accrual period. The Issuer intends to report OID on the
basis of an accrual period that corresponds to the interval between [Payment]
[Distribution] Dates. The adjusted issue price of a Note is the sum of its issue
price plus prior accruals of OID, reduced by the total payments made with
respect to such Note in all prior periods, other than qualified stated interest
payments. The present value of the remaining payments is determined on the basis
of three factors: (i) the original yield to maturity of the Note (determined on
the basis of compounding at the end of each accrual period and properly adjusted
for the length of the accrual period), (ii) events which have occurred before
the end of the accrual period and (iii) the assumption that the remaining
payments will be made in accordance with the original Prepayment Assumption.
The effect of this method is to increase the portions of OID required to be
included in income by a Noteholder to take into account prepayments on the
Receivables at a rate that exceeds the Prepayment Assumption, and to decrease
(but not below zero for any period) the portions of OID required to be included
in income by a Noteholder to take into account prepayments with respect to the
Receivables at a rate that is slower than the Prepayment Assumption. Although
OID will be reported to Noteholders based on the Prepayment Assumption, no
representation is made to Noteholders that the Receivables will be prepaid at
that rate or at any other rate.
A holder of a Note that acquires the Note for an amount that exceeds its
stated redemption price will not include any OID in gross income. A subsequent
holder of a Note which acquires the Notes for an amount that is less than its
stated redemption price will be required to include OID in gross income, but
such a holder who purchases such Note for an amount that exceeds its adjusted
issue price will be entitled (as will an initial holder who pays more than a
Note's issue price) to reduce the amount of OID included in income in each
period by the amount of OID multiplied by a fraction, the numerator of which is
the excess of (w) the purchaser's adjusted basis in the Note immediately after
purchase thereof over (x) the adjusted issue price of the Note, and the
denominator of which is the excess of (y) all amounts remaining to be paid on
the Note after the purchase date, other than qualified stated interest, over (z)
the adjusted issue price of the Note.
Total Accrual Election. As an alternative to separately accruing stated
interest, OID, de minimis OID, market discount, de minimis market discount,
unstated interest, premium, and acquisition premium, a holder of a Note may
elect to include all income that accrues on the Note using the constant yield
method. If a Noteholder makes this election, income on a Note will be calculated
as though (i) the issue price of the Note were equal to the Noteholder's
adjusted basis in the Note immediately after its acquisition by the Noteholder;
(ii) the Note were issued on the Noteholder's acquisition date; and (iii) none
of the interest payments on the Note were "qualified stated interest." A
Noteholder may make such an election for a Note that has premium or market
discount, respectively, only if the Noteholder makes, or has previously made, an
election to amortize bond premium or to include market discount in income
currently. See "-- Market Discount" and "-- Amortizable Bond Premium" below.
Market Discount. The Notes, whether or not issued with OID , will be
subject to the "market discount rules" of section 1276 of the Code. In general,
these rules provide that if the Note Owner acquires a Note at a market discount
(that is, a discount from its stated redemption price at maturity or, if the
Notes were issued with OID, its original issue price plus any accrued OID that
exceeds a de minimis amount specified in the Code) and thereafter (a) recognizes
gain upon a disposition, or (b) receives payments of principal, the lesser of
(i) such gain or principal payment or (ii) the accrued market discount will be
taxed as ordinary interest income. Generally, the accrued market discount will
be the total market discount on the Note multiplied by a fraction, the numerator
of which is the number of days the Note Owner held the Note and the denominator
of which is the number of days from the date the Note Owner acquired the Note
until its maturity date. The Note Owner may elect, however, to determine accrued
market discount under the constant yield method.
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Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Note Owner may elect to include market
discount in gross income as it accrues and, if the Note Owner makes such an
election, is exempt from this rule. Any such election will apply to all debt
instruments acquired by the taxpayer on or after the first day of the first
taxable year to which such election applies. The adjusted basis of a Note
subject to such election will be increased to reflect market discount included
in gross income, thereby reducing any gain or increasing any loss on a sale or
taxable disposition.
Amortizable Bond Premium. In general, if a Note Owner purchases a Note at a
premium (that is, an amount in excess of the amount payable upon the maturity
thereof), such Note Owner will be considered to have purchased such Note with
"amortizable bond premium" equal to the amount of such excess. Such Note Owner
may elect to amortize such bond premium as an offset to interest income and not
as a separate deduction item as it accrues under a constant yield method over
the remaining term of the Note. Such Note Owner's tax basis in the Note will be
reduced by the amount of the amortized bond premium. Any such election shall
apply to all debt instruments (other than instruments the interest on which is
excludible from gross income) held by the Note Owner at the beginning of the
first taxable year for which the election applies or thereafter acquired and is
irrevocable without the consent of the IRS. Bond premium on a Note held by a
Note Owner who does not elect to amortize the premium will decrease the gain or
increase the loss otherwise recognized on the disposition of the Note.
Short-Term Notes. Under the Code, special rules apply to Notes that have a
maturity of one year or less from their date of original issuance ("Short-Term
Notes"). Such Notes are treated as issued with "acquisition discount" which is
calculated and included in income under principles similar to those governing
OID except that acquisition discount is equal to the excess of all payments of
principal and interest on the Short-Term Notes over their issue price. In
general, an individual or other cash basis holder of a short-term obligation is
not required to accrue acquisition discount for federal income tax purposes
unless it elects to do so. Accrual basis Noteholders and certain other
Noteholders, including banks, regulated investment companies, dealers in
securities and cash basis Noteholders who so elect, are required to accrue
acquisition discount on Short-Term Notes on either a straight-line basis or
under a constant yield method (based on daily compounding), at the election of
the Noteholder. In the case of a Noteholder not required and not electing to
include acquisition discount in income currently, any gain realized on the sale
or retirement of the Short-Term Notes will be ordinary income to the extent of
the acquisition discount accrued on a straight-line basis (unless an election is
made to accrue the acquisition discount under the constant yield method) through
the date of sale or retirement. Noteholders who are not required and do not
elect to accrue acquisition discount on Short-Term Notes will be required to
defer deductions for interest on borrowings allocable to short-term obligations
in an amount not exceeding the deferred income until the deferred income is
realized.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder generally will equal the
holder's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included by such Noteholder in income with
respect to the Note and decreased by any bond premium previously amortized and
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss if the Note was held as
a capital asset, except for gain representing accrued interest, accrued market
discount or OID that has not previously accrued, in each case to the extent not
previously included in income. Capital losses incurred on sale or disposition of
a Note generally may be used only to offset capital gains.
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Non-U.S. Note Owners. In general, a non-U.S. Note Owner will not be subject
to United States federal income tax on interest (including OID) on a beneficial
interest in a Note unless (i) the non-U.S. Note Owner actually or constructively
owns 10 percent or more of the total combined voting power of all classes of
stock of the Seller (or affiliate of the Seller) entitled to vote (or of a
profits or capital interest of the Trust), (ii) the non-U.S. Note Owner is a
controlled foreign corporation that is related to the Seller (or the Trust)
through stock ownership, (iii) the non-U.S. Note Owner is a bank receiving
interest described in Code Section 881(c)(3)(A), (iv) such interest is
contingent interest described in Code Section 871(h)(4), or (v) the non-U.S.
Note Owner bears certain relationships to any Certificate Owner. To qualify for
the exemption from taxation, the Note Owner must comply with applicable
certification requirements.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct taxpayer identification number and a statement that the holder is not
subject to backup withholding. Should a nonexempt Noteholder fail to provide the
required certification, the Trust will be required to withhold 31 percent of the
amount otherwise payable to the holder, and remit the withheld amount to the IRS
as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Special Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, the
Trust might be treated as a publicly traded partnership that would not be
taxable as a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of the Notes as equity interests in such a publicly
traded partnership could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income," income to foreign holders generally
would be subject to U.S. federal tax and U.S. federal tax return filing and
withholding requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF OFFERED CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust as a partnership for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders (including the Seller),
and the Notes being debt of the partnership. However, the proper
characterization of the arrangement involving the Trust, the Certificates, the
Notes, the Seller and the Servicer is not clear because there is no authority on
transactions closely comparable to those contemplated herein.
A variety of alternative characterizations of the Certificates are
possible. For example, because the Certificates generally will have certain
features characteristic of debt, the Certificates might be considered debt of
the Seller or the Trust. Any such characterization would not result in
materially adverse tax consequences to Certificateholders as compared to the
consequences from treatment
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of the Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Partnership Taxation. Assuming that the Trust is classified as a
partnership, the Trust will not be subject to federal income tax, but each
Certificateholder will be required to take into account separately such holder's
allocated share of income, gains, losses, deductions and credits of the Trust.
The Trust's income will consist primarily of interest accrued on the Receivables
(including appropriate adjustments for market discount (as discussed below), and
any OID and bond premium), investment income from investments of collections
held between Distribution Dates, any gain upon, or with respect to, collection
or disposition of the Receivables and any income earned on any notional
principal contracts. The Trust's deductions will consist primarily of interest
accruing on the Notes, servicing and other fees and losses or deductions upon,
or with respect to, collection or the disposition of the Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement. In the Trust
Agreement, the Certificateholders will agree that the yield on a Certificate is
intended to qualify as a "guaranteed payment" and not as a distributive share of
partnership income. A guaranteed payment would be treated by a Certificateholder
as ordinary income, but may well not be treated as interest income. The Trust
Agreement will provide that, to the extent that such treatment is not respected,
the Certificateholders will be allocated ordinary gross income of the Trust for
each interest period equal to the sum of (i) the amount of interest that accrues
on the Certificates for such interest period based on the Certificate Rate; (ii)
an amount equivalent to interest that accrues during such interest period on
amounts previously due on the Certificates but not yet distributed; and (iii)
any Trust income attributable to discount on the Receivables that corresponds to
any excess of the principal balance of the Certificates over their initial issue
price. All remaining taxable income of the Trust generally will be allocated to
the Seller, as "general partner" of the Trust.
Except as set forth below, losses and deductions generally will not be
allocated to the Certificateholders except to the extent the Certificateholders
are reasonably expected to bear the economic burden of such losses or
deductions. Any such losses could be characterized as capital losses, and the
Certificateholders generally would only be able to deduct such losses against
capital gain income. Accordingly, a Certificateholder's taxable income from the
Trust could exceed the cash it receives from the Trust.
Although the allocation of gross income to Certificateholders described
above is intended to comply with applicable Treasury regulations and other
authorities, no assurance can be given that the IRS would not instead require
that Certificateholders be allocated a distributive share of partnership net
income or loss. Moreover, if losses or deductions were allocated to
Certificateholders, such losses or deductions would, to the extent that funds
were available therefor, later be reimbursed through allocations of ordinary
income.
It is believed that allocating partnership income on the foregoing basis
should comport with the partners' economic interests in the partnership,
although no assurance can be given that the IRS would not require a greater
amount of income to be allocated to Certificateholders. Moreover, under the
foregoing method of allocation, Certificateholders may be allocated income equal
to the amount of interest accruing on the Certificates based on the Certificate
Rate even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis Certificateholders will in effect
be required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocation and tax reporting will be done on a uniform basis for all
Certificateholders of the Trust but Certificateholders of the Trust may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the Trust.
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Certificateholders will be required to report items of income, loss and
deduction allocated to them by the Trust in the taxable year in which or with
which the taxable year of the Trust to which such allocations relate ends. The
Code prescribes certain rules for determining the taxable year of the Trust. It
is likely that, under these rules, the taxable year of the Trust will be the
calendar year. However, in the event that all of the Certificateholders
possessing a 5 percent or greater interest in the equity or the profits of the
Trust share a taxable year that is other than the calendar year, the Trust would
be required to use that year as its taxable year.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code. The
characterization under the Trust Agreement of yield on the Certificates as a
guaranteed payment could adversely affect taxpayers, such as regulated
investment companies and real estate investment trusts, that expect to earn
"interest" income.
Limitations on Losses. Under the "passive activity" rules of the Code, any
loss allocated to a Certificateholder who is a natural person, estate, trust,
closely held "C" corporation or personal service corporation would be a passive
activity loss while, for purposes of those rules, income allocated to such a
Certificateholder would be "portfolio income."
In addition a taxpayer that is an individual, trust or estate may generally
deduct miscellaneous itemized deductions (which do not include interest expense)
only to the extent they exceed two percent of the individual's adjusted gross
income. Those limitations would apply to an individual Certificateholder's share
of expenses of the Trust (including fees paid to the Servicer) and might result
in such holder having taxable income that exceeds the amount of cash actually
distributed to such holder over the life of the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were not issued
with OID or imputed interest, and, therefore, the Trust should not have OID or
imputed interest income. However, the purchase price paid by the Trust for the
Receivables may be greater or less than the remaining principal balance of the
Receivables at the time of purchase. If so, the Receivables will have been
acquired at a premium or discount, as the case may be. (As indicated above, the
Trust will make this calculation on an aggregate basis, but might be required to
recompute it on a Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss with respect to distributions from the Trust. A
Certificateholder will, however, recognize gain to the extent any money
distributed exceeds the Certificateholder's adjusted basis in the Certificates
(as
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described below under "-- Disposition of Certificates") immediately before
distribution, and a Certificateholder will recognize loss upon termination of
the Trust or termination of the Certificateholder's interest in the Trust if the
Trust only distributes money to the Certificateholder and the amount distributed
is less than the Certificateholder's adjusted basis in the Certificates. Any
such gain or loss would be long-term capital gain or loss if the holding period
of the Certificates were more than one year, assuming that the Certificates are
held as capital assets.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special federal
income tax reporting requirements. The Trust does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the Trust will elect to include
market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed miscellaneous itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal balance of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
Treasury regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future Treasury regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and federal income tax purposes on an accrual basis and the
fiscal year of the Trust will be the calendar year.
S-60
<PAGE> 63
The Trustee will file a partnership information return (Form 1065) with the IRS
for each taxable year of the Trust and will report each Certificateholder's
allocable share of items of Trust income and expense to holders and the IRS on
Schedule K-1. The Trust will provide the Schedule K-1 information to nominees
that fail to provide the Trust with the information statement described below
and such nominees will be required to forward such information to the beneficial
owners of the Certificates. Generally, holders must file federal income tax
returns that are consistent with the information return filed by the Trust or be
subject to penalties unless the holder notifies the IRS of all such
inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and federal taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and federal taxpayer identification
number of such person, (y) whether such person is a United States person, a
tax-exempt entity or a foreign government, an international organization, or any
wholly owned agency or instrumentality of either of the foregoing, and (z)
certain information on Certificates that were held, bought or sold on behalf of
such person throughout the year. In addition, brokers and financial institutions
that hold Certificates through a nominee are required to furnish directly to the
Trust information as to themselves and their ownership of Certificates. A
clearing agency registered under Section 17A of the Exchange Act is not required
to furnish any such information statement to the Trust. The information referred
to above for any calendar year must be furnished to the Trust on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust with the information described above may be subject to
penalties.
The Code provides for administrative examination of a partnership as if the
partnership were a separate taxpayer. Under these audit procedures, the tax
treatment of items of Trust income, gain, loss, deduction and credit would be
determined at the Trust level in a unified proceeding, rather than in separate
proceedings with each Certificateholder. Generally, the statute of limitations
for Trust items does not expire before three years after the date on which the
partnership information return is filed. The Seller will be designated the "tax
matters partner" for the Trust and, as such, is designated to receive notice on
behalf of, and to provide notice to those Certificateholders not receiving
notice from, the IRS, and to represent the Certificateholders in any dispute
with the IRS. Any adverse 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 while the Certificateholders may
participate in any adjudicative process that is undergone at the Trust level in
arriving at such a determination, such Certificateholders will be precluded from
separately litigating a proposed adjustment to the items of the Trust. As the
tax matters partner, the Seller may enter into a binding settlement on behalf of
all Certificateholders with a less than a 1 percent interest in the Partnership
(except for any group of such Certificateholders with an aggregate interest of 5
percent or more in Trust profits that elects to form a notice group or
Certificateholders who otherwise notify the IRS that the Seller is not
authorized to settle on their behalf). In the absence of a proceeding at the
Trust level, a Certificateholder under certain circumstances may pursue a claim
for credit or refund on his own behalf by filing a request for administrative
adjustment of a Trust item. Each Certificateholder is advised to consult its own
tax advisor with respect to the impact of these procedures on its particular
case.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will not be subject to a "backup" withholding
tax of 31% unless, in general, the Certificateholder fails to comply with
certain identification procedures and is not an exempt recipient under
applicable provisions of the Code.
S-61
<PAGE> 64
TAX CONSEQUENCES TO NON-U.S. CERTIFICATEHOLDERS
The Certificates may not be purchased by persons other than U.S. persons
and non-U.S. persons who will satisfy the Seller and the Trustee of the Trust
that such non-U.S. person will be taxed with respect to its ownership of
Certificates as if it were a U.S. person. However, in the case of such a
non-U.S. person, the Trust will withhold U.S. income tax at the highest marginal
rate.
CERTAIN STATE TAX CONSEQUENCES
Because of the variation in each state's and locality's tax laws, it is
impossible to predict the tax classification of the Trust or the tax
consequences to the Trust or 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 taxation of the Trust and state and local tax
consequences of the purchase, ownership and disposition of Notes and
Certificates.
MICHIGAN TAX CONSEQUENCES
The State of Michigan imposes a state individual income tax and a Single
Business Tax which is based partially upon the net income of corporations,
partnerships and other entities doing business in the State of Michigan. This
discussion is based upon present provisions of Michigan statutes and the
regulations promulgated thereunder, and applicable judicial or ruling authority,
all of which are subject to change, which change may be retroactive. No ruling
on any of the issues discussed below will be sought from the Michigan Department
of Treasury.
MICHIGAN TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Michigan Tax Counsel will deliver his opinion that,
assuming the Notes will be treated as debt for federal income tax purposes, the
Notes will be treated as debt for Michigan income and Single Business Tax
purposes. Accordingly, Noteholders not otherwise subject to taxation in Michigan
should not become subject to taxation in Michigan solely because of a holder's
ownership of Notes. However, a Noteholder already subject to Michigan's income
tax or Single Business Tax could be required to pay additional Michigan tax as a
result of the holder's ownership or disposition of Notes.
MICHIGAN TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
If the arrangement created by the Trust Agreement is treated as a
partnership (not taxable as a corporation) for federal income tax purposes, it
is expected that Michigan Tax Counsel will deliver his opinion that the same
treatment should also apply for Michigan tax purposes. In such case, the
partnership should have no Michigan Single Business Tax liability (which could
otherwise result in reduced distributions to Certificateholders). The
Certificateholders also should not be subject to the Michigan Single Business
Tax on income received through the partnership.
Individual Certificateholders that are nonresidents of Michigan and are not
otherwise subject to Michigan taxes may be subject to Michigan Individual Income
Tax on the income from the partnership. Michigan law is not clear with respect
to this issue. Other states, with similar laws, do take the position that
individual partners are subject to personal income tax on income from a
partnership when a partnership is doing business in their state. A
Certificateholder not otherwise subject to taxation in Michigan would not be
subject to Michigan Individual Income Tax on income beyond that derived from the
Certificates.
If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity would be subject to the Michigan
Single Business Tax (which would result in reduced distributions
S-62
<PAGE> 65
to Certificateholders). A Certificateholder not otherwise subject to tax in
Michigan would not become subject to Michigan tax as a result of its mere
ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
THE NOTES
The Notes may, in general, be purchased by or on behalf of (i) "employee
benefit plans" (as defined in Section 3(3) of ERISA), (ii) "plans" described in
Section 4975(e)(1) of the Code, including individual retirement accounts and
Keogh Plans, or (iii) entities whose underlying assets include plan assets by
reason of a plan's investment in such entity (each, a "Plan"). However, the
acquisition and holding of Notes by or on behalf of a Plan could be considered
to give rise to a prohibited transaction under ERISA and the Code if the Trust,
the Owner Trustee, the Indenture Trustee, any holder of the Certificates or any
of their respective affiliates, is or becomes a "party in interest" or a
"disqualified person" (as defined in ERISA and the Code, respectively) with
respect to such Plan. In such case, certain exemptions from the prohibited
transaction rules could be applicable to such acquisition and holding by a Plan
depending on the type and circumstances of the Plan fiduciary making the
decision to acquire a Note. For additional information regarding treatment of
the Notes under ERISA, see "ERISA Considerations" in the Prospectus.
THE CERTIFICATES
The Certificates may not be acquired by a Plan or a person investing "plan
assets" of a Plan (including without limitation, for this purpose, any insurance
company general account, but excluding any entity registered under the
Investment Company Act of 1940, as amended) (each, a "Plan Investor"). In
addition, investors other than Plan Investors should be aware that a prohibited
transaction under ERISA and the Code could be deemed to occur if any holder of
the Certificates or any of their respective affiliates, is or becomes a party in
interest or a disqualified person with respect to any Plan that acquires and
holds the Notes without such Plan being covered by one or more exemptions from
the prohibited transaction rules. For additional information regarding treatment
of the Certificates under ERISA, see "ERISA Considerations" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Note Underwriting Agreement"), the Seller has agreed to cause the Trust to
sell to each of the Note Underwriters named below (collectively, the "Note
Underwriters"), and each of the Note Underwriters
S-63
<PAGE> 66
has severally agreed to purchase, the initial principal amount of Notes set
forth opposite its name below:
<TABLE>
<CAPTION>
[PRINCIPAL AMOUNT [PRINCIPAL AMOUNT
PRINCIPAL AMOUNT OF OF CLASS A-2 OF CLASS A-3
NOTE UNDERWRITERS [CLASS A-1] NOTES NOTES] NOTES]
----------------- ------------------- ----------------- -----------------
<S> <C> <C> <C>
....................................... $ $ [] $ []
....................................... [] []
....................................... [] []
....................................... [] []
Total............................. $ $ [] $ []
</TABLE>
The Seller has been advised by the Note Underwriters that they propose
initially to offer the Notes to the public at the prices set forth herein, and
to certain dealers at such prices less the initial concession not in excess of
% per [Class A-1] Note[, % per Class A-2 Note and % per Class A-3
Note]. The Note Underwriters may allow, and such dealers may reallow, a
concession not in excess of % per [Class A-1] Note[, % per Class A-2
Note and % per Class A-3 Note] to certain other dealers. After the initial
public offering of the Notes, the public offering price and such concessions may
be changed.
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Certificate Underwriting Agreement"), the Seller has agreed to cause the
Trust to sell to each of the Certificate Underwriters named below (the
"Certificate Underwriters" and, together with the Note Underwriters, the
"Underwriters"), and each of the Certificate Underwriters has severally agreed
to purchase, the initial Certificate Balance of Certificates set forth opposite
its name below:
<TABLE>
<CAPTION>
CERTIFICATE BALANCE
CERTIFICATE UNDERWRITERS OF 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-64
<PAGE> 67
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>
<CAPTION>
PAGE
----
<S> <C>
ABS......................................................... S-27
ABS Table................................................... S-28
Accrued Certificate Interest................................ S-44
Accrued Note Interest....................................... S-43
[Additional Yield Supplement Amount......................... S-15]
APR......................................................... S-4
Available Funds............................................. S-41
Available Interest.......................................... S-41
Available Principal......................................... S-41
Available Reserve Amount.................................... S-47
Business Day................................................ S-6
[Cap Notional Amount........................................ S-48]
[Cap Rate................................................... S-48]
Cede........................................................ S-2
Cedel....................................................... I-1
Certificate Balance......................................... S-44
Certificateholders.......................................... S-9
Certificateholders' Distribution Amount..................... S-44
Certificateholders' Interest Carryover Shortfall............ S-44
Certificateholders' Monthly Accrued Interest................ S-44
Certificateholders' Monthly Principal....................... S-44
Certificateholders' Percentage.............................. S-44
Certificateholders' Principal Carryover Shortfall........... S-45
Certificateholders' Principal Distribution Amount........... S-45
[Certificate Interest Reserve Amount........................ S-47]
Certificate Owner........................................... S-4
Certificate Pool Factor..................................... S-33
[Certificate Prepayment Amount.............................. S-11, S-39]
[Certificate Prepayment Premium............................. S-10]
Certificate Rate............................................ S-9
Certificates................................................ S-1, S-3
Certificate Underwriters.................................... S-61
Certificate Underwriting Agreement.......................... S-61
[Class A-1] Final Scheduled [Distribution] [Payment] Date... S-7
[Class A-1] Notes........................................... S-1, S-3
[Class A-1 Rate............................................. S-6]
[Class A-2 Final Scheduled [Distribution] [Payment] Date.... S-8]
[Class A-2 Notes............................................ S-1, S-3]
[Class A-2 Rate............................................. S-6]
[Class A-3 Final Scheduled [Distribution] [Payment] Date.... S-7]
[Class A-3 Notes............................................ S-1, S-3]
[Class A-3 Rate............................................. S-6]
Closing Date................................................ S-4
Code........................................................ S-17, S-51
Collection Account.......................................... S-15
</TABLE>
S-65
<PAGE> 68
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Collection Period........................................... S-7
Commission.................................................. S-2
Cutoff Date................................................. S-24
Determination Date.......................................... S-7, S-36
Distribution Date........................................... S-2, S-9
DTC......................................................... S-2, I-1
ERISA....................................................... S-17
Euroclear................................................... I-1
Exchange Act................................................ S-2
Final Scheduled Distribution Date........................... S-10
Final Scheduled Maturity Date............................... S-5
Ford........................................................ S-20
Ford Credit................................................. S-3
[Funding Period............................................. S-12]
General Partner............................................. S-2
[Global Certificates........................................ I-1]
[Global Notes............................................... I-1]
Global Securities........................................... I-1
[Guaranteed Rate Agreement.................................. S-49]
Indenture................................................... S-3
Indenture Trustee........................................... S-3
[Index Maturity............................................. S-35]
[Initial] Cutoff Date....................................... S-4
Initial Pool Balance........................................ S-8
[Initial] Receivables....................................... S-4
Interest Period............................................. S-6, S-35
[Interest Rate Cap.......................................... S-48]
[Interest Rate Cap Provider................................. S-11, S-48]
[Interest Rate Swap......................................... S-11, S-49]
[Interest Reset Period...................................... S-35]
[Investment Provider........................................ S-16, S-50]
IRS......................................................... S-50
Issuer...................................................... S-3
Liquidated Receivables...................................... S-41
Liquidation Proceeds........................................ S-41
[Mandatory Redemption....................................... S-8, S-37]
[Mandatory Repurchase....................................... S-10, S-38]
[Maximum Initial Yield Supplement Amount.................... S-15, S-48]
[Maximum Subsequent Yield Supplement Amount................. S-15, S-48]
[Maximum Yield Supplement Amount............................ S-15, S-48]
Michigan Tax Counsel........................................ S-17
Net Losses.................................................. S-33
[Net Trust Swap Payment..................................... S-12, S-49]
[Net Trust Swap Receipt..................................... S-12, S-49]
Noteholders................................................. S-6
Noteholders' Accelerated Principal.......................... S-7, S-36
Noteholders' Interest Carryover Shortfall................... S-43
Noteholders' Monthly Accrued Interest....................... S-43
Noteholders' Monthly Principal.............................. S-43
Noteholders' Payment Amount................................. S-43
Noteholders' Percentage..................................... S-43
Noteholders' Principal Carryover Shortfall.................. S-43
</TABLE>
S-66
<PAGE> 69
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Noteholders' Principal Payment Amount....................... S-7, S-44
Note Interest Rate[s]....................................... S-6
Note Owner.................................................. S-3
Note Pool Factor............................................ S-33
[Note Prepayment Amount..................................... S-8, S-37]
[Note Prepayment Premium.................................... S-8]
Notes....................................................... S-1, S-3
Note Underwriters........................................... S-61
Note Underwriting Agreement................................. S-61
OID......................................................... S-51
OID Regulations............................................. S-52
Owner Trustee............................................... S-3
[Payment Date............................................... S-2, S-6]
Plan........................................................ S-60
Plan Investor............................................... S-60
Pool Balance................................................ S-6
[Pool/Pre-Funding Balance................................... S-5]
[Pre-Funded Amount.......................................... S-5]
[Pre-Funded Percentage...................................... S-8]
[Pre-Funding Account........................................ S-2, S-12]
Prepayable Obligation....................................... S-52
Prepayment Assumption....................................... S-52
Prospectus.................................................. S-2
Purchase Agreement.......................................... S-6
Rating Agencies............................................. S-23
Realized Losses............................................. S-5
Receivables................................................. S-1
Receivables Pool............................................ S-24
Record Date................................................. S-6
Redemption Price............................................ S-37
Regular Principal........................................... S-7, S-36
Replacement Guaranteed Rate Agreement....................... S-50
[Required Rate.............................................. S-14]
Reserve Initial Deposit..................................... S-45
Sale and Servicing Agreement................................ S-4
Securities.................................................. S-1, S-3
Securityholders............................................. S-9
Seller...................................................... S-1, S-3
Servicer.................................................... S-3
Servicing Fee Rate.......................................... S-16
Short-Term Notes............................................ S-53
Special Tax Counsel......................................... S-17
Specified Reserve Balance................................... S-13, S-46
[Subsequent Cutoff Date..................................... S-5]
[Subsequent Receivables..................................... S-2, S-5]
[Subsequent Transfer Date................................... S-5]
Supplemental Servicing Fee.................................. S-41
[Swap Counterparty.......................................... S-11, S-49]
[Swap Notional Amount....................................... S-49]
Transfer and Servicing Agreements........................... S-39
Trust....................................................... S-1, S-3
Trust Agreement............................................. S-3
</TABLE>
S-67
<PAGE> 70
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Underwriters................................................ S-61
U.S. Person................................................. I-4
[Yield Supplement Account................................... S-14]
[Yield Supplement Agreement................................. S-15]
[Yield Supplement Amount.................................... S-15, S-48]
[Yield Supplement Deposit Amount............................ S-48]
[Yield Supplement Initial Deposit........................... S-14]
</TABLE>
S-68
<PAGE> 71
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Ford Credit
Auto Owner Trust 199 % [Class A-1] Asset Backed Notes[, Floating Rate Class
A-2 Asset Backed Notes and % Class A-3 Asset Backed Notes] (collectively, [the
"Global Notes") and % Asset Backed Certificates (the "Global Certificates" and
together with the Global Notes,] the "Global Securities") will be available only
in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel Bank,
societe anonyme ("Cedel") or the Euroclear System ("Euroclear"). The Global
Securities will be tradeable as home market instruments in both the European and
U.S. domestic markets. Initial settlement and all secondary trades will settle
in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
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> 72
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
I-2
<PAGE> 73
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 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.
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> 74
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.
Recently enacted Treasury regulations provide that as of January 1, 1999,
the current versions of Form 1001 and Form W-8 will be replaced with a unified
Form W-8. Therefore, at such time, beneficial owners must file the revised Form
W-8 in order to continue to obtain an exemption or reduced tax rate.
[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, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a U.S. court is able to exercise
primary supervision over the administration of such trust and one or more U.S.
Persons has the authority to control all substantial decisions of the trust.
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 Notes.
Investors are advised to consult their own tax advisers for specific tax advice
concerning their holding and disposing of the Global Notes.
I-4
<PAGE> 75
=========================================================
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
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Securityholders.................. S-3
Summary..................................... S-4
Risk Factors................................ S-22
The Trust................................... S-26
The Receivables Pool........................ S-27
Pool Factors................................ S-35
Maturity and Prepayment Considerations...... S-35
Description of the Notes.................... S-36
Description of the Certificates............. S-39
Description of the Transfer and Servicing
Agreements................................ S-41
Certain Federal Income Tax Consequences..... S-53
Certain State Tax Consequences.............. S-62
ERISA Considerations........................ S-63
Underwriting................................ S-63
Legal Opinions.............................. S-64
Index of Terms.............................. S-65
Annex I -- Global Clearance, Settlement and
Tax Documentation Procedures.............. I-1
PROSPECTUS
Available Information....................... 2
Incorporation of Certain Documents by
Reference................................. 2
Summary..................................... 3
Risk Factors................................ 13
The Trusts.................................. 18
The Receivables Pools....................... 20
Maturity and Prepayment Considerations...... 22
Pool Factors and Trading Information........ 23
Use of Proceeds............................. 23
The Seller and the General Partner.......... 24
The Servicer................................ 25
Description of the Notes.................... 25
Description of the Certificates............. 31
Certain Information Regarding the
Securities................................ 32
Description of the Transfer and Servicing
Agreements................................ 42
Certain Legal Aspects of the Receivables.... 55
Certain Federal Income Tax Consequences..... 59
ERISA Considerations........................ 60
Plan of Distribution........................ 65
Legal Opinions.............................. 65
Index of Terms.............................. 66
</TABLE>
UNTIL , 199 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT), ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES OR THE
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
=========================================================
=========================================================
$
FORD CREDIT
AUTO OWNER TRUST
199 -
$
% [ CLASS A-1]
ASSET BACKED NOTES
[$
FLOATING RATE CLASS A-2
ASSET BACKED NOTES]
[$
% CLASS A-3
ASSET BACKED NOTES]
$
% ASSET BACKED CERTIFICATES
FORD CREDIT AUTO
RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
-----------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------
=========================================================
<PAGE> 76
SUBJECT TO COMPLETION DATED , 199
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 199
$
FORD CREDIT AUTO GRANTOR TRUST 199 -
$ % ASSET BACKED CERTIFICATES, CLASS A
[$ % ASSET BACKED CERTIFICATES, CLASS B]
FORD LOGO
FORD CREDIT AUTO RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
---------------------------
The Ford Credit Auto Grantor Trust 199 - (the "Trust") will be formed
pursuant to a Pooling and Servicing Agreement, to be dated as of
, 199 , among Ford Credit Auto Receivables Two L.P. (the
"Seller"), Ford Motor Credit Company (the "Servicer") and , as
Trustee, and will issue $ aggregate initial principal balance of % Asset
Backed Certificates, Class A (the "Class A Certificates") and
$ aggregate initial principal balance of % Asset Backed Certificates,
Class B (the "Class B Certificates" and, together with the Class A Certificates,
the "Certificates"). [Only the Class A Certificates are being offered hereby.]
The Class A Certificates will evidence in the aggregate an undivided ownership
interest of approximately % in the Trust. The Class B Certificates[, which
initially will be retained by the Seller,] will evidence in the aggregate an
undivided ownership interest of approximately % in the Trust. The rights of
the Class B Certificateholders to receive distributions with respect to the
Receivables are subordinated to the rights of the Class A Certificateholders to
the extent described herein. The Trust property will include a pool of motor
vehicle retail installment sale contracts (the "Receivables") secured by
security interests in the motor vehicles financed thereby, including certain
monies due or received thereunder on or after , 199 , and certain
other property, as more fully described herein. See "Summary -- The Trust
Property" herein. [The Trustee also will hold monies on deposit in a trust
account (the "Pre-Funding Account"). Additional motor vehicle retail installment
sale contracts (the "Subsequent Receivables") will be purchased by the Trust
from the Seller from time to time on or before , 199 out of funds
on deposit in the Pre-Funding Account.]
Principal and interest to the extent of the [applicable] Certificate Rate
generally will be distributed on the day of each month (the "Distribution
Date"), commencing , 199 . The final scheduled Distribution Date
on the [Class A] Certificates will be , 199 (the "Final Scheduled
Distribution Date").
---------------------------
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" ON PAGE S-13 HEREIN AND ON PAGE 12 OF THE
ACCOMPANYING PROSPECTUS.
---------------------------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
FORD CREDIT AUTO RECEIVABLES TWO L.P., FORD CREDIT AUTO RECEIVABLES TWO, INC.,
FORD MOTOR CREDIT COMPANY, FORD MOTOR COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO THE
TO PUBLIC(1) DISCOUNT SELLER(1)(2)
------------------ ------------- ---------------
<S> <C> <C> <C>
Per Class A Certificate............................. % % %
[Per Class B Certificate............................ % % %
Total............................................... $ $ $ ]
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
---------------------------
The [Class A] Certificates are offered by the Underwriters when, as and
if issued and accepted by the Underwriters and subject to their right to reject
orders in whole or in part. It is expected that delivery of the [Class A]
Certificates will be made in book-entry form only through the Same Day Funds
Settlement System of The Depository Trust Company, or through Cedel Bank,
societe anonyme or the Euroclear System, on or about the Closing Date.
---------------------------
The date of this Prospectus Supplement is , 199 .
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.
<PAGE> 77
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE [CLASS A] CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE [CLASS A] CERTIFICATES MAY
NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE [CLASS A]
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, periodic and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the [Class A] Certificates. See "Certain Information Regarding the
Securities -- Book-Entry Registration" and "-- Reports to Securityholders" in
the accompanying Prospectus (the "Prospectus"). Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Seller, as originator of the Trust, will file with the
Securities and Exchange Commission (the "Commission") such periodic reports as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder. In
addition, the Commission maintains a public access site on the Internet through
the World Wide Web at which site reports, information statements and other
information, including all electronic filings, may be viewed. The Internet
address of such World Wide Web site is http://www.sec.gov.
S-2
<PAGE> 78
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
ISSUER........................ Ford Credit Auto Grantor Trust 199 - (the
"Trust" or the "Issuer"), a trust to be
formed by the Seller and the Trustee pursuant
to the Agreement.
SELLER........................ Ford Credit Auto Receivables Two L.P., a
Delaware limited partnership (the "Seller").
SERVICER...................... Ford Motor Credit Company, a Delaware
corporation (the "Servicer" or "Ford
Credit").
TRUSTEE....................... , as trustee under the Agreement
(the "Trustee").
THE CERTIFICATES.............. The Trust will issue Asset Backed Certificates
(the "Certificates") in an aggregate initial
balance of $ . The Certificates represent
fractional undivided interests in the Trust
and will be issued pursuant to a Pooling and
Servicing Agreement to be dated as of
, 199 (as amended and
supplemented from time to time, the
"Agreement"), among the Seller, the Servicer
and the Trustee.
The Certificates will consist of $
aggregate initial balance of % Asset
Backed Certificates, Class A (the "Class A
Certificates") and $ aggregate initial
balance of % Asset Backed Certificates,
Class B (the "Class B Certificates"). [Only
the Class A Certificates are being offered
hereby.] Each Certificate will represent a
fractional undivided ownership interest in
the Trust.
The [Class A] Certificates will be available
for purchase in book entry form only in
minimum denominations of $1,000 and integral
multiples thereof. No person acquiring a
beneficial ownership interest in [Class A]
Certificates (a "Certificate Owner") will be
entitled to receive Definitive Certificates,
except in the limited circumstances described
herein. See "Certain Information Regarding
the Securities -- Definitive Securities" in
the Prospectus.
The Class A Certificates will evidence in the
aggregate an undivided ownership interest
(the "Class A Percentage") of approximately
% in the Trust (initially representing
$ ) and the Class B Certificates will
evidence in the aggregate an undivided
ownership interest (the "Class B Percentage")
of approximately % in the Trust (initially
representing $ ). The Class B
Certificates are subordinated to the Class A
Certificates to the extent described herein.
[The Class B Certificates are not being
offered hereby and initially will be retained
by the Seller.]
S-3
<PAGE> 79
THE TRUST PROPERTY............ The property of the Trust will include (i) the
Receivables; (ii) with respect to Precomputed
Receivables, all monies due thereunder on or
after the related Cutoff Date and with
respect to Simple Interest Receivables, all
monies due or received thereunder on or after
the related Cutoff Date; (iii) security
interests in the Financed Vehicles and any
accessions thereto; (iv) the rights to
proceeds from claims on certain physical
damage, credit life, credit disability or
other insurance policies, if any, covering
the Financed Vehicles or the Obligors; (v)
any Dealer Recourse; (vi) the Seller's rights
to certain documents and instruments relating
to the Receivables; (vii) such amounts as
from time to time may be held in one or more
accounts maintained pursuant to the
Agreement, as described herein[, including
the Yield Supplement Account] [and the
Pre-Funding Account]; (viii) certain rights
under the Agreement [and the Yield Supplement
Agreement]; (ix) certain rights under the
Purchase Agreement, including the right of
the Seller to cause Ford Credit to repurchase
Receivables from the Seller; (x) certain
payments and proceeds with respect to the
Receivables held by the Servicer; (xi)
certain rebates of premiums and other amounts
relating to certain insurance policies and
other items financed under the Receivables;
and (xii) any and all proceeds of the
foregoing. The property of the Trust does not
include the Payahead Account and the
Subordination Spread Account.
THE RECEIVABLES............... On , 199 (the "Closing Date"),
the Trust will purchase Receivables (the
"[Initial] Receivables") having an aggregate
principal balance of approximately $ as
of , 199 (the "[Initial]
Cutoff Date"), from the Seller pursuant to
the Agreement. As of the [Initial] Cutoff
Date, the weighted average annual percentage
rate ("APR") of the [Initial] Receivables was
approximately %, the weighted average
remaining maturity of the [Initial]
Receivables was approximately months and the
weighted average original maturity of the
[Initial] Receivables was approximately
months.
[On and following the Closing Date, pursuant to
the Agreement, the Seller will be obligated,
subject only to the availability thereof, to
sell, and the Trust will be obligated to
purchase, subject to the satisfaction of
certain conditions set forth therein,
additional Receivables (the "Subsequent
Receivables") from time to time during the
Funding Period having an aggregate principal
balance equal to approximately $ (such
amount being equal to an amount on deposit in
the Pre-Funding Account (the "Pre-Funded
Amount") on the Closing Date). The Seller
will designate as a Cutoff Date (each a
"Subsequent Cutoff Date") the date as of
which particular Subsequent Receivables are
conveyed to the Trust. It is expected that
certain of the Subsequent Receivables arising
between
S-4
<PAGE> 80
the Initial Cutoff Date and the Closing Date
will be conveyed to the Trust on the Closing
Date and that other Subsequent Receivables
will be conveyed to the Trust as frequently
as daily thereafter on dates specified by the
Seller (each date on which Subsequent
Receivables are conveyed to the Trust being
referred to as a "Subsequent Transfer Date")
occurring during the Funding Period. See
"Description of the Certificates -- Sale and
Assignment of Receivables; Subsequent
Receivables" herein.]
The [Initial] Receivables [and the Subsequent
Receivables] will be purchased by the Seller
from Ford Credit pursuant to a Purchase
Agreement between the Seller and Ford Credit
(as amended and supplemented from time to
time, the "Purchase Agreement"). The
[Initial] Receivables have been selected[,
and the Subsequent Receivables will be
selected,] from the contracts owned by Ford
Credit based on the criteria specified in the
Agreement and described herein and in the
Prospectus. No Initial Receivable has[, and
no Subsequent Receivable will have,] a
scheduled maturity later than
(the "Final Scheduled Maturity Date").
[Subsequent Receivables may be originated by
Ford Credit at a later date using credit
criteria different from those which were
applied to the Initial Receivables and may be
of a different credit quality and seasoning.
In addition, following the transfer of
Subsequent Receivables to the Trust, the
characteristics of the entire pool of
Receivables included in the Trust may vary
significantly from those of the Initial
Receivables. See "Risk Factors -- The
Subsequent Receivables and the Pre-Funding
Account" and "The Receivables Pool" herein.]
The "Pool[/Pre-Funding] Balance" at any time
[will represent] [is the sum of (i)] the
aggregate principal balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments (other than Payaheads) received from
Obligors, Liquidation Proceeds, Advances and
Purchase Amounts to be remitted by the
Servicer or the Seller, as the case may be,
all for such Collection Period and all
Realized Losses during such Collection Period
[(such amount, the "Pool Balance") and (ii)
the amount on deposit in the Pre-Funding
Account (excluding any Investment Earnings)].
"Realized Losses" means the excess of the
principal balance of any Liquidated
Receivable over Liquidation Proceeds to the
extent allocable to principal.
DISTRIBUTION DATES............ Distributions with respect to the Certificates
will be made on the day of each month or, if
any such day is not a Business Day, on the
next succeeding Business Day (each, a
"Distribution Date") commencing
, 199 . Distributions will be
made to holders of the [Class A] Certificates
(the "[Class A] Certificateholders") of
record as of the
S-5
<PAGE> 81
day immediately preceding such Distribution
Date or, if Definitive Certificates are
issued, as of the day of the preceding month
(a "Record Date"). A "Business Day" is a day
that in The City of New York or in the city
in which the corporate trust office of the
Trustee is located is neither a legal holiday
nor a day on which banking institutions are
authorized by law, regulation or executive
order to be closed.
[CLASS A] CERTIFICATE RATE.... % per annum (the "[Class A] Certificate
Rate").
[CLASS B CERTIFICATE RATE..... % per annum (the "Class B Certificate
Rate").]
[CLASS A] INTEREST............ On each Distribution Date, the Trustee shall
pass through and distribute pro rata to the
[Class A Certificateholders] [holders of
record of Class A Certificates (the "Class A
Certificateholders")] interest at one-twelfth
of the [Class A] Certificate Rate, calculated
on the basis of a 360-day year consisting of
twelve 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
S-6
<PAGE> 82
preceding Collection Period; and (e) the
principal balance of each Receivable
liquidated by the Servicer, during the
preceding Collection Period. A "Collection
Period" with respect to a Distribution Date
will be the calendar month preceding the
month in which such Distribution Date occurs,
or, in the case of the initial Distribution
Date, the period from the [Initial] Cutoff
Date through the last day of the calendar
month preceding the month in which the
initial Distribution Date occurs.
[CLASS B INTEREST............. On each Distribution Date, the Trustee shall
pass through and distribute pro rata to the
holders of record of Class B Certificates
(the "Class B Certificateholders") interest
at one-twelfth of the Class B Certificate
Rate, calculated on the basis of a 360-day
year consisting of twelve 30-day months, on
the Class B Certificate Balance as of the
last day of the preceding calendar month to
the extent of funds available, after giving
effect to (A) any amounts required to be
distributed to the Class A Certificateholders
pursuant to the subordination of the rights
of the Class B Certificateholders, and (B)
amounts required to pay the Servicing Fee for
the prior Collection Period and any overdue
Servicing Fees to the Servicer, from (i) the
Class B Percentage of the Available Interest
and (ii) the Subordination Spread Account.
The "Class B Certificate Balance" shall
equal, initially, the Class B Percentage of
the Pool[/Pre-Funding] Balance as of the
[Initial] Cutoff Date and thereafter shall
equal the initial Class B Certificate Balance
reduced by all principal distributions on the
Class B Certificates.
CLASS B PRINCIPAL............. On each Distribution Date, the Trustee shall
pass through and distribute pro rata to Class
B Certificateholders principal to the extent
of funds available, after giving effect to
(A) any amounts required to be distributed to
the Class A Certificateholders pursuant to
the subordination of the rights of the Class
B Certificateholders, (B) amounts required to
pay the Servicing Fee for the prior
Collection Period and any overdue Servicing
Fees to the Servicer, and (C) the interest
due to the Class B Certificateholders, from
(i) the Class B Percentage of the Available
Principal and (ii) the Subordination Spread
Account. Such principal shall consist of the
Class B Percentage of: (a) the principal
portion of all scheduled payments due with
respect to Precomputed Receivables during the
preceding Collection Period (including
amounts withdrawn from the Payahead Account
but excluding amounts deposited into the
Payahead Account); (b) the principal portion
of all prepayments in full received with
respect to Precomputed Receivables during the
preceding Collection Period (and certain
partial prepayments) (including amounts
withdrawn from the Payahead Account but
excluding amounts deposited into the Payahead
Account); (c) the principal portion of all
payments received with respect to Simple
Interest Receivables during the preceding
Collection
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Period; (d) the principal balance of each
Receivable that was purchased by the Servicer
or repurchased by the Seller, in each case,
under an obligation that arose during the
preceding Collection Period; and (e) the
principal balance of each Receivable
liquidated by the Servicer, during the
preceding Collection Period.]
OPTIONAL PREPAYMENT........... If the Servicer exercises its option to
purchase the Receivables, which can occur
after the Pool Balance declines to 10% or
less of the Initial Pool Balance, the Class A
Certificateholders will receive an amount
equal to the Class A Certificate Balance
together with accrued interest at the [Class
A] Certificate Rate, [the Class B
Certificateholders will receive and amount
equal to the Class B Certificate Balance
together with accrued interest at the Class B
Certificate Rate] and the [Class A]
Certificates will be retired. The "Initial
Pool Balance" will equal [the sum of (i)] the
Pool Balance as of the [Initial] Cutoff Date
[plus (ii) the aggregate principal balances
of all Subsequent Receivables added to the
Trust as of their respective Subsequent
Cutoff Dates]. See "Description of the
Certificates -- Optional Prepayment" herein.
[MANDATORY REPURCHASE FROM
PRE-FUNDING ACCOUNT........... The [Class A] Certificates will be prepaid, in
part, on the Distribution Date on or
immediately following the last day of the
Funding Period in the event that any amount
remains on deposit in the Pre-Funding Account
after giving effect to the purchase of all
Subsequent Receivables, including any such
purchase on such date (a "Mandatory
Repurchase"). The aggregate principal balance
of [Class A] Certificates to be prepaid will
be an amount equal to the amount then on
deposit in the Pre-Funding Account.
[A limited recourse mandatory prepayment
premium (the "Certificate Prepayment
Premium") will be payable by the Trust to the
[Class A] Certificate holders if the
aggregate principal balance of [Class A]
Certificates to be prepaid pursuant to a
Mandatory Repurchase exceeds $ . The
Certificate Prepayment Premium will equal the
excess, if any, discounted as 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
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discounted to present value to such
Distribution Date at the applicable yield
described in clause (ii) above. Pursuant to
the Agreement, the Seller will be obligated
to pay the Certificate Prepayment Premium to
the Trust as liquidated damages for the
failure to deliver Subsequent Receivables
having an aggregate principal balance equal
to the Pre-Funded Amount. The Trust's
obligation to pay the Certificate Prepayment
Premium will be limited to funds received
from the Seller pursuant to the preceding
sentence. In the event that such funds are
insufficient to pay the aggregate Certificate
Prepayment Premium in full, [Class A]
Certificateholders [of each class of
Certificates] will receive their ratable
share [(based upon the Certificate Prepayment
Premium for each class of Certificates)] of
the aggregate amount available to be
distributed in respect of the Certificate
Prepayment Premium. No other assets of the
Trust will be available for the purpose of
making such payment.]]
[PRE-FUNDING ACCOUNT.......... During the period (the "Funding Period") from
and including the Closing Date until the
earliest of (i) the date on which (a) the
amount on deposit in the Pre-Funding Account
is less than $ , (b) an Event of
Default occurs under the Agreement or (c)
certain events of insolvency occur with
respect to the Seller or the Servicer or (ii)
the close of business on the
Distribution Date, the Pre-Funded Amount will
be maintained as an account in the name of
the Trustee (the "Pre-Funding Account"). The
Pre-Funded Amount will initially equal
approximately $ , and, during the
Funding Period, will be reduced by the amount
thereof used to purchase Subsequent
Receivables in accordance with the Agreement
and the amount thereof deposited in the
Subordination Spread Account in connection
with the purchase of such Subsequent
Receivables. The Seller expects that the Pre-
Funded Amount will be reduced to less than
$ by the Distribution
Date. Any Pre-Funded Amount remaining at the
end of the Funding Period will be payable to
the Certificateholders pro rata in proportion
to their initial principal balances.]
SUBORDINATION................. The rights of the Class B Certificateholders to
receive distributions to which they would
otherwise be entitled with respect to the
Receivables are subordinated to the rights of
the Class A Certificateholders, as described
more fully herein.
SUBORDINATION SPREAD
ACCOUNT....................... An account (the "Subordination Spread Account")
will be created with an initial deposit by
the Seller of cash or Permitted Investments
maturing on or prior to the initial
Distribution Date and having a value of
[$ (the "Subordination Initial
Deposit").] [at least $ plus an
amount attributable to the difference between
the anticipated investment earnings on the
Pre-Funded Amount and
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the weighted average interest expense on the
portion of the Certificates represented by
the Pre-Funded Amount. On each Subsequent
Transfer Date, cash or Permitted Investments
having a value approximately equal to %
of the aggregate principal balance of the
Subsequent Receivables conveyed to the Trust
on such Subsequent Transfer Date will be
withdrawn from the Pre-Funding Account from
amounts otherwise distributable to the Seller
in connection with the sale of Subsequent
Receivables and deposited in the
Subordination Spread Account. The amount
initially deposited in the Subordination
Spread Account by the Seller together with
the aggregate amount transferred from the
Pre-Funding Account to the Subordination
Spread Account on each Subsequent Transfer
Date is referred to as the "Subordination
Initial Deposit."] The Subordination Initial
Deposit will be augmented by the deposit in
the Subordination Spread Account of amounts
otherwise distributable to Class B
Certificateholders until the amount in the
Subordination Spread Account reaches an
amount equal to the Specified Subordination
Spread Account Balance. Thereafter, amounts
otherwise distributable to the Class B
Certificateholders will be deposited in the
Subordination Spread Account to the extent
necessary to maintain the amount in the
Subordination Spread Account at an amount
equal to the Specified Subordination Spread
Account Balance. Amounts in the Subordination
Spread Account on any Distribution Date
(after giving effect to all distributions
made on such Distribution Date) in excess of
the Specified Subordination Spread Account
Balance for such Distribution Date generally
will be released to the Class B
Certificateholders. The "Specified
Subordination Spread Account Balance" with
respect to any Distribution Date will be
equal to $ , except that in the
event that on any Distribution Date (i) the
annualized average for the preceding three
Collection Periods (or such shorter number of
Collection Periods as have elapsed since the
Cutoff Date) of the ratios of net losses
(i.e., the balances of all Receivables which
are determined to be uncollectible in the
Collection Period, less any Liquidation
Proceeds) to the Pool Balance as of the first
day of each such Collection Period exceeds
% or (ii) the average for the preceding
three Collection Periods (or such shorter
number of Collection Periods as have elapsed
since the Cutoff Date) of the ratios of the
number of Financed Vehicles that have been
repossessed but not yet sold or are
delinquent 60 days or more to the outstanding
number of Receivables exceeds %, then
the Specified Subordination Spread Account
Balance for such Distribution Date shall be
an amount equal to the percentage of the Pool
Balance as of the first day of such
Collection Period determined by deducting
from eleven percent the following fraction,
expressed as a percentage: (x) 1 minus (y) a
fraction, the numerator of which is the
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<PAGE> 86
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 Certificates
is $ or less after giving effect to
distributions on such Distribution Date, the
Specified Subordination Spread Account
Balance shall be the greater of the balance
described above or $ . The
Subordination Spread Account will be
maintained with , as agent for the Class A
Certificateholders as a segregated trust
account, and will not be part of the Trust.
[YIELD SUPPLEMENT ACCOUNT;
YIELD SUPPLEMENT AGREEMENT.... Ford Credit will establish a yield supplement
account with the Trustee for the benefit of
the Certificateholders (the "Yield Supplement
Account"). The Yield Supplement Account is
designed solely to hold funds to be applied
by the Trustee to provide payments to the
Certificateholders in respect of Receivables
the APR of which is less than the sum of (i)
the weighted average of the Class A
Certificate Rate and the Class B Certificate
Rate and (ii the Servicing Fee Rate (the
"Required Rate"). The Yield Supplement
Account will be created with an initial
deposit by Ford Credit (the "Yield Supplement
Initial Deposit") in an amount (which amount
may be discounted at a rate to be specified
in the Agreement) equal to the aggregate
amount by which (i) interest on the principal
balance of each [Initial] Receivable for the
period commencing on the [Initial] Cutoff
Date and ending with the scheduled maturity
of such Receivable, assuming that payments on
such Receivables are made as scheduled and no
prepayments are made, at a rate equal to the
Required Rate, exceeds (ii) interest on such
principal balances at the APR of such
Receivable (the "Yield Supplement Amount"
[and, with respect to all of the [Initial]
Receivables, the "Maximum [Initial] Yield
Supplement Amount")].
[Ford Credit, the Seller and the Trustee will
enter into a Yield Supplement Agreement (as
amended and supplemented from time to time,
the "Yield Supplement Agreement") pursuant to
which, on each Subsequent Transfer Date, Ford
Credit will deposit an amount (which amount
may be discounted at a rate to be specified
in the Agreement), if any, into the Yield
Supplement Account (the "Additional Yield
Supplement Amount") equal to the aggregate
Yield Supplement Amounts in respect of the
related Subsequent Receivables for the period
commencing with the related Subsequent Cutoff
Date and ending with the scheduled maturity
of each such Subsequent Receivable, assuming
that payments on such Receivables are made as
scheduled and no prepayments are made. The
aggregate of the Additional Yield Supplement
Amounts in respect of the
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<PAGE> 87
Subsequent Receivables is referred to herein
as the "Maximum Subsequent Yield Supplement
Amount" and, together with the Maximum
Initial Yield Supplement Amount, the "Maximum
Yield Supplement Amount."] See "Description
of the Certificates -- Yield Supplement
Account; Yield Supplement Agreement" herein.]
COLLECTION ACCOUNT............ Except under certain conditions described
herein, the Servicer will be required to
remit collections received with respect to
the Receivables not later than the [ ]
Business Day after receipt to one or more
accounts in the name of the Trustee (the
"Collection Account"). Pursuant to the
Agreement, the Servicer will have the power,
revocable at the discretion of the Trustee,
to instruct the Trustee to withdraw funds on
deposit in the Collection Account and to
apply such funds on each Distribution Date to
the following (in the priority indicated):
(i) the Servicing Fee for the prior
Collection Period and any overdue Servicing
Fees to the Servicer, (ii) the Class A
Distributable Amount to the Class A
Certificateholders, (iii) the Class B
Distributable Amount to the Class B
Certificateholders, and (iv) the remaining
balance, if any, to the Subordination Spread
Account.
SERVICER FEE.................. The Servicer will receive each month a fee for
servicing the Receivables equal to (a) the
product of one-twelfth of 1.00% (the
"Servicing Fee Rate") and the Pool Balance
outstanding at the beginning of the previous
month, plus (b) any late, prepayment, and
other administrative fees and expenses
collected during such month [plus (c)
reinvestment proceeds on any payments
received in respect of the Receivables].
MATURITY AND PREPAYMENT
CONSIDERATIONS................ As the rate of payment of principal of the
Certificates depends on the rate of payment
(including prepayments) of the principal
balance of the Receivables, the final
distribution in respect of the Certificates
could occur significantly earlier than the
Final Scheduled Distribution Date. It is
expected that the final distribution in
respect of the Certificates will occur on or
prior to the Final Scheduled Distribution
Date. However, if sufficient funds are not
available to reduce the aggregate Certificate
Balance of either class of Certificates to
zero on or prior to the Final Scheduled
Distribution Date, the final distribution in
respect of such class of Certificates could
occur later than such date.
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
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<PAGE> 88
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" herein and in the Prospectus
and "Certain State Tax Consequences" herein
for additional information concerning the
application of federal income and Michigan
tax laws, respectively, to the Trust and the
Certificates.
ERISA CONSIDERATIONS.......... The Class A Certificates may, in general, be
purchased by employee benefit plans that are
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
upon satisfaction of certain conditions de
scribed under "ERISA Considerations" herein
and in the Prospectus with respect to the
Underwriters' Exemption. [However, as set
forth in "ERISA Considerations" in the
Prospectus, certain special considerations
may apply with respect to the Pre-Funding
Account.]
[The Underwriters' Exemption does not apply to
the Class B Certificates, which may be
purchased by employee benefit plans subject
to ERISA only if some other statutory or
administrative exemption from the prohibited
transaction rules of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code")
applies to such purchases. These exemptions
may apply with respect to, inter alia,
purchases by certain insurance company
general accounts, insurance company pooled
separate accounts,
S-13
<PAGE> 89
and bank collective investment funds, and on
behalf of employee benefit plans by certain
"in house" asset managers and qualified
professional asset managers.]
Any benefit plan fiduciary considering a
purchase of [Class A] Certificates should,
among other things, consult with legal
counsel in determining whether all required
conditions with respect to the various
exemptions have been satisfied. See "ERISA
Considerations" herein and in the Prospectus.
RATING[S] OF THE
CERTIFICATES.................. It is a condition to the issuance of the Class
A Certificates that they be rated in the
highest investment rating category by at
least two nationally recognized rating
agencies[, and it is a condition to the
issuance of the Class B Certificates that
they be rated by at least two nationally
recognized rating agencies [at least]
" " or its equivalent]. [However, the
rating agencies do not evaluate, and the
ratings do not address, the likelihood that
the Certificate Prepayment Premium will be
paid.] There can be no assurance that a
rating will not be lowered or withdrawn by a
rating agency if circumstances so warrant.
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<PAGE> 90
RISK FACTORS
LIMITED LIQUIDITY
There is currently no secondary market for the [Class A] Certificates. The
Underwriters currently intend to make a market in the [Class A] Certificates,
but they are under no obligation to do so. There can be no assurance that a
secondary market will develop or, if a secondary market does develop, that it
will provide the [Class A] Certificateholders with liquidity of investment or
that it will continue for the life of the [Class A] Certificates.
[THE SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT
On the Closing Date, the Seller will transfer to the Trust the
approximately $ of Initial Receivables and the approximately
$ Pre-Funded Amount on deposit in the Pre-Funding Account. If the
principal balance of eligible Receivables originated by Ford Credit during the
Funding Period is less than the Pre-Funded Amount, the Seller will have
insufficient Receivables to sell to the Trust on the Subsequent Transfer Dates,
thereby resulting in a prepayment of principal to the Certificateholders as
described in the following paragraph. See "-- Trust's Relationship to Ford and
Ford Credit" below. In addition, any conveyance of Subsequent Receivables is
subject to the satisfaction, on or before the related Subsequent Transfer Date,
of the following conditions precedent, among others: (i) each such Subsequent
Receivable must satisfy the eligibility criteria specified in the Agreement;
(ii) the Seller will not select such Subsequent Receivables in a manner that it
believes is adverse to the interests of the Certificateholders; (iii) as of the
related Subsequent Cutoff Date, the Receivables in the Trust at that time,
including the Subsequent Receivables to be conveyed by the Seller as of such
Subsequent Cutoff Date, will satisfy the parameters described under "The
Receivables Pool" herein and under "The Receivables Pools" in the Prospectus;
(iv) the applicable Subordination Initial Deposit for such Subsequent Transfer
Date shall have been made; and (v) the Seller shall have executed and delivered
to the Trustee a written assignment conveying such Subsequent Receivables to the
Trustee (including a schedule identifying such Subsequent Receivables).
Moreover, any such conveyance of Subsequent Receivables made during any given
Collection Period will also be subject to the satisfaction, on or about the
fifteenth day of the month following the end of such Collection Period, of the
following conditions subsequent, among others: (a) the Seller will deliver
certain opinions of counsel to the Trustee and the Rating Agencies with respect
to the validity of the conveyance of all such Subsequent Receivables conveyed
during such Collection Period; (b) the Trustee shall have received written
confirmation from a firm of independent certified public accountants that, as of
the end of the preceding Collection Period, the Receivables in the Trust at that
time, including the Subsequent Receivables conveyed by the Seller during such
Collection Period, satisfied the parameters described under "The Receivables
Pool" herein and under "The Receivables Pools" in the Prospectus; and (c) the
Rating Agencies shall have each notified the Seller in writing that, following
the addition of all such Subsequent Receivables, the Certificates will be rated
by the Rating Agencies in the same respective rating categories in which they
were rated on the Closing Date. The Seller will immediately repurchase any
Subsequent Receivable, at a price equal to the Purchase Amount thereof, upon the
failure of the Seller to satisfy any of the foregoing conditions subsequent with
respect thereto. Such confirmation of the ratings of the Certificates may depend
on factors other than the characteristics of the Subsequent Receivables,
including the delinquency, repossession and net loss experience on the
automobile and light truck receivables in the portfolio serviced by Ford Credit.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the conveyance of Subsequent Receivables to the Trust by
the end of the Funding Period, the Certificateholders will receive, on the
Distribution Date on or immediately following the last day of the Funding
Period, a prepayment of principal in an amount equal to the Pre-Funded Amount
remaining in the Pre-Funding Account following the purchase of any Subsequent
Receivables on such Distribution Date. It is anticipated that the principal
balance of Subsequent Receivables sold to
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<PAGE> 91
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.
Each Subsequent Receivable must satisfy the eligibility criteria specified
in the Agreement and any additional criteria specified by the Rating Agencies at
the time of its addition. However, Subsequent Receivables may have been
originated by Ford Credit at a later date using credit criteria different from
those which were applied to the Initial Receivables and may be of a different
credit quality and seasoning. In addition, an increasing percentage of the
Subsequent Receivables may be Final Payment Receivables. Therefore, following
the transfer of Subsequent Receivables to the Trust, the characteristics of the
entire Receivables Pool included in the Trust may vary significantly from those
of the Initial Receivables. See "The Receivables Pool" herein and "The
Receivables Pools" in the Prospectus. The ability of Ford Credit to generate
Subsequent Receivables is largely dependent upon the level of retail sales of
automobiles and light trucks. The level of retail sales of automobiles and light
trucks may change as a result of a variety of social and economic factors.
Economic factors include interest rates, unemployment levels, the rate of
inflation and consumer perceptions of economic conditions generally. However,
the Seller is unable to determine and has no basis to predict whether or to what
extent economic or social factors will affect the level of vehicle sales.]
[TRUST'S RELATIONSHIP TO FORD AND FORD CREDIT
Neither the Seller nor Ford Credit is obligated to make any payments in
respect of the Certificates or the Receivables. However, the ability of the
Seller to convey Subsequent Receivables on Subsequent Transfer Dates is
completely dependent upon the generation of additional receivables by Ford
Credit. The ability of Ford Credit to generate receivables is, in turn,
dependent to a large extent on the sales of automobiles and light trucks
manufactured or distributed by Ford Motor Company and its consolidated
subsidiaries ("Ford"). If, during the Funding Period, Ford were temporarily or
permanently no longer manufacturing or distributing vehicles, the rate of sales
of automobiles and light trucks manufactured by Ford would decrease, adversely
affecting the ability of the Seller to sell Subsequent Receivables to the Trust.
The use of incentive programs (e.g., manufacturers' rebate programs) also may
affect retail sales. There can be no assurance, therefore, that Ford Credit will
continue to generate receivables at the same rate as in prior years. In
addition, if Ford Credit were to cease acting as Servicer, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Certificateholders.
Ford and Ford Credit are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports and other information with
the Commission. For further information regarding Ford and Ford Credit,
reference is made to such reports and other information which are available as
described under "Available Information" in the Prospectus.]
LIMITED ASSETS
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables[, the
Pre-Funding Account] [, the Yield Supplement Account] and the Subordination
Spread Account. Holders of the Certificates must rely for repayment upon
payments on the Receivables and, if and to the extent available, amounts on
deposit in the [Pre-Funding Account[, the Yield Supplement Account] and the]
Subordination Spread Account. [The Pre-Funding Account will be available only
during the Funding Period and is designed solely to cover obligations of the
Trust relating to a portion of its funds not invested in Receivables and is not
designed to cover losses on the Receivables.] [The Yield Supplement Account is
designed solely to hold funds to be applied to provide payments to the
Securityholders in respect of Receivables the APR of which is less than the
Required Rate.] Funds in the Subordination Spread Account will be available on
each Distribution Date to cover shortfalls in distributions of interest and
principal on the Certificates. However, amounts to be deposited in the
[Pre-Funding Account[, the Yield
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<PAGE> 92
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.
SUBORDINATION OF THE CLASS B CERTIFICATES
Distributions of interest and principal on the Class B Certificates will be
subordinated in priority of payment to interest and principal due on the Class A
Certificates. No distributions with respect to a Collection Period will be made
on the Class B Certificates until the full amount of interest on and principal
of the Class A Certificates on the related Distribution Date has been
distributed to the Class A Certificateholders. Any amounts released from the
Subordination Spread Account to the Seller will not be available to the
Certificateholders.
MATURITY AND PREPAYMENT CONSIDERATIONS
As the rate of payment of principal of [each class of] the Certificates
depends on the rate of payment (including prepayments) of the principal balance
of the Receivables, the final distribution in respect of [each class of] the
Certificates could occur significantly earlier than the Final Scheduled
Distribution Date. It is expected that the final distribution in respect of the
Certificates will occur on or prior to the Final Scheduled Distribution Date.
However, if sufficient funds are not available to reduce the aggregate
Certificate Balance of either class of Certificates to zero on or prior to the
Final Scheduled Distribution Date, the final distribution in respect of such
class of Certificates could occur later than such date. See "Maturity and
Prepayment Considerations" herein and in the Prospectus.
RATINGS
It is a condition to the issuance of the [Class A] Certificates that the
Class A Certificates be rated in the highest rating category [and the Class B
Certificates be rated [at least] " " or its equivalent] by at least two
nationally recognized rating agencies (the "Rating Agencies"). A rating is not a
recommendation to purchase, hold or sell Certificates, inasmuch as such rating
does not comment as to market price or suitability for a particular investor.
The ratings of the Certificates address the likelihood of the payment of
principal and interest on the Certificates pursuant to their terms. [However,
the Rating Agencies do not evaluate, and the ratings of the Certificates do not
address, the likelihood that the Certificate Prepayment Premium will be paid.]
There can be no assurance that a rating will remain for any given period of time
or that a rating will not be lowered or withdrawn entirely by a Rating Agency if
in its judgment circumstances in the future so warrant.
THE TRUST
GENERAL
The Seller will establish the Trust by selling and assigning the Trust
property, as described below, to the Trustee in exchange for the Certificates.
The Servicer will service the Receivables pursuant to the Agreement and will be
compensated for acting as the Servicer. See "Description of the Certificates --
Servicing Compensation and Expenses" herein. To facilitate servicing and to
minimize administrative burden and expense the Servicer will retain physical
possession of the Receivables held by the Trust and documents relating thereto
as custodian for the Trust. Due to the administrative burden and expense, the
certificates of title to the Financed Vehicles will not be amended to reflect
the assignment of the security interest in the Financed Vehicles to the Trust.
In the absence of such amendment, the Trust may not have a perfected security
interest in the Financed Vehicles in all states. See "Certain Legal Aspects of
the Receivables" in the Prospectus.
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<PAGE> 93
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.
Each [Class A] Certificate represents a fractional undivided ownership
interest in the Trust. The Trust property will include retail installment sale
contracts between Dealers and Obligors, all payments due thereunder on or after
the related Cutoff Date with respect to the Precomputed Receivables and all
payments due or received thereunder on or after the related Cutoff Date with
respect to the Simple Interest Receivables. The Trust property will also include
(i) security interests in the Financed Vehicles and any accessions thereto; (ii)
the rights to proceeds from claims on certain physical damage, credit life,
credit disability or other insurance policies, if any, covering the Financed
Vehicles or the Obligors; (iii) any Dealer Recourse; (iv) the Seller's rights to
certain documents and instruments relating to the Receivables; (v) such amounts
as from time to time may be held in one or more accounts maintained pursuant to
the Agreement, as described herein[, including the Yield Supplement Account]
[and the Pre-Funding Account]; (vi) certain rights under the Agreement [and the
Yield Supplement Agreement]; (vii) certain rights under the Purchase Agreement,
including the right of the Seller to cause Ford Credit to repurchase Receivables
from the Seller; (viii) certain payments and proceeds with respect to the
Receivables held by the Servicer; (ix) certain rebates of premiums and other
amounts relating to certain insurance policies and other items financed under
the Receivables; and (x) any and all proceeds of the foregoing. The property of
the Trust does not include the Payahead Account and the Subordination Spread
Account.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include the [Initial]
Receivables purchased as of the [Initial] Cutoff Date [and will include any
Subsequent Receivables purchased as of any Subsequent Cutoff Date (the Initial
Cutoff Date or any Subsequent Cutoff Date being individually referred to herein
as a "Cutoff Date")].
The [Initial] Receivables were purchased[, and the Subsequent Receivables
were or will be purchased,] by Ford Credit from Dealers in the ordinary course
of business in accordance with Ford Credit's underwriting standards, and were
[or will be] selected from Ford Credit's portfolio for inclusion in the
Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pools," as well as the following: each
Receivable (i) provides for level monthly payments which provide interest at the
APR and fully amortize the amount financed over an original term no greater than
months, (ii) is not more than days past due as of the [applicable] Cutoff
Date and has never been extended and (iii) was originated on or after
. As of the [applicable] Cutoff Date, no Obligor on any
Receivable was [or will have been] noted in the related records of the Servicer
as being the subject of a bankruptcy proceeding. No selection procedures
believed by the Seller to be adverse to the Certificateholders were [or will be]
used in selecting the Receivables.
[The obligation of the Trust to purchase the Subsequent Receivables on a
Subsequent Transfer Date will be subject to the Receivables in the Trust,
including the Subsequent Receivables to be conveyed to the Trust on such
Subsequent Transfer Date, meeting the following criteria: (i) not
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<PAGE> 94
more than % of the principal balances of the Receivables in the Trust will
represent vehicles financed at Ford Credit's used vehicle rates; and (ii) the
weighted average APR of the Receivables in the Trust will not be less than %,
unless the Seller increases the Subordination Initial Deposit by the amounts, if
any, specified by the Rating Agencies to maintain the ratings of the
Certificates. In addition, such obligation will be subject to the Receivables,
including the Subsequent Receivables to be transferred to the Trust on such
Subsequent Transfer Date, having a weighted average remaining term not greater
than months. Such criteria will be based on the characteristics of the
Initial Receivables on the Initial Cutoff Date and any Subsequent Receivables on
the related Subsequent Cutoff Dates.]
[The Initial Receivables will represent approximately % of the aggregate
initial principal balance of the Certificates. However, except for the criteria
described in the preceding paragraphs and the criteria, if any, specified by the
Rating Agencies to maintain the ratings of the Certificates, there will be no
required characteristics of the Subsequent Receivables. Therefore, following the
transfer of Subsequent Receivables to the Trust, the aggregate characteristics
of the entire Receivables Pool, including the composition of the Receivables,
the distribution by APR and the geographic distribution described in the
following tables, may vary significantly from those of the Initial Receivables.]
Neither Ford Credit nor any of its affiliates maintains records adequate to
provide quantitative data regarding its prepayment experience on its portfolio
of U.S. retail installment sale contracts for either new or used vehicles.
However, Ford Credit (i) believes that the actual rate of prepayments will
result in a substantially shorter weighted average life than the scheduled
weighted average life and (ii) estimates that the actual weighted average life
of its portfolio of U.S. retail installment contracts for new and used
automobiles and light trucks ranges between 60% and 70% of their scheduled
weighted average life. See "Maturity and Prepayment Considerations" herein and
in the Prospectus.
The composition, geographical distribution, and distribution by annual
percentage rate of the [Initial] Receivables as of the [Initial] Cutoff Date are
set forth in the following tables.
COMPOSITION OF THE [INITIAL] RECEIVABLES
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<S> <C>
Aggregate Principal Balance................................. $
Number of Receivables
Average Principal Balance................................... $
(Range)................................................... $ to $
Average Original Amount Financed............................ $
(Range)................................................... $ to $
Weighted Average APR........................................ %
(Range)................................................... % to %
Weighted Average Original Term.............................. months
(Range)................................................... to months
Weighted Average Remaining Term............................. months
(Range)................................................... to months
Scheduled Weighted Average Life(1).......................... months
</TABLE>
- -------------------------
(1) Based on payments due on or after the [Initial] Cutoff Date, assuming that
no prepayments on the [Initial] Receivables are made after the [Initial]
Cutoff Date and that all payments on Simple Interest Receivables are
received on their respective due dates.
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<PAGE> 95
GEOGRAPHIC DISTRIBUTION OF THE [INITIAL] RECEIVABLES
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE(2)
-------- -------------------
<S> <C>
Alabama[(3)]................ %
Alaska......................
Arizona.....................
Arkansas....................
California..................
Colorado....................
Connecticut.................
Delaware....................
District of Columbia........
Florida.....................
Georgia.....................
Hawaii......................
Idaho.......................
Illinois....................
Indiana.....................
Iowa........................
Kansas......................
Kentucky....................
Louisiana...................
Maine.......................
Maryland....................
Massachusetts...............
Michigan....................
Minnesota...................
Mississippi.................
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE(2)
-------- -------------------
<S> <C>
Missouri.................... %
Montana.....................
Nebraska....................
Nevada......................
New Hampshire...............
New Jersey..................
New Mexico..................
New York....................
North Carolina..............
North Dakota................
Ohio........................
Oklahoma....................
Oregon......................
Pennsylvania[(3)]...........
Rhode Island................
South Carolina..............
South Dakota................
Tennessee...................
Texas.......................
Utah........................
Vermont.....................
Washington..................
West Virginia...............
Wisconsin...................
Wyoming.....................
</TABLE>
- -------------------------
(1) Based on the billing addresses of the Obligors on the [Initial] Receivables
as of the [Initial] Cutoff Date.
(2) Percentages may not add to 100.00% due to rounding. States showing 0.0% each
represent less than 0.05%.
[(3) Alabama and Pennsylvania were excluded for administrative reasons.]
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<PAGE> 96
DISTRIBUTION BY APR OF THE [INITIAL] RECEIVABLES
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE
OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE RECEIVABLES BALANCE BALANCE(L)
--------- ----------- --------- ----------
<S> <C> <C> <C>
0.00% to 1.00%............................................. $ %
1.01 to 2.00...............................................
2.01 to 3.00...............................................
3.01 to 4.00...............................................
4.01 to 5.00...............................................
5.01 to 6.00...............................................
6.01 to 7.00...............................................
7.01 to 8.00...............................................
8.01 to 9.00...............................................
9.01 to 10.00..............................................
10.01 to 11.00.............................................
11.01 to 12.00.............................................
12.01 to 13.00.............................................
13.01 to 14.00.............................................
14.01 to 15.00.............................................
15.01 to 16.00.............................................
16.01 to 17.00.............................................
17.01 to 18.00.............................................
18.01 to 19.00.............................................
19.01 to 20.00.............................................
-------- -------- ------
Totals................................................ $ 100.00%
======== ======== ======
</TABLE>
- -------------------------
(1) Percentages may not add to 100.00% due to rounding.
Approximately % of the aggregate principal balance of the [Initial]
Receivables, constituting % of the number of [Initial] Receivables, as of the
[Initial] Cutoff Date, represent vehicles financed at new vehicle rates, and the
remainder of the [Initial] Receivables represent vehicles financed at used
vehicle rates.
By aggregate principal balance, approximately % of the [Initial]
Receivables constitute Precomputed Receivables, % of the [Initial] Receivables
constitute Simple Interest Receivables and % constitute Final Payment
Receivables. In addition, % of the [Initial] Receivables that are Precomputed
Receivables and % that are Simple Interest Receivables constitute Final
Payment Receivables. See "The Receivables Pools" in the Prospectus for a further
description of the characteristics of Precomputed Receivables, Simple Interest
Receivables and Final Payment Receivables.
Based on principal balance, less than % of the [Initial] Receivables
provide recourse to the Dealer which originated the Receivable. See "The
Receivables Pools" in the Prospectus for a further description of such recourse
provisions.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
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
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<PAGE> 97
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,
--------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts
Outstanding During the
Period........................ 2,572,022 3,610,904 3,612,265 3,438,699 3,430,145 3,398,797 3,388,214
Average Daily Delinquencies as a
Percent of Average Contracts
Outstanding
31-60 Days(2)................. 2.83% 2.44% 2.54% 2.21% 2.03% 2.02% 2.35%
61-90 Days(2)................. 0.32% 0.25% 0.26% 0.17% 0.15% 0.15% 0.20%
Over 90 Days(3)............... 0.10% 0.07% 0.08% 0.04% 0.03% 0.03% 0.04%
</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.
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding During
the Period (Millions)
Gross................................ $40,516 $40,098 $40,269 $35,699 $33,703 $31,205 $29,505
Net.................................. $34,062 $33,517 $33,647 $30,015 $28,526 $26,152 $24,637
Percent of Average Gross Portfolio
Outstanding During the Period
without Recourse to Dealers........ 99.5% 99.3% 99.4% 99.1% 98.6% 97.7% 96.4%
Repossessions as a Percent of Average
Number of Contracts Outstanding.... 2.70%(2) 2.84%(2) 3.01% 2.38% 2.15% 2.27% 2.74%
Net Losses as a Percent of Gross
Liquidations(3).................... 2.32% 1.91% 2.21% 1.43% 1.06% 1.16% 1.52%
Net Losses as a Percent of Average
Gross Portfolio Outstanding(3)..... 1.32%(2) 1.11%(2) 1.28% 0.82% 0.62% 0.69% 0.90%
Net Losses as a Percent of Average
Net Portfolio Outstanding(3)....... 1.55%(2) 1.33%(2) 1.53% 0.98% 0.73% 0.82% 1.08%
</TABLE>
- -------------------------
(1) All gross amounts and percentages are based on the gross amount scheduled to
be paid on each contract including unearned finance and other charges. All
net amounts and percentages are based on the net amount scheduled to be paid
on each contract excluding unearned finance and other charges. The
information in the table includes U.S. retail installment sale contracts for
new and used automobiles and light trucks and includes previously sold
contracts which Ford Credit continues to service; it does not include retail
installment sale contracts purchased by Ford Credit under certain special
financing programs.
(2) Annualized rate.
(3) "Net Losses" are equal to the aggregate balance of all contracts which are
determined to be uncollectible in the period less any recoveries on
contracts charged-off in the period or any prior periods. Effective January
1, 1993, net losses include expenses associated with outside collection
agencies. Other expenses associated with collection, repossession, and
disposition of the vehicle continue to be excluded. These other expenses are
not material to the data presented.
As shown above, credit losses have increased since the beginning of 1995
reversing a general trend of improvement that had begun in 1989. The increase
reflects an increase in losses per repossession and an increase in repossession
rates. See "Description of the Transfer and Servicing Agreements -- Servicing
Procedures" in the Prospectus.
POOL FACTORS
The "Certificate Pool Factor" for [the Class A] [each class of]
Certificates will be a seven-digit decimal which the Servicer will compute prior
to each distribution with respect to such [class of] Certificates indicating the
remaining Certificate Balance of such [class of] Certificates, as of the
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<PAGE> 98
applicable Distribution Date (after giving effect to distributions to be made on
such Distribution Date), as a fraction of the initial Certificate Balance of
such [class of] Certificates. [The] [Each] Certificate Pool Factor will
initially be 1.0000000 and thereafter will decline to reflect reductions of the
Certificate Balance of the [Class A] [applicable class of] Certificates as a
result of scheduled payments, prepayments and liquidations of the Receivables
[(and also as a result of a prepayment arising from application of the
Pre-Funding Account)]. [[The] [Each] Certificate Pool Factor will not change as
a result of the addition of Subsequent Receivables.] A Certificateholder's
portion of the aggregate outstanding Certificate Balance for the [Class A]
[related class of] Certificates is the product of (a) the original denomination
of such Certificateholder's Certificate and (b) the [applicable] Certificate
Pool Factor.
MATURITY AND PREPAYMENT CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Maturity and Prepayment
Considerations" in the Prospectus. As the rate of payment of principal of [the]
[each class of] Certificates depends on the rate of payment (including
prepayments and liquidations due to default) of the principal balance of the
Receivables, the final distribution in respect of the Certificates could occur
significantly earlier than the Final Scheduled Distribution Date. It is expected
that the final distribution in respect of the Certificates will occur on or
prior to the Final Scheduled Distribution Date. However, if sufficient funds are
not available to reduce the aggregate Certificate Balance of either class of
Certificates to zero on or prior to the Final Scheduled Distribution Date, the
final distribution in respect of such class of Certificates could occur later
than such date.
The rate of prepayments of the Receivables may be influenced by a variety
of economic, social and other factors, and under certain circumstances relating
to breaches of representations, warranties or covenants, the Seller and/or the
Servicer will be obligated to repurchase Receivables from the Trust. See "The
Receivables Pool" herein and "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" in the Prospectus. A higher
than anticipated rate of prepayments will reduce the aggregate principal balance
of the Receivables more quickly than expected and thereby reduce anticipated
aggregate distributions of interest on the Certificates. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Receivables will be
borne entirely by the Certificateholders as set forth in the priority of
distributions herein. Such reinvestment risks include the risk that interest
rates may be lower at the time such holders received payments from the Trust
than interest rates would otherwise have been had such prepayments not been made
or had such prepayments been made at a different time.
Holders of Certificates should consider, in the case of Certificates
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Receivables could result in an actual yield that is
less than the anticipated yield and, in the case of Certificates purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
the Receivables could result in an actual yield that is less than the
anticipated yield.
DESCRIPTION OF THE CERTIFICATES
The [Class A] Certificates will be issued pursuant to the terms of the
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Agreement will be filed with the Commission following
the issuance of the [Class A] Certificates. The following summary describes
certain terms of the [Class A] Certificates and the Agreement. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the [Class A] Certificates and the
Agreement. The following summary supplements the description of the general
terms and provisions of the [Class A] Certificates of any given series and the
related Agreement set forth in the Prospectus, to which description reference is
hereby made.
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<PAGE> 99
GENERAL
The Certificates will evidence interests in the Trust created pursuant to
the Agreement. The Class A Certificates will evidence in the aggregate an
undivided ownership interest (the "Class A Percentage") of approximately % in
the Trust and the Class B Certificates will evidence in the aggregate an
undivided ownership interest (the "Class B Percentage") of approximately % in
the Trust. [The Class B Certificates, which are not being offered hereby,
initially will be retained by the Seller.]
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Percentage of the Available Principal plus
interest at the [Class A] Certificate Rate on the Class A Certificate Balance.
[Subject to the prior rights of the Class A Certificateholders, it is intended
that the Class B Certificateholders receive, on each Distribution Date, the
Class B Percentage of the Available Principal plus interest at the Class B
Certificate Rate on the Class B Certificate Balance.]
[MANDATORY REPURCHASE
Cash distributions to Certificateholders will be made, on a pro rata basis,
on the Distribution Date on or immediately following the last day of the Funding
Period in the event that the amount on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Receivables, including any such
purchase on such date, exceeds $ (a "Mandatory Repurchase").
[The Certificate Prepayment Premium will be payable by the Trust to the
Certificateholders pursuant to a Mandatory Repurchase if the amount on deposit
in the Pre-Funding Account exceeds $ . The Certificate Prepayment
Premium will equal the excess, if any, discounted as described below, of (i) the
amount of interest that would accrue on the remaining Pre-Funded Amount (the
"Certificate Prepayment Amount") at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, during the period commencing on and including
the Distribution Date on which such Certificate Prepayment Amount is required to
be distributed to Certificateholders to but excluding over (ii)
the amount of interest that would have accrued on such Certificate Prepayment
Amount over the same period at a per annum rate of interest equal to the bond
equivalent yield to maturity on the Determination Date preceding such
Distribution Date on the , in the case of a Class A Certificate,
and on the , in the case of a Class B Certificate. Such excess
shall be discounted to present value to such Distribution Date at the applicable
yield described in clause (ii) above. Pursuant to the Agreement, the Seller will
be obligated to pay the Certificate Prepayment Premium to the Trust as
liquidated damages for the failure to deliver Subsequent Receivables having an
aggregate principal balance equal to the Pre-Funded Amount. The Trust's
obligation to pay the Certificate Prepayment Premium will be limited to funds
received from the Seller pursuant to the preceding sentence. In the event that
such funds are insufficient to pay the aggregate Certificate Prepayment Premium
in full, [Class A] Certificateholders [of each class of Certificates] will
receive their ratable share [(based upon the Certificate Prepayment Premium for
each class of Certificates)] of the aggregate amount available to be distributed
in respect of the Certificate Prepayment Premium. No other assets of the Trust
will be available for the purpose of making such payment.]]
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables when the
Pool Balance declines to 10% or less of the Initial Pool Balance, the Class A
Certificateholders will receive an amount in respect of the Class A Certificates
equal to the outstanding Class A Certificate Balance together with accrued
interest at the [Class A] Certificate Rate, [the Class B Certificateholders will
receive an amount in respect of the Class B Certificates equal to the
outstanding Class B Certificate Balance together with accrued interest at the
Class B Certificate Rate,] which distributions shall effect early
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<PAGE> 100
retirement of the Certificates. See "Description of the Transfer and Servicing
Agreements -- Termination" in the Prospectus.
[SALE AND ASSIGNMENT OF RECEIVABLES; SUBSEQUENT RECEIVABLES
Certain information with respect to the conveyance of the Initial
Receivables from the Seller to the Trust on the Closing Date pursuant to the
Agreement is set forth under "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" in the Prospectus. In
addition, during the Funding Period, pursuant to the Agreement, the Seller will
be obligated to sell to the Trust Subsequent Receivables having an aggregate
principal balance equal to approximately $ (such amount being equal to
the initial Pre-Funded Amount) to the extent that such Subsequent Receivables
are available.
During the Funding Period on each Subsequent Transfer Date, subject to the
conditions described below, the Seller will sell and assign to the Trust,
without recourse, the Seller's entire interest in the Subsequent Receivables
designated by the Seller as of the related Subsequent Cutoff Date and identified
in a schedule attached to a subsequent transfer assignment relating to such
Subsequent Receivables executed on such date by the Seller. It is expected that
on the Closing Date, subject to the conditions described below, certain of the
Subsequent Receivables designated by the Seller and arising between the Initial
Cutoff Date and the Closing Date will be conveyed to the Trust. Upon the
conveyance of Subsequent Receivables to the Trust on a Subsequent Transfer Date,
(i) the Pool Balance will increase in an amount equal to the aggregate principal
balance of the Subsequent Receivables, (ii) an amount equal to % of the
aggregate principal balance of such Subsequent Receivables will be withdrawn
from the Pre-Funding Account and will be deposited in the Subordination Spread
Account and (iii) an amount equal to the excess of the aggregate principal
balance of such Subsequent Receivables over the amount described in clause (ii)
will be withdrawn from the Pre-Funding Account and paid to the Seller.
[Coincident with each such transfer of Subsequent Receivables, the Yield
Supplement Agreement will require Ford Credit to deposit into the Yield
Supplement Account an amount equal to the Additional Yield Supplement Amount, if
any, in respect of such Subsequent Receivables. See "-- Yield Supplement
Account; Yield Supplement Agreement" below.]
[Any conveyance of Subsequent Receivables is subject to the satisfaction,
on or before the related Subsequent Transfer Date, of the following conditions
precedent, among others: (i) each such Subsequent Receivable must satisfy the
eligibility criteria specified in the Agreement; (ii) the Seller will not have
selected such Subsequent Receivables in a manner that it believes is adverse to
the interests of the Certificateholders; (iii) as of the related Subsequent
Cutoff Date, the Receivables, including any Subsequent Receivables conveyed by
the Seller as of such Subsequent Cutoff Date, satisfy the criteria described
under "The Receivables Pool" herein and "The Receivables Pools" in the
Prospectus; (iv) the applicable Subordination Initial Deposit for such
Subsequent Transfer Date shall have been made; and (v) the Seller shall have
executed and delivered to the Trustee a written assignment conveying such
Subsequent Receivables to the Trust (including a schedule identifying such
Subsequent Receivables). Moreover, any such conveyance of Subsequent Receivables
made during any Collection Period will also be subject to the satisfaction, on
or about the fifteenth day of the month following the end of such Collection
Period, of the following conditions subsequent, among others: (i) the Seller
will have delivered certain opinions of counsel to the Trustee and the Rating
Agencies with respect to the validity of the conveyance of all such Subsequent
Receivables conveyed during such Collection Period; (ii) the Trustee shall have
received written confirmation from a firm of independent certified public
accountants that, as of each applicable Subsequent Cutoff Date, the Receivables
in the Trust at that time, including the Subsequent Receivables conveyed by the
Seller as of such Subsequent Cutoff Date, satisfied the parameters described
under "The Receivables Pool" herein and under "The Receivables Pools" in the
Prospectus; and (iii) the Rating Agencies shall have each notified the Seller in
writing that, following the addition of all such Subsequent Receivables, the
[Class A] Certificates are rated in the
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<PAGE> 101
same rating categories in which they were rated at the Closing Date. The Seller
will immediately repurchase any Subsequent Receivable, at a price equal to the
Purchase Amount thereof, upon the failure of the Seller to satisfy any of the
foregoing conditions subsequent with respect thereto.
[Subsequent Receivables may have been originated by Ford Credit at a later
date using credit criteria different from those which were applied to the
Initial Receivables. See "Risk Factors -- The Subsequent Receivables and the
Pre-Funding Account" and "The Receivables Pool" herein.]]
ACCOUNTS
In addition to the Accounts referred to under "Description of the Transfer
and Servicing Agreements -- Accounts" in the Prospectus, the Servicer will also
establish and will maintain with the Trustee [the Pre-Funding Account] [the
Yield Supplement Account] [and] the Subordination Spread Account, in the name of
the Trustee on behalf of the Certificateholders, and the Payahead Account, in
the name of the Trustee on behalf of the Obligors. The Subordination Spread
Account and the Payahead Account will not be part of the Trust.
SERVICING COMPENSATION AND EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be 1.00% per annum of the Pool Balance as of the first day of the
Collection Period (after giving effect to distributions to be made on the
following Distribution Date). The Servicing Fee (together with any portion of
the Servicing Fee that remains unpaid from prior Distribution Dates) will be
paid on each Distribution Date solely to the extent of the Available Interest.
The Servicer is also entitled to receive a supplemental servicing fee (the
"Supplemental Servicing Fee") for each Collection Period equal to any late,
prepayment, and other administrative fees and expenses collected during the
Collection Period[, plus any interest earned during the Collection Period on
deposits made with respect to the Receivables]. See "Description of the Transfer
and Servicing Agreements -- Servicing Compensation and Expenses" in the
Prospectus.
DISTRIBUTIONS
On or about the calendar day of each month (the "Determination Date"), the
Servicer will inform the Trustee of the amount of aggregate collections on the
Receivables; the aggregate Advances to be made by the Servicer, the aggregate
Purchase Amount of Receivables to be purchased by the Seller or the Servicer,
all with respect to the preceding Collection Period.
On each Distribution Date, the Servicer, or the Trustee, as the case may
be, shall transfer the portion of Payaheads constituting all or a portion of
scheduled payments for that Collection Period or, which together with that
month's payment by an Obligor constitute prepayments in full on the Receivables
to the Collection Account. On the Distribution Date, the Trustee shall cause
collections made during the Collection Period which constitute Payaheads to be
transferred from the Collection Account to the Servicer, or to the Payahead
Account if required.
The Servicer shall determine prior to each Distribution Date the Total
Available Amount, the Available Interest, the Available Principal, the Class A
Distributable Amount and the Class B Distributable Amount and, based on the
Total Available Amount and the other distributions to be made on such
Distribution Date, as described below, determine the amount to be distributed to
Certificateholders of each class.
Determination of Available Amounts. The "Total Available Amount" for a
Distribution Date (being the funds available for distribution to
Certificateholders of each Class with respect to such Distribution Date in
accordance with the priorities described below) shall be the sum of the
Available Interest and the Available Principal.
The "Available Interest" for a Distribution Date shall be the sum of the
following amounts with respect to the preceding Collection Period: (i) all
scheduled payments of interest and the interest
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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 Precomputed Advances made by the
Servicer of principal due on the Precomputed Receivables; (iv) to the extent
attributable to principal, the Purchase Amount received with respect to each
Receivable purchased by the Seller or the Servicer under an obligation which
arose during such Collection Period; and (v) partial prepayments of any refunded
item included in the principal balance of a Receivable, such as extended
warranty protection plan costs, or physical damage, credit life, disability
insurance premiums, or any partial prepayment which causes a reduction in the
Obligor's periodic payment to an amount below the scheduled payment as of the
Cutoff Date. The Available Principal shall be determined on the related
Determination Date based on the methodology described under "Description of the
Transfer and Servicing Agreements -- Distributions -- Allocations of Collections
on Receivables" in the Prospectus.
The Available Interest and the Available Principal on any Distribution Date
shall exclude the following: (i) amounts received on Precomputed Receivables to
the extent that the Servicer has previously made an unreimbursed Precomputed
Advance; (ii) Liquidation Proceeds with respect to a particular Precomputed
Receivable to the extent of any unreimbursed Precomputed Advances thereon; (iii)
all payments and proceeds (including Liquidation Proceeds) of any Receivables
the Purchase Amount of which has been included in the Total Available Amount in
a prior Collection Period; (iv) amounts received in respect of interest on
Simple Interest Receivables during the preceding Collection Period in excess of
the amount of interest that would have been due during the Collection Period on
Simple Interest Receivables at their respective APRs (assuming that a payment is
received on each Simple Interest Receivable on the due date thereof); [and] (v)
Liquidation Proceeds with respect to a Simple Interest Receivable attributable
to accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) but only to the extent of any unreimbursed Simple
Interest Advances[; and (vi) amounts released from the Pre-Funding Account.]
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Calculation of Distributable Amounts. The "Class A Distributable Amount"
with respect to a Distribution Date shall be an amount equal to the sum of:
(i) the "Class A Principal Distributable Amount," consisting of the
Class A Percentage of:
(a) the principal portion of all scheduled payments due with
respect to Precomputed Receivables during the preceding Collection
Period;
(b) the principal portion of all prepayments in full received
during the preceding Collection Period (and certain partial prepayments)
(except to the extent included in (a) above);
(c) the principal portion of all payments received with respect to
Simple Interest Receivables during the preceding Collection Period;
(d) the principal balance of each Receivable that was purchased by
the Seller or the Servicer under an obligation that arose during the
preceding Collection Period (except to the extent included in (a)
through (c) above); and
(e) the principal balance of each Receivable liquidated by the
Servicer during the preceding Collection Period; plus
(ii) the "Class A Interest Distributable Amount," consisting of thirty
(30) days' interest at the [Class A] Certificate Rate on the Class A
Certificate Balance as of the last day of the preceding Collection Period.
The "Class A Certificate Balance" shall equal, initially, the Class A
Percentage of the Pool[/Pre-Funding] Balance as of the Cutoff Date and,
thereafter shall equal the initial Class A Certificate Balance, reduced by all
amounts previously distributed to Class A Certificateholders and allocable to
principal.
The "Class B Distributable Amount" with respect to a Distribution Date
shall be an amount equal to the sum of:
(i) the "Class B Principal Distributable Amount," consisting of the
Class B Percentage of the amounts set forth under (i)(a) through (i)(e)
above with respect to the Class A Principal Distributable Amount; plus
(ii) the "Class B Interest Distributable Amount," consisting of thirty
(30) days' interest at the Class B Certificate Rate on the Class B
Certificate Balance as of the last day of the preceding Collection Period
[plus the excess, for each Receivable having an APR greater than the sum of
the weighted average of the Class A Certificate Rate and the Class B
Certificate Rate and the Servicing Fee Rate, of the interest portion of the
scheduled payment over the portion of such interest equal to interest at
the sum of the weighted average of the Class A Certificate Rate and the
Class B Certificate Rate and the Servicing Fee Rate].
The "Class B Certificate Balance" shall equal, initially, the Class B
Percentage of the Pool Balance as of the [Initial] Cutoff Date and, thereafter
shall equal the initial Class B Certificate Balance, reduced by all amounts
previously distributed to Class B Certificateholders (or deposited in the
Subordination Spread Account not including the Subordination Initial Deposit)
and allocable to principal and by the Class A Principal Carryover Shortfall and
the Class B Principal Carryover Shortfall.
Calculation of Amounts to be Distributed. Prior to each Distribution Date,
the Servicer will calculate the amounts to be distributed to the
Certificateholders.
The holders of the Class A Certificates will receive on any Distribution
Date, to the extent of available funds, an amount equal to the sum of the Class
A Distributable Amount and any outstanding Class A Interest Carryover Shortfall
and Class A Principal Carryover Shortfall (as defined below). On each
Distribution Date on which the sum of the Class A Interest Distributable Amount
and any outstanding Class A Interest Carryover Shortfall (plus interest on such
Class A
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Interest Carryover Shortfall at the Class A Certificate Rate from such preceding
Distribution Date to the current Distribution Date, to the extent permitted by
law) exceeds the Class A Percentage of the Available Interest (after payment of
the Servicing Fee including any unpaid Servicing Fees with respect to prior
Collection Periods) on such Distribution Date, the Class A Certificateholders
shall be entitled to receive such shortfall first, from the Class B Percentage
of the Available Interest (after payment of the Servicing Fee including any
unpaid Servicing Fees with respect to prior Collection Periods); second, if such
amounts are insufficient, from amounts available in the Subordination Spread
Account; and third, if such amounts are insufficient, from the Class B
Percentage of the Available Principal; provided, however, that if the Servicer
shall fail to make an advance of interest in respect of a Receivable prepaid in
full, the portion of such shortfall attributable thereto shall be paid only from
amounts available in the Subordination Spread Account. The "Class A Interest
Carryover Shortfall" as of the close of any Distribution Date means the excess
of the Class A Interest Distributable Amount for such Distribution Date plus any
outstanding Class A Interest Carryover Shortfall from the preceding Distribution
Date, plus interest on such outstanding Class A Interest Carryover Shortfall, to
the extent permitted by law, at the Class A Certificate Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class A Certificates actually received on such
current Distribution Date.
On each Distribution Date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class A Percentage of the
Available Principal on such Distribution Date, the Class A Certificateholders
shall be entitled to receive such shortfall first, from the Class B Percentage
of the Available Principal; second, if such amounts are insufficient, from
amounts available in the Subordination Spread Account; and third, if such
amounts are insufficient, from the Class B Percentage of the Available Interest.
The "Class A Principal Carryover Shortfall" as of the close of any Distribution
Date means the excess of the Class A Principal Distributable Amount plus any
outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class A
Certificates actually received on such current Distribution Date.
[The holders of the Class B Certificates will receive on any Distribution
Date, to the extent of available funds, an amount equal to the sum of the Class
B Distributable Amount and any outstanding Class B Interest Carryover Shortfall
and Class B Principal Carryover Shortfall (as defined below). On each
Distribution Date on which the sum of the Class B Interest Distributable Amount
and any outstanding Class B Interest Carryover Shortfall (plus interest on such
Class B Interest Carryover Shortfall at the Class B Certificate Rate from such
preceding 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
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unpaid Servicing Fees with respect to prior Collection Periods) payable to the
Servicer and (C) the interest due to the Class B Certificateholders) on such
Distribution Date, the Class B Certificateholders shall be entitled to receive
such shortfall from amounts available in the Subordination Spread Account. The
"Class B Principal Carryover Shortfall" as of the close of any Distribution Date
means the excess of the Class B Principal Distributable Amount plus any
outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class B
Certificates actually received on such current Distribution Date.]
[The holders of the Class B Certificates are entitled to receive on any
Distribution Date an amount equal to the sum of the Class B Interest
Distributable Amount, the Class B Principal Distributable Amount (and any
shortfalls from prior Distribution Dates in payments to the Class B
Certificateholders), after giving effect to (A) any amounts required to be
distributed to the holders of Class A Certificates pursuant to the subordination
of the rights of the holders of Class B Certificates, and (B) amounts required
to pay the Servicing Fee (including any unpaid Servicing Fees with respect to
prior Collection Periods) payable to the Servicer on such Distribution Date.]
SUBORDINATION OF THE CLASS B CERTIFICATES; SUBORDINATION SPREAD ACCOUNT
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Class A
Certificateholders in the event of defaults and delinquencies on the Receivables
as provided in the Agreement. The protection afforded to the Class A
Certificateholders will be effected both by the preferential right of the Class
A Certificateholders to receive current distributions with respect to the
Receivables and by the establishment of the Subordination Spread Account. The
Subordination Spread Account will be created with an initial deposit by the
Seller of the Subordination Initial Deposit and will be augmented by deposit
therein of amounts otherwise distributable to Class B Certificateholders until
the amount in the Subordination Spread Account reaches an amount equal to the
Specified Subordination Spread Account Balance. Thereafter, amounts otherwise
distributable to the Class B Certificateholders or the Servicer will be
deposited in the Subordination Spread Account to the extent necessary to
maintain the amount in the Subordination Spread Account at the Specified
Subordination Spread Account Balance.
The Subordination Spread Account will not be a part of or otherwise
includible in the Trust and will be a segregated trust account held by as agent
for the [Class A] Certificateholders (the "[Class A] Agent"). On each
Distribution Date, (i) if the amounts on deposit in the Subordination Spread
Account are less than the Specified Subordination Spread Account Balance, the
Trustee will, after payment of any amounts required to be distributed to holders
of the Class A Certificates and the payment of the Servicing Fee due with
respect to the related Collection Period (including any unpaid Servicing Fees
with respect to prior Collection Periods), withdraw from the Collection Account
and deposit in the Subordination Spread Account the amount remaining in the
Collection Account that would otherwise be distributed to the holders of the
Class B Certificates, or such lesser portion thereof as is sufficient to restore
the amount in the Subordination Spread Account to such Specified Subordination
Spread Account Balance and (ii) if the amount on deposit in the Subordination
Spread Account on such Distribution Date (after giving effect to all deposits or
withdrawals therefrom on such Distribution Date) is greater than the Specified
Subordination Spread Account Balance for such Distribution Date, the [Class A]
Agent will release and distribute any such excess to the [Servicer] [holders of
the Class B Certificates]. Upon any such distribution, the [Class A]
Certificateholders will have no rights in, or claims to, such amounts.
Amounts held from time to time in the Subordination Spread Account will
continue to be held for the benefit of holders of the Class A Certificates,
holders of the Class B Certificates and the Seller, as their respective
interests may appear. Funds in the Subordination Spread Account shall be
invested as provided in the Agreement in Permitted Investments. The [Servicer]
[holders of the Class B Certificates] shall be entitled to receive all
investment earnings on amounts in the Subordination Spread Account. Investment
income on amounts in the Subordination Spread
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Account will not be available for distribution to the holders of the [Class A]
Certificates or otherwise subject to any claims or rights of the holders of the
[Class A] Certificates.
The time necessary for the Subordination Spread Account to reach and
maintain the Specified Subordination Spread Account Balance at any time after
the date of issuance of the Certificates will be affected by the delinquency,
credit loss and repossession and prepayment experience of the Receivables and,
therefore, cannot be accurately predicted.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts withdrawn from the
Subordination Spread Account and the Class B Distributable Amount and applied to
such deficiency, as described above), the holders of the Class B Certificates
will not receive any portion of the Total Available Amount.
The subordination of the Class B Certificates and the Subordination Spread
Account described above are intended to enhance the likelihood of receipt by
Class A Certificateholders of the full amount of principal and interest on the
Receivables due them and to decrease the likelihood that the Class A
Certificateholders will experience losses. However, in certain circumstances,
the Subordination Spread Account could be depleted and shortfalls could result.
[YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT
The Yield Supplement Account will be created with an initial deposit by
Ford Credit of the Yield Supplement Initial Deposit. The Yield Supplement
Initial Deposit will equal an amount (which amount may be discounted at a rate
to be specified in the Agreement) equal to the aggregate amount by which (i)
interest on the principal balance of each [Initial] Receivable for the period
commencing on the [Initial] Cutoff Date and ending with the scheduled maturity
of such Receivable, assuming that payments on such Receivables are made as
scheduled and no prepayments are made) at a rate equal to the Required Rate,
exceeds (ii) interest on such principal balances at the APR of such Receivable
(the "Yield Supplement Amount" [and, with respect to all of the [Initial]
Receivables, the "Maximum [Initial] Yield Supplement Amount"]).
On each Distribution Date, the Trustee will transfer to the Collection
Account from monies on deposit in the Yield Supplement Account an amount equal
to the Yield Supplement Deposit Amount in respect of the Receivables for such
Distribution Date. The "Yield Supplement Deposit Amount" with respect to a
Distribution Date is the aggregate Yield Supplement Amount, if any, in respect
of the Receivables for the related Collection Period. Amounts on deposit on any
Distribution Date in the Yield Supplement Account in excess of the Maximum Yield
Supplement Amount, after giving effect to all distributions to be made on such
Distribution Date, will be paid to the Seller. Monies on deposit in the Yield
Supplement Account may be invested in Permitted Investments under the
circumstances and in the manner described in the Agreement. Any monies remaining
on deposit in the Yield Supplement Account upon the termination of the Trust
will be paid to the Seller.
[Pursuant to the Yield Supplement Agreement, on each Subsequent Transfer
Date, Ford Credit will deposit into the Yield Supplement Account an amount equal
to the Additional Yield Supplement Amount. The aggregate of the Additional Yield
Supplement Amounts in respect of Subsequent Receivables, if any, is referred to
herein as the "Maximum Subsequent Yield Supplement Amount" and, together with
the Maximum Initial Yield Supplement Amount, the "Maximum Yield Supplement
Amount."]]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Certificates. The
summary does not purport to deal with federal income tax consequences applicable
to all categories of holders, some of which may be
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subject to special rules. For example, it does not discuss the tax treatment of
Certificateholders that are insurance companies, regulated investment companies
or dealers in securities. Moreover, there are no cases or Internal Revenue
Service ("IRS") rulings on similar transactions involving interests issued by a
trust with terms similar to those of the Offered Certificates (as defined
below). As a result, the IRS may disagree with all or a part of the discussion
below. Prospective investors are urged to consult their own tax advisors in
determining the federal, state, local, foreign and any other tax consequences to
them of the purchase, ownership and disposition of the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The Trust will be provided
with an opinion of Special Tax Counsel regarding certain federal income tax
matters discussed below. An opinion of Special Tax Counsel, however, is not
binding on the IRS or the courts. No ruling on any of the issues discussed below
will be sought from the IRS.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel will, upon issuance of the Offered
Certificates, deliver its opinion that the Trust will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code and will not be
classified as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes.
In addition, Special Tax Counsel has prepared or reviewed the statements
herein and in the Prospectus under the heading "Summary -- Tax Status" as they
relate to federal income tax matters and under the heading "Certain Federal
Income Tax Consequences," and is of the opinion that such statements are correct
in all material respects. Such statements are intended as an explanatory
discussion of the possible effects of the classification of the Trust as a
grantor trust for federal income tax purposes on investors generally and of
related tax matters affecting investors generally, but do not purport to furnish
information in the level of detail or with the attention to the investor's
specific tax circumstances that would be provided by an investor's own tax
adviser. Accordingly, each investor is advised to consult its own tax advisers
with regard to the tax consequences to it of investing in the Certificates.
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR TRUST
As set forth above, it is expected that Special Tax Counsel will deliver
its opinion that the Trust will be classified as a grantor trust under subpart
E, Part I of subchapter J of the Code and will not be classified as an
association taxable as a corporation. Owners of Certificates (referred to herein
as "Offered Certificateholders"), subject to the discussion of stripped coupons
below under "-- Tax Consequences to Holders of Offered Certificates --
Characterization of Fees," will be treated for federal income tax purposes as
owners of a portion of the Trust's assets as described below. The Certificates
issued by the Trust and offered pursuant to this Prospectus Supplement and the
Prospectus are referred to herein as "Offered Certificates."
TAX CONSEQUENCES TO HOLDERS OF OFFERED CERTIFICATES
Income on the Receivables. If the Receivables are not characterized as
"stripped bonds" or otherwise recharacterized, each Offered Certificateholder
will be required to report on its federal income tax return its pro rata share
of the entire income of the Trust for the period during which it owns an Offered
Certificate, including interest or finance charges earned on the Receivables,
and any gain or loss upon collection or disposition of the Receivables. Because
the Receivables, when originally issued by the Obligors to the Dealers from whom
Ford Credit acquired the Receivables, are believed to have had adequate stated
interest, the original issue discount ("OID") and imputed interest rules should
not apply to the Receivables except to the extent that a Receivable is treated
as a "stripped bond," as discussed below. The portion of each monthly payment to
an Offered
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Certificateholder that is allocable to principal on the Receivables will
represent a recovery of capital, which will reduce the tax basis of such Offered
Certificateholder's undivided interest in the Receivables. In computing its
federal income tax liability, an Offered Certificateholder will be entitled to
deduct, consistent with its method of accounting, its pro rata share of
reasonable servicing fees, and other fees paid or incurred by the Trust as
provided in Section 162 or 212 of the Code. If an Offered Certificateholder is
an individual, estate or trust the deduction for his pro rata share of such fees
will be allowed only to the extent that all of his miscellaneous itemized
deductions, including his share of such fees, exceed 2% of his adjusted gross
income. In addition, in the case of Offered Certificateholders who are
individuals, otherwise allowable itemized deductions will be reduced, but not
more than 80%, by an amount equal to 3% of the Offered Certificateholder's
adjusted gross income in excess of a statutorily defined threshold ($117,950 in
the case of a married couple filing jointly for taxable years beginning in 1996,
which amount will be adjusted for inflation). Because the Servicer will not
report to Offered Certificateholders the amount of income or deductions
attributable to the Supplemental Servicing Fee, such an Offered
Certificateholder may effectively underreport his net taxable income. To the
extent that the Receivables are characterized as "stripped bonds," as discussed
below, the portion of interest treated as retained by the Seller or the Servicer
would not be included in the income of Offered Certificateholders. See "--
Characterization of Fees" below.
To the extent that the purchase price of an Offered Certificate allocated
to an Offered Certificateholder's undivided interest in a Receivable is greater
than or less than the portion of the principal balance of the Receivable
allocable to the Offered Certificate, such interest in the Receivable will have
been acquired at a premium or discount, as the case may be. In determining
whether an Offered Certificateholder has purchased its interest in the
Receivables (or any Receivable) at a discount, a portion of the purchase price
for an Offered Certificate may be allocated to accrued interest on each
Receivable and to amounts held in the Collection Account pending distribution to
Certificateholders at the time of purchase as though such accrued interest and
collections on the Receivables were separate assets purchased by the Offered
Certificateholder, thus reducing the portion of the purchase price allocable to
an Offered Certificateholder's undivided interest in each Receivable (the
"Purchase Price") and increasing the potential discount on the Receivables.
Characterization of Fees. The Servicer intends to report income to Offered
Certificateholders on the assumption that the Offered Certificateholders own an
interest (equal to the applicable Class Percentage) in all of the principal and
interest derived from the Receivables. However, to the extent that the amounts
paid to the Servicer or the Seller exceed reasonable fees for services rendered,
by reason of the extent to which either the weighted average APR of the
Receivables, or the individual stated APRs of some of the Receivables, exceed
the Certificate Rate, such amounts will be treated as an interest in the
Receivables retained by the Seller or the Servicer. There are no authoritative
pronouncements for federal income tax purposes as to either the maximum amount
of compensation that may be considered reasonable for servicing Receivables or
performing other services in the context of transactions involving receivables
such as the Receivables, although the IRS has issued such guidelines in the
context of mortgage loans. To the extent that amounts paid to the Servicer or
the Seller exceed reasonable compensation for services provided, they would be
viewed as having retained for federal income tax purposes an ownership interest
in a portion of each interest payment with respect to certain Receivables (each
such payment, a "stripped coupon"). As a result, such Receivables would be
treated as "stripped bonds" within the meaning of the Code.
To the extent that the Receivables are characterized as "stripped bonds,"
the income and deductions of the Trust allocable to Offered Certificateholders
will not include the portion of the interest on the Receivables treated as
having been retained by the Seller (or other Offered Certificateholder) and the
Trust's deductions will be limited to reasonable servicing and other fees. In
addition, an Offered Certificateholder will not be subject to the market
discount rules discussed below with respect to the stripped Receivables, but
instead will be subject to the OID rules. However, if the price at which such a
Certificateholder were deemed to have acquired a stripped
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Receivable is less than the remaining principal balance of such Receivable by an
amount which is less than a statutorily defined de minimis amount, such
Receivable would not be treated as having OID. In general, the amount of OID on
a Receivable treated as a "stripped bond" will be de minimis if it is less than
1/4 of one percent for each remaining full year of weighted average life of the
Receivable (probably based on a prepayment assumption) remaining after the
purchase date until the final maturity of the Receivable. If the amount of OID
is de minimis under this rule, the actual amount of OID on such a Receivable
would be includible in income proportionately as principal payments are received
on the Receivable in the proportion that the amount of the principal payment
made bears to the total principal balance of the Receivable.
If the OID on a Receivable, which may differ for each Receivable, based on
the Purchase Price paid by an Offered Certificateholder, is not treated as being
de minimis, such a Certificateholder will be required to include any OID on a
Receivable in income as it accrues, regardless of when cash payments are
received, using a method reflecting a constant yield to maturity on the
Receivable. It is possible that the IRS could require use of a prepayment
assumption in computing the yield of a stripped Receivable. If a stripped
Receivable is deemed to be acquired by an Offered Certificateholder at a greater
than de minimis OID, such treatment would accelerate the accrual of income by
such holder. Prospective investors are advised to consult their own tax advisors
regarding the extent to which a portion of the amounts paid to the Servicer (or
other Offered Certificateholder) could be characterized other than as
compensation for services rendered for federal income tax purposes and the
calculation of OID on the Receivables.
It is also possible that any fees deemed to be excessive could be
characterized as deferred purchase price payable to the Seller by Offered
Certificateholders in exchange for the Receivables. The likely effect of such
recharacterization would be to accelerate realization of taxable income by such
a holder.
Rule of 78's Receivables. The annual statement regularly furnished to
Certificateholders for federal income tax purposes will include information
based on the actuarial method of accounting for interest and principal on the
Receivables, and the amount of the fees paid to the Servicer and others. Offered
Certificateholders should generally be permitted to account for interest on the
Receivables using the actuarial method (the method used to compute the
Certificate Pool Factor and the Certificate Rate). However, the Rule of 78's
Receivables provide that, upon a prepayment in full, the amount payable by the
Obligor will be determined under the Rule of 78's. Prospective investors should
consult their tax advisors as to whether they may be required or permitted to
use the Rule of 78's method to account for interest on the Rule of 78's
Receivables. An Offered Certificateholder will be furnished information for
federal income tax purposes enabling him to report interest on the Receivables
under the Rule of 78's method of accounting only upon written request to the
Trustee, and payment of the actual costs of producing the same.
If a Rule of 78's Receivable is prepaid, any amount received by the Trust
upon prepayment in excess of the account balance using the actuarial method
would constitute income to an Offered Certificateholder who had reported income
with respect to such Rule of 78's Receivable on the actuarial method, and an
amount equal to such excess would be paid to the Servicer as part of its
Supplemental Servicing Fee and be deductible to the extent described above.
Market Discount. If the Receivables are not treated as "stripped bonds,"
the interest of an Offered Certificateholder in each Receivable whose Purchase
Price is less than the original issue price (plus OID, if any, previously
includible in the income of any holder) of the Receivable will be treated as
having been purchased at a "market discount." The market discount on a
Receivable will be considered to be zero if it is less than a statutorily
defined de minimis amount.
In general, under the market discount provisions of the Code, principal
payments received by the Trust, and all or a portion of the gain recognized upon
a sale or other disposition of a Receivable or upon the sale or other
disposition of an Offered Certificate by a holder thereof, will be taxable as
ordinary income to the extent of accrued market discount, and a portion of the
interest deductions
S-34
<PAGE> 110
attributable to indebtedness treated as incurred or continued to purchase or
carry a Receivable or an Offered Certificate must be deferred. The ordinary
income treatment on dispositions and deferral of interest deductions described
in the preceding sentence will not apply if an Offered Certificateholder elects
to include market discount in income currently as it accrues for each taxable
year during which it holds the Offered Certificate. Market discount will accrue
in the manner to be provided in Treasury regulations, but the Conference Report
accompanying the Tax Reform Act of 1986 states that, until such regulations are
issued, it is intended that taxpayers may elect to accrue market discount either
(i) under a constant yield (economic accrual) method or (ii) at the election of
the taxpayer, in the proportion that the stated interest paid on the obligation
for the current period bears to total remaining interest on the obligation. As
described above, if the Offered Certificates are characterized as "stripped
bonds," any discount would be treated as OID, the amount and timing of which
should be comparable to the amount and timing of market discount if an election
is made to include market discount in income currently on the constant yield
method. See "-- Characterization of Fees" above. Due to the complexity of the
market discount rules, the Offered Certificateholders are urged to consult their
tax advisors as to whether market discount will result from the acquisition of
Offered Certificates, and as to the tax treatment of any such discount.
Premium. In the event that a Receivable is treated as purchased at a
premium (i.e., the Purchase Price exceeds the sum of principal payments to be
made thereon), such premium will be amortizable by an Offered Certificateholder
as an offset to interest income (with a corresponding reduction in such holder's
basis) under a constant yield method over the remaining term of the Receivable
if an election under Section 171 of the Code is made (or previously in effect in
accordance with the provisions of the Tax Reform Act of 1986) with respect to
the Offered Certificates. Any such election will also apply to debt instruments
held by the taxpayer during the year in which the election is made and all debt
instruments acquired thereafter.
Sale of an Offered Certificate or a Receivable. If an Offered Certificate
is sold, gain or loss will be recognized equal to the difference between the
amount realized on the sale and the adjusted basis of the Offered
Certificateholder in the Receivables and any other assets held by the Trust. An
Offered Certificateholder's adjusted basis will equal such holder's cost for the
Offered Certificate, increased by any discount previously included in income,
and decreased by any deduction previously allowed for accrued premium and by the
amount of principal payments previously received on the Receivables. Any gain or
loss will be capital gain or loss if the Offered Certificate was held as a
capital asset, except that gain will be treated in whole or in part as ordinary
interest income to the extent of the seller's interest in accrued market
discount not previously taken into income on Receivables having a fixed maturity
date of more than one year from the date of origination.
Under proposed Treasury regulations, the grant of an extension of the
maturity of a Receivable to the Obligor thereon could be treated as an exchange
if it changes the yield on the Receivable by more than a de minimis amount,
potentially resulting in taxable gain or loss to Certificateholders. Reports to
Certificateholders will not include information sufficient to calculate any such
gain or loss and accordingly, in the event that an extension were to result in a
deemed exchange, a Certificateholder could underreport its taxable income. No
assurance can be given as to whether the proposed regulations will be adopted as
final regulations in their present form or whether, if adopted, they will apply
to the Receivables.
Foreign Offered Certificateholders. Interest attributable to Receivables
which is received by a foreign Offered Certificateholder will generally not be
subject to the 30% withholding tax imposed with respect to payments of interest,
provided that such foreign holder is not engaged in a trade or business in the
United States and that such foreign holder fulfills certain certification
requirements. Under such requirements, the holder must certify, under 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
S-35
<PAGE> 111
under the laws of the U.S. or any political subdivision thereof, or an estate or
trust the income of which is includible in gross income for U.S. federal income
tax purposes, regardless of its source.
Backup Withholding. Payments made on the Offered Certificates and proceeds
from the sale of the Offered Certificates will not be subject to a "backup"
withholding tax of 31% unless, in general, an Offered Certificateholder fails to
comply with certain reporting procedures and is not an exempt recipient under
applicable provisions of the Code.
CERTAIN STATE TAX CONSEQUENCES
The State of Michigan imposes an Individual Income Tax and a Single
Business Tax which is based partially upon the net income of corporations,
partnerships and other entities doing business in the State of Michigan. This
discussion is based upon present provisions of Michigan statutes and the
regulations promulgated thereunder, and applicable judicial or ruling authority,
all of which are subject to change, which change may be retroactive. No ruling
on any of the issues discussed below will be sought from the Michigan Department
of Treasury.
Because of the variation in each state's and locality's tax laws based in
whole or in part upon income, it is impossible to predict tax consequences to
holders of Certificates in all of the state and local taxing jurisdictions in
which they may be subject to tax. Certificateholders are urged to consult their
own tax advisors with respect to state and local tax consequences arising out of
the purchase, ownership and disposition of the Certificates.
TAX CONSEQUENCES WITH RESPECT TO THE OFFERED CERTIFICATES
If the arrangement created by the Trust Agreement is a grantor trust for
federal income tax purposes, it is expected that Michigan Tax Counsel will
deliver his opinion that the same treatment will also apply for Michigan
Individual Income Tax and Single Business Tax purposes and that the Trust will
not be subject to such taxes. Rather, a corporate Offered Certificateholder
whose commercial domicile is in Michigan, as well as an individual Offered
Certificateholder who is a resident of Michigan, should be subject to Michigan
Single Business Tax and the Individual Income Tax, respectively, on income
received through the Trust. On the other hand, a corporate Offered
Certificateholder whose commercial domicile is not in Michigan, and an
individual Offered Certificateholder who is not a resident of Michigan, should
not be subject to such taxes on income received through the Trust.
If the Offered Certificates are instead treated as ownership interests in
an association taxable as a corporation or a "publicly traded partnership"
taxable as a corporation, then the hypothetical entity should be viewed as a
passive holder of investments and should not be subject to the Michigan Single
Business Tax (which, if applicable, could result in reduced distributions to
Certificateholders). The hypothetical entity, however, may be subject to
Michigan Intangibles Tax on income from loans secured by Michigan property. The
Michigan Intangibles Tax, however, has been repealed effective January 1, 1998.
In any event, an Offered Certificateholder not otherwise subject to tax in
Michigan would not become subject to Michigan tax as a result of its mere
ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
S-36
<PAGE> 112
ERISA CONSIDERATIONS
[THE CLASS A CERTIFICATES]
The Class A Certificates may, in general, be purchased by or on behalf of
(i) "employee benefit plans" (as defined in Section 3(3) of ERISA), (ii) "plans"
described in Section 4975(e)(1) of the Code, including individual retirement
accounts and Keogh Plans, or (iii) entities whose underlying assets include plan
assets by reason of a plan's investment in such entity (each, a "Plan"),
provided that certain conditions are met with respect to an individual
administrative exemption issued by the United States Department of Labor
to , , (the "Underwriters' Exemption"). The Seller
believes that the Underwriters' Exemption will apply to the acquisition and
holding of the Class A Certificates by a Plan and that all conditions of the
Underwriters' Exemption other than those within the control of the investors
have been or will be met. Any Plan fiduciary considering whether to purchase a
Class A Certificate on behalf of a Plan should consult with its counsel
regarding the applicability of the Underwriters' Exemption and other relevant
issues. For additional information regarding treatment of the Class A
Certificates under ERISA, [including certain special considerations that apply
with respect to the Pre-Funding Account,] see "ERISA Considerations" in the
Prospectus.
[THE CLASS B CERTIFICATES
Because the Class B Certificates are subordinated to the Class A
Certificates in certain respects, the Underwriters' Exemption will not apply to
the purchase of Class B Certificates by or on behalf of a Plan. However, other
prohibited transaction exemptions may be applicable. These exemptions may apply
with respect to, inter alia, purchases by certain insurance company general
accounts, insurance company pooled separate accounts and bank collective
investment funds, and on behalf of employee benefit plans by certain "in house"
asset managers and qualified professional asset managers. Any Plan fiduciary
considering whether to purchase a Class B Certificate on behalf of a Plan should
consult with its counsel regarding the applicability of one or more of such
exemptions to such purchase. For additional information regarding treatment of
the Class B Certificates under ERISA, see "ERISA Considerations" in the
Prospectus.]
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement"), the Seller has agreed to cause the Trust to sell
to each of the Underwriters named below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase, the principal balance of the
Class A Certificates [and Class B Certificates] set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE
OF CLASS A
UNDERWRITERS CERTIFICATES
------------ -----------------
<S> <C>
............................................................ $
............................................................
---------------
Total.................................................. $
===============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL BALANCE
OF CLASS B
[UNDERWRITERS CERTIFICATES
------------- -----------------
<S> <C>
............................................................ $
............................................................
---------------
Total.................................................. $
---------------
Total.................................................. $ ]
===============
</TABLE>
S-37
<PAGE> 113
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-38
<PAGE> 114
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and defined herein and the pages on which the definitions of such
terms may be found herein. Certain defined terms used in this Prospectus
Supplement are defined in the Prospectus. See "Index of Terms" in the
Prospectus.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
[Additional Yield Supplement Amount......................... S-10]
Agreement................................................... S-3
[APR........................................................ S-4]
Available Interest.......................................... S-25
Available Principal......................................... S-25
Business Day................................................ S-5
Cede........................................................ S-2
Cedel....................................................... I-1
Certificate Owner........................................... S-3
Certificate Pool Factor..................................... S-21
[Certificate Prepayment Amount.............................. S-8, S-23]
[Certificate Prepayment Premium............................. S-7
[Certificateholders......................................... S-5]
Certificates................................................ S-1, S-3
[Class A] Agent............................................. S-28
Class A Certificate Balance................................. S-6, S-26
Class A Certificateholders.................................. S-5
[Class A] Certificate Rate.................................. S-5
Class A Certificates........................................ S-1, S-3
Class A Distributable Amount................................ S-26
Class A Interest Carryover Shortfall........................ S-27
Class A Interest Distributable Amount....................... S-26
Class A Percentage.......................................... S-3, S-22
Class A Principal Carryover Shortfall....................... S-27
Class A Principal Distributable Amount...................... S-26
Class B Certificate Balance................................. S-6, S-27
Class B Certificateholders.................................. S-6
Class B Certificate Rate.................................... S-5
Class B Certificates........................................ S-1, S-3
Class B Distributable Amount................................ S-26
[Class B Interest Carryover Shortfall....................... S-28]
Class B Interest Distributable Amount....................... S-27
Class B Percentage.......................................... S-3, S-22
[Class B Principal Carryover Shortfall...................... S-28]
Class B Principal Distributable Amount...................... S-26
Closing Date................................................ S-4
Code........................................................ [S-12,] S-30
Collection Account.......................................... S-10
Collection Period........................................... S-6
Commission.................................................. S-2
Cutoff Date................................................. S-4, S-16
Determination Date.......................................... S-25
Distribution Date........................................... S-1, S-5
DTC......................................................... S-2, I-1
ERISA....................................................... S-12
</TABLE>
S-39
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Euroclear................................................... I-1
Exchange Act................................................ S-2
Final Scheduled Distribution Date........................... S-1
Final Scheduled Maturity Date............................... S-5
[Ford....................................................... S-14]
Ford Credit................................................. S-3
[Funding Period............................................. S-8]
Global Securities........................................... I-1
[Initial] Cutoff Date....................................... S-4
Initial Pool Balance........................................ S-7
[Initial] Receivables....................................... S-4
Issuer...................................................... S-3
IRS......................................................... S-30
Liquidated Receivables...................................... S-25
Liquidation Proceeds........................................ S-25
[Mandatory Repurchase....................................... S-7, S-23]
[Maximum Initial Yield Supplement Amount.................... S-10, S-29]
[Maximum Subsequent Yield Supplement Amount................. S-10, S-30]
[Maximum Yield Supplement Amount............................ S-10, S-30]
Michigan Tax Counsel........................................ S-11
Net Losses.................................................. S-21
Offered Certificateholders.................................. S-30
Offered Certificates........................................ S-30
OID......................................................... S-31
Plan........................................................ S-35
Pool Balance................................................ S-5
[Pool/Pre-Funding Balance................................... S-5]
[Pre-Funded Amount.......................................... S-4]
[Pre-Funding Account........................................ S-1, S-8]
Prospectus.................................................. S-2
Purchase Agreement.......................................... S-5
Purchase Price.............................................. S-31
Rating Agencies............................................. S-15
Realized Losses............................................. S-5
Receivables................................................. S-1
Receivables Pool............................................ S-16
Record Date................................................. S-5
[Required Rate.............................................. S-10]
Seller...................................................... S-1, S-3
Servicer.................................................... S-1, S-3
Servicing Fee Rate.......................................... S-11
Special Tax Counsel......................................... S-11
Specified Subordination Spread Account Balance.............. S-9
Subordination Initial Deposit............................... S-9
Subordination Spread Account................................ S-9
[Subsequent Cutoff Date..................................... S-4]
[Subsequent Receivables..................................... S-1, S-4]
[Subsequent Transfer Date................................... S-4]
Supplemental Servicing Fee.................................. S-24
Total Available Amount...................................... S-25
Trust....................................................... S-1, S-3
Trustee..................................................... S-3
</TABLE>
S-40
<PAGE> 116
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Underwriters................................................ S-35
Underwriters' Exemption..................................... S-35
Underwriting Agreement...................................... S-35
United States Person........................................ S-33
[Yield Supplement Account................................... S-10]
[Yield Supplement Agreement................................. S-10]
[Yield Supplement Amount.................................... S-10, S-29]
[Yield Supplement Deposit Amount............................ S-29]
[Yield Supplement Initial Deposit........................... S-10]
</TABLE>
S-41
<PAGE> 117
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Ford Credit
Auto Grantor Trust 199 % Asset Backed Certificates, Class A [and % Asset
Backed Certificates, Class B] ([collectively,] the "Global Securities") will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ("DTC"),
Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"). The
Global Securities will be tradeable as home market instruments in both the
European and U.S. domestic markets. Initial settlement and all secondary trades
will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
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.
<PAGE> 118
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
I-2
<PAGE> 119
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
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).
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
I-3
<PAGE> 120
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.
Recently enacted Treasury regulations provide that as of January 1, 1999,
the current versions of Form 1001 and Form W-8 will be replaced with a unified
Form W-8. Therefore, at such time, beneficial owners must file the revised Form
W-8 in order to continue to obtain an exemption or reduced tax rate.
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, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust if a U.S. court is able to exercise
primary supervision over the administration of such trust and one or more U.S.
Persons has the authority to control all substantial decisions of the trust.
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 Notes.
Investors are advised to consult their own tax advisers for specific tax advice
concerning their holding and disposing of the Global Notes.
I-4
<PAGE> 121
=========================================================
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
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders............... S-2
Summary..................................... S-3
Risk Factors................................ S-15
The Trust................................... S-17
The Receivables Pool........................ S-18
Pool Factors................................ S-22
Maturity and Prepayment Considerations...... S-23
Description of the Certificates............. S-23
Certain Federal Income Tax Consequences..... S-31
Certain State Tax Consequences.............. S-36
ERISA Considerations........................ S-37
Underwriting................................ S-37
Legal Opinions.............................. S-38
Index of Terms.............................. S-39
Annex I -- Global Clearance, Settlement and
Tax Documentation Procedures.............. I-1
PROSPECTUS
Available Information....................... 2
Incorporation of Certain Documents by
Reference................................. 2
Summary..................................... 3
Risk Factors................................ 13
The Trusts.................................. 18
The Receivables Pools....................... 20
Maturity and Prepayment Considerations...... 22
Pool Factors and Trading Information........ 23
Use of Proceeds............................. 23
The Seller and the General Partner.......... 24
The Servicer................................ 25
Description of the Notes.................... 25
Description of the Certificates............. 31
Certain Information Regarding the
Securities................................ 32
Description of the Transfer and Servicing
Agreements................................ 42
Certain Legal Aspects of the Receivables.... 55
Certain Federal Income Tax Consequences..... 59
ERISA Considerations........................ 60
Plan of Distribution........................ 65
Legal Opinions.............................. 65
Index of Terms.............................. 66
</TABLE>
UNTIL , 199 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS
SUPPLEMENT), ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
=========================================================
=========================================================
$
FORD CREDIT
AUTO GRANTOR TRUST
199 -
$
% ASSET BACKED CERTIFICATES,
CLASS A
[$
% ASSET BACKED NOTES,
CLASS B]
FORD CREDIT AUTO
RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
-----------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------
=========================================================
<PAGE> 122
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 , 199
[FORD LOGO]
FORD CREDIT AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
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 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. In order to facilitate the ownership
of a series of Securities by investors outside the United States, if so
specified in the related Prospectus Supplement, an additional trust (each, an
"Intermediary Trust") will be formed with respect to such series pursuant to an
Intermediary Pooling and Servicing Agreement among the Trustee, the Seller and
the Servicer. The property of each Trust with respect to a series for which an
Intermediary Trust is not formed will include a pool of motor vehicle retail
installment sale contracts secured by new or used automobiles and light trucks
(the "Receivables"), certain monies due or received thereunder on or after the
applicable Cutoff Date set forth in the related Prospectus Supplement, security
interests in the vehicles financed thereby and certain other property, all as
described herein and in the related Prospectus Supplement. The property of each
Trust with respect to a series for which an Intermediary Trust is formed will
include certificates issued by such Intermediary Trust that represent undivided
interests in such Intermediary Trust, the property of which will include the
property described in the immediately preceding sentence, all as described
herein and in the related Prospectus Supplement. Such undivided interests may
constitute all or a portion of the beneficial interests in such Intermediary
Trust. In addition, if so specified in the related Prospectus Supplement, the
property of the Trust or the related Intermediary Trust, as applicable, will
include monies on deposit in a trust account (the "Pre-Funding Account") to be
established with the Indenture Trustee or the applicable Trustee, as the case
may be, which will be used to purchase additional motor vehicle retail
installment sale contracts (the "Subsequent Receivables") from the Seller from
time to time during the Funding Period specified in the related Prospectus
Supplement.
Each class of Securities of any series will represent the right to receive
directly, or indirectly through the related Intermediary Trust, if applicable, a
specified amount of payments of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. Distributions on Certificates of a series may be subordinated in
priority to payments due on any related Notes to the extent described herein and
in the related Prospectus Supplement. A series may include one or more classes
of Notes and/or Certificates which differ as to the timing and priority of
payment, interest rate or amount of distributions in respect of principal or
interest or both. A series may include one or more classes of Notes or
Certificates entitled to distributions in respect of principal with
disproportionate, nominal or no interest 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 13 HEREIN.
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
FORD CREDIT AUTO RECEIVABLES TWO L.P., FORD CREDIT AUTO RECEIVABLES TWO, INC.,
FORD MOTOR CREDIT COMPANY, FORD MOTOR COMPANY OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is , 199 .
<PAGE> 123
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes and the Certificates offered pursuant to this
Prospectus. The Seller intends to establish a Trust and to cause it to issue a
series of Securities as soon as practicable after the Registration Statement
becomes effective. For further information, reference is made to the
Registration Statement which may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the Commission's regional offices at Citicorp Center, 500
West Madison Street, Suite 1400, 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. In addition, the
Commission maintains a public access site on the Internet through the World Wide
Web at which site reports, information statements and other information,
including all electronic filings, may be viewed. The Internet address of such
World Wide Web site is http://www.sec.gov.
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 (the "Exchange Act"),
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).
2
<PAGE> 124
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. The institution acting as Trustee
for the Trust will also act as trustee for
the Intermediate Trust, if any, with respect
to such Series.
INDENTURE TRUSTEE............. With respect to any applicable series of
Securities, the Indenture Trustee specified
in the related Prospectus Supplement.
INTERMEDIARY TRUST............ If so specified in the related Prospectus
Supplement, the Intermediary Trust to be
formed with respect to a series of Securities
pursuant to an Intermediary Pooling and
Servicing Agreement (as amended and
supplemented from time to time, the
"Intermediary Pooling and Servicing
Agreement") among the institution designated
therein as intermediary trustee, the Seller
and the Servicer.
THE NOTES..................... A series of Securities may include one or more
classes of Notes, which will be issued
pursuant to an Indenture between the Trust
and the Indenture Trustee (as amended and
supplemented from time to time, an
"Indenture"). The related Prospectus
Supplement will specify which class or
classes, if any, of Notes of the related
series are being offered thereby.
Notes will be available for purchase in the
denominations specified in the related
Prospectus Supplement and will be
3
<PAGE> 125
available in book-entry form only. No person
acquiring a beneficial ownership interest in
Notes (a "Note Owner") will be entitled to
receive Definitive Notes, except in the
limited circumstances described herein or in
the related Prospectus Supplement. See
"Certain Information Regarding the Securities
-- Definitive Securities."
Each class of Notes will have a stated
principal amount and may bear interest at a
specified rate or rates (with respect to each
class of Notes, the "Note Interest Rate").
Each class of Notes may have a different Note
Interest Rate, which may be a fixed, variable
or adjustable Note Interest Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the stated
principal amount and the Note Interest Rate
for each class of Notes or the method for
determining such Note Interest Rate.
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.
Furthermore, a series may include one or more
classes of Notes ("Residual Cash Flow Notes")
entitled to all or a portion of any remaining
payments of principal and interest on the
related Receivables or, with respect to a
series for which an Intermediary Trust is
formed, the related Intermediary Trust
Certificates, after making all other
distributions required on each Distribution
Date.
If the Servicer exercises its option to
purchase the Receivables of a Trust or, with
respect to a series for which an Intermediary
Trust is formed, of such Intermediary Trust
(or, if the Servicer does not exercise such
option, 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 or the related Intermediary
4
<PAGE> 126
Trust, if applicable, 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 may include one or more
classes of Certificates and may or may not
include any Notes. The related Prospectus
Supplement will specify which class or
classes, if any, of the Certificates are
being offered thereby.
Certificates will be available for purchase in
the denominations specified in the related
Prospectus Supplement and may be available in
book-entry form. If Certificates are issued
in book-entry form, no person acquiring a
beneficial ownership interest in Certificates
(a "Certificate Owner") will be entitled to
receive Definitive Certificates, except in
the limited circumstances described herein or
in the related Prospectus Supplement. See
"Certain Information Regarding the
Securities -- Definitive Securities."
Each class of Certificates will have a stated
Certificate Balance (with respect to each
class of Certificates, the "Certificate
Balance") and may accrue interest on such
Certificate Balance at a specified rate (with
respect to each class of Certificates, the
"Certificate Rate"). Each class of
Certificates may have a different Certificate
Rate, which may be a fixed, variable or
adjustable Certificate Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the
Certificate Balance and the Certificate Rate
for each class of Certificates or the method
for determining the Certificate Rate.
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
5
<PAGE> 127
disproportionate, nominal or no interest
distributions or (ii) interest distributions
with disproportionate, nominal or no
distributions in respect of principal.
Furthermore, a series may include one or more
classes of Certificates ("Residual Cash Flow
Certificates") entitled to all or a portion
of any remaining payments of principal and
interest on the related Receivables or, with
respect to a series for which an Intermediary
Trust is formed, the related Intermediary
Trust Certificates, after making all other
distributions required on each Distribution
Date.
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, with
respect to a series for which an Intermediary
Trust is formed of such Intermediary Trust
(or, if the Servicer does not exercise such
option, 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 or the related Intermediary Trust, if
applicable, 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 with respect to a
series for which an Intermediary Trust is not
formed 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. The
property of each Trust with respect to a
series for which an Intermediary Trust is
formed will include certificates
6
<PAGE> 128
("Intermediary Trust Certificates") issued by
the related Intermediary Trust, which
certificates will represent undivided
interests in the related Intermediary Trust,
the property of which will include the
property described in the immediately
preceding sentence. Such Intermediary Trust
Certificates may constitute all or a portion
of the beneficial interests in such
Intermediary Trust.
On the Closing Date (the "Closing Date")
specified in the related Prospectus
Supplement with respect to a series for which
an Intermediary Trust is not formed, the
Seller will sell or transfer Receivables (the
"Initial Receivables") having an aggregate
principal balance specified in the related
Prospectus Supplement as of the date
specified therein (the "Initial Cutoff Date")
to such Trust pursuant to either a Sale and
Servicing Agreement among the Seller, the
Servicer and the Trust (as amended and
supplemented from time to time, a "Sale and
Servicing Agreement") or, if the Trust is to
be treated as a grantor trust for federal
income tax purposes, the related Pooling and
Servicing Agreement among the Seller, the
Servicer and the Trustee. The property of
each Trust with respect to a series for which
an Intermediary Trust is not formed may also
include amounts on deposit in certain trust
accounts, including the related Collection
Account, any Pre-Funding Account, any Yield
Supplement Account (as defined in the related
Prospectus Supplement), any Reserve Account
and any other account identified in the
applicable Prospectus Supplement.
On the Closing Date specified in the related
Prospectus Supplement with respect to a Trust
of a series for which an Intermediary Trust
is formed, the Seller will (i) sell or
transfer the Initial Receivables having an
aggregate principal balance specified in the
related Prospectus Supplement as of the
Initial Cutoff Date to such Intermediary
Trust pursuant to the related Intermediary
Pooling and Servicing Agreement among the
Seller, the Servicer and the Trustee and (ii)
sell or transfer the Intermediary Trust
Certificates issued by such Intermediary
Trust to the Trust pursuant to a Sale
Agreement between the Seller and the Trust
(as amended and supplemented from time to
time, a "Sale Agreement"). If so specified in
the related Prospectus Supplement, an
Intermediary Trust may be formed after the
Closing Date, in which case the sales and
transfers described above would occur at the
time of formation of such Intermediary Trust.
The property of each Trust with respect to a
series for which an Intermediary Trust is
formed may also include amounts on deposit in
certain trust accounts, including the related
Collection Account, any Pre-Funding Account,
any Yield Supplement Account (as defined in
the related Prospectus Supplement), any
7
<PAGE> 129
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 or
Intermediary Trust, as applicable, will be
obligated to purchase (subject to the
satisfaction of certain conditions described
in the applicable Sale and Servicing
Agreement, Intermediary Pooling 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, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing
Agreement, as applicable, and described
herein and in the related Prospectus
Supplement. The purchase price for the
Receivables purchased by the Trust from the
Seller and by the Seller from Ford Credit may
be more or less than the aggregate principal
balance thereof.
CREDIT AND CASH FLOW
ENHANCEMENT................... If and to the extent specified in the related
Prospectus Supplement, credit enhancement
with respect to any class or classes of
Securities may include any one or more of the
following: subordination of one or more other
classes of Securities, a Reserve Account,
overcollateralization, letters of credit,
credit or liquidity facilities, surety bonds,
guaranteed investment contracts, guaranteed
rate agreements, swaps or other interest rate
protection agreements, repurchase
obligations, yield supplement agreements,
other agreements with respect to third party
payments or other support, cash deposits or
other arrangements. Any form of credit
enhancement may have certain limitations and
exclusions from coverage thereunder, which
will be described in the related Prospectus
Supplement.
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RESERVE ACCOUNT............... If so specified in the related Prospectus
Supplement, a Reserve Account will be created
for the related Trust with an initial deposit
by the Seller of cash or certain investments
having a value equal to the amount specified
in the related Prospectus Supplement. To the
extent specified in the related Prospectus
Supplement, funds in the Reserve Account will
thereafter be supplemented by the deposit of
amounts remaining on any Distribution Date
after making all other distributions required
on such date and any amounts deposited from
time to time from the Pre-Funding Account in
connection with a purchase of Subsequent
Receivables. Amounts in the Reserve Account
will be available to cover shortfalls in
amounts due to the holders of those classes
of Securities specified in the related
Prospectus Supplement in the manner and under
the circumstances specified therein. The
related Prospectus Supplement will also
specify to whom and the manner and
circumstances under which amounts on deposit
in the Reserve Account (after giving effect
to all other required distributions to be
made by the applicable Trust) in excess of
the Specified Reserve Balance (as defined in
the related Prospectus Supplement) will be
distributed.
PRE-FUNDING ACCOUNT........... If so specified in the related Prospectus
Supplement, the property of each Trust or the
related Intermediary Trust, if applicable,
may include monies on deposit in a
Pre-Funding Account, which monies will be
used to purchase Subsequent Receivables from
the Seller from time to time during the
Funding Period specified in the related
Prospectus Supplement. The amount that may be
initially deposited into a Pre-Funding
Account may be up to 100% of the net proceeds
from the sale of the Securities issued by a
Trust and the length of the Funding Period
may be up to one year. The amount that may be
initially deposited into a Pre-Funding
Account, and the length of a Funding Period,
will be specified in the related Prospectus
Supplement.
TRANSFER AND SERVICING
AGREEMENTS.................... With respect to each Trust of a series for
which an Intermediary Trust is not formed,
the Seller will sell the related Receivables
to such Trust pursuant to a Sale and
Servicing Agreement or a Pooling and
Servicing Agreement. With respect to each
Trust of a series for which an Intermediary
Trust is formed, the Seller will sell (i) the
related Receivables to such Intermediary
Trust pursuant to an Intermediary Pooling and
Servicing Agreement and (ii) the Intermediary
Trust Certificates issued by such
Intermediary Trust to the Trust pursuant to a
Sale Agreement. The rights and benefits of
any Trust under a Sale and Servicing
Agreement or an Intermediary Pooling and
Servicing Agreement and a Sale Agreement, as
applicable, will be assigned to the Indenture
Trustee as collateral for the
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Notes of the related series. The Servicer
will agree with such Trust or the related
Intermediary Trust, as applicable, to be
responsible for servicing, managing,
maintaining custody of and making collections
on the Receivables. Ford Credit will
undertake certain administrative duties under
an Administration Agreement with respect to
any Trust that has issued Notes.
To the extent provided in the related
Prospectus Supplement, the Servicer will
advance scheduled payments under each
Precomputed Receivable which shall not have
been timely made (a "Precomputed Advance"),
to the extent that the Servicer, in its sole
discretion, expects to recoup the Precomputed
Advance from subsequent payments on or with
respect to such Receivable. With respect to
Simple Interest Receivables, to the extent
provided in the related Prospectus
Supplement, the Servicer shall advance any
interest shortfall (a "Simple Interest
Advance" and, together with a Precomputed
Advance, an "Advance"). The Servicer shall be
entitled to reimbursement of Advances from
subsequent payments on or with respect to the
Receivables to the extent described herein
and in the related Prospectus Supplement.
The Seller will be obligated to repurchase any
Receivable if the interest of the applicable
Trust or Intermediary Trust, as the case may
be, 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.
The Servicer may be obligated to purchase or
make Advances with respect to any Receivable
if, among other things, it extends the date
for final payment by the Obligor of such
Receivable beyond the applicable Final
Scheduled Maturity Date (as defined in the
related Prospectus Supplement, the "Final
Scheduled Maturity Date"), changes the annual
percentage rate ("APR") or the total amount
or number of scheduled payments of such
Receivable or fails to maintain a perfected
security interest in the related Financed
Vehicle.
To the extent provided in the related
Prospectus Supplement, the Servicer will be
entitled to receive a fee for servicing the
Receivables with respect to each series 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
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of the Transfer and Servicing
Agreements -- Servicing Compensation and
Expenses" herein and "Description of the
Transfer and Servicing
Agreements -- Servicing Compensation and
Expenses" or "Description of the
Certificates -- Servicing Compensation and
Expenses" in the related Prospectus
Supplement.
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES; REPURCHASE
OBLIGATIONS................... In connection with the sale of Receivables to a
Trust, or an Intermediary Trust, as
applicable, security interests in the
Financed Vehicles securing such Receivables
will be assigned by the Seller to such Trust
or Intermediary Trust, as the case may be.
Due to the administrative burden and expense,
the certificates of title to the Financed
Vehicles will not be amended to reflect the
assignment to such Trust or Intermediary
Trust. In the absence of such an amendment,
such Trust or Intermediary Trust, as the case
may be, may not have a perfected security
interest in the Financed Vehicles securing
the Receivables in some states. The Seller
will be obligated to repurchase any
Receivable sold to a Trust or an Intermediary
Trust, as applicable, 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 or Intermediary Trust, as the case may
be, if such breach shall materially adversely
affect the interest of such Trust or
Intermediary 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 or Intermediary
Trust, as applicable, 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 or
Intermediary Trust, as the case may be, 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 Intermediary
Trust, as applicable, 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 or
Intermediary Trust, as the case may be, 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 or an
Intermediary Trust's losing the priority of
its
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security interest or its security interest in
such Financed Vehicle after the Closing Date
with respect to an Initial Receivable or
after the applicable Subsequent Transfer Date
with respect to a Subsequent Receivable.
Federal and state consumer protection laws
impose requirements upon creditors in
connection with extensions of credit and
collections of retail installment loans, and
certain of these laws make an assignee of
such a loan liable to the obligor thereon for
any violation by the lender. The Seller will
be obligated to repurchase any Receivable
which fails to comply with such requirements.
TAX STATUS.................... Unless the Prospectus Supplement specifies that
the related Trust will be treated as a
grantor trust, upon the issuance of the
related series of Securities (a) Special Tax
Counsel to such Trust expects to deliver an
opinion to the effect that, for federal
income tax purposes, each of such Trust and
the related Intermediary Trust, if
applicable, will not be characterized as an
association (or a publicly traded
partnership) taxable as a corporation and (b)
Michigan Tax Counsel to such Trust expects to
deliver an opinion to the effect that the
same characterizations would apply for
Michigan income and Single Business Tax
purposes as for federal income tax purposes.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor
trust, upon the issuance of the related
series of Certificates (a) Special Tax
Counsel to such Trust expects to deliver an
opinion to the effect that such Trust will be
treated as a grantor trust for federal income
tax purposes and will not be subject to
federal income tax and (b) Michigan Tax
Counsel to such Trust expects to deliver an
opinion to the effect that the same treatment
would apply for Michigan income and Single
Business Tax purposes as for federal income
tax purposes.
See "Certain Federal Income Tax Consequences"
herein and in the related Prospectus
Supplement and "Certain State Tax
Consequences" in the related Prospectus
Supplement. "Special Tax Counsel" and
"Michigan Tax Counsel" will each be
identified by name in the related Prospectus
Supplement.
ERISA CONSIDERATIONS.......... A fiduciary of any employee benefit plan or
other retirement arrangement subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as
amended (the "Code"), should carefully review
with its legal advisors whether the purchase
or holding of Notes or Certificates of any
series could give rise to a transaction
prohibited or not otherwise permissible under
ERISA or Section 4975 of the Code. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
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RISK FACTORS
CERTAIN LEGAL ASPECTS -- THE RECEIVABLES
Pursuant to each Sale and Servicing Agreement, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing Agreement, the Servicer will
service and administer the Receivables held by each Trust or Intermediary Trust,
as applicable, and, as custodian on behalf of such Trust or Intermediary Trust,
as the case may be, 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 or Intermediary Trust, as applicable, 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 or Intermediary
Trust, as the case may be, 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 or
Intermediary Trust, as the case may be, if a subsequent purchaser were to obtain
physical possession of such Receivables without knowledge of the assignment, the
Trust's or Intermediary 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, Intermediary Pooling and Servicing Agreement
or Pooling and Servicing Agreement, as applicable, relating to each Trust or
Intermediary Trust, as the case may be, 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 or Intermediary Trust against the rights of
subsequent purchasers of a Financed Vehicle or subsequent lenders who take a
security interest in a Financed Vehicle. If there are any Financed Vehicles as
to which Ford Credit failed to obtain a perfected security interest, its
security interest would be subordinate to, among others, subsequent purchasers
of the Financed Vehicles and holders of perfected security interests. Such a
failure would constitute a breach of Ford Credit's warranties under the related
Purchase Agreement and of the Seller's warranties under the related Sale and
Servicing Agreement, Intermediary Pooling 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, Intermediary Pooling 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 or Intermediary Trust,
as applicable, as the secured party on the certificate of title, the Trust's or
Intermediary 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 or Intermediary
Trust, as applicable. 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
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state laws ("Insolvency Laws") will not result in consolidation of the assets
and liabilities of either of the Seller or Ford Credit Auto Receivables Two,
Inc., the general partner of the Seller (the "General Partner"), with those of
Ford Credit. These steps include the creation of the Seller as a separate,
limited-purpose limited partnership pursuant to a limited partnership agreement
containing certain limitations (including restrictions on the nature of the
Seller's business and a restriction on the Seller's ability to commence a
voluntary case or proceeding under any Insolvency Law without the consent of the
General Partner). The General Partner's Certificate of Incorporation contains
similar limitations, including a restriction on the General Partner's ability to
commence a voluntary case or proceeding with respect to itself or the Seller
under any Insolvency Law without the unanimous affirmative vote of all of the
General Partner's directors. However, there 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
Tenth Circuit suggested that even where a transfer of accounts from a seller to
a buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's bankruptcy estate in a bankruptcy of the seller. If
Ford Credit or the Seller were to become subject to a bankruptcy proceeding and
a court were to follow the Octagon court's reasoning, Securityholders might
experience delays in payment or possibly losses on their investment in the
Securities. Counsel to the Seller has advised the Seller that the reasoning of
the Octagon case appears to be inconsistent with other precedent. In addition,
the Permanent Editorial Board of the UCC has issued an official commentary (PEB
Commentary No. 14) which characterizes the Octagon court's interpretation of
Article 9 of the UCC as erroneous. Such commentary states that nothing in
Article 9 is intended to prevent the transfer of ownership of accounts or
chattel paper. However, such commentary is not legally binding on any court. See
"The Seller and the General Partner."
DEFICIENCIES FROM SALE UPON INSOLVENCY OR DISSOLUTION OF SELLER OR GENERAL
PARTNER
With respect to each Trust that is not a grantor trust, if an Insolvency
Event or a dissolution occurs with respect to the Seller or the General Partner
while the Notes of the related series are outstanding, if so specified in the
related Prospectus Supplement the Indenture Trustee or Trustee for such Trust
will be required to promptly sell, dispose of or otherwise liquidate the related
Receivables and, with respect to a series for which an Intermediary Trust is
formed, the related Intermediary Trust Certificates in a commercially reasonable
manner on commercially reasonable terms, unless the related Trustee shall have
received written instructions from (i) the Noteholders (other than the Seller)
of each class of Notes of such series representing not less than a majority of
the aggregate unpaid principal amount of such class of Notes and the right to
receive interest thereon, (ii) the Certificateholders (other than the Seller) of
Certificates of such series representing not less than a majority of the
aggregate Certificate Balance of all such Certificates and the right to receive
interest thereon, (iii) not less than a majority of the holders (other than the
Seller) of certain interests, if any, in the Reserve Account with respect to
such Trust, (iv) not less than a majority of the holders (other than the Seller)
of Final Payment Securities, if any, of such series and the right to receive
interest thereon and (v) any other person specified in the related Prospectus
Supplement, to the effect that each such party disapproves of the liquidation of
such Receivables and Intermediary Trust Certificates, as applicable, and
termination of such Trust and the related Intermediary
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Trust and in connection therewith, the related Trustee (x) appoints an entity
acceptable to Ford Credit to acquire an interest in such Trust and to act as a
substitute "general partner" for federal income tax purposes and (y) obtains an
opinion of counsel as to certain tax matters. The proceeds from any such sale,
disposition or liquidation of Receivables and Intermediary Trust Certificates,
as applicable, will be treated as collections on the Receivables and
distributions on the Intermediary Trust Certificates, as applicable, and
deposited in the Collection Account with respect to such series. If the proceeds
from the liquidation of the Receivables and Intermediary Trust Certificates, as
the case may be, 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 series and any amounts available from any credit enhancement are not
sufficient to pay any Notes and the Certificates of such series in full, the
amount of principal returned to any Noteholders or the Certificateholders will
be reduced and such Noteholders and/or 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 or Certificates of a given Trust or the Receivables of a
given Trust or Intermediary Trust.
However, in connection with the sale of Receivables by the Seller to a
given Trust or Intermediary Trust, as applicable, 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/or principal on one or more classes of Certificates of a series
may be subordinated in priority of payment to interest and/or 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 (which, in the case of a Trust with respect to a series for which an
Intermediary Trust is formed, will be an indirect interest in the Receivables
provided by such Trust's ownership of the related Intermediary Trust
Certificates) 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, Ford, 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 (which, in the case
of a series for which an Intermediary Trust is formed, will be the primary
source
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of distributions on the related Intermediary Trust Certificates) 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 (which, in the
case of a Trust with respect to a series for which an Intermediary Trust is
formed, will be the primary source of distributions on the related Intermediary
Trust Certificates) 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 Receivables or
Intermediary Trust Certificates, as applicable, owned by the Trust with respect
to such series in certain limited circumstances as specified in the related
Indenture. See "Description of the Notes -- The Indenture -- Events of Default;
Rights upon Event of Default." However, there is no assurance that the market
value of such Receivables or Intermediary Trust Certificates, as the case may
be, will at any time be equal to or greater than the aggregate principal amount
of such outstanding Notes. Therefore, upon an Event of Default with respect to
the Notes of any series, there can be no assurance that sufficient funds will be
available to repay the related Noteholders in full. In addition, the amount of
principal required to be paid to Noteholders of such series under the related
Indenture will generally be limited to amounts available to be deposited in the
applicable Note Payment Account. Therefore, the failure to pay principal on a
class of Notes generally will not result in the occurrence of an Event of
Default until the final scheduled Distribution Date for such class of Notes.
MATURITY AND PREPAYMENT CONSIDERATIONS
All the Receivables are prepayable at any time. (For this purpose the term
"prepayments" includes prepayments in full, partial prepayments (including those
related to rebates of extended warranty contract costs and insurance premiums)
and liquidations due to default, as well as receipts of proceeds from physical
damage, credit life and disability insurance policies and certain other
Receivables repurchased for administrative reasons.) The rate of prepayments on
the Receivables may be influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Vehicle securing a Receivable without the consent of the Servicer.
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, Intermediary Pooling 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, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain covenants. See "Description of the Transfer and Servicing Agreements
- -- Sale and Assignment of Receivables." Consistent with its normal servicing
practices and procedures, the Servicer may, in its discretion and on a
case-by-case basis, arrange with Obligors to extend or modify the terms of the
related Receivables. Some of such arrangements (including any extension beyond
the Final Scheduled Maturity Date set forth in the related Prospectus
Supplement) may 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 or
Intermediary Trust, as applicable, 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
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"-- Insolvency Event or Dissolution" regarding the sale of the Receivables or
Intermediary Trust Certificates, as applicable, 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 series of Securities 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 second business day after receipt.
However, so long as Ford Credit is the servicer and provided that (i) there
exists no Event of Servicing Termination and (ii) each other condition to making
monthly deposits as may be required by the related Sale and Servicing Agreement,
Intermediary Pooling and Servicing Agreement or Pooling and Servicing Agreement
is satisfied, the Servicer may retain such amounts until the business day
preceding 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 or an Intermediary Trust, as the case may be, to the
related Collection Account on or before the business day preceding the
applicable Distribution Date. Pending deposit into the Collection Account,
collections may be employed by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds, the applicable Securityholders might incur a loss.
To the extent set forth in the related Prospectus Supplement, the Servicer may,
in order to satisfy the requirements described above, obtain a letter of credit
or other security for the benefit of the related Trust to secure timely
remittances of collections on the related Receivables and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the Servicer.
EVENT OF SERVICING TERMINATION
With respect to a series of Securities that includes Notes, upon the
occurrence of an Event of Servicing Termination, the Indenture Trustee or the
Noteholders with respect to such series, as described under "Description of the
Transfer and Servicing Agreements -- Rights Upon Event of Servicing
Termination," may remove the Servicer without the consent of the Trustee or any
of the Certificateholders with respect to such series. The Trustee or the
Certificateholders with respect to such series will not have the ability to
remove the Servicer if an Event of Servicing Termination occurs. In addition,
the Noteholders of such series have the ability, with certain specified
exceptions, to waive Events of Servicing Termination, including Events of
Servicing Termination that could materially adversely affect the
Certificateholders of such series. See "Description of the Transfer and
Servicing Agreements -- Waiver of Past Events of Servicing Termination."
BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, each class of
Securities of a given series will be initially represented by one or more
certificates registered in the name of Cede & Co. ("Cede"), or any other nominee
for The Depository Trust Company ("DTC") set forth in the related Prospectus
Supplement (Cede, or such other nominee, "DTC's Nominee"), and will not be
registered in the names of the holders of the Securities of such series or their
nominees. Because of this, unless and until Definitive Securities for such
series are issued, holders of such Securities will not be recognized by the
Trustee or any Indenture Trustee as "Certificateholders," "Noteholders" or
"Securityholders," as the case may be (as such terms are used herein or in the
related Pooling and Servicing Agreement or the related Indenture and Trust
Agreement, as applicable). Hence, until Definitive Securities are issued,
holders of such Securities will be able to exercise the rights of
Securityholders only indirectly through DTC and its participating organizations.
See "Certain Information Regarding the Securities -- Book-Entry Registration"
and "-- Definitive Securities."
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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, and, if the Trust is not to be treated as a
grantor trust for federal income tax purposes, may establish a separate
Intermediary Trust pursuant to the respective Intermediary Pooling and Servicing
Agreement, for the transactions described herein and in the related Prospectus
Supplement. The property of each Trust with respect to a series for which an
Intermediary Trust is not formed will include a pool (a "Receivables Pool") of
motor vehicle retail installment sale contracts (and, with respect to Final
Payment Receivables (as defined below), if any, the right to certain payments on
retail installment sale contracts) between dealers (the "Dealers") and
purchasers (the "Obligors") of new and used automobiles or light trucks and all
payments due thereunder on or after the applicable Cutoff Date (as such term is
defined in the related Prospectus Supplement, a "Cutoff Date") in the case of
Precomputed Receivables and all payments received thereunder on or after the
applicable Cutoff Date in the case of Simple Interest Receivables. The property
of each Trust with respect to a series for which an Intermediary Trust is formed
will include Intermediary Trust Certificates issued by such Intermediary Trust
that represent undivided interests in such Intermediary Trust, the property of
which will include the property described in the immediately preceding sentence.
Such Intermediary Trust Certificates may constitute all or a portion of the
beneficial interests in such Intermediary Trust. 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 or, in the case of a series for which
an Intermediary Trust is formed, to such Intermediary 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 or Intermediary Trust, as the case may be, as frequently as daily
during the Funding Period. Any Subsequent Receivables so conveyed will also be
assets of the applicable Trust or Intermediary Trust, as the case may be,
subject to the prior rights of the related Indenture Trustee and the
Noteholders, if any, therein. The property of each Trust with respect to a
series for which an Intermediary Trust is not formed will also include (i)
security interests in the Financed Vehicles and any accessions thereto; (ii) the
rights to proceeds from claims on certain physical damage, credit life, credit
disability or other insurance policies, if any, covering the Financed Vehicles
or the Obligors; (iii) any Dealer Recourse; (iv) the Seller's rights to certain
documents and instruments relating to the Receivables; (v) such amounts as from
time to time may be held in one or more accounts maintained pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
described herein and in the related Prospectus Supplement; (vi) certain rights
under the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable; (vii) certain rights under the related Purchase
Agreement and yield supplement agreement, if any; (viii) certain payments and
proceeds with respect to the Receivables held by the Servicer; (ix) certain
rebates of premiums and other amounts relating to certain insurance policies and
other items financed under the Receivables; and (x) any and all proceeds of the
foregoing. The property of each Trust with respect to a series for which an
Intermediary Trust is formed will include (i) Intermediary Trust Certificates
issued by such Intermediary Trust that represent undivided interests in such
Intermediary Trust, the property of which will include the property described in
the immediately preceding sentence, except that the relevant agreements for
purposes of clauses (v) and (vi) of such sentence shall be the related
Intermediary Pooling and Servicing Agreement and Sale Agreement. Such
Intermediary Trust Certificates may constitute all or a portion of the
beneficial interests in such Intermediary Trust. With
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respect to any series of Notes, the relevant rights and benefits with respect to
the property of the related Trust will be assigned by the Seller and the
applicable Trustee to the related Indenture Trustee for the benefit of the
related Noteholders. Any Yield Supplement Account will be maintained with the
related Indenture Trustee or applicable Trustee, as the case may be, for the
benefit of the related Securityholders. If so specified in the related
Prospectus Supplement, a Yield Supplement Account may not be part of the
property of the related Trust. If so specified in the related Prospectus
Supplement, a Pre-Funding Account may be a part of the property of any given
Trust or Intermediary Trust. To the extent specified in the related Prospectus
Supplement, a Reserve Account or other form of credit enhancement may be a part
of the property of any given Trust or Intermediary Trust 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 or
Intermediary Trust, as applicable, 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 or Intermediary
Trust, as applicable, and documents relating thereto as custodian for each such
Trust or Intermediary Trust, as the case may be. 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 or Intermediary Trust, as the case may be. In the absence
of such amendment, any Trust or Intermediary Trust, as applicable, 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 the case of a series for which an Intermediary
Trust is formed, such Noteholders or Certificateholders, as the case may be,
would be entitled to such rights or proceeds indirectly, through the applicable
Trust's ownership of the related Intermediary Trust Certificates. In such
circumstances, certain factors, such as the applicable Trust's or Intermediary
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, Intermediary Trust, if applicable, and
the related Trustee will be specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust and Intermediary 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, the Sale
and Servicing Agreement or Intermediary Pooling and Servicing Agreement, or the
related
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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, Intermediary Pooling and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, or if the Trustee
becomes insolvent. In such circumstances, the Administrator or the Servicer, as
the case may be, 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
The Receivables in each Receivables Pool have been or will be purchased by
Ford Credit in the ordinary course of business in accordance with Ford Credit's
underwriting standards, which emphasize the Obligor's ability to pay and
creditworthiness, as well as the asset value of the Financed Vehicle. Ford
Credit generally does not finance more than 100% of the purchase price of a
vehicle plus related amounts financed in connection therewith, if any (such as
taxes, insurance, etc.), which amount generally is less than or equal to the
manufacturer's suggested retail price ("MSRP") of a new vehicle or published
prices for used vehicles. New vehicles generally can be purchased at a discount
from MSRP.
The Receivables to be held by each Trust or Intermediary Trust, as
applicable, will be selected from the Seller's portfolio for inclusion in a
Receivables Pool by several criteria, including that each Receivable (i) is
secured by a new or used vehicle, (ii) was originated in the United States,
(iii) provides for level monthly payments (except for the last payment, which
may be minimally different from the level payments or which, in the case of
Final Payment Receivables, may be a larger final scheduled payment) that fully
amortize the amount financed over its original term to maturity, (iv) is a
Precomputed Receivable or a Simple Interest Receivable (either of which may be a
Final Payment Receivable) and (v) satisfies the other criteria, if any, set
forth in the related Prospectus Supplement. No selection procedures believed by
the Seller to be adverse to the Noteholders or the Certificateholders of any
series were or will be used in selecting the related Receivables. All terms of
the retail installment sale contracts constituting such Receivables which are
material to investors are described herein and in the related Prospectus
Supplement.
"Precomputed Receivables" consist of either (i) monthly actuarial
receivables ("Actuarial Receivables") or (ii) receivables that provide for
allocation of payments according to the "Rule of 78's" ("Rule of 78's
Receivables"). An Actuarial Receivable provides for amortization of the loan
over a series of fixed level payment monthly installments. Each monthly
installment, including the monthly installment representing the final payment on
the Receivable, consists of an amount of interest equal to 1/12 of the APR of
the loan multiplied by the unpaid principal balance of the loan, and an amount
of principal equal to the remainder of the monthly installment. A Rule of 78's
Receivable provides for the payment by the obligor of a specified total amount
of payments, payable in equal monthly installments on each due date, which total
represents the principal amount financed and add-on interest in an amount
calculated on the stated APR for the term of the receivable. The rate at which
such amount of add-on interest is earned and, correspondingly, the amount of
each fixed monthly installment allocated to reduction of the outstanding
principal are calculated in accordance with the "Rule of 78's."
"Simple Interest Receivables" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level payment monthly installments. However, unlike the monthly installment
under an Actuarial Receivable, each monthly installment consists of an amount of
interest which is calculated on the basis of the outstanding principal balance
of the
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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 in accordance
with certain conditions. With respect to Final Payment Receivables, if so
provided in the related Prospectus Supplement, only the principal and interest
payments due prior to the final scheduled payment and not the final scheduled
payment will be included in such Trust or Intermediary Trust, as applicable; 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 or the related Intermediary
Trust, as applicable, and to cause such Trust to issue certificates representing
interests in such final scheduled payments or indebtedness secured by such final
scheduled payments.
If so specified in the related Prospectus Supplement, some of the
Receivables to be included in a Receivables Pool may provide for recourse to the
Dealer which originated the Receivable. Dealers are generally obligated under
these recourse plans for payment of the unpaid principal balance of a defaulted
contract, unless Ford Credit fails to repossess the vehicle and deliver it to
the Dealer within 90 days after default. The Dealer's obligation generally
terminates after the first 24 monthly payments are made under the related
contract.
In the event of the prepayment in full (voluntarily or by acceleration) of
a Rule of 78's Receivable, under the terms of the contract, a "refund" or
"rebate" will be made to the Obligor of the portion of the total amount of
payments then due and payable under the contract allocable to "unearned" add-on
interest, calculated in accordance with a method equivalent to the Rule of 78's.
If an Actuarial Receivable is prepaid in full, with minor variations based upon
state law, the Actuarial Receivable requires that the rebate be calculated on
the basis of a constant interest rate. If a Simple Interest Receivable is
prepaid, rather than receive a rebate, the obligor is required to pay interest
only to the date of prepayment. The amount of a rebate under a Rule of 78's
Receivable generally will be less than the amount of a rebate on an Actuarial
Receivable and generally will be less than the remaining scheduled payments of
interest that would have been due under a Simple Interest Receivable for which
all payments were made on schedule.
Each Trust or Intermediary Trust, as applicable, 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 distributed to
the
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Trust or Intermediary Trust, as applicable, as owner of such Receivable, 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 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 or Intermediary Trust, as applicable, pursuant to
the related Sale and Servicing Agreement, Intermediary Pooling 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 or Intermediary Trust, as applicable, pursuant to
such Sale and Servicing Agreement, Intermediary Pooling and Servicing Agreement
or Pooling and Servicing Agreement as a result of breaches of certain covenants.
Consistent with its normal servicing practices and procedures, the Servicer may,
in its discretion and on a case-by-case basis, arrange with Obligors to extend
or modify the terms of the related Receivables. Some of such arrangements
(including any extension beyond the Final Scheduled Maturity Date set forth in
the related Prospectus Supplement) may 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 or Intermediary Trust, as applicable and "--
Insolvency Event or Dissolution" regarding the sale of the Receivables or
Intermediary Trust Certificates, as applicable, 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.
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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 or the Administrator will compute prior to each
distribution with respect to such class of Notes indicating the remaining
outstanding principal amount of such class of Notes, as of the applicable
Distribution Date (after giving effect to payments to be made on such
Distribution Date), as a fraction of the initial outstanding principal amount of
such class of Notes. The "Certificate Pool Factor" for each class of
Certificates will be a seven-digit decimal which the Servicer or the
Administrator will compute prior to each distribution with respect to such class
of Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal amount of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be, as a result of scheduled
payments, prepayments and liquidations of the Receivables (and also as a result
of a prepayment arising from application of the Pre-Funding Account, if any).
The Note Pool Factor and the Certificate Pool Factor will not change as a result
of the addition of Subsequent Receivables, if any. A Noteholder's portion of the
aggregate outstanding principal amount of the related class of Notes is the
product of (i) the original denomination of such Noteholder's Note and (ii) the
applicable Note Pool Factor. A Certificateholder's portion of the aggregate
outstanding Certificate Balance for the related class of Certificates is the
product of (i) the original denomination of such Certificateholder's Certificate
and (ii) the applicable Certificate Pool Factor.
With respect to each Trust, the Noteholders, if any, and the
Certificateholders will receive reports on or about each Distribution Date
concerning payments received on the Receivables during the Collection Period
immediately preceding such Distribution Date, the Pool Balance (as such term is
defined in the related Prospectus Supplement, the "Pool Balance"), each
Certificate Pool Factor or Note Pool Factor, as applicable, and various other
items of information. In addition, Securityholders of record during any calendar
year will be furnished information for tax reporting purposes not later than the
latest date permitted by law. See "Certain Information Regarding the Securities
Reports to Securityholders."
USE OF PROCEEDS
The net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) in the case of a Trust with respect to a
series for which an Intermediary Trust is not formed, to the purchase of the
Receivables from the Seller, (ii) in the case of a Trust with respect to a
series for which an Intermediary Trust is formed, to the purchase of the related
Intermediary Trust Certificates from the Seller, (iii) to the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any, and (iv) to make the
initial deposit into the Reserve Account, if any. The Seller will use that
portion of such net proceeds paid to it with respect to any such Trust to
purchase the related Receivables from Ford Credit.
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THE SELLER AND THE GENERAL PARTNER
The Seller was organized as a Delaware limited partnership on February 23,
1996. The general partner of the Seller is Ford Credit Auto Receivables Two,
Inc., a Delaware corporation and a wholly owned, limited-purpose subsidiary of
Ford Credit. The limited partnership interests in the Seller are owned by Ford
Credit. The Seller was organized for limited purposes, which include purchasing
receivables from Ford Credit and transferring such receivables to third parties
and any activities incidental to and necessary or convenient for the
accomplishment of such purposes. The principal executive offices of the Seller
are located at The American Road, Dearborn, Michigan 48121. The telephone number
of such offices is (313) 322-3000. The General Partner is located at The
American Road, Dearborn, Michigan 48121.
The Seller has taken steps in structuring the transactions contemplated
herein and in the related Prospectus Supplement that are intended to ensure that
the voluntary or involuntary application for relief by Ford Credit under any
Insolvency Law will not result in consolidation of the assets and liabilities of
either of the Seller or the General Partner with those of Ford Credit. These
steps include the creation of the Seller as a separate, limited-purpose limited
partnership pursuant to a limited partnership agreement containing certain
limitations (including restrictions on the nature of the Seller's business and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the consent of the General Partner). In
addition, the General Partner is a separate, limited-purpose corporation whose
Certificate of Incorporation contains certain limitations (including
restrictions on the nature of the General Partner's business and a restriction
on the General Partner's ability to commence a voluntary case or proceeding with
respect to itself or the Seller under any Insolvency Law without the unanimous
affirmative vote of all of its directors). Such Certificate of Incorporation
includes a provision that, under certain circumstances relating to the credit
ratings of Ford Credit, requires the General Partner to have two directors who
qualify under the Certificate of Incorporation as "Independent Directors."
However, there can be no assurance that the activities of the Seller or the
General Partner would not result in a court concluding that the assets and
liabilities of such entity should be consolidated with those of Ford Credit in a
proceeding under any Insolvency Law.
The Seller has received the advice of counsel to the effect that, subject
to certain facts, assumptions and qualifications, it would not be a proper
exercise by a court of its equitable discretion to disregard the separate
existence of each of the Seller and the General Partner and to require the
consolidation of the assets and liabilities of either such entity with the
assets and liabilities of Ford Credit in the event of the application of the
federal bankruptcy laws to Ford Credit. Among other things, it is assumed by
counsel that each of the Seller and the General Partner will follow certain
procedures in the conduct of its affairs, including maintaining records and
books of account separate from those of Ford Credit, refraining from commingling
its assets with those of Ford Credit, doing business from an office separate
from that of Ford Credit and refraining from holding itself out as having agreed
to pay, or being liable for, the debts of Ford Credit. Each of the Seller and
the General Partner intends to follow and has represented to such counsel that
it will follow these and other procedures related to maintaining its separate
identity. However, in the event that either the Seller or the General Partner
did not follow these procedures, there can be no assurance that a court would
not conclude that the assets and liabilities of such entity should be
consolidated with those of Ford Credit. If a court were to reach such a
conclusion, or a filing were made under any Insolvency Law by or against the
Seller or the General Partner, or if an attempt were made to litigate any of the
foregoing issues, delays in distributions on the Securities (and possible
reductions in the amount of such distributions which may be substantial) could
occur.
It is intended by Ford Credit and the Seller that each transfer of
Receivables by Ford Credit to the Seller under a Purchase Agreement constitute a
"true sale" of such Receivables to the Seller. If the transfer constitutes such
a "true sale," the Receivables and the proceeds thereof would not be part of
Ford Credit's bankruptcy estate under Section 541 of the United States
Bankruptcy Code should Ford Credit become the subject of a bankruptcy case
subsequent to the transfer of the
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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
Tenth Circuit suggested that even where a transfer of accounts from a seller to
a buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's bankruptcy estate in a bankruptcy of the seller. If
Ford Credit or the Seller were to become subject to a bankruptcy proceeding and
a court were to follow the Octagon court's reasoning, Securityholders might
experience delays in payment or possibly losses on their investment in the
Securities. As part of the advice of counsel described above, counsel has
advised the Seller that the reasoning of the Octagon case appears to be
inconsistent with other precedent. In addition, the Permanent Editorial Board of
the UCC has issued an official commentary (PEB Commentary No. 14) which
characterizes the Octagon court's interpretation of Article 9 of the UCC as
erroneous. Such commentary states that nothing in Article 9 is intended to
prevent the transfer of ownership of accounts or chattel paper. However, such
commentary is not legally binding on any court.
THE SERVICER
Ford Credit was incorporated in Delaware in 1959 and is a wholly owned
indirect subsidiary of Ford.
Ford Credit and its subsidiaries provide wholesale financing and capital
loans to Ford retail dealerships and associated non-Ford dealerships throughout
the world, most of which are privately owned and financed, and purchase 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 dealerships. In addition, subsidiaries of Ford Credit provide these
financing services in the United States, Europe, Canada and Australia to
non-Ford dealerships. A substantial majority of all new vehicles financed by
Ford Credit are manufactured by Ford and its affiliates. 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 and finances certain receivables of Ford and its
subsidiaries. Ford Credit's insurance operations are conducted by the American
Road Insurance Company and its subsidiaries in the United States and Canada and
consist of extended service plan contracts for new and used vehicles
manufactured by affiliated and nonaffiliated companies, primarily originating
from Ford dealers, physical damage insurance covering vehicles and equipment
financed at wholesale by Ford Credit, and the reinsurance of credit life and
credit disability insurance for retail purchasers of vehicles and equipment.
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.
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Each class of Notes will initially be represented by one or more Notes, in
each case registered in the name of the nominee of DTC (together with any
successor depository selected by the Trust, the "Depository") except as set
forth below. The Notes will be available for purchase in the denominations
specified in the related Prospectus Supplement and in book-entry form only. The
Seller has been informed by DTC that DTC's nominee will be Cede, unless another
nominee is specified in the related Prospectus Supplement. Accordingly, such
nominee is expected to be the holder of record of the Notes of each class.
Unless and until Definitive Notes are issued under the limited circumstances
described herein or in the related Prospectus Supplement, no Noteholder will be
entitled to receive a physical certificate representing a Note. All references
herein and in the related Prospectus Supplement to actions by Noteholders refer
to actions taken by DTC upon instructions from its participating organizations
(the "Participants") and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to Noteholders
refer to distributions, notices, reports and statements to DTC or its nominee,
as the registered holder of the Notes, for distribution to Noteholders in
accordance with DTC's procedures with respect thereto. See "Certain Information
Regarding the Securities -- Book-Entry Registration" and "-- Definitive
Securities."
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses, Note
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes of a given series will be described in the
related Prospectus Supplement. The right of holders of any class of Notes to
receive payments of principal and/or interest may be senior or subordinate to
the rights of holders of any other class or classes of Notes of such series, as
described in the related Prospectus Supplement. Payments of interest on the
Notes of such series may be made prior to payments of principal thereon. The
dates for payments of interest and principal on the Notes of such series may be
different from the Distribution Dates for the Certificates of such series. To
the extent provided in the related Prospectus Supplement, a series may include
one or more classes of Notes designated as 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,
or one or more classes of Residual Cash Flow Notes entitled to all or a portion
of any remaining payments of principal and interest on the related Receivables
or, with respect to a series for which an Intermediary Trust is formed, the
related Intermediary Trust Certificates, after making all other distributions on
each Distribution Date. 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."
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.
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If so specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement, in
which case each class of Noteholders will receive its ratable share (based upon
the aggregate amount of interest due to such class of Noteholders) of the
aggregate amount available to be distributed in respect of interest on the Notes
of such series. See "Description of the Transfer and Servicing Agreements --
Distributions" and "-- Credit and Cash Flow Enhancement."
In the case of a series of Notes which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
Modification of Indenture. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, without the
consent of the Noteholders of the related series, execute a supplemental
indenture for the purpose of adding to the covenants of the Trust, curing any
ambiguity, correcting or supplementing any provision which may be inconsistent
with any other provision or making any other provision with respect to matters
arising under the related Indenture which will not be inconsistent with other
provisions of the related Indenture.
With respect to a series of Notes, without the consent of the holder of
each such outstanding Note affected thereby, however, no supplemental indenture
will: (i) change the due date of any installment of principal of or interest on
any such Note or reduce the principal amount thereof, the interest rate thereon
or the redemption price with respect thereto or change any place of payment
where, or the coin or currency in which, any such Note or any interest thereon
is payable; (ii) impair the right to institute suit for the enforcement of
certain provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Receivables or
Intermediary Trust Certificates, as applicable, 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.
The Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders of the
related series, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that (x) such action will not, (i) as evidenced by an opinion of counsel,
materially adversely affect the interest of any such Noteholder and (ii) as
confirmed by the Rating Agencies (as such term is
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defined in the related Prospectus Supplement, the "Rating Agencies") rating the
Notes of the related series, cause the then current rating assigned to any class
of such Notes to be withdrawn or reduced and (y) an opinion of counsel as to
certain tax matters is delivered.
Events of Default; Rights upon Event of Default. With respect to the Notes
of a given series, "Events of Default" under the related Indenture will consist
of: (i) a default for five days or more in the payment of any interest on any
such Note; (ii) a default in the payment of the principal of or any installment
of the principal of any such Note when the same becomes due and payable; (iii) a
default in the observance or performance of any material covenant or agreement
of the applicable Trust made in the related Indenture and the continuation of
any such default for a period of 60 days after notice thereof is given to such
Trust by the applicable Indenture Trustee or to such Trust and such Indenture
Trustee by the holders of at least 25% in principal amount of such Notes then
outstanding; (iv) any representation or warranty made by such Trust in the
related Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in a material respect as of the time
made, and such breach not having been cured within 30 days after notice thereof
is given to such Trust by the applicable Indenture Trustee or to such Trust and
such Indenture Trustee by the holders of at least 25% in principal amount of
such Notes then outstanding; (v) certain events of bankruptcy, insolvency,
receivership or liquidation of the applicable Trust; or (vi) such other events,
if any, set forth in the related Prospectus Supplement. However, the amount of
principal required to be paid to Noteholders of such series under the related
Indenture will generally be limited to amounts available to be deposited in the
applicable Note Payment Account. Therefore, the failure to pay principal on a
class of Notes generally will not result in the occurrence of an Event of
Default until the final scheduled Distribution Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of such Notes then outstanding. Any such rescission could be treated, for
federal income tax purposes, as a constructive exchange of such Notes by the
related Noteholders for deemed new Notes upon which gain or loss would be
recognized.
If the Notes of any series have been declared due and payable following an
Event of Default with respect thereto, the related Indenture Trustee may
institute proceedings to collect amounts due or foreclose on Trust property,
exercise remedies as a secured party, sell the related Receivables or, with
respect to a series for which an Intermediary Trust is formed, the related
Intermediary Trust Certificates or elect to have the applicable Trust maintain
possession of such Receivables or Intermediary Trust Certificates, as the case
may be, and continue to apply collections on such Receivables or distributions
on such Intermediary Trust Certificates as if there had been no declaration of
acceleration. However, such Indenture Trustee is prohibited from selling the
related Receivables or Intermediary Trust Certificates, as the case may be,
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 or Intermediary Trust Certificates,
as the case may be, 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.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such Indenture
at the request or direction of any of the holders of such Notes, if such
Indenture
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Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying with
such request. Subject to the provisions for indemnification and certain
limitations contained in the related Indenture, the holders of a majority in
principal amount of the outstanding Notes of a given series will have the right
to direct the time, method and place of conducting any proceeding or any remedy
available to the applicable Indenture Trustee, and the holders of a majority in
principal amount of such Notes then outstanding may, in certain cases, waive any
default with respect thereto, except a default in the payment of principal or
interest or a default in respect of a covenant or provision of such Indenture
that cannot be modified without the waiver or consent of all the holders of such
outstanding Notes. Any such waiver could be treated, for federal income tax
purposes, as a constructive exchange of such Notes by the related Noteholders
for deemed new Notes upon which gain or loss would be recognized.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the applicable Indenture Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in principal
amount of the outstanding Notes of such series have made written request to such
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered such Indenture Trustee
reasonable indemnity, (iv) such Indenture Trustee has for 60 days failed to
institute such proceeding and (v) no direction inconsistent with such written
request has been given to such Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the applicable Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes such Trust's obligation to make due and punctual payments upon
the Notes of the related series and the performance or observance of every
agreement and covenant of such Trust under the Indenture, (iii) no Event of
Default shall have occurred and be continuing immediately after such merger or
consolidation, (iv) such Trust has been advised that the rating of the Notes or
the Certificates of such series then in effect would not be reduced or withdrawn
by the Rating Agencies as a result of such merger or consolidation, (v) such
Trust has received an opinion of counsel to the effect that such consolidation
or merger would have no material adverse tax consequence to the Trust or to any
related Noteholder or Certificateholder, (vi) any action as is necessary to
maintain the lien and security interest created by the related Indenture shall
have been taken and (vii) such Trust has received an opinion of counsel and
officer's certificate each stating that such consolidation or merger satisfies
all requirements under the related Indenture.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "Basic
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of such Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any claim
against any present or former
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holder of such Notes because of the payment of taxes levied or assessed upon
such Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the
validity or effectiveness of the related Indenture to be impaired or permit any
person to be released from any covenants or obligations with respect to such
Notes under such Indenture except as may be expressly permitted thereby or (v)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
assets of such Trust or any part thereof, or any interest therein or the
proceeds thereof, except as may be created by the terms of the related
Indenture.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture, pursuant to any
Advances made to it by the Servicer or otherwise in accordance with the Basic
Documents.
List of Noteholders. With respect to the Notes of any series, three or more
holders of the Notes of such series or one or more holders of such Notes
evidencing not less than 25% of the aggregate outstanding principal amount of
such Notes may, by written request to the related Indenture Trustee, obtain
access to the list of all Noteholders maintained by such Indenture Trustee for
the purpose of communicating with other Noteholders with respect to their rights
under the related Indenture or under such Notes. Such Indenture Trustee may
elect not to afford the requesting Noteholders access to the list of Noteholders
if it agrees to mail the desired communication or proxy, on behalf of and at the
expense of the requesting Noteholders, to all Noteholders of such series.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the Issuer will be obligated to appoint a successor
trustee for such series. The Issuer may also remove any such Indenture Trustee
if such Indenture Trustee ceases to be eligible to continue as such under the
related Indenture or if such Indenture Trustee becomes insolvent. In such
circumstances, the Issuer will be obligated to appoint a successor trustee for
the applicable series of Notes. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee for any series of Notes does not
become effective until acceptance of the appointment by the successor trustee
for such series.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Except for the Certificates, if any, of a given series retained by the
Seller, each class of Certificates may initially be represented by one or more
Certificates registered in the name of the Depository, except as set forth
below. Except for the Certificates, if any, of a given series retained by the
Seller, the Certificates will be available for purchase in the denominations
specified in the related Prospectus Supplement and may be available in
book-entry form only. The Seller has been informed by DTC that DTC's nominee
will be Cede, unless another nominee is specified in the related Prospectus
Supplement. Accordingly, such nominee is expected to be the holder of record of
the Certificates of any series issued in book-entry form that are not retained
by the Seller. If the Certificates of a series are issued in book-entry form,
unless and until Definitive Certificates are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Certificateholder (other than the Seller) will be entitled to receive a physical
certificate representing a Certificate. If the Certificates of a series are
issued in book-entry form, all references herein and in the related Prospectus
Supplement to actions by Certificateholders refer to actions taken by DTC upon
instructions from the Participants and all references herein and in the related
Prospectus Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities -- Book-Entry Registration" and "-- Definitive Securities." Any
Certificates of a given series owned by the Seller or its affiliates will be
entitled to equal and proportionate benefits under the applicable Trust
Agreement, except that such Certificates will be deemed not to be outstanding
for the purpose of determining whether the requisite percentage of
Certificateholders have given any request, demand, authorization, direction,
notice, consent or other action under the Basic Documents (other than the
commencement by the related Trust of a voluntary proceeding in bankruptcy as
described under "Description of the Transfer and Servicing Agreements --
Insolvency Event or Dissolution").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Certificate Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and will be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distributions or (ii) interest
distributions with disproportionate, nominal or no distributions in respect of
principal, or one or more classes of Residual Cash Flow Certificates entitled to
all or a portion of any remaining payments of principal and interest on the
related Receivables or, with respect to a series for which an Intermediary Trust
is formed, the related Intermediary Trust Certificates, after making all other
distributions on each Distribution Date. 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.
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See also "Certain Information Regarding the Securities -- Fixed Rate Securities"
and "-- Floating Rate Securities." Distributions in respect of the Certificates
of a given series that includes Notes may be subordinate to payments in respect
of the Notes of such series as more fully described in the related Prospectus
Supplement. Distributions in respect of interest on and principal of any class
of Certificates will be made on a pro rata basis among all the
Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
LIST OF CERTIFICATEHOLDERS
With respect to the Certificates of any series, three or more holders of
the Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of all
Certificateholders maintained by such Trustee for the purpose of communicating
with other Certificateholders with respect to their rights under the related
Trust Agreement or Pooling and Servicing Agreement or under such Certificates.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Note Interest Rate or Certificate Rate, as the case may be,
specified in the applicable Prospectus Supplement. Interest on each class of
Fixed Rate Securities will be computed on the basis of a 360-day year of twelve
30-day months or on such other day count basis as is specified in the applicable
Prospectus Supplement. See "Description of the Notes -- Principal and Interest
on the Notes" and "Description of the Certificates -- Distributions of Principal
and Interest."
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities, the
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) the CD Rate (a
"CD Rate Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate
Security"), (iii) the Federal Funds Rate (a "Federal Funds Rate Security"), (iv)
LIBOR (a "LIBOR Security"), (v) the Treasury Rate (a "Treasury Rate Security")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement. The
"Index Maturity" for any class of Floating Rate Securities is the period of
maturity of the instrument or obligation from which the Base Rate is calculated.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates," or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite
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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.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
related Trustee or Indenture Trustee with respect to such series. All
determinations of interest by the Calculation Agent shall, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
Floating Rate Securities of a given class. All percentages resulting from any
calculation of the rate of interest on a Floating Rate Security will be rounded,
if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
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.
Unless otherwise specified in the applicable Prospectus Supplement, 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
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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 of the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper." If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Security for commercial paper of the specified Index Maturity placed for an
industrial issuer 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.
Unless otherwise specified in the applicable Prospectus Supplement, "Money
Market Yield" shall be a yield calculated in accordance with the following
formula:
Money Market Yield = D X 360
------------- 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.
Unless otherwise specified in the applicable Prospectus Supplement, 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
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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.
Unless otherwise specified in the applicable Prospectus Supplement, 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
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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. 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.
Unless otherwise specified in the applicable Prospectus Supplement, 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.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Calculation Date" pertaining to any Treasury Rate Determination Date shall be
the first to occur of (a) the tenth calendar day after such Treasury Rate
Determination Date or, if such a day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
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BOOK-ENTRY REGISTRATION
The Prospectus Supplement related to a given series will specify whether
the holders of the Notes or Certificates of such series may hold their
respective Securities through DTC (in the United States) 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 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.
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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 related Administrator in respect of each Trust that is
not a grantor trust and the Seller in respect of each Trust that is a grantor
trust that it will take any action permitted to be taken by a Securityholder
under the related Indenture or Trust Agreement or Pooling and Servicing
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 36
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation 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
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between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and the risk from transfers of securities and cash that are not
simultaneous.
The Euroclear System has subsequently been extended to clear and settle
transactions between Euroclear Participants and counterparties both in Cedel and
in many domestic securities markets. Transactions may be settled in any of 34
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 related Administrator in respect of each Trust that is not a
grantor trust and the Seller in respect of each Trust that is a grantor trust
would seek an alternative depository (if available) or cause the issuance of
Definitive Securities to Securityholders or their nominees in the manner
described under "-- Definitive Securities" below.
Except as required by law, none of the Administrator, if any, the
applicable Trustee or the applicable Indenture Trustee, if any, will have any
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Securities of any series held by DTC's
Nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
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<PAGE> 161
DEFINITIVE SECURITIES
With respect to any series of Notes and any series of Certificates issued
in book-entry form, such Notes or Certificates will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive Certificates,"
respectively, and collectively referred to herein as "Definitive Securities") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, only if (i) the related Administrator in respect of a Trust
that is not a grantor trust or the Seller in respect of a Trust that is a
grantor trust 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 the Seller, as the case may be, is unable to locate a
qualified successor and so notifies the Applicable Trustee in writing, (ii) the
Administrator or the Seller, as the case may be, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
Event of Default or an Event of Servicing Termination with respect to such
Securities, holders representing at least a majority of the outstanding
principal amount of the Notes or the Certificates, as the case may be, of such
series advise the Applicable Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders of a given series through Participants of the availability of
Definitive Securities. Upon surrender by DTC of the definitive certificates
representing the corresponding Securities and receipt of instructions for
re-registration, the Applicable Trustee will reissue such Securities as
Definitive Securities to such Securityholders.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or the related Trust Agreement or
Pooling and Servicing Agreement, as applicable, directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the register
maintained by the Applicable Trustee. The final payment on any such Definitive
Security, however, will be made only upon presentation and surrender of such
Definitive Security at the office or agency specified in the notice of final
distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Distribution Date, the Servicer or Administrator 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 or the
Administrator will prepare and provide to the related Trustee a statement to be
delivered to the related Certificateholders on such Distribution Date. With
respect to each series of Securities, each such statement to be delivered to
Noteholders will include (to the extent applicable) the following information
(and any other information 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
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Prospectus Supplement) as to the Certificates of such series with respect to
such Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of each
class of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the amount of the distribution allocable to draws from the
Reserve Account (if any), the Yield Supplement Deposit Amount (if any) (as
defined in the related Prospectus Supplement) or payments in respect of any
other credit or cash flow enhancement arrangement;
(iv) the Pool Balance and the principal balance of the Intermediary
Trust Certificates, if applicable, as of the close of business on the last
day of the preceding Collection Period;
(v) the aggregate outstanding principal amount and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(vi) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period or Collection Periods, as the case may be;
(vii) the amount of the aggregate Realized Losses (as defined in the
related Prospectus Supplement), if any, for such Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
as defined in the related Prospectus Supplement), if any, in each case as
applicable to each class of Securities, and the change in such amounts from
the preceding statement;
(ix) the aggregate Purchase Amounts for Receivables, if any, that were
repurchased in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) the balance of the Yield Supplement Account (if any) on such
date, after giving effect to changes therein on such date;
(xii) the amount of Advances on such date;
(xiii) for each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xiv) for the first such date that is on or immediately following the
end of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been used to fund the purchase of Subsequent
Receivables and is being passed through as payments of principal on the
Securities of such series; and
(xv) the amount of any cumulative shortfall between payments due in
respect of any credit or cash flow enhancement arrangement and payments
received in respect of such credit or cash flow enhancement arrangement,
and the change in any such shortfall from the preceding statement.
Each amount set forth pursuant to subclauses (i), (ii), (vi) and (viii)
with respect to the Notes or the Certificates of any series will be expressed as
a dollar amount per $1,000 of the initial principal amount of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
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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 (i) with respect to a
series for which an Intermediary Trust is not formed, 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 (ii) with respect to a series for which an Intermediary Trust is
formed, each Intermediary Pooling and Servicing Agreement and Sale Agreement
pursuant to which an Intermediary Trust will be created, such Intermediary Trust
will purchase Receivables from the Seller, the Servicer will agree to service
such Receivables, and a Trust will purchase Intermediary Trust Certificates from
the Seller, (iii) 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
Sale and Assignment by Ford Credit. Prior to the time of issuance of the
Securities of a given Trust, pursuant to a related Purchase Agreement (the
"Purchase Agreement"), Ford Credit will sell and assign to the Seller, without
recourse, its entire interest in the Initial Receivables, if any, of the related
Receivables Pool, including its security interests in the related Financed
Vehicles.
Sale and Assignment by the Seller -- Series for Which an Intermediary Trust
is Not Formed. With respect to a series for which an Intermediary Trust is not
formed, at the time of issuance of the Securities of the related Trust, the
Seller will sell and assign to such Trust, without recourse, the Seller's entire
interest in the Initial Receivables, including its security interests in the
related Financed Vehicles. Each such Receivable will be identified in a schedule
to the related Sale and Servicing Agreement or Pooling and Servicing Agreement.
The applicable Trustee of such Trust will not independently verify the existence
and qualification of any Receivables. The Trustee of such Trust will,
concurrently with such sale and assignment, execute and deliver the related
Notes and/or Certificates to the Seller in exchange for the Receivables.
Sale and Assignment by the Seller -- Series for Which an Intermediary Trust
is Formed. With respect to a series for which an Intermediary Trust is formed,
at the time of issuance of the Securities of the related Trust, the Seller will
sell and assign to such Intermediary Trust, without recourse, the Seller's
entire interest in the Initial Receivables, including its security interests in
the related Financed Vehicles. Each such Receivable will be identified in a
schedule to the related Intermediary Pooling and Servicing Agreement. The
applicable Trustee of such Intermediary Trust will not independently verify the
existence and qualification of any Receivables. The Trustee of such Intermediary
Trust will, concurrently with such sale and assignment, execute, authenticate,
and deliver the related Intermediary Trust Certificates to the Seller in
exchange for the Receivables. The Seller will, concurrently with the issuance of
the Intermediary Trust Certificates, sell and assign to the related Trust,
without recourse, the Seller's entire interest in such Intermediary Trust
Certificates. The Trustee of the related Trust will, concurrently with the sale
and assignment to it of the
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Intermediary Trust Certificates, execute and deliver the related Notes and/or
Certificates to the Seller in exchange for such Intermediary Trust Certificates.
General. The net proceeds received by the Seller from the sale of the
Certificates and the Notes of a series will be applied to the purchase of the
related Receivables from Ford Credit, to the deposit of the Pre-Funded Amount
into the Pre-Funding Account, if any, and to make the initial deposit into the
Reserve Account, if any. The related Prospectus Supplement for a given Trust
will specify whether, and the terms, conditions and manner under which,
Subsequent Receivables will be sold by the Seller to the applicable Trust or
Intermediary Trust, as the case may be, from time to time during any Funding
Period on each date specified as a transfer date in the related Prospectus
Supplement (each, a "Subsequent Transfer Date").
The proceeds from the Receivables purchased by the Trust or Intermediary
Trust, as applicable, from the Seller and by the Seller from Ford Credit may be
more or less than the aggregate principal balance thereof. If any Receivables
are purchased for a purchase price less than their respective principal
balances, a portion of the collections or proceeds in respect of principal from
such Receivables may be deemed collections or proceeds in respect of interest on
such Receivables for the purposes of making payments on the Securities.
In each Purchase Agreement, Ford Credit will represent and warrant to the
Seller, and in each Sale and Servicing Agreement, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing Agreement the Seller will represent
and warrant to the applicable Trust or Intermediary Trust, as the case may be,
among other things, that (i) the information provided with respect to the
related Receivables is correct in all material respects; (ii) the Obligor on
each related Receivable has obtained or agreed to obtain physical damage
insurance in accordance with Ford Credit's normal requirements; (iii) at the
date of issuance of the related Notes and/or Certificates or at the applicable
Subsequent Transfer Date, if any, the related Receivables are free and clear of
all security interests, liens, charges, and encumbrances (such representation
and warranty will be made to the best of its knowledge with respect to
mechanic's liens and the like relating to each Financed Vehicle) and no setoffs,
defenses, or counterclaims against it have been asserted or threatened; (iv) at
the date of issuance of the related Notes and/or Certificates or at the
applicable Subsequent Transfer Date, if any, each of the related Receivables is
or will be secured by a first perfected security interest in the Financed
Vehicle in favor of Ford Credit; and (v) each related Receivable, at the time it
was originated, complied, and at the date of issuance of the related Notes
and/or Certificates or at the applicable Subsequent Transfer Date, if any,
complies in all material respects with applicable federal and state laws,
including consumer credit, truth in lending, equal credit opportunity, and
disclosure laws.
As of the last day of the second (or, if the Seller elects, the first)
month following the discovery by or notice to the Seller of a breach of any
representation or warranty of the Seller which materially and adversely affects
the interests of the related Trust or Intermediary Trust, as applicable, in any
Receivable, the Seller, unless it cures the breach, will purchase such
Receivable from such Trust or Intermediary Trust, as the case may be, 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 monies 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 the related series for any such uncured breach.
Pursuant to each Sale and Servicing Agreement, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing Agreement, the Servicer will
service and administer the Receivables held by each Trust or Intermediary Trust,
as applicable, and, as custodian on behalf of such Trust or Intermediary Trust,
as the case may be, 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
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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 or Intermediary Trust, as applicable, 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 or Intermediary Trust, as the case may
be, 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 or Intermediary Trust, as the
case may be, if a subsequent purchaser were to obtain physical possession of
such Receivables without knowledge of the assignment, the Trust's or
Intermediary 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 (i) with respect to a series for which an Intermediary Trust is not
formed, with the related Indenture Trustee one or more accounts, in the name of
the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, or (ii) with respect to series for which an Intermediary
Trust is formed, with the related Trustee one or more accounts, in the name of
the Trustee on behalf of the holders of the beneficial interests in such
Intermediary Trust, in each case 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 (including amounts distributed in
respect of the related Intermediary Trust Certificates, if applicable) and any
Pre-Funding Account, Reserve Account or other credit enhancement for payment to
such Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "Note Payment Account"). The Servicer will
establish and maintain with the related Trustee an account, in the name of such
Trustee on behalf of such Certificateholders, into which amounts released from
the Collection Account and any Pre-Funding Account, Yield Supplement Account,
Reserve Account or other credit or cash flow enhancement for 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 or, with respect to a
series for which an Intermediary Trust is formed, in the name of the Trustee of
such Intermediary Trust, into which, to the extent required by the Sale and
Servicing Agreement or Intermediary Pooling 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 with respect to the related
Receivables and will not be available for distribution to the applicable
Noteholders or Certificateholders. The Payahead Account will initially be
maintained with the applicable Indenture Trustee. With respect to each Trust
that does not issue Notes, the Servicer will also establish and maintain with
the related Trustee the Payahead Account in the name of such Trustee. So long as
Ford Credit is the servicer and provided that (i) there exists no Event of
Servicing Termination and (ii) each other condition to holding Payaheads as may
be required by the
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applicable Sale and Servicing Agreement, Intermediary Pooling 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 series of
Securities, 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, Intermediary Pooling and Servicing
Agreement or Pooling and Servicing Agreement in Permitted Investments.
"Permitted Investments" means (i) direct obligations of, and obligations fully
guaranteed as to timely payment by, the United States of America or its
agencies; (ii) demand deposits, time deposits, certificates of deposit or
bankers' acceptances of certain depository institutions or trust companies
having the highest rating from the applicable Rating Agency; (iii) commercial
paper having, at the time of such investment, a rating in the highest rating
category from the applicable Rating Agency; (iv) investments in money market
funds having the highest rating from the applicable Rating Agency; (v)
repurchase obligations with respect to any security that is a direct obligation
of, or fully guaranteed by, the United States of America or its agencies, in
either case entered into with a depository institution or trust company
described in clause (ii) above; and (vi) any other investment (which may include
motor vehicle retail installment sale contracts) acceptable to the Rating
Agencies rating the Securities of the related Trust as being consistent with the
rating of such Securities. Permitted Investments are generally limited to
obligations or securities that mature on or before the date of the next
distribution for such series. However, to the extent permitted by the Rating
Agencies, funds in any Reserve Account may be invested in securities that will
not mature prior to the date of the next distribution with respect to such
Certificates or Notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Account at any time may be less than the balance
of the Reserve Account. If the amount required to be withdrawn from any Reserve
Account to cover shortfalls in collections on the related Receivables (as
provided in the related Prospectus Supplement) exceeds the amount of cash in the
Reserve Account, a temporary shortfall in the amounts distributed to the related
Noteholders or Certificateholders could result, which could, in turn, increase
the average life of the Notes or the Certificates of such series. Investment
earnings on funds deposited in the Trust Accounts, net of losses and investment
expenses (collectively, "Investment Earnings"), shall be deposited in the
applicable Collection Account or distributed as provided in the related
Prospectus Supplement.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a series of Securities, (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.
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SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by each Trust or Intermediary Trust, as
applicable, and will continue such collection procedures as it follows with
respect to its own automotive retail installment sale contracts, in a manner
consistent with the related Sale and Servicing Agreement, Intermediary Pooling
and Servicing Agreement or Pooling and Servicing Agreement. Consistent with its
normal procedures, the Servicer may, in its discretion, arrange with the Obligor
on a Receivable to defer or modify the payment schedule. Some of such
arrangements may cause the Servicer to purchase the Receivable while others may
result in the Servicer making Advances with respect to the Receivable. If the
Servicer determines that eventual payment in full of a Receivable is unlikely,
the Servicer will follow its normal practices and procedures to realize upon the
Receivable, including the repossession and disposition of the Financed Vehicle
securing the Receivable at a public or private sale, or the taking of any other
action permitted by applicable law.
COLLECTIONS
With respect to each series of Securities, 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 second business day after receipt.
However, so long as Ford Credit is the servicer and provided that (i) there
exists no Event of Servicing Termination and (ii) each other condition to making
monthly deposits as may be required by the related Sale and Servicing Agreement
or Pooling and Servicing Agreement is satisfied, the Servicer may retain such
amounts until the business day preceding 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 or an Intermediary Trust,
as the case may be, to the related Collection Account on or prior to the
business day preceding the applicable Distribution Date. Pending deposit into
the Collection Account, collections may be employed by the Servicer at its own
risk and for its own benefit and will not be segregated from its own funds. To
the extent set forth in the related Prospectus Supplement, the Servicer may, in
order to satisfy the requirements described above, obtain a letter of credit or
other security for the benefit of the related Trust to secure timely remittances
of collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by the Servicer.
Collections on a Receivable made during a Collection Period which are not
late fees, prepayment charges, or certain other similar fees or charges shall be
applied first to any outstanding Advances made by the Servicer, with respect to
such Receivable and then to the scheduled payment. To the extent that such
collections on a Precomputed Receivable during a Collection Period exceed the
outstanding Precomputed Advances and the scheduled payment on such Precomputed
Receivable, the collections shall be applied to prepay the Precomputed
Receivable in full. If the collections are insufficient to prepay the
Precomputed Receivable in full, they generally shall be treated as Payaheads
until such later Collection Period as such Payaheads may be transferred to the
Collection Account and applied either to the scheduled payment or to prepay the
Precomputed Receivable in full.
ADVANCES
If so provided in the related Prospectus Supplement, to the extent the
collections on a Precomputed Receivable for a Collection Period are less than
the scheduled payment, the amount of Payaheads made on such Precomputed
Receivable not previously applied (the "Payahead Balance"), if any, with respect
to such Precomputed Receivable shall be applied by the Servicer to the extent of
the shortfall. To, the extent of any remaining shortfall, the Servicer will make
a Precomputed Advance of the deficiency. The Servicer will be obligated to make
a Precomputed Advance in respect of a Precomputed Receivable only to the extent
that the Servicer, in its sole discretion,
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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 or prior to the business day preceding the applicable
Distribution Date. The Servicer will be entitled to recoup its Precomputed
Advances from subsequent payments by or on behalf of the Obligor, collections of
Liquidation Proceeds and payment of the Purchase Amount; or, upon the
determination that reimbursement from the preceding sources is unlikely, will be
entitled to recoup its Precomputed Advances from collections from other
Receivables in the related Receivables Pool.
If so provided in the related Prospectus Supplement, on or before each
applicable Distribution Date, the Servicer shall deposit into the related
Collection Account as a Simple Interest Advance an amount equal to the amount of
interest that would have been due on the related Simple Interest Receivables at
their respective APRs for the related Collection Period (assuming that such
Simple Interest Receivables are paid on their respective due dates) minus the
amount of interest actually received on such Simple Interest Receivables during
the related Collection Period. If such calculation results in a negative number,
an amount equal to such amount shall be paid to the Servicer in reimbursement of
outstanding Simple Interest Advances. In addition, in the event that a Simple
Interest Receivable becomes a Liquidated Receivable (as such term is defined in
the related Prospectus Supplement), the amount of accrued and unpaid interest
thereon (but not including interest for the then current Collection Period)
shall be withdrawn from the Collection Account and paid to the Servicer in
reimbursement of outstanding Simple Interest Advances. No advances of principal
will be made with respect to Simple Interest Receivables. As used herein,
"Advances" means both Precomputed Advances and Simple Interest Advances.
In the event that an Obligor shall prepay a Receivable in full, if the
related contract did not require such Obligor to pay a full month's interest for
the month of prepayment, at the APR, generally the Servicer will advance the
amount of such interest. The Servicer will not be entitled to recoup any such
advance.
SERVICING COMPENSATION AND EXPENSES
The Servicer will be entitled to receive a servicing fee (the "Servicing
Fee") for each Collection Period equal to a specified percentage (the "Servicing
Fee Rate") of the Pool Balance as of the first day of 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 series of Securities.
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 and Intermediary Trust, as applicable. 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 series of Securities, on each Distribution Date,
collections on the related Receivables will be transferred from or, with respect
to a series for which an Intermediary Trust is formed, distributions with
respect to the related Intermediary Trust Certificates will be made 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 the related
Trust or Intermediary Trust 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 to make payments or
distributions to Securityholders on the related Distribution Date. Such amount
shall be allocated to the interest and principal portion of scheduled payments
on the Receivables in accordance with the Servicer's customary servicing
procedures and distributed as described in the related Prospectus Supplement,
together with the statement described under "Certain Information Regarding the
Securities -- Reports to Securityholders."
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Accounts, overcollateralization, letters of credit,
credit or liquidity facilities, surety bonds, guaranteed investment contracts,
guaranteed rate agreements, swaps or other interest rate protection agreements,
repurchase obligations, yield supplement agreements, other agreements with
respect to third party payments or other support, cash deposits or such other
arrangements as may be described in the related Prospectus Supplement or any
combination of two or more of the foregoing. If specified in the applicable
Prospectus Supplement, credit or cash flow enhancement for a class of Securities
may cover one or more other classes of Securities of the same series, and credit
or cash flow enhancement for a series of Securities may cover one or more other
series of Securities. Such credit or cash flow enhancement may be part of the
property of the related Trust or Intermediary Trust, if applicable.
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
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decrease the likelihood that such Securityholders will experience losses. The
credit enhancement for a class or series of Securities may not provide
protection against all risks of loss and may not guarantee repayment of the
entire principal amount and interest thereon. If losses occur which exceed the
amount covered by any credit enhancement or which are not covered by any credit
enhancement, Securityholders of any class or series will bear their allocable
share of deficiencies, as described in the related Prospectus Supplement. In
addition, if a form of credit enhancement covers more than one series of
Securities, Securityholders of any such series will be subject to the risk that
such credit enhancement will be exhausted by the claims of Securityholders of
other series.
The Seller may replace the credit enhancement for any class of Securities
with another form of credit enhancement without the consent of Securityholders,
provided the applicable Rating Agencies confirm in writing that substitution
will not result in the reduction or withdrawal of the rating of such class of
Securities or any other class of Securities of the related series.
Reserve Account. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement, Sale Agreement,
Intermediary Pooling and Servicing Agreement or Pooling and Servicing Agreement,
the Seller will establish for a series or class of Securities an account, as
specified in the related Prospectus Supplement (the "Reserve Account"), which
will be maintained with the related Trustee or Indenture Trustee, as applicable.
If so provided in the related Prospectus Supplement, the Reserve Account will be
funded by an initial deposit by the Seller on the Closing Date in the amount set
forth in the related Prospectus Supplement and, if the related series has a
Funding Period, will also be funded on each Subsequent Transfer Date to the
extent described in the related Prospectus Supplement. As further described in
the related Prospectus Supplement, the amount on deposit in the Reserve Account
will be increased on each Distribution Date thereafter up to the Specified
Reserve Balance (as defined in the related Prospectus Supplement) by the deposit
therein of the amount of collections on the related Receivables remaining on
each such Distribution Date after the payment of all other required payments and
distributions on such date. The related Prospectus Supplement will describe the
circumstances and manner under which distributions may be made out of the
Reserve Account, either to holders of the Securities covered thereby or to the
Seller.
The Seller may at any time, without consent of the Securityholders, sell,
transfer, convey or assign in any manner its rights to and interests in
distributions from the Reserve Account provided that (i) the Rating Agencies
confirm in writing that such action will not result in a reduction or withdrawal
of the rating of any class of Securities, (ii) the Seller provides to the
applicable Trustee and any Indenture Trustee an opinion of counsel from
independent counsel that such action will not cause the related Trust to be
classified as an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes and (iii) such transferee or
assignee agrees in writing to take positions for federal income tax purposes
consistent with the federal income tax positions agreed to be taken by the
Seller.
NET DEPOSITS
As an administrative convenience and for so long as certain conditions are
satisfied (see "-- Collections" above), the Servicer will be permitted to make
the deposit of collections, aggregate Advances and Purchase Amounts for any
series for or with respect to the related Collection Period, net of
distributions to the Servicer as reimbursement of Advances or payment of the
Servicer Fee with respect to such Collection Period. Similarly, the Servicer may
cause to be made a single, net transfer from the Collection Account to the
related Payahead Account, if any, or vice versa. The Servicer, however, will
account to the Trustee, any Indenture Trustee, the Noteholders, if any, and the
Certificateholders with respect to each series as if all deposits,
distributions, and transfers were made individually.
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STATEMENTS TO TRUSTEES AND TRUSTS
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, Intermediary Pooling and Servicing
Agreement and Pooling and Servicing Agreement will provide that a firm of
independent certified public accountants will furnish to the related Trust and
Indenture Trustee or Trustee, as applicable, annually a statement as to
compliance by the Servicer during the preceding twelve months (or, in the case
of the first such certificate, from the applicable Closing Date) with certain
standards relating to the servicing of the applicable Receivables, the
Servicer's accounting records and computer files with respect thereto and
certain other matters.
Each Sale and Servicing Agreement, Intermediary Pooling 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,
Intermediary Pooling and Servicing Agreement or Pooling and Servicing Agreement,
as applicable, throughout the preceding twelve months (or, in the case of the
first such certificate, from the Closing Date) or, if there has been a default
in the fulfillment of any such obligation, describing each such default. The
Servicer has agreed to give each Indenture Trustee and each Trustee notice of
certain Events of Servicing Termination under the related Sale and Servicing
Agreement, Intermediary Pooling and Servicing Agreement or Pooling and Servicing
Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling, Intermediary Pooling and
Servicing Agreement 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, Intermediary Pooling and Servicing Agreement or
Pooling and Servicing Agreement.
Each Sale and Servicing Agreement, Intermediary Pooling 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, the related Intermediary 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,
Intermediary Pooling 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, Intermediary Pooling 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
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responsibilities under such Sale and Servicing Agreement, Intermediary Pooling
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, Intermediary Pooling
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,
Intermediary Pooling 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,
Intermediary Pooling 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, Intermediary Pooling and Servicing Agreement or Pooling and
Servicing Agreement to any corporation more than 50% of the voting stock of
which is owned, directly or indirectly, by Ford and the Servicer may at any time
perform certain specific duties as servicer through other subcontractors.
EVENTS OF SERVICING TERMINATION
"Events of Servicing Termination" under each Sale and Servicing Agreement,
Intermediary Pooling and Servicing Agreement and Pooling and Servicing Agreement
will consist of (i) any failure by the Servicer or the Seller, as the case may
be, to deliver to the Applicable Trustee for distribution to the Securityholders
of the related series or for deposit in any of the Trust Accounts or the
Certificate Distribution Account any required payment, which failure continues
unremedied for three business days after written notice from the Applicable
Trustee is received by the Servicer or the Seller, as the case may be, or after
discovery by an officer of the Servicer or the Seller, as the case may be; (ii)
any failure by the Servicer or the Seller, as the case may be, duly to observe
or perform in any material respect any other covenant or agreement in such Sale
and Servicing Agreement, Intermediary Pooling and Servicing Agreement or Pooling
and Servicing Agreement, which failure materially and adversely affects the
rights of the Noteholders or the Certificateholders of the related series and
which continues unremedied for 90 days after the giving of written notice of
such failure (A) to the Servicer or the Seller, as the case may be, by the
Applicable Trustee or (B) to the Servicer or the Seller, as the case may be, and
to the Applicable Trustee by holders of Notes or Certificates of such series, as
applicable, evidencing not less than 25% in principal amount of such outstanding
Notes or of such Certificate Balance; (iii) the occurrence of an Insolvency
Event with respect to the Servicer or the Seller; and (iv) such other events, if
any, set forth in the related Prospectus Supplement. "Insolvency Event" means,
with respect to any entity, any of the following events or actions: certain
events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings with respect to such entity and certain
actions by such entity indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON EVENT OF SERVICING TERMINATION
In the case of any Trust that has issued Notes, as long as an Event of
Servicing Termination under a Sale and Servicing Agreement or Intermediary
Pooling and Servicing Agreement remains unremedied, the related Indenture
Trustee or holders of Notes of the related series evidencing not less than a
majority of the principal amount of such Notes then outstanding may terminate
all the
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rights and obligations of the Servicer under such Sale and Servicing Agreement
or Intermediary Pooling 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 or Intermediary Pooling and Servicing Agreement and
will be entitled to similar compensation arrangements. In the case of any Trust
that has not issued Notes, as long as an Event of Servicing Termination under
the related Sale and Servicing Agreement, Intermediary Pooling and Servicing
Agreement or Pooling and Servicing Agreement remains unremedied, the related
Trustee or holders of Certificates of the related series evidencing not less
than a majority of the Certificate Balance of such Certificates then outstanding
may terminate all the rights and obligations of the Servicer under such Sale and
Servicing Agreement, Intermediary Pooling 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, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Event of Servicing
Termination other than such appointment has occurred, such trustee or official
may have the power to prevent such Indenture Trustee, such Noteholders, such
Trustee or such Certificateholders from effecting a transfer of servicing. In
the event that such Indenture Trustee or Trustee is unwilling or unable to so
act, it may appoint, or petition a court of competent jurisdiction for the
appointment of, a successor with a net worth of at least $100,000,000 and whose
regular business includes the servicing of motor vehicle receivables. Such
Indenture Trustee or Trustee may make such arrangements for compensation to be
paid, which in no event may be greater than the servicing compensation to the
Servicer under such Sale and Servicing Agreement, Intermediary Pooling and
Servicing Agreement or Pooling and Servicing Agreement.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
With respect to each Trust that has issued Notes, the holders of Notes
evidencing not less than a majority of the principal amount of the then
outstanding Notes of the related series (or the holders of the Certificates of
such series evidencing not less than a majority of the outstanding Certificate
Balance, in the case of any Event of Servicing Termination which does not
adversely affect the related Indenture Trustee or such Noteholders) may, on
behalf of all such Noteholders and Certificateholders, waive any Event of
Servicing Termination under the related Sale and Servicing Agreement or
Intermediary Pooling and Servicing Agreement and its consequences, except an
Event of Servicing Termination consisting of a failure to make any required
deposits to or payments from any of the Trust Accounts or to the Certificate
Distribution Account in accordance with such Sale and Servicing Agreement or
Intermediary Pooling and Servicing Agreement. With respect to each Trust that
has not issued Notes, holders of Certificates of such series evidencing not less
than a majority of the Certificate Balance of such Certificates then outstanding
may, on behalf of all such Certificateholders, waive any Event of Servicing
Termination under the related Sale and Servicing Agreement, Intermediary Pooling
and Servicing Agreement or Pooling and Servicing Agreement, except an Event of
Servicing Termination consisting of a failure to make any required deposits to
or payments from the Certificate Distribution Account or the related Trust
Accounts in accordance with such Sale and Servicing Agreement, Intermediary
Pooling and Servicing Agreement or Pooling and Servicing Agreement. No such
waiver will impair such Noteholders' or Certificateholders' rights with respect
to subsequent defaults.
AMENDMENT
Each of the Transfer and Servicing Agreements may be amended by the parties
thereto, without the consent of the related Noteholders or Certificateholders,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Transfer and Servicing Agreements or
of modifying in any manner the rights of such Noteholders or
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Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the related Trustee or Indenture Trustee, as applicable,
materially and adversely affect the interest of any such Noteholder or
Certificateholder and provided that an opinion of counsel as to certain tax
matters is delivered if required. The Transfer and Servicing Agreements may also
be amended by the Seller, the Servicer, the related Trustee and any related
Indenture Trustee with the consent of the holders of Notes evidencing not less
than a majority in principal amount of the then outstanding Notes, if any, of
the related series and the holders of the Certificates of such series evidencing
not less than a majority of the Certificate Balance of such Certificates then
outstanding, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Receivables and, with respect to a series
for which an Intermediary Trust is formed, distributions on the related
Intermediary Trust Certificates or distributions that are required to be made
for the benefit of such Noteholders or Certificateholders or change any Note
Interest Rate or Certificate Rate or the amount required to be on deposit in the
Reserve Account, if any, or (ii) reduce the aforesaid percentage of the Notes or
Certificates of such series which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes or Certificates,
as the case may be, of such series; and provided that an opinion of counsel as
to certain tax matters is delivered if required.
INSOLVENCY EVENT OR DISSOLUTION
With respect to a Trust that is not a grantor trust, if an Insolvency Event
or a dissolution occurs with respect to the Seller or the General Partner, the
related Receivables and, with respect to a series for which an Intermediary
Trust is formed, the related Intermediary Trust Certificates, will be liquidated
and the Trust and the related Intermediary Trust, if applicable, will be
terminated 90 days after the date of such Insolvency Event or dissolution,
unless, before the end of such 90-day period, the related Trustee shall have
received written instructions from (i) the Noteholders (other than the Seller)
of each class of Notes of such series representing not less than a majority of
the aggregate unpaid principal amount of such class of Notes and the right to
receive interest thereon, (ii) the Certificateholders (other than the Seller) of
Certificates of such series representing not less than a majority of the
aggregate Certificate Balance of all such Certificates and the right to receive
interest thereon, (iii) not less than a majority of the holders (other than the
Seller) of certain interests, if any, in the Reserve Account with respect to
such Trust, (iv) not less than a majority of the holders (other than the Seller)
of certificates representing interests in, or indebtedness secured by, final
scheduled payments with respect to the Final Payment Receivables, if any,
initially retained by the Seller and subsequently added to such Trust (such
certificates or indebtedness being referred to herein as "Final Payment
Securities") and the right to receive interest thereon and (v) any other person
specified in the related Prospectus Supplement, to the effect that each such
party disapproves of the liquidation of such Receivables and Intermediary Trust
Certificates, as applicable, and termination of such Trust and Intermediary
Trust and in connection therewith, the related Trustee (x) appoints an entity
acceptable to Ford Credit to acquire an interest in such Trust and to act as a
substitute "general partner" for federal income tax purposes and (y) obtains an
opinion of counsel that each of such Trust and Intermediary Trust will
thereafter not be classified as an association taxable as a corporation for
federal income tax and applicable state tax purposes. Promptly after the
occurrence of an Insolvency Event or a dissolution with respect to the Seller or
the General Partner, notice thereof is required to be given to such Noteholders,
Certificateholders, holders of interests in the Reserve Account, holders of
Final Payment Securities and any such other person; provided that any failure to
give such required notice will not prevent or delay termination of such Trust.
Upon termination of any Trust, the related Trustee shall, or shall direct the
related Indenture Trustee to, promptly sell the assets of such Trust (other than
the Trust Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The
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proceeds from any such sale, disposition or liquidation of the Receivables and
Intermediary Trust Certificates, as applicable, of such Trust will be treated as
collections on such Receivables and distributions on the Intermediary Trust
Certificates, as applicable, and deposited in the related Collection Account.
With respect to any series, if the proceeds from the liquidation of the related
Receivables and Intermediary Trust Certificates, as applicable, 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 such series in
full, the amount of principal returned to Noteholders and Certificateholders
thereof will be reduced and some or all of such Noteholders and/or
Certificateholders will incur a loss.
Each Trust Agreement and Intermediary Pooling and Servicing Agreement will
provide that the applicable Trustee does not have the power to commence a
voluntary proceeding in bankruptcy with respect to the related Trust without the
unanimous prior approval of all Certificateholders (including the Seller, the
Servicer or their affiliates) of such Trust and the delivery to such Trustee by
each such Certificateholder (including the Seller, the Servicer or their
affiliates) of a certificate certifying that such Certificateholder reasonably
believes that such Trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
SELLER LIABILITY
Under each Trust Agreement, the Seller will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder in
the capacity of an investor with respect to such Trust) arising out of or based
on the arrangement created by such Trust Agreement as though such arrangement
created a partnership under the Delaware Revised Uniform Limited Partnership Act
in which the Seller was a general partner.
TERMINATION
With respect to each Trust and each Intermediary 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.
In order to avoid excessive administrative expense, the Servicer will be
permitted at its option to purchase from each Trust or Intermediary Trust, as
applicable, as of the end of any applicable Collection Period, if the then
outstanding Pool Balance with respect to the Receivables held by such Trust or
Intermediary Trust, as the case may be, 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 or the related Intermediary Trust, as applicable, in the manner and
subject to the terms and conditions set forth in
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such Prospectus Supplement. If the Applicable Trustee receives satisfactory bids
as described in such Prospectus Supplement, then the Receivables remaining in
such Trust or Intermediary Trust, as the case may be, 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 certain
reports and to perform other administrative obligations required by the related
Indenture. With respect to any such Trust, as compensation for the performance
of the Administrator's obligations under the applicable Administration Agreement
and as reimbursement for its expenses related thereto, the Administrator will be
entitled to a periodic administration fee (the "Administration Fee"), which fee
will be paid by the Seller.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTERESTS IN VEHICLES
In all states in which the Receivables have been originated, retail
installment sale contracts such as the Receivables evidence the credit sale of
automobiles and light trucks by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the Uniform Commercial Code (the "UCC").
Perfection of security interests in the vehicles is generally governed by the
motor vehicle registration laws of the state in which the vehicle is located. In
most states in which the Receivables have been originated, a security interest
in a vehicle is perfected by notation of the secured party's lien on the
vehicle's certificate of title. Each Receivable prohibits the sale or transfer
of the Financed Vehicle without Ford Credit's consent.
With respect to each Trust, pursuant to the related Purchase Agreement,
Ford Credit will assign its security interests in the Financed Vehicles securing
the related Receivables to the Seller. With respect to a series for which an
Intermediary Trust is not formed, 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 the related Receivables to
the Trust. With respect to a series for which on Intermediary Trust is formed,
pursuant to the related Intermediary Pooling and Servicing Agreement, the Seller
will assign its security interests in the Financed Vehicles securing the related
Receivables to the Intermediary Trust. The related Trust will have the benefit
of such security interests through its ownership of the related Intermediary
Trust Certificates. However, because of the administrative burden and expense,
the Servicer, the Seller and the Trust or Intermediary Trust, as applicable,
will not amend any certificate of title to identify the Trust or Intermediary
Trust, as the case may be, 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 or Intermediary Trust, as applicable, 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, Intermediary Pooling and Servicing Agreement
or Pooling and Servicing
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Agreement, as applicable, relating to each Trust or Intermediary Trust, as the
case may be, 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 or Intermediary Trust against the rights of subsequent purchasers of a
Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. If there are any Financed Vehicles as to which Ford Credit
failed to obtain a perfected security interest, its security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles and
holders of perfected security interests. Such a failure would constitute a
breach of Ford Credit's warranties under the related Purchase Agreement and of
the Seller's warranties under the related Sale and Servicing Agreement,
Intermediary Pooling 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,
Intermediary Pooling 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 or Intermediary Trust, as applicable, as the
secured party on the certificate of title, the Trust's or Intermediary 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 or Intermediary Trust.
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after a vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the vehicle
owner re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle;
accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. In the ordinary course of servicing receivables, Ford Credit
takes steps to effect re-perfection upon receipt of notice of re-registration or
information from the obligor as to relocation. Similarly, when an obligor sells
a vehicle, Ford Credit must surrender possession of the certificate of title or
will receive notice as a result of its lien noted thereon and accordingly will
have an opportunity to require satisfaction of the related receivable before
release of the lien. Under each Sale and Servicing Agreement, Intermediary
Pooling 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 or
Intermediary Trust, as applicable, Ford Credit will represent to the Seller and
the Seller will represent to the Trust or Intermediary Trust, as the case may
be, 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
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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 accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the obligor, some jurisdictions require that the
obligor be notified of the default and be given a time period within which the
obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding, and preparing the collateral for disposition
and arranging for this sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance. Repossessed vehicles are generally resold by Ford Credit through
automobile auctions which are attended principally by dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied to the expenses of resale and repossession and then to the satisfaction
of the indebtedness of the obligor on the receivable. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
However, the deficiency judgment would be a personal judgment against the
obligor for the shortfall, and a defaulting obligor can be expected to have very
little capital or sources of income available following repossession. Therefore,
in many cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any holder of any lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle
retail installment sales acts, retail
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installment sales acts, and other similar laws. Also, state laws impose finance
charge ceilings and other restrictions on consumer transactions and require
contract disclosures in addition to those required under federal law. The
requirements impose specific statutory liabilities upon creditors who fail 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 or Intermediary Trust, as applicable, 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,
Intermediary Pooling and Servicing Agreement or Pooling and Servicing Agreement,
respectively, and would create an obligation of Ford Credit and the Seller to
repurchase the Receivable unless the breach is cured. See "Description of the
Transfer and Servicing Agreements -- Sale and Assignment of the Receivables."
Courts have imposed general equitable principles on secured parties
pursuing repossession of collateral or litigation involving deficiency balances.
These equitable principles may have the effect of relieving an obligor from some
or all of the legal consequences of a default.
In several cases, obligors have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
Ford Credit and the Seller will warrant under each Purchase Agreement and
the applicable Sale and Servicing Agreement, Intermediary Pooling 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 or an Intermediary Trust for violation of
any law and such claim materially and adversely affects such Trust's or
Intermediary 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, Intermediary Pooling 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."
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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. The Servicer does not intend to
consent to any sale or transfer and intends to require prepayment of the
Receivable. The Servicer may enter into a transfer of equity agreement with the
secondary purchaser for the purpose of effecting the transfer of the Financed
Vehicle.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a series. The summary does not purport to deal with federal
income tax consequences applicable to all categories of holders, some of which
may be subject to special rules. For example, it does not discuss the tax
treatment of Noteholders or Certificateholders that are insurance companies,
regulated investment companies or dealers in securities. Moreover, there are no
cases or Internal Revenue Service ("IRS") rulings on similar transactions
involving both debt instruments and equity interests issued by a trust with
terms similar to those of the Notes and the Certificates. As a result, the IRS
may disagree with all or a part of the discussion below. Prospective investors
are urged to consult their own tax advisors in determining the federal, state,
local, foreign and any other tax consequences to them of the purchase, ownership
and disposition of the Notes and the Certificates of any series.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of special federal tax counsel to each Trust specified in the
related Prospectus Supplement ("Special Tax Counsel"), regarding certain federal
income tax matters discussed below. An opinion of Special Tax Counsel, however,
is not binding on the IRS or the courts. No ruling on any of the issues
discussed below will be sought from the IRS. For purposes of the following
summary, references to the Trust, the Notes, the Certificates and related terms,
parties and documents shall be deemed to refer, unless otherwise specified
herein, to each Trust and the Notes, Certificates and related terms, parties and
documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a partnership under
the Code or whether the Trust will be treated as a grantor trust. The Prospectus
Supplement for each series of Certificates will specify whether the Trust is
intended to be treated as a partnership or the Trust will be treated as a
grantor trust.
SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel will, upon issuance of a series of
Notes and/or Certificates, deliver its opinion that each of the applicable Trust
and the related Intermediary Trust, if
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any, will not be classified as an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes.
In addition, Special Tax Counsel will render its opinion that it has
prepared or reviewed the statements herein and in the related Prospectus
Supplement under the heading "Summary--Tax Status" as they relate to federal
income tax matters and under the heading "Certain Federal Income Tax
Consequences," and is of the opinion that such statements are correct in all
material respects. Such statements are intended as an explanatory discussion of
the possible effects of the classification of the Trust as a partnership or a
grantor trust, as the case may be, for federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
the investor's specific tax circumstances that would be provided by an
investor's own tax adviser. Accordingly, each investor is advised to consult its
own tax advisers with regard to the tax consequences to it of investing in the
Notes and/or Certificates.
ERISA CONSIDERATIONS
ERISA and Section 4975 of the Code impose certain restrictions on (a)
employee benefit plans (as defined in Section 3(3) of ERISA), (b) plans
described in Section 4975(e)(1) of the Code, including individual retirement
accounts or Keogh plans, (c) any entities whose underlying assets include plan
assets by reason of a plan's investment in such entities (each of (a), (b) and
(c), a "Plan") and (d) persons who have certain specified relationships to such
Plans ("Parties in Interest" under ERISA and "Disqualified Persons" under the
Code). Moreover, based on the reasoning of the United States Supreme Court in
John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993),
an insurance company's general account may be deemed to include assets of the
Plans investing in the general account (for example, through the purchase of an
annuity contract), and the insurance company might be treated as a Party in
Interest with respect to a Plan by virtue of such investment. ERISA also imposes
certain duties on persons who are fiduciaries of Plans subject to ERISA and
prohibits certain transactions between a Plan and Parties in Interest or
Disqualified Persons with respect to such Plans. Violation of these rules may
result in the imposition of an excise tax or penalty.
A fiduciary of any Plan should carefully review with its legal and other
advisors whether the purchase or holding of any Securities of a series could
give rise to a transaction prohibited or otherwise impermissible under ERISA or
the Code, and should refer to "ERISA Considerations" in the related Prospectus
Supplement regarding any restrictions on the purchase and/or holding of the
Securities offered thereby.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to the prohibited transaction provisions of ERISA and
Section 4975 of the Code. Accordingly, assets of such plans may, subject to the
provisions of any other applicable federal and state law, be invested in
Securities of any series without regard to the factors described herein and
under "ERISA Considerations" in the related Prospectus Supplement. It should be
noted, however, that any such plan that is qualified and exempt from taxation
under Sections 401(a) and 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Trust were
deemed to be assets of a Plan investing in Securities issued by the Trust. Under
a regulation (the "Plan Assets Regulation") issued by the United States
Department of Labor ("DOL"), 29 C.F.R. Section 2510.3-101, the assets of the
Trust would be treated as plan assets of a Plan for purposes of ERISA and the
Code if the Plan acquires an "Equity Interest" in the Trust and none of the
exceptions contained in the Plan Assets Regulation is applicable. An Equity
Interest is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no
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substantial equity features. The Certificates will most likely be deemed Equity
Interests for purposes of ERISA. It should be noted, however, as discussed
below, that the purchase of Notes by a Plan may also give rise to potential
prohibited transactions, and all prospective investors should review the
discussion herein with their legal advisors.
CERTIFICATES ISSUED BY TRUSTS THAT ISSUE ONLY CERTIFICATES
The ERISA considerations that apply with respect to Securities issued by a
Trust differ depending on whether the Trust issuing the Securities (i) issues
both Notes and Certificates or (ii) issues only Certificates. The discussion in
this section "-- Certificates Issued by Trusts That Issue Only Certificates"
applies only with respect to Certificates issued by a Trust that issues only
Certificates.
Senior Certificates. The following discussion applies only to
nonsubordinated Certificates (referred to herein as "Senior Certificates")
issued by a Trust that does not issue Notes.
If so specified in the related Prospectus Supplement, the DOL will have
issued an individual exemption to one or more of the underwriters of the Senior
Certificates (the "Underwriters' Exemption"). The Underwriters' Exemption
generally exempts from the application of the prohibited transaction provisions
of Section 406 of ERISA and the excise taxes imposed on such prohibited
transactions pursuant to Section 4975(a) and (b) of the Code and Section 502(i)
of ERISA certain transactions relating to the initial purchase, holding and
subsequent resale by Plans of certificates in pass-through trusts that consist
of certain receivables, loans and other obligations that meet the conditions and
requirements set forth in the Underwriters' Exemption. In addition, the
Underwriters' Exemption provides that the assets of such pass #-through trusts
may include (i) yield supplement agreements or similar yield maintenance
arrangements (provided such arrangements do not involve swap agreements or other
notional principal contracts) and (ii) certain pre-funding account arrangements.
The receivables covered by the Underwriters' Exemption include motor vehicle
retail installment sale contracts such as the Receivables. The Underwriters'
Exemption will apply to the acquisition, holding and resale of the Senior
Certificates by a Plan from the applicable underwriters, provided that specified
conditions (certain of which are described below) are met. The Seller believes
that the Underwriters' Exemption will apply to the acquisition and holding of
the Senior Certificates by a Plan and that all conditions of the Underwriters'
Exemption other than those within the control of the investors have been or will
be met.
The Underwriters' Exemption sets forth six general conditions that must be
satisfied for a transaction involving the acquisition of the Senior Certificates
by a Plan to be eligible for the exemptive relief thereunder:
(1) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for the Senior Certificates) that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an unrelated
party;
(2) The rights and interests evidenced by the Senior Certificates acquired
by a Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic rating
categories from any one of four Rating Agencies;
(4) The Trustee is not an affiliate of any other member of the "Restricted
Group," which consists of the applicable underwriters, the Seller, the Servicer,
the applicable Trustee and any Obligor with respect to the Receivables included
in the Trust constituting more than 5% of the aggregate unamortized principal
balance of the assets of the Trust as of the date of initial issuance of the
Senior Certificates, and any affiliate of such parties;
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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 Underwriters' Exemption are satisfied, the
Underwriters' Exemption should provide relief from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA as well as the excise taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(A) through
(D) of the Code, in connection with the direct or indirect purchase, exchange,
transfer or holding of the Senior Certificates by a Plan. However, no exemption
is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of
ERISA for the acquisition or holding of a Senior Certificate on behalf of an
"Excluded Plan" by any person who has discretionary authority or renders
investment advice with respect to the assets of such Excluded Plan. For purposes
of the Senior Certificates, an Excluded Plan is a Plan sponsored by any member
of the Restricted Group.
If certain other specific conditions of the Underwriters' Exemption are
also satisfied, the Underwriters' Exemption should provide relief from the
restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes
imposed by Section 4975(a) and (b) of the Code by reason of Section
4975(c)(1)(E) of the Code in connection with the direct or indirect sale,
exchange, transfer or holding of Senior Certificates in the initial issuance of
Senior Certificates between the Seller or applicable underwriters and a Plan
other than an Excluded Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of Plan assets in the
Senior Certificates is (a) an Obligor with respect to 5% or less of the fair
market value of the Receivables or (b) an affiliate of such person. The Seller
expects such specific conditions to be satisfied with respect to the issuance of
the Senior Certificates.
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The Underwriters' Exemption also applies to transactions in connection with
the servicing, management and operation of the Trust, provided that, in addition
to the general requirements described above, (a) such transactions are carried
out in accordance with the terms of a binding pooling and servicing agreement
and (b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus provided to, investing Plans before their
purchase of Senior Certificates issued by the Trust. The related Pooling and
Servicing Agreement is a pooling and servicing agreement as defined in the
Underwriters' Exemption. All transactions relating to the servicing, management
and operations of the Trust will be carried out in accordance with the related
Pooling and Servicing Agreement. See "Description of the Transfer and Servicing
Agreements" herein and in the related Prospectus Supplement.
Any Plan fiduciary considering whether to purchase a Senior Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the Underwriters' Exemption and other relevant issues.
Subordinated Certificates. The following discussion applies only to
subordinated Certificates (referred to herein as "Subordinated Certificates")
issued by a Trust that does not issue Notes.
Because the Subordinated Certificates are subordinated to the Senior
Certificates in certain respects, the Underwriters' Exemption will not apply to
the purchase of Subordinated Certificates by or on behalf of a Plan. However,
other exemptions may be applicable, such as Prohibited Transaction Class
Exemption ("PTCE") 90-1, which exempts certain transactions involving insurance
company pooled separate accounts; PTCE 95-60, which exempts certain transactions
involving insurance company general accounts; PTCE 91-38, which exempts certain
transactions involving bank collective investment funds; PTCE 96-23, which
exempts certain transactions effected on behalf of a Plan by an "in house" asset
manager; or PTCE 84-14, which exempts certain transactions effected on behalf of
a Plan by a "qualified professional asset manager." It should be noted, however,
that even if the conditions specified in one or more of these exemptions are
met, the scope of relief provided by these exemptions may not necessarily cover
all acts that might be construed as prohibited transactions.
Any Plan fiduciary considering whether to purchase a Subordinated
Certificate on behalf of a Plan should consult with its counsel regarding the
applicability of one or more of such exemptions to such purchase. Prior to
making an investment in the Subordinated Certificates, a Plan investor must
determine whether, and each fiduciary causing the Subordinated Certificates to
be purchased by, on behalf of or using the assets of a Plan shall be deemed to
have represented that either (i) no part of the funds to be used to purchase the
Subordinated Certificates constitutes assets allocable to any trust that
contains the assets of any Plan or (ii) such purchase is covered by one or more
of the exemptions described above.
SECURITIES ISSUED BY TRUSTS THAT ISSUE BOTH NOTES AND CERTIFICATES
The discussion in this section "-- Securities Issued by Trusts That Issue
Both Notes and Certificates" applies only to Securities issued by a Trust that
issues both Notes and Certificates.
The Notes. Unless otherwise provided in the related Prospectus Supplement,
the Seller believes that the Notes of any series should be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. However, without regard to whether the Notes of a series are treated
as an Equity Interest for such purposes, the acquisition or holding of such
Notes by or on behalf of a Plan could be considered to give rise to a prohibited
transaction if the applicable Trust, Trustee, Indenture Trustee, any holder of
the Certificates of such series or any of their respective affiliates, is or
becomes a Party in Interest or a Disqualified Person with respect to such Plan.
In such case, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the Plan fiduciary making
the decision to acquire a Note. Included among these exemptions are PTCE 90-1,
which exempts certain transactions involving insurance company pooled separate
accounts; PTCE 95-60, which exempts certain
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transactions involving insurance company general accounts; PTCE 91-38, which
exempts certain transactions involving bank collective investment funds; PTCE
96-23, which exempts certain transactions effected on behalf of a Plan by an "in
house" asset manager; and PTCE 84-14, which exempts certain transactions
effected on behalf of a Plan by a "qualified professional asset manager." It
should be noted, however, that even if the conditions specified in one or more
of these exemptions are met, the scope of relief provided by these exemptions
may not necessarily cover all acts that might be construed as prohibited
transactions.
The Certificates. Because the Certificates issued by a Trust that also
issues Notes will most likely be treated as Equity Interests under the Plan
Assets Regulation, such Certificates may not be acquired by (i) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Code that is subject
to Section 4975 of the Code, (iii) a governmental plan, as defined in Section
3(32) of ERISA, subject to any federal, state or local law which is, to a
material extent, similar to the provisions of Section 406 of ERISA or Section
4975 of the Code, (iv) an entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (within the meaning of the Plan
Assets Regulation), or (v) a person investing "plan assets" of any such plan
(including without limitation, for purposes of this clause (v), as applicable,
an insurance company general account, but excluding any entity registered under
the Investment Company Act of 1940, as amended) (each, a "Plan Investor").
In addition, investors other than Plan Investors should be aware that a
prohibited transaction could be deemed to occur if any holder of the
Certificates or any of their respective affiliates, is or becomes a Party in
Interest or a Disqualified Person with respect to any Plan that purchases and
holds the related Notes without being covered by one or more of the exemptions
described above in "The Notes."
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
The Small Business Job Protection Act of 1996 added new Section 401(c) of
ERISA relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the
Department of Labor is required to issue final regulations (the "General Account
Regulations") not later than December 31, 1997 with respect to insurance
policies issued on or before December 31, 1998 that are supported by an
insurer's general account. The General Account Regulations are to provide
guidance on which assets held by the insurer constitute "plan assets" for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code. Section 401(c) also provides that, except in the case of avoidance of
the General Account Regulations and actions brought by the Secretary of Labor
relating to certain breaches of fiduciary duties that also constitute breaches
of state or federal criminal law, until the date that is 18 months after the
General Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section 4975
of the Code may result on the basis of a claim that the assets of the general
account of an insurance company constitute the assets of any Plan. The plan
asset status of insurance company separate accounts is unaffected by new Section
401(c) of ERISA, and separate account assets continue to be treated as the plan
assets of any Plan invested in a separate account. Plan investors considering
the purchase of Securities on behalf of an insurance company general account
should consult their legal advisors regarding the effect of the General Account
Regulations on such purchase.
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
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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.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Permitted Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by J.D. Bringard,
Esq., Vice President -- General Counsel of the Servicer. Certain Michigan state
tax and other matters will be passed upon for each Trust by J.D. Bringard, Esq.,
Vice President -- General Counsel of the Servicer. Mr. Bringard is a full-time
employee of Ford Credit and owns and holds options to purchase shares of Common
Stock of Ford.
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<PAGE> 187
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>
<CAPTION>
PAGE
----
<S> <C>
Actuarial Receivables....................................... 20
Administration Agreement.................................... 55
Administration Fee.......................................... 55
Administrator............................................... 55
Advances.................................................... 10, 47
Applicable Trustee.......................................... 38
APR......................................................... 10
Base Rate................................................... 32
Basic Documents............................................. 29
Book-Entry Certificates..................................... 37
Book-Entry Notes............................................ 37
Book-Entry Securities....................................... 37
Calculation Agent........................................... 33
Calculation Date............................................ 33, 34, 35, 36
CD Rate..................................................... 33
CD Rate Determination Date.................................. 33
CD Rate Security............................................ 32
Cede........................................................ 17
Cedel....................................................... 37
Cedel Participants.......................................... 38
Certificate Balance......................................... 5
Certificate Distribution Account............................ 44
Certificateholders.......................................... 17, 38
Certificate Owner........................................... 5
Certificate Pool Factor..................................... 23
Certificate Rate............................................ 5
Certificates................................................ 1
Closing Date................................................ 7
Code........................................................ 12, 59
Collection Account.......................................... 44
Collection Period........................................... 46
Commercial Paper Rate....................................... 34
Commercial Paper Rate Determination Date.................... 34
Commercial Paper Rate Security.............................. 32
Commission.................................................. 2
Composite Quotations........................................ 33
Cutoff Date................................................. 18
Dealer Agreements........................................... 18
Dealer Recourse............................................. 18
Dealers..................................................... 8, 18
Definitive Certificates..................................... 40
Definitive Notes............................................ 40
Definitive Securities....................................... 40
Depositaries................................................ 37
Depository.................................................. 26
Determination Date.......................................... 48
Disqualified Persons........................................ 60
</TABLE>
66
<PAGE> 188
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Distribution Date........................................... 31
DOL......................................................... 60
DTC......................................................... 17
DTC's Nominee............................................... 17, 37
Eligible Deposit Account.................................... 45
Eligible Institution........................................ 45
Equity Interest............................................. 60
ERISA....................................................... 12
Euroclear................................................... 38
Euroclear Operator.......................................... 39
Euroclear Participants...................................... 38
Euroclear System............................................ 38
Events of Default........................................... 28
Events of Servicing Termination............................. 51
Exchange Act................................................ 2
Excluded Plan............................................... 62
Federal Funds Rate.......................................... 34
Federal Funds Rate Determination Date....................... 35
Federal Funds Rate Security................................. 32
Final Payment Receivables................................... 21
Final Payment Securities.................................... 53
Final Scheduled Maturity Date............................... 10
Financed Vehicles........................................... 6
Fixed Rate Securities....................................... 32
Floating Rate Securities.................................... 32
Ford........................................................ 15
Ford Credit................................................. 3
FTC Rule.................................................... 58
Funding Period.............................................. 5
General Account Regulations................................. 64
General Partner............................................. 14
H.15(519)................................................... 32
Indenture................................................... 3
Indenture Trustee........................................... 1
Index Maturity.............................................. 32
Indirect Participants....................................... 37
Initial Cutoff Date......................................... 7
Initial Pool Balance........................................ 54
Initial Receivables......................................... 7
Insolvency Event............................................ 51
Insolvency Laws............................................. 14
Interest Reset Date......................................... 33
Interest Reset Period....................................... 32
Intermediary Pooling and Servicing Agreement................ 3
Intermediary Trust.......................................... 1
Intermediary Trust Certificates............................. 7
Investment Earnings......................................... 45
IRS......................................................... 59
Issuer...................................................... 3
LIBOR....................................................... 35
LIBOR Determination Date.................................... 35
LIBOR Security.............................................. 32
</TABLE>
67
<PAGE> 189
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
London Banking Day.......................................... 35
Michigan Tax Counsel........................................ 12
Money Market Yield.......................................... 34
MSRP........................................................ 20
Noteholders................................................. 17, 38
Note Interest Rate.......................................... 4
Note Owner.................................................. 4
Note Payment Account........................................ 44
Note Pool Factor............................................ 23
Notes....................................................... 1
Obligors.................................................... 18
Participants................................................ 26, 37
Parties in Interest......................................... 60
Payahead Account............................................ 44
Payahead Balance............................................ 46
Payaheads................................................... 44
Permitted Investments....................................... 45
Plan........................................................ 60
Plan Assets Regulation...................................... 60
Plan Investor............................................... 64
Pool Balance................................................ 23
Pooling and Servicing Agreement............................. 3
Precomputed Advance......................................... 10
Precomputed Receivables..................................... 20
Pre -Funded Amount.......................................... 8
Pre -Funding Account........................................ 1, 5
Prospectus Supplement....................................... 1
PTCE........................................................ 63
Purchase Agreement.......................................... 8, 42
Purchase Amount............................................. 43
Rating Agencies............................................. 28
Receivables................................................. 1, 6
Receivables Pool............................................ 18
Registration Statement...................................... 2
Reserve Account............................................. 49
Residual Cash Flow Certificates............................. 6
Residual Cash Flow Notes.................................... 4
Restricted Group............................................ 61
Reuters Screen LIBO Page.................................... 35
Rule of 78's Receivables.................................... 20
Rules....................................................... 38
Sale Agreement.............................................. 7
Sale and Servicing Agreement................................ 7
Securities.................................................. 1
Securities Act.............................................. 2
Securityholders............................................. 17
Seller...................................................... 1, 3
Senior Certificates......................................... 61
Servicer.................................................... 1, 3
Servicer Fee................................................ 47
Servicing Fee............................................... 47
Servicing Fee Rate.......................................... 47
</TABLE>
68
<PAGE> 190
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Simple Interest Advance..................................... 10
Simple Interest Receivables................................. 20
Special Tax Counsel......................................... 12, 59
Spread...................................................... 32
Spread Multiplier........................................... 32
Strip Certificates.......................................... 5
Strip Notes................................................. 4
Subordinated Certificates................................... 63
Subsequent Receivables...................................... 1, 8
Subsequent Transfer Date.................................... 43
Supplemental Servicing Fee.................................. 47
Terms and Conditions........................................ 39
Transfer and Servicing Agreements........................... 42
Treasury bills.............................................. 36
Treasury Rate............................................... 36
Treasury Rate Determination Date............................ 36
Treasury Rate Security...................................... 32
Trust....................................................... 1, 3
Trust Accounts.............................................. 45
Trust Agreement............................................. 3
Trustee..................................................... 1
UCC......................................................... 55
Underwriters' Exemption..................................... 61
Underwriting Agreements..................................... 65
</TABLE>
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<PAGE> 191
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.......................... $2,006,000
Rating agency fees.......................................... $ 960,000
Printing.................................................... $ 390,000
Legal fees and expenses..................................... $ 85,000
Accountants' fees........................................... $ 225,000
Fees and expenses of Indenture Trustee...................... $ 60,000
Fees and expenses of applicable Trustees.................... $ 125,000
Miscellaneous expenses...................................... $ 149,000
----------
Total..................................................... $4,000,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides as follows:
SECTION 17-108. INDEMNIFICATION.
Subject to such standards and restrictions, if any, as are set forth in its
partnership agreement, a limited partnership may, and shall have the power to,
indemnify and hold harmless any partner or other person from and against any and
all claims and demands whatsoever.
Section 4.2 of the Agreement of Limited Partnership of Ford Credit Auto
Receivables Two L.P. provides as follows:
Section 4.2. Exculpation and Indemnification.
(a) Neither the General Partner nor any director, officer, partner,
agent or legal representative of the General Partner or the Partnership,
nor any of their Affiliates or the respective directors, officers,
partners, stockholders, agents or legal representatives of any of their
Affiliates (collectively, the "Indemnified Parties") shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to
any Partner (or its Affiliates) for any losses, claims, damages,
liabilities or expenses, including, without limitation, judgments, interest
on such judgments, fines, charges, costs, amounts paid in settlement,
expenses and attorneys' fees incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or
any appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or commission, whether
pending or merely threatened, whether or not any Indemnified Party is or
may be a party thereto, including interest on any of the foregoing
(collectively, "Damages"), arising out of, or in connection with, the
management or conduct of the business and affairs of the Partnership,
except for any such Damages to the extent that they are found by a court of
competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Indemnified Parties or willful violations of the
express provisions hereof by the indemnified Parties. The Indemnified
Parties may consult with counsel and accountants with respect to the
affairs of the Partnership and shall be fully protected and justified, to
the extent allowed by law, in acting, or failing to act, if such action or
failure to act is in accordance with the advice or opinion of such counsel
or accountants.
(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
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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 shall have power to 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 the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person 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 the
person's 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
the person 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 the person's conduct was
unlawful.
(b) A corporation shall have power to 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 the person 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 the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person 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 present or former director or officer 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, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person 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 present or former 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, with respect to a person who is a director or officer at the time
of such determination, (1) by a majority vote of
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the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any 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 such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation 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 such person's 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 such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
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 such
person 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 such person 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
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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).
Similar indemnification provisions in Section 5 of Article NINTH of the
Certificate of Incorporation of both Ford Motor Company and Ford Motor Credit
Company are applicable to directors, officers and employees of Ford Credit Auto
Receivables Two, Inc. who serve as such at the request of Ford Motor Company or
Ford Motor Credit Company.
Ford Credit Auto Receivables Two, Inc. is insured for liabilities it may
incur pursuant to Article FIFTH of its Certificate of Incorporation relating to
the indemnification of its directors, officers and employees. In addition,
directors, officers and certain key employees are insured against certain losses
which may arise out of their employment and which are not recoverable under the
indemnification provisions of Ford Credit Auto Receivables Two, Inc.'s
Certificate of Incorporation. The premium for both insurance coverages is paid
by Ford Motor Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(A) Exhibits:
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement for the Notes. Filed as
Exhibit 1.1 to Registration Statement No. 333-01245 and
incorporated herein by reference.
1.2 -- Form of Underwriting Agreement for the Certificates. Filed
as Exhibit 1.2 to Registration Statement No. 333-01245 and
incorporated herein by reference.
3.1 -- Certificate of Limited Partnership of the Seller. Filed as
Exhibit 3.1 to Registration Statement No. 333-01245 and
incorporated herein by reference.
3.2 -- Limited Partnership Agreement between the General Partner
and Ford Credit. Filed as Exhibit 3.2 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
3.3 -- Certificate of Incorporation of the General Partner. Filed
as Exhibit 3.3 to Registration Statement No. 333-01245 and
incorporated herein by reference.
3.4 -- By-Laws of the General Partner. Filed as Exhibit 3.4 to
Registration Statement No. 333-01245 and incorporated herein
by reference.
4.1 -- Form of Indenture between the Trust and the Indenture
Trustee (including forms of Notes). Filed as Exhibit 4.1 to
Registration Statement No. 333-01245 and incorporated herein
by reference.
4.2 -- Form of Trust Agreement between the Seller and the Owner
Trustee (including forms of Certificates). Filed as Exhibit
4.2 to Registration Statement No. 333-01245 and incorporated
herein by reference.
4.3 -- Form of Pooling and Servicing Agreement among the Seller,
the Servicer and the Trustee (including forms of
Certificates). Filed as Exhibit 4.3 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
4.4 -- Form of Standard Terms and Conditions of Agreement among the
Seller, the Servicer and the Trustee. Filed as Exhibit 4.4
to Registration Statement No. 333-01245 and incorporated
herein by reference.
4.5 -- Form of Intermediary Pooling and Servicing Agreement among
the Seller, the Servicer and the Trustee (including forms of
Certificates).
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 LLP with
respect to federal income tax matters.
</TABLE>
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<PAGE> 195
<TABLE>
<S> <C> <C>
8.2 -- Form of Opinion of J.D. Bringard, Esq., Vice President --
General Counsel of the Servicer with respect to tax matters
under Michigan law.
10.1 -- Form of Interest Rate Cap between the Trust and the Interest
Rate Cap Provider. Filed as Exhibit 10.1 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
10.2 -- Form of Interest Rate Swap between the Trust and the Swap
Counterparty. Filed as Exhibit 10.2 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
10.3 -- Form of Guaranteed Rate Agreement between the Trust and the
Investment Provider. Filed as Exhibit 10.3 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
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 LLP
(included as part of Exhibit 8.1).
23.3 -- Form of Consent of J.D. Bringard, Esq., Vice President --
General Counsel of the Servicer (included as part of Exhibit
8.2).
24.1 -- Powers of Attorney.
25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Chase Manhattan Bank.
99.1 -- Form of Sale and Servicing Agreement among the Seller, the
Servicer and the Trust. Filed as Exhibit 99.1 to
Registration Statement No. 333-01245 and incorporated herein
by reference.
99.2 -- Form of Administration Agreement among the Trust, the
Administrator and the Indenture Trustee. Filed as Exhibit
99.2 to Registration Statement No. 333-01245 and
incorporated herein by reference.
99.3 -- Form of Purchase Agreement between Ford Credit and the
Seller. Filed as Exhibit 99.3 to Registration Statement No.
333-01245 and incorporated herein by reference.
99.4 -- Form of Appendix A -- Defined Terms. Filed as Exhibit 99.4
to Registration Statement No. 333-01245 and incorporated
herein by reference.
99.5 -- Form of Sale Agreement between the Seller and the Trust.
</TABLE>
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 with or furnished
to the Commission, 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
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the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(i) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Detroit and the State of Michigan on
the 16th day of January, 1998.
FORD CREDIT AUTO RECEIVABLES TWO L.P.
By FORD CREDIT AUTO RECEIVABLES TWO,
INC.,
General Partner of the Registrant
By: /s/ ELIZABETH S. ACTON*
------------------------------------
(Elizabeth S. Acton,
Chairman of the Board of Directors
of
Ford Credit Auto Receivables Two,
Inc.)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
directors and officers of FORD CREDIT AUTO RECEIVABLES TWO, INC. in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ELIZABETH S. ACTON* Chairman of the Board of January 16, 1998
- --------------------------------------------- Directors and Director (principal
(Elizabeth S. Acton) executive officer)
/s/ THOMAS W. PARKINSON* Controller (principal accounting January 16, 1998
- --------------------------------------------- officer)
(Thomas W. Parkinson)
/s/ JOHN P. BURKHARD* Director and President and January 16, 1998
- --------------------------------------------- Treasurer (principal financial
(John P. Burkhard) officer)
/s/ HURLEY D. SMITH* Director January 16, 1998
- ---------------------------------------------
(Hurley D. Smith)
</TABLE>
*By: /s/ R. P. CONRAD
---------------------------------
(R. P. Conrad, Attorney in Fact)
II-7
<PAGE> 198
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement for the Notes. Filed as
Exhibit 1.1 to Registration Statement No. 333-01245 and
incorporated herein by reference.
1.2 -- Form of Underwriting Agreement for the Certificates. Filed
as Exhibit 1.2 to Registration Statement No. 333-01245 and
incorporated herein by reference.
3.1 -- Certificate of Limited Partnership of the Seller. Filed as
Exhibit 3.1 to Registration Statement No. 333-01245 and
incorporated herein by reference.
3.2 -- Limited Partnership Agreement between the General Partner
and Ford Credit. Filed as Exhibit 3.2 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
3.3 -- Certificate of Incorporation of the General Partner. Filed
as Exhibit 3.3 to Registration Statement No. 333-01245 and
incorporated herein by reference.
3.4 -- By-Laws of the General Partner. Filed as Exhibit 3.4 to
Registration Statement No. 333-01245 and incorporated herein
by reference.
4.1 -- Form of Indenture between the Trust and the Indenture
Trustee (including forms of Notes). Filed as Exhibit 4.1 to
Registration Statement No. 333-01245 and incorporated herein
by reference.
4.2 -- Form of Trust Agreement between the Seller and the Owner
Trustee (including forms of Certificates). Filed as Exhibit
4.2 to Registration Statement No. 333-01245 and incorporated
herein by reference.
4.3 -- Form of Pooling and Servicing Agreement among the Seller,
the Servicer and the Trustee (including forms of
Certificates). Filed as Exhibit 4.3 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
4.4 -- Form of Standard Terms and Conditions of Agreement among the
Seller, the Servicer and the Trustee. Filed as Exhibit 4.4
to Registration Statement No. 333-01245 and incorporated
herein by reference.
4.5 -- Form of Intermediary Pooling and Servicing Agreement among
the Seller, the Servicer and the Trustee (including forms of
Certificates).
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 LLP with
respect to federal income tax matters.
8.2 -- Form of Opinion of J.D. Bringard, Esq., Vice President --
General Counsel of the Servicer with respect to tax matters
under Michigan law.
10.1 -- Form of Interest Rate Cap between the Trust and the Interest
Rate Cap Provider. Filed as Exhibit 10.1 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
10.2 -- Form of Interest Rate Swap between the Trust and the Swap
Counterparty. Filed as Exhibit 10.2 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
10.3 -- Form of Guaranteed Rate Agreement between the Trust and the
Investment Provider. Filed as Exhibit 10.3 to Registration
Statement No. 333-01245 and incorporated herein by
reference.
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 LLP
(included as part of Exhibit 8.1).
23.3 -- Form of Consent of J.D. Bringard, Esq., Vice President --
General Counsel of the Servicer (included as part of Exhibit
8.2).
24.1 -- Powers of Attorney.
</TABLE>
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
<S> <C> <C> <C>
25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Chase Manhattan Bank.
99.1 -- Form of Sale and Servicing Agreement among the Seller, the
Servicer and the Trust. Filed as Exhibit 99.1 to
Registration Statement No. 333-01245 and incorporated herein
by reference.
99.2 -- Form of Administration Agreement among the Trust, the
Administrator and the Indenture Trustee. Filed as Exhibit
99.2 to Registration Statement No. 333-01245 and
incorporated herein by reference.
99.3 -- Form of Purchase Agreement between Ford Credit and the
Seller. Filed as Exhibit 99.3 to Registration Statement No.
333-01245 and incorporated herein by reference.
99.4 -- Form of Appendix A -- Defined Terms. Filed as Exhibit 99.4
to Registration Statement No. 333-01245 and incorporated
herein by reference.
99.5 -- Form of Sale Agreement between the Seller and the Trust.
</TABLE>
<PAGE> 1
EXHIBIT 4.5
__________________________________________
FORD CREDIT AUTO INTERMEDIARY TRUST ____-_
ASSET BACKED CERTIFICATES
_____________________________________
FORD CREDIT AUTO RECEIVABLES TWO L.P.
Seller
FORD MOTOR CREDIT COMPANY
Servicer
______
Trustee and Class A Agent
_________________
INTERMEDIARY POOLING AND SERVICING AGREEMENT
Dated as of ______ __, ____
_________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Creation of Trust . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II Conveyance of Receivables. . . . . . . . . . . . . . . . . . . 2
ARTICLE III Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV Acceptance by Trustee. . . . . . . . . . . . . . . . . . . . . 3
ARTICLE V Incorporation of Standard Terms
and Conditions of Agreement. . . . . . . . . . . . . . . . . 4
ARTICLE VI Special Definitions and Terms. . . . . . . . . . . . . . . . . 4
ARTICLE VII Additional Representations
and Warranties of the Seller. . . . . . . . . . . . . . . . . 7
ARTICLE VIII Ford Motor Credit Company Not
to Resign as Servicer . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IX Agent for Service . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE X Additional Covenants of the Seller. . . . . . . . . . . . . . . 9
Schedule A -- List of Receivables
Schedule B -- Location of Receivables
</TABLE>
i
<PAGE> 3
This Intermediary Pooling and Servicing Agreement, dated as of ______
__,____, is made with respect to the formation of the Ford Credit Auto
Intermediary Trust ____-_, among FORD CREDIT AUTO RECEIVABLES TWO L.P., a
Delaware limited partnership, as Seller ("Seller"), FORD MOTOR CREDIT COMPANY,
a Delaware corporation, as Servicer ("Servicer"), and ______, a ______
corporation, as trustee (in such capacity, the "Trustee") and as agent (the
"Class A Agent").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
Section 1.1 Creation of Trust. Upon the execution of this Agreement by
the parties hereto, there is hereby created the Ford Credit Auto Intermediary
Trust ____-_. For all purposes of this Agreement and any certificate or other
document made or delivered pursuant hereto, each reference to "Ford Credit Auto
Grantor Trust ____-__" shall be deemed to be replaced with a reference to "Ford
Credit Auto Intermediary Trust ____-__."
ARTICLE II
Section 2.1 Conveyance of Receivables. In consideration of the Trustee's
delivery to, or upon the order of, the Seller of Certificates ("Certificates")
in an aggregate amount equal to the Original Pool Balance, the Seller does
hereby irrevocably sell, transfer, assign, and otherwise convey to the Trustee,
in trust for the benefit of the Certificateholders, without recourse (subject
to the obligations herein) all right, title and interest of the Seller, whether
now owned or hereafter acquired, in and to the following: (i) the Receivables
listed in Schedule A hereto and all monies paid thereon and due thereon on or
after the Cutoff Date (including any monies received prior to the Cutoff Date
that are due on or after the Cutoff Date and were not used to reduce the
principal balances of the Receivables); (ii) the security interests in the
Financed Vehicles granted by Obligors pursuant to the Receivables and any other
interest of the Issuer in the Financed Vehicles; (iii) rights to receive
proceeds with respect to the Receivables from claims on any physical damage,
credit life, credit disability, or other insurance policies covering Financed
Vehicles or Obligors; (iv) Dealer Recourse; (v) all of the Seller's rights to
the Receivable Files; (vi) the
2
<PAGE> 4
Certificate Distribution Account and the Collection Account and all amounts,
securities, investments and other property deposited in or credited to either
of the foregoing and all proceeds thereof; (vii) all of the Seller's rights
under the Pooling and Servicing Agreement; (viii) all of the Seller's rights
under the Purchase Agreement, including the right of the Seller to cause Ford
Credit to repurchase Receivables from the Seller; (ix) payments and proceeds
with respect to the Receivables held by the Servicer; (x) all property
(including the right to receive Liquidation Proceeds) securing a Receivable
(other than a Receivable repurchased by the Servicer or purchased by the
Seller); (xi) rebates of premiums and other amounts relating to insurance
policies and other items financed under the Receivables in effect as of the
Cutoff Date; and (xii) all present and future claims, demands, causes of action
and choses in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in respect of
any or all of the foregoing, including all proceeds of the conversion thereof,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, insurance proceeds, condemnation awards,
rights to payment of any and every kind and other forms of obligations and
receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing.
ARTICLE III
Reserved
ARTICLE IV
Section 4.1 Acceptance by Trustee. The Trustee does hereby accept all
consideration conveyed by the Seller pursuant to Section 2.1, and declares that
the Trustee shall hold such consideration upon the trusts herein set forth for
the benefit of all present and future Certificateholders, subject to the terms
and provisions of this Agreement.
3
<PAGE> 5
ARTICLE V
Section 5.1 Incorporation of Standard Terms and Conditions of Agreement.
This Pooling and Servicing Agreement does hereby incorporate by reference the
Standard Terms and Conditions of Agreement for Ford Credit Auto Grantor Trusts
dated as of ______ __, ____ ("Standard Terms and Conditions of Agreement"), in
the form attached hereto.
ARTICLE VI
Section 6.1 Special Definitions and Terms. Whenever used in the Standard
Terms and Conditions of Agreement and in this Pooling and Servicing Agreement,
the following words and phrases shall have the following meanings:
The "Class A Percentage" means ___%.
The "Class B Percentage" means ___%.
The "Corporate Trust Office" at the date hereof is located at
______
______
______
The "Cutoff Date" shall be ______ __, ____.
The first "Distribution Date" shall be ______ __, ____.
The "Optional Purchase Percentage" shall be 10%.
The "Original Pool Balance" is $______.
The "Pass-Through Rate" is ___% per annum.
The "Purchase Agreement" is the agreement dated as of ______ __, ____,
relating to the purchase by the Seller from Ford Motor Credit Company of the
Receivables.
4
<PAGE> 6
The "Required Deposit Rating" shall be a rating on (i) short-term
unsecured debt obligations of P-1 by Moody's Investors Service, Inc. and (ii)
short-term unsecured debt obligations of A-1+ by Standard & Poor's Corporation;
and any requirement that short-term unsecured debt obligations have the
"Required Deposit Rating" shall mean that such short-term unsecured debt
obligations have the foregoing required ratings from each of such rating
agencies.
The "Servicing Fee Rate" is 1.00% per annum.
The "Specified Subordination Spread Account Balance" with respect to
any Distribution Date shall be $______; 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 net
balances of all Receivables which are determined to be uncollectible in the
Collection Period, less any recoveries on Receivables charged off in the period
or prior periods) 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 Receivables 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 such percentage of the Pool Balance as of the opening of
business of the first day of such Collection Period as is determined by
deducting from ____ 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 opening
of business 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 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 $______.
5
<PAGE> 7
The "Subordination Initial Deposit" is $______.
6
<PAGE> 8
ARTICLE VII
Section 7.1 Additional Representations and Warranties of the Seller. The
Seller does hereby make the following representations and warranties on which
the Trustee shall be deemed to have relied in accepting the Receivables in
trust and executing and authenticating the Certificates:
(i) New and Used Vehicles. Approximately ___% of the
aggregate Principal Balance of the Receivables, constituting ___%
of the number of Receivables, as of the Cutoff Date, represent
vehicles financed at new vehicle rates, and the remainder of the
Receivables represent vehicles financed at used vehicle rates;
(ii) Origination. Each Receivable shall have an origination
date on or after ______ __, ____;
(iii) Maturity of Receivables. Each Receivable shall have an
original maturity of not greater than [sixty (60) months];
(iv) Minimum Annual Percentage Rate. Each Receivable shall
have an Annual Percentage Rate equal to or greater than ___%;
(v) Scheduled Payments. Each Receivable shall have a first
Scheduled Payment due on or prior to ______ __, ____ and no
Receivable shall have a payment that is more than [thirty (30)]
days overdue as of the Cutoff Date;
(vi) Location of Receivable Files. The Receivable Files
shall be kept at one or more of the locations listed in Schedule B
hereto;
(vii) No Extensions. The number of Scheduled Payments shall
not have been extended on any Receivable on or before the Cutoff
Date;
7
<PAGE> 9
[(viii) No Receivables Originated in Alabama or Pennsylvania.
No Receivable shall have been originated in Alabama or
Pennsylvania;] and
(ix) Rating Agencies. The rating agencies rating the
Certificates are Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group.
ARTICLE VIII
Section 8.1 Ford Motor Credit Company Not to Resign as Servicer. Subject
to the provisions of Section 18.3 of the Standard Terms and Conditions of
Agreement, Ford Motor Credit Company shall not resign from the obligations and
duties hereby imposed on it as Servicer under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of Ford Motor Credit Company shall be communicated
to the Trustee at the earliest practicable time (and, if such communication is
not in writing, shall be confirmed in writing at the earliest practicable time)
and any such determination shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee concurrently with or promptly after such
notice. No such resignation shall become effective until the Trustee or a
successor Servicer shall have taken the actions required by the last paragraph
of Section 19.1 of the Standard Terms and Conditions of Agreement and shall
have assumed the responsibilities and obligations of Ford Motor Credit Company
in accordance with Section 19.2 of the Standard Terms and Conditions of
Agreement.
ARTICLE IX
Section 9.1 Agent for Service. The agent for service for the Seller and
the Servicer shall be J.D. Bringard, Esq., Ford Motor Credit Company, The
American Road, Dearborn, Michigan 48121.
8
<PAGE> 10
ARTICLE X
Section 10.1 Additional Covenants of the Seller.
(a) The Seller agrees with each nationally recognized rating agency
which has been requested by the Seller or an affiliate to rate the
Class A Certificates issued pursuant to this Agreement and which is then rating
such Certificates that it shall not issue any additional securities that could
reasonably be expected to affect materially and adversely the Certificates
issued pursuant to this Agreement unless it shall have first obtained written
confirmation from such rating agency that such issuance will not result in the
qualification, downgrading or withdrawal of the then current rating assigned to
the Class A Certificates. The Seller shall provide a copy of any such written
confirmation to the Trustee.
(b) The Seller shall not, without first receiving written confirmation
from each nationally recognized rating agency which has been requested by the
Seller or an affiliate to rate the Class A Certificates and which is then
rating such Certificates that the then current rating assigned to the Class A
Certificates will not result in the qualification, downgrading or withdrawal of
such rating, and, upon the Seller's receipt of such written confirmation from
each such rating agency, the Trustee shall, without any exercise of its own
discretion, provide its written consent to the Seller, do any of the following:
(i) engage in any business or activity other than those set
forth in Section 2.3 of the Seller's Limited Partnership Agreement;
(ii) incur any indebtedness, or assume or guaranty any
indebtedness of any other entity, other than (A) any indebtedness
incurred in connection with Notes (as defined in the Seller's
Limited Partnership Agreement) and (B) any indebtedness to Ford
Motor Credit Company or any affiliate thereof incurred in
connection with the acquisition of receivables or certificates
issued by trusts established by Ford Motor
9
<PAGE> 11
Credit Company or Ford Credit Auto Receivables Corporation or any
affiliate thereof;
(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 Seller) formed or surviving the
consolidation or merger of which acquires the properties and assets of
the Seller 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 Seller, including those obligations of the Seller
under this Agreement, and has a Certificate of Incorporation containing
provisions identical to the provisions of Article Third, Article Fourth
and Article Fifteen of the General Partner's Certificate of
Incorporation; 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 Seller 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 General Partner, institute proceedings
to be adjudicated bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against it, or file a petition
seeking or 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 limited partnership 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 limited partnership action in furtherance of
any such action.
10
<PAGE> 12
IN WITNESS WHEREOF, the Seller, the Servicer, and the Trustee have caused
this Pooling and Servicing Agreement to be duly executed by their respective
officers as of the day and year first above written.
FORD CREDIT AUTO
RECEIVABLES TWO L.P.
By: FORD CREDIT AUTO
RECEIVABLES TWO, INC.,
as General Partner
[SEAL]
ATTEST: By:
_______________________
TITLE:
___________________________
TITLE:
FORD MOTOR CREDIT COMPANY
[SEAL]
ATTEST: By: ________________________
TITLE:
___________________________
TITLE:
______, as Trustee
ATTEST: By: ________________________
TITLE:
___________________________
TITLE: Trust Officer
11
<PAGE> 13
______, as Class A Agent
Pursuant to Section 14.7
hereof
ATTEST: By: _________________________
TITLE:
___________________________
TITLE: Trust Officer
<PAGE> 14
SCHEDULE A
LIST OF RECEIVABLES
DELIVERED TO TRUSTEE
AT CLOSING
<PAGE> 15
SCHEDULE B
LOCATION OF RECEIVABLES
Indianapolis
5875 Castle Creek Pkwy. North Drive
Suite 240
Indianapolis, IN 46250-4308
Detroit-North
580 Kirts Boulevard
Suite 300
Troy, MI 48084
Chicago-North
9700 Higgins Road
Suite 720
Rosemont, IL 60018
Ohio South
9797 Springboro Pike
Suite 302
Miamisburg, OH 45343
Detroit/West
One ParkLane Blvd.
Suite 405E
Dearborn, MI 48126
Chicago South
The Office of Waterfall Glen I
Suite 310
900 South Frontage Road
Woodridge, IL 60517
Grand Rapids
2851 Charlevoix Drive SE
Suite 300
Grand Rapids, MI 49546
Chicago - East
One River Place, Suite A
Lansing, IL 60438
<PAGE> 16
Akron
175 Montroes West Avenue
Suite 300 Crown Pointe
Copley, OH 44321
Louisville
502 Executive Park
Louisville, KY 40207
Milwaukee
10850 W. Park Place
Suite 110
Milwaukee, WI 53224
Chicago West
2500 W. Higgins Rd.
Suite 280
Hoffman Estates, IL 60195-2008
Saginaw
4901 Towne Centre Rd.
Suite 200
Saginaw, MI 48605
Findlay
3500 North Main Street
Findlay, OH 45840-1447
Cleveland
5700 Lombardo Centre
Suite 101
Seven Hills, OH 44131-2581
Philadelphia
Bay Colony Executive Park
575 E. Swedesford
Suite 100
Wayne, PA 19087
New Jersey South
5000 Dearborn Circle
Suite 200
Mt. Laurel, NJ 08054
Baltimore-West
1829 Reistertown Road
Baltimore, MD 21208-8861
B-2
<PAGE> 17
Long Island
972 Brush Hollow Road
5th Floor
Westbury, NY 11590-1740
Washington, D.C.
2440 Research Blvd.
Suite 150
Rockville, MD 20850-3293
New Haven
116 Washington Ave.
Floor #4
North Haven, CT 06473
Norfolk
Greenbrier Pointe
1401 Greenbrier Pkwy.
Suite 350
Chesapeake, VA 23320
New Jersey North
103 Eisenhower Parkway
4th Floor
Roseland, NJ 07068-1069
Pittsburgh
Foster Plaza 9
750 Holiday Drive
4th Floor, Suite 420
Pittsburgh, PA 15220-2783
Richmond
300 Arboretum Place
Suite 320
Richmond, VA 23236
Syracuse
5788 Widewaters Pkwy.
DeWitt, NY 13214
Westchester
660 White Plains Road
Tarrytown, NY 10591-0010
B-3
<PAGE> 18
Mobile
1201 Montlimar Dr.
Suite 700
Mobile, AL 36609
Birmingham
3535 Grandview Parkway
Suite 340
Birmingham, AL 35243
Orlando
2600 Lake Lucien Drive
Suite 306, The Forum Bldg.
Maitland, FL 32751
Memphis
6555 Quince Road
Suite 300
Memphis, TN 38119
Atlanta - North
North Park Town Center
1000 Abernathy Rd. N.E.
Bldg. 400, Suite 180
Atlanta, GA 30328
Greensboro
1500 Pinecroft Rd.
Suite 220
Greensboro, NC 27407
Charlotte
5832 Farm Pond Lane
Suite 200
Charlotte, NC 28212
Jacksonville
9485 Regency Square Boulevard
Jacksonville, FL 32225
Jackson
Highland Village Center
4500 I-55 North
Suite 292
Jackson, MS 39211
B-4
<PAGE> 19
Columbia
250 Berryhill Road
Suite 201
Columbia, SC 29210
Miami
6303 Blue Lagoon Drive
Suite 200
Miami, FL 33126
Dothan
3160 West Main Street
Suite 1
Dothan, AL 36301-1180
Nashville
565 Marriott Drive
Suite 190, Highland Ridge
Nashville, TN 37210
Raleigh
3651 Trust Drive
Raleigh, NC 27604
Tampa
Lincoln Pointe, Suite 800
2502 Rocky Point Drive
Tampa, FL 33607
Odessa
Ashford Park Office Center
Suite 201A
2626 John Ben Sheppard Parkway
Odessa, TX 79762
Lubbock
Suite 200
4010 82nd Street
Lubbock, TX 79424
Dallas
801 E. Campbell Road
Suite 600, Campbell Forum
Richardson, TX 75081
B-5
<PAGE> 20
Austin
1701 Directors Blvd.
Suite 320
Austin, TX 78744
Fort Worth
2350 W. Airport Hwy.
Suite 400, Center Park Tower
Bedford, TX 76022
Beaumont
2615 Calder
Suite 715
Beaumont, TX 77704
Houston-West
820 Gessner
Suite 700
Houston, TX 77024
Harlingen
1916 East Harrison
Harlingen, TX 78550
Corpus Christi
5350 South Staples
Suite 225
Corpus Christi, TX 78411
Little Rock
1701 Centerview Dr.
Suite 301
Little Rock, AR 72211
Amarillo
1616 S. Kentucky
Suite 130 Bldg. D
Amarillo, TX 79102
El Paso
1200 Golden Key Circle
Suite 104
El Paso, TX 79925
B-6
<PAGE> 21
Albuquerque
6100 Uptown Blvd., NE
Suite 300
Albuquerque, NM 87110
Houston-North
363 N. Sam Houston Pkwy. E.
Suite 700
Houston, TX 77060
San Antonio
1600 N.E. Loop 410
Suite 200
San Antonio, TX 78209
Tulsa
9820 East 41st St.
Suite 300
Tulsa, OK 74145
Minneapolis
11095 Viking Drive
Suite 308, One Southwest Crossing
Eden Prairie, MN 55344-7290
Wichita
7570 West 21st Street
Wichita, KS 67212
St. Louis
4227 Earth City Exp.
Suite 100
Earth City, MO 63045
Jefferson City
210 Prodo Drive
Jefferson City, MO 65109
Kansas City
8717 West 110th Street
Bldg. #14, Suite 550
Overland Park, KS 66210
B-7
<PAGE> 22
Des Moines
4200 Corporate Drive
Suite 107
West Des Moines, IA 50266
Omaha
10040 Regency Circle
Suite 100
Omaha, NE 68114-3786
Davenport
2535 Tech Drive
Suite 300, Commerce Exch. Bldg.
Bettendorf, IA 52722
Denver
6300 S. Syracuse Way
Suite 195
Englewood, CO 80111
Fargo
3100 13th Ave. South
Suite 304
Fargo, ND 58103
Springfield
3275 E. Ridgeview
Springfield, MO 65804-1816
Waterloo
211 E. San Marnan Dr.
Waterloo, IA 50702
San Bernadino
1615 Orange Tree Lane
Suite 215
Redlands, CA 92374
Salt Lake City
310 E. 4500 South
Suite 340
Murray, UT 84017
B-8
<PAGE> 23
Honolulu
1585 Kapiolani Blvd.
Suite 922, Ala Moano Pacific Center
Honolulu, HI 96814
Spokane
North 901 Monroe
Suite 350
Spokane, WA 99210-2148
Grand Junction
744 Horizon Ct.
Suite 330
Grand Junction, CO 81506
San Francisco
4301 Hacienda Dr.
Suite 400
Pleasanton, CA 94588
Portland
10220 S.W. Greenburg Rd.
Suite 415
Portland, OR 97223-5506
Sacramento
2720 Gateway Oaks Dr.
Suite 200
Sacramento, CA 95833
San Diego
3111 Camino Del Rio N.
Suite 1333
San Diego, CA 92108
Phoenix
4742 North 24th Street
Suite 215
Phoenix, AZ 85016
San Jose
1900 McCarthy Blvd.
Suite 400
Milpitas, CA 95035
B-9
<PAGE> 24
Seattle
13555 S.E. 36th Street
Suite 350
Bellevue, WA 98006
Orange
765 The City Drive
Suite 200
Orange, CA 92668
Anchorage
3201 C Street
Suite 203
Anchorage, AK 99503
Appleton
54 Park Place
Appleton, WI 54915-8861
South Bend
4215 Edison Lakes Parkway
Suite 140
Mishawaka, IN 46545
Columbus
655 Metro Place South
Suite 470, Metro V
Dublin, OH 43017-0792
Henderson
618 North Green Street
Henderson, KY 42420
Lansing
2140 University Park Drive
Okemos, MI 48864
Marshall
1408 North Michigan
Marshall, IL 62441
New Jersey-Central
101 Interchange Plaza
Cranbury, NJ 08512
B-10
<PAGE> 25
Huntington
3425 U.S. Route 60 East
Barboursville, WV 25504
Buffalo
95 John Muir Drive
Suite 102
Amherst, NY 14228
Manchester
4 Bedford Farms
Bedford, NH 03110
Harrisburg
4900 Ritter Road
Mechanicsburg, PA 17055
Boston South
Southboro Place, 2nd Floor
352 Turnpike Road
Southboro, MA 01772
Boston North
One Tech Drive, 3rd Floor
Andover, MA 01810-2497
Portland
2401 Congress Street
Portland, ME 04102
Albany
5 Pine West Plaza
Albany, NY 12205
Roanoke
5238 Valley Pointe Pkwy.
Roanoke, VA 24019
Falls Church
1420 Springhill Road
Suite 550
McLean, VA 22102
B-11
<PAGE> 26
Bristol
Landmark Center - Suite A
113 Landmark Lane
Bristol, TN 37620
Chattanooga
6025 Lee Highway
Suite 443
Chattanooga, TN 37421
Decatur
401 Lee Street
Suite 500
Decatur, AL 35602
Fayetteville
4317 Ramsey Street
Suite 300
Fayetteville, NC 28311
Athens
3708 Atlanta Highway
Athens, GA 30604
Knoxville
5500 Lonas Drive
Suite 260
Knoxville, TN 37909
Macon
5400 Riverside Drive
Suite 201
Macon, GA 31210
Pensacola
25 W. Cedar Street
Suite 316
Pensacola, Fl 32501
Savannah
6600 Abercorn Street
Suite 206
Savannah, GA 31405
B-12
<PAGE> 27
Tyler
821 East SE Loop 323
Suite 300
Tyler, TX 75701
Oklahoma City
4101 Perimeter Ctr Dr.
Suite 300, Perimeter Center
Oklahoma City, OK 73112-2304
Baltimore-East
Campbell Corporate Center One
4940 Campell Blvd., Suite 140
Whitemarsh Business Community
Baltimore, MD 21236
Billings
1643 Lewis Avenue
Suite 201
Billings, MT 59102
Cheyenne
6234 Yellowstone
Cheyenne, WY 82009
Cape Girardeau
2851 Independence
Cape Girardeau, MO 63701
Atlanta -South
1691 Phoenix Blvd.
Suite 300
Atlanta, GA 30349
Pasadena
800 East Colorado Blvd.
Suite 400
Pasadena, CA 91109
Colorado Springs
5575 Tech Center Dr.
Suite 220
Colorado Springs, CO 80919
B-13
<PAGE> 28
South Bay
301 E. Ocean Boulevard
Suite 1900
Long Beach, CA 90802
Ventura
260 Maple court
Suite 210
Ventura, CA 93003
Las Vegas
3900 Paradise Road
Suite 239
Las Vegas, NV 89109
Eugene
1600 Valley River Drive
Suite 190
Eugene, OR 97401
Tupelo
One Mississippi Plaza
Tupelo, MS 38801
Charleston
4975 Lacross Road
Suite 150, Rivergate Center
North Charleston, SC 29418-6518
Western Carolina
215 Thompson Street
Hendersonville, NC 28739-2828
B-14
<PAGE> 29
New Orleans
3838 N. Causeway Blvd.
Suite 3000
Metairie, LA 70002
Lafayette
Saloom Office Park
Suite 350
100 Asma Boulevard
Lafayette, LA 70508
Shreveport
South Pointe Centre, Suite 200
3007 Knight Street
Shreveport, LA 71105
B-15
<PAGE> 1
EXHIBIT 5.1
(FORD LOGO)
FORD MOTOR CREDIT COMPANY
Hurley D. Smith
Secretary and Corporate Counsel The American Road
Dearborn, Michigan 48121-6044
January 16, 1998
Ford Credit Auto Receivables Two, Inc.
The American Road
Dearborn, Michigan 48121
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Dear Sirs:
The undersigned, Hurley D. Smith, Corporate Counsel of Ford Credit Auto
Receivables Two, Inc. ("FCAR"), Ford Credit Auto Receivables Two L.P.
("Seller") and Ford Motor Credit Company ("Ford Credit") has acted as counsel
for FCAR, Seller and Ford Credit in connection with Registration Statement No.
333-40421, as amended (the "Registration Statement"), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, respecting the issuance by various trusts (each a "Trust") to be
formed pursuant to either an Owner Trust Agreement ("Owner Trust Agreement")
to be entered into between the Seller and the Owner Trustee (the "Owner
Trustee") designated therein or a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") to be entered into among the Seller, Ford
Credit and the Trustee designated therein (the "Trustee") of Asset Backed
Securities consisting of either Notes and/or Certificates. Any Asset Backed
Securities consisting of Notes are to be issued pursuant to a Trust Indenture
(the "Trust Indenture") to be entered into between the Trust and the Indenture
Trustee designated therein (the "Indenture Trustee") and any Asset Backed
Securities consisting of Certificates are to be issued pursuant to either the
Owner Trust Agreement or the Pooling and Servicing Agreement.
In that connection, I have examined, or caused to be examined, originals,
or copies certified to my satisfaction, of such documents, corporate and
partnership records and other instruments as I have deemed necessary or
appropriate for the purposes of this opinion. Based upon the foregoing, I am
of the opinion that the Asset Backed Securities, when duly executed and
authenticated by the Indenture Trustee, Owner Trustee or Trustee, as the case
may be, in accordance with the terms of the applicable Trust Indenture, Owner
Trust Agreement or Pooling and Servicing Agreement, and issued and delivered
against payment thereof, will be legally issued, fully paid and nonassessable.
I hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement. In giving this consent, I do not admit that I am in
the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Commission issued
thereunder.
Very truly yours,
/s/ Hurley D. Smith
<PAGE> 1
EXHIBIT 8.1
January 16, 1998
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Receivables Two L.P.
Registration Statement on Form S-3 No. 333-40421
Ladies and Gentlemen:
We have acted as special counsel to Ford Credit Auto Receivables Two
L.P., as Seller (the "Seller"), in connection with Registration Statement on
Form S-3 No. 333-40421, as amended (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, respecting the issuance by various trusts (each, a "Trust") to be
formed pursuant to either an Amended and Restated Trust Agreement (the "Trust
Agreement") to be entered into by the Seller and the Owner Trustee (the "Owner
Trustee") designated therein or a Pooling and Servicing Agreement (the "Pooling
and Servicing Agreement") to be entered into by the Seller, Ford Credit Motor
Company ("Ford Credit") and the Trustee designated therein (the "Trustee") of
Asset Backed Securities consisting of either Notes and/or Certificates. Any
Asset Backed Securities consisting of Notes are to be issued pursuant to an
Indenture (the "Indenture") to be entered into by the Trust and the Indenture
Trustee designated therein (the "Indenture Trustee") and any Asset Backed
Securities consisting of Certificates are to be issued pursuant to either the
Trust Agreement or the Pooling and Servicing Agreement. Capitalized terms
used herein and not otherwise defined herein have the meanings assigned to them
in the Registration Statement.
In this connection, we have examined and relied upon the
Registration Statement filed with the Securities
<PAGE> 2
Ford Credit Auto Receivables Two L.P.
January 16, 1998
Page 2
and Exchange Commission (the "SEC") on November 14, 1997 and Amendment No. 1
thereto, filed with the SEC on January 16, 1998, including (i) the form of
prospectus included therein (the "Prospectus"); (ii) the forms of prospectus
supplements included therein (the "Prospectus Supplements"); (iii) the form of
Indenture; (iv) the form of Trust Agreement; (v) the form of Purchase
Agreement; (vi) the form of Sale and Servicing Agreement; (vii) the form of
Administration Agreement; (viii) the form of Pooling and Servicing Agreement;
and (ix) such other documents as we have deemed necessary or appropriate as a
basis for the opinion set forth below, and we have assumed (i) that such
documents will not be amended and (ii) that the parties to such documents will
comply with the terms thereof.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents. As to any facts material to the opinions expressed herein which were
not independently established or verified, we have relied upon statements,
representations, and certifications of officers and other representatives of
the Seller, the Servicer, the Underwriters, and others, including, in
particular, (i) certain calculations performed by the Underwriters and (ii) a
representation of the Servicer regarding the reasonableness of certain fees
payable to it.
In rendering our opinion, we have also considered and relied upon the
Internal Revenue Code of 1986, as amended, and administrative rulings, judicial
decisions, regulations, and such other authorities as we have deemed
appropriate, all as in effect as of the date hereof. The stautory provisions,
regulations, interpretations, and other authorities upon which our opinion is
based are subject to change, and such changes could apply retroactively. In
addition, there can be no assurance that positions contrary to those stated in
our opinion will not be taken by the Internal Revenue Service.
<PAGE> 3
Ford Credit Auto Receivables Two L.P.
January 16, 1998
Page 3
We express no opinions as to the laws of any jurisdiction other than
the federal laws of the United States of America to the extent specifically
referred to herein.
Based upon and subject to the foregoing, we are of the opinion that the
statements in the Prospectus under the heading "Summary -- Tax Status" to the
extent they relate to federal income tax matters and under the heading "Certain
Federal Income Tax Consequences," subject to the qualifications set forth
therein, accurately describe the material federal income tax consequences to
holders of Notes and/or Certificates, under existing law and the assumptions
stated therein.
We also note that the Prospectus and the Basic Documents do not relate
to a specific transaction. Accordingly, the above-referenced description of
federal income tax consequences may require modification in the context of an
actual transaction.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
<PAGE> 1
EXHIBIT 8.2
January 16, 1998
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Receivables Two L.P.
Registration Statement on Form S-3 No. 333-40421
Ladies and Gentlemen:
The undersigned, J.D. Bringard, Vice President-General Counsel
of Ford Motor Credit Company ("Ford Credit") has acted as counsel to Ford
Credit Auto Receivables Two L.P., as Seller (the "Seller") in connection with
Registration Statement on Form S-3 No. 333-40421, as amended (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, respecting the issuance by various trusts
(each, a "Trust") to be formed pursuant to either an Owner Trust Agreement
("Owner Trust Agreement") to be entered into among the Seller and the Owner
Trustee designated therein or a Pooling and Servicing Agreement ("Pooling and
Servicing Agreement") to be entered into among the Seller, Ford Credit, and the
Trustee designated therein (the "Trustee") of Asset Backed Securities
consisting of either Notes and/or Certificates. Any Asset Backed Securities
consisting of Notes are to be issued pursuant to a Trust Indenture to be
entered into between the Trust and the Indenture Trustee designated therein
and any Asset Backed Securities consisting of Certificates are to be issued
pursuant to either the Owner Trust Agreement or the Pooling and Servicing
Agreement.
I am admitted to the State Bar of Michigan and I express no
opinion as to the laws of any other jurisdiction except the laws of the United
States of America
<PAGE> 2
Ford Credit Auto Receivables Two L.P.
January 16, 1998
Page 2
and the State of Michigan to the extent specifically referred to herein.
I hereby confirm that the statements set forth in the Prospectus
forming a part of the Registration Statement under the caption "Summary--Tax
Status" as they relate to Michigan state tax matters accurately describe the
material Michigan state tax consequences to holders of the Certificates and/or
the Notes.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Opinions" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ J. D. Bringard
<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 18th day of
November, 1997.
/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 Edsel B. Ford II, K. J. Coates, J. D.
Bringard, H. D. Smith, 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 14th
day of November, 1997.
/s/ JAMES B. SMITH /S/ HURLEY D. SMITH
---------------------- --------------------------
(James B. Smith) (Hurley D. Smith)
/s/ JOHN P. BURKHARD /s/ THOMAS W. PARKINSON
--------------------- --------------------------
(John P. Burkhard) (Thomas W. Parkinson)
6
<PAGE> 8
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 Edsel B. Ford II, K. J. Coates, J. D.
Bringard, H. D. Smith, 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 her name hereto as of the 16th
day of January, 1998.
/s/ E.S. ACTON
----------------------
(E.S. Acton)
7
<PAGE> 1
EXHIBIT 25
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
-------------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
-------------------------------------------
FORD CREDIT AUTO RECEIVABLES TWO L.P.
(Exact name of obligor as specified in its charter)
A DELAWARE LIMITED PARTNERSHIP 38-3295857
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
THE AMERICAN ROAD
DEARBORN, MI 48121
(Address of principal executive offices) (Zip Code)
-------------------------------------------
ASSET BACKED CERTIFICATES
(Title of the indenture securities)
-------------------------------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York and State of New York, on the 14th day
of January, 1998.
THE CHASE MANHATTAN BANK
By:
/s/ Michael A. Smith
-----------------------
MICHAEL A. SMITH
VICE PRESIDENT
3
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ................................................................... $ 11,760
Interest-bearing balances ........................................................... 4,343
Securities:
Held to maturity securities.............................................................. 2,704
Available for sale securities............................................................ 37,885
Federal funds sold and securities purchased under
agreements to resell ................................................................ 27,358
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................................ $127,370
Less: Allowance for loan and lease losses ........................................... 2,760
Less: Allocated transfer risk reserve ............................................... 13
--------
Loans and leases, net of unearned income,
allowance, and reserve .............................................................. 124,597
Trading Assets .......................................................................... 64,630
Premises and fixed assets (including capitalized
leases).............................................................................. 2,925
Other real estate owned ................................................................. 286
Investments in unconsolidated subsidiaries and
associated companies................................................................. 232
Customers' liability to this bank on acceptances
outstanding ......................................................................... 2,212
Intangible assets ....................................................................... 1,480
Other assets ............................................................................ 11,117
--------
TOTAL ASSETS ............................................................................ $291,529
========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<S> <C>
Deposits
In domestic offices ................................................................. $ 86,574
Noninterest-bearing ................................................................. $ 31,818
Interest-bearing .................................................................... 54,756
--------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ........................................................................... 69,887
Noninterest-bearing ................................................................. $ 3,777
Interest-bearing .................................................................... 66,110
Federal funds purchased and securities sold under agree-
ments to repurchase ..................................................................... 45,307
Demand notes issued to the U.S. Treasury ................................................ 161
Trading liabilities ..................................................................... 47,406
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ....................................... 4,578
With a remaining maturity of more than one year
through three years........................................................... 261
With a remaining maturity of more than three years ................................ 131
Bank's liability on acceptances executed and outstanding ................................ 2,212
Subordinated notes and debentures ....................................................... 5,715
Other liabilities ....................................................................... 12,355
TOTAL LIABILITIES ....................................................................... 274,587
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ........................................... 0
Common stock ............................................................................ 1,211
Surplus (exclude all surplus related to preferred stock)................................ 10,294
Undivided profits and capital reserves .................................................. 5,414
Net unrealized holding gains (losses)
on available-for-sale securities ........................................................ 7
Cumulative foreign currency translation adjustments ..................................... 16
TOTAL EQUITY CAPITAL .................................................................... 16,942
--------
TOTAL LIABILITIES AND EQUITY CAPITAL .................................................... $291,529
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
- 5 -
<PAGE> 1
EXHIBIT 99.5
================================================================================
SALE AGREEMENT
by and among
--------------------
FORD CREDIT AUTO OWNER TRUST - ,
------ -
as Issuer,
and
--------------------
FORD CREDIT AUTO RECEIVABLES TWO L.P.,
as Seller
Dated as of ,
------------ ----
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND USAGE .................................................... 1
ARTICLE II
TRUST PROPERTY ........................................................... 2
SECTION 2.1. Conveyance of Trust Property ............................. 2
SECTION 2.2. Representations and Warranties of
the Seller as to the Receivables ........................ 2
SECTION 2.3. Repurchase upon Breach ................................... 7
SECTION 2.4. Custody of Receivable Files .............................. 8
SECTION 2.5. Duties of Servicer as Custodian .......................... 8
SECTION 2.6. Instructions; Authority to Act ........................... 10
SECTION 2.7. Custodian's Indemnification .............................. 10
SECTION 2.8. Effective Period and Termination ......................... 10
ARTICLE III
[RESERVED]...........................................................
i
<PAGE> 3
Page
----
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO
NOTEHOLDERS AND CERTIFICATEHOLDERS ...................................
SECTION 4.1. Accounts .................................................... 19
SECTION 4.2. Collections ................................................. 23
SECTION 4.3. Application of Collections .................................. 24
SECTION 4.4. Advances .................................................... 24
SECTION 4.5. Additional Deposits ......................................... 25
SECTION 4.6. Distributions ............................................... 26
SECTION 4.7. Reserve Account ............................................. 28
SECTION 4.8. Net Deposits ................................................ 31
SECTION 4.9. Statements to Noteholders and
Certificateholders ........................................ 31
ARTICLE V
YIELD SUPPLEMENT LETTER OF CREDIT; YIELD SUPPLEMENT ACCOUNT
SECTION 5.1. Yield Supplement Letter of Credit
and the Yield Supplement Account .......................... 34
ARTICLE VI
THE SELLER ................................................................
SECTION 6.1. Representations and Warranties of Seller .................... 38
SECTION 6.2. Liability of Seller; Indemnities ............................ 40
SECTION 6.3. Merger or Consolidation of, or
Assumption of the Obligations
of, Seller ................................................ 41
SECTION 6.4. Limitation on Liability of
Seller and Others ......................................... 42
SECTION 6.5. Seller May Own Notes or Certificates ........................ 42
ARTICLE VII
[RESERVED] ..............................................................
ii
<PAGE> 4
Page
----
ARTICLE VIII
[RESERVED] ................................................................
ARTICLE IX
TERMINATION ................................................................
SECTION 9.1. Optional Purchase of All Receivables ........................ 56
SECTION 9.2. Succession Upon Satisfaction and
Discharge of Indenture ................................... 56
ARTICLE X
MISCELLANEOUS PROVISIONS ...................................................
SECTION 10.1. Amendment ................................................... 57
SECTION 10.2. Protection of Title to Trust ................................ 58
SECTION 10.3. Governing Law ............................................... 62
SECTION 10.4. Notices ..................................................... 62
SECTION 10.5. Severability of Provisions .................................. 62
SECTION 10.6. Assignment .................................................. 63
SECTION 10.7. Further Assurances .......................................... 63
SECTION 10.8. No Waiver; Cumulative Remedies .............................. 63
SECTION 10.9. Third-Party Beneficiaries ................................... 63
SECTION 10.10. Actions by Noteholders or
Certificateholders ........................................ 64
SECTION 10.11. Agent for Service ........................................... 64
SECTION 10.12. No Bankruptcy Petition. ..................................... 64
SECTION 10.13. Limitation of Liability of
Owner Trustee and Indenture Trustee ...................... 64
iii
<PAGE> 5
SALE AGREEMENT, dated as of _______ __, ____ (as from time
to time amended, supplemented or otherwise modified and in effect, this
"Agreement"), by and among FORD CREDIT AUTO OWNER TRUST ____-_ (the "Issuer"),
a Delaware business trust, and FORD CREDIT AUTO RECEIVABLES TWO L.P., a Delaware
limited partnership, as seller (the "Seller").
WHEREAS, the Issuer desires to purchase Intermediary Trust Certificates
representing 100% of the beneficial interests of an intermediary trust, the
property of which consists of a portfolio of receivables arising in connection
with motor vehicle retail installment sale contracts generated by Ford Motor
Credit Company in the ordinary course of its business and sold to the Seller;
and
WHEREAS, the Seller is willing to sell such Intermediary Trust
Certificates to the Issuer;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein are defined in
Appendix A hereto, which also contains rules as to usage that shall be
applicable herein.
<PAGE> 6
ARTICLE II
TRUST PROPERTY
SECTION 2.1. Conveyance of Trust Property. In consideration of the
Issuer's delivery to, or upon the order of, the Seller of Notes and
Certificates, in aggregate principal amounts equal to the initial principal
amount of the Notes and the Initial Certificate Balance, respectively, the
Seller does hereby irrevocably sell, transfer, assign and otherwise convey to
the Issuer without recourse (subject to the obligations herein) all right,
title and interest of the Seller, whether now owned or hereafter acquired, in
and to the Trust Property. The sale, transfer, assignment and conveyance made
hereunder shall not constitute and is not intended to result in an assumption
by the Issuer of any obligation of the Seller to the Obligors, the Dealers or
any other Person in connection with the Receivables and the other Trust
Property or any agreement, document or instrument related thereto.
It is the intention of the Seller and the Issuer that the transfer of the
Trust Property contemplated herein constitute a sale of the Trust Property,
conveying good title to the Trust Property from the Seller to the Issuer.
However, in the event that such transfer is deemed to be a pledge to secure the
payment of the Notes and the Certificates, the Seller hereby grants to the
Issuer a first priority security interest in all of the Seller's right, title
and interest in, to and under the Trust Property, and all proceeds thereof, to
secure the payment of the Notes and the Certificates, and in such event, this
Agreement shall constitute a security agreement under applicable law.
SECTION 2.2. Representations and Warranties of the Seller as to the
Receivables. The Seller makes the following representations and warranties as
to the Receivables on which the Issuer shall be deemed to have relied in
accepting the Receivables. Such representations and warranties speak as of the
execution and delivery of this Agreement, but shall survive the sale, transfer,
assignment and conveyance of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
2
<PAGE> 7
(i) Characteristics of Receivables. Each Receivable (a) shall have
been originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business, shall
have been fully and properly executed by the parties thereto, shall have been
purchased by the Seller from Ford Credit, which in turn shall have purchased
such Receivable from such Dealer under an existing dealer agreement with Ford
Credit, and shall have been validly assigned by such Dealer to Ford Credit,
which in turn shall have been validly assigned by Ford Credit to the Seller in
accordance with its terms, (b) shall have created or shall create a valid,
subsisting, and enforceable first priority security interest in favor of Ford
Credit in the Financed Vehicle, which security interest has been assigned by
Ford Credit to the Seller, which in turn shall be assignable by the Seller to
the Indenture Trustee, (c) shall contain customary and enforceable provisions
such that the rights and remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the security, (d) shall
provide for level monthly payments (provided that the payment in the first or
last month in the life of the Receivable may be minimally different from the
level payment) that fully amortize the Amount Financed by maturity and yield
interest at the Annual Percentage Rate, (e) shall provide for, in the event
that such contract is prepaid, a prepayment that fully pays the Principal
Balance, and (f) is a Precomputed Receivable or a Simple Interest Receivable.
(ii) Schedule of Receivables. The information set forth in the Schedule
of Receivables shall be true and correct in all material respects as of the
opening of business on the Cutoff Date, and no selection procedures believed to
be adverse to the Noteholders or the Certificateholders shall have been
utilized in selecting the Receivables from those receivables which meet the
criteria contained herein. The computer tape or other listing regarding the
Receivables made available to the Issuer and its assigns (which computer tape
or other listing is required to be delivered as specified herein) is true and
correct in all respects.
(iii) Compliance with Law. Each Receivable and the sale of the Financed
Vehicle shall have complied at the time it was originated or made and at the
execu-
3
<PAGE> 8
tion of this Agreement shall comply in all material respects with all
requirements of applicable federal, State, and local laws, and regulations
thereunder, including, without limitation, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B and Z, and State adaptations of the National Consumer Act and of
the Uniform Consumer Credit Code, and other consumer credit laws and equal
credit opportunity and disclosure laws.
(iv) Binding Obligation. Each Receivable shall represent the genuine,
legal, valid, and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in accordance with its terms subject to the
effect of bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights generally.
(v) No Government Obligor. None of the Receivables shall be due from the
United States of America or any State or from any agency, department, or
instrumentality of the United States of America or any State.
(vi) Security Interest in Financed Vehicle. Immediately prior to the
sale, transfer, assignment, and conveyance thereof, each Receivable shall be
secured by a validly perfected first security interest in the Financed Vehicle
in favor of Ford Credit as secured party or all necessary and appropriate
actions shall have been commenced that would result in the valid perfection of
a first security interest in the Financed Vehicle in favor of Ford Credit as
secured party.
(vii) Receivables in Force. No Receivable shall have been satisfied,
subordinated, or rescinded, nor shall any Financed Vehicle have been released
from the lien granted by the related Receivable in whole or in part.
(viii) No Waiver. No provision of a Receivable shall have been waived.
4
<PAGE> 9
(ix) No Defenses. No right of rescission, setoff, counterclaim, or
defense shall have been asserted or threatened with respect to any Receivable.
(x) No Liens. To the best of the Seller's knowledge, no liens or claims
shall have been filed for work, labor, or materials relating to a Financed
Vehicle that shall be liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by the Receivable.
(xi) No Default. Except for payment defaults continuing for a period of
not more than [thirty (30)] days as of the Cutoff Date, no default, breach,
violation, or event permitting acceleration under the terms of any Receivable
shall have occurred; and no continuing condition that with notice or the lapse
of time would constitute a default, breach, violation, or event permitting
acceleration under the terms of any Receivable shall have arisen; and the
Seller shall not waive any of the foregoing.
(xii) Insurance. Ford Credit, in accordance with its customary
procedures, shall have determined that the Obligor has obtained or agreed to
obtain physical damage insurance covering the Financed Vehicle.
(xiii) Title. It is the intention of the Seller that the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Seller to the Issuer and that the beneficial interest in and title to the
Receivables not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. No
Receivable has been sold, transferred, assigned, or pledged by the Seller to
any Person other than the Issuer. Immediately prior to the transfer and
assignment herein contemplated, the Seller had good and marketable title to
each Receivable free and clear of all Liens, encumbrances, security interests,
and rights of others and, immediately upon the transfer thereof, the Issuer
shall have good and marketable title to each Receivable, free and clear of all
Liens, encumbrances, security interests, and rights of others; and the transfer
has been perfected under the UCC.
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(xiv) Valid Assignment. No Receivable shall have been originated in,
or shall be subject to the laws of, any jurisdiction under which the sale,
transfer, assignment and conveyance of such Receivable under this Agreement or
pursuant to transfers of the Notes or the Certificates shall be unlawful, void,
or voidable. The Seller has not entered into any agreement with any account
debtor that prohibits, restricts or conditions the assignment of any portion of
the Receivables.
(xv) All Filings Made. All filings (including, without limitation, UCC
filings) necessary in any jurisdiction to give the Issuer a first perfected
ownership interest in the Receivables, and to give the Indenture Trustee a
first perfected security interest therein, shall have been made.
(xvi) Chattel Paper. Each Receivable constitutes "chattel paper" as
defined in the UCC.
(xvii) One Original. There shall be only one original executed copy of
each Receivable.
(xviii) New and Used Vehicles. Approximately ___% of the aggregate
Principal Balance of the Receivables, constituting ___% of the number of
Receivables, as of the Cutoff Date, represent vehicles financed at new vehicle
rates, and the remainder of the Receivables represent vehicles financed at used
vehicle rates.
[(xix)Amortization Type. Approximately ____% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date constitute Precomputed
Receivables, and the remainder of the Receivables constitute Simple Interest
Receivables.]
(xx) Origination. Each Receivable shall have an origination date on or
after ______ __, ____.
(xxi) Maturity of Receivables. Each Receivable shall have an original
maturity of not greater than sixty (60) months.
(xxii) Minimum Annual Percentage Rate. Each Receivable shall have an
Annual Percentage Rate equal to or greater than ___%.
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(xxiii) Scheduled Payments. Each Receivable shall have a first Scheduled
Payment due[, in the case of Precomputed Receivables, or a scheduled due date,
in the case of Simple Interest Receivables,] on or prior to ______ __, ____ and
no Receivable shall have a payment that is more than [thirty (30)] days overdue
as of the Cutoff Date.
(xxiv) Location of Receivable Files. The Receivable Files shall be kept
at one or more of the locations listed in Schedule B hereto.
(xxv) No Extensions. The number of Scheduled Payments shall not have
been extended on any Receivable on or before the Cutoff Date.
(xxvi) Rating Agencies. The rating agencies rating the Notes and the
Certificates are Moody's and Standard & Poor's.
(xxvii) Agreement. The representations and warranties of the Seller in
Section 6.1 are true and correct.
[(xxviii) No Receivables Originated in Alabama or Pennsylvania. No
Receivable shall have been originated in Alabama or Pennsylvania.]
SECTION 2.3. Repurchase upon Breach. The Seller, the Servicer, the
Issuer or the Owner Trustee, as the case may be, shall inform the other parties
to this Agreement, the Indenture Trustee and Ford Credit promptly, in writing,
upon the discovery of any breach of the Seller's representations and warranties
made by the Seller pursuant to Section 2.2. Unless the breach shall have been
cured by the last day of the second Collection Period following the discovery,
the Indenture Trustee shall enforce the obligation of the Seller under this
Section 2.3, and, if necessary, the Seller shall enforce the obligation of Ford
Credit under the Purchase Agreement, to repurchase any Receivable materially
and adversely affected by the breach as of such last day (or, at the Seller's
option, the last day of the first Collection Period following the discovery).
In consideration of the purchase of the Receivable, the Seller shall remit the
Purchase Amount, in the manner specified in Section 4.5. The sole remedy of
the Issuer, the Owner Trustee,
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the Indenture Trustee, the Noteholders or the Certificateholders with
respect to a breach of the Seller's representations and warranties pursuant to
Section 2.2 shall be to require the Seller to repurchase Receivables pursuant
to this Section 2.3 or to enforce the obligation of Ford Credit to the Seller
to repurchase such Receivables pursuant to the Purchase Agreement. Neither the
Owner Trustee nor the Indenture Trustee shall have any duty to conduct an
affirmative investigation as to the occurrence of any condition requiring the
repurchase of any Receivable pursuant to this Section 2.3 or the eligibility of
any Receivable for purposes of this Agreement.
SECTION 2.4. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer, upon
the execution and delivery of this Agreement, hereby revocably appoints the
Servicer, and the Servicer hereby accepts such appointment, to act as the agent
of the Issuer and the Indenture Trustee as custodian of the following documents
or instruments, which are hereby constructively delivered to the Indenture
Trustee, as pledgee of the Issuer pursuant to the Indenture, with respect to
each Receivable:
(i) The original of the Receivable.
(ii) The original credit application fully executed by the Obligor or a
photocopy thereof or a record thereof on a computer file or disc or on
microfiche.
(iii) The original certificate of title or such documents that the
Servicer or Ford Credit shall keep on file, in accordance with its customary
procedures, evidencing the security interest of Ford Credit in the Financed
Vehicle.
(iv) Any and all other documents (including any computer file or disc or
microfiche) that the Servicer or the Seller shall keep on file, in accordance
with its customary procedures, relating to a Receivable, an Obligor, or a
Financed Vehicle.
The Servicer shall provide an Officer's Certificate to the Issuer and the
Indenture Trustee confirming that the Servicer has received on behalf of the
Issuer
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and the Indenture Trustee all the documents and instruments necessary
for the Servicer to act as the agent of the Issuer and the Indenture Trustee
for the purposes set forth in this Section 2.4, including the documents
referred to herein, and the Issuer, the Owner Trustee and the Indenture Trustee
are hereby authorized to rely on such Officer's Certificate.
SECTION 2.5. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Receivable Files for the
benefit of the Issuer and the Indenture Trustee and maintain such accurate and
complete accounts, records, and computer systems pertaining to each Receivable
File as shall enable the Servicer and the Issuer to comply with the terms and
conditions of this Agreement, and the Indenture Trustee to comply with the
terms and conditions of the Indenture. In performing its duties as custodian
the Servicer shall act with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to the receivable files
relating to all comparable automotive receivables that the Servicer services
for itself or others. In accordance with its customary practices with respect
to its retail installment sale contracts, the Servicer shall conduct, or cause
to be conducted, periodic audits of the Receivable Files held by it under this
Agreement, and of the related accounts, records, and computer systems, in such
a manner as shall enable the Issuer or the Indenture Trustee to verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report
to the Owner Trustee and the Indenture Trustee any failure on its part to hold
the Receivable Files and maintain its accounts, records, and computer systems
as herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or any
periodic review by the Issuer, the Owner Trustee or the Indenture Trustee of
the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at one of its offices specified in Schedule B to this
Agreement, or at such other office as shall be specified to the Issuer and the
Indenture Trustee by written notice not later than ninety (90) days after any
change in location. The Servicer shall make available to the Issuer and the
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Indenture Trustee or their duly authorized representatives, attorneys,
or auditors a list of locations of the Receivable Files, the Receivable Files,
and the related accounts, records, and computer systems maintained by the
Servicer at such times as the Issuer or the Indenture Trustee shall instruct.
(c) Release of Documents. Upon written instructions from the Indenture
Trustee, the Servicer shall release any document in the Receivable Files to the
Indenture Trustee, the Indenture Trustee's agent, or the Indenture Trustee's
designee, as the case may be, at such place or places as the Indenture Trustee
may designate, as soon thereafter as is practicable. Any document so released
shall be handled by the Indenture Trustee with due care and returned to the
Servicer for safekeeping as soon as the Indenture Trustee or its agent or
designee, as the case may be, shall have no further need therefor.
SECTION 2.6. Instructions; Authority to Act. All instructions from the
Indenture Trustee shall be in writing and signed by an Authorized Officer of
the Indenture Trustee, and the Servicer shall be deemed to have received proper
instructions with respect to the Receivable Files upon its receipt of such
written instructions.
SECTION 2.7. Custodian's Indemnification. The Servicer as custodian
shall indemnify the Issuer, the Owner Trustee and the Indenture Trustee for any
and all liabilities, obligations, losses, compensatory damages, payments,
costs, or expenses of any kind whatsoever that may be imposed on, incurred, or
asserted against the Issuer, the Owner Trustee or the Indenture Trustee as the
result of any improper act or omission in any way relating to the maintenance
and custody by the Servicer as custodian of the Receivable Files; provided,
however, that the Servicer shall not be liable to the Owner Trustee for any
portion of any such amount resulting from the willful misfeasance, bad faith,
or negligence of the Indenture Trustee or the Owner Trustee and shall not be
liable to the Indenture Trustee for any portion of any such amount resulting
from the willful misfeasance, bad faith, or negligence of the Indenture Trustee
or the Owner Trustee.
SECTION 2.8. Effective Period and Termination. The Servicer's appointment
as custodian shall become
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effective as of the Cutoff Date and shall continue in full force and
effect until terminated pursuant to this Section 2.8. If Ford Credit shall
resign as Servicer in accordance with the provisions of this Agreement or if
all of the rights and obligations of the Servicer shall have been terminated
under Section 8.1, the appointment of the Servicer as custodian hereunder may
be terminated by the Indenture Trustee, or by the Noteholders of Notes
evidencing not less than 25% of the principal amount of the Notes Outstanding
or, with the consent of Noteholders of Notes evidencing not less than 25% of
the principal amount of the Notes Outstanding, by the Owner Trustee or by
Certificateholders of Certificates evidencing not less than 25% of the
Certificate Balance, in the same manner as the Indenture Trustee or such
Securityholders may terminate the rights and obligations of the Servicer under
Section 8.1. As soon as practicable after any termination of such appointment,
the Servicer shall deliver the Receivable Files and the related accounts and
records maintained by the Servicer to the Indenture Trustee or the Indenture
Trustee's agent at such place or places as the Indenture Trustee may reasonably
designate.
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ARTICLE III
[RESERVED]
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ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT;
STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1. Accounts. (a) The Servicer shall, prior to the Closing
Date, establish and maintain a segregated trust account in the name of the
Indenture Trustee, at a Qualified Institution or Qualified Trust Institution
(which shall initially be ), which shall be designated as the
"Collection Account". The Collection Account shall be held in trust for the
benefit of the Noteholders and the Certificateholders. The Collection Account
shall be under the sole dominion and control of the Indenture Trustee;
provided, that the Servicer may make deposits to and direct the Indenture
Trustee in writing to make withdrawals from the Collection Account in
accordance with the terms of the Basic Documents. All monies deposited from
time to time in the Collection Account shall be held by the Indenture Trustee
as part of the Trust Property and all deposits to and withdrawals therefrom
shall be made only upon the terms and conditions of the Basic Documents.
If the Servicer is required to remit collections pursuant to the first
sentence of Section 4.2, all amounts held in the Collection Account shall, to
the extent permitted by applicable law, rules and regulations, be invested, as
directed in writing by the Servicer, by the bank or trust company then
maintaining the Collection Account in Permitted Investments that mature not
later than the Business Day immediately prior to the Distribution Date for the
Collection Period to which such amounts relate and such Permitted Investments
shall be held to maturity. All interest and other income (net of losses and
investment expenses) on funds on deposit in the Collection Account shall be
withdrawn from the Collection Account at the written direction of the Servicer
and shall be paid to the . In the event that the Collection Account
is no longer to be maintained at , the Servicer
shall, with the Indenture Trustee's or Owner Trustee's assistance as necessary,
cause the Collection Account to be moved to a Qualified Institution or a
Qualified Trust Institution within ten (10) Business Days (or such longer
period not to exceed thirty (30) calendar days as to which each Rating Agency
may consent).
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(b) The Servicer shall, prior to the Closing Date, establish and maintain
a segregated trust account in the name of the Indenture Trustee at a Qualified
Institution or Qualified Trust Institution (which shall initially be ),
which shall be designated as the "Note Payment Account". The Note
Payment Account shall be held in trust for the benefit of the Noteholders. The
Note Payment Account shall be under the sole dominion and control of the
Indenture Trustee. All monies deposited from time to time in the Note Payment
Account pursuant to this Agreement and the Indenture shall be held by the
Indenture Trustee as part of the Trust Property and shall be applied as
provided in the Basic Documents. In the event that the Note Payment Account is
no longer to be maintained at , the Servicer shall,
with the Indenture Trustee's assistance as necessary, cause the Note Payment
Account to be moved to a Qualified Institution or a Qualified Trust Institution
within ten (10) Business Days (or such longer period not to exceed thirty (30)
calendar days as to which each Rating Agency may consent).
(c) The Servicer shall, prior to the Closing Date, establish and maintain
a segregated trust account in the name of the Owner Trustee at a Qualified
Institution or Qualified Trust Institution (which shall initially be ),
which shall be designated as the "Certificate Distribution Account".
Except as provided in the Trust Agreement, the Certificate Distribution Account
shall be held in trust for the benefit of the Certificateholders. The
Certificate Distribution Account shall be under the sole dominion and control
of the Owner Trustee. All monies deposited from time to time in the
Certificate Distribution Account pursuant to this Agreement and the Indenture
shall be held by the Owner Trustee as part of the Trust Property and shall be
applied as provided in the Basic Documents. In the event that the Certificate
Distribution Account is no longer to be maintained at , the
Servicer shall, with the Owner Trustee's assistance as necessary, cause the
Certificate Distribution Account to be moved to a Qualified Institution or a
Qualified Trust Institution within ten (10) Business Days (or such longer
period not to exceed thirty (30) calendar days as to which each Rating Agency
may consent).
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(d) The Servicer shall, prior to the Closing Date, establish and maintain
a segregated trust account in the name of the Indenture Trustee at a Qualified
Institution or Qualified Trust Institution (which shall initially be ),
which shall be designated as the "Payahead Account" (the Payahead
Account, together with the Collection Account and the Note Payment Account, the
"Trust Accounts"). The Payahead Account shall be held in trust for the benefit
of the Securityholders. The Payahead Account shall be under the sole dominion
and control of the Indenture Trustee provided, that the Servicer may make
deposits to and direct the Indenture Trustee in writing to make withdrawals
from the Payahead Account in accordance with the Basic Documents. All monies
deposited from time to time in the Payahead Account shall be held by the
Indenture Trustee as part of the Trust Property and all deposits to and
withdrawals therefrom shall be made only upon the terms and conditions of the
Basic Documents.
If the Servicer is required to remit collections pursuant to the first
sentence of Section 4.2, all amounts held in the Payahead Account shall, to the
extent permitted by applicable law, rules and regulations, be invested, as
directed in writing by the Servicer, by the bank or trust company then
maintaining the Payahead Account in Permitted Investments that mature not later
than the Business Day immediately prior to the Distribution Date for the
Collection Period to which such amounts relate and such Permitted Investments
shall be held to maturity. All interest and other income (net of losses and
investment expenses) on funds on deposit in the Payahead Account shall be
withdrawn from the Payahead Account at the direction of the Servicer and shall
be paid to . In the event that the Payahead Account is no
longer to be maintained at , the Servicer shall, with the
Indenture Trustee's or Owner Trustee's assistance as necessary, cause the
Payahead Account to be moved to a Qualified Institution or a Qualified Trust
Institution within ten (10) Business Days (or such longer period not to exceed
thirty (30) calendar days as to which each Rating Agency may consent).
(e) Notwithstanding the provisions of clause (d) above and of Section
4.6(a)(ii), for so long as (i) Ford Credit is the Servicer, (ii) the rating of
Ford Credit's short-term unsecured debt is at least P-1 by
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Moody's and is at least A-1 by Standard & Poor's and (iii) no Event of
Servicing Termination shall have occurred (each, a "Monthly Remittance
Condition"), Payaheads need not be remitted to and deposited in the Payahead
Account but instead may be remitted to and held by the Servicer. So long as
each Monthly Remittance Condition is satisfied, the Servicer shall not be
required to segregate or otherwise hold separate any Payaheads remitted to the
Servicer as aforesaid but shall be required to remit Payaheads to the
Collection Account in accordance with Section 4.6(a)(i). At any time as any
Monthly Remittance Condition is not satisfied, the Servicer shall deposit in
the Payahead Account the amount of any Payaheads then held or received by it
(which amount shall be at least equal to the Payahead Balance as of the close
of business on the last day of the immediately preceding Collection Period).
Notwithstanding the foregoing, if a Monthly Remittance Condition is not
satisfied the Servicer may utilize, with respect to Payaheads, an alternative
remittance schedule (which may include the remittance schedule utilized by the
Servicer before the Monthly Remittance Condition became unsatisfied), if the
Servicer provides to the Owner Trustee and the Indenture Trustee written
confirmation from each Rating Agency that such alternative remittance schedule
will not result in the downgrading or withdrawal by such Rating Agency of the
ratings then assigned to the Notes and the Certificates. The Owner Trustee and
the Indenture Trustee shall not be deemed to have knowledge of any event or
circumstance under clause (iii) of the first sentence of this Section 4.1(e)
that would require remittance of the Payaheads to the Payahead Account unless
the Owner Trustee or the Indenture Trustee has received notice of such event or
circumstance from the Seller or the Servicer in an Officer's Certificate or
from the Noteholders of Notes evidencing not less than 25% of the principal
amount of the Notes Outstanding or from the Certificateholders of Certificates
evidencing not less than 25% of the Certificate Balance or unless a Trustee
Officer in the Corporate Trust Office with knowledge hereof and familiarity
herewith has actual knowledge of such event or circumstance.
SECTION 4.2. Collections. The Servicer shall remit daily to the
Collection Account (i) all payments by or on behalf of the Obligors (including
Payaheads on the Receivables and Rule of 78's Payments, but excluding Pur-
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chased Receivables) and (ii) all Liquidation Proceeds, both as
collected during the Collection Period. Ford Credit, so long as it is acting
as the Servicer, may make remittances of collections on a less frequent basis
than that specified in the immediately preceding sentence. It is understood
that such less frequent remittances may be made only on the specific terms and
conditions set forth below in this Section 4.2 and only for so long as such
terms and conditions are fulfilled. Accordingly, notwithstanding the
provisions of the first sentence of this Section 4.2, the Servicer shall remit
collections received during a Collection Period to the Collection Account in
immediately available funds on the related Distribution Date but only for so
long as each Monthly Remittance Condition is satisfied. Notwithstanding the
foregoing, if a Monthly Remittance Condition is not satisfied the Servicer may
utilize an alternative remittance schedule (which may include the remittance
schedule utilized by the Servicer before the Monthly Remittance Condition
became unsatisfied), if the Servicer provides to the Owner Trustee and the
Indenture Trustee written confirmation from each Rating Agency that such
alternative remittance schedule will not result in the downgrading or
withdrawal by such Rating Agency of the ratings then assigned to the Notes and
the Certificates. The Owner Trustee or the Indenture Trustee shall not be
deemed to have knowledge of any event or circumstance under clause (iii) of the
definition of Monthly Remittance Condition that would require daily remittance
by the Servicer to the Collection Account unless the Owner Trustee or the
Indenture Trustee has received notice of such event or circumstance from the
Seller or the Servicer in an Officer's Certificate or from the Noteholders of
Notes evidencing not less than 25% of the principal amount of the Notes
Outstanding or from the Certificateholders of Certificates evidencing not less
than 25% of the Certificate Balance or a Trustee Officer in the Corporate Trust
Office with knowledge hereof or familiarity herewith has actual knowledge of
such event or circumstance. For purposes of this Article IV the phrase
"payments by or on behalf of Obligors" shall mean payments made by Persons
other than the Servicer or by other means.
SECTION 4.3. Application of Collections. For the purposes of this
Agreement, as of the close of business on the last day of each Collection
Period, all col-
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lections for the Collection Period with respect to each Receivable
(other than a Purchased Receivable) shall be applied by the Servicer as
follows:
Payments by or on behalf of the Obligor which are not late fees,
prepayment charges, or other administrative fees and expenses, or
similar charges which constitute the Supplemental Servicing Fee shall
be applied first to reduce Outstanding Advances made with respect to
such Receivable, as described in Section 4.4(a) below. Next, any
excess shall be applied (i) in the case of Simple Interest
Receivables, to interest and principal on the Receivable in
accordance with the Simple Interest Method and (ii) in the case of
Precomputed Receivables, to the Scheduled Payment with respect to
such Receivable and any remaining excess (except for partial
prepayments which cause a reduction in the Obligor's periodic payment
to below the Scheduled Payment as of the Cutoff Date) shall be added
to the Payahead Balance, and shall be applied to prepay the
Precomputed Receivable but only if the sum of such excess and the
previous Payahead Balance shall be sufficient to prepay the
Precomputed Receivable in full, otherwise such excess shall
constitute a Payahead, and shall increase the Payahead Balance.
SECTION 4.4. Advances. (a) As of the close of business on the last day
of each Collection Period, if the payments by or on behalf of the Obligor on a
Precomputed Receivable (other than a Purchased Receivable) after application
under Section 4.3 shall be less than the Scheduled Payment, whether as a result
of any extension granted to the Obligor or otherwise, the Payahead Balance, if
any, with respect to such Receivables shall be applied by the Indenture Trustee
to the extent of the shortfall, and such Payahead Balance shall be reduced
accordingly. Next, subject to the following sentence, the Servicer shall make
an Advance of any remaining shortfall. The Servicer will be obligated to make
an Advance in respect of a Receivable only to the extent that the Servicer, in
its sole discretion, shall determine that the Advance shall be recoverable from
subsequent collections or recoveries on any Receivable.
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With respect to each Receivable, the Advance shall increase Outstanding
Advances. Outstanding Advances shall be reduced by subsequent payments by or
on behalf of the Obligor, collections of Liquidation Proceeds and payments of
the Purchase Amount.
If the Servicer shall determine that an Outstanding Advance with respect
to any Receivable shall not be recoverable, the Servicer shall be reimbursed
from any collections made on other Receivables in the Trust, and Outstanding
Advances with respect to such Receivable shall be reduced accordingly.
(b) 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 Annual Percentage Rate, the
Servicer shall make an unreimbursable advance of the amount of such interest.
SECTION 4.5. Additional Deposits. (a) The Servicer shall deposit in the
Collection Account the aggregate Advances pursuant to Section 4.4(a) and the
aggregate advances pursuant to Section 4.4(b). To the extent that the Servicer
fails to make an advance pursuant to Section 4.4(b) on the date required, the
Indenture Trustee shall withdraw such amount from the Reserve Account and
deposit such amount in the Collection Account. The Servicer and the Seller
shall deposit in the Collection Account the aggregate Purchase Amounts with
respect to Purchased Receivables and the Servicer shall deposit therein all
amounts to be paid under Sections 9.1 and 3.7(b). The Indenture Trustee shall
deposit in the Collection Account the aggregate of amounts received pursuant to
the Yield Supplement Agreement, if any, and amounts received from the Letter of
Credit Bank or the Yield Supplement Account, if any, pursuant to Article V.
All such deposits with respect to a Collection Period shall be made, in
immediately available funds, on the Distribution Date related to such
Collection Period.
(b) The Indenture Trustee shall on the Distribution Date relating to
each Collection Period make a withdrawal from the Reserve Account in an amount
equal to the amount (if positive) calculated by the Servicer pursuant to the
second sentence of Section 4.6(b) and shall deposit such funds into the
Collection Account.
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SECTION 4.6. Distributions. (a) On each Distribution Date, the
Indenture Trustee shall cause to be made the following transfers and
distributions in the amounts set forth in the Servicer's Certificate for such
Distribution Date:
(i) From the Payahead Account, or from the Servicer in the event
the provisions of Section 4.1(e) above are applicable, to the Collection
Account, in immediately available funds, (x)Ethe portion of Payaheads
constituting Scheduled Payments or prepayments in full, required by
Sections 4.3 and 4.4(a), and (y) the Payahead Balance, if any, relating
to any Purchased Receivable.
(ii) From the Collection Account to the Payahead Account, or to the
Servicer in the event the provisions of Section 4.1(e) above are
applicable, in immediately available funds, the aggregate Payaheads
required by Section 4.3 for the Collection Period related to such
Distribution Date.
(iii) From the Collection Account to the Servicer, in immediately
available funds, repayment of Outstanding Advances pursuant to Section
4.4(a).
(b) Prior to each Distribution Date, the Servicer shall on each
Determination Date calculate the Available Funds, the Available Interest, the
Available Principal, the Scheduled Principal, the Servicing Fee, the Accrued
Note Interest, the Noteholders' Regular Principal, the Noteholders' Accelerated
Principal, the Principal Distribution Amount, the Accrued Certificate Interest,
the Certificateholders' Regular Principal and the Yield Supplement Amount, if
any. In addition, the Servicer shall calculate on each Determination Date the
difference between the Total Required Payment (together with, after the Notes
have been paid in full, the Certificateholders' Regular Principal) and
Available Funds.
(c) On each Distribution Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Determination Date pursuant to Section 3.9), to make
the following withdrawals from the Collec-
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tion Account and make deposits, distributions and payments, to the extent of
funds on deposit in the Collection Account, in the following order of priority:
(i) first, to the Servicer, the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(ii) second, to the Note Payment Account, the Accrued Note
Interest;
(iii) third, to the Note Payment Account, the Noteholders'
Regular Principal;
(iv) fourth, to the Certificate Distribution Account, the
Accrued Certificate Interest;
(v) fifth, on or after the Distribution Date on which the
outstanding principal amount of all the Notes is reduced to zero,
to the Certificate Distribution Account, the Certificateholders'
Regular Principal;
(vi) sixth, to the Reserve Account, the amount, if any,
necessary to reinstate the balance in the Reserve Account up to
the Specified Reserve Balance;
(vii) seventh, to the Note Payment Account, the Noteholders'
Accelerated Principal; and
(viii) eighth, to the Seller, any remaining portion of funds
on deposit in the Collection Account.
Notwithstanding the foregoing, following the occurrence and during the
continuation of an Event of Default which has resulted in an acceleration of
the Notes or following an Insolvency Event or a dissolution with respect to the
Seller or the General Partner, the Available Funds remaining after the
application of clauses (i) and (ii) above will be deposited in the Note Payment
Account to the extent necessary to reduce the principal amount of all the Notes
to zero, and the Certificateholders will not receive any distributions until
the principal amount
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and accrued interest on all the Notes have been paid in full.
SECTION 4.7. Reserve Account. (a) (i) The Seller shall, prior to the
Closing Date, establish and maintain an account in the name of the Indenture
Trustee at a Qualified Institution or Qualified Trust Institution (which shall
initially be ), which shall be designated as the "Reserve Account".
The Reserve Account shall be under the sole dominion and control of the
Indenture Trustee; provided, that the Servicer may make deposits to the Reserve
Account in accordance with the Basic Documents. On the Closing Date, the
Seller shall deposit the Reserve Initial Deposit into the Reserve Account from
the net proceeds of the sale of the Notes and the Certificates. All amounts on
deposit in and credited to the Reserve Account, including the Reserve Initial
Deposit and any Permitted Investments (whether in the form of deposit accounts,
Physical Property, book-entry securities, uncertificated securities or
otherwise), and all proceeds thereof (such amounts, the "Reserve Account
Property") shall hereby be sold, conveyed and transferred by the Seller to the
Trust. Pursuant to the Indenture, the Trust will pledge all of its right,
title and interest in, to and under the Reserve Account and the Reserve Account
Property to the Indenture Trustee on behalf of the Noteholders to secure the
Trust's obligations under the Notes and the Indenture.
The Reserve Account Property shall, to the extent permitted by applicable
law, rules and regulations, be invested, as directed in writing by the
Servicer, by the bank or trust company then maintaining the Reserve Account in
Permitted Investments that mature not later than the next Distribution Date,
and such Permitted Investments shall be held to maturity. All interest and
other income (net of losses and investment expenses) on funds on deposit in the
Reserve Account shall, upon the written direction of the Servicer, be paid to
the Seller on any Distribution Date to the extent funds on deposit therein, as
certified by the Servicer, exceed the Specified Reserve Balance. In the event
the Reserve Account is no longer to be maintained at ,
the Servicer shall, with the Indenture Trustee's or Owner Trustee's
assistance as necessary, cause the Reserve Account to be moved to a Qualified
Institution or a Qualified Trust Institution within ten
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(10) Business Days (or such longer period not to exceed thirty (30) calendar
days as to which each Rating Agency may consent).
(ii) With respect to Reserve Account Property:
(A) any Reserve Account Property that is held in
deposit accounts shall be held solely in the name of the
Indenture Trustee at one or more depository institutions
having the Required Rating. Each such deposit account
shall be subject to the exclusive custody and control of
the Indenture Trustee, and the Indenture Trustee shall have
sole signature authority with respect thereto.
(B) any Reserve Account Property that constitutes
Physical Property shall be delivered to the Indenture
Trustee in accordance with paragraph (a) of the definition
of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a financial
intermediary (as such term is defined in Section 8-313(4)
of the UCC) acting solely for the Indenture Trustee.
(C) any Reserve Account Property that is a book-entry
security held through the Federal Reserve System pursuant
to federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued
book-entry registration of such Reserve Account Property
as described in such paragraph.
(D) any Reserve Account Property that is an
"uncertificated security" under Article 8 of the UCC shall
be delivered to the Indenture Trustee in accordance with
paragraph (c) of the definition of "Delivery" and shall be
maintained by the Indenture Trustee, pending maturity or
disposi-
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tion, through continued registration of the
Indenture Trustee's (or its nominee's) ownership of such
security;
(E) Property of a type which is not capable of being
delivered to the Indenture Trustee in accordance with the
definition of "Delivery" shall not constitute Reserve
Account Property.
Effective upon Delivery of any Reserve Account Property in the form of
Physical Property, uncertified securities or book-entry securities, the
Indenture Trustee shall be deemed to have represented that it has purchased
such Reserve Account Property for value, in good faith, and without notice of
any adverse claim thereto.
(b) If the Servicer pursuant to Section 4.4 determines on any
Determination Date that it is required to make an Advance and does not do so
from its own funds, the Servicer shall promptly instruct the Indenture Trustee
in writing to withdraw funds, in an amount specified by the Servicer, from the
Reserve Account and deposit them in the Collection Account to cover any
shortfall. Such payment shall be deemed to have been made by the Servicer
pursuant to Section 4.4 for purposes of making distributions pursuant to this
Agreement, but shall not otherwise satisfy the Servicer's obligation to deliver
the amount of the Advances to the Indenture Trustee, and the Servicer shall
within two Business Days replace any funds in the Reserve Account so used.
(c) If the amount on deposit in the Reserve Account on any Distribution
Date (after giving effect to all deposits thereto or withdrawals therefrom on
such Distribution Date) is greater than the Specified Reserve Balance for such
Distribution Date, the Servicer shall instruct the Indenture Trustee to
distribute the amount of such excess to the Seller; provided that the Indenture
Trustee and the Owner Trustee hereby release, on each Distribution Date, their
security interest in, to and under Reserve Account Property distributed to the
Seller; and provided further, that any portion of such excess attributable to
investment income (net of losses and investment expenses) shall be paid to the
Seller.
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(d) Following the payment in full of the aggregate principal amount of the
Notes and the Certificate Balance and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders and the termination of the Trust, any
remaining Reserve Account Property shall be distributed to the Seller.
SECTION 4.8. Net Deposits. For so long as (i) Ford Credit shall be the
Servicer, (ii) the Servicer shall be entitled pursuant to Section 4.2 to remit
collections on a monthly rather than daily basis, and (iii) the Servicer shall
be entitled pursuant to Section 4.1(e) to retain Payaheads rather than deposit
them in the Payahead Account, Ford Credit may make the remittances pursuant to
Sections 4.2 and 4.5 above, net of amounts to be distributed to Ford Credit
pursuant to Section 4.6(c). Nonetheless, the Servicer shall account for all of
the above described remittances and distributions except for the Supplemental
Servicing Fee in the Servicer's Certificate as if the amounts were deposited
and/or transferred separately. The Seller may make the remittances pursuant to
Sections 4.2 and 4.5 above, net of amounts to be distributed to the Seller
pursuant to Sections 4.6(c) and 4.7(c). Nonetheless, the Seller shall account
for all of the above described remittances and distributions as if the amounts
were deposited and/or transferred separately.
SECTION 4.9. Statements to Noteholders and Certificateholders. On each
Distribution Date, the Servicer shall provide to the Indenture Trustee (with
copies to the Rating Agencies and each Note Paying Agent) for the Indenture
Trustee to forward to each Noteholder of record as of the most recent Record
Date and to the Owner Trustee (with copies to the Rating Agencies and to each
Certificate Paying Agent) for the Owner Trustee to forward to each
Certificateholder of record as of the most recent Record Date a statement based
on information in the Servicer's Certificate furnished pursuant to Section 3.9,
setting forth for the Collection Period relating to such Distribution Date the
following information as to the Notes and the Certificates to the extent
applicable:
(i) the amount of such distribution allocable to principal
allocable to the Notes and to the Certificates;
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(ii) the amount of such distribution allocable to interest
allocable to the Notes and the Certificates;
(iii) the amount of such distribution allocable to the Yield
Supplement Amount;
(iv) the Pool Balance as of the close of business on the last day
of the preceding Collection Period;
(v) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and the amount of any unpaid
Servicing Fees and the change in such amount from that of the prior
Distribution Date;
(vi) the amounts of the Noteholders' Interest Carryover Shortfall,
the Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall, if any, on such Distribution Date and the change in
such amounts from the preceding Distribution Date;
(vii) the aggregate outstanding principal amount of each Class of
Notes, the Note Pool Factor for each Class of Notes, the Certificate
Balance and the Certificate Pool Factor as of such Distribution Date;
(viii) the balance of the Reserve Account on such Distribution
Date, after giving effect to distributions made on such Distribution Date
and the change in such balance from the preceding Distribution Date;
(ix) the amount of the aggregate Realized Losses, if any, with
respect to the related Collection Period;
(x) the aggregate Purchase Amount of Receivables repurchased by the
Seller or purchased by the Servicer, if any, with respect to the related
Collection Period; and
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(xi) the amount of Advances, if any, on such Distribution Date.
Each amount set forth on the Distribution Date statement pursuant to
clauses (i), (ii), (v) or (vi) above shall be expressed as a dollar amount per
$1,000 of original principal amount or original Certificate Balance of a Note
or a Certificate, as applicable.
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ARTICLE V
YIELD SUPPLEMENT LETTER OF CREDIT
SECTION 5.1. Yield Supplement Letter of Credit and the Yield Supplement
Account.
(a) The Servicer shall, prior to the Closing Date, establish and maintain
an account in the name of the Indenture Trustee at a Qualified Institution or
Qualified Trust Institution (which shall initially be ),
which shall be designated as the "Yield Supplement Account". Amounts on
deposit in the Yield Supplement Account will be used for the payment of any
Yield Supplement Amounts required to be paid on any Distribution Date pursuant
to the Yield Supplement Agreement which Ford Credit has not paid as of such
Distribution Date. The Yield Supplement Account shall be under the sole
dominion and control of the Indenture Trustee; provided that the Servicer may
make deposits to and direct the Indenture Trustee to make withdrawals from the
Yield Supplement Account in accordance with the Basic Documents. On the
Closing Date, the Seller will deposit the Yield Supplement Initial Deposit into
the Yield Supplement Account from the net proceeds of the sale of the Notes and
the Certificates. To the extent, on any Distribution Date, the amount on
deposit in the Yield Supplement Account (after giving effect to any withdrawals
to be made on such Distribution Date, but exclusive of net investment income)
is greater than the Specified Yield Supplement Balance, then, in such event,
the Servicer shall instruct the Indenture Trustee in writing to pay such excess
amount to the Seller. In the event that the Yield Supplement Account is no
longer to be maintained at ,
the Servicer shall, with the Indenture Trustee's assistance as necessary,
cause the Yield Supplement Account to be moved to a Qualified Institution or a
Qualified Trust Institution within ten (10) Business Days (or such longer
period not to exceed thirty (30) calendar days as to which each Rating Agency
may consent).
The Seller hereby sells, conveys and transfers to the Trust the Yield
Supplement Account, all funds and investments on deposit therein or credited
thereto and
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all proceeds thereof, subject, however, to the limitations set forth below.
Pursuant to the Indenture, the Trust will pledge its rights under the
Yield Supplement Agreement (including its rights to amounts on deposit in the
Yield Supplement Account) to the Indenture Trustee to secure its obligations
under the Notes and the Indenture. Such sale, conveyance and transfer of the
Yield Supplement Account by the Seller to the Trust, and such pledge by the
Trust of its rights to amounts in the Yield Supplement Account to the Indenture
Trustee, shall be subject to the following limitations:
(i) All or a portion of the Yield Supplement Account may be
invested and reinvested in the manner specified in Section 4.1(a) in
accordance with written instructions from the Servicer. All such
investments shall be made in the name of the Indenture Trustee and
all income and gain realized thereon shall be solely for the benefit
of and shall be payable by the Indenture Trustee to
upon written direction of the Servicer in the manner specified in
Section 4.1(a);
(ii) If, with respect to any Collection Period, Ford Credit
shall have failed to make or cause to be made in full the remittance
of the Yield Supplement Amount on the date required by the Yield
Supplement Agreement, the Indenture Trustee on the related
Distribution Date, shall, upon the written direction of the Servicer,
withdraw from the Yield Supplement Account and deposit into the
Collection Account the amount of the shortfall between the amount of
funds that are required to be remitted by Ford Credit with respect to
the Yield Supplement Agreement as set forth in the Servicer's
Certificate and the amount of funds actually so remitted and to the
extent of any remaining shortfall, the Indenture Trustee shall
withdraw an amount equal thereto from the Reserve Account and deposit
such amount in the Collection Account; and
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(iii) Upon termination of this Agreement in accordance with
Section 9.1 or (a) in the event that the Seller obtains a Yield
Supplement Letter of Credit or (b) the Seller otherwise satisfies the
requirements with respect to the Yield Supplement Agreement
established by the Rating Agencies, in either case as evidenced by
satisfaction of the Rating Agency Condition and, in either case,
delivers to the Indenture Trustee an Opinion of Counsel to the effect
that the contemplated action will not adversely affect the status of
the Trust as a partnership for federal income and Applicable Tax
State income and franchise tax purposes and an Officer's Certificate
of the Seller that all conditions precedent to the liquidation of the
Yield Supplement Account have been satisfied, any amounts on deposit
in the Yield Supplement Account shall, upon written request of the
Seller, be paid to the Seller.
(b) If a Yield Supplement Letter of Credit has been obtained by Ford
Credit, and if, with respect to any Collection Period, Ford Credit shall have
failed to make or cause to be made in full the remittance of the Yield
Supplement Amount, upon written notice by the Servicer of such failure (which
notice shall be given on the Distribution Date for such Collection Period), the
Indenture Trustee shall draw on the Yield Supplement Letter of Credit in
accordance with the terms thereof, in the amount of the shortfall between the
amount of funds with respect to the Yield Supplement Amount that are required
to be remitted by Ford Credit with respect to the Yield Supplement Agreement as
set forth in the Servicer's Certificate and the amount of funds actually so
remitted as set forth in the Servicer's Certificate. Any such draw on the
Yield Supplement Letter of Credit shall be made after receipt of the related
Servicer's Certificate on the Distribution Date for such Collection Period.
Upon receipt of a request for a draw by the Indenture Trustee under the Yield
Supplement Letter of Credit, the Letter of Credit Bank is to promptly make a
payment to the Indenture Trustee in an amount equal to the Yield Supplement
Amount (minus payments made on the Yield Supplement Agreement), and the
Indenture Trustee shall deposit into the Collection Account pursuant to Section
4.5 the amount received from the Letter of Credit Bank in
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respect of such drawing. The Servicer shall include in each Servicer's
Certificate, or in an Officer's Certificate provided to the Indenture Trustee
with each Servicer's Certificate, the Stated Amount (as defined in the Yield
Supplement Letter of Credit) of the Yield Supplement Letter of Credit as of the
close of business on the last day of the Collection Period preceding the date
of such Servicer's Certificate. In the event that the rating of the Letter of
Credit Bank declines below the Required Rating, the Servicer shall promptly
notify the Indenture Trustee in writing of such decline, and upon receipt of
such notification, the Indenture Trustee shall, unless a suitable replacement
letter of credit shall have been delivered, promptly draw the full amount
available under the Yield Supplement Letter of Credit and deposit such amount
in the Yield Supplement Account.
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ARTICLE VI
THE SELLER
SECTION 6.1. Representations and Warranties of Seller. The Seller makes
the following representations and warranties on which the Issuer is deemed to
have relied in acquiring the Trust Property. The representations and
warranties speak as of the execution and delivery of this Agreement and shall
survive the sale of the Trust Property to the Issuer and the pledge thereof by
the Issuer to the Indenture Trustee pursuant to the Indenture:
(a) Organization and Good Standing. The Seller shall have been duly
organized and shall be validly existing as a limited partnership in good
standing under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and had at all
relevant times, and shall have, power, authority, and legal right to acquire
and own the Receivables.
(b) Due Qualification. The Seller shall be duly qualified to do business
as a foreign limited partnership in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority. The Seller shall have the power and authority
to execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their terms. The Seller shall have full power and
authority to sell and assign the property to be sold and assigned to and
deposited with the Issuer and has duly authorized such sale and assignment to
the Issuer by all necessary action; and the execution, delivery, and
performance of this Agreement and the other Basic Documents to which it is a
party shall have been duly authorized by the Seller by all necessary action.
(d) Valid Sale; Binding Obligation. This Agreement shall evidence a
valid sale, transfer, and assignment of the Receivables and the other Trust
Property
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conveyed by the Seller to the Issuer hereunder, enforceable against
creditors of and purchasers from the Seller; and this Agreement and the other
Basic Documents to which the Seller is a party constitute legal, valid, and
binding obligations of the Seller, enforceable against the Seller in accordance
with their terms, subject, as to enforceability, to applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership, liquidation and
other similar laws and to general equitable principles.
(e) No Violation. The consummation of the transactions contemplated
by this Agreement and the other Basic Documents to which the Seller is a party
and the fulfillment of the terms hereof and thereof will not conflict with,
result in any breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time or both) a default under, the
Certificate of Limited Partnership or Limited Partnership Agreement, any
indenture, agreement, or other instrument to which the Seller is a party or by
which the Seller is bound; nor result in the creation or imposition of any lien
upon any of its properties pursuant to the terms of any such indenture,
agreement, or other instrument; nor violate any law or, to the best of the
Seller's knowledge, any order, rule, or regulation applicable to the Seller of
any federal or State regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
(f) No Proceedings. To the Seller's best knowledge, there are no
proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over the Seller or its properties: (i) asserting the
invalidity of this Agreement, the Indenture, any of the other Basic Documents,
the Notes or the Certificates, (ii) seeking to prevent the issuance of the
Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Indenture or any of the other Basic
Documents, (iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement, the Indenture, any of the other
Basic Documents, the Notes or the Certificates, or (iv) relating to the Seller
and which might adversely
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affect the federal or Applicable Tax State income, excise, franchise or similar
tax attributes of the Notes or the Certificates.
SECTION 6.2. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement, and hereby agrees to the
following:
(a) The Seller shall indemnify, defend, and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against any taxes that may at
any time be asserted against any such Person with respect to, and as of the
date of, the sale of the Receivables to the Issuer or the issuance and original
sale of the Notes and the Certificates, including any sales, gross receipts,
general corporation, tangible personal property, privilege, or license taxes
(but, in the case of the Issuer, not including any taxes asserted with respect
to ownership of the Receivables or federal or other Applicable Tax State income
taxes arising out of the transactions contemplated by this Agreement and the
other Basic Documents) and costs and expenses in defending against the same.
(b) The Seller shall indemnify, defend, and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders from and against any loss, liability or expense incurred by
reason of (i) the Seller's willful misfeasance, bad faith, or negligence (other
than errors in judgment) in the performance of its duties under this
Agreement, or by reason of reckless disregard of its obligations and duties
under this Agreement and (ii) the Seller's violation of federal or State
securities laws in connection with the registration or the sale of the Notes or
the Certificates.
(c) The Seller shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained herein and in the
Trust Agreement, in the case of the Owner Trustee, and in
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the Indenture, in the case of the Indenture Trustee, except to the
extent that such cost, expense, loss, claim, damage or liability: (i) in the
case of the Owner Trustee, shall be due to the willful misfeasance, bad faith
or negligence (except for errors in judgment) of the Owner Trustee or, in the
case of the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence (except for errors in judgment) of the Indenture Trustee;
or (ii) in the case of the Owner Trustee shall arise from the breach by the
Owner Trustee of any of its representations or warranties set forth in Section
7.3 of the Trust Agreement or (iii) in the case of the Indenture Trustee shall
arise from the breach by the Indenture Trustee of any of its representations
and warranties set forth in the Indenture.
(d) The Seller shall pay any and all taxes levied or assessed upon all or
any part of the Owner Trust Estate.
(e) Indemnification under this Section 6.2 shall survive the resignation
or removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and shall include, without limitation, reasonable fees and
expenses of counsel and expenses of litigation. If the Seller shall have made
any indemnity payments pursuant to this Section 6.2 and the Person to or on
behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall repay such amounts to the Seller,
without interest.
SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (i) into which the Seller may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Seller shall be a party, (iii) succeeding to the business of the
Seller, or (iv) more than 50% of the voting stock of which is owned directly or
indirectly by Ford Motor Company, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, will be the successor to the Seller under this Agreement
without the execution or filing of any document or any further act on the part
of any of the parties to this Agreement; provided, however, that (x) the Seller
shall have delivered to the Owner Trustee and the Indenture
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Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such merger, conversion, consolidation or succession and such agreement of
assumption comply with this Section 6.3 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with and (y) the Seller shall have delivered to the Owner Trustee and
the Indenture Trustee an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Issuer and the Indenture Trustee,
respectively, in the Receivables and the other Trust Property, and reciting the
details of such filings, or (B) stating that, in the opinion of such counsel,
no such action shall be necessary to preserve and protect such interest. The
Seller shall provide notice of any merger, conversion, consolidation, or
succession pursuant to this Section 6.3 to the Rating Agencies.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (x) or (y) above shall be
conditions to the consummation of the transactions referred to in clauses (i),
(ii) or (iii) above.
SECTION 6.4. Limitation on Liability of Seller and Others. The Seller
and any officer or employee or agent of the Seller may rely in good faith on
the advice of counsel or on any document of any kind, prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Seller shall not be under any obligation to appear in, prosecute, or defend
any legal action that shall not be incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or liability.
SECTION 6.5. Seller May Own Notes or Certificates. The Seller, and any
Affiliate of the Seller, may in its individual or any other capacity become the
owner or pledgee of Notes or Certificates with the same rights as it would have
if it were not the Seller or an Affiliate thereof, except as otherwise
expressly provided herein or in the other Basic Documents. Except as set forth
herein or in the other Basic Documents, Notes and Certificates so owned by or
pledged to the Seller or any such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement and the
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other Basic Documents, without preference, priority, or distinction as among
all of the Notes and Certificates.
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ARTICLE VII
[RESERVED]
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ARTICLE VIII
[RESERVED]
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ARTICLE IX
TERMINATION
SECTION 9.1. Optional Purchase of All Receivables. (a) On the last day
of any Collection Period as of which the Pool Factor shall be less than the
Optional Purchase Percentage, the Servicer shall have the option to purchase
the corpus of the Trust. To exercise such option, the Servicer shall deposit
pursuant to Section 4.5 in the Collection Account an amount equal to the
aggregate Purchase Amount for the Receivables, plus the appraised value of any
other property held by the Trust, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Owner Trustee and the Indenture
Trustee, and shall succeed to all interests in and to the Trust.
Notwithstanding the foregoing, the Servicer shall not be permitted to exercise
such option unless the amount to be deposited in the Collection Account
pursuant to the preceding sentence is greater than or equal to the sum of the
outstanding principal amount of the Notes and the Certificate Balance and all
accrued but unpaid interest (including any overdue interest) thereon. The
amount deposited in the Collection Account pursuant to this Section 9.1 shall
be used on the next Distribution Date to make payments in full to Noteholders
and Certificateholders in the manner set forth in Article IV.
SECTION 9.2. Succession Upon Satisfaction and Discharge of Indenture.
Following the satisfaction and discharge of the Indenture and the payment in
full of the principal of and interest on the Notes, the Certificateholders will
succeed to the rights of the Noteholders hereunder, and the Indenture Trustee
will, continue to carry out its obligations hereunder with respect to the
Certificateholders, including without limitation making distributions from the
Payahead Account and the Collection Account in accordance with Section 4.6 and
making withdrawals from the Reserve Account in accordance with Section 4.5(b)
and Section 4.7.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Amendment. (a) This Agreement may be amended by the
Seller, the Servicer and the Issuer, with the consent of the Indenture Trustee
and the Owner Trustee to the extent that their respective rights or obligations
may be affected thereby (which consent may not be unreasonably withheld), but
without the consent of any of the Noteholders or the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement,
or to add any other provisions with respect to matters or questions arising
under this Agreement that shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Owner Trustee and the Indenture Trustee,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
(b) This Agreement may also be amended from time to time by the Seller,
the Servicer and the Issuer, with the consent of the Indenture Trustee and the
Owner Trustee to the extent that their respective rights or obligations may be
affected thereby (which consent may not be unreasonably withheld) and with the
consent of (i) the Noteholders of Notes evidencing not less than a majority of
the principal amount of the Notes Outstanding and (ii) the Certificateholders
of Certificates evidencing not less than a majority of the Certificate Balance
(which consent of any Noteholder of a Note or Certificateholder of a
Certificate given pursuant to this Section 10.1 or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Note or
Certificate, as the case may be, and on all future Noteholders of such Note or
Certificateholders of such Certificate, as the case may be, and of any Note or
Certificate, as applicable, issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is made upon
such Note or the Certificate), for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or
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accelerate or delay the timing of, or change the allocation or priority
of, collections of payments on Receivables or distributions that shall be
required to be made on any Note or Certificate or change any Note Interest Rate
or the Certificate Rate or the Specified Reserve Balance, without the consent
of all adversely affected Noteholders or Certificateholders or (b) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of the Noteholders of all Notes and Certificateholders of all
Certificates affected thereby.
(c) Prior to the execution of any such amendment or consent the Servicer
will provide and the Owner Trustee shall distribute written notification of the
substance of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
Rating Agency. It shall not be necessary for the consent of Noteholders or the
Certificateholders pursuant to this Section 10.1 to approve the particular form
of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Noteholders and Certificateholders provided
for in this Agreement) and of evidencing the authorization of the execution
thereof by Noteholders and Certificateholders shall be subject to such
reasonable requirements as the Owner Trustee and the Indenture Trustee may
prescribe, including the establishment of record dates pursuant to paragraph
number 2 of the Depository Agreements.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement and the Opinion of Counsel referred to in
Section 10.2(i)(1). The Owner Trustee or the Indenture Trustee may, but shall
not be obligated to, enter into any such amendment which affects such Owner
Trustee's or Indenture
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<PAGE> 47
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 10.2. Protection of Title to Trust. (a) The Seller shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
Issuer and the Indenture Trustee for the benefit of the Noteholders in the
Receivables and in the proceeds thereof. The Seller shall deliver (or cause to
be delivered) to the Owner Trustee and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as
soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity,
or corporate structure in any manner that would, could, or might make any
financing statement or continuation statement filed by the Seller in accordance
with paragraph (a) above seriously misleading within the meaning of Section
9-402(7) of the UCC, unless it shall have given the Owner Trustee and the
Indenture Trustee at least five (5) days' prior written notice thereof and
shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements.
(c) The Seller and the Servicer shall give the Owner Trustee and the
Indenture Trustee at least sixty (60) days' prior written notice of any
relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of
any amendment of any previously filed financing or continuation statement
or of any new financing statement and shall promptly file any such amendment or
new financing statement. The Servicer shall at all times maintain each office
from which it shall service Receivables, and its principal executive office,
within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments
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<PAGE> 48
or recoveries on (or with respect to) each Receivable and the amounts from time
to time deposited in the Collection Account, Payahead Account, the Yield
Supplement Account and the Reserve Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Issuer,
the Servicer's master computer records (including any back-up archives) that
refer to a Receivable shall indicate clearly the interest of the Issuer and the
Indenture Trustee in such Receivable and that such Receivable is owned by the
Issuer and has been pledged to the Indenture Trustee pursuant to the Indenture.
Indication of the Issuer's and the Indenture Trustee's interest in a
Receivable shall be deleted from or modified on the Servicer's computer systems
when, and only when, the Receivable shall have been paid in full or
repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender, or other transferee, the
Servicer shall give to such prospective purchaser, lender, or other transferee
computer tapes, records, or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Owner Trustee, the Indenture Trustee
and their respective agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee and the
Indenture Trustee, within twenty (20) Business Days, a list of all Receivables
(by contract number and name of Obligor) then held as part of the Trust,
together with a reconciliation of such list to the Schedule of Receivables and
to each of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust.
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(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this Agreement
and of each amendment thereto, an Opinion of Counsel either (A)
stating that, in the opinion of such Counsel, all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Issuer and the Indenture Trustee in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) stating that, in the opinion of
such Counsel, no such action shall be necessary to preserve and
protect such interest; and
(2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a
date during such 120-day period, either (A) stating that, in the
opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Issuer and the Indenture
Trustee in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are
given, or (B) stating that, in the opinion of such Counsel, no such
action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (i)(1) or (i)(2) above shall
specify any action necessary (as of the date of such opinion) to be taken in
the following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable law, cause the
Notes and the Certificates to be registered with the Securities and Exchange
Commission pursuant to Section 12(b) or Section 12(g) of the Securities
Exchange Act of 1934 within the time periods specified in such sections.
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<PAGE> 50
(k) For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts shall constitute but one and the same instrument.
SECTION 10.3. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights,
and remedies of the parties under this Agreement shall be determined in
accordance with such laws.
SECTION 10.4. Notices. All demands, notices, and communications under
this Agreement shall be in writing, personally delivered, sent by telecopier,
overnight courier or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller or the Servicer, to the agent for service as specified in Section 10.11
hereof, or at such other address as shall be designated by the Seller or the
Servicer in a written notice to the Owner Trustee and the Indenture Trustee,
(b) in the case of the Owner Trustee, at the Corporate Trust Office of the
Owner Trustee, (c) in the case of the Indenture Trustee, at the Corporate Trust
Office of the Indenture Trustee, (d) in the case of Moody's Investors Service,
Inc., at the following address: Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007, and (e) in
the case of Standard & Poor's Ratings Group, at the following address:
Standard & Poor's Ratings Group, 25 Broadway, 20th Floor, New York, New York
10004, Attention: Asset Backed Surveillance Department. Any notice required
or permitted to be mailed to a Noteholder or Certificateholder shall be given
by first class mail, postage prepaid, at the address of such Person as shown in
the Note Register or the Certificate Register, as applicable. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Noteholder or
Certificateholder shall receive such notice.
SECTION 10.5. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
63
<PAGE> 51
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Notes,
the Certificates or the rights of the holders thereof.
SECTION 10.6. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.3 and 8.2 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Owner Trustee, the Indenture Trustee, the
Noteholders of Notes evidencing not less than 66-2/3% of the principal amount
of the Notes Outstanding and the Certificateholders of Certificates evidencing
not less than 66-2/3% of the Certificate Balance.
SECTION 10.7. Further Assurances. The Seller and the Servicer agree to
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Owner Trustee or
the Indenture Trustee more fully to effect the purposes of this Agreement,
including, without limitation, the execution of any financing statements or
continuation statements relating to the Receivables for filing under the
provisions of the UCC of any applicable jurisdiction.
SECTION 10.8. No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Owner Trustee, the Indenture
Trustee, the Noteholders or the Certificateholders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
therein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
SECTION 10.9. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Noteholders, the
Certificateholders, and their respective successors and permit-
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<PAGE> 52
ted assigns. Except as otherwise provided in this Article X, no other
Person will have any right or obligation hereunder. The parties hereto hereby
acknowledge and consent to the pledge of this Agreement by the Issuer to the
Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture.
SECTION 10.10. Actions by Noteholders or Certificateholders. (a)
Wherever in this Agreement a provision is made that an action may be taken or a
notice, demand, or instruction given by Noteholders or Certificateholders, such
action, notice, or instruction may be taken or given by any Noteholder or
Certificateholder, as applicable, unless such provision requires a specific
percentage of Noteholders or Certificateholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Noteholder or Certificateholder shall bind such
Noteholder or Certificateholder and every subsequent holder of such Note or
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done
by the Owner Trustee, the Indenture Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Note or
Certificate.
SECTION 10.11. Agent for Service. The agent for service of the Seller
and the Servicer in respect of this Agreement shall be J.D. Bringard, Esq.,
Ford Motor Credit Company, The American Road, Dearborn, Michigan 48121.
SECTION 10.12. No Bankruptcy Petition. The Owner Trustee, the Indenture
Trustee, the Issuer and the Servicer each covenants and agrees that, prior to
the date which is one year and one day after the payment in full of all
securities issued by the Seller or by a trust for which the Seller was the
depositor which securities were rated by any nationally recognized statistical
rating organization it will not institute against, or join any other Person in
instituting against, the Seller or the General Partner any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or State bankruptcy or similar law. This Section
10.12 shall survive the resignation or removal of the Owner Trustee under the
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<PAGE> 53
Trust Agreement or the Indenture Trustee under the Indenture or the termination
of this Agreement.
SECTION 10.13. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by _____ not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
_____ in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by _____, not in its individual capacity but solely
as Indenture Trustee, and in no event shall _____ have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
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<PAGE> 54
IN WITNESS WHEREOF, the parties have caused this Sale and Servicing
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
FORD CREDIT AUTO RECEIVABLES
TWO L.P.,
as Seller
By: FORD CREDIT AUTO
RECEIVABLES TWO L.P.,
as General Partner
By:
---------------------------------
Name:
Title:
FORD CREDIT AUTO OWNER TRUST
- ;
----- --
as Issuer
By:
----------------------,
as Owner Trustee
By:
-----------------------------------
Name:
Title:
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<PAGE> 55
Accepted and agreed:
,
- -------------------------
as Indenture Trustee
By:
-----------------------------
Name:
Title:
,
- -------------------------
as Owner Trustee
By:
-----------------------------
Name:
Title:
68
<PAGE> 56
SCHEDULE A
[SCHEDULE OF RECEIVABLES]
Delivered to Indenture Trustee at Closing
<PAGE> 57
SCHEDULE B
LOCATION OF RECEIVABLES
Indianapolis
5875 Castle Creek Pkwy. North Drive
Suite 240
Indianapolis, IN 46250-4308
Detroit-North
580 Kirts Boulevard
Suite 300
Troy, MI 48084
Chicago-North
9700 Higgins Road
Suite 720
Rosemont, IL 60018
Ohio South
9797 Springboro Pike
Suite 302
Miamisburg, OH 45343
Detroit/West
One ParkLane Blvd.
Suite 405E
Dearborn, MI 48126
Chicago South
The Office of Waterfall Glen I
Suite 310
900 South Frontage Road
Woodridge, IL 60517
Grand Rapids
2851 Charlevoix Drive SE
Suite 300
Grand Rapids, MI 49546
Chicago - East
One River Place, Suite A
Lansing, IL 60438
<PAGE> 58
Akron
175 Montrose West Avenue
Suite 300 Crown Pointe
Copley, OH 44321
Louisville
502 Executive Park
Louisville, KY 40207
Milwaukee
10850 W. Park Place
Suite 110
Milwaukee, WI 53224
Chicago West
2500 W. Higgins Rd.
Suite 280
Hoffman Estates, IL 60195-2008
Saginaw
4901 Towne Centre Rd.
Suite 200
Saginaw, MI 48605
Findlay
3500 North Main Street
Findlay, OH 45840-1447
Cleveland
5700 Lombardo Centre
Suite 101
Seven Hills, OH 44131-2581
Philadelphia
Bay Colony Executive Park
575 E. Swedesford
Suite 100
Wayne, PA 19087
New Jersey South
5000 Dearborn Circle
Suite 200
Mt. Laurel, NJ 08054
Baltimore-West
1829 Reistertown Road
Baltimore, MD 21208-8861
B-2
<PAGE> 59
Long Island
972 Brush Hollow Road
5th Floor
Westbury, NY 11590-1740
Washington, D.C.
2440 Research Blvd.
Suite 150
Rockville, MD 20850-3293
New Haven
116 Washington Ave.
Floor #4
North Haven, CT 06473
Norfolk
Greenbrier Pointe
1401 Greenbrier Pkwy.
Suite 350
Chesapeake, VA 23320
New Jersey North
103 Eisenhower Parkway
4th Floor
Roseland, NJ 07068-1069
Pittsburgh
Foster Plaza 9
750 Holiday Drive
4th Floor, Suite 420
Pittsburgh, PA 15220-2783
Richmond
300 Arboretum Place
Suite 320
Richmond, VA 23236
Syracuse
5788 Widewaters Pkwy.
DeWitt, NY 13214
Westchester
660 White Plains Road
Tarrytown, NY 10591-0010
B-3
<PAGE> 60
Mobile
1201 Montlimar Dr.
Suite 700
Mobile, AL 36609
Birmingham
3535 Grandview Parkway
Suite 340
Birmingham, AL 35243
Orlando
2600 Lake Lucien Drive
Suite 306, The Forum Bldg.
Maitland, FL 32751
Memphis
6555 Quince Road
Suite 300
Memphis, TN 38119
Atlanta - North
North Park Town Center
1000 Abernathy Rd. N.E.
Bldg. 400, Suite 180
Atlanta, GA 30328
Greensboro
1500 Pinecroft Rd.
Suite 220
Greensboro, NC 27407
Charlotte
5832 Farm Pond Lane
Suite 200
Charlotte, NC 28212
Jacksonville
9485 Regency Square Boulevard
Jacksonville, FL 32225
Jackson
Highland Village Center
4500 I-55 North
Suite 292
Jackson, MS 39211
B-4
<PAGE> 61
Columbia
250 Berryhill Road
Suite 201
Columbia, SC 29210
Miami
6303 Blue Lagoon Drive
Suite 200
Miami, FL 33126
Dothan
3160 West Main Street
Suite 1
Dothan, AL 36301-1180
Nashville
565 Marriott Drive
Suite 190, Highland Ridge
Nashville, TN 37210
Raleigh
3651 Trust Drive
Raleigh, NC 27604
Tampa
Lincoln Pointe, Suite 800
2502 Rocky Point Drive
Tampa, FL 33607
Odessa
Ashford Park Office Center
Suite 201A
2626 John Ben Sheppard Parkway
Odessa, TX 79762
Lubbock
Suite 200
4010 82nd Street
Lubbock, TX 79424
Dallas
801 E. Campbell Road
Suite 600, Campbell Forum
Richardson, TX 75081
B-5
<PAGE> 62
Austin
1701 Directors Blvd.
Suite 320
Austin, TX 78744
Fort Worth
2350 W. Airport Hwy.
Suite 400, Center Park Tower
Bedford, TX 76022
Beaumont
2615 Calder
Suite 715
Beaumont, TX 77704
Houston-West
820 Gessner
Suite 700
Houston, TX 77024
Harlingen
1916 East Harrison
Harlingen, TX 78550
Corpus Christi
5350 South Staples
Suite 225
Corpus Christi, TX 78411
Little Rock
1701 Centerview Dr.
Suite 301
Little Rock, AR 72211
Amarillo
1616 S. Kentucky
Suite 130 Bldg. D
Amarillo, TX 79102
El Paso
1200 Golden Key Circle
Suite 104
El Paso, TX 79925
B-6
<PAGE> 63
Albuquerque
6100 Uptown Blvd., NE
Suite 300
Albuquerque, NM 87110
Houston-North
363 N. Sam Houston Pkwy. E.
Suite 700
Houston, TX 77060
San Antonio
1600 N.E. Loop 410
Suite 200
San Antonio, TX 78209
Tulsa
9820 East 41st St.
Suite 300
Tulsa, OK 74145
Minneapolis
11095 Viking Drive
Suite 308, One Southwest Crossing
Eden Prairie, MN 55344-7290
Wichita
7570 West 21st Street
Wichita, KS 67212
St. Louis
4227 Earth City Exp.
Suite 100
Earth City, MO 63045
Jefferson City
210 Prodo Drive
Jefferson City, MO 65109
Kansas City
8717 West 110th Street
Bldg. #14, Suite 550
Overland Park, KS 66210
B-7
<PAGE> 64
Des Moines
4200 Corporate Drive
Suite 107
West Des Moines, IA 50266
Omaha
10040 Regency Circle
Suite 100
Omaha, NE 68114-3786
Davenport
2535 Tech Drive
Suite 300, Commerce Exch. Bldg.
Bettendorf, IA 52722
Denver
6300 S. Syracuse Way
Suite 195
Englewood, CO 80111
Fargo
3100 13th Ave. South
Suite 304
Fargo, ND 58103
Springfield
3275 E. Ridgeview
Springfield, MO 65804-1816
Waterloo
211 E. San Marnan Dr.
Waterloo, IA 50702
San Bernadino
1615 Orange Tree Lane
Suite 215
Redlands, CA 92374
Salt Lake City
310 E. 4500 South
Suite 340
Murray, UT 84017
B-8
<PAGE> 65
Honolulu
1585 Kapiolani Blvd.
Suite 922, Ala Moano Pacific Center
Honolulu, HI 96814
Spokane
North 901 Monroe
Suite 350
Spokane, WA 99210-2148
Grand Junction
744 Horizon Ct.
Suite 330
Grand Junction, CO 81506
San Francisco
4301 Hacienda Dr.
Suite 400
Pleasanton, CA 94588
Portland
10220 S.W. Greenburg Rd.
Suite 415
Portland, OR 97223-5506
Sacramento
2720 Gateway Oaks Dr.
Suite 200
Sacramento, CA 95833
San Diego
3111 Camino Del Rio N.
Suite 1333
San Diego, CA 92108
Phoenix
4742 North 24th Street
Suite 215
Phoenix, AZ 85016
San Jose
1900 McCarthy Blvd.
Suite 400
Milpitas, CA 95035
B-9
<PAGE> 66
Seattle
13555 S.E. 36th Street
Suite 350
Bellevue, WA 98006
Orange
765 The City Drive
Suite 200
Orange, CA 92668
Anchorage
3201 C Street
Suite 203
Anchorage, AK 99503
Appleton
54 Park Place
Appleton, WI 54915-8861
South Bend
4215 Edison Lakes Parkway
Suite 140
Mishawaka, IN 46545
Columbus
655 Metro Place South
Suite 470, Metro V
Dublin, OH 43017-0792
Henderson
618 North Green Street
Henderson, KY 42420
Lansing
2140 University Park Drive
Okemos, MI 48864
Marshall
1408 North Michigan
Marshall, IL 62441
New Jersey-Central
101 Interchange Plaza
Cranbury, NJ 08512
B-10
<PAGE> 67
Huntington
3425 U.S. Route 60 East
Barboursville, WV 25504
Buffalo
95 John Muir Drive
Suite 102
Amherst, NY 14228
Manchester
4 Bedford Farms
Bedford, NH 03110
Harrisburg
4900 Ritter Road
Mechanicsburg, PA 17055
Boston South
Southboro Place, 2nd Floor
352 Turnpike Road
Southboro, MA 01772
Boston North
One Tech Drive, 3rd Floor
Andover, MA 01810-2497
Portland
2401 Congress Street
Portland, ME 04102
Albany
5 Pine West Plaza
Albany, NY 12205
Roanoke
5238 Valley Pointe Pkwy.
Roanoke, VA 24019
Falls Church
1420 Springhill Road
Suite 550
McLean, VA 22102
B-11
<PAGE> 68
Bristol
Landmark Center - Suite A
113 Landmark Lane
Bristol, TN 37620
Chattanooga
6025 Lee Highway
Suite 443
Chattanooga, TN 37421
Decatur
401 Lee Street
Suite 500
Decatur, AL 35602
Fayetteville
4317 Ramsey Street
Suite 300
Fayetteville, NC 28311
Athens
3708 Atlanta Highway
Athens, GA 30604
Knoxville
5500 Lonas Drive
Suite 260
Knoxville, TN 37909
Macon
5400 Riverside Drive
Suite 201
Macon, GA 31210
Pensacola
25 W. Cedar Street
Suite 316
Pensacola, Fl 32501
Savannah
6600 Abercorn Street
Suite 206
Savannah, GA 31405
B-12
<PAGE> 69
Tyler
821 East SE Loop 323
Suite 300
Tyler, TX 75701
Oklahoma City
4101 Perimeter Ctr Dr.
Suite 300, Perimeter Center
Oklahoma City, OK 73112-2304
Baltimore-East
Campbell Corporate Center One
4940 Campell Blvd., Suite 140
Whitemarsh Business Community
Baltimore, MD 21236
Billings
1643 Lewis Avenue
Suite 201
Billings, MT 59102
Cheyenne
6234 Yellowstone
Cheyenne, WY 82009
Cape Girardeau
2851 Independence
Cape Girardeau, MO 63701
Atlanta -South
1691 Phoenix Blvd.
Suite 300
Atlanta, GA 30349
Pasadena
800 East Colorado Blvd.
Suite 400
Pasadena, CA 91109
Colorado Springs
5575 Tech Center Dr.
Suite 220
Colorado Springs, CO 80919
B-13
<PAGE> 70
South Bay
301 E. Ocean Boulevard
Suite 1900
Long Beach, CA 90802
Ventura
260 Maple court
Suite 210
Ventura, CA 93003
Las Vegas
3900 Paradise Road
Suite 239
Las Vegas, NV 89109
Eugene
1600 Valley River Drive
Suite 190
Eugene, OR 97401
Tupelo
One Mississippi Plaza
Tupelo, MS 38801
Charleston
4975 Lacross Road
Suite 150, Rivergate Center
North Charleston, SC 29418-6518
Western Carolina
215 Thompson Street
Hendersonville, NC 28739-2828
B-14
<PAGE> 71
New Orleans
3838 N. Causeway Blvd.
Suite 3000
Metairie, LA 70002
Lafayette
Saloom Office Park
Suite 350
100 Asma Boulevard
Lafayette, LA 70508
Shreveport
South Pointe Centre, Suite 200
3007 Knight Street
Shreveport, LA 71105
B-15
<PAGE> 72
EXHIBIT A
[FORM OF YIELD SUPPLEMENT AGREEMENT]
________, _____
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48212
Re: Ford Credit Auto Owner Trust -
Ladies and Gentlemen:
We hereby confirm arrangements made as of the date hereof with you to be
effective upon (i) receipt by us of the enclosed copy of this letter agreement
(as from time to time amended, supplemented or otherwise modified and in
effect, the "Yield Supplement Agreement"), executed by you, and (ii) execution
of the Purchase Agreement referred to below and payment of the purchase price
specified thereunder. Capitalized terms used and not otherwise defined herein
shall have the meanings assigned to such terms in the Purchase Agreement, dated
as of _______, ____ (as from time to time amended, supplemented or otherwise
modified and in effect, the "Purchase Agreement"), between Ford Motor Credit
Company, as seller (the "Seller"), and Ford Credit Auto Receivables Two L.P. as
purchaser (the "Purchaser").
1. On or prior to the Determination Date preceding each Distribution Date,
the Servicer shall notify the Purchaser and the Seller of the Yield Supplement
Amount for such Distribution Date.
2. In consideration for the Purchaser entering into the Purchase Agreement
and the purchase price paid to the Seller for the Receivables under the
Purchase Agreement, we agree to make a payment of the Yield Supplement Amount
to the Purchaser, or to the pledgee of the assignee of the Purchaser referred
to in Section 5 hereof, on the Business Day prior to each Distribution Date.
3. All payments pursuant hereto shall be made by federal wire transfer
(same day) funds or in immediately available funds, to such account as the
Purchaser
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Ford Credit Auto Receivables Two L.P.
______, ____
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or the pledgee of the assignee of the Purchaser referred to in Section 5
hereof, may designate in writing to the Seller, prior to the relevant
Distribution Date.
4. Our agreements set forth in this Yield Supplement Agreement are our
primary obligations and such obligations are irrevocable, absolute and
unconditional, shall not be subject to any counterclaim, setoff or defense and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstances or condition
whatsoever.
5. Pursuant to the Sale and Servicing Agreement, the Purchaser will sell,
transfer, assign and convey its interest in this Yield Supplement Agreement to
Ford Credit Auto Owner Trust ____-__ (the "Trust"), and the Seller hereby
acknowledges and consents to such sale, transfer, assignment and conveyance.
Concurrent with such sale, transfer, assignment and conveyance, pursuant to the
Indenture, the Trust will pledge its rights under this Yield Supplement
Agreement, along with certain other assets of the Trust, to __________, as
Indenture Trustee, to secure its obligations under the Notes and the Indenture,
and the Seller hereby acknowledges and consents to such pledge. The Seller
hereby agrees, for the benefit of the Trust, that following such sale,
transfer, assignment, conveyance and pledge, this Yield Supplement Agreement
shall not be amended, modified or terminated without the consent of _________,
as Owner Trustee on behalf of the Trust, and, prior to the payment in full of
the Notes, the Indenture Trustee.
6. This Yield Supplement Agreement will be governed by, and construed in
accordance with, the laws of the State of New York.
7. Except as otherwise provided herein, all notices pursuant to this Yield
Supplement Agreement shall be in writing and shall be effective upon receipt
thereof. All notices shall be directed as set forth below, or to such other
address or to the attention of such other person as the relevant party shall
have designated for such purpose in a written notice.
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Ford Credit Auto Receivables Two L.P.
______, ____
Page 3
If to the Purchaser:
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Attention: Secretary
Telephone: (313) 594-7765
Telecopy: (313) 248-7613
If to the Seller:
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
Attention: Secretary
Telephone: (313) 594-9876
Telecopy: (313) 248-7613
8. This Yield Supplement Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, all
of which shall be deemed to be one and the same document.
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Ford Credit Auto Receivables Two L.P.
,
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Page 4
If the foregoing satisfactorily sets forth the terms and conditions of our
agreement, please indicate your acceptance thereof by signing in the space
provided below and returning to us the enclosed duplicate original of this
letter.
Very truly yours,
FORD MOTOR CREDIT COMPANY,
as Seller
By:
-----------------------------
Name:
Title:
Agreed and accepted as of
the date first above written:
FORD CREDIT AUTO RECEIVABLES TWO L.P.,
as Purchaser
By:
----------------------------
Name:
Title:
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