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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1999
REGISTRATION NO. -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FORD CREDIT AUTO RECEIVABLES TWO L.P.
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
A DELAWARE LIMITED PARTNERSHIP
IRS EMPLOYER NUMBER: 38-3295857
THE AMERICAN ROAD
DEARBORN, MICHIGAN 48121
(313) 322-3000
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R. P. CONRAD, ESQ.
FORD MOTOR CREDIT COMPANY
THE AMERICAN ROAD
DEARBORN, MICHIGAN 48121
(313) 594-7765
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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COPY TO:
SUSAN M. CURTIS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT TO BE MAXIMUM AGGREGATE MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Asset Backed Securities......... $1,000,000 100% $1,000,000 $278
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to the
offering of series of Asset Backed Notes and Asset Backed Certificates by
various Ford Credit Auto Trusts created from time to time by Ford Credit Auto
Receivables Two L.P. and (ii) a form of Prospectus Supplement. The form of
Prospectus Supplement relates only to the securities described therein and is a
form which may be used by Ford Credit Auto Receivables Two L.P. to offer Asset
Backed Notes and Asset Backed Certificates under this Registration Statement and
may be used by Ford Motor Credit Company in connection with offers and sales of
Asset Backed Notes and Asset Backed Certificates originally purchased by Ford
Motor Credit Company from the Seller.
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BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE YOU UNDERSTAND THE
STRUCTURE AND THE RISKS. SEE ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE OF
THIS PROSPECTUS AND THE RISK FACTORS SET FORTH IN THE RELATED PROSPECTUS
SUPPLEMENT.
The notes and the certificates will represent interests in or obligations of the
trust only and will not represent interests in or obligations of Ford Motor
Company, Ford Motor Credit Company, the servicer or any of their affiliates.
This prospectus may be used to offer and sell any of the notes and/or
certificates only if accompanied by the prospectus supplement for the related
trust.
(FORD LOGO)
FORD CREDIT AUTO TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
<TABLE>
<S> <C>
FORD CREDIT AUTO FORD MOTOR CREDIT
RECEIVABLES TWO L.P. COMPANY
SELLER SERVICER
</TABLE>
THE TRUSTS --
-- may periodically issue asset-backed notes and
certificates of one or more trusts in one or more
classes; and
-- will own --
-- receivables in a portfolio of motor vehicle
retail installment sale contracts;
-- collections on the receivables;
-- security interests in the vehicles securing
those receivables;
-- funds in the accounts of the trust; and
-- any enhancements issued.
THE NOTES --
-- will represent obligations of a trust and will be
paid only from the assets of that trust;
-- may have one or more forms of enhancement; and
-- will be issued as part of a trust which may
include one or more classes of notes and
certificates.
THE CERTIFICATES --
-- will represent beneficial interests in a trust
and will be paid only from the assets of that
trust;
-- may have one or more forms of enhancement; and
-- will be issued as part of a trust which will
include one or more classes of notes and
certificates.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR ANY RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is
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TABLE OF CONTENTS
<TABLE>
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OVERVIEW OF THE INFORMATION IN THIS
PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT.............................. 3
SUMMARY................................... 4
RISK FACTORS.............................. 9
THE TRUSTS................................ 16
The Receivables......................... 16
The Trustee............................. 17
Property of the Trusts.................. 17
THE RECEIVABLES POOLS..................... 17
Property of the Trusts.................. 17
PRIMUS.................................. 18
Underwriting............................ 18
Subvened Loans.......................... 19
Servicing and Collections............... 19
Repossession and Write-offs............. 19
We Will Provide More Specific
Information About the Receivables in
the Prospectus Supplement............. 20
Criteria for Selecting the
Receivables........................... 20
Simple Interest Receivables............. 21
Actuarial Receivables................... 21
Final Payment Receivables............... 21
MATURITY AND PREPAYMENT CONSIDERATIONS.... 22
USE OF PROCEEDS........................... 22
THE SELLER AND THE GENERAL PARTNER........ 23
Description of the Seller and the
General Partner....................... 23
Insolvency of the Seller or the General
Partner May Result in Consolidation of
Their Assets with the Trust........... 23
Trust Assets May be Affected if Sale of
Receivables Were Treated as a Loan.... 24
THE SERVICER.............................. 24
DESCRIPTION OF THE NOTES.................. 25
The Trust May Use Book-Entry
Registration Instead of Issuing
Definitive Notes...................... 25
Principal and Interest on the Notes..... 25
The Indenture........................... 26
The Indenture Trustee................... 30
DESCRIPTION OF THE CERTIFICATES........... 30
Distributions of Principal and
Interest.............................. 31
List of Certificateholders.............. 32
CERTAIN INFORMATION REGARDING THE
SECURITIES.............................. 32
Fixed Rate Securities................... 32
Floating Rate Securities................ 32
Book-Entry Registration................. 33
Definitive Securities................... 38
Reports to Securityholders.............. 38
DESCRIPTION OF THE RECEIVABLES TRANSFER
AND SERVICING AGREEMENTS................ 40
Sale and Assignment of Receivables...... 40
Accounts................................ 41
Servicing Procedures.................... 42
Collections............................. 43
Advances................................ 43
Servicing Compensation and Expenses..... 44
Distributions........................... 44
Credit and Cash Flow Enhancement........ 45
Net Deposits............................ 46
Statements to Trustees and Trusts....... 46
Evidence as to Compliance............... 46
Certain Matters Regarding the
Servicer.............................. 46
Rights Upon Event of Servicing
Termination........................... 47
Waiver of Past Events of Servicing
Termination........................... 48
Amendment............................... 48
Insolvency Event or Dissolution......... 48
Payment of Notes........................ 49
Termination............................. 49
Administration Agreement................ 50
SOME IMPORTANT LEGAL ISSUES RELATING TO
THE RECEIVABLES......................... 50
Security Interests in Vehicles.......... 50
Repossession............................ 52
Notice of Sale; Redemption Rights....... 52
Deficiency Judgments and Excess
Proceeds.............................. 52
Consumer Protection Laws................ 53
Other Limitations....................... 54
Transfers of Vehicles................... 54
TAX MATTERS............................... 54
Scope of the Tax Opinions............... 55
ERISA CONSIDERATIONS...................... 55
Prohibited Transaction Considerations... 55
Investment in Notes..................... 56
Investment in Certificates.............. 56
Special Considerations Applicable to
Insurance Company General Accounts.... 56
Plans Not Subject to ERISA or the Tax
Code.................................. 57
General Investment Considerations....... 57
PLAN OF DISTRIBUTION...................... 57
LEGAL OPINIONS............................ 58
WHERE YOU CAN FIND MORE INFORMATION....... 58
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE............................... 59
GLOSSARY OF TERMS IN THE PROSPECTUS....... 60
</TABLE>
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OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
This prospectus provides general information about the notes and certificates to
be issued by the trusts, some of which may not apply to a particular trust.
The related prospectus supplement will describe the specific terms of the trust,
including:
-- the timing and amount of interest and principal payments;
-- information about the receivables;
-- information about credit enhancement for each offered class;
-- credit ratings; and
-- the method for selling the securities.
You should rely only on information on the notes and certificates provided in
this prospectus and the related prospectus supplement. We have not authorized
anyone to provide you with different information.
We have included cross-references to captions in these materials where you can
find further related discussions. We have started with several introductory
sections which provide the information in abbreviated form, followed by a more
complete description. The introductory sections are:
-- Summary -- gives an overview of the terms which the securities may
have.
-- Risk Factors -- describes briefly some of the risks to investors of a
purchase of the securities.
Cross references may be contained in the introductory sections which will direct
you elsewhere in this prospectus or the related prospectus supplement to more
detailed descriptions of a particular topic. You can also find references to key
topics in the Table of Contents on the preceding page.
You can find a glossary of the defined terms that appear in this document under
the caption "Glossary of Terms for Prospectus" beginning on page in this
prospectus.
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SUMMARY
The following summary is a short description of the information contained
elsewhere in this prospectus. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this prospectus
and the related prospectus supplement, each in its entirety.
THE TRUSTS
A separate trust will be formed to issue each series of securities. Each trust
will be a Delaware business trust or a common law trust created by a trust
agreement between the seller and the trustee.
THE SELLER
Ford Credit Auto Receivables Two L.P., a Delaware limited partnership.
THE SERVICER
Ford Motor Credit Company, a Delaware corporation.
THE TRUSTEES
Each prospectus supplement will specify --
-- the trustee of the trust; and
-- the indenture trustee relating to the notes.
THE NOTES
Each trust will issue one or more classes of notes. The notes issued by each
trust will be governed by an indenture between the trust and an indenture
trustee.
Some of the notes issued by each trust may not be offered to the public. Each
prospectus supplement will specify the class or classes of notes that are being
offered.
The minimum denominations will be specified in the related prospectus
supplement.
Principal and Interest on the Notes
For each class of notes, the prospectus supplement will state --
-- the principal amount; and
-- either the rate of interest or the method of determining the rate of
interest. The rate of interest on the notes may be fixed, variable or
adjustable.
THE CERTIFICATES
Each trust may issue one or more classes of certificates. The certificates will
be governed by a trust agreement.
Some of the certificates in any trust may not be offered to the public. Each
prospectus supplement will specify the class or classes of certificates that are
being offered by it.
The minimum denominations will be specified in the related prospectus
supplement.
Principal and Interest on the Certificates
For each class of certificates, the prospectus supplement will state --
-- the certificate balance; and
-- the rate of interest or the method of determining the rate of
interest. The rate of interest on the certificates may be fixed,
variable or adjustable.
Subordination to Notes
Distributions on the certificates will be subordinated to payments on the notes
to the extent described in the related prospectus supplement.
OPTIONAL REDEMPTION
The servicer has the option to purchase the receivables of the trust on any
payment date on which the aggregate principal balance of the receivables at the
time they were sold to the trust declines to 10% or less of the initial amount,
and the notes and the certificates will be prepaid in full.
A TRUST MAY ISSUE MULTIPLE CLASSES WITH DIFFERENT CHARACTERISTICS
Each trust may issue more than one class of notes and certificates. In these
cases, the
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characteristics of the securities issued by the trust may differ from one
another. Some of these characteristics are:
-- rate at which interest accrues (if at all);
-- whether the interest rate is fixed, variable or adjustable;
-- timing and/or frequency of interest payments;
-- amount of payments of interest and principal;
-- priority of interest and principal payments relative to the other
classes;
-- whether or not distributions of principal and interest will be
delayed or not made at all upon the occurrence of specified events;
-- whether payments of principal and interest may or may not be made
from designated portions of the pool of receivables; and
-- allocations of losses on the receivables.
Any differences in characteristics will be specified in the prospectus
supplement.
RESIDUAL PAYMENT SECURITIES MAY BE ISSUED
A trust might issue one or more classes of notes or certificates entitled to all
or some of the remaining payments of principal and interest on the related
receivables after the trust has made all other payments it is required to make.
STRIP SECURITIES MAY BE ISSUED
A trust might issue one or more classes of notes or certificates providing for
distributions of interest which are disproportionately large or small in
comparison to the principal distributions, including --
-- distributions of interest with no or only a nominal distribution of
principal; or
-- distributions of principal with no or only a nominal distribution of
interest.
PHYSICAL SECURITIES MIGHT NOT BE ISSUED
The notes may be available only in book-entry form. Each investor's interest in
the notes would be represented through an agent, rather than by a physical note
held by the investor. A trust will not issue physical notes to investors unless
specific events occur which make it necessary or desirable to do so.
The Certificates may be issued in physical form or in book-entry form, as
described in the prospectus supplement.
For a more detailed description of the events under which physical notes will be
issued, see "Certain Information Regarding the Securities -- Definitive
Securities."
THE RECEIVABLES AND OTHER TRUST PROPERTY
The receivables supporting the securities of each trust will consist of a pool
of motor vehicle retail installment sale contracts secured by new and used
automobiles and light trucks and other property, including:
-- the rights to receive payments made on the receivables after the
cutoff date specified in the related prospectus supplement;
-- security interests in the vehicles financed by the receivables;
-- various accounts and the proceeds thereof; and
-- any proceeds from claims on various related insurance policies.
Various motor vehicle dealers will have originated the receivables and sold them
to Ford Credit or to PRIMUS (which subsequently sold them to Ford Credit), and
Ford Credit will in turn sell them to the seller. A sale and servicing agreement
will govern the sale of the receivables by Ford Credit to the seller and will
specify criteria which the receivables must meet in order to be sold.
The seller will transfer the receivables to the trust on the closing date. The
prospectus supplement will specify the aggregate principal balance of any
receivables initially transferred to the trust.
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For a more detailed description of the receivables, including the criteria they
must meet, and the other property supporting the securities, see "The
Receivables Pools" in this prospectus.
Other Property of the Trust
In addition to the receivables, each trust will own amounts on deposit in
various trust accounts, which may include:
-- an account into which collections are deposited;
-- an account to fund post-closing purchases of additional receivables;
-- a reserve account or other account relating to credit enhancement;
and
-- any other account identified in the related prospectus supplement.
Purchase of Receivables After the Closing Date
A trust may be permitted to purchase additional receivables during a specified
period after the closing date. A trust will purchase additional receivables with
amounts deposited on the closing date in a pre-funding account. One or more
classes of notes or certificates may be prepaid if all of the additional
receivables are not purchased before the time described in the prospectus
supplement. The holders of securities that are prepaid due to additional
receivables not being purchased may be entitled to a prepayment premium if so
specified in the prospectus supplement.
The prospectus supplement will specify the amount of the deposit. The prospectus
supplement will also describe (1) how often receivables may be purchased, which
could be as frequently as daily, and (2) the time period during which additional
receivables may be purchased, which can be up to one year.
To the extent provided in the related prospectus supplement, the seller may be
required to sell, and the trust may be required to purchase, receivables with an
aggregate principal balance approximately equal to the amount on deposit in the
pre-funding account. These requirements will be subject to --
-- the availability of additional receivables; and
-- any conditions provided in the related sale and servicing agreement.
CREDIT AND PAYMENT ENHANCEMENT
The related prospectus supplement will specify the credit enhancement, if any,
for each trust. Credit or payment enhancement may consist of one or more of the
following:
-- subordination of one or more classes of securities;
-- a reserve account;
-- "excess spread," or interest earned on the receivables in excess of
the amount required to be paid on the securities;
-- collateralization greater than the principal amount of securities
issued;
-- letters of credit;
-- liquidity facilities;
-- surety bonds;
-- guaranteed investment contracts;
-- guaranteed rate agreements;
-- swaps or other interest rate protection agreements;
-- repurchase obligations;
-- yield supplement arrangements;
-- cash deposits; or
-- other agreements with respect to third party payments or other
support.
Limitations or exclusions from coverage could apply to any form of credit
enhancement. The prospectus supplement will describe the credit enhancement and
related limitations and exclusions applicable for securities issued by the
trust.
Reserve Account
If there is a reserve account, the seller will initially deposit in it cash or
other investments
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having a value equal to the amount specified in the prospectus supplement.
Any reserve account will be available to cover shortfalls in the payments on the
securities as described in the prospectus supplement. The prospectus supplement
may also specify (1) a minimum balance to be maintained in the reserve account
and what funds are available for deposit to reinstate that balance, (2) when and
to whom any amount will be distributed if the balance exceeds this minimum
amount, and (3) the maximum balance of the reserve account.
For more information about credit enhancement, see "Description of the
Receivables Transfer and Servicing Agreements -- Credit and Cash Flow
Enhancement" in this prospectus.
TRANSFER AND SERVICING OF THE RECEIVABLES
The seller will transfer the related receivables to each trust under the sale
and servicing agreement and each trust will assign its rights and benefits under
the sale and servicing agreement to the indenture trustee as collateral for the
notes. The servicer will agree with the trust to be responsible for servicing,
managing, maintaining custody of and making collections on the receivables.
For more information about the sale and servicing of the receivables, see
"Description of the Receivables Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" in this prospectus.
Servicing Fees
Each trust will pay the servicer a fee based on the outstanding balance of the
receivables for providing servicing of the receivables. The amount of the fee
will be specified in the prospectus supplement. The servicer will also be
entitled to retain as supplemental servicing compensation --
-- late fees;
-- prepayment charges;
-- extension fees;
-- other administrative fees or similar charges; and
-- reinvestment proceeds on any payments received in respect of the
receivables.
Servicer Advances Certain Late Payments
When actual collections received on the receivables are less than the scheduled
collections received in a collection period, the servicer is required to advance
to the trust that portion of the shortfalls that the servicer, in its sole
discretion, expects to be paid in the future by the related obligors (excluding
principal of simple interest receivables). On each date on which payments are
due on the securities, the servicer may advance to the applicable trust --
-- any shortfall in the scheduled payments under any actuarial
receivable; and/or
-- any shortfall in interest (but not principal) due under each simple
interest receivable.
The servicer will be entitled to reimbursement from future collections by the
trust for these advances before any payments are made on notes or certificates.
Repurchase/Advances May Be Required For Modified Receivables
In the course of its normal servicing procedures, the servicer may defer or
modify the payment schedule of a receivable. Some of these arrangements may
obligate the servicer to --
-- repurchase the receivable; or
-- advance funds to the trust with respect to the receivable.
For a discussion of the representations and warranties given by the servicer and
its related repurchase obligations, see "Description of the Receivables Transfer
and Servicing Agreements -- Sale and Assignment of Receivables" in this
prospectus.
Repurchase May Be Required For Breaches of Representation or Warranty
The seller will make representations and warranties relating to the receivables
when it sells them to the trust. The seller will be required to repurchase a
receivable if --
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-- one of the seller's representations or warranties is breached with
respect to that receivable; and
-- the receivable is materially and adversely affected by the breach.
The seller is not required to repurchase a receivable if the breach relating to
the receivable is cured within the second collection period after discovery of
the breach.
For a discussion of the representations and warranties given by the seller and
its related repurchase obligations, see "Description of the Receivables Transfer
and Servicing Agreements -- Sale and Assignment of Receivables" in this
prospectus.
THE TRUST'S SECURITY INTEREST IN THE RECEIVABLES AND THE VEHICLES SECURING THE
RECEIVABLES
Ford Credit will assign to the seller its ownership interest in the receivables
and its security interest in the financed vehicles securing the receivables, and
the seller will in turn assign to the trust a security interest in the
receivables and the financed vehicles.
For more information about the trust's security interest in the vehicles
securing the receivables see "Some Important Legal Issues Relating to the
Receivables -- Security Interests in Vehicles" in this prospectus.
TAX STATUS
Upon the issuance of securities by a trust --
-- Special Tax Counsel to the trust is required to deliver an opinion
that, for federal income tax purposes, the trust will not be
characterized as an association (or a publicly traded partnership)
taxable as a corporation; and
-- Michigan tax counsel to the trust is required to deliver an opinion
that the same characterizations would apply for Michigan income and
single business tax purposes as for federal income tax purposes.
ERISA CONSIDERATIONS
Administrators of employee benefit plans should review the matters discussed
under "ERISA Considerations" in this prospectus and in the related prospectus
supplement.
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
INTERESTS OF OTHER PERSONS IN
THE RECEIVABLES COULD REDUCE
THE FUNDS AVAILABLE TO MAKE
PAYMENTS ON THE SECURITIES Financing statements under the Uniform Commercial
Code will be filed reflecting the sale of the
receivables by Ford Credit to the seller and the
subsequent sale by the seller to the trust. Ford
Credit's accounting records and computer systems
will also be marked to reflect a sale of the
receivables to the trust. However, by obtaining
physical possession of a receivable, another
person could acquire an interest in that
receivable that is superior to the trust's
interest because the servicer will not segregate
or mark the receivables as belonging to the
trust. If another person acquires an interest in
a receivable that is superior to the trust's
interest in the receivable, the collections on
that receivable will not be available to make
payment on the securities.
Another person could acquire an interest in a
vehicle financed by a receivable that is superior
to the trust's interest because the servicer will
not amend the certificate of title or ownership
to identify the trust as the new secured party.
If another person acquires an interest in a
vehicle that is superior to the trust's interest
in the vehicle, the proceeds from the sale of the
vehicle will not be available to make payments on
the securities.
The trust's security interest in the receivables
or the financed vehicles could be impaired for
one or more of the following reasons:
-- Ford Credit or PRIMUS might fail to perfect
its security interest in a receivable;
-- Ford Credit or PRIMUS might fail to perfect
its security interest in a financed vehicle;
-- the trust may not have a security interest
in the financed vehicles in all states
because the certificates of title to the
financed vehicles will not be amended to
reflect assignment to the trust;
-- holders of some types of liens, such as tax
liens or mechanics liens, may have priority
over the trust's security interest;
-- the trust may lose its security interest in
vehicles confiscated by the government; and
-- the trust could lose its priority to a
person who obtains physical possession of a
receivable without knowledge of the
assignment of the receivable to the trust.
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Neither the seller nor the servicer will be
required to repurchase a receivable if the
security interest in a related vehicle or the
receivable becomes impaired after the receivable
is sold to the trust.
BANKRUPTCY OF FORD CREDIT
COULD RESULT IN DELAYS IN
PAYMENT OR LOSSES ON THE
SECURITIES If Ford Credit becomes subject to bankruptcy
proceedings, you could experience losses or
delays in the payments on your securities. Ford
Credit will sell the receivables to the seller,
and the seller will in turn transfer the
receivables to the trust. However, if Ford Credit
becomes subject to a bankruptcy proceeding, a
court in the bankruptcy proceeding could conclude
that Ford Credit effectively still owns the
receivables by concluding that the sale to the
seller was not a "true sale" or that the seller
should be consolidated with Ford Credit for
bankruptcy purposes. If a court were to reach
this conclusion, you could experience losses or
delays in payments on your securities due to,
among other things:
-- the "automatic stay" which prevents secured
creditors from exercising remedies against a
debtor in bankruptcy without permission from
the court and provisions of the U.S.
Bankruptcy Code that permit substitution of
collateral in certain circumstances;
-- certain tax or government liens on Ford
Credit's property that arose prior to the
transfer of the receivables to the trust and
having a claim on collections that is senior
to payments on your securities; and
-- the trust not having a perfected security
interest in (1) one or more of the vehicles
securing the receivables or (2) any cash
collections held by Ford Credit at the time
that Ford Credit becomes the subject of a
bankruptcy proceeding.
The seller will take steps in structuring the
transactions to minimize the risk that a court
would consolidate the seller with Ford Credit for
bankruptcy purposes or conclude that the sale of
the receivables to the seller was not a "true
sale."
In a 1993 case, the U.S. Court of Appeals for the
Tenth Circuit concluded that accounts transferred
by a seller to a buyer should be included in the
bankruptcy estate of the seller even if the
transfer was a true sale. The reasoning appears
to be inconsistent with other cases and of expert
commentators to the Uniform Commercial Code,
including comments made after the 1993 decision,
and we are not aware of any subsequent cases that
have been similarly decided. However, if Ford
Credit enters a bankruptcy proceeding and the
court in the bankruptcy proceeding applies the
reasoning of the court in that case, you could
experience losses or delays in the payments on
your securities.
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THE TRUST MAY SELL THE
RECEIVABLES UPON AN
INSOLVENCY OR DISSOLUTION OF
THE SELLER OR GENERAL
PARTNER, WHICH COULD RESULT
IN LOSSES TO YOU If the seller or the General Partner becomes
insolvent, the receivables may be liquidated and
the trust terminated. If this occurs (1) the
trust might suffer a loss on the sale of the
receivables, reducing the amount available to
repay your securities and (2) the average term
and date of repayment of your securities would be
shortened.
Liquidation of the receivables might be required
where --
-- either of the seller or the general partner
becomes insolvent or dissolves; and
-- notes of the related trust are outstanding.
The receivables generally need not be liquidated
if --
-- an objection to the liquidation is received
from a majority of (1) the noteholders, (2)
the certificateholders, (3) the holders of
interests in the reserve account, (4) the
holders of any other securities issued by
the trust and (5) any other persons that may
be specified in the related prospectus
supplement, in each case excluding the
seller in such capacities; and
-- an entity acceptable to Ford Credit agrees
to acquire an interest in a trust and to act
as a substitute "general partner" for
federal income tax purposes; and
-- the trustee of the trust obtains an opinion
of counsel as to certain tax matters.
The proceeds from any such sale, disposition or
liquidation of the receivables will be treated as
collections on the receivables.
For more information on the possible liquidation
of the trust as a result of the insolvency of the
seller or the general partner, you should refer
to the section of this prospectus entitled
"Description of the Receivables Transfer and
Servicing Agreements -- Insolvency Event or
Dissolution."
ONLY THE ASSETS OF THE TRUST
ARE AVAILABLE TO PAY YOUR
SECURITIES None of the seller, the general partner of the
seller, Ford Credit or Ford Motor Company or any
of their affiliates is obligated to make any
payments relating to (1) the notes or
certificates of a trust or (2) the receivables
owned by a trust. Therefore, you may seek payment
of your securities only from the assets of the
trust. If these assets are insufficient, you may
suffer losses on your securities. There are,
however, two exceptions:
-- first, the seller will make representations
and warranties regarding the characteristics
of the receivables it sells to
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the trust and may have to repurchase
receivables if any of these representations and
warranties are breached and the receivable is
materially and adversely affected by the
breach; and
-- second, the servicer may have to purchase a
receivable if it breaches certain of its
servicing obligations, including extending
the payment schedule of the receivable
beyond the date specified in the prospectus
supplement.
Each trust will be expected or permitted to have
the receivables as assets and, to the extent
specified in the related prospectus supplement,
various deposit accounts and any payment or
credit enhancement.
AMOUNTS ON DEPOSIT IN ANY RESERVE ACCOUNT WILL BE
LIMITED AND SUBJECT TO DEPLETION. The amount
required to be on deposit in any reserve account
will be limited in amount. After the amounts in
the reserve account are depleted, the trust will
depend solely on collections on the receivables
to make payments on your securities. The balance
in any reserve account will decrease as --
-- the outstanding balance of the receivables
decreases; and
-- amounts are paid out to cover shortfalls in
distributions of principal and interest on
the securities.
YOU MAY SUFFER LOSSES UPON A LIQUIDATION OF THE
RECEIVABLES IF THE PROCEEDS OF THE LIQUIDATION
ARE LESS THAN THE AMOUNTS DUE ON THE OUTSTANDING
SECURITIES. If the receivables of any trust are
liquidated, the related securityholders may
suffer losses if the trust sells the receivables
for less than the total amount due on the
securities. If any outstanding notes are
accelerated due to an event of default under the
related indenture, the noteholders may be able to
direct the indenture trustee to sell the
receivables owned by the related trust. The
market value of the receivables may be less than
the aggregate principal amount of the outstanding
notes and certificates. Therefore, upon an event
of default with respect to the notes of any
trust, there can be no assurance that sufficient
funds will be available to repay the related
securityholders in full. In addition, 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. See "Description of
the Notes -- The Indenture" in this prospectus.
DELAYS IN COLLECTING PAYMENTS
COULD OCCUR IF FORD CREDIT
CEASES TO BE THE SERVICER If Ford Credit were to cease acting as servicer,
the processing of payments on the receivables and
information relating to collections could be
delayed, which could delay payments to
securityholders. Ford Credit can be removed as
servicer if it defaults on its servicing
obligations as described in the prospectus
section titled "Description of the
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Receivables Transfer and Servicing Agreements --
Events of Servicing Termination".
SUBORDINATION MAY CAUSE SOME
CLASSES OF SECURITIES TO BEAR
ADDITIONAL CREDIT RISK The rights of the holders of any class of notes
to receive payments of interest and principal may
be subordinated to one or more other classes of
notes. In addition, the rights of the holders of
any class of certificates to receive payments of
interest and principal may be subordinated to one
or more classes of notes and to one or more other
classes of certificates.
Holders of subordinated classes of securities
will bear more credit risk than more senior
classes. Subordination may take the following
forms:
-- interest payments on any date on which
interest is due will first be allocated to
the more senior classes;
-- principal payments on the subordinated
classes might not begin until principal of
the more senior classes is repaid in full;
-- subordinated classes bear the first risk of
losses; and
-- if the trustee had to sell receivables, the
net proceeds of that sale may be allocated
first to pay principal and interest on the
more senior classes.
The timing and priority of payment, seniority,
allocations of losses and method of determining
payments on the respective classes of securities
of any trust will be described in the related
prospectus supplement.
For more information about these credit risks,
see "Description of the Notes" and "Description
of the Certificates" in this prospectus and, as
applicable, in the related prospectus supplement.
YOU MAY HAVE TO REINVEST YOUR
PRINCIPAL AT A LOWER RATE OF
RETURN BECAUSE OF PREPAYMENTS
ON THE SECURITIES If your securities are prepaid, you may not be
able to reinvest the principal repaid to you
earlier than expected at a rate of return that is
equal to or greater than the rate of return on
your securities. You also may not be paid the
principal amount of your securities in full if
the assets of the related trust are insufficient
to pay the principal amount of all the securities
of the trust in full.
POTENTIAL PREPAYMENT OF SECURITIES DUE TO
PREPAYMENT OF RECEIVABLES. All the receivables
may be prepaid at any time. "Prepayments" may
include:
-- prepayments in full;
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-- partial prepayments (including those related
to rebates of extended warranty contract
costs and insurance premiums);
-- liquidations due to default;
-- receipts of proceeds from physical damage,
credit life and disability insurance
policies; and
-- repurchases for other administrative
reasons.
A variety of economic, social and other factors
will influence the rate of prepayments on the
receivables, including the structure of the loan
and the fact that the vehicle securing a
receivable may not be sold without the consent of
the servicer.
YOU MAY SUFFER LOSSES ON YOUR
SECURITIES BECAUSE THE
SERVICER WILL HOLD
COLLECTIONS AND COMMINGLE
THEM WITH ITS OWN FUNDS The servicer will generally be permitted to hold
with its own funds (1) collections it receives
from obligors on the receivables and (2) the
purchase price of receivables required to be
repurchased from the trust until the next date
distributions are due to be made on the
securities. During this time, the servicer may
invest collections and repurchase price amounts
at its own risk and for its own benefit and need
not segregate them from its own funds. If the
servicer is unable to pay these amounts to the
trust on the distribution date, you might incur a
loss on your securities.
On or before the business day preceding a date
when payments are due to be made on the
securities, the servicer must deposit to the
related collection account (1) all the
collections it received and (2) the aggregate
purchase amount of any receivables to be
purchased from the trust.
The servicer must deposit all collections into
the collections account no later than the second
business day after receipt if --
-- the servicer is not Ford Credit;
-- there is an event of servicing termination
under the sale and servicing agreement; or
-- the rating of Ford Credit's short-term
unsecured debt is less than P-1 by Moody's,
A-1 by Standard & Poor's or F-1 by Fitch.
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 payments by
the servicer of the amounts it owes to the trust.
For more information about the servicer's
obligations regarding payments on the
receivables, see "Description of the
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<PAGE> 17
Receivables Transfer and Servicing Agreements --
Collections" in this prospectus.
THE CERTIFICATEHOLDERS CANNOT
CONTROL REMOVAL OF THE
SERVICER UPON A DEFAULT ON
ITS SERVICING OBLIGATIONS The indenture trustee or the holders of a
majority of the outstanding balance of the notes
(or the class of notes specified in the
prospectus supplement) issued by the trust can
remove the servicer if the servicer --
-- does not deliver to the applicable trustee
the available funds for application to a
required payment; or
-- defaults on a servicing obligation which
materially and adversely affects the trust.
The noteholders may also waive a default by the
servicer. The certificateholders do not have any
rights to participate in such determinations for
so long as any of the notes are outstanding, and
the certificateholders may be adversely affected
by determinations made by the noteholders
IF BOOK-ENTRY REGISTRATION IS
USED, YOU MAY BE ABLE TO
EXERCISE YOUR RIGHTS AS A
SECURITYHOLDER ONLY THROUGH
THE CLEARING AGENCY If the prospectus supplement specifies that
securityholders of the trust will hold their
interests through a clearing agency or one of its
participating organizations, the securities will
be registered in the name of a nominee of the
clearing agency and physical certificates will
not be issued to individual securityholders.
These securityholders will not be recognized
directly by the trustee of the trust or the
indenture trustee and must exercise all of their
rights and receive any payments through the
clearing agency or the participating
organization, until physical certificates are
issued. Physical certificates will only be issued
in the limited circumstances described in the
prospectus section titled "Certain Information
Regarding the Securities -- Definitive
Securities". The clearing agency in the U.S. is
expected to be DTC and in Europe either
Cedelbank, societe anonyme or Euroclear.
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THE TRUSTS
The seller will establish a separate trust as either a Delaware business
trust or a common law trust to issue each series of notes and certificates. Each
trust will be established for the transactions described in this prospectus and
in the related prospectus supplement.
THE RECEIVABLES
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) 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.
In addition to the receivables, the trust will also have a right to --
-- in the case of Actuarial Receivables, all payments due thereunder on
or after the applicable Cutoff Date; and
-- in the case of Simple Interest Receivables, all payments received
thereunder on or after the applicable Cutoff Date.
On the Closing Date, the seller will sell and transfer the Initial
Receivables to the trust in an amount specified in the related prospectus
supplement. To the extent provided in the related prospectus supplement, the
seller will convey the Subsequent Receivables to the trust as frequently as
daily during the Funding Period specified in the prospectus supplement. The
trusts will purchase any Subsequent Receivables with amounts on deposit in a
pre-funding account. Up to 100% of the net proceeds from the sale of the
securities issued by a trust may be deposited into a pre-funding account to
later purchase Subsequent Receivables. Any Subsequent Receivables will also be
assets of the trust and will be subject to the prior rights of the related
indenture trustee and the noteholders, if any, therein. The property of each
trust will also include:
-- security interests in the Financed Vehicles;
-- 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;
-- the seller's rights to certain documents and instruments relating to
the receivables;
-- such amounts as from time to time may be held in one or more accounts
maintained under the related sale and servicing agreement;
-- certain rights under the related sale and servicing agreement;
-- certain rights under the purchase agreement and any yield supplement
agreement;
-- certain payments and proceeds with respect to the receivables held by
the servicer;
-- certain rebates of premiums and other amounts relating to certain
insurance policies and other items financed under the receivables; and
-- any and all proceeds of the above items.
The relevant rights and benefits with respect to the property of the trust
will be assigned by the seller and the applicable trustee to the related
indenture trustee for the benefit of the 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 holders of the related
securities.
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ASSETS RELATING TO CREDIT ENHANCEMENT MAY BE PART OF THE PROPERTY OF THE
TRUST. If and to the extent specified in the related prospectus supplement, one
or more of the following may be a part of the property of the trust:
-- a yield supplement account;
-- a pre-funding account;
-- a reserve account; or
-- another form of credit enhancement.
THE TRUSTEE
The trustee for each trust will be specified in the related prospectus
supplement. The trustee's liability in connection with the issuance and sale of
the related securities is limited solely to the express obligations of the
trustee set forth in the related trust agreement. The trustee may resign at any
time, in which event the servicer, or its successor, will be obligated to
appoint a successor trustee. The administrator of each trust may also remove the
trustee if:
-- the trustee ceases to be eligible to continue as trustee under the
related trust agreement, or
-- the trustee becomes insolvent.
In either of these circumstances, the administrator must appoint a
successor trustee. If the trustee resigns or is removed, the resignation or
removal and appointment of a successor trustee will not become effective until
the successor trustee accepts its appointment.
The principal offices of each trust and the related trustee will be
specified in the applicable prospectus supplement.
THE RECEIVABLES POOLS
PROPERTY OF THE TRUSTS
Installment sale financing consists principally of purchasing and servicing
retail installment sale contracts secured by new or used automobiles and light
trucks. Ford Credit originates receivables primarily from sales by franchised
Ford Motor Company dealers and associated non-Ford dealers to retail customers.
PRIMUS originates receivables primarily from sales by franchised non-Ford
dealers. Non-Ford dealers with relationships to PRIMUS include those selling
vehicles manufactured by DaimlerChrysler, General Motors, Honda, Jaguar, Mazda,
Nissan, Saturn, Subaru, Suzuki, Toyota and Volkswagen. In addition, Ford Credit
from time to time may purchase pools of automobile receivables from third party
originators which could be sold to a trust.
The receivables in each trust have been or will be purchased directly by
Ford Credit or by PRIMUS in the ordinary course of business in accordance with
the same underwriting standards, which standards emphasize the obligor's ability
to pay and creditworthiness, as well as the asset value of the Financed Vehicle.
A dealer is paid a purchase price for each receivable generally equal to the
total contract balance less the finance charge. A portion of the finance charge
is paid or credited to the dealer. In the United States, Ford Credit purchases
automotive retail contracts from about 7,100 Ford dealers and associated
non-Ford dealers through approximately 140 automotive financing branches.
Generally, no more than 100% of the purchase price of a vehicle, plus
related amounts such as taxes, insurance, etc., is financed, which amount
generally is less than or equal to the MSRP
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of a new vehicle or published prices for used vehicles. New vehicles generally
can be purchased at a discount from MSRP.
PRIMUS
PRIMUS Automotive Financial Services, Inc. was formed in New York in 1991
as a wholly-owned subsidiary of Ford Credit when Ford Credit purchased Marine
Midland Automotive Financial Corporation. In August 1999, Ford Credit expects to
start operating PRIMUS' business as a division of Ford Credit. PRIMUS offers a
full array of automotive financing products, including indirect retail and lease
programs, wholesale lines of credit, mortgages, capital loans and revolving
lines of credit, all designed for dealers and retail customers. In addition to
offering financing under the PRIMUS name, PRIMUS offers private-label financial
services to Subaru of America, Inc., Jaguar Cars, Inc., Mazda North American
Operations, American Suzuki Motor Company. PRIMUS also is the source of choice
for Kia Motors America, Inc., The Hertz Corporation and Aston Martin Lagonda and
additionally is a source for other finance companies.
PRIMUS purchases retail installment sale contracts and leases from non-Ford
dealers and may purchase them from other third parties. Such contracts are
usually purchased without recourse to the seller, subject to certain exceptions
for breaches of representations and warranties and delivery to PRIMUS of a
valid, enforceable and correctly issued lien on the related vehicle. PRIMUS
conducts its United States operations with about 4,100 dealers through
approximately 29 branch offices and its principal office is located at 9009
Carothers Parkway, Franklin, Tennessee 37068.
Receivables originated by PRIMUS are immediately assigned to Ford Credit,
including the related financing documents, security interest in the related
vehicle and any other property of the dealer securing the receivable. PRIMUS
continues to service for Ford Credit those receivables that PRIMUS has
originated in accordance with substantially the same servicing guidelines and
criteria as Ford Credit.
UNDERWRITING
Ford Credit and PRIMUS utilize the same underwriting standards and credit
scoring criteria. Each applicant for a contract completes a credit application
with the dealer. Each application is screened for acceptability and a credit
investigation is conducted to determine the creditworthiness of the applicant.
The credit investigation is conducted through the use of a credit bureau review
of each application together with an internal review and verification process.
Ford Credit and PRIMUS use statistically-based retail credit risk rating
guidelines to determine the creditworthiness of applicants.
These guidelines are used as internal measuring devices to indicate the
degree of risk associated with offered contracts and are not the sole method
used to decide whether to extend credit. The final credit decision also reflects
other factors such as the relationship with the dealer and the judgment of the
credit analyst. Within each branch, purchase approval authority guidelines are
established based upon the amount financed, the percent of the total purchase
price advanced and credit scores. The retail rate pricing strategy of Ford
Credit and PRIMUS is based on a principle of offering a customer a finance rate
that reflects the level of risk associated with the customer's credit score.
Each obligor is required on each related receivable to obtain or agree to obtain
physical damage insurance.
Once an offered contract has been approved, the dealer submits the contract
and the credit application to be checked for accuracy and regulatory compliance.
The dealer is required to perfect the security interest of Ford Credit or
PRIMUS, as applicable in the vehicles.
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SUBVENED LOANS
Subvention programs are marketing tools of automobile manufacturers under
which the manufacturer will offer a reduced financing rate to retail customers
as an incentive to purchase an automobile. Subvention programs, if any, require
the respective automobile manufacturer to pay an amount to compensate Ford
Credit or PRIMUS for offering the incentive interest rate financing. The
subvention compensation payments will not be property of the trust.
SERVICING AND COLLECTIONS
Ford Credit and PRIMUS separately service their respective accounts, but
utilize similar servicing practices and procedures. Ford Credit services over
4.2 million retail accounts from its approximately 140 branches in the United
States. On June 15, 1999, Ford Credit announced that it intended to restructure
its loan servicing and move its loan servicing functions, such as collections
and loan processing housed in its approximately 140 branches into seven regional
service centers in the U.S.
PRIMUS services over 0.5 million retail accounts from its service center in
Franklin, Tennessee. Servicing personnel at Ford Credit and at PRIMUS do not
know which, if any, of the receivables that they are servicing have been sold.
Once a receivable has been purchased from a dealer, a customer payment book
with monthly payment coupons is mailed to the obligor which instructs the
obligor to send payments to one of several lock-box centers. Most of the
receivables are paid without any additional servicing. Ford Credit and PRIMUS
plan to initiate monthly retail invoicing in the future.
Ford Credit and PRIMUS initiate collection activity on accounts that are 10
or more days delinquent by mailing a past-due notice to the customer. Collection
accounts are rated by behavior scoring and collection assignments are issued at
Ford after specified periods of delinquency. These assignments are placed in
high, medium and low categories respectively for collection follow-up.
A customer collection representative will attempt to contact an obligor to
determine the reason for a delinquency and identify the obligor's plans to
resolve the delinquency. If the obligor cannot make the past due payments,
extensions and rewrites are the primary options used to adjust a delinquent
account. A rewrite is a refinancing of the obligor's outstanding balance with a
different contract term, while an extension defers remaining payments for one or
more months. Fees are usually collected on extensions to cover the costs
associated with revised terms. Periodic management reports (delinquencies,
extensions, rewrites, etc.) and operating audits are the primary methods used to
maintain control over the use of collection actions.
REPOSSESSION AND WRITE-OFFS
Reasonable efforts will be made to collect on delinquent accounts and keep
obligors' accounts current. Repossession is considered as a last resort when:
-- the obligor has demonstrated the inability or intention not to pay;
-- the contract payments are in substantial default;
-- the security interest in the vehicle is impaired; and/or
-- the customer had not complied with specific contract provisions.
If a vehicle is repossessed or voluntarily surrendered, a condition report
will be prepared. A repossessed vehicle will be sold at an auction and the
proceeds will be applied to the outstanding balance of the receivable. The
Vehicle Remarketing Departments of Ford Credit and PRIMUS are responsible for
managing the disposal of repossessed vehicles and seek to obtain
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the highest net price for the vehicle, comprised of gross auction proceeds less
auction fees and costs for reconditioning, transportation, operating and
carrying inventory.
All collection activities for accounts that have been written off by Ford
Credit are consolidated and performed by Ford Credit at its collection
operations in Mesa, Arizona. These collection efforts have recovered an average
of 15% to 20% of the remaining balances (after application of repossession
proceeds). The collection activities for accounts written off by PRIMUS have
been performed by PRIMUS employees and by outside collection agencies, but are
expected to be consolidated and performed by Ford Credit in the near future.
Collection activities are continued until an account is paid or settled in full,
legally uncollectible due to bankruptcy of the obligor, the death of the obligor
without a collectible estate or the expiration of the statute of limitations.
WE WILL PROVIDE MORE SPECIFIC INFORMATION ABOUT THE RECEIVABLES IN THE
PROSPECTUS SUPPLEMENT
We will provide information about each Receivables Pool in the related
prospectus supplement, including, to the extent appropriate:
-- the portion originated by Ford Credit and by PRIMUS;
-- the aggregate principal balance of all of the receivables;
-- the average principal balance and the range of principal balances;
-- the number of receivables;
-- the average original amount financed and the range of original amount
financed;
-- the weighted average APR and the range of APRs;
-- the weighted average original term and the range of original terms;
-- the weighted average remaining term and the range of remaining terms;
-- the scheduled weighted average life;
-- the distribution by APR and by the states of origination;
-- the portion of such Receivables Pool consisting of Actuarial
Receivables and of Simple Interest Receivables; and
-- the portion of such Receivables Pool secured by new vehicles and by
used vehicles;
CRITERIA FOR SELECTING THE RECEIVABLES
The receivables to be held by each trust will be selected from the seller's
portfolio for inclusion in a Receivables Pool by several criteria, including
that each receivable:
-- is secured by a new or used vehicle;
-- was originated in the U. S.;
-- 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;
-- is an Actuarial Receivable or a Simple Interest Receivable (either of
which may be a Final Payment Receivable); and
-- satisfies the other criteria, if any, set forth in the related
prospectus supplement.
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No selection procedures which the seller believes to be adverse to the
noteholders or the certificateholders of any trust 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 in
this prospectus and in the related prospectus supplement.
SIMPLE INTEREST RECEIVABLES
If an obligor on a Simple Interest Receivable 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.
ACTUARIAL RECEIVABLES
PREPAYMENT OF ACTUARIAL RECEIVABLES. Because interest and principal are not
computed separately on Actuarial Receivables, obligors under Actuarial
Receivables will be entitled to rebates if they prepay or if their obligations
are accelerated. 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.
PREPAYMENT OF SIMPLE INTEREST RECEIVABLES. 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 an
Actuarial Receivable 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.
FINAL PAYMENT RECEIVABLES
If so provided in the related prospectus supplement, only the principal and
interest payments due on Final Payment Receivables prior to the final scheduled
payment and not the final scheduled payment will be included in a trust; the
final scheduled payment will be retained by the seller. However, 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 a trust and to cause
a trust to issue certificates representing interests in such final scheduled
payments or indebtedness secured by such final scheduled payments.
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MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the notes and the certificates of any trust
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. "Prepayments" for these purposes includes the
following circumstances:
-- Prepayments in full. All of the receivables are prepayable at any time
without penalty to the obligor.
-- Repurchases of the Receivables by the Seller. The seller may be
required to repurchase a receivable from the trust if certain breaches
of representations and warranties occur and the receivable is
materially and adversely affected by the breach.
-- Repurchases of the receivables by the Servicer. The servicer may be
obligated to purchase receivables from the trust if certain breaches
of certain covenants occur or if the servicer extends or modifies the
terms of the related receivables beyond the date specified in the
prospectus supplement.
-- Partial prepayments, including those related to rebates of extended
warranty contract costs and insurance premiums.
-- Liquidations of the Receivables due to default.
-- Receipts of proceeds from physical damage, credit life and disability
insurance policies.
-- Receivables repurchased by the seller or the servicer for
administrative reasons.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the notes or the certificates of a
given trust 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 securityholders of a given trust. 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 securities of the trust.
USE OF PROCEEDS
The net proceeds from the sale of the securities of a given trust will be
applied by the trust --
-- to the purchase of the receivables from the seller;
-- to make the initial deposit into any pre-funding account; and
-- to make the initial deposit into any yield supplement account; and
-- to make the initial deposit into any reserve account.
The seller will use the amount each trust pays to it for the receivables to
purchase the receivables from Ford Credit. The trust may also transfer certain
classes of notes or certificates to the seller in partial payment for the
receivables. Additionally, Ford Credit may be deemed to have made a capital
contribution to the seller as a part of the purchase price it receives for the
receivables.
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THE SELLER AND THE GENERAL PARTNER
DESCRIPTION OF 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.
INSOLVENCY OF THE SELLER OR THE GENERAL PARTNER MAY RESULT IN CONSOLIDATION OF
THEIR ASSETS WITH THE TRUST
The seller has taken steps in structuring the transactions contemplated in
this prospectus 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 under 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
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distributions on the securities (and possible reductions in the amount of such
distributions which may be substantial) could occur.
TRUST ASSETS MAY BE ADVERSELY AFFECTED IF SALE OF RECEIVABLES TO THE SELLER WERE
TREATED AS A LOAN
Ford Credit and the seller each intend 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 U. S. Bankruptcy Code should Ford
Credit become the subject of a bankruptcy case subsequent to the transfer of the
receivables to the seller. The seller has received the advice of counsel to the
effect that, subject to certain facts, assumptions and qualifications, in the
event Ford Credit were to become the subject of a voluntary or involuntary case
under the United States Bankruptcy Code subsequent to the transfer of
receivables to the seller, the transfer of such receivables by Ford Credit to
the seller under 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 under Section 541 of the U. S. 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 Uniform Commercial Code has issued an official commentary (PEB Commentary
No. 14) which characterizes the Octagon court's interpretation of Article 9 of
the Uniform Commercial Code 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 Motor Company.
Ford Credit and its subsidiaries provide wholesale financing and capital
loans to Ford dealers and associated non-Ford dealers 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 and divisions of Ford Credit provide these financing
services in the United States, Europe, Canada and Australia to non-Ford dealers.
A substantial majority of all new vehicles financed by Ford Credit are
manufactured by Ford Motor Company and its affiliates and a substantial majority
of new vehicles financed through PRIMUS are manufactured by other automobile
manufacturers. Ford Credit and PRIMUS also provide retail financing for used
vehicles built by Ford Motor Company and other manufacturers. In addition to
vehicle financing, Ford Credit makes loans to affiliates of Ford Motor Company
and finances certain receivables of Ford Motor Company and its subsidiaries.
Ford Credit also conducts insurance operations through the American Road
Insurance Company and its subsidiaries in the United States and Canada. American
Road's business consists of extended
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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
One or more classes of Asset Backed Notes of the related trust will be
issued under the terms of an indenture between the trust and the indenture
trustee specified in the related prospectus supplement, 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.
THE TRUST MAY USE BOOK-ENTRY REGISTRATION INSTEAD OF ISSUING DEFINITIVE NOTES
Each class of notes may initially be represented by one or more notes, in
each case registered in the name of DTC's nominee, unless they are Definitive
Notes. The notes will be available for purchase in the denominations specified
in the related prospectus supplement and may be available in book-entry form
only. Accordingly, such nominee is expected to be the holder of record of the
notes issued in book-entry form. If a class of notes is issued in book-entry
form, unless and until Definitive Notes are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no noteholder of such class of notes will be entitled to receive a
physical certificate representing a note of such class. If a class of notes is
issued in book-entry form, all references in this prospectus and in the related
prospectus supplement to actions by noteholders of such class of notes refer to
actions taken by DTC upon instructions from its Participants and all references
in this prospectus and in the related prospectus supplement to distributions,
notices, reports and statements to noteholders of such class of notes refer to
distributions, notices, reports and statements to DTC or its nominee, as the
registered holder of such class of notes, for distribution to noteholders of
such class of notes in accordance with DTC's procedures with respect thereto.
PRINCIPAL AND INTEREST ON THE NOTES
Each class of notes will have a stated principal amount and may bear
interest at the Note Interest Rate. 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
trust 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 trust, as described in the related prospectus
supplement. Payments of interest on the notes of such trust may be made prior to
payments of principal thereon. The dates for payments of interest and principal
on the notes of such trust may be different from the Distribution Dates for the
certificates of such trust. To the extent provided in the related prospectus
supplement, the trust 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.
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STRIP NOTES AND RESIDUAL CASH FLOW NOTES. To the extent provided in the
related prospectus supplement, the trust may include one or more classes of
notes that are --
-- Strip Notes entitled to (1) principal payments with disproportionate,
nominal or no interest payments or (2) interest payments with
disproportionate, nominal or no principal payments; or
-- Residual Cash Flow Notes entitled to all or a portion of any remaining
payments of principal and interest on the related receivables after
making all other distributions on each Distribution Date.
NOTE INTEREST RATES. Each class of notes may have a different Note Interest
Rate, which may be a fixed, variable or adjustable rate. For certain classes of
Strip Notes, the Note Interest Rate may be zero. The related prospectus
supplement will specify the Note Interest Rate for each class of notes of a
given trust or the method for determining such Note Interest Rate.
PREPAYMENT OF NOTES. One or more classes of notes of the trust may be
redeemable in whole or in part under the circumstances specified in the related
prospectus supplement, including at the end of the any Funding Period or as a
result of the servicer's exercising its option to purchase the related
Receivables Pool. In the event of a redemption, the noteholders may be entitled
to receive a redemption premium from the trust, in the amount and to the extent
provided in the related prospectus supplement.
FIXED PRINCIPAL PAYMENTS. To the extent specified in any prospectus
supplement, one or more classes of notes of a given trust 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.
PRIORITY. If so specified in the related prospectus supplement, payments to
noteholders of all classes within the trust 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 trust. See "Description of the Receivables Transfer and Servicing
Agreements -- Distributions" and "-- Credit and Cash Flow Enhancement."
In the case of notes of a trust 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. The trust and the indenture trustee may, without
the consent of the noteholders of the related trust, 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.
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Without the consent of the holder of each such outstanding note affected
thereby, however, no supplemental indenture will:
-- 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;
-- impair the right to institute suit for the enforcement of certain
provisions of the related indenture regarding payment;
-- reduce the percentage of the aggregate amount of the outstanding notes
of such trust, 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;
-- 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;
-- reduce the percentage of the aggregate outstanding amount of such
notes, the consent of the holders of which is required to direct the
related indenture trustee to sell or liquidate the receivables, if the
proceeds of such sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the outstanding notes of
such trust;
-- 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 trust necessary to amend such indenture or certain other
related agreements; or
-- 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 trust, 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 (1) such action will not, (A) as evidenced by an opinion of counsel,
materially adversely affect the interest of any such noteholder and (B) as
confirmed by the Rating Agencies rating the notes of the related trust, cause
the then current rating assigned to any class of such notes to be withdrawn or
reduced and (2) an opinion of counsel as to certain tax matters is delivered.
RIGHTS UPON EVENT OF DEFAULT. With respect to the notes of a given trust,
if an Event of Default should occur and be continuing with respect to the notes
of any trust, 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 trust have been declared due and payable following an
Event of Default with respect thereto, the related indenture trustee may
institute proceedings to collect amounts
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due or foreclose on trust property, exercise remedies as a secured party, sell
the related receivables or elect to have the applicable trust maintain
possession of such receivables and continue to apply collections on such
receivables as if there had been no declaration of acceleration. However, such
indenture trustee is prohibited from selling the related receivables following
an Event of Default, other than a default in the payment of any principal of or
a default for five days or more in the payment of any interest on any note of
such trust, unless
-- the holders of all outstanding notes of such trust consent to such
sale,
-- the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on the outstanding notes of such trust at
the date of such sale, or
-- such indenture trustee determines that the proceeds of receivables
would not be sufficient on an ongoing basis to make all payments on
the notes of such trust 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 trust.
Subject to the provisions of the applicable indenture relating to the
duties of the related indenture trustee, if an Event of Default under the
indenture occurs and is continuing with respect to notes of the trust, such
indenture trustee will be under no obligation to exercise any of the rights or
powers under such indenture at the request or direction of any of the holders of
such notes, if such indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the related indenture, the
holders of a majority in principal amount of the outstanding notes of a given
trust 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 trust will have the right to institute any
proceeding with respect to the related indenture, unless --
-- such holder previously has given to the applicable indenture trustee
written notice of a continuing Event of Default;
-- the holders of not less than 25% in principal amount of the
outstanding notes of such trust have made written request to such
indenture trustee to institute such proceeding in its own name as
indenture trustee;
-- such holder or holders have offered such indenture trustee reasonable
indemnity;
-- such indenture trustee has for 60 days failed to institute such
proceeding; and
-- 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.
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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 the 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 the trust contained in the
applicable indenture.
THE TRUSTS WILL BE SUBJECT TO COVENANTS UNDER THE INDENTURE. Each trust
will be subject to the covenants discussed below, as provided in the related
indenture.
-- RESTRICTIONS ON MERGER AND CONSOLIDATION. The related trust may not
consolidate with or merge into any other entity, unless:
-- 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,
-- such entity expressly assumes the trust's obligation to make due and
punctual payments upon the notes of the related trust and the
performance or observance of every agreement and covenant of the
trust under the indenture,
-- no Event of Default under the indenture shall have occurred and be
continuing immediately after such merger or consolidation,
-- the trust has been advised that the rating of the notes or the
certificates of such trust then in effect would not be reduced or
withdrawn by the Rating Agencies as a result of such merger or
consolidation,
-- the 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,
-- any action as is necessary to maintain the lien and security
interest created by the related indenture shall have been taken, and
-- the 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.
-- Other negative covenants. Each trust will not, among other things --
-- except as expressly permitted by the applicable Basic Documents ,
sell, transfer, exchange or otherwise dispose of any of the assets
of the trust,
-- claim any credit on or make any deduction from the principal and
interest payable in respect of the notes of the related trust (other
than amounts withheld under the tax Code or applicable state law) or
assert any claim against any present or former holder of such notes
because of the payment of taxes levied or assessed upon the trust,
-- dissolve or liquidate in whole or in part,
-- 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
-- permit any lien, charge, excise, claim, security interest, mortgage
or other encumbrance to be created on or extend to or otherwise
arise upon or burden the assets of the trust or any part thereof, or
any interest therein or the proceeds thereof, except as may be
created by the terms of the related indenture.
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No trust may engage in any activity other than as specified under the
section of the related prospectus supplement titled "The Trust." No trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
under the related notes and the related indenture, as a result of 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 trust, three or more
holders of the notes of any trust 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 trust.
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 the
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 of notes for each trust will be specified in the
related prospectus supplement. The indenture trustee for any trust may resign at
any time, in which event the trust will be obligated to appoint a successor
trustee for such trust. The trust 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 trust will be obligated to appoint a successor trustee for
the notes of the applicable trust. Any resignation or removal of the indenture
trustee and appointment of a successor trustee for the notes of the trust does
not become effective until acceptance of the appointment by the successor
trustee for such trust.
DESCRIPTION OF THE CERTIFICATES
One or more classes of certificates of the related trust will be issued
under the terms of a trust agreement, 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
certificates and the trust agreement.
THE TRUSTS MIGHT NOT ISSUE PHYSICAL CERTIFICATES REPRESENTING CERTIFICATES.
Except for the certificates, if any, of a given trust retained by the seller,
each class of certificates may initially be represented by one or more
certificates registered with in the name of DTC's nominee, except as set forth
below. Except for the certificates, if any, of a given trust retained by the
seller, the
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certificates will be available for purchase in the denominations specified in
the related prospectus supplement and may be available in book-entry form only.
Accordingly, such nominee is expected to be the holder of record of any class of
certificates issued in book-entry form that is not retained by the seller. If a
class of certificates is issued in book-entry form, unless and until Definitive
Certificates are issued under the limited circumstances described in this
prospectus or in the related prospectus supplement, no certificateholder (other
than the seller) of such class of certificates will be entitled to receive a
physical certificate representing a certificate of such class. If a class of
certificates is issued in book-entry form, all references in this prospectus and
in the related prospectus supplement to actions by certificateholders of such
class of certificates refer to actions taken by DTC upon instructions from the
Participants and all references in this prospectus and in the related prospectus
supplement to distributions, notices, reports and statements to
certificateholders of such class of certificates refer to distributions,
notices, reports and statements to DTC or its nominee, as the case may be, as
the registered holder of such class of certificates, for distribution to
certificateholders of such class of certificates in accordance with DTC's
procedures with respect thereto. Any certificates of a given trust 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 Receivables
Transfer and Servicing Agreements -- Insolvency Event or Dissolution"). See also
"Certain Information Regarding the Securities -- Book-Entry Registration" and
"-- Definitive Securities."
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
Each class of certificates will have a stated Certificate Balance and may
accrue interest on such Certificate Balance at the Certificate Rate. 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 prior to distributions with respect to principal of such
certificates on the Distribution Date specified in the prospectus supplement.
To the extent provided in the related prospectus supplement, the trust may
include one or more classes of certificates that are --
-- Strip Certificates entitled to (1) distributions in respect of
principal with disproportionate, nominal or no interest distributions
or (2) interest distributions with disproportionate, nominal or no
distributions in respect of principal; or
-- Residual Cash Flow Certificates entitled to all or a portion of any
remaining payments of principal and interest on the related
receivables after the trust has made all other distributions on each
Distribution Date.
CERTIFICATE RATES. Each class of certificates may have a different
Certificate Rate, which may be a fixed, variable or adjustable Certificate Rate.
The Certificate Rate for certain classes of Strip Certificates may be zero. The
related prospectus supplement will specify the Certificate Rate for each class
of certificates of a given trust or the method for determining such Certificate
Rate. See also "Certain Information Regarding the Securities -- Fixed Rate
Securities" and "-- Floating Rate Securities."
CERTIFICATES MAY BE SUBORDINATED TO NOTES. Distributions in respect of the
certificates of a given trust that includes notes may be subordinate to payments
in respect of the notes of such trust 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
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the certificateholders of such class. One or more classes of certificates of the
trust may be prepaid in whole or in part under the circumstances specified in
the related prospectus supplement, including at the end of any Funding Period or
as a result of the servicer's exercising its option to purchase the related
Receivables Pool. In the event of a 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. See "Description of
the Receivables Transfer and Servicing Agreements Termination."
CERTIFICATES MAY BE SUBORDINATED TO ONE OR MORE CLASSES OF OTHER
CERTIFICATES. In the case of a certificates of a trust 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 trust, three or more holders of the
certificates of such trust 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 the trustee for the purpose of communicating
with other certificateholders with respect to their rights under the related
trust 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 be Fixed Rate Securities or 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 may 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 at a rate determined by reference to 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 applicable prospectus supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security:
-- the CD Rate,
-- the Commercial Paper Rate,
-- the Federal Funds Rate,
-- LIBOR,
-- the Treasury Rate, or
-- such other Base Rate as is set forth in such prospectus supplement.
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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):
-- a maximum limitation, or ceiling, on the rate at which interest may
accrue during any interest period; and
-- a minimum limitation, or floor, on the rate at which interest may
accrue during any interest period. In addition to any maximum interest
rate that may be applicable to any class of Floating Rate 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 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 trust, which may be either the related trustee or
indenture trustee with respect to such trust. 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 prospectus
supplement and in the applicable prospectus supplement.
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.
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 prospectus supplement and in the applicable prospectus
supplement.
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 prospectus supplement and
in the applicable prospectus supplement.
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
prospectus supplement and in the applicable prospectus supplement.
BOOK-ENTRY REGISTRATION
The prospectus supplement related to a given trust will specify whether the
holders of the notes or certificates of such trust may hold their respective
securities as Book-Entry Securities.
Investors in the global notes may hold them through any of The Depository
Trust Company, Cedelbank, societe anonyme or the Euroclear System. The global
notes 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.
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INITIAL SETTLEMENT OF THE GLOBAL NOTES. All global notes will be held in
book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors'
interests in the global notes will be represented through financial institutions
acting on their behalf as direct and indirect participants in DTC. As a result,
Cedelbank and Euroclear will hold positions on behalf of their customers or
participants through their respective depositaries, which in turn will hold such
positions in accounts as DTC participants.
Investors electing to hold their global notes 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 notes through Cedelbank 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 notes will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Unless and until Definitive Securities are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no securityholder will be entitled to receive a physical certificate
representing a Book-Entry Security. All references in this prospectus 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
in this prospectus 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 holders of
Book-Entry Securities in accordance with DTC's procedures with respect thereto.
In the event that any of DTC, Cedelbank or Euroclear should discontinue its
services, the related administrator of each 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 trust held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
SECONDARY MARKET TRADING OF THE GLOBAL NOTES. 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 Cedelbank customers and/or Euroclear participants.
Secondary market trading between Cedelbank customers or Euroclear participants
will be settled using the procedures applicable to conventional eurobonds in
same-day funds.
Trading between DTC seller and Cedelbank or Euroclear purchaser. When
global notes are to be transferred from the account of a DTC participant to the
account of a Cedelbank customer or a Euroclear participant, the purchaser will
send instructions to Cedelbank or Euroclear through a Cedelbank customer or
Euroclear participant at least one business day prior to settlement. Cedelbank
or Euroclear will instruct the respective depositary, as the case may be, to
receive the global notes against payment. Payment will include interest accrued
on the global notes 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
notes. After settlement has been completed, the global notes will be credited to
the
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respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedelbank customer'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 notes 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
(that is, the trade fails), the Cedelbank or Euroclear cash debit will be valued
instead as of the actual settlement date.
Cedelbank customers 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 Cedelbank or Euroclear. Under this approach,
they may take on credit exposure to Cedelbank or Euroclear until the global
notes are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank customers 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, Cedelbank customers or Euroclear participants
purchasing global notes would incur overdraft charges for one day, assuming they
cleared the overdraft when the global notes were credited to their accounts.
However, interest on the global notes would accrue from the value date.
Therefore, in many cases the investment income on the global notes earned during
that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each Cedelbank customer'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 notes to the
respective depositary for the benefit of Cedelbank customers 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 Cedelbank or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedelbank customers and Euroclear
participants may employ their customary procedures for transactions in which
global notes are to be transferred by the respective clearing system, through
the respective depositary, to a DTC participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank customer or Euroclear
participant at least one business day prior to settlement. In these cases,
Cedelbank 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 notes 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 Cedelbank customer or Euroclear participant
the following day, and receipt of the cash proceeds in the Cedelbank customer'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
Cedelbank customer or Euroclear participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (that is, the trade fails), receipt of the
cash proceeds in the Cedelbank customer's or Euroclear participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase
global notes from DTC participants for delivery to Cedelbank customers or
Euroclear participants should note that
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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 Cedelbank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedelbank or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
(b) borrowing the global notes in the U.S. from a DTC participant no later
than one day prior to settlement, which would give the global notes
sufficient time to be reflected in their Cedelbank 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 Cedelbank
customer or Euroclear participant.
The securityholders who are not participants, either directly or
indirectly, but who desire to purchase, sell or otherwise transfer ownership of,
or other interest in, securities may do so only through direct and indirect
participants. In addition, securityholders will receive all distributions of
principal and interest from the indenture trustee or 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" 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, 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 of each trust that it will take
any action permitted to be taken by a securityholder under the related indenture
or trust agreement 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.
Non-U.S. holders of global notes 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.
THE DEPOSITORIES. 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 under
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the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities for its 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 securities of the trust), 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.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its customers and facilitates the
clearance and settlement of securities transactions between Cedelbank customers
through electronic book-entry changes in accounts of Cedelbank customers,
thereby eliminating the need for physical movement of certificates. Transactions
may be settled by Cedelbank in any of 36 currencies, including United States
dollars. Cedelbank provides to its Cedelbank customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Cedelbank interfaces with domestic markets in several countries. As a
professional depository, Cedelbank is subject in Luxembourg to regulation by and
supervision by the Commission for the Supervision of the Financial Sector.
Cedelbank customers 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 trust securities. Indirect access to Cedelbank is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedelbank customer,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants and
to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and the risk from transfers of
securities and cash that are not simultaneous.
The Euroclear system has subsequently been extended to clear and settle
transactions between Euroclear participants and counterparties both in Cedelbank
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 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. These 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 trust 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
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indirectly. The Euroclear operator acts under the Terms and Conditions, the
Operating Procedures of the Euroclear system and Belgian law only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
DEFINITIVE SECURITIES
With respect to any class of notes and any class of certificates issued in
book-entry form, such notes or certificates will be issued as Definitive Notes
and Definitive Certificates, respectively, to noteholders or certificateholders
or their respective nominees, rather than to DTC or its nominee, only if (i) the
related administrator of the 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 under the indenture 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 class 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 class 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
directly to holders of 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
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 securities
of each trust, 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 securities of each trust, 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 trust with respect to such Distribution Date or the period
since the previous Distribution Date, as applicable, and each such statement to
be
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delivered to certificateholders will include (to the extent applicable) the
following information (and any other information so specified in the related
prospectus supplement) as to the certificates of such trust with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(1) 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;
(2) the amount of the distribution allocable to interest on or with
respect to each class of securities of such trust;
(3) the amount of the distribution allocable to draws from any reserve
account, any yield supplement account or payments in respect of any
other credit or cash flow enhancement arrangement;
(4) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;
(5) the aggregate outstanding principal amount for each class of such
notes and the Certificate Balance for each class of such certificates,
each after giving effect to all payments reported under clause (1)
above on such date;
(6) 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;
(7) the amount of the aggregate Realized Losses (as defined in the related
prospectus supplement), if any, for such Collection Period;
(8) previously due and unpaid interest payments (plus interest accrued on
such unpaid interest), if any, on the notes and the certificates, in
each case as applicable to each class of securities, and the change in
such amounts from the preceding statement;
(9) previously due and unpaid principal payments (plus interest accrued on
such unpaid principal), if any, on the notes and the certificates, in
each case as applicable to each class of securities, and the change in
such amounts from the preceding statement;
(10) the aggregate Purchase Amounts for receivables, if any, that were
repurchased in such Collection Period;
(11) the balance of any reserve account on such date, after giving effect
to changes therein on such date;
(12) the balance of any yield supplement account on such date, after giving
effect to changes therein on such date;
(13) the amount of Advances on such date;
(14) for each such date during any Funding Period, the amount remaining in
the pre-funding account;
(15) for the first such date that is on or immediately following the end of
any Funding Period, the amount remaining in the pre-funding account
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 trust; and
(16) 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.
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Each amount set forth under clauses (1), (2), (6), (8) and (9) with respect
to the notes or the certificates of any trust will be expressed as a dollar
amount per $1,000 of the initial principal amount of such notes or the initial
Certificate Balance of such certificates, as applicable.
Within the prescribed period of time for federal income tax reporting
purposes after the end of each calendar year during the term of each trust, the
applicable trustee will mail to each person who at any time during such calendar
year has been a securityholder with respect to the 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 "Tax
Matters."
DESCRIPTION OF THE RECEIVABLES TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Receivables Transfer
and Servicing Agreements. Forms of the Receivables 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 Receivables Transfer and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
SALE AND ASSIGNMENT BY FORD CREDIT. Before each trust issues the related
securities, Ford Credit will sell and assign to the seller under a purchase
agreement, 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. When the trust issues the related
securities, the seller will sell and assign to the trust under a sale and
servicing agreement, 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. The applicable trustee of the trust will not
independently verify the existence and qualification of any receivables. The
trustee of the 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.
PURCHASE OF THE RECEIVABLES. The net proceeds received by the seller from
the sale of the certificates and the notes of the trust will be applied to the
purchase of the related receivables from Ford Credit, to the deposit into any
pre-funding account and to make the initial deposit into any reserve account.
The related prospectus supplement for the trust will specify whether, and the
terms, conditions and manner under which, Subsequent Receivables will be sold by
the seller to the applicable trust from time to time during any Funding Period
on each Subsequent Transfer Date.
The proceeds from the receivables purchased by the trust from the seller
and by the seller from Ford Credit may be more or less than the aggregate
principal balance thereof. If any receivables are purchased for a purchase price
less than their respective principal balances, a portion of the collections or
proceeds in respect of principal from such receivables may be deemed collections
or proceeds in respect of interest on such receivables for the purposes of
making payments on the securities.
REPRESENTATIONS AND WARRANTIES. In each purchase agreement, Ford Credit
will represent and warrant to the seller, and in each sale and servicing
agreement the seller will represent and warrant to the applicable trust among
other things, that at the date of issuance of the related notes and/or
certificates or at the applicable Subsequent Transfer Date --
-- the information provided about the related receivables is correct in
all material respects;
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-- the obligor on each related receivable had obtained or agreed to
obtain physical damage insurance in accordance with Ford Credit's
normal requirements;
-- 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;
-- 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 or PRIMUS; and
-- 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.
SELLER MUST REPURCHASE THE RECEIVABLES RELATING TO A BREACH OF
REPRESENTATION OR WARRANTY. As of the last day of the second (or, if the seller
elects, the first) month following the discovery by or notice to the seller of a
breach of any representation or warranty of the seller which materially and
adversely affects the interests of the related trust in any receivable, the
seller, unless it cures the breach, will purchase such receivable from the trust
and Ford Credit will purchase such receivable from the seller, at a price equal
to then 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 trust for any such uncured breach.
SERVICING OF THE RECEIVABLES. Under each sale and servicing agreement, the
servicer will service and administer the receivables held by each trust and, as
custodian on behalf of the trust, will maintain possession as the trustee's
agent of the retail installment sale contracts and any other documents relating
to such receivables. To assure uniform quality in servicing both the receivables
and the servicer's own portfolio of receivables, as well as to facilitate
servicing and save administrative costs, the installment sale contracts and
other documents relating thereto will not be physically segregated from other
similar documents that are in the servicer's possession or otherwise stamped or
marked to reflect the transfer to the trust so long as Ford Credit is servicing
the related receivables. However, Uniform Commercial Code financing statements
reflecting the sale and assignment of such receivables by Ford Credit to the
seller and by the seller to the trust, will be filed, and the servicer's
accounting records and computer systems will be marked to reflect such sale and
assignment. Because such receivables will remain in the servicer's possession
and will not be stamped or otherwise marked to reflect the assignment to the
trust if a subsequent purchaser were to obtain physical possession of such
receivables without knowledge of the assignment, the trust's interest in the
receivables could be defeated. See "Some Important Legal Issues Relating to the
receivables -- Security Interests in Vehicles."
ACCOUNTS
The servicer will establish and maintain with the related indenture trustee
one or more collection accounts in the name of the indenture trustee on behalf
of the related noteholders and certificateholders into which all payments made
on or with respect to the related receivables will be deposited. The servicer
may establish and maintain with such indenture trustee a note payment account,
in the name of such indenture trustee on behalf of such noteholders, into which
amounts released from the collection account and any pre-funding account,
reserve account or other credit enhancement for payment to such noteholders will
be deposited and from which all distributions to such noteholders will be made.
The servicer may establish and maintain with the related trustee a certificate
distribution account, in the name of the trustee on behalf of such
certificateholders, into which amounts released from the collection account and
any pre-
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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.
If so provided in the related prospectus supplement, the servicer will
establish for each trust an additional payahead account in the name of the
related indenture trustee into which, to the extent required by the sale and
servicing agreement, 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 initially will be maintained with the applicable indenture
trustee. So long as Ford Credit is the servicer and provided that (i) there
exists no Event of Servicing Termination and (ii) each other condition to
holding Payaheads as may be required by the applicable sale and servicing
agreement is satisfied, Payaheads may be retained by the servicer until the
applicable Distribution Date.
Any other accounts to be established with respect to securities of the
trust, including any pre-funding account, yield supplement account or reserve
account, will be described in the related prospectus supplement.
For any securities of the trust, funds in the trust accounts will be
invested as provided in the related sale and servicing agreement in Permitted
Investments.
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 trust. Net investment earnings on funds deposited in the trust accounts
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.
SERVICING PROCEDURES
Ford Credit will act as servicer and make reasonable efforts to collect all
payments due with respect to the receivables held by each trust and will use the
same collection procedures that it follows with respect to automotive retail
installment sale contracts that it continues to own, in a manner consistent with
the related sale and servicing agreement. PRIMUS will act as a subservicer for
those trust receivables that were originated by PRIMUS.
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. 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 last day of the
Collection Period preceding the latest Final Scheduled Distribution Date set
forth in the related prospectus supplement, changes the 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. 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.
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COLLECTIONS
With respect to securities of each trust, the servicer will deposit all
payments on the related receivables received from obligors and all proceeds of
the related receivables collected during each Collection Period specified in the
related prospectus supplement 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 (1) there exists no Event of Servicing Termination
and (2) each other condition to making monthly deposits as may be required by
the related sale 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 the trust 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 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 an Actuarial Receivable during a Collection Period exceed the
outstanding Actuarial Advances and the scheduled payment on such Actuarial
Receivable, the collections shall be applied to prepay the Actuarial Receivable
in full. If the collections are insufficient to prepay the Actuarial 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 Actuarial
Receivable in full.
ADVANCES
If so provided in the related prospectus supplement, to the extent the
collections on an Actuarial Receivable for a Collection Period are less than the
scheduled payment, the amount of Payaheads made on such Actuarial Receivable not
previously applied, if any, with respect to such Actuarial Receivable shall be
applied by the servicer to the extent of the shortfall. To, the extent of any
remaining shortfall, the servicer will advance the Actuarial Advance. The
servicer will be obligated to make an Actuarial Advance in respect of an
Actuarial Receivable only to the extent that the servicer, in its sole
discretion, expects to recoup the Actuarial Advance from the obligor, the
Purchase Amount, Liquidation Proceeds or collections from other receivables in
the related Receivables Pool. The servicer will deposit Actuarial 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
Actuarial 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 Actuarial 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 an amount equal to the Simple Interest Advance. If the Simple
Interest Advance is 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, 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
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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.
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 for each
Collection Period equal to a specified percentage of the Pool Balance as of the
first day of such Collection Period. The servicer also will be entitled to
receive as a supplemental servicing fee for each Collection Period any late,
prepayment, and other administrative fees and expenses collected during such
Collection Period. If specified in the related prospectus supplement, the
supplemental servicing fee will include net investment earnings on funds
deposited in the trust accounts and other accounts with respect to the trust.
The servicer will be paid the servicing fee and the supplemental servicing fee
for each Collection Period on the applicable Distribution Date.
The servicing fee and the supplemental servicing fee 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 fees will also compensate the
servicer for administering the particular receivables pool, including making
advances, accounting for collections, furnishing monthly and annual statements
to the related trustee and indenture trustee with respect to distributions, and
generating federal income tax information for the trust. The fees also will
reimburse the servicer for certain taxes, the fees of the related trustee and
indenture trustee, accounting fees, outside auditor fees, data processing costs,
and other costs incurred in connection with administering the applicable
receivables.
DISTRIBUTIONS
With respect to securities of each trust, 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 trust. 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 trust will be set forth in the related prospectus
supplement.
With respect to securities of each trust, on each Distribution Date,
collections on the related receivables will be transferred from the collection
account to the Note Payment Account, if any, and the certificate distribution
account for distribution to noteholders, if any, and certificateholders to the
extent provided in the related prospectus supplement. Credit enhancement, such
as a reserve account, will be available to the related 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, distributions in respect of principal of a class
of securities of a given trust 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 trust may be subordinate to payments in respect of notes
of such trust or other classes of certificates of such trust.
ALLOCATION OF COLLECTIONS ON RECEIVABLES. Distributions of principal on the
securities of the trust may be based on the amount of principal collected or due
and the amount of realized
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losses incurred in a Collection Period. On each 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 C Reports to
Securityholders."
CREDIT AND CASH FLOW ENHANCEMENT
ANY FORM OF CREDIT ENHANCEMENT MAY BE LIMITED AND MAY ONLY APPLY TO CERTAIN
CLASSES OF SECURITIES. The presence of a reserve account and other forms of
credit enhancement for the benefit of any class or securities of the trust is
intended to (1) enhance the likelihood of receipt by the securityholders of such
class of the full amount of principal and interest due thereon and (2) decrease
the likelihood that such securityholders will experience losses. The credit
enhancement for a class 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 will bear their allocable share of deficiencies, as described in
the related prospectus supplement. In addition, if a form of credit enhancement
covers securities of more than one trust, securityholders of any such trust will
be subject to the risk that such credit enhancement will be exhausted by the
claims of securityholders of other trusts.
SELLER MAY REPLACE CREDIT ENHANCEMENT WITH RATING CONFIRMATION. If so
provided in the related prospectus supplement, the seller may replace the credit
enhancement for any class of securities with another form of credit enhancement
without the consent of securityholders, provided the applicable Rating Agencies
confirm in writing that substitution will not result in the reduction or
withdrawal of the rating of such class of securities or any other class of
securities of the related trust.
RESERVE ACCOUNT. 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 trust 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 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.
SELLER MAY ASSIGN RIGHTS IN RESERVE ACCOUNT SUBJECT TO CONDITIONS. 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 --
-- 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;
-- 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
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-- such transferee or assignee agrees in writing to take positions for
federal income tax purposes consistent with the federal income tax
positions agreed to be taken by the seller.
NET DEPOSITS
As an administrative convenience and for so long as certain conditions are
satisfied (see "-- Collections" above), the servicer will be permitted to make
the deposit of collections, aggregate Advances and Purchase Amounts for any
trust for or with respect to the related Collection Period, net of distributions
to the servicer as reimbursement of Advances or payment of fees to the servicer
with respect to such Collection Period. Similarly, the servicer may cause to be
made a single, net transfer from the collection account to any related payahead
account, 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 trust as if all deposits, distributions, and transfers were made
individually.
STATEMENTS TO TRUSTEES AND TRUSTS
Prior to each Distribution Date with respect to securities of each trust,
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 trust described under "Certain Information Regarding the
Securities -- Reports to Securityholders."
EVIDENCE AS TO COMPLIANCE
Each sale 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 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
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.
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 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.
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Each sale and servicing agreement will further provide that neither the
servicer nor any of its directors, officers, employees and agents will be under
any liability to the related trust or the related noteholders or
certificateholders for taking any action or for refraining from taking any
action under such sale 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 will provide that the servicer is
under no obligation to appear in, prosecute or defend any legal action that is
not incidental to the servicer's servicing responsibilities under such sale and
servicing agreement 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, 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, 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 Motor Company, 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. 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 to any corporation more than 50% of the voting stock of
which is owned, directly or indirectly, by Ford Motor Company and the servicer
may at any time perform certain specific duties as servicer through other
subcontractors.
RIGHTS UPON EVENT OF SERVICING TERMINATION
As long as an Event of Servicing Termination under a sale and servicing
agreement remains unremedied, the related indenture trustee or holders of not
less than a majority of the principal amount of such notes then outstanding may
terminate all the rights and obligations of the servicer under such sale and
servicing agreement, whereupon such indenture trustee or a successor servicer
appointed by such indenture trustee will succeed to all the responsibilities,
duties and liabilities of the servicer under such sale and servicing agreement
and will be entitled to similar compensation arrangements. When all of the notes
have been paid in full, the certificateholders will succeed to the rights of the
noteholders to terminate and replace the servicer.
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, the 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.
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WAIVER OF PAST EVENTS OF SERVICING TERMINATION
The holders of not less than a majority of the principal amount of the then
outstanding notes of the related trust (or the holders of not less than a
majority of the outstanding Certificate Balance, in the case of any Event of
Servicing Termination which does not adversely affect the related indenture
trustee or such noteholders) may, on behalf of all such noteholders and
certificateholders, waive any Event of Servicing Termination under the related
sale and servicing agreement and its consequences, except an Event of Servicing
Termination consisting of a failure to make any required deposits to or payments
from any of the trust accounts or to the certificate distribution account in
accordance with such sale and servicing agreement.
AMENDMENT
The parties to each of the Receivables Transfer and Servicing Agreements
may amend such agreements without the consent of the related securityholders, to
add any provisions to or change or eliminate any of the provisions of such
Receivables Transfer and Servicing Agreements or modify the rights of such
noteholders or certificateholders; provided that such action will not, in the
opinion of counsel satisfactory to the related trustee or indenture trustee, as
applicable, materially and adversely affect the interest of any such noteholder
or certificateholder and provided that an opinion of counsel as to certain tax
matters is delivered if required. The Receivables 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 of the related trust and the holders of the certificates of such trust
evidencing not less than a majority of the Certificate Balance of such
certificates then outstanding, to add any provisions to or change or eliminate
any of the provisions of such Receivables Transfer and Servicing Agreements or
modify the rights of such noteholders or certificateholders; provided, however,
that no such amendment may (1) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on the related
receivables or distributions that are required to be made for the benefit of
such noteholders or certificateholders or change any Note Interest Rate or
Certificate Rate or the amount required to be on deposit in the Reserve Account,
if any, or (2) reduce the aforesaid percentage of the notes or certificates of
such trust 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 trust; and provided that an opinion of counsel as to certain tax
matters is delivered if required.
INSOLVENCY EVENT OR DISSOLUTION
If an Insolvency Event or a dissolution occurs with respect to the seller
or the General Partner, the related receivables will be liquidated and the trust
will be terminated 90 days after the date of such Insolvency Event or
dissolution, unless, before the end of such 90-day period --
-- the related trustee shall have received written instructions from --
-- the noteholders (other than the seller) of each class of notes of
such trust representing not less than a majority of the aggregate
unpaid principal amount of such class of notes and the right to
receive interest thereon;
-- the certificateholders (other than the seller) of certificates of
such trust representing not less than a majority of the aggregate
Certificate Balance of all such certificates and the right to
receive interest thereon;
-- not less than a majority of the holders (other than the seller) of
certain interests in any reserve account with respect to the trust;
-- not less than a majority of the holders (other than the seller) of
certificates representing interests in, or indebtedness secured by,
final scheduled payments
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with respect to the Final Payment Receivables, if any, initially
retained by the seller and subsequently added to the trust and the
right to receive interest thereon; and
-- any other person specified in the related prospectus supplement, to
the effect that each such party disapproves of the liquidation of
such receivables and termination of the trust; and
-- in connection therewith, the related trustee --
-- appoints an entity acceptable to Ford Credit to acquire an interest
in the trust and to act as a substitute "general partner" for
federal income tax purposes; and
-- obtains an opinion of counsel that the 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 any
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 the trust. Upon termination of any trust, the related trustee
shall, or shall direct the related indenture trustee to, promptly sell the
assets of the trust (other than the trust accounts and the certificate
distribution account) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation of
the receivables of the trust will be treated as collections on such receivables
and deposited in the related collection account. With respect to any trust, if
the proceeds from the liquidation of the related receivables and any amounts on
deposit in the reserve account, the payahead account, the note payment account
and the certificate distribution account are not sufficient to pay the notes and
the certificates of such trust 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 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 the trust and the
delivery to the trustee by each such certificateholder (including the seller,
the servicer or their affiliates) of a certificate certifying that such
certificateholder reasonably believes that the trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding notes of a given trust 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 trust will succeed to all the rights of the noteholders of such trust,
under the related sale and servicing agreement, except as otherwise provided
therein.
TERMINATION
With respect to each trust, the obligations of the servicer, the seller,
the related trustee and the related indenture trustee under the Receivables
Transfer and Servicing Agreements will terminate upon the earlier of (1) the
maturity or other liquidation of the last related receivable and the disposition
of any amounts received upon liquidation of any such remaining receivables, (2)
the payment to noteholders and certificateholders of the related trust of all
amounts required to be paid to them under the Receivables Transfer and Servicing
Agreements and (3) the occurrence of either event described below.
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In order to avoid excessive administrative expense, the servicer will be
permitted at its option to purchase from each trust as of the end of any
applicable Collection Period, if the then outstanding Pool Balance with respect
to the receivables held by the trust is 10% or less of 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 the 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 the
trust in the manner and subject to the terms and conditions set forth in such
prospectus supplement. If the applicable trustee receives satisfactory bids as
described in such prospectus supplement, then the receivables remaining in the
trust will be sold to the highest bidder.
As more fully described in the related prospectus supplement, any
outstanding notes of the related trust 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 under the
applicable trust agreement will effect early retirement of the certificates of
such trust.
ADMINISTRATION AGREEMENT
Ford Credit, will be the administrator of each trust and will agree, to the
extent provided in an administration agreement, to provide the notices and
certain reports and to perform other administrative obligations required by the
related indenture. The administrator will be entitled to a periodic
administration fee which will be paid by the seller as compensation for the
performance of the administrator's obligations under the applicable
administration agreement and as reimbursement for its expenses related thereto.
SOME IMPORTANT LEGAL ISSUES RELATING TO 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. 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, under the related purchase agreement, Ford
Credit will assign its security interests in the financed vehicles securing the
related receivables to the seller. Under the related sale and servicing
agreement, the seller will assign its security interests in the financed
vehicles securing the related receivables to the trust. However, because of the
administrative burden and expense, the servicer, the seller and the trust will
not amend any certificate of title to identify the trust as the new secured
party on the certificates of title relating to the financed vehicles. Also, the
servicer will continue to hold any certificates of title relating to the
financed vehicles in its possession as custodian for the trust under the related
sale and servicing agreement. See "Description of the Receivables Transfer and
Servicing Agreements -- Sale and Assignment of Receivables."
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In most states, assignments such as those under the purchase agreement and
the sale and servicing agreement relating to each trust together with a
perfected security interest in the chattel paper are an effective conveyance of
a security interest in the vehicles subject to the chattel paper without
amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party. In the
absence of fraud or forgery by the vehicle owner or the servicer or
administrative error by state or local agencies, the notation of Ford Credit's
lien on the certificates of title will be sufficient to protect the 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 and would create an obligation of Ford
Credit under such purchase agreement and of the seller under such sale and
servicing agreement to purchase the related receivable if such breach shall
materially adversely affect the interest of the 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. By not identifying the trust as the secured party
on the certificate of title, that 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. If the trust does not have a perfected security interest in a Financed
Vehicle, its ability to realize on such Financed Vehicle in the event of a
default may be adversely affected.
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, the servicer will
be obligated to take appropriate steps, at the servicer's expense, to maintain
perfection of security interests in the financed vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for certain unpaid taxes take priority over even a perfected
security interest in a Financed Vehicle. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. Federal law and the laws of certain states permit the
confiscation of motor vehicles under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected security
interest in the confiscated motor vehicle. With respect to each trust, Ford
Credit will represent to the seller and the seller will represent to the trust
that each security interest in a Financed Vehicle is or will be prior to all
other present liens (other than tax liens and liens that arise by operation of
law) upon and security interests in such Financed Vehicle. However, liens for
repairs or taxes, or the
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confiscation of a Financed Vehicle, could arise or occur at any time during the
term of a receivable. No notice will be given to the applicable trustee or
certificateholders and any indenture trustee or noteholders, if any, in the
event such a lien arises or confiscation occurs. Neither the seller nor the
servicer will have any obligation to repurchase a receivable as to which any of
the aforementioned occurrences result in the trust losing the priority of its
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.
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
Uniform Commercial Code, except where specifically limited by other state laws.
The Uniform Commercial Code 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 Uniform Commercial Code 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 Uniform Commercial
Code 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
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there are remaining funds, the Uniform Commercial Code requires the lender to
remit the surplus to the former obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle
retail installment sales acts, retail installment sales acts, and other similar
laws. Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. The requirements impose specific statutory
liabilities upon creditors who fail 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,
also known as the FTC rule, the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, other state statutes, or the common law in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction and any assignee
of the seller to all claims and defenses which the obligor in the transaction
could assert against the seller of the goods. Liability under the FTC rule is
limited to the amounts paid by the obligor under the contract, and the holder of
the contract may also be unable to collect any balance remaining due thereunder
from the obligor.
Most of the receivables will be subject to the requirements of the FTC
rule. Accordingly, each trust, as holder of the related receivables, will be
subject to any claims or defenses that the purchaser of the Financed Vehicle may
assert against the seller of the Financed Vehicle. Such claims are limited to a
maximum liability equal to the amounts paid by the obligor on the receivable.
Under most state motor vehicle dealer licensing laws, sellers of motor vehicles
are required to be licensed to sell motor vehicles at retail sale. Furthermore,
Federal Odometer Regulations promulgated under the Motor Vehicle Information and
Cost Savings Act require that all sellers of new and used vehicles furnish a
written statement signed by the seller certifying the accuracy of the odometer
reading. If a seller is not properly licensed or if an Odometer Disclosure
Statement was not provided to the purchaser of the related financed vehicle, the
obligor may be able to assert a defense against the seller of the vehicle. If an
obligor were successful in asserting any such claim or defense, such claim or
defense would constitute a breach of Ford Credit's and the seller's
representations and warranties under the related purchase agreement and the
related sale and servicing agreement and would create an obligation of Ford
Credit and the seller to repurchase the receivable unless the breach is cured.
See "Description of the Receivables 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 Uniform Commercial Code 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
Uniform Commercial Code 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.
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Ford Credit and the seller will warrant under each purchase agreement and
the applicable sale and servicing agreement that each receivable complies with
all requirements of law in all material respects. Accordingly, if an obligor has
a claim against the trust for violation of any law and such claim materially and
adversely affects the 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 and would create an obligation of Ford
Credit and the seller to repurchase the receivable unless the breach is cured.
See "Description of the Receivables Transfer and Servicing Agreements -- Sale
and Assignment of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
TRANSFERS OF VEHICLES
The receivables prohibit the sale or transfer of the vehicle securing a
receivable without Ford Credit's consent and, except those originated in Ohio
and Wisconsin, permit Ford Credit to accelerate the maturity of the receivable
upon a sale or transfer without its consent. 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.
TAX MATTERS
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 trust. 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 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 trust.
The following summary is based upon current provisions of the Tax 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 Tax Counsel to each trust specified
in the related prospectus supplement 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 to each trust and the notes, certificates and
related terms, parties and documents applicable to the trust.
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SCOPE OF THE TAX OPINIONS
It is expected that Special Tax Counsel will, upon issuance of notes and/or
certificates of the trust, deliver its opinion that the applicable trust will
not be classified as an association (or publicly traded partnership) taxable as
a corporation for federal income tax purposes.
In addition, Special Tax Counsel will render its opinion that it has
prepared or reviewed the statements in this prospectus and in the related
prospectus supplement under the heading "Summary -- Tax Status" as they relate
to federal income tax matters and under the heading "Tax Matters," 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/or certificates.
ERISA CONSIDERATIONS
ERISA and the Tax Code impose certain requirements on Plans and on persons
who are fiduciaries of Plans. In accordance with ERISA's general fiduciary
standards, before investing in securities, a Plan fiduciary should determine,
among other factors, whether the investment:
-- is permitted under the governing Plan;
-- is appropriate for the Plan in view of its overall investment policy
and the composition and diversification of its portfolio; and
-- is prudent considering the factors discussed in this prospectus.
ERISA and the Tax Code prohibit some transactions involving assets of a
Plan and persons who are "parties in interest" under ERISA or "disqualified
persons" under the Tax Code. Prohibited transactions may generate excise taxes
and other liabilities.
A fiduciary of any Plan should carefully review with its legal and other
advisors whether the purchase or holding of any securities of a trust could give
rise to a transaction prohibited or otherwise impermissible under ERISA or the
Tax 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.
PROHIBITED TRANSACTION CONSIDERATIONS
Whether or not an investment in the notes or the certificates will give
rise to a transaction prohibited or otherwise impermissible under ERISA or the
Tax Code will depend on the structure of the trust.
Certain transactions involving a trust might be deemed to constitute
prohibited transactions under ERISA and the Tax Code if assets of the trust were
deemed to be assets of a Plan investing in securities issued by the trust. Under
the Plan Assets Regulation issued by the DOL, the assets of the trust would be
treated as plan assets of a Plan for purposes of ERISA and the Tax Code if the
Plan acquires an "equity interest" in the trust and none of the exceptions
contained in the Plan Assets Regulation is applicable. An equity interest is
defined under the Plan Assets Regulation as an interest other than an instrument
which is treated as indebtedness under applicable local law and which has no
substantial equity features. Under the Plan Assets Regulation, if a Plan invests
in an "equity interest" of an entity that is neither a "publicly offered
security" nor a security issued by an investment company registered under the
Investment
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Company Act of 1940, the Plan's assets are deemed to include both the equity
interest itself and an undivided interest in each of the entity's underlying
assets, unless it is established that the entity is an "operating company" or
that equity participation by "benefit plan investors" is not "significant."
Equity participation in an entity by Benefit Plan Investors is
"significant" on any date if the 25% Limitation is met.
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 in this prospectus with their
legal advisors.
INVESTMENT IN NOTES
The seller believes that the notes of any trust should be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. (If provided in the prospectus supplement that notes of any class
are not to be treated as indebtedness for ERISA purposes, the discussion in "--
The Certificates" below will apply to any such class of notes.) However, without
regard to whether the notes of the trust 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 trust or any of their respective affiliates, is or becomes a Party in
Interest or a Disqualified Person with respect to such Plan. In such case,
certain exemptions from the prohibited transaction rules could be applicable
depending on the type and circumstances of the Plan fiduciary making the
decision to acquire a note. Included among these exemptions are PTCE 90-1, PTCE
95-60, PTCE 91-38, PTCE 96-23, and PTCE 84-14. 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.
INVESTMENT IN CERTIFICATES
The certificates will most likely be treated as Equity Interests under the
Plan Assets Regulation. Accordingly, if equity participation in the certificates
by Benefit Plan Investors is "significant" within the meaning of the Plan Asset
Regulation, the assets of the trust could be deemed to be the assets of Plans
investing in the certificates. In such event, such assets, transactions
involving such assets and the persons with authority or control over and
otherwise providing services with respect to such assets would be subject to the
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and of the Tax Code and there is no assurance that any
statutory or administrative exemption from the application of such rules would
be available.
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 Tax Code. Under Section 401(c), the
Department of Labor is required to issue general account regulations with
respect to insurance policies issued on or before December 31, 1998 that are
supported by an insurer's general account. The general account
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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 Tax 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 Tax 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.
As of the date hereof, the DOL has issued proposed regulations under
Section 401(c). It should be noted that if the general account regulations are
adopted substantially in the form in which proposed, the general account
regulations may not exempt the assets of insurance company general accounts from
treatment as "plan assets" after December 31, 1998. The general account
regulations should not, however, adversely affect the applicability of PTCE
95-60.
PLANS NOT SUBJECT TO ERISA OR THE TAX CODE
Certain employee benefit plans, such as governmental plans and certain
church plans (each of which is defined in ERISA) are not subject to the
prohibited transaction provisions of ERISA and Section 4975 of the Tax 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 trust without
regard to the factors described in this prospectus 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 Tax Code is subject to the prohibited
transaction rules set forth in Section 503 of the Tax Code.
GENERAL INVESTMENT CONSIDERATIONS
Prospective investors who are Plan investors should consult with their
legal advisors concerning the impact of ERISA and the Tax Code and the potential
consequences of making an investment in any securities of the trust with respect
to such investors' specific circumstances. Moreover, each Plan fiduciary should
take into account, among other considerations, whether the fiduciary has the
authority to make the investment; the composition of the Plan's portfolio with
respect to diversification by type of asset; the Plan's funding objectives; the
tax effects of the investment; and whether under the general fiduciary standards
of investment prudence and diversification an investment in any securities of
the trust 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
The seller will agree to cause the related trust to sell to the
underwriters named in the related prospectus supplement the notes and
certificates of the trust that the seller agrees to sell in an underwriting
agreement. Each of the underwriters will severally agree to purchase the
principal amount of each class of notes and certificates of the related trust
set forth in the related prospectus supplement and the underwriting agreement.
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Each prospectus supplement (or supplemental prospectus supplement, as
described below) will either --
-- 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
-- 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. Each
prospectus supplement, together with a supplemental prospectus
supplement, may also be used by Ford Credit or another affiliate for
the sale of a specified class of notes or certificates originally
purchased from the seller by Ford Credit.
The seller and Ford Credit will indemnify the underwriters of securities
purchased from the seller 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. Ford Credit will
indemnify the underwriters of securities purchased from Ford Credit against
certain civil 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.
Under each underwriting agreement with respect to a given trust, 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 trust.
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 trust will be
passed upon for the related trust, the seller and the servicer by Hurley D.
Smith, Esq., Secretary and Corporate Counsel of the servicer, or other counsel
satisfactory to the underwriters. Certain Michigan state tax and other matters
will be passed upon for each trust by Hurley D. Smith, Esq., Secretary and
Corporate Counsel of the servicer, or other counsel to the servicer acceptable
to the underwriters. Mr. Smith is a full-time employee of Ford Credit and owns
and holds options to purchase shares of Common Stock of Ford Motor Company.
WHERE YOU CAN FIND MORE INFORMATION
The seller, as originator of each trust, has filed with the SEC a
Registration Statement, Registration No. - under the Securities Act, with
respect to the notes and the certificates offered by this prospectus. You may
read and copy any notices, reports, statements or other information that any of
the trust, the servicer, the seller or Ford Motor Company has filed or causes to
be filed and obtain copies of the Registration Statement at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
SEC'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 SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the SEC 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
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Wide Web site is http://www.sec.gov. You may obtain more information on the
operation of the Public Room by calling the SEC at 1-800-SEC-0330. You may also
obtain more information about the Ford Motor Company and Ford Credit on the
World Wide Web. The respective Internet addresses of such World Wide Web sites
are http://www.Ford.com and http://www.FordCredit.com.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by each trust under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended, subsequent to the date of
this prospectus and prior to the termination of the offering of the securities
shall be deemed to be incorporated by reference in this prospectus. Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed document
which also is or is deemed to be incorporated by reference in this prospectus
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 in this prospectus 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 Motor Credit Company, c/o Secretary,
The American Road, Dearborn, Michigan 48121 (Telephone: (313) 322-3000).
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GLOSSARY OF TERMS FOR THE PROSPECTUS
Set forth below is a list of the defined terms used in this prospectus. The
terms appear in bold faced type whenever used.
"25% LIMITATION" means that immediately after the most recent acquisition
of any equity interest in the entity, 25% or more of the value of any class of
equity interest in the entity is held by Benefit Plan Investors.
"ACTUARIAL ADVANCE" means an advance on an Actuarial Receivable made by the
servicer, in its sole discretion, for a deficiency in a scheduled payment as of
the last day of a Collection Period.
"ACTUARIAL RECEIVABLE" means a receivable that provides for amortization of
the loan over a series of fixed level payment monthly installments where 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 loan APR multiplied by the unpaid principal balance of the loan, and an
amount of principal equal to the remainder of the monthly installment.
"ADVANCES" means, collectively, Actuarial Advances and Simple Interest
Advances.
"ADMINISTRATOR" means Ford Credit, in its capacity as administrator of the
trust under an administration agreement.
"APR" means, with respect to a receivable, its annual percentage rate and
with respect to the Receivables Pool, the weighted average annual percentage
rate of all of the receivables in that pool.
"BASE RATE" means, with respect to Floating Rate Securities, an interest
rate basis upon which a Spread is applied to calculate the interest rate of the
Floating Rate Securities for a particular period.
"BASIC DOCUMENTS" means the applicable trust agreement, purchase agreement,
sale and servicing agreement, indenture, administration agreement, control
agreement and certain other related documents.
"BENEFIT PLAN INVESTOR" means any:
-- "employee benefit plans" (as defined in Section 3(3) of ERISA
including without limitation governmental plans, foreign pension plans
and church plans;
-- "plans" described in Section 4975(e)(1) of the Tax Code, including
individual retirement accounts and Keogh plans; or
-- entities whose underlying assets include plan assets by reason of a
plan's investment in such entity, including without limitation, as
applicable, an insurance company general account.
"BOOK-ENTRY SECURITIES" means the notes and certificates that are held in
the U.S. through DTC and in Europe through Cedelbank or Euroclear.
"CALCULATION AGENT" means, for each trust that issues Floating Rate
Securities, that calculation agent appointed to calculate interest rates on each
class of Floating Rate Securities issued by the trust.
"CALCULATION DATE" means:
(1) with respect to any CD Rate Determination Date, any Commercial Paper
Rate Determination Date or any Treasury Rate Determination Date, the
first to occur of:
-- the tenth calendar day after the respective determination date or,
if it is not a business day, the next business day, or
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-- the second business day preceding the date any payment is required
to be made for any period following the applicable Interest Reset
Date; and
(2) with respect to any Federal Funds Rate Determination Date, the next
business day.
"CD RATE" for each Interest Reset Period shall be the rate as of the 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)." If such rate is not
published on or before 3:00 p.m., New York City time on the Calculation Date,
then the CD Rate shall 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 such rate is not published in either
H.15(519) or Composite Quotations on or before 3:00 p.m., New York City time on
such Calculation Date, then the CD Rate will be calculated by the Calculation
Agent for such CD Rate Security from 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 selected by the Calculation
Agent for such CD Rate Security in negotiable U.S. dollar certificates of
deposit in The City of New York 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 by the
Calculation Agent are not quoting offered rates, the CD Rate for such Interest
Reset Period will be the same as the CD Rate for the immediately preceding
Interest Reset Period.
"CD RATE DETERMINATION DATE" means the second business day prior to the
Interest Reset Date for the related Interest Reset Period.
"CD RATE SECURITY" means a Floating Rate Security designated in the
applicable prospectus supplement with a Base Rate equal to the CD Rate.
"CEDELBANK" means Cedelbank, societe anonyme, a professional depository
under the laws of Luxembourg.
"CEDELBANK CUSTOMER" means a participating organization of Cedelbank.
"CERTIFICATE BALANCE" means with respect to each class of certificates and
as the context so requires, (i) with respect to all certificates of such class,
an amount equal to, initially, the initial Certificate Balance of such class of
certificates and, thereafter, an amount equal to the initial Certificate Balance
of such class of certificates, reduced by all amounts distributed to
certificateholders of such class of certificates and allocable to principal or
(ii) with respect to any certificate of such class, an amount equal to,
initially, the initial denomination of such certificate and, thereafter, an
amount equal to such initial denomination, reduced by all amounts distributed in
respect of such certificate and allocable to principal.
"CERTIFICATE RATE" with respect to each class of certificates, the rate
specified in the prospectus supplement at which interest may accrue.
"CLOSING DATE" means the date specified in the prospectus supplement on
which the seller will sell and transfer the Initial Receivables to the trust.
"COLLECTION PERIOD" means with respect to securities of each trust, the
collection period specified in the related prospectus supplement during which
all payments on the related receivables are received from obligors and all
proceeds of the related receivables are collected.
"COMMERCIAL PAPER RATE" for each Interest Reset Period shall be the Money
Market Yield on the Commercial Paper Rate Determination Date of the rate for
commercial paper having the Index Maturity specified in the applicable
prospectus supplement, as such rate shall be published
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in H.15(519) under the heading "Commercial Paper." If such rate is not published
on or before 3:00 p.m., New York City time on the Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield of the rate for commercial
paper of the specified Index Maturity as published in Composite Quotations under
the heading "Commercial Paper." If such rate is not published in either
H.15(519) or Composite Quotations on or before 3:00 p.m., New York City time on
such Calculation Date, then the Commercial Paper Rate 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 selected by the Calculation Agent for such
Commercial Paper Rate Security in The City of New York 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 by the Calculation Agent are not quoting
offered rates, 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.
"COMMERCIAL PAPER RATE DETERMINATION DATE" means the second business day
prior to the Interest Reset Date for the related Interest Reset Period.
"COMMERCIAL PAPER RATE SECURITY" means a Floating Rate Security designated
in the applicable prospectus supplement with a Base Rate equal to the Commercial
Paper Rate.
"COMPOSITE QUOTATIONS" means the daily statistical release entitled
"Composite 3:30 p.m. Quotations for U.S. Government Securities" published by the
Federal Reserve Bank of New York.
"CUTOFF DATE" means the "Cutoff Date" specified in the applicable
prospectus supplement.
"DEFINITIVE CERTIFICATES" means with respect to any class of certificates
issued in book-entry form, such certificates issued in fully registered,
certificated form to certificateholders or their respective nominees, rather
than to DTC or its nominee.
"DEFINITIVE NOTES" means with respect to any class of notes issued in
book-entry form, such notes issued in fully registered, certificated form to
noteholders or their respective nominees, rather than to DTC or its nominee.
"DEFINITIVE SECURITIES" means collectively, the Definitive Notes and the
Definitive Certificates.
"DETERMINATION DATE" means the business day before each Distribution Date.
"DISTRIBUTION DATE" means the dates specified in each related prospectus
supplement for the payment of principal of and interest on the securities.
"DOL" means the United States Department of Labor.
"DTC" means The Depository Trust Company and any successor depository
selected by the trust.
"ELIGIBLE DEPOSIT ACCOUNT" means either --
-- a segregated account with an Eligible Institution; or
-- a segregated trust account with the corporate trust department of
a depository institution organized under the laws of the U. S. 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.
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"ELIGIBLE INSTITUTION" means, with respect to securities of the trust --
-- the corporate trust department of the related indenture trustee or
the related trustee, as applicable; or
-- a depository institution organized under the laws of the U. S. or
any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), (1) 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 (2) whose
deposits are insured by the FDIC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EUROCLEAR", a professional depository operated by the Brussels, Belgium
office of Morgan Guaranty Trust Company of New York under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation.
"EVENTS OF DEFAULT" under the related indenture will consist of:
-- a default for five days or more in the payment of any interest on
any such note, except that a default in the payment of interest on
a subordinated class of notes may not constitute an "Event of
Default" until the more senior class or classes of notes have been
paid in full;
-- 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;
-- 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 the trust by the
applicable indenture trustee or to the trust and such indenture
trustee by the holders of at least 25% in principal amount of such
notes then outstanding;
-- any representation or warranty made by the 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 the trust by the
applicable indenture trustee or to the trust and such indenture
trustee by the holders of at least 25% in principal amount of such
notes then outstanding;
-- certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust; or
-- such other events, if any, set forth in the related prospectus
supplement.
The amount of principal required to be paid to noteholders of such trust
under the related indenture, however, generally will 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 under the indenture until the final scheduled
Distribution Date for such class of notes.
"EVENTS OF SERVICING TERMINATION" under each sale and servicing agreement
will consist of:
-- 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 trust 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
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the case may be, or after discovery by an officer of the servicer
or the seller, as the case may be;
-- 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, which
failure materially and adversely affects the rights of the
noteholders or the certificateholders of the related trust 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 trust, as applicable, of
not less than 25% in principal amount of such outstanding notes or
of such Certificate Balance;
-- the occurrence of an Insolvency Event with respect to the servicer
or the seller; and
-- such other events, if any, set forth in the related prospectus
supplement.
"FEDERAL FUNDS RATE" for each Interest Reset Period shall be the effective
rate on the Federal Funds Rate Determination Date for Federal Funds as published
in H.15(519) under the heading "Federal Funds (Effective)." If such rate is not
published on or before 3:00 p.m., New York City time on the Calculation Date,
then the Federal Funds Rate shall be the rate on such Federal Funds Rate
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations on or before 3:00 p.m., New York City time on
such Calculation Date, then the Federal Funds Rate 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 on or before 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 prospectus supplement for the period from and including a
Monday to but excluding the succeeding Monday will be reset by the Calculation
Agent for such prospectus supplement 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.
"FEDERAL FUNDS RATE DETERMINATION DATE" means the Interest Reset Date for
the related Interest Reset Period.
"FEDERAL FUNDS RATE SECURITY" means a Floating Rate Security designated in
the applicable prospectus supplement with a Base Rate equal to the Federal Funds
Rate.
"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 --
-- payment in full in cash of such amount;
-- transfer of the vehicle to Ford Credit provided certain conditions
are satisfied; or
-- refinancing the final scheduled payment in accordance with certain
conditions.
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"FINAL PAYMENT SECURITIES" indebtedness secured by, final scheduled
payments with respect to the Final Payment Receivables, if any, initially
retained by the seller and subsequently added to the trust.
"FIXED RATE SECURITIES" means securities (other than certain classes of
Strip Notes or Strip Certificates) which bear interest at a fixed rate per
annum.
"FLOATING RATE SECURITIES" securities (other than certain classes of Strip
Notes or Strip Certificates) may bear interest at a variable or adjustable rate
per annum.
"FORD CREDIT" means Ford Motor Credit Company.
"FUNDING PERIOD" the period specified in the related prospectus supplement
during which the seller will sell any Subsequent Receivables to the trust, which
period may be as frequently as daily.
"GENERAL PARTNER" means Ford Credit Auto Receivables Two, Inc., a Delaware
corporation, the general partner of the seller.
"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.
"INDEX MATURITY" for any class of Floating Rate Securities means the period
of maturity of the instrument or obligation from which the Base Rate is
calculated.
"INITIAL POOL BALANCE" means the Pool Balance on the related Closing Date,
as described in the related prospectus supplement.
"INITIAL RECEIVABLES" means the receivables the seller will sell or
transfer to the trust on the Closing Date specified in the related prospectus
supplement having an aggregate principal balance described in the related
prospectus supplement as of the date specified.
"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 by means of bankruptcy proceedings or inability to
pay its obligations.
"INTEREST RESET DATE" means 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.
"INTEREST RESET PERIOD" means with respect to any class of Floating Rate
Securities, each period for which interest is accrued, as defined in the related
prospectus supplement
"LIBOR" with respect to the London Inter-Bank Offering Rate indexed to the
offered rates for U.S. dollar deposits, for each Interest Reset Period will be
determined by the Calculation Agent for any LIBOR Security as follows:
(1) On the 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.
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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.
(2) If fewer than two offered rates appear on the Reuters Screen LIBO Page
on such LIBOR Determination Date, the Calculation Agent for such LIBOR
Security will request the principal London offices of each of four
major banks in the London interbank market selected by such Calculation
Agent to provide such Calculation Agent with its offered quotations for
deposits in U.S. dollars for the period of the specified Index
Maturity, commencing on such Interest Reset Date, to prime banks in the
London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an
amount of not less than $1,000,000 that is representative of a single
transaction in such market at such time. If at least two such
quotations are provided, LIBOR for such Interest Reset Period will be
the arithmetic mean of such quotations. If fewer than two such
quotations are provided, LIBOR for such Interest Reset Period will be
the arithmetic mean of rates quoted by three major banks in The City of
New York selected by the Calculation Agent for such LIBOR Security at
approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date for loans in U.S. dollars to leading European banks,
for the period of the specified Index Maturity, commencing on such
Interest Reset Date, and in a principal amount equal to an amount of
not less than $1,000,000 that is representative of a single transaction
in such market at such time; provided, however, that if the banks
selected as aforesaid by such Calculation Agent are not quoting rates
as mentioned in this sentence, LIBOR for such Interest Reset Period
will be the same as LIBOR for the immediately preceding Interest Reset
Period.
"LIBOR DETERMINATION DATE" means the second London banking day prior to the
Interest Reset Date for the related Interest Reset Period.
"LIBOR SECURITY" means a Floating Rate Security designated in the
applicable prospectus supplement with a Base Rate equal to LIBOR.
"MONEY MARKET YIELD" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C> <C>
Money Market Yield D X 360 X 100
= --------------
360 -(D X M)
</TABLE>
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.
"MSRP" means with respect to an automobile, the manufacturer's suggested
retail price.
"NOTE INTEREST RATE" with respect to each class of notes, the rate
specified in the prospectus supplement at which interest may accrue.
"PAYAHEADS" means early payments by or on behalf of obligors on Actuarial
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.
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"PERMITTED INVESTMENTS" means:
-- direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America or its agencies;
-- 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 rating the notes or certificates;
-- commercial paper having, at the time of such investment, a rating
in the highest rating category from the applicable rating agency
rating the notes or certificates;
-- investments in money market funds having the highest rating from
the applicable rating agency rating the notes or certificates;
-- 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 having the highest rating
from the applicable rating agency rating the notes or
certificates; and
-- any other investment (which may include motor vehicle retail
installment sale contracts) acceptable to the rating agencies
rating the notes or certificates as being consistent with that
rating.
"PLAN" means any of the following
-- employee benefit plans (as defined in Section 3(3) of ERISA),
-- plans described in Section 4975(e)(1) of the Tax Code, including
individual retirement accounts or Keogh plans, and
-- any entities whose underlying assets include plan assets by reason
of a plan's investment in such entities.
"PLAN ASSETS REGULATION" means a regulation, 29 C.F.R. Section 2510.3-101,
issued by the DOL.
"POOL BALANCE" is the aggregate principal balance of the receivables as of
the Cutoff Date or the end of a Collection Period, as further described in the
prospectus supplement.
"PRIMUS" means --
-- PRIMUS Automotive Financial Services, Inc., a wholly owned
subsidiary of Ford Credit until the time such entity's business
operations are transferred to and assumed by Ford Credit; and
-- thereafter, PRIMUS, a division of Ford Credit.
"PTCE" means a Prohibited Transaction Class Exemption under ERISA.
"PURCHASE AMOUNT" means a price at which the seller or the servicer must
purchase a receivable, 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.
"RATING AGENCIES" means the nationally recognized rating agencies providing
a rating on the securities issued by the trust.
"RECEIVABLES POOL" means the pool of receivables sold to the applicable
trust.
"RECEIVABLES TRANSFER AND SERVICING AGREEMENTS" means collectively each
purchase agreement under which Ford Credit will sell receivables to the seller,
each sale and servicing agreement under which the trust will purchase
receivables from the seller and the servicer will
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agree to service such receivables, each trust agreement under which the trust
will be created and certificates will be issued and each administration
agreement under which Ford Credit will undertake certain administrative duties.
"SELLER" means Ford Credit Auto Receivables Two L.P., a Delaware limited
partnership, as the seller of the securities being offered by the prospectus
supplement.
"SERVICER" means Ford Credit acting in its capacity as servicer of the
receivables under the applicable sale and servicing agreement.
"SIMPLE INTEREST ADVANCE" means an amount that the servicer shall deposit
into the related collection account, in its sole discretion, 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.
"SIMPLE INTEREST RECEIVABLES" are receivables that provide for the
amortization of the amount financed under each receivable over a series of fixed
level payment monthly installments. However, unlike the monthly installment
under an Actuarial Receivable, each monthly installment consists of an amount of
interest which is calculated on the basis of the outstanding principal balance
of the receivable multiplied by the stated APR and further multiplied by the
period elapsed (as a fraction of a calendar year) since the preceding payment of
interest was made. As payments are received under a Simple Interest Receivable,
the amount received is applied first to interest accrued to the date of payment
and the balance is applied to reduce the unpaid principal balance.
"SPECIAL TAX COUNSEL" means the special federal tax counsel to each trust
specified in the related prospectus supplement that will provide an opinion
regarding certain federal income tax matters.
"STRIP CERTIFICATES" means any certificates issued that are entitled to:
-- distributions in respect of principal with disproportionate,
nominal or no interest distributions, or
-- interest distributions with disproportionate, nominal or no
distributions in respect of principal.
"STRIP NOTES" means any notes issued that are entitled to:
-- principal payments with disproportionate, nominal or no interest
payments, or
-- interest payments with disproportionate, nominal or no principal
payments.
"SUBSEQUENT RECEIVABLES" additional receivables sold by the seller to the
applicable trust after the Closing Date.
"SUBSEQUENT TRANSFER DATE" means each date specified as a transfer date in
the related prospectus supplement on which Subsequent Receivables will be sold
by the seller to the applicable trust.
"TAX CODE" means the Internal Revenue Code of 1986, as amended.
"TREASURY RATE" for each Interest Period shall be the rate for the auction
held on the Treasury Rate Determination Date for such Interest Reset Period of
U. S. 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)". If such rate is not published on or to 3:00 p.m., New York City
time on the Calculation Date, then the Treasury Rate shall be the auction
average rate
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(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 on or before 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 shall be
calculated by the Calculation Agent 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 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 by such Calculation Agent are not quoting bid rates, then the Treasury
Rate for such Interest Reset Period will be the same as the Treasury Rate for
the immediately preceding Interest Reset Period.
"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.
"TREASURY RATE SECURITY" means a Floating Rate Security designated in the
applicable prospectus supplement with a Base Rate equal to the Treasury Rate.
"TRUSTEE" means the trustee of the trust identified in the related
prospectus supplement.
69
<PAGE> 72
(This page intentionally left blank)
<PAGE> 73
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 AND IS SUBJECT TO COMPLETION OR AMENDMENT. 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 OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
BEFORE YOU PURCHASE ANY OF
THESE SECURITIES, BE SURE YOU
UNDERSTAND THE STRUCTURE AND
THE RISKS. SEE ESPECIALLY THE
RISK FACTORS BEGINNING ON
PAGE OF THIS PROSPECTUS
SUPPLEMENT AND ON PAGE OF
THE ATTACHED PROSPECTUS.
These securities are asset
backed securities issued by a
trust. The securities are not
obligations of Ford Motor
Company, Ford Motor Credit
Company or any of their
affiliates.
No one may use this
prospectus supplement to
offer and sell these
securities unless it is
accompanied by the
prospectus.
SUBJECT TO COMPLETION, DATED ,
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED ,
$[ ]
FORD CREDIT AUTO OWNER TRUST [ ]
(FORD LOGO)
FORD CREDIT AUTO
RECEIVABLES TWO L.P.
SELLER
FORD MOTOR CREDIT
COMPANY
SERVICER
THE TRUST WILL ISSUE THE FOLLOWING SECURITIES:
<TABLE>
<CAPTION>
PRINCIPAL FINAL
AMOUNT INTEREST RATE MATURITY DATE
--------- ------------- -------------
<S> <C> <C> <C>
Class A-1 Notes............. $[ ] [ ]% [ ]
Class A-2 Notes............. $[ ] [ ]% [ ]
Class A-3 Notes............. $[ ] [ ]-month LIBOR +[ ] [ ]
Class A-4 Notes............. $[ ] [ ]% [ ]
Class A-5 Notes(1).......... $[ ] [ ]% [ ]
Class A-6 Notes(1).......... $[ ] [ ]% [ ]
Class B Notes............... $[ ] [ ]% [ ]
Class C Certificates........ $[ ] [ ]% [ ]
Class D Certificates(1)..... $[ ] [ ]% [ ]
</TABLE>
-----------------------------------------
[(1) The Class [ ] Notes and the Class [ ] Certificates are
not being offered by this prospectus supplement.]
-- The trust will pay interest and principal on the
securities [quarterly] on the [ ] day of each
[month] [ , , and ]. The first
payment date will be [ ].
-- The trust will pay principal sequentially to the
earliest maturing class of securities then
outstanding until paid in full.
THE UNDERWRITERS ARE OFFERING THE FOLLOWING SECURITIES BY
THIS PROSPECTUS SUPPLEMENT:
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(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 Class A-4 Note................... [ ]% [ ]% [ ]%
Per Class B Note..................... [ ]% [ ]% [ ]%
Per Class C Certificate.............. [ ]% [ ]% [ ]%
Total................................ $[ ] $[ ] $[ ]
</TABLE>
-----------------------------------------
[(1) The price of the offered notes and certificates will
also include interest accrued on the offered securities,
if any, from [ ].]
[(2) Before deducting expenses payable by the seller
estimated to be $[ ].]
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The date of this prospectus supplement is [ ]
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<S> <C>
WHERE TO FIND INFORMATION IN THESE
DOCUMENTS.......................... S-3
SUMMARY OF TERMS OF THE SECURITIES... S-4
STRUCTURAL SUMMARY................... S-9
RISK FACTORS......................... S-15
THE TRUST............................ S-23
Limited Purpose and Limited
Assets.......................... S-23
Capitalization of the Trust........ S-24
The Owner Trustee and the Delaware
Trustee......................... S-24
THE RECEIVABLES POOL................. S-24
Weighted Average Life of the
Securities...................... S-29
Delinquencies, Repossessions and
Net Losses of Ford Credit's and
PRIMUS's Portfolios............. S-35
HOW YOU CAN COMPUTE YOUR PORTION OF
THE AMOUNT OUTSTANDING ON THE NOTES
OR CERTIFICATES.................... S-36
MATURITY AND PREPAYMENT
CONSIDERATIONS..................... S-37
DESCRIPTION OF THE NOTES............. S-39
The Indenture...................... S-39
Payments of Interest............... S-39
Payments of Principal.............. S-40
The Indenture...................... S-42
[Mandatory Prepayment.............. S-43]
Optional Redemption................ S-43
DESCRIPTION OF THE CERTIFICATES...... S-44
Distributions of Interest Income... S-44
Distributions of Principal
Payments........................ S-45
[Mandatory Prepayment.............. S-45]
Optional Prepayment................ S-46
Priority of Notes.................. S-46
DESCRIPTION OF THE RECEIVABLES
TRANSFER AND SERVICING
AGREEMENTS......................... S-47
Sale and Assignment of
Receivables[; Subsequent
Receivables].................... S-47
Accounts........................... S-49
Servicing Compensation and
Expenses........................ S-49
Rights Upon Event of Servicing
Termination..................... S-49
Waiver of Past Events of Servicing
Termination..................... S-50
Distributions...................... S-50
Reserve Account.................... S-57
[Yield Supplement Account; Yield
Supplement Agreement............ S-58]
[Interest Rate Cap................. S-59]
[Interest Rate Swap................ S-59]
[Guaranteed Rate Agreement......... S-60]
YEAR 2000 ISSUES AFFECTING FORD
CREDIT............................. S-62
Year 2000 Conversion............... S-62
State of Readiness................. S-62
Y2K Costs.......................... S-63
Y2K Risks.......................... S-63
Y2K Contingency Plans.............. S-63
FEDERAL INCOME TAX MATTERS........... S-64
Scope of the Tax Opinions.......... S-65
Tax Characterization of the
Trust........................... S-65
Tax Consequences to Holders of
the Notes....................... S-66
Tax Consequences to Holders of
Class C Certificates............ S-70
Certain U.S. Federal Income Tax
Documentation Requirements...... S-75
STATE TAX MATTERS.................... S-76
Michigan Tax Consequences.......... S-76
Michigan Tax Consequences With
Respect to the Notes............ S-76
Michigan Tax Consequences With
Respect to the Class C
Certificates.................... S-77
LEGAL INVESTMENT..................... S-77
ERISA CONSIDERATIONS................. S-77
The Notes.......................... S-77
The Class C Certificates........... S-78
UNDERWRITING......................... S-79
LEGAL OPINIONS....................... S-82
GLOSSARY OF TERMS FOR THE PROSPECTUS
SUPPLEMENT......................... S-83
ANNEX I -- Form of Investment Letter,
Class C Certificates...... I-1
</TABLE>
S-2
<PAGE> 75
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
This prospectus supplement and the attached prospectus provide information about
the trust, Ford Credit Auto Owner Trust [ ], including terms and conditions
that apply to the notes and certificates to be issued by the trust. The specific
terms of the trust are contained in this prospectus supplement. You should rely
only on information on the notes and certificates provided in this prospectus
supplement and the attached prospectus. We have not authorized anyone to provide
you with different information.
We have included cross-references to captions in these materials where you can
find further related discussions. We have started with several introductory
sections describing the trust and terms in abbreviated form, followed by a more
complete description of the terms. The introductory sections are:
-- Summary of Terms of the Securities -- provides important information
concerning the amounts and the payment terms of each class of
securities
-- Structural Summary -- gives a brief introduction to the key structural
features of the trust
-- Risk Factors -- describes briefly some of the risks to investors of a
purchase of the securities
Cross references may be contained in the introductory sections which will direct
you elsewhere in this prospectus supplement or the attached prospectus to more
detailed descriptions of a particular topic. You can also find references to key
topics in the Table of Contents on the preceding page.
Capitalized terms are defined in a Glossary on page S- of this prospectus
supplement or in the Glossary on page of the prospectus.
[Ford Financial Services, Inc., a wholly owned subsidiary of Ford Motor Credit
Company, may use this prospectus supplement and the attached prospectus in
connection with offers and sales related to market-making transactions in the
Class [A-1] Notes and the Class [A-2] Notes] [Ford Motor Credit Company may use
this prospectus supplement and the attached prospectus in connection with offers
and sales of the Class [A-5] Notes and the Class [A-6] Notes originally
purchased by Ford Motor Credit Company from Ford Credit Auto Receivables Two
L.P., the seller.] [[Ford Financial Services, Inc.] [and Ford Motor Credit
Company] will make any such sales at prices related to prevailing market prices
at the time of sale.]
S-3
<PAGE> 76
SUMMARY OF TERMS OF THE SECURITIES
The following summary is a short description of the main terms of the
offering of the securities. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this prospectus
supplement and the attached prospectus, each in its entirety.
ISSUER
Ford Credit Auto Owner Trust [ ], a Delaware business trust, will use the
proceeds from the issuance and sale of the securities to purchase a pool of
motor vehicle retail installment sale contracts which constitute the
receivables. Ford Motor Credit Company originated the receivables directly or
indirectly through its subsidiary PRIMUS Automotive Financial Services, and will
continue to service the receivables. The trust will rely upon collections on the
receivables and the funds on deposit in certain accounts to make payments on the
securities. The trust will be solely liable for the payment of the securities.
OFFERED SECURITIES
The trust is offering the following securities by this prospectus supplement:
-- $[ ] Class A-1 [ ]% Asset Backed Notes
-- $[ ] Class A-2 [ ]% Asset Backed Notes
-- $[ ] Class A-3 [Floating Rate] Asset Backed Notes
-- $[ ] Class A-4 [ ]% Asset Backed Notes
-- $[ ] Class B [ ]% Asset Backed Notes
-- $[ ] Class C [ ]% Asset Backed Certificates
[The trust is also issuing $[ ] aggregate principal amount of Class A-5
[ ]% Asset Backed Notes, $[ ] aggregate principal amount of Class A-6
[ ]% Asset Backed Notes and $[ ] aggregate principal amount of Class D
[ ]% Asset Backed Certificates. The trust is not offering the Class A-5 Notes,
the Class A-6 Notes or the Class D Certificates by this prospectus supplement.]
CLOSING DATE
The trust expects to issue the securities on [ ].
TRUSTEES
Notes [ ]
Certificates [ ]
INTEREST AND PRINCIPAL PAYMENT DATES
[Monthly] [Quarterly] on the [ ] day of each [month] [ , ,
and ] the trust will pay interest and principal on the securities.
FIRST SCHEDULED PAYMENT DATE
The first scheduled payment date will be [ ].
RECORD DATES
On each payment date, the trust will pay interest and principal to the holders
of record of the securities for that payment date. The record dates for the
securities will be as follows:
Notes The day immediately
preceding the payment date.
Certificates The last day of the month
immediately preceding the payment date.
INTEREST RATES
The trust will pay interest on each class of securities at the rates specified
on the cover of this prospectus supplement.
[Interest Reset Dates
The interest rate on the Class A-3 Notes will be equal to LIBOR plus [ ]%.
LIBOR will be determined with respect to payments made on each [payment date]
[on the [ ] day of each month] as of the second London
S-4
<PAGE> 77
banking day prior to the preceding [payment][distribution] date.
INTEREST ACCRUAL
[Class A-1 and Class A-2 Notes
["actual/360"]
This means that, if there are no outstanding shortfalls in
the payment of interest, the interest due on each payment
date will be the product of:
1. the outstanding principal balance;
2. the interest rate; and
3. [the actual number of days since the previous payment
date (or in the case of the first payment date, since the
closing date) divided by 360.]
[All Other Securities]
["30/360"], accrued from
[payment date to payment date] the day of the previous
month to the
day of the current month.
This means that, if there are no outstanding shortfalls in
the payment of interest, the interest due on each payment
date will be the product of:
1. the outstanding principal balance;
2. the interest rate; and
3. [30 (or in the case of the first payment date,
[ ]) divided by 360.] [the actual number of days
since the previous payment date (or in the case of the
first payment date, since the closing date) divided by
360.]
For a more detailed description of the payment of interest, you should refer to
the sections of this prospectus supplement entitled "Description of the Notes --
Payments of Interest" and "Description of the Certificates -- Distributions of
Interest Income."
SEQUENTIAL PRINCIPAL PAYMENTS
The trust will pay principal sequentially to the earliest maturing class of
securities then outstanding until such class is paid in full.
For a more detailed description of the payment of principal, you should refer to
the sections of this prospectus supplement entitled "Description of the Notes --
Payments of Principal" and "Description of the Certificates -- Distributions of
Principal Payments."
OPTIONAL REDEMPTION
The servicer has the option to purchase the receivables on any payment date on
which the aggregate principal balance of the receivables is 10% or less of the
aggregate principal balance of the receivables at the time they were sold to the
trust [(including any receivables sold to the trust after the closing date)] at
a price equal to the outstanding principal balance of the securities plus
accrued and unpaid interest thereon. The trust will apply such payment to the
redemption of the securities in full.
It is expected that at such time this redemption option becomes available to the
servicer only the [Class A-6 Notes, the Class B Notes] and the [Class [C ]]
Certificates will be outstanding.
[MANDATORY PREPAYMENT
The Class [C] notes will be redeemed in part to the extent of the balance
remaining in the account established to make post-closing purchases of
receivables at the end of the period allotted to make those purchases. [To the
extent that more than $[ ] is remaining in the account after
[ ] the [Class] [C] Certificates will be redeemed at the principal
amount thereof [plus a prepayment premium as described in "Description of the
Notes -- Mandatory Redemption"]
S-5
<PAGE> 78
FINAL MATURITY DATES
The trust is required to pay the outstanding principal amount of each class of
notes and certificates, to the extent not previously paid, in full on the final
maturity date specified on the cover page of this prospectus supplement for each
class.
RATINGS
It is a condition to the issuance of the securities that the:
-- Class A-1 and Class A-2 Notes be rated in the highest short-term
rating category by at least two nationally recognized rating
agencies;
-- [Class A-3, Class A-4, Class A-5 and Class A-6 Notes] be rated in the
[highest] long-term rating category by at least two nationally
recognized rating agencies;
-- Class B Notes be rated "[ ]" or its equivalent by at least two
nationally recognized rating agencies; and
-- [Class] [C] Certificates be rated "[ ]" or its equivalent by at
least two nationally recognized rating agencies.
A rating is not a recommendation to purchase, hold or sell the offered notes and
certificates, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. The ratings of the offered notes and
certificates address the likelihood of the payment of principal and interest on
the notes and certificates according to their terms. A rating agency may lower
or withdraw its rating in the future, in its discretion. [The rating agencies do
not evaluate whether any prepayment premiums will be paid.]
MINIMUM DENOMINATIONS
Offered Notes $[1,000] and integral
multiples thereof
[Class] [C] Certificates
$20,000 and integral
multiples of $1,000 in excess thereof
REGISTRATION, CLEARANCE AND SETTLEMENT
Offered Notes DTC/Cedel/Euroclear
[Class] [C] Certificates
Issued in fully registered,
certificated form
REQUIRED REPRESENTATIONS FROM PURCHASERS OF THE [CLASS] [C] CERTIFICATES
To purchase [Class] [C] Certificates, you (and anyone to whom you assign or sell
the [Class] [C] Certificates) must:
(1) represent and certify under penalties of perjury that you are a United
States person; and
(2) represent and certify that you
(a) are not a plan that is subject to the fiduciary responsibility
provisions of the Employee Retirement Income Security Act of
1974, as amended, or Section 4975 of the Internal Revenue Code
of 1986, as amended and are not purchasing [Class] [C]
Certificates on behalf of such a plan or arrangement; or
(b) are an insurance company using its general account and less than
25% of the assets of such general account represent assets or
one or more plans or arrangements described above.
You can find a form of the representation letter an investor in the [Class] [C]
Certificates will have to sign in Annex I to this prospectus supplement.
TAX STATUS
Opinions of Counsel
Skadden, Arps, Slate, Meagher & Flom LLP will deliver its opinion that for
federal income tax purposes the:
-- Class A Notes will be characterized as debt;
S-6
<PAGE> 79
-- Class B Notes should be treated as debt, although the issue is not
free from doubt; and
-- trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
Hurley D. Smith, Esq., Secretary and Corporate Counsel of Ford Credit, will
deliver his opinion to the same effect with respect to Michigan income and
single business tax purposes.
Investor Representations
Offered Notes If you purchase the offered
notes, you agree by your purchase that you will treat the
offered notes as indebtedness.
[[Class] [C] Certificates
If you purchase the [Class]
[C] Certificates, you agree by your purchase that you will
treat the trust as a partnership in which the
certificateholders are partners for federal income tax and
Michigan income and single business tax purposes.]
Investment Restrictions
[Class] C Certificates
The [Class] [C]
Certificates may not be purchased by persons who are not
U.S. Persons.
If you are considering purchasing the [Class] [C] Certificates, you should refer
to "Certain Federal Income Tax Consequences" in this prospectus supplement and
in the prospectus and "Certain State Tax Consequences" in this prospectus
supplement for more details.
ERISA CONSIDERATIONS
Offered Notes The offered notes are
generally eligible for purchase by employee benefit plans,
subject to the considerations discussed under "ERISA
Considerations" in this prospectus supplement and the
prospectus.
[Class] [C] Certificates
The [Class] [C]
Certificates may not be acquired by an employee benefit plan
or by an individual retirement account. However, an
insurance company using its general account may acquire the
[Class] [C] Certificates subject to the considerations
discussed under "ERISA Considerations" in this prospectus
supplement.
You should refer to "ERISA Considerations" in this prospectus supplement and in
the prospectus for more information.
ELIGIBILITY OF NOTES FOR PURCHASE BY MONEY MARKET FUNDS
[Class [A-1] and Class [A-2] Notes
The Class [A-1] Notes and
Class [A-2] Notes are structured to be eligible for purchase
by money market funds under Rule 2a-7 under the Investment
Company Act of 1940, as amended.
A money market fund should consult its legal advisors
regarding whether an investment by the money market fund in
the Class [A-1] Notes or the Class [A-2] Notes satisfies the
money market fund's investment policies and objectives.]]
S-7
<PAGE> 80
INVESTOR INFORMATION -- MAILING ADDRESS, TELEPHONE NUMBER, FACSIMILE NUMBER AND
PRINCIPAL EXECUTIVE OFFICES
The mailing address of Ford Credit Auto Receivables Two L.P. is The American
Road, Dearborn, Michigan 48121, attention of the Secretary. The servicer's
telephone number is (313) 322-3000 and the facsimile number is (313) 594-7742.
CUSIP NUMBERS
-- Class A-1 Notes: [ ]
-- Class A-2 Notes: [ ]
-- Class A-3 Notes: [ ]
-- Class A-4 Notes: [ ]
-- Class B Notes: [ ]
-- Class C Certificates: [ ]
S-8
<PAGE> 81
STRUCTURAL SUMMARY
This summary briefly describes certain major structural components of the
trust. To fully understand the terms of the trust, you will need to read both
this prospectus supplement and the attached prospectus, each in its entirety.
TRANSFER OF RECEIVABLES AND APPLICATION OF PROCEEDS
[Initial Receivables]
Ford Credit Auto Receivables Two L.P., the seller, will purchase certain motor
vehicle retail installment sale contracts originated by Ford Credit and PRIMUS,
which constitute the [initial] receivables, and then will sell the [initial]
receivables with an aggregate principal balance of $[ ] as of
[ ] to Ford Credit Auto Owner Trust [ ] on the closing date.
[Subsequent Receivables]
[In addition, the trust will deposit $[ ] into a pre-funding account to
be used to fund the purchase of subsequent receivables after the closing date.
The trust will be obligated to purchase and the seller will be obligated to sell
subsequent receivables under the terms and conditions of the sale and servicing
agreement. The trust will purchase the subsequent receivables [insert
information about timing of the purchases]. The trust will pay for the
subsequent receivables with proceeds from the sale of the securities on the
closing date. The following chart represents the application of proceeds from
investors and the transfer of the receivables sold by Ford Credit:
[FORD MOTOR CREDIT COMPANY FLOW CHART DESCRIBING APPLICATION OF PROCEEDS FROM
INVESTORS AND THE TRANSFER OF RECEIVABLES SOLD BY FORD MOTOR CREDIT COMPANY]
FORD MOTOR CREDIT COMPANY FLOW CHART
PROPERTY OF THE TRUST
The property of the trust will include the following:
-- the receivables and the collections on the receivables;
-- security interests in the vehicles financed by the receivables;
-- bank accounts[, including the pre-funding account and the yield
supplement account];
-- rights to proceeds under insurance policies that cover the obligors
under the receivables or the vehicles financed by the receivables;
-- remedies for breaches of representations and warranties made by the
dealers that originated the receivables;
-- the trust's rights under the [interest rate cap] [interest rate swap]
[guaranteed rate agreement] [yield supplement agreement]; and
S-9
<PAGE> 82
-- other rights under documents relating to the receivables.
COMPOSITION OF THE RECEIVABLES
The composition of the receivables as of [ ] is as follows:
<TABLE>
<S> <C> <C>
-- Aggregate Principal
Balance............. [ ]
-- Number of
Receivables......... [ ]
-- Average Principal
Balance............. [ ]
(Range)........... [ ]
[ ]
-- Average Original
Amount Financed..... [ ]
(Range)........... [ ]
-- Weighted Average
APR................. [ ]
(Range)(1)........ [ ]
-- Weighted Average
Original Term....... [ ]
(Range)........... [ ]
[ ]
-- Weighted Average
Remaining Term...... [ ]
(Range)........... [ ]
[ ]
-- Scheduled Weighted
Average Life(2)..... [ ]
</TABLE>
- ---------------
(1) Includes receivables with annual percentage rates below the interest rates
on the notes and certificates.
(2) From [ ], assuming (1) payments on all receivables are due on the
first day of the month, (2) all payments on the receivables are paid when
due, commencing one month from [ ] and (3) no prepayments on the
receivables are made.
SERVICER OF THE RECEIVABLES
Ford Credit will be the servicer of the receivables and may use PRIMUS as
subservicer for receivables originated by PRIMUS. The trust will pay the
servicer a servicing fee each month equal to [ ]% of the principal balance
of the receivables at the beginning of the previous month. In addition to the
servicing fee, the trust will also pay the servicer a supplemental servicing fee
equal to any late, prepayment, and other administrative fees and expenses
collected during each month and any reinvestment earnings on any payments
received on the receivables.
PRIORITY OF DISTRIBUTIONS
From collections on the receivables during the prior calendar month and amounts
withdrawn from the reserve account, the trust will pay the following amounts on
each payment date in the following order of priority after reimbursement of
advances made by the servicer for payments due from obligors but not received:
(1) Servicing Fee -- the servicing fee payable to the servicer;
(2) Class A Note Interest -- interest due on all the Class A Notes
ratably to each class of the Class A Notes;
(3) First Allocation of Principal -- to the principal distribution
account, an amount, if any, equal to the excess of (x) the principal
balances of the Class A Notes over (y) the principal balance of the
receivables [less the yield supplement overcollateralization amount]
specified for such payment date on the schedule on page S-[ ] of this
prospectus supplement;
(4) Class B Note Interest -- interest due on the Class B Notes to the
holders of the Class B Notes;
(5) Second Allocation of Principal -- to the principal distribution
account, an amount, if any, equal to the excess of (x) the principal
balances of the notes over (y) the principal balance of the
receivables [less the yield supplement overcollateralization amount
specified for such payment date on the schedule on page S-[ ] of
this prospectus supplement]. This amount will be reduced by any
amount deposited in the principal
S-10
<PAGE> 83
distribution account in accordance with clause (3) above;
(6) Class C Certificate Interest -- interest due on the Class C
Certificates to the holders of the Class C Certificates;
(7) Class D Certificate Interest -- interest due on the Class D
Certificates to the holders of the Class D Certificates;
(8) Reserve Account Deposit -- to the reserve account, the amount, if
any, necessary to reinstate the balance of the reserve account up to
its required amount;
(9) Regular Principal Allocation -- to the principal distribution
account, an amount equal to the greater of (1) the sum of the
principal balance of the Class A-1 Notes and the Class A-2 Notes and
(2) the excess of (x) the sum of the principal balances of the notes
and the certificates over (y) the principal balance of the
receivables less the specified overcollateralization amount and less
the yield supplement overcollateralization amount] specified for such
payment date on the schedule on page S-[ ] of this prospectus
supplement.] This amount will be reduced by any amounts previously
deposited to the principal distribution account in accordance with
clauses (3) and (5); and
(10) any amounts remaining after the above distributions shall be paid to
the seller.
DISTRIBUTIONS FROM THE PRINCIPAL DISTRIBUTION ACCOUNT
From deposits made to the principal distribution account, the trust will pay
principal on the notes and certificates in the following order of priority:
(1) to the Class A-1 Notes until they are paid in full;
(2) to the Class A-2 Notes until they are paid in full;
(3) to the Class A-3 Notes until they are paid in full;
(4) to the Class A-4 Notes until they are paid in full;
(5) to the Class A-5 Notes until they are paid in full;
(6) to the Class A-6 Notes until they are paid in full;
(7) to the Class B Notes until they are paid in full;
(8) to the Class C Certificates until they are paid in full;
(9) to the Class D Certificates until they are paid in full; and
(10) to the seller, any funds remaining.
For a more detailed description of the priority of distributions and the
allocation of funds on each payment date, you should refer to "Description of
the Receivables Transfer and Servicing Agreements -- Distributions -- Monthly
Withdrawals from Collection Account" in this prospectus supplement.
CHANGE IN PRIORITY OF DISTRIBUTION UPON CERTAIN EVENTS OF DEFAULT
If an event of default under the indenture occurs, the order of priority for
distributions will change.
-- Following the occurrence of an event of default relating to
1. default in the payment of principal,
2. default for five days or more in the payment of interest on any class of
notes which has resulted in an acceleration of the notes, or
3. following an insolvency or a dissolution with respect to the seller or Ford
Credit Auto Receivables Two, Inc., the general partner of the seller.
The trust will make no distributions of principal or interest on the Class B
Notes until payment in full of principal and interest on the Class A Notes and
no distributions
S-11
<PAGE> 84
of principal or interest on the Class C Certificates until payment in full of
principal and interest on the Class B Notes.
-- Following the occurrence of any other event of default which has resulted
in an acceleration of the notes, the trust will continue to pay interest on
the Class A Notes and interest on the Class B Notes on each payment date
prior to paying principal on the Class A Notes on such payment date.
However, the trust will pay the Class A Notes and the Class B Notes in full
before paying any principal or interest on the Class C Certificates or the
Class D Certificates.
For a more detailed description of events of default and rights of investors in
such circumstance, you should refer to "Description of Notes -- The Indenture --
Events of Default; Rights upon Event of Default" in this prospectus supplement
and in the prospectus. For a more detailed description of the priority of
distributions and allocation of funds following an event of default, you should
refer to "Descriptions of the Transfer and Servicing Agreements -- Distributions
- -- Monthly Withdrawals from Collection Account" in this prospectus supplement.
CREDIT ENHANCEMENT
The credit enhancement provides protection for the Class A Notes, the Class B
Notes and the Class C Certificates against losses and delays in payment. Losses
on the receivables or other shortfalls of cash flow will be covered by payments
on other receivables to the extent of any overcollateralization, by withdrawals
from the reserve account and by allocation of available cash flow to the more
senior classes of securities prior to more subordinate classes.
The credit enhancement for the securities will be as follows:
Class A Notes Subordination of the
Class B Notes, the Class C Certificates and the Class D
Certificates; the reserve account; [insert other type of
credit support] and overcollateralization;
Class B Notes Subordination of the
Class C Certificates and the Class D Certificates; the
reserve account; [insert other type of credit support] and
overcollateralization; and
Class C CertificatesSubordination of the
Class D Certificates; the reserve account; and
overcollateralization.
Subordination of Principal and Interest
As long as the Class A Notes remain outstanding, (1) payments of interest on the
Class B Notes will be subordinated to payments of interest on the Class A Notes
and, in certain circumstances, allocations to principal and (2) payments of
principal on the Class B Notes will be subordinated to payments of interest and
principal on the Class A Notes.
As long as the Class A Notes or Class B Notes remain outstanding, (1) payments
of interest on the Class C Certificates will be subordinated to payments of
interest on the Class A Notes and the Class B Notes and, in certain
circumstances, allocations to principal and (2) payments of principal on the
Class C Certificates will be subordinated to payments of interest and principal
on the Class A Notes and the Class B Notes.
As long as the Class A Notes, Class B Notes, or Class C Certificates remain
outstanding, (1) payments of interest on the Class D Certificates will be
subordinated to payments of interest on the Class A Notes, the Class B Notes and
the Class C Certificates and, in certain circumstances, allocations to principal
and (2) payments of principal on the Class D Certificates will be subordinated
to payments of interest and principal on the Class A Notes, the Class B Notes
and the Class C Certificates.
For a more detailed discussion of the subordination of the notes and
certificates and the priority of distributions, including changes after certain
events of default, you should refer to "Description of the Certificates --
Priority of
S-12
<PAGE> 85
Notes", "Description of the Receivables Transfer and Servicing Agreements --
Distributions -- Monthly Withdrawals from Collection Account" and "Description
of the Notes -- The Indenture Event of Default; Rights upon Event of Default" in
this prospectus supplement.
Reserve Account
On the closing date, the seller will deposit $[ ] to the reserve
account for the trust.
On each payment date, if collections on the receivables are insufficient to pay
the first seven items listed in "Priority of Distributions" above, the indenture
trustee will withdraw funds from the reserve account to pay such amounts.
On and after the final maturity date for any class of securities, if any
principal amount of such class remains outstanding, the indenture trustee will
withdraw funds from the reserve account to repay such class of securities in
full.
The balance required to be on deposit in the reserve account will be the lesser
of (a) $[ ] and (b) the outstanding principal balance of the notes and
certificates.
On each payment date, the trust will deposit into the reserve account, to the
extent necessary to reinstate the required balance of the reserve account, any
collections on the receivables remaining after the first seven items listed in
"Priority of Distributions" above are satisfied.
[The trust will also deposit in the reserve account from the pre-funding account
[ ]% of the principal balance of any subsequent receivables which the seller
transfers to the trust].
For a more detailed description of the deposits to and withdrawals from the
Reserve Account, you should refer to "Description of the Receivables Transfer
and Servicing Agreements -- Reserve Account" in this prospectus supplement.
[Overcollateralization
The overcollateralization amount represents the amount by which the principal
balance of the receivables exceeds the principal balance of the notes and
certificates. Initially, the receivables balance will exceed the principal
balance of the notes and certificates by [ ]% of the receivables balance. The
application of funds according to item nine of "Priority of Distributions" above
is expected to result in the payment of more principal on the securities in most
months than the amount of principal paid on the receivables in the related
period. As the principal balance of the notes and certificates is paid down to a
target overcollateralization level further below the receivables balance,
additional credit enhancement is created.
The target level for the overcollateralization amount is structured as a dynamic
formula to absorb anticipated losses on the receivables and to compensate for
the low interest rates of some of the receivables. The target level
S-13
<PAGE> 86
for the overcollateralization amount on each payment date will be the sum of:
(X) the excess of:
(1) the lesser of:
(a) the greatest of:
(A) $[ ],
(B) 1.00% of the outstanding principal balance of the
receivables,
and
(C) the aggregate principal balance of the receivables that are
delinquent 91 days or more and have not yet been liquidated,
and
(b) the outstanding principal balance of the notes and certificates,
over
(2) the balance required to be on deposit in the reserve account,
and
(Y) the yield supplement overcollateralization amount specified for the
applicable payment date on the schedule on page S-[ ] of this prospectus
supplement.]
For a more detailed description of the application of funds and the calculation
of the overcollateralization amount, you should refer to "Description of the
Receivables Transfer and Servicing Agreements -- Distributions -- Monthly
Withdrawals from Collection Account" in this prospectus supplement.]
[Yield Supplement Account
The trust will deposit $[ ] into the yield supplement account on the closing
date. [In addition, the trust will deposit an additional amount upon each
transfer of subsequent receivables to the trust based on the amount by which
[ ]% exceeds the annual percentage rate on each of those subsequent
receivables.]
For a more detailed description of the yield supplement account, see
"Description of the Receivables Transfer and Servicing Agreements -- Yield
Supplement Account" in this prospectus supplement.]
[Interest Rate Cap
The seller will enter into an interest rate cap with the cap counterparty on the
closing date. The cap counterparty will be obligated to make payments to the
trust on the basis of a notional amount which will be, as of any distribution
date, equal to the principal amount on the Class A-3 Notes as of the preceding
distribution date. The amount paid by the cap counterparty will be based on the
difference between [LIBOR] and [ ]%.
For a more detailed description of the interest rate cap, see "Description of
the Receivables Transfer and Servicing Agreements -- Interest Rate Cap" in this
prospectus supplement.]
[Interest Rate Swap
The seller will enter into an interest rate swap with the swap counterparty on
the closing date. The swap counterparty will be obligated to make payments to
the trust, and the trust will be obligated to make payments to the swap
counterparty, on the basis of a notional amount which will be, as of any
distribution date, equal to the principal amount of the Class A-3 Notes as of
the preceding [distribution] [payment] date. The amounts paid by each party will
be based on the difference between [LIBOR] and [ ]%.
For a more detailed description of the interest rate swap, see "Description of
the Receivables Transfer and Servicing Agreement -- Interest Rate Swap" in this
prospectus supplement.]
S-14
<PAGE> 87
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of these securities.
THE ABSENCE OF A SECONDARY
MARKET COULD LIMIT YOUR
ABILITY TO RESELL YOUR NOTES
OR CERTIFICATES The absence of a secondary market for the notes
and the certificates could limit your ability to
resell them. This means that if in the future you
want to sell any of your notes or certificates
before they mature, you may be unable to find a
buyer or, if you find a buyer, the selling price
may be less that it would have been if a market
existed for the notes or certificates. There
currently is no secondary market for the notes or
the certificates. The underwriters for the
offered notes [and the Class [C] Certificates]
expect to make a market in such securities but
will not be obligated to do so. There is no
assurance that a secondary market for the notes
and certificates will develop. If a secondary
market for the notes and certificates does
develop, it might end at any time or it might not
be sufficiently liquid to enable you to resell
any of your notes or certificates.
PREPAYMENTS ON RECEIVABLES
WILL CAUSE PREPAYMENTS OF
YOUR NOTES OR CERTIFICATES
RESULTING IN REINVESTMENT
RISK TO YOU You may receive payment of principal on your
notes or certificates earlier than you expect for
the reasons set forth below. You may not be able
to reinvest any principal paid to you earlier
than you expected at a rate of return that is
equal to or greater than the rate of return on
your notes or certificates.
Prepayments on the receivables by the related
obligors and purchases of the receivables by the
seller and the servicer will shorten the life of
the securities to an extent that cannot be fully
predicted. The receivables included in the trust
may be prepaid, in full or in part, voluntarily
or as a result of defaults, theft of or damage to
the related vehicles or other reasons. Ford
Credit will be required to repurchase a
receivable from the seller, and the seller will
be required to repurchase a receivable from the
trust, if Ford Credit breached its
representations and warranties with respect to
the receivable in the purchase agreement with the
seller. Ford Credit, in its capacity as servicer,
also will be required to purchase a receivable
from the trust if it breaches its servicing
obligations with respect to the receivable. The
servicer also will be entitled to purchase all
remaining receivables from the trust once the
aggregate principal balance of the receivables is
10% or less of the aggregate principal balance of
the receivables as of the date initially
transferred to the trust.
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<PAGE> 88
The rate of prepayments on the receivables may be
influenced by a variety of economic, social and
other factors in addition to those described in
the preceding paragraph.
Ford Credit does not generally maintain records
of the historical prepayment experience of its
portfolio of receivables. No prediction can be
made as to the actual prepayment rates which will
be experienced on the receivables. You will bear
all reinvestment risk resulting from prepayments
on the receivables and the corresponding
acceleration of payments on the securities.
The final payment of each class of securities is
expected to occur prior to its final payment date
because of the prepayment and purchase
considerations set forth above. If sufficient
funds are not available to pay any class of notes
in full on its final payment date, an event of
default will occur and final payment of such
class of notes may or may not occur later than
such date.
For more information regarding the timing of
repayments of the notes and the certificates, see
"Maturity and Prepayment Considerations" in this
prospectus supplement and in the prospectus.
YOU MAY SUFFER LOSSES DUE TO
LIMITED ASSETS OF THE TRUST The only source of funds for payments on the
notes and certificates will be the assets of the
trust. You may suffer a loss on your notes or
certificates if the assets of the trust are
insufficient to pay fully the principal amount of
the securities. The securities are obligations
solely of the trust and will not be insured or
guaranteed by Ford Credit, including in its
capacity as servicer or originator of the
receivables, the indenture trustee, the owner
trustee or any other person or entity.
Consequently, you must rely for payment of your
securities upon payments on the receivables, and,
to the extent available, funds on deposit in the
reserve accounts.
The indenture authorizes the indenture trustee to
sell the receivables following an acceleration of
the maturity dates of the notes. However, the
amount received by the indenture trustee upon
selling the receivables may be less than the
aggregate principal amount of the outstanding
notes and certificates. In such circumstance, the
principal amount of the notes and the principal
balance of the certificates may not be paid in
full.
[YOU MAY SUFFER LOSSES DUE TO
RECEIVABLES WITH LOW APRS The receivables include receivables which have
annual percentage rates that are less than the
interest rates on the notes or certificates.
Interest paid on the higher coupon receivables
compensates for the lower coupon receivables to
the extent such interest is paid by the trust as
principal on the notes or certificates and
additional overcollateralization is created.
Excessive prepayments on the higher coupon
S-16
<PAGE> 89
receivables may adversely impact your notes or
certificates by reducing such interest payments
available.
The target level of overcollateralization takes
into account the mix of receivables by annual
percentage rate, and potential changes in that
mix, but there is no assurance that the target
overcollateralization will be achieved or will be
sufficient to pay all notes and certificates in
full.]
[CLASS C CERTIFICATES AND
CLASS B NOTES ARE SUBJECT TO
GREATER CREDIT RISK BECAUSE
THE CLASS C CERTIFICATES ARE
SUBORDINATE TO THE CLASS A
NOTES AND THE CLASS B NOTES,
AND THE CLASS B NOTES ARE
SUBORDINATE TO THE CLASS A
NOTES The Class C Certificates bear greater credit risk
than the notes because payments of interest and
principal on the Class C Certificates are
subordinated, to the extent described below, to
payments of interest and principal on the Class A
Notes and the Class B Notes. The Class B Notes
bear greater risk than the Class A Notes because
payments of interest and principal on the Class B
Notes are subordinated, to the extent described
below, to payments of interest and principal on
the Class A Notes.]
Interest payments on the Class B Notes on each
payment date will be subordinated to servicing
fees due to the servicer, interest payments on
the Class A Notes and an allocation of principal
payments to the Class A Notes to the extent the
sum of the principal balances of the Class A
Notes exceeds the receivables balance. Interest
payments on the Class C Certificates on each
payment date will be subordinated to servicing
fees due to the servicer, interest payments on
the Class B Notes and an allocation of principal
payments to the Class A Notes or Class B Notes to
the extent the sum of the principal balances of
the Class A Notes and the Class B Notes exceeds
the receivables balance (after giving effect to
the allocation described in the preceding
sentence).
For a more detailed description of such principal
payment circumstances, see "Description of the
Receivables Transfer and Servicing
Agreements -- Distributions -- Monthly
Withdrawals from the Collection Account" in this
prospectus supplement. The payment sequence
changes, however, following certain events of
default.
Principal payments on the Class B Notes will be
fully subordinated to principal payments on the
Class A Notes. No principal will be paid on the
Class B Notes until the Class A Notes have been
paid in full. Principal payments on the Class C
Certificates will be fully subordinated to
principal payments on the Class B Notes. No
principal will be paid on
S-17
<PAGE> 90
the Class C Certificates until the Class B Notes
have been paid in full.
PREPAYMENTS, POTENTIAL LOSSES
AND CHANGE IN ORDER OF
PRIORITY OF PRINCIPAL
PAYMENTS MAY RESULT FROM AN
EVENT OF DEFAULT UNDER THE
INDENTURE An event of default under the indenture may
result in payments on the notes being
accelerated. As a result --
-- you may suffer losses on your notes or
certificates if the assets of the trust are
insufficient to pay the amounts owed on the
notes or certificates;
-- payments on your notes or certificates may
be delayed until more senior classes of
notes or certificates are repaid; and
-- your notes or certificates may be repaid
earlier than as scheduled, which may require
you to reinvest your principal at a lower
rate of return.
DEFAULTS RESULTING FROM NON-PAYMENT OF INTEREST,
INSOLVENCY OR DISSOLUTION MAY DELAY PAYMENTS ON
THE CLASS B NOTES AND THE CERTIFICATES. The trust
will not make any distributions of principal or
interest on the Class B Notes or on the
certificates until payment in full of principal
and interest on the Class A Notes following a
default --
-- in the payment of principal on any note
which has resulted in acceleration of the
notes;
-- for five days or more in the payment of
interest on any note which has resulted in
an acceleration of the notes; or
-- resulting from an insolvency or a
dissolution with respect to the seller or
Ford Credit Auto Receivables Two, Inc., the
general partner of the seller.
This may result in a delay or default in the
Class B Notes or on the certificates.
DEFAULTS RESULTING FROM OTHER EVENTS MAY DELAY
PAYMENTS ON THE CERTIFICATES. Following the
occurrence of any event of default which has
resulted in acceleration of the notes, the trust
will not make any distribution of principal or
interest on the certificates until the notes are
paid in full.
TRUSTEE MAY SELL RECEIVABLES ON A DEFAULT. If the
maturity dates of the notes are accelerated
following an event of default under the
indenture, the indenture trustee, acting at the
direction of the holders of a majority in
outstanding principal amount of the Class A
Notes, may sell the receivables and prepay the
notes, and after the notes are paid in full,
prepay the certificates. The holders of the Class
B Notes will not have any right to direct the
indenture trustee or to consent to any action
until the Class A Notes are paid in full.
S-18
<PAGE> 91
See "Description of the Notes -- The
Indenture -- Events of Default; Rights Upon
Events of Default" in this prospectus supplement
and in the prospectus.
YOU MAY SUFFER LOSSES BECAUSE
YOU HAVE LIMITED CONTROL OVER
ACTIONS OF THE TRUST ACTIONS
AND CONFLICTS BETWEEN CLASSES
OF NOTES MAY OCCUR Because the trust has pledged the property of the
trust to the indenture trustee to secure payment
on the notes, the indenture trustee, acting at
the direction of the holders of a majority in
outstanding principal amount of the Class A
Notes, has the power to direct the trust to sell
the receivables or to take one or more of the
other actions specified in the indenture relating
to the property of the trust until the Class A
Notes have been paid in full. Furthermore, the
holders of a majority of the Class A Notes, or
the indenture trustee acting on behalf of the
holders of Class A Notes, under certain
circumstances, has the right to terminate the
servicer as the servicer of the receivables
without consideration of the effect such
termination would have on the holders of Class B
Notes or certificates. The holders of Class B
Notes will not have the ability to remove the
servicer until the Class A Notes have been paid
in full and the holders of certificates will not
have the ability to remove the servicer until the
notes have been paid in full. In addition, the
holders of not less than a majority in
outstanding principal amount of the Class A Notes
will have the right to waive certain events of
default with respect to the servicer, without
consideration of the effect such waiver would
have on the holders of Class B Notes or
certificates.
See "Description of the Receivables Transfer and
Servicing Agreements -- Events of Servicing
Termination" in the prospectus and "-- Rights
Upon Event of Servicing Termination" and
"-- Waiver of Past Events of Servicing
Termination" in this prospectus supplement and in
the prospectus.
GEOGRAPHIC CONCENTRATION MAY
RESULT IN MORE RISK TO YOU As of [ ], Ford Credit's records
indicate that the billing addresses of the
obligors of the receivables were recorded as
being in the following states:
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
PRINCIPAL
BALANCE
-------------
<S> <C>
[Texas.................................... [ ]%
California................................ [ ]%
Florida................................... [ ]%
Illinois.................................. [ ]%]
</TABLE>
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<PAGE> 92
No other state, by billing addresses, constituted
more than 5% of the balance of the receivables as
of [ ]. Economic conditions or other
factors affecting these states in particular
could adversely affect the delinquency, credit
loss or repossession experience of the trust.
[THE TRUST IS COMPLETELY
DEPENDENT ON FORD CREDIT AND
PRIMUS TO ORIGINATE
SUBSEQUENT RECEIVABLES
ELIGIBLE TO BE PURCHASED The trust is completely dependent upon Ford
Credit and PRIMUS for the generation of new
receivables. The ability of Ford Credit and
PRIMUS 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
subsidiaries and by the various automotive
companies which originate receivables purchased
by PRIMUS. If, during the period allotted for
purchases of subsequent receivables, Ford or any
of the entities from which PRIMUS purchases
receivables were temporarily or permanently no
longer manufacturing or distributing vehicles,
the rate of sales of automobiles and light trucks
manufactured by those companies would decrease,
adversely affecting the ability of the seller to
sell 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 and
PRIMUS will continue to generate receivables at
the same rate as in prior years.
The ability of Ford Credit and PRIMUS to generate
additional eligible receivables depends on the
retail sales of automobiles and light trucks and
decisions by buyers to finance those purchases
with Ford Credit and with the persons from whom
PRIMUS purchases receivables. The level of those
sales and financings 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
origination of additional eligible receivables.
Post-closing purchases of receivables will be
funded with amounts on deposit in a "pre-funding
account", which will be funded with on a portion
of the proceeds of the offering. If the seller
has insufficient eligible receivables to transfer
to the trust during the funding period, some of
the notes or
S-20
<PAGE> 93
certificates will be prepaid at the end of the
funding period in an amount equal to the amount
on deposit at the time in the pre-funding account
[less any amount in the pre-funding account
designated for deposit to the reserve account in
connection with transfers of subsequent
receivables].
The classes of notes or certificates prepaid
depends on the amount on deposit in the
pre-funding account. If the amount on deposit is
greater than $ [ ], the trust will prepay the
classes of notes and certificates pro rata based
on their aggregate outstanding principal balance.
If the amount on deposit in the pre-funded
account is less than this amount, the amounts
will be first used to redeem the notes in order
of their seniority. We expect that the seller
will not convey receivables to the trust with a
purchase price exactly equal to the amount on the
deposit in the account, and that the trust will
therefore prepay at least a nominal amount of the
Class A-1 Notes.
Ford and Ford Credit are subject to the
informational requirements of the Exchange Act
and in accordance with those requirements 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.]
POTENTIAL DELAYS IN PAYMENTS
ON SECURITIES DUE TO
POTENTIAL COMPUTER PROGRAM
PROBLEMS BEGINNING IN THE
YEAR 2000 An issue affecting Ford Credit and others is the
inability of many computer systems and
applications to process the year 2000 and beyond
("Y2K"). To address this problem, in 1996, Ford
Credit initiated a global Y2K program to manage
Ford Credit's overall Y2K compliance effort. As
part of this program, Ford Credit established a
global Y2K Program Office to coordinate Ford
Credit's compliance efforts. Ford Credit
participates closely with Ford's Y2K Central
Program Office and the Ford Y2K Steering
Committee. Ford's Y2K program has been certified
by the Information Technology Association of
America as meeting its Y2K best practices
standards.
The most reasonably likely worst case scenario
for Ford Credit with respect to the Y2K problem
as it relates to the securities is the failure of
an external alliance, particularly another
financial institution or energy supplier to that
financial institution, to be Y2K compliant. This
could result in delay in collecting receivables,
which in turn could result in a delay in making
payments on the notes and certificates.
Ford Credit has established a Y2K business
resumption planning committee to evaluate
business disruption scenarios, coordinate the
establishment of Y2K contingency plans, and
S-21
<PAGE> 94
identify and implement preemptive strategies.
Detailed contingency plans for critical business
processes have been developed. In addition, Ford
Credit is participating with the Ford Motor
Company Y2K business resumption steering
committee. The trust will not be responsible for
paying any Y2K compliance costs incurred by Ford
Motor Company or by Ford Credit.
S-22
<PAGE> 95
THE TRUST
LIMITED PURPOSE AND LIMITED ASSETS
Ford Credit Auto Owner Trust [ ] is a business trust formed under the laws
of the State of Delaware under a trust agreement dated as of [ ] among
Ford Credit Auto Receivables Two L.P., the Owner Trustee [and the Delaware
Trustee]. The trust will not engage in any activity other than:
-- acquiring, holding and managing the assets of the trust, including the
receivables, and the proceeds of those assets;
-- issuing the notes and the certificates;
-- making payments on the notes and the certificates; and
-- engaging in other activities that are necessary, suitable or
convenient to accomplish any of the other purposes listed above or are
in any way connected with those activities.
The trust will initially be capitalized with the notes and the
certificates. [The [Class A-5 Notes and the Class A-6 Notes] initially will be
sold to Ford Credit and thereafter may be sold to third party investors.] [The
Class D Certificates initially will be retained by the seller and thereafter may
be sold to third party investors.] The trust will use the proceeds it receives
from the issuance of the notes and the certificates to [(1)] acquire the
receivables it will initially purchase from the seller under a sale and
servicing agreement to be dated as of [ ] among the trust, the seller
and the servicer[, and (2) to fund the initial deposit into the Reserve Account]
[, and [(2)][(3)] to fund the deposit into the Pre-Funding Account].
If the protection provided to the holders of record of the notes by the
subordination of the certificates [and to the noteholders and the
certificateholders by the [Reserve Account]] [and the Yield Supplement
Overcollateralization Amount] [and the Yield Supplement Account] [and the
Guaranteed Rate Agreement] [and the Interest Rate Swap] [and the Interest Rate
Cap] is insufficient, the trust would have to look principally to the obligors
on the receivables and the proceeds from the repossession and sale of the
financed vehicles which secure defaulted receivables. In that event, various
factors, such as the trust not having perfected security interests in the
financed vehicles securing the receivables in all states, may affect the
servicer's ability to repossess and sell the collateral securing the
receivables, and thus may reduce the proceeds which the trust can distribute to
the noteholders and the certificateholders. See "Description of the Receivables
Transfer and Servicing Agreements -- Distributions" and "-- Reserve Account" in
this prospectus supplement and "Certain Legal Aspects of the Receivables" in the
attached prospectus [and "Description of the Receivables Transfer and Servicing
Agreements -- Sale and Assignment of Receivables; Subsequent Receivables" in
this prospectus supplement].
S-23
<PAGE> 96
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
Closing Date, as if the issuance and sale of the notes and the certificates had
taken place on such date:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 Notes............................................. $[ ]
Class A-2 Notes............................................. [ ]
Class A-3 Notes............................................. [ ]
Class A-4 Notes............................................. [ ]
Class A-5 Notes............................................. [ ]
Class A-6 Notes............................................. [ ]
Class B Notes............................................... [ ]
Class C Certificates........................................ [ ]
Class D Certificates........................................ [ ]
Total.................................................. $[ ]
</TABLE>
THE OWNER TRUSTEE [AND THE DELAWARE TRUSTEE]
[ ] is the Owner Trustee under the trust agreement. [ ]
is a [ ] and its principal offices are located at [ ].
[[ ] is the Delaware Trustee under the trust agreement. [ ] is
a [ ] and its principal offices are located at [ ].] The
seller and its affiliates may maintain normal commercial banking relations with
the Owner Trustee[, the Delaware Trustee], [its] [their] parents and [its]
[their] affiliates.
THE RECEIVABLES POOL
The trust will own a pool of receivables consisting of motor vehicle retail
installment sale contracts secured by security interests in the motor vehicles
financed by those contracts. The Receivables Pool will [consist of] [include]
the [Initial Receivables][receivables] which the seller transfers to the trust
on the Closing Date. The [Initial Receivables][receivables] will include
payments on the receivables which are made on or after the [Initial] Cutoff
Date.
[THE SUBSEQUENT RECEIVABLES. In addition under the sale and servicing agreement,
on and after the Closing Date, the seller will be obligated to sell and the
trust will be obligated to purchase Subsequent Receivables from time to time
during the Funding Period. The Subsequent Receivables will only be transferred
if the conditions set forth in the sale and servicing agreement are met. The
seller's obligation to transfer Subsequent Receivables is subject to their
availability. The Subsequent Receivables will have an aggregate principal
balance equal to approximately $[ ]. The seller will designate a
Subsequent Cutoff Date each time it conveys Subsequent Receivables to the trust.
We expect that the seller will convey some of the Subsequent Receivables
arising between the Initial Cutoff Date and the Closing Date to the trust on the
Closing Date and that the seller will convey other Subsequent Receivables to the
trust as frequently as daily after the Closing Date on dates specified by the
seller during the Funding Period. See "Description of the Receivables Transfer
and Servicing Agreements -- Sale and Assignment of Subsequent Receivables" in
this prospectus supplement.]
[Upon each 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
those Subsequent Receivables. See "Description of the Receivables Transfer and
Servicing Agreements -- Yield Supplement Account; Yield Supplement Agreement" in
this prospectus supplement.]
S-24
<PAGE> 97
CRITERIA APPLICABLE TO SELECTION OF RECEIVABLES. Ford Credit purchased
approximately % of the [Initial Receivables] [receivables] (by principal
balance) from Ford dealers in the ordinary course of business in accordance with
Ford Credit's underwriting standards. PRIMUS purchased approximately % of
the [Initial Receivables] [receivables] (by principal balance) from non-Ford
dealers in the ordinary course of business in accordance with PRIMUS'
underwriting standards which are substantially identical to Ford Credit's
underwriting standards. Prior to PRIMUS becoming a division of Ford Credit,
PRIMUS sold all receivables it originated to Ford Credit on a regular basis.
The receivables were [and will be] selected from Ford Credit's and PRIMUS's
portfolio for inclusion in the Receivables Pool by several criteria, some of
which are set forth in the prospectus under "The Receivables Pools." [These
criteria include the requirement that each receivable:
-- provides for level monthly payments which provide interest at an
annual percentage rate of not less than [ ]% and not greater than
[ ]% [unless the seller increases the Reserve Initial Deposit by
the amounts, if any, specified by the rating agencies rating the
securities to maintain the ratings of the notes and the certificates];
-- will fully amortize the amount financed over an original term no
greater than [ ] months;
-- is not more than [ ] days past due as of the [applicable] Cutoff Date
and has never been extended; and
-- 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.] The receivables were [or will be] selected
at random from Ford Credit's and PRIMUS's portfolio of retail installment sale
contracts for new vehicles and Ford Credit's and PRIMUS's portfolio of retail
installment sale contracts for used vehicles, in each case meeting the criteria
described above. No selection procedures believed to be adverse to the
noteholders or the certificateholders were [or will be] utilized in selecting
the receivables from qualifying retail installment sale contracts. No receivable
has [or will have] a scheduled maturity later than [ ].
[The trust will not be obligated to purchase Subsequent Receivables on any
Subsequent Transfer Date unless the receivables in the trust, taken together
with the Subsequent Receivables to be transferred to the trust on that
Subsequent Transfer Date, would meet the following criteria:
-- not more than [ ]% of the principal balances of the receivables in
the trust will represent vehicles financed at Ford Credit's used
vehicle rates;
-- the weighted average annual percentage of the receivables in the trust
will not be less than [ ]%, unless the seller increases the [amount
on deposit in the Reserve Account and the Specified Reserve Balance]
[Reserve Initial Deposit] by the amounts, if any, specified by the
rating agencies rating the securities to maintain the ratings of the
notes and the certificates; and
-- the receivables will have a weighted average remaining term not
greater than [ ] months.
These 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 CHARACTERISTICS OF THE SUBSEQUENT RECEIVABLES MAY DIFFER FROM THOSE OF
THE INITIAL RECEIVABLES. The Initial Receivables will represent approximately
[ ]% of the aggregate initial
S-25
<PAGE> 98
principal amount of the notes and the certificates. However, there will be no
required characteristics of the Subsequent Receivables except:
-- the criteria described in this section; and
-- the criteria, if any, specified by the rating agencies rating the
securities to maintain the ratings of the notes and the certificates.
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 annual percentage rate and
the geographic distribution described in the following tables, may vary
significantly from those of the Initial Receivables.]
[Ford Credit and PRIMUS may originate Subsequent Receivables at a later
date using credit criteria different from those which were applied to the
Initial Receivables and the Subsequent Receivables 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
which the trust owns may vary significantly from those of the Initial
Receivables. See "Risk Factors -- The Trust is Completely Dependent on Ford
Credit to Originate Subsequent Receivables Eligible to be Purchased" and "The
Receivables Pool" in this prospectus supplement.]
With respect to the expected prepayment experience of the Receivables Pool,
Ford Credit --
-- believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled
weighted average life; and
-- 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 [ ]% and [ ]% of their scheduled
weighted average life.
See "Maturity and Prepayment Considerations" in this prospectus supplement and
in the prospectus.
[PURCHASES OF SUBSEQUENT RECEIVABLES. The trust may purchase Subsequent
Receivables during the Funding Period. The trust will initially have $[ ]
available to purchase Subsequent Receivables. This amount will be funded with
the proceeds of the offering and will be maintained in the Pre-Funding Account.
During the Funding Period, that amount will be reduced by:
-- the amount used to purchase Subsequent Receivables; and
-- the amount which the trust deposits into the Reserve Account upon each
purchase of Subsequent Receivables.
The seller expects that the amount in the Pre-Funding Account will be
reduced to $[ ] or less by the [ ] Payment Date.
The geographical distribution and distribution by average annual percentage
rate of the [Initial] Receivables Pool as of the [Initial] Cutoff Date are set
forth in the following tables.
S-26
<PAGE> 99
GEOGRAPHIC DISTRIBUTION OF THE [INITIAL] RECEIVABLES POOL AS OF THE [INITIAL]
CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE
-------- -------------------
<S> <C>
Alabama[(2)].......... %
Alaska................ %
Arizona............... %
Arkansas.............. %
California............ %
Colorado.............. %
Connecticut........... %
Delaware.............. %
District of
Columbia............ %
Florida............... %
Georgia............... %
Hawaii................ %
Idaho................. %
Illinois.............. %
Indiana............... %
Iowa.................. %
Kansas................ %
Kentucky.............. %
Louisiana............. %
Maine................. %
Maryland.............. %
Massachusetts......... %
Michigan.............. %
Minnesota............. %
Mississippi........... %
Missouri.............. %
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL
STATE(1) BALANCE
-------- -------------------
<S> <C>
Montana............... %
Nebraska.............. %
Nevada................ %
New Hampshire......... %
New Jersey............ %
New Mexico............ %
New York.............. %
North Carolina........ %
North Dakota.......... %
Ohio.................. %
Oklahoma.............. %
Oregon................ %
Pennsylvania(2)....... %
Rhode Island.......... %
South Carolina........ %
South Dakota.......... %
Tennessee............. %
Texas................. %
Utah.................. %
Vermont............... %
Virginia.............. %
Washington............ %
West Virginia......... %
Wisconsin............. %
Wyoming............... %
</TABLE>
- ---------------
(1) Based on the billing addresses of the obligors on the receivables as of the
[Initial] Cutoff Date.
(2) Excluded for administrative reasons.
S-27
<PAGE> 100
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE [INITIAL] RECEIVABLES POOL
AS OF THE [INITIAL] CUTOFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- --------- ----------- ----------------- -------------
<S> <C> <C> <C>
0.00 to 0.99............................... $ %
1.00 to 1.99............................... %
2.00 to 2.49............................... %
2.50 to 2.99............................... %
3.00 to 3.49............................... %
3.50 to 3.99............................... %
4.00 to 4.49............................... %
4.50 to 4.99............................... %
5.00 to 5.49............................... %
5.50 to 5.99............................... %
6.00 to 6.49............................... %
6.50 to 6.99............................... %
7.00 to 7.49............................... %
7.50 to 7.99............................... %
8.00 to 8.49............................... %
8.50 to 8.99............................... %
9.00 to 9.49............................... %
9.50 to 9.99............................... %
10.00 to 10.49............................. %
10.50 to 10.99............................. %
11.00 to 11.49............................. %
11.50 to 11.99............................. %
12.00 to 12.49............................. %
12.50 to 12.99............................. %
13.00 to 13.49............................. %
13.50 to 13.99............................. %
14.00 to 14.49............................. %
14.50 to 14.99............................. %
15.00 to 15.49............................. %
15.50 to 15.99............................. %
16.00 to 16.49............................. %
16.50 to 16.99............................. %
17.00 to 17.49............................. %
17.50 to 17.99............................. %
18.00 to 18.49............................. %
18.50 to 18.99............................. %
19.00 to 19.49............................. %
19.50 to 19.99............................. %
20.00 [to [ ]]......................... %
------- ----------------- ------
Totals................................ [ ] $[ ] [ ]%
======= ================= ======
</TABLE>
- ---------------
(1) May not add to 100.00% due to rounding.
S-28
<PAGE> 101
The [Initial] Receivables have the characteristics indicated below.
<TABLE>
<CAPTION>
PERCENTAGE
BY AGGREGATE
CHARACTERISTIC PRINCIPAL BALANCE
- -------------- -----------------
<S> <C>
Originated by Ford Credit................................... [ ]%
Originated by PRIMUS........................................ [ ]%
Precomputed Receivables..................................... [ ]%
Simple Interest Receivables................................. [ ]%
[Final Payment Receivables.................................. [ ]%]
[Precomputed Receivables which are Final Payment
Receivables............................................... [ ]%]
[Simple Interest Receivables which are Final Payment
Receivables............................................... [ ]%]
Vehicles financed at new vehicle rates...................... [ ]%
Vehicles financed at used vehicle rates..................... [ ]%
</TABLE>
See "The Receivables Pools" in the prospectus for a further description of
the characteristics of Precomputed Receivables [,][and] Simple Interest
Receivables [and Final Payment Receivables].
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, 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 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 assets, including the [Initial
Receivables][receivables].
The rate of payment of principal of each class of notes and [the] [each
class of] certificates will depend on the rate of payment (including
prepayments) of the principal balance of the receivables. For this reason, final
payment of [the] [any class of] notes and the final distribution in respect of
[the] [each class of] certificates could occur significantly earlier than the
respective Final Scheduled [Payment] [Distribution] Dates. The noteholders and
the certificateholders will exclusively bear any reinvestment risk associated
with early payment of the notes and the certificates, respectively.
The table captioned "Percent of Initial Note Principal Amount or Initial
Certificate Balance at Various ABS Percentages" has been prepared on the basis
of the characteristics of the [Initial Receivables] receivables [and certain
assumed characteristics with respect to the Subsequent Receivables] [and/or
state other assumptions on which the ABS Table is based]. The ABS Table assumes
that --
-- the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases;
-- each scheduled monthly payment on the receivables is made on the last
day of each month and each month has 30 days;
-- 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]);
S-29
<PAGE> 102
-- the balance in the Reserve Account on each [Payment Date and each]
Distribution Date is equal to the Specified Reserve Balance; and
-- the servicer exercises its option to purchase the receivables on the
earliest Distribution Date on which it is permitted to do so, as
described in this prospectus supplement.
[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 [ ]. The ABS Table indicates
the projected weighted average life of each class of notes and the Class [C]
Certificates and sets forth the percent of the initial principal amount of each
class of notes and the percent of the initial Certificate Balance of the Class
[C] Certificates] 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] [receivables]
have been aggregated into hypothetical pools with all of the [Initial
Receivables] [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, annual percentage
rate, 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.............................. %
5.............................. %
6.............................. %
7.............................. %
8.............................. %
9.............................. %
10............................. %
11............................. %
12............................. %
13............................. %
14............................. %
15............................. %
16............................. %
17............................. %
18............................. %
-----------------
$[ ]
=================
</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 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
S-30
<PAGE> 103
actual characteristics and performance of the receivables, or actual prepayment
experience, will affect the percentages of initial amounts outstanding over time
and the weighted average lives of each class of notes and the [Class [ ]]
Certificates. [In addition, the ABS Table was prepared based on the
characteristics of the initial receivables, which may be different from any
Subsequent Receivables purchased by the trust.]
S-31
<PAGE> 104
[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]
--------------------------------- --------------------------------- ---------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
Weighted Average Life
(years)(1)...........
</TABLE>
- ---------------
(1) The weighted average life of a note is determined by (a) 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 Distribution Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of the note.
(2) The weighted average life of a certificate is determined by (a) 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, (b) adding the results and (c)
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-32
<PAGE> 105
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
[CLASS A-4 NOTES] [CLASS A-5 NOTES] [CLASS A-6 NOTES]
--------------------------------- --------------------------------- ---------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date........... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
[ / / ]................
Weighted Average Life
(years)(1)...........
</TABLE>
- ---------------
(1) The weighted average life of a note is determined by (a) 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 Distribution Date, (b)
adding the results and (c) 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-33
<PAGE> 106
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT OR
INITIAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
[CLASS B NOTES] [CLASS [C] CERTIFICATES]
------------------------------------ ------------------------------------
DISTRIBUTION DATE 0.5% 1.0% 1.5% 1.8% 0.5% 1.0% 1.5% 1.8%
----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date........................ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
[ / / ].............................
Weighted Average Life
(years)(1)(2).....................
</TABLE>
- ---------------
(1) The weighted average life of a note is determined by (a) 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 Distribution Date, (b)
adding the results and (c) dividing the sum by the related initial principal
amount of the note.
(2) The weighted average life of a certificate is determined by (a) 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, (b) adding the results and (c)
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-34
<PAGE> 107
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES OF FORD CREDIT'S AND PRIMUS'S
PORTFOLIOS
Set forth below is certain information concerning the combined experience
of Ford Credit and PRIMUS with their portfolios of U.S. retail installment sale
contracts for new and used automobiles and light trucks (including previously
sold contracts which Ford Credit or PRIMUS continues to service). [Ford Credit
began originating Final Payment Receivables in [ ].] [PRIMUS began
originating Final Payment Receivables in [ ].] There is no assurance
that the delinquency, repossession or loss experience of the receivables will be
comparable to Ford Credit's and PRIMUS's experience shown in the following
tables or that [insert any information regarding current trends] will continue
in the future.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
[ ] [ ] [ ] [ ] [ ] [ ] [ ]
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts Outstanding
During the Period......................
Average Daily Delinquencies as a Percent
of Average Contracts Outstanding
31-60 Days(2).......................... % % % % % % %
61-90 Days(2).......................... % % % % % % %
Over 90 Days(3)........................ % % % % % % %
</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.
(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>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------
[ ] [ ] [ ] [ ] [ ] [ ] [ ]
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding During
the Period (Millions) Gross.......... $ $ $ $ $ $ $
Net.................................. $ $ $ $ $ $ $
Repossessions as a Percent of Average
Number of Contracts Outstanding...... % % % % % % %
Net Losses as a Percent of Gross
Liquidations(2).................... % % % % % % %
Net Losses as a Percent of Average
Gross Portfolio Outstanding(2)..... % % % % % % %
Net Losses as a Percent of Average
Net Portfolio Outstanding(2)....... % % % % % % %
</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.
(2) "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. Net Losses include
expenses associated with outside collection agencies but exclude other
expenses associated with collection, repossession, and disposition of the
vehicle. These other expenses are not material to the data presented.
S-35
<PAGE> 108
HOW YOU CAN COMPUTE YOUR PORTION OF THE AMOUNT
OUTSTANDING ON THE NOTES OR CERTIFICATES
The servicer will provide to you in each report which it delivers to you a
factor which you can use to compute your portion of the principal amount
outstanding on the notes or certificates. We have described these factors
separately for the notes and the certificates below.
NOTES
HOW THE SERVICER COMPUTES THE FACTOR FOR YOUR [CLASS OF] NOTES. [The
servicer will compute a separate factor for each class of notes.] The 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. The servicer will
compute the factor 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.
YOUR PORTION OF THE OUTSTANDING AMOUNT OF THE NOTES. For each note you own,
your portion of [the] [that class of] notes is the product of --
-- the original denomination of your note; and
-- the factor relating to your [class of] notes computed by the servicer
in the manner described above.
CERTIFICATES
HOW THE SERVICER COMPUTES THE FACTOR FOR YOUR [CLASS OF] CERTIFICATES. [The
servicer will compute a separate factor for each class of certificates.] The
factor for [the] [each class of] certificates will be a seven-digit decimal
which the servicer will compute prior to each distribution with respect to [the]
[such class of] certificates indicating the remaining Certificate Balance [of
such class of certificates], as of the applicable Distribution Date. The factor
for [any class of] [the] certificates will be calculated 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].
YOUR PORTION OF THE OUTSTANDING AMOUNT OF THE CERTIFICATES. For each
certificate you own, your portion of [the] [that class of] certificates is the
product of --
-- the original denomination of your certificate; and
-- the factor relating to your [class of] certificates computed by the
servicer in the manner described above.
THE FACTORS DESCRIBED ABOVE WILL DECLINE AS THE TRUST MAKES PAYMENTS ON THE
SECURITIES
Each of the factors described above will initially be 1.0000000. They will
then decline to reflect reductions in --
-- the outstanding principal amount of the [applicable class of] notes;
or
-- the outstanding principal amount [of the applicable class of
certificates], as the case may be.
These amounts will be reduced over time as a result of scheduled payments,
prepayments and liquidations of the receivables [and as a result of a prepayment
arising from application of funds in the Pre-Funding Account]. [They will not
change, however, as a result of the addition of Subsequent Receivables.]
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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, no principal payments will be
made at any time, including upon the occurrence and during the continuation of
an Event of Default under the indenture --
-- on the Class [A-2] Notes until the Class [A-1] Notes have been paid in
full;
-- on the Class [A-3] Notes until the Class [A-2] Notes have been paid in
full;
-- on the Class [A-4] Notes until the Class [A-3] Notes have been paid in
full;
-- on the Class [A-5] Notes until the Class [A-4] Notes have been paid in
full;
-- on the Class [A-6] Notes until the Class [A-5] Notes have been paid in
full; or
-- on the Class [B] Notes until the Class [A-6] Notes have been paid in
full.
[No distributions of principal on the certificates will be made until all
the notes have been paid in full. [In addition, no distributions of principal
will be made on the Class [D] Certificates until the Certificate Balance of the
Class [C] Certificates has been reduced to zero.] See "Description of the
Notes -- Payments of Principal" and "Description of the Certificates --
Distributions of Principal Payments" in this prospectus supplement.
As the rate of payment of principal of [the] [each class of] notes and
[the] [each class of] 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] [each class
of] certificates could occur significantly earlier than the [respective] Final
Scheduled [Payment] [Distribution] Date[s].
THERE IS NO ASSURANCE THAT YOUR SECURITIES WILL BE REPAID ON THE SCHEDULED
DATES. It is expected that final payment of [the] [each class of] notes and the
final distribution in respect of [the] [each class of] certificates will occur
on or prior to the [respective] Final Scheduled [Payment and] [Distribution]
Date[s]. Failure to make final payment of [the] [any class of] notes on or prior
to the [respective] Final Scheduled [Payment and] [Distribution] Date[s] 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
this prospectus supplement and in the prospectus. In addition, the sale and
servicing agreement requires that the remaining Certificate Balance [of each
class of certificates] be paid in full on the [respective] Final Scheduled
Distribution Date[s]. However, no assurance can be given that sufficient funds
will be available to pay [the] [each class of] notes and [the] [each class of]
certificates in full on or prior to the [respective] Final Scheduled [Payment
and] [Distribution] Date[s]. If sufficient funds are not available, final
payment of [the] [any class of] notes and the final distribution in respect of
[the] [either class of] certificates could occur later than such dates.
THE LEVEL OF PREPAYMENTS OF THE RECEIVABLES AND REQUIRED REPURCHASES BY THE
SELLER ARE UNPREDICTABLE AND MAY AFFECT PAYMENTS ON THE SECURITIES. The rate of
prepayments of the receivables may be influenced by a variety of economic,
social and other factors. In addition, under circumstances relating to breaches
of representations, warranties or covenants, the seller and/or the servicer may
be obligated to repurchase receivables from the trust. See "The Receivables
Pool" in this prospectus supplement and "Description of the Receivables 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. The
noteholders and the certificateholders will alone bear any reinvestment risks
resulting from a faster or slower incidence of prepayment of receivables as set
forth in the priority of distributions in this prospectus supplement. Such
reinvestment risks
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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.
RISKS OF SLOWER OR FASTER REPAYMENTS. Noteholders and certificateholders
should consider --
-- in the case of notes or 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 notes or 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.
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DESCRIPTION OF THE NOTES
THE INDENTURE
The trust will issue the notes under an indenture to be dated as of
[ ], between the trust and [ ], as indenture trustee. We
will file a copy of the indenture with the Securities and Exchange Commission
after the trust issues the notes. The following summary describes certain terms
of the notes and the indenture. The summary is not a complete description of all
the provisions of the notes and the indenture. We refer you to those provisions.
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.
PAYMENTS OF INTEREST
[The] [Each class of] notes [other than the Class A-3 Notes] will
constitute "Fixed Rate Securities," as that 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 those terms are defined under "Certain
Information Regarding the Securities -- Floating Rate Securities" in the
prospectus.] Interest on the principal amount[s] of the notes will accrue at the
[respective] per annum interest rates for the [various classes of] notes and
will be payable to the noteholders on each [Payment Date] [Distribution Date].
The trust will make payments on the notes as of each Record Date.
[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 --
-- no amount is withdrawn from the Reserve Account to cover shortfalls;
and
-- 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 Guaranteed Rate Agreement Counterparty in this prospectus supplement is
at any time reduced below A-1+ or P-1 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 Receivables Transfer and
Servicing Agreements -- Guaranteed Rate Agreement" in this prospectus
supplement.]
CALCULATION OF INTEREST. Interest will accrue during each Interest Period
and will be calculated on the [various classes of notes] as follows:
-- [Actual/360. Interest on the Class A-1 Notes and the Class A-2 Notes
will be calculated on the basis of actual days elapsed and a 360-day
year.]
-- 30/360. Interest on the [Class A-3 Notes, Class A-4 Notes, Class A-5
Notes and Class A-6 Notes] will be calculated on the basis of a
360-day year of twelve 30-day months.
-- Unpaid Interest Accrues. 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 interest rate [plus 2.00%]
(to the extent lawful).
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-- [With respect to the interest rate on the Class A-3 Notes, the "Index
Maturity" for LIBOR will be [three months (in the case of quarterly
Payment Dates)] [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.]
PRIORITY OF INTEREST PAYMENTS. The trust will generally derive the interest
payments it makes on the notes on any Distribution Date from the funds deposited
into the Collection Account with respect to the preceding Collection Period.
This will include funds, if any, deposited into the Collection Account from the
Reserve Account and the Payahead Account, remaining after the payment of --
-- the Servicing Fee; and
-- in the case of the Class B Notes, interest on the Class A Notes and
the First Priority Principal Distribution Amount, if any.
THE TRUST WILL PAY INTEREST PRO RATA TO CLASS A NOTEHOLDERS IF IT DOES NOT
HAVE ENOUGH FUNDS AVAILABLE TO PAY ALL INTEREST DUE. The amount available for
interest payments on the Class A Notes could be less than the amount of interest
payable on the Class A Notes on any Distribution Date. In that event, [the Class
A-1 noteholders, the Class A-2 noteholders, the Class A-3 noteholders, the Class
A-4 noteholders, the Class A-5 noteholders, and the Class A-6 noteholders] will
receive their ratable share of the aggregate amount available to be distributed
in respect of interest on the Class A Notes. Their ratable share of the interest
due will be based on the total amount of interest due to the Class A
noteholders.
INTEREST PAID ON THE CLASS B NOTES IS SUBORDINATE TO INTEREST PAID ON THE
CLASS A NOTES. Interest on the Class B Notes will not be paid on any
Distribution Date until interest payments on the Class A Notes and the First
Priority Principal Distribution Amount, if any, have been paid in full. If the
amount available for interest payments on the Class B Notes is less than the
amount of interest payable on the Class B Notes on any Distribution Date, each
of the holders of the Class B Notes will receive their ratable share (based upon
the total amount of interest due to such Class B noteholders) of the aggregate
amount available to be distributed in respect of interest on the Class B Notes.
See "Description of the Receivables Transfer and Servicing
Agreements -- Distributions" and "-- Reserve Account" in this prospectus
supplement.
EVENT OF DEFAULT. An Event of Default under the indenture will occur if the
full amount of interest due on the Class A Notes is not paid within five days of
the related Distribution Date. While any of the Class A Notes remain
outstanding, the failure to pay interest due on the Class B Notes within five
days of the related Distribution Date will not be an Event of Default. See
"Description of the Notes -- The Indenture Events of Default; Rights upon Event
of Default" in this prospectus supplement and in the prospectus.
PAYMENTS OF PRINCIPAL
The trust will generally make principal payments to the noteholders on each
[Distribution] [Payment] Date in an amount equal to the Principal Distribution
Amount. The "Principal Distribution Amount" with respect to any [Distribution]
[Payment] Date equals the sum of --
-- the First Priority Principal Distribution Amount;
-- the Second Priority Principal Distribution Amount; and
-- and the Regular Principal Distribution Amount.
The trust will pay the Principal Distribution Amount on each [Distribution]
[Payment] Date to the extent that it has funds available after it pays in full
all amounts ranking senior to each component of the Principal Distribution
Amount. The trust will make these payments in
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accordance with the priorities described in "Description of the Receivables
Transfer and Servicing Agreements -- Distributions" in this prospectus
supplement.
The trust will derive principal payments on the notes from the funds on
deposit in the Collection Account with respect to the Collection Period
preceding the related Distribution Date. This will include funds, if any,
deposited into the Collection Account from the Reserve Account and the Payahead
Account).
EVENT OF DEFAULT. Payments on the notes may be accelerated upon an Event of
Default. The effect on the noteholders of an Event of Default depends on the
type of default.
-- DEFAULTS ON PAYMENTS OF INTEREST AND PRINCIPAL AND INSOLVENCY
RESULTING IN ACCELERATION. Following the occurrence and during the
continuation of an Event of Default relating to default in the payment
of principal or default for five days or more in the payment of
interest on any note 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 priority of distributions
changes and Class A noteholders must be paid in full before any
distributions of principal or interest may be made on the Class B
Notes and the certificates.
-- OTHER DEFAULTS RESULTING IN ACCELERATION. Following the occurrence of
any other Event of Default which has resulted in an acceleration of
the notes, the priority of distributions does not change and the trust
will continue to pay interest on the Class A Notes and the Class B
Notes on each [Payment] [Distribution] Date prior to the distribution
of principal on the Class A Notes on such [Payment] [Distribution]
Date.
-- CERTIFICATES SUBORDINATED UPON ANY EVENT OF DEFAULT. Following the
occurrence of any Event of Default, the priority of distributions
changes and the Class B noteholders will be entitled to be paid in
full before any distributions of principal or interest may be made on
the certificates. See "Description of the Receivables Transfer and
Servicing Agreements -- Distributions" and "-- Reserve Account" in
this prospectus supplement.
On each Determination Date, the indenture trustee will determine the amount
in the Collection Account for distribution on the related [Payment]
[Distribution] Date. Payments to noteholders and certificateholders will be made
on each [Payment] [Distribution] Date in accordance with that determination.
PRIORITY OF PRINCIPAL REPAYMENTS. Principal payments on the notes will be
applied on each [Payment] [Distribution] Date, including upon the occurrence and
during the continuation of an Event of Default in the following order of
priority:
[ -- to the principal amount of the Class A-1 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-2 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-3 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-4 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-5 Notes until such principal
amount is paid in full;
-- to the principal amount of the Class A-6 Notes until such principal
amount is paid in full; and
-- to the principal amount of the Class B Notes until such principal
amount is paid in full.]
NOTES MAY NOT BE REPAID ON THEIR SCHEDULED DATES OF FINAL PRINCIPAL
REPAYMENTS. The principal amounts of [the] [any class of] notes to the extent
not previously paid will be due on the Final Scheduled [Payment] [Distribution]
Date relating [that class of] [the] notes. Those dates are listed on the cover
of this prospectus supplement. The actual date on which the
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aggregate outstanding principal amount of [the] [any class of] notes is paid may
be earlier or later than the [Final Scheduled] [Payment] [Distribution Dates]
[relating to that class of notes] based on a variety of factors, including those
described under "Maturity and Prepayment Considerations" in this prospectus
supplement and in the prospectus.
THE INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Upon an Event of Default
under the indenture, the noteholders will have the rights set forth in the
prospectus under "Description of the Notes -- The Indenture -- Events of
Default; Rights Upon Event of Default." The indenture trustee may sell the
receivables subject to the conditions described in the prospectus under
"Description of the Notes -- The Indenture -- Events of Default; Rights Upon
Event of Default" following an Event of Default, including --
-- a default in the payment of any principal of or a default for five
days or more in the payment of any interest on any note; or
-- an Insolvency Event or dissolution with respect to the trust.
In the case of any other Event of Default, the indenture trustee may not
sell the receivables unless one of the conditions set forth in the prospectus
under "Description of the Notes -- The Indenture -- Event of Default; Rights
upon Event of Default" has been satisfied [and, in addition, either --
-- the holders of all outstanding certificates consent to such sale, or
-- the proceeds of the sale are sufficient to pay in full the principal
of and accrued interest on all of the outstanding notes and
certificates on the date of the sale].
In the event of a sale of the receivables by the indenture trustee following an
Event of Default, the noteholders [and certificateholders] will receive notice
and an opportunity to submit a bid in the sale.
[The failure to pay interest due on the Class B Notes will not be an Event
of Default until the Class A Notes have been paid in full.]
Under the Trust Indenture Act of 1939, the indenture trustee may be deemed
to have a conflict of interest and be required to resign as trustee for either
the Class A Notes or the Class B Notes if a default occurs under the indenture.
In these circumstances, the indenture will provide for a successor trustee to be
appointed for one or both of the Class A Notes and Class B Notes, in order that
there be separate trustees for each of the Class A Notes and the Class B Notes.
So long as any amounts remain unpaid with respect to the Class A Notes --
-- only the indenture trustee for the Class A noteholders will have the
right to exercise remedies under the indenture; and
-- only the Class A noteholders will have the right to direct or consent
to any action to be taken, including sale of the receivables.
In any case, the Class B noteholders will be entitled to their respective shares
of any proceeds of enforcement, subject to the subordination of the Class B
Notes to the Class A Notes as described in this prospectus supplement. When the
Class A Notes are repaid in full, all rights to exercise remedies under the
indenture will transfer to the trustee for the Class B Notes.
If an indenture trustee relating to any class of notes resigns, its resignation
will become effective only after a successor indenture trustee for that class of
notes is appointed and the successor accepts the appointment.]
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[MANDATORY PREPAYMENT
If any amounts remain in the Pre-Funding Account at the end of the
Pre-Funding Period, the trust will prepay [the] [one or more classes of] notes
in part on the Distribution Date on or immediately following the last day of the
Funding Period, after giving effect to any purchases of Subsequent Receivables
on that Distribution Date.
AMOUNT PREPAID. The classes which the trust will redeem depends upon the
amount on deposit in Pre-Funding Account when the redemption is to occur, as
described below.
-- If the amount on deposit in the Pre-Funding Account is less than or
equal to $[ ], then that amount will be used to prepay the
[Class A-1] Notes [up to an amount not to exceed their outstanding
principal amount and then to prepay the Class A-2 Notes].
-- If the amount on deposit in the Pre-Funding Account is greater than
$[ ], then that amount will be used to prepay [each class of]
[the] notes and [each class of] [the] certificates. The aggregate
principal amount of [each class of] notes and certificates redeemed
will be an amount equal to the Pre-Funding Percentage of the amount on
deposit in the Pre-Funding Account.
[NOTE PREPAYMENT PREMIUM. The trust will be required to pay the Note
Prepayment Premium, which represents the certificateholders' expected yield on
their certificates over a reference security through [ ], to the
noteholders if --
-- the trust is required to prepay the notes and certificates in a
mandatory prepayment described above;
-- and the amount prepaid exceeds $[ ].
THE TRUST'S OBLIGATION TO PAY THE NOTE PREPAYMENT PREMIUM AND CERTIFICATE
PREPAYMENT PREMIUM ARE LIMITED TO AMOUNTS IT RECEIVES FROM THE SELLER. Under 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 [for each class of
certificates] will be limited to funds received from the seller with respect to
these amounts.
[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-6] Notes and the [Class B] Notes will be redeemed 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 Pool Balance shall have declined to 10% or less of the Initial Pool
Balance [plus the aggregate principal balance of any Subsequent Receivables as
of the Subsequent Cutoff Date], as described in the prospectus under
"Description of the Receivables Transfer and Servicing
Agreements -- Termination." The redemption price for the [Class A-6] Notes and
the [Class B] Notes will be equal to --
-- the unpaid principal amount of such notes plus accrued and unpaid
interest at the rate of interest on those notes; plus
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-- interest on any past due interest at the rate of interest on those
notes (to the extent lawful).
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates [in fully registered, certificated
form] under the trust agreement. We have filed a form of the trust agreement as
an exhibit to the registration statement of which this prospectus supplement is
a part. A copy of the trust agreement will be filed with the SEC after the trust
issues the notes and the certificates. We summarize below some of the most
important terms of the certificates and the trust agreement. This summary is not
a complete description of all the provisions of the trust agreement and the
certificates. We refer you to those documents. The following summary is a
supplement to the description of the general terms and provisions of the
certificates of any given series and the related trust agreement provided under
the headings "Description of the Certificates," "Certain Information Regarding
the Securities" and "Description of the Receivables Transfer and Servicing
Agreements" in the prospectus. We refer you to those sections of the prospectus.
DISTRIBUTIONS OF INTEREST INCOME
On each Distribution Date, commencing [ ], the
certificateholders of each class of certificates will be entitled to
distributions in an amount equal to the amount of interest that would accrue on
the Certificate Balance of their class of certificates at the applicable rate of
interest on the certificates. [The certificates will constitute Fixed Rate
Securities, as such term is defined under "Certain Information Regarding the
Securities -- Fixed Rate Securities" in the prospectus.] The [Class [ ]]
Certificates 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 will accrue --
-- from and including the Closing Date (in the case of the first
Distribution Date); or
-- from and including the [[ ] day of the calendar month] [the
Distribution Date] preceding each Distribution Date to but excluding
the [ ] day of the following calendar month] [the following
Distribution Date].
[INTEREST IS CALCULATED 30/360. Interest on the certificates will be
calculated on the basis of a 360-day year of twelve 30-day months.]
UNPAID INTEREST ACCRUES. Interest distributions due for any Distribution
Date but not distributed on such Distribution Date will be due on the next
Distribution Date increased by an amount equal to interest on such amount at the
rate of interest on the certificates (to the extent lawful).
FUNDS AVAILABLE FOR DISTRIBUTIONS ON CERTIFICATES. The trust will fund
interest distributions on the certificates from the portion of the funds on
deposit in the Collection Account with respect to the Collection Period
preceding the related Distribution Date, including funds, if any, deposited into
the Collection Account from the Reserve Account and the Payahead Account,
remaining after the trust pays:
-- the Servicing Fee;
-- the interest due on the Class A Notes;
-- the First Priority Principal Distribution Amount, if any;
-- the interest due on the Class B Notes;
-- the Second Priority Principal Distribution Amount, if any; and
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-- in the case of the Class [D] Certificates, the interest due on the
Class [C] Certificates.
However, following the occurrence 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 noteholders
will be entitled to be paid interest and all principal in full before any
distributions may be made on the certificates. See "Description of the
Receivables Transfer and Servicing Agreements -- Distributions" and "-- Reserve
Account" in this prospectus supplement.
DISTRIBUTIONS OF PRINCIPAL PAYMENTS
THE TRUST WILL DISTRIBUTE PRINCIPAL ON THE CERTIFICATES ONLY AFTER
PRINCIPAL ON THE NOTES IS FULLY PAID. Certificateholders will be entitled to
receive principal payments on each Distribution Date, commencing with the
Distribution Date on which all of the notes have been paid in full in an amount
generally equal to the Principal Distribution Amount, after giving effect to any
portion of that amount payable to noteholders. The trust will make distributions
of principal to the certificateholders at that time to the extent that amounts
are remaining after it pays in full of all amounts ranking senior to such
component in accordance with the priorities described in "Description of the
Receivables Transfer and Servicing Agreements -- Distributions" in this
prospectus supplement.
PRIORITY OF PRINCIPAL DISTRIBUTIONS. Distributions with respect to
principal payments on the certificates will be applied on each Distribution Date
commencing on the Distribution Date on which all the notes are paid in full in
the following order of priority:
(1) in payment of the Certificate Balance of the Class C Certificates,
until the Certificate Balance of the Class C Certificates has been paid
in full; and
(2) in payment of the Certificate Balance of the Class D Certificates,
until the Certificate Balance of the Class D Certificates has been paid
in full.
The trust will make distributions with respect to principal payments on the
certificates from the funds on deposit in the Collection Account with respect to
the Collection Period preceding the related Distribution Date (including funds,
if any, deposited into the Collection Account from the Reserve Account and the
Payahead Account). Following the occurrence 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 noteholders
will be entitled to be paid interest and all principal in full before any
distributions may be made on the certificates. See "Description of the
Receivables Transfer and Servicing Agreements -- Distributions" and "-- Reserve
Account" in this prospectus supplement.
The outstanding Certificate Balance of each class of certificates will be
payable in full on the Final Scheduled Distribution Date relating to [that class
of] [the] certificates. The actual date on which the trust pays the aggregate
Certificate Balance [of either class of certificates] may be earlier or later
than the applicable Final Scheduled Distribution Date, based on a variety of
factors, including those described under "Maturity and Prepayment
Considerations" in this prospectus supplement and in the prospectus.
[MANDATORY PREPAYMENT
The trust will make cash distributions to certificateholders, 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 $[ ]. The aggregate
principal balance of the certificates to be repurchased will be an amount equal
to the certificates' Pre-Funding Percentage of the amount then on deposit in the
Pre-Funding Account. [The Certificate Prepayment Premium, which represents the
certificateholders' expected yield on
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their certificates over a reference security through [ ], will be
payable by the trust to the certificateholders at the time of any mandatory
prepayment of the certificates as described above.]
THE TRUST'S OBLIGATION TO PAY THE NOTE PREPAYMENT PREMIUM AND CERTIFICATE
PREPAYMENT PREMIUM ARE LIMITED TO AMOUNTS IT RECEIVES FROM THE SELLER. Under 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 seller's 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 [for each class
of certificates] will be limited to funds received from the seller with respect
to these amounts.
[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 [of each class of certificates] will receive their
ratable share (based upon the aggregate Certificate 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 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, you will
receive an amount in respect of your certificates equal to the sum of:
-- the outstanding Certificate Balance [of such class] together with
accrued interest at the rate of interest on [the] [that class of]
certificates; and
-- interest on any past due interest at the rate of interest on your
certificates, to the extent lawful.
That distribution will cause the early retirement of your certificates. See
"Description of the Receivables Transfer and Servicing Agreements --
Termination" in the prospectus.
PRIORITY OF NOTES
The rights of certificateholders to receive distributions of interest are
subordinated to the rights of noteholders to receive payments of interest and,
under some conditions, principal. In addition, the certificateholders will have
no right to receive distributions of principal until the aggregate principal
amount of all the notes has been paid in full.
Consequently, before the trust makes distributions of interest on the
[Class C] Certificates, funds on deposit in the Collection Account with respect
to the Collection Period preceding the related Distribution Date (including
funds, if any, deposited into the Collection Account from the Reserve Account
and the Payahead Account) will be applied to the payment of --
-- the interest due on the Class A Notes;
-- the First Priority Principal Distribution Amount, if any;
-- interest due on the Class B Notes; and
-- the Second Priority Principal Distribution Amount, if any.
Those amounts also will be applied to the payment of principal on the notes in
full before distributions of principal on the Class C Certificates. See
"Description of the Receivables Transfer and Servicing
Agreements -- Distributions" in this prospectus supplement.
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In addition, following the occurrence 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 noteholders
will be entitled to be paid interest and all principal in full before any
distributions may be made on the certificates. See "Description of the
Receivables Transfer and Servicing Agreements -- Insolvency Event or
Dissolution" in the prospectus.
[In addition, on each Distribution Date after any rating agency rating the
notes or certificates reduces or withdrawals its ratings of [any class of] [the]
notes, the certificateholders will not receive any distributions of principal
until --
-- all the notes have been paid in full; or
-- the reduced or withdrawn 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 any rating agency
if in its judgment the withdrawal or reduction is warranted by the
circumstances.]
DESCRIPTION OF THE RECEIVABLES TRANSFER AND SERVICING AGREEMENTS
We have summarized below some of the important terms of the Receivables
Transfer and Servicing Agreements. We have filed forms of the Receivables
Transfer and Servicing Agreements as exhibits to the registration statement. We
will file copies of the actual Receivables Transfer and Servicing Agreements
with the SEC after we issue the notes and the certificates. This summary is not
a complete description of all of the provisions of the Receivables Transfer and
Servicing Agreements. It is subject to all of the provisions of the Receivables
Transfer and Servicing Agreements. The following summary supplements the
description of the general terms and provisions of the Receivables Transfer and
Servicing Agreements set forth under the heading "Description of the Receivables
Transfer and Servicing Agreements" in the prospectus.
SALE AND ASSIGNMENT OF RECEIVABLES[; SUBSEQUENT RECEIVABLES]
You can find more information about the transfer of the [Initial
Receivables] [receivables] from the seller to the trust on the Closing Date
under the sale and servicing agreement in the prospectus under "Description of
the Receivables Transfer and Servicing Agreements -- Sale and Assignment of
Receivables". [During the Funding Period, under the sale and servicing
agreement, the seller will be obligated to sell to the trust Subsequent
Receivables having an aggregate principal balance equal to the initial
Pre-Funded Amount, which is approximately $[ ], to the extent that the
seller has Subsequent Receivables 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
which the seller designated as of the related Subsequent Cutoff Date and
identified in a schedule attached to a subsequent transfer assignment relating
to those Subsequent Receivables executed on that date by the seller. We expect
that on the Closing Date, subject to the conditions described below, the seller
will convey to the trust some of the Subsequent Receivables designated by the
seller and arising between the Initial Cutoff Dates and the Closing Date. Upon
the conveyance of Subsequent Receivables to the trust on a Subsequent Transfer
Date --
(1) the Pool Balance will increase in an amount equal to the aggregate
principal balances of the Subsequent Receivables;
(2) the trust will withdraw an amount equal to [ ]% of the aggregate
principal balances of such Subsequent Receivables from the Pre-Funding
Account and deposit that amount into the Reserve Account; and
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(3) the trust will withdraw an amount equal to the excess of the aggregate
principal balances of such Subsequent Receivables over the amount
described in clause (2) from the Pre-Funding Account and pay that
amount to the seller.]
[Coincident with each such transfer of Subsequent Receivables, the Yield
Supplement Agreement will require Ford Credit or PRIMUS, as applicable, to
deposit into the Yield Supplement Account an amount equal to the Additional
Yield Supplement Amount, if any, in respect of those Subsequent Receivables. See
"-- Yield Supplement Account; Yield Supplement Agreement" in this prospectus
supplement.]
[CONDITIONS PRECEDENT TO TRANSFER OF SUBSEQUENT RECEIVABLES. 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:
(1) each Subsequent Receivable must satisfy the eligibility criteria
specified in the sale and servicing agreement;
(2) the seller will not have selected the Subsequent Receivables in a
manner that it believes is adverse to the interests of the noteholders
or the certificateholders;
(3) as of the related Subsequent Cutoff Date, the receivables, including
any Subsequent Receivables which the seller conveys as of such
Subsequent Cutoff Date, satisfy the criteria described under "The
Receivables Pool" in this prospectus supplement and "The Receivables
Pools" in the prospectus;
(4) the applicable Reserve Initial Deposit for the related Subsequent
Transfer Date shall have been made; and
(5) the seller shall have executed and delivered to the trust (with a copy
to the indenture trustee) a written assignment conveying the Subsequent
Receivables to the trust (including a schedule identifying the
Subsequent Receivables).
CONDITIONS SUBSEQUENT TO TRANSFER OF SUBSEQUENT RECEIVABLES. Any 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 that Collection Period, of the following conditions
subsequent, among others:
(1) the seller will have delivered opinions of counsel to the Owner
Trustee, the indenture trustee and the rating agencies rating the notes
or certificates regarding the validity of the conveyance of all the
Subsequent Receivables conveyed during that Collection Period;
(2) 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" in this prospectus
supplement and under "The Receivables Pools" in the prospectus; and
(3) each of the rating agencies rating the notes or certificates shall have
notified the seller in writing that, following the addition of all such
Subsequent Receivables, [each class of] [the] notes and [each class of]
[the] certificates will be rated by those in the same rating category
as they were rated by those rating agencies on the Closing Date.
The seller will be required to immediately repurchase any Subsequent
Receivable, at a price equal to the Purchase Amount of that Subsequent
Receivable, upon its failure to satisfy any of the conditions subsequent listed
above with respect to those Subsequent Receivables.
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[CREDIT CRITERIA MAY DIFFER WITH REGARD TO SUBSEQUENT RECEIVABLES. Ford Credit
may have originated the Subsequent Receivables 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" in this prospectus supplement.]]
ACCOUNTS
ACCOUNTS OF THE TRUST. In general, the servicer will be permitted to retain
collections on the receivables until the business day preceding the following
Distribution Date. However, the servicer will be required to remit collections
received with respect to the receivables not later than the second Business Day
after receipt to the Collection Account if (1) there is an Event of Servicing
Termination, (2) if Ford Credit is no longer the servicer or (3) if one of the
other conditions set forth in the sale and servicing agreement is not met. In
addition to the Accounts referred to under "Description of the Receivables
Transfer and Servicing Agreements -- Accounts" in the prospectus --
-- the indenture trustee will establish the Principal Distribution
Account;
-- the Owner Trustee will establish the Certificate Interest Distribution
Account and the Certificate Principal Distribution Account; [and]
-- the servicer will establish and will maintain with the indenture
trustee the Reserve Account, in the name of the indenture trustee on
behalf of the noteholders and the certificateholders[; and][.]
-- [the indenture trustee will establish the Yield Supplement Account.]
PAYAHEAD ACCOUNT. The servicer also will establish and will maintain with
the indenture trustee the Payahead Account. Amounts on deposit in the Payahead
Account are held for the benefit of obligors who have paid ahead a payment or a
payment before its due date until the servicer applies those amounts when the
payment is due. For that reason, the Payahead Account will not be included in
the property of the trust.
SERVICING COMPENSATION AND EXPENSES
The servicer is entitled to receive the Servicing Fee on each Distribution
Date. The Servicing Fee, together with any portion of the Servicing Fee that
remains unpaid from prior Distribution Dates, will be payable on each
Distribution Date. The Servicing Fee will be paid only to the extent of the
funds on deposit in the Collection Account with respect to the Collection Period
preceding such Distribution Date, including funds, if any, deposited into the
Collection Account from the Reserve Account and the Payahead Account. The
servicer also is entitled to receive the Supplemental Servicing Fee. See
"Description of the Receivables Transfer and Servicing Agreements -- Servicing
Compensation and Expenses" in the prospectus.
RIGHTS UPON EVENT OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, the indenture trustee or the
[Class A] noteholders evidencing not less than a majority of the principal
amount of the [Class A] Notes may remove the servicer without the consent of any
of the [Class B] noteholders or the certificateholders. The [Class B]
noteholders will not have the ability to remove the servicer if an Event of
Servicing Termination occurs until the Class A notes have been paid in full. The
Class C certificateholders will not have the ability to remove the servicer if
an Event of Servicing Termination occurs until after the notes have been paid in
full.
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WAIVER OF PAST EVENTS OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, the [Class A] noteholders
evidencing not less than a majority of the principal amount of the [Class A]
Notes may, subject to the exceptions provided in the sale and servicing
agreement, waive any Event of Servicing Termination, without the consent of any
of the [Class B] noteholders or the certificateholders. The [Class B]
noteholders will not have the right to determine whether any Event of Servicing
Termination should be waived until the [Class A] Notes have been paid in full.
The Class C certificateholders will not have the right to determine whether any
Event of Servicing Termination should be waived until the notes have been paid
in full.
DISTRIBUTIONS
DEPOSITS TO THE COLLECTION ACCOUNT AND DETERMINATION OF AVAILABLE
COLLECTIONS. On or before the Distribution Date, the servicer will cause all
collections or receivables, Precomputed Advances, Simple Interest Advances and
other amounts constituting the Available Funds to be deposited into the
Collection Account. See "Description of the Receivables Transfer and Servicing
Agreements -- Sale and Assignment of Receivables," "-- Collections" and "--
Advances" in the prospectus. On or before each Distribution Date, the servicer
will notify the indenture trustee to withdraw from the Reserve Account and
deposit into the Collection Account the Reserve Account Excess Amount.
In addition, the servicer will notify the indenture trustee to withdraw
from the Reserve Account and deposit in the Collection Account an amount equal
to the lesser of:
-- the amount, if any, by which (a) the Total Required Payment exceeds
(b) the Available Funds for such Distribution Date; and
-- the amount of cash or other immediately available funds in the Reserve
Account on such Distribution Date (after giving effect to any
withdrawals from the Reserve Account relating to the Reserve Account
Excess Amount for that Distribution Date).
On or before the Final Scheduled [Payment] [Distribution] Date with respect
to [any class of] [the] notes or [the] [either class of] certificates, the
servicer will notify the indenture trustee to withdraw from the Reserve Account
and deposit in the Collection Account an amount equal to the lesser of --
-- the sum of the Available Funds plus the amount, if any, withdrawn from
the Reserve Account in respect of the excess of the Total Required
Payment over the Available Funds for such Distribution Date is
insufficient to pay such class of notes or such class of certificates
in full in accordance with the priorities described in "-- Monthly
Withdrawals from Collection Account" below; and
-- the amount of cash or other immediately available funds in the Reserve
Account on such Distribution Date (after giving effect to any
withdrawals from the Reserve Account relating to the Reserve Account
Excess Amount and to the amount by which the Total Required Payment
exceeds the Available Funds for such [Payment] [Distribution] Date).
The Available Collections will be determined on the related Determination
Date as described under "Description of the Notes -- Payments of Principal" in
this prospectus supplement and "Description of the Receivables Transfer and
Servicing Agreements -- Distributions" in the prospectus.
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<PAGE> 123
[FLOW CHART DESCRIBING SOURCES
OF FUNDS AVAILABLE FOR DISTRIBUTION
ON ANY DISTRIBUTION DATE]
[SOURCES OF FUNDS]
PRIORITY OF PAYMENTS. On each Distribution Date, the servicer will allocate
amounts on deposit in the Collection Account as described under "Description of
the Receivables Transfer and Servicing Agreements -- Distributions" in the
prospectus and will instruct the indenture trustee to make the following
deposits and distributions, to the extent of funds then on deposit in the
Collection Account with respect to the Collection Period preceding such
Distribution Date (including funds, if any, deposited into the Collection
Account from the Reserve Account and the Payahead Account), in the following
order of priority:
(1) to the servicer, the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods;
(2) [to the swap counterparty, the net amount if any which the trust has
received on the Interest Rate Swap with respect to that Distribution
Date and] to the Class A noteholders --
(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class A Notes at their respective interest
rates on the principal outstanding as of the previous Distribution
Date after giving effect to all payments of principal to the Class
A noteholders on the preceding Distribution Date; and
(b) any shortfall in the amount of interest payable to the Class A
noteholders on prior Distribution Dates over the amounts actually
paid to the Class A noteholders on those prior Distribution Dates,
plus interest on any shortfall to the extent permitted by law.
(3) to the Principal Distribution Account, the First Priority Principal
Distribution Amount, if any;
(4) to the Class B noteholders --
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(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class B Notes at the interest rate for such
notes on the principal outstanding as of the previous Distribution
Date after giving effect to all payments of principal to the Class
B noteholders on the preceding Distribution Date; and
(b) any shortfall in the amount of interest payable to the Class B
noteholders on prior Distribution Dates over the amounts actually
paid to the Class B noteholders on those prior Distribution Dates,
plus interest on any shortfall to the extent permitted by law;
(5) to the Principal Distribution Account, the Second Priority Principal
Distribution Amount, if any;
(6) to the Certificate Interest Distribution Account --
(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class C Certificates at the interest rate on
such certificates on the Certificate Balance as of the previous
Distribution Date after giving effect to all payments of principal
to the Class C certificateholders on the preceding Distribution
Date; and
(b) any shortfall in the amount of interest payable to the Class C
certificateholders on prior Distribution Dates over the amounts
actually paid to the Class C certificateholders on those prior
Distribution Dates, plus interest on any shortfall to the extent
permitted by law;
(7) to the Certificate Interest Distribution Account --
(a) the aggregate amount of interest accrued for the related Interest
Period on each of the Class D certificates at the interest rate on
such certificates on the Certificate Balance as of the previous
Distribution Date after giving effect to all payments of principal
to the Class D certificateholders on the preceding Distribution
Date; and
(b) any shortfall in the amount of interest payable to the Class D
certificateholders on prior Distribution Dates over the amounts
actually paid to the Class D certificateholders on those prior
Distribution Dates, plus interest on any shortfall to the extent
permitted by law;
[(8) to the Reserve Account, the amount required to reinstate the amount in
the Reserve Account up to the Specified Reserve Balance;]
[(9) to the Principal Distribution Account, the Regular Principal
Distribution Amount;] and
(10) to the seller, any funds remaining on deposit in the Collection
Account with respect to the Collection Period preceding such
Distribution Date.
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[FLOW CHART DESCRIBING HOW THE TRUST DISTRIBUTES AVAILABLE FUNDS ON A
DISTRIBUTION DATE WHEN NO EVENT OF DEFAULT HAS OCCURRED]
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PRIORITY OF PAYMENTS WILL CHANGE UPON AN EVENT OF DEFAULT. The changes in
the priority of payments depends upon the circumstances resulting in an Event of
Default, as described below.
-- Defaults in Payment of Interest and Principal and Insolvency.
Following the occurrence and during the continuation of an Event of
Default relating to:
-- a default in the payment of principal on any note which has resulted
in acceleration of the notes;
-- a default for five days or more in the payment of interest on any
note which has resulted in acceleration of the notes;
-- the occurrence of an Insolvency Event or dissolution with respect to
the trust which has resulted in an acceleration of the notes; or
-- an Insolvency Event or a dissolution with respect to the seller or
the General Partner,
the funds on deposit in the Collection Account, including funds, if
any, deposited into the Collection Account from the Reserve Account and
the Payahead Account, remaining after the application of clauses (1)
and (2) in "Monthly Withdrawals from Collection Account" above will be
deposited in the Principal Distribution Account to the extent necessary
to pay the principal amount of the Class A Notes in full and no
distributions of principal or interest on the Class B Notes will be
made until payment in full of principal and interest on the Class A
Notes.
-- Other Defaults. Following the occurrence and during the continuation
of any other Event of Default which has resulted in an acceleration of
the notes, the funds on deposit in the Collection Account, including
funds, if any, deposited into the Collection Account from the Reserve
Account and the Payahead Account, remaining after application of
clauses (1), (2), (3) and (4) in "Monthly Withdrawals from Collection
Account" above will be deposited in the Principal Distribution Account
to the extent necessary to pay the principal amount of all the notes
in full, and in neither case will the certificateholders receive any
distributions until the principal amount and accrued interest on all
the notes has been paid in full.
PRINCIPAL DISTRIBUTION AMOUNTS. On and after the Distribution Date on which
the principal amount of the notes has been paid in full, amounts in respect of
the First Priority Principal Distribution Amount, if any, the Second Priority
Principal Distribution Amount, if any, and the Regular Principal Distribution
Amount, if any (in each case, after giving effect to any portion thereof payable
to noteholders) as described in clauses (3), (5) and (9) in "Priority of
Payments" above, respectively, will be deposited into the Certificate Principal
Distribution Account.
SERVICER WILL PROVIDE INFORMATION TO INDENTURE TRUSTEE. On each
Determination Date, the servicer will provide the indenture trustee with the
information specified in the sale and servicing agreement with respect to the
Collection Period preceding such Determination Date, including:
-- the amount of aggregate collections on the receivables;
-- the aggregate amount of Liquidated Receivables;
-- 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.
OVERVIEW OF HOW THE TRUST DISTRIBUTES PRINCIPAL. In general, the trust will
make principal distributions on the notes and certificates under the
circumstances described below.
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-- as the Pool Balance decreases as a result of principal payments on
the receivables, receipt of Liquidation Proceeds allocable to
principal and Realized Losses, to the extent that the Pool Balance
is less than the aggregate outstanding principal balance on the
notes and the certificates plus any intended amount of
overcollateralization; and
-- on the respective Scheduled [Payment] [Distribution] Dates of the
notes and certificates.
We discuss each of these situations in more detail below.
The Trust Will Make Principal Payments to Maintain Overcollateralization as
the Pool Balance Decreases. The trust will make principal distributions on
[Distribution] [Payment] Dates which are not Final Scheduled [Distribution]
[Payment] Dates in order to maintain a desired level of overcollateralization.
The trust will generally pay principal on the most senior class of notes or
certificates outstanding at any time that the aggregate outstanding principal
balance of the notes and the certificates exceeds the Pool Balance minus the
Specified Overcollateralization Amount [together with the Yield Supplement
Overcollateralization Amount]. Under most circumstances, the amount of that
prepayment will be equal to the Regular Principal Distribution Amount. However,
where substantial prepayments occur in a single Collection Period, to the extent
that the aggregate outstanding principal balance of the notes exceeds the
remaining Pool Balance, a Second Priority Principal Distribution Amount or a
First Priority Principal Distribution Amount may also be payable.
Required Principal Distributions Made as a Result of Notes Reaching Their
Final Scheduled [Payment] [Distribution] Dates May Delay Interest Payments on
More Subordinate Classes of Notes or Certificates. If the principal amount due
on a class of notes or certificates has not been repaid prior to the applicable
Final Scheduled [Payment] [Distribution] Date, then the entire principal amount
will be due on that date. This would generally be caused by events resulting in
slower payments on the receivables, including --
-- a larger-than-expected number of late payments on the Simple Interest
Receivables; or
-- slower-than-expected prepayments on the receivables.
The ranking in the priority of payments of the Principal Distribution
Amount which is triggered on any Final Scheduled [Payment] [Distribution] Date
depends upon the class of the applicable notes or certificates. Those priorities
are set forth in the table below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
CLASS OF NOTES OR CERTIFICATES ON ITS PRIORITY OF PRINCIPAL DISTRIBUTION
FINAL AMOUNT TRIGGERED
SCHEDULED [PAYMENT OR] DISTRIBUTION DATE
<S> <C>
- ------------------------------------------------------------------------------------
[any of] the Class A Notes First Priority Principal Distribution
Amount
- ------------------------------------------------------------------------------------
the Class B Notes Second Priority Principal Distribution
Amount
- ------------------------------------------------------------------------------------
[any class of] [the] certificates Regular Principal Distribution Amount
- ------------------------------------------------------------------------------------
</TABLE>
Higher-Priority Principal Payments Made as a Result of Losses or
Prepayments May Delay Interest Payments on Class B Notes or Certificates. The
trust will pay principal on the most senior classes of notes prior to the
payment of interest on more subordinate notes or certificates in cases where the
Pool Balance has decreased to a level which is less than the aggregate
outstanding principal balance of the notes or less than the aggregate
outstanding principal balance of the Class A Notes.
-- To the extent that the Pool Balance has decreased to a level which is
less than the aggregate outstanding principal balance on the notes, a
Second Priority Principal Distribution Amount will be payable prior to
the payment of interest on the certificates.
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-- To the extent that the Pool Balance has decreased to a level which is
less than the aggregate outstanding principal balance on the Class A
Notes, a First Priority Principal Distribution Amount will be payable
prior to the payment of interest on the Class B Notes and on the
certificates.
Because of the prioritization of the above amounts, the occurrence of any of the
following events may result in insufficient funds for the trust to make payments
of interest on more subordinate classes of notes or certificates on a timely
basis:
-- substantial losses suffered by the trust as a result of defaults which
are not covered by sufficient Liquidation Proceeds allocable to
principal; or
-- delayed collections on the receivables resulting from either --
-- a larger-than-expected number of late payments on the Simple
Interest Receivables; or
-- slower-than-expected prepayments on the receivables.
PRIORITY IN WHICH THE TRUST DISTRIBUTES AMOUNTS IN THE PRINCIPAL
DISTRIBUTION ACCOUNT. On each Distribution Date, the trust will pay out all
amounts on deposit in the Principal Distribution Account will be paid in the
following order of priority:
(1) to the Class A-1 noteholders in reduction of principal until the
principal amount of the Class A-1 Notes has been paid in full;
(2) to the Class A-2 noteholders in reduction of principal until the
principal amount of the Class A-2 Notes has been paid in full;
(3) to the Class A-3 noteholders in reduction of principal until the
principal amount of the Class A-3 Notes has been paid in full;
(4) to the Class A-4 noteholders in reduction of principal until the
principal amount of the Class A-4 Notes has been paid in full;
(5) to the Class A-5 noteholders in reduction of principal until the
principal amount of the Class A-5 Notes has been paid in full;
(6) to the Class A-6 noteholders in reduction of principal until the
principal amount of the Class A-6 Notes has been paid in full;
(7) to the Class B noteholders in reduction of principal until the
principal amount of the Class B Notes has been paid in full;
(8) to the Certificate Principal Distribution Account, in reduction of the
Certificate Balance of the Class C Certificates, until the Certificate
Balance of the Class C Certificates has been reduced to zero;
(9) to the Certificate Principal Distribution Account, in reduction of the
Certificate Balance of the Class D Certificates, until the Certificate
Balance of the Class D Certificates has been reduced to zero; and
(10) to the seller, any funds remaining on deposit in the Principal
Distribution Account.
On each Distribution Date, all amounts on deposit in the Certificate
Interest Distribution Account will be paid in the following order of priority:
(1) to the Class C Certificateholders, all interest accrued on the Class C
Certificates, including unpaid interest and interest on that interest;
(2) to the Class D Certificateholders, all interest accrued on the Class D
Certificates, including unpaid interest and interest on that interest;
and
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(3) to the seller, any funds remaining on deposit in the Certificate
Interest Distribution Account.
On each Distribution Date, all amounts on deposit in the Certificate
Principal Distribution Account will be paid in the following order of priority:
(1) to the Class C Certificateholders, in reduction of the Certificate
Balance of the Class C Certificates, until the Certificate Balance of
the Class C Certificates has been reduced to zero;
(2) to the Class D Certificateholders, in reduction of the Certificate
Balance of the Class D Certificates, until the Certificate Balance of
the Class D Certificates has been reduced to zero; and
(3) to the seller, any funds remaining on deposit in the Certificate
Principal Distribution Account.
RESERVE ACCOUNT
The seller will establish the Reserve Account. It will be held in the name
of the indenture trustee for the benefit of the noteholders and
certificateholders. To the extent that amounts on deposit in the Reserve Account
are depleted, the noteholders and certificateholders will have no recourse to
the assets of the seller or servicer as a source of payment.
DEPOSITS TO THE RESERVE ACCOUNT. The Reserve Account will be funded by a
deposit by the seller on the Closing Date in the amount of $[ ]. The
amount on deposit in the Reserve Account may increase from time to time [(1)] up
to the Specified Reserve Balance by deposits of funds withdrawn from the
Collection Account after payment of the Total Required Payment [and (2) deposits
from the Pre-Funding Account made in connection with purchases of Subsequent
Receivables].
WITHDRAWALS FROM THE RESERVE ACCOUNT. The amount on deposit in the Reserve
Account may decrease --
-- on each Distribution Date by withdrawal of the Reserve Account Excess
Amount, if any, with respect to such Distribution Date;
-- on each Distribution Date by withdrawal of any shortfall between the
Total Required Payment and Available Funds on such Distribution Date;
and
-- on the Final Scheduled Distribution Date of [any class of] [the] notes
or [either class of] [the] certificates, by withdrawal of the amount,
if any, by which the sum of the Available Funds plus the amount, if
any, withdrawn from the Reserve Account in respect of the excess of
the Total Required Payment over the Available Funds for such
Distribution Date is insufficient to pay such class of notes or such
class of certificates in full in accordance with the priorities
described in "Description of the Receivables Transfer and Servicing
Agreements -- Distributions" in this prospectus supplement.
In addition, the trust will withdraw amounts from the Reserve Account on
any Distribution Date to the extent that such amounts together with the
Available Funds for such Distribution Date would be sufficient to pay the sum of
the Servicing Fee and all outstanding notes and certificates in full.
[THE TRUST WILL MAKE ADDITIONAL DEPOSITS TO THE RESERVE ACCOUNT ON EACH
SUBSEQUENT TRANSFER DATE. 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 as payment for the Subsequent
Receivables and deposited in the Reserve Account.]
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INVESTMENT. Amounts on deposit in the Reserve Account will be invested by
the indenture trustee at the direction of the seller in Permitted Investments
and investment earnings (net of losses and investment expenses) therefrom will
be deposited into the Reserve Account. Permitted Investments are generally
limited to obligations or securities that mature on or before the date of the
next [Payment] [Distribution] Date. However, to the extent each rating agency
rating the notes or certificates confirms that such actions will not adversely
affect its ratings of the notes, funds in the Reserve Account may be invested in
notes or certificates that will not mature prior to the date of the next
[Payment] [Distribution] Date with respect to such certificates or notes and
will not be sold to meet any shortfalls.
FUNDS IN THE RESERVE ACCOUNT WILL BE LIMITED. Amounts on deposit in the
Reserve Account from time to time are available to --
-- enhance the likelihood that you will receive the amounts due on your
notes or certificates; and
-- decrease the likelihood that you will experience losses on your notes
or certificates.
However, the amounts on deposit in the Reserve Account are limited to the
Specified Reserve Balance. If the amount required to be withdrawn from the
Reserve Account to cover shortfalls in funds on deposit in the Collection
Account exceeds the amount on deposit in the Reserve Account, a temporary
shortfall in the amounts distributed to the noteholders and certificateholders
could result. In addition, depletion of the Reserve Account ultimately could
result in losses on your notes or certificates.
[THE SPECIFIED RESERVE BALANCE. After making distributions which are ranked
senior in priority, the trust will deposit amounts to the Reserve Account in
order to maintain the Specified Reserve Balance. The Specified Reserve Balance
would 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 annual
percentage rate of less than [ ]%. See "The Receivables Pool" in this
prospectus supplement. In addition, subject to certain limitations, the seller
has the option to increase the Specified Reserve Balance upon a transfer of
Subsequent Receivables.]
[YIELD SUPPLEMENT ACCOUNT; YIELD SUPPLEMENT AGREEMENT
Ford Credit will establish the Yield Supplement Account with the indenture
trustee for the benefit of the noteholders and the certificateholders. The Yield
Supplement Account will be established because the trust will own some
receivables which have an annual percentage rate which is lower than the average
interest rates on the securities. As such, the Yield Supplement Account is
designed solely to hold funds to be applied to provide payments to the
noteholders and the certificateholders in respect of receivables the annual
percentage rate of which is less than a "required rate" equal to the sum of:
-- the weighted average of the interest rates on the notes and the
certificates; plus
-- the product of one-twelfth of 1.00% and the Initial Pool
[/Pre-Funding] Balance.
The Yield Supplement Account will be created with an initial deposit by Ford
Credit in an amount equal to the Yield Supplement Amount.
[FORD CREDIT WILL MAKE ADDITIONAL DEPOSITS INTO THE YIELD SUPPLEMENT ACCOUNT
UPON EACH TRANSFER OF SUBSEQUENT RECEIVABLES TO THE TRUST. Under the Yield
Supplement Agreement, Ford Credit will be required to deposit the Yield
Supplement Amount with respect to any Subsequent Receivables which the seller
transfers to the trust into the Yield Supplement Account. The indenture trustee
will then transfer these amounts from the Yield Supplement Account into the
Collection Account on each Distribution Date. If the amounts on deposit in the
Yield Supplement Account exceed the aggregate of these additional amounts,
including the amounts transferred
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from the Yield Supplement Account into the Collection Accounts and the initial
deposit into the Yield Supplement Account then the excess will be paid out 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.]
[INTEREST RATE CAP
The seller will enter into an interest rate cap, dated as of the Closing
Date with the cap counterparty described below. [The interest rate cap is
designed to help minimize the variability in payments which might result from
the mismatch between the receivables which bear a fixed rate and the payments,
based on LIBOR, which the trust is obligated to make to the Class A-3
noteholders.]
CAP NOTIONAL AMOUNT. The interest rate cap will obligate the cap
counterparty to make payments based on a cap notional amount. The cap notional
amount on any [Distribution] [Payment] Date will be at least equal to the
outstanding principal amount of the Class A-3 Notes as of the close of the
preceding [Distribution] [Payment] Date.
HOW MUCH THE CAP COUNTERPARTY IS REQUIRED TO PAY. On each [Distribution]
[Payment] Date on which LIBOR for the preceding [Distribution] [Payment] Date
exceeds [ ]%, the cap counterparty will make a payment to the indenture
trustee, on behalf of the trust, in an amount equal to:
(LIBOR - CR) X NA X (D/360)
Where:
<TABLE>
<S> <C> <C>
CR = [ ]%;
NA = the notional amount of the interest rate cap; and
D = the actual number of days from and including the preceding
[Distribution] [Payment] Date to but excluding such
[Distribution] [Payment] Date.
</TABLE>
The indenture trustee will deposit these amounts into the Collection
Account for the benefit of the noteholders and the certificateholders.
DEPENDENCE ON CAP COUNTERPARTY'S ABILITY TO PERFORM. The cap counterparty's
obligations under the interest rate cap will be unsecured. [In the event of a
downgrade of the cap counterparty, the cap counterparty is not required to
assign the cap or post collateral.] The cap counterparty's failure to make
payments under the interest rate cap on a timely basis would reduce amounts
available for distributions on your notes or certificates. In that event, you
could incur a loss on your investment. The trust will report any shortfall
between the amounts which the cap counterparty owes to the trust on the interest
rate cap and the amounts the trust actually receives in respect of these amounts
in the statement delivered on the following [Payment Date or] Distribution Date.
See "Certain Information Regarding the Securities -- Reports to Securityholders"
in the prospectus.
ABOUT THE CAP COUNTERPARTY. The counterparty on the interest rate cap will
be [ ]. The cap counterparty is rated [ ] by [ ] and [ ] by [ ].
[INTEREST RATE SWAP
The indenture trustee on behalf of the trust will enter into one or more
interest rate swaps with the swap counterparty described below. [The interest
rate swap is designed to help minimize the variability in payments which might
result from the mismatch between the receivables which bear a fixed rate and the
payments, based on LIBOR, which the trust is obligated to make to the Class A-3
noteholders.]
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SWAP NOTIONAL AMOUNT. Each interest rate swap will obligate each of the
trust and the swap counterparty to make payments based on a notional amount
established when the contract is formed. The notional amount of the interest
rate swap on any [Distribution] [Payment] Date will equal [the outstanding
principal amount of the Class A-3 Notes as of the close of the preceding
[Distribution] [Payment] Date.]
HOW MUCH THE TRUST AND THE SWAP COUNTERPARTY ARE EACH OBLIGATED TO PAY. The
parties will make payments under the interest rate swap on each [Distribution]
[Payment] Date as follows:
-- the swap counterparty will pay to the trust interest at a per annum
rate equal to [LIBOR] on the swap notional amount; and
-- the trust will pay to the swap counterparty 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]].
PAYMENTS WILL BE NETTED. 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 paid as a net amount to the party with the lesser
obligation. Any net amount which the trust receives from the counterparty on the
interest rate swap will be deposited in the Collection Account for the benefit
of the noteholders and the certificateholders. Any payments which the trust is
required to make under the interest rate swap will be paid from the Collection
Account in the same manner and priority as accrued and unpaid interest on the
[Class A] notes on each [Distribution] [Payment] Date.
DEPENDENCE ON THE SWAP COUNTERPARTY'S ABILITY TO PERFORM. The swap
counterparty's obligations under the interest rate swap will be unsecured. [In
the event of a downgrade of the cap counterparty, the cap counterparty is not
required to assign the cap or post collateral.] The swap counterparty's failure
to make payments under the interest rate swap on a timely basis would reduce
amounts available for distributions to holders of the notes and the
certificates. In that event, you could incur a loss on your investment. The
trust will report any shortfall between the amounts which the swap counterparty
owes to the trust on the interest rate swap and the amounts the trust actually
receives in respect of these amounts in the statement delivered to noteholders
and certificateholders on the following [Payment Date or] Distribution Date. See
"Certain Information Regarding the Securities -- Reports to Securityholders" in
the prospectus.
ABOUT THE SWAP COUNTERPARTY. The counterparty on the interest rate swap
will be [ ]. The swap counterparty is rated [ ] by [ ] and [ ] by
[ ].
[GUARANTEED RATE AGREEMENT
The seller will enter into a guaranteed rate agreement as of the Closing
Date with the guaranteed rate counterparty described below. This agreement is
designed to guarantee to the trust a rate of return at least equal to the
weighted average of the interest rates on the notes and the certificates on
amounts on deposit in the Collection Account.
GUARANTEED RATE AGREEMENT COUNTERPARTY DIRECTS INVESTMENTS. Under the
guaranteed rate agreement, the indenture trustee will invest amounts on deposit
in the [Collection] Account from the date of deposit to the related
[Distribution] [Payment] Date at the direction of the guaranteed rate agreement
counterparty. The indenture trustee will be required to invest in the eligible
investments specified in the guaranteed rate agreement, which are substantially
similar to Permitted Investments. Amounts invested in accordance with the
guaranteed rate agreement will continue to be held in the name of the indenture
trustee for the benefit of the noteholders and the certificateholders and will
remain assets of the trust for purposes of bankruptcy, tax and other applicable
laws.
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RATE GUARANTEE. The guaranteed rate agreement provides that the guaranteed
rate agreement counterparty will guarantee a rate of return on such amounts
equal to [the weighted average of the respective interest rates on the notes and
the certificates] and will be entitled to receive any earnings on amounts on
deposit in the Collection Account in excess of that guaranteed return.
REMEDIES ON RATINGS DOWNGRADE OF THE GUARANTEED RATE AGREEMENT
COUNTERPARTY. If the commercial paper rating or certificate of deposit rating of
the counterparty on the guaranteed rate agreement is at any time reduced below
A-1+ or P1 by the applicable rating agency rating the notes or the certificates,
within 60 days of receiving notice of such decline, the servicer will either --
-- with the prior written assurance of each rating agency rating the
securities that such action will not result in a reduction of the
rating of any of the notes or the certificates, cause the guaranteed
rate agreement counterparty to pledge securities, in a manner
conferring on the indenture trustee a perfected first lien in such
securities, securing the guaranteed rate agreement counterparty's
performance of its obligations under the guaranteed rate agreement;
-- direct the indenture trustee to terminate the guaranteed rate
agreement and to obtain a Replacement Guaranteed Rate Agreement; or
-- establish any other arrangement satisfactory to each rating agency
rating the notes or certificates such that such rating agency will not
reduce the rating of any of the notes or the certificates.
[If the servicer is unable to obtain a Replacement Guaranteed Rate
Agreement or a pledge of securities or otherwise satisfy the applicable ratings
agency rating the notes or certificates 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" in this prospectus supplement.]
THERE IS NO ASSURANCE THAT THE GUARANTEED RATE AGREEMENT COUNTERPARTY WILL
PERFORM ITS OBLIGATIONS UNDER THE GUARANTEED RATE AGREEMENT. The counterparty's
obligations under the guaranteed rate agreement will be unsecured. There is no
assurance that the counterparty will pay its obligations under the guaranteed
rate agreement when due to the trust. The counterparty's failure to make
payments under the guaranteed rate agreement on a timely basis would reduce
amounts available for distributions to holders of the notes and the
certificates. In that event, you could incur a loss on your investment. The
trust will report any shortfall between the amounts which the guaranteed rate
agreement counterparty owes to the trust on the guaranteed rate agreement and
the amounts the trust actually receives in respect of these amounts in the
statement delivered to the noteholders and the certificateholders on the
following [Payment Date or] Distribution Date. See "Certain Information
Regarding the Securities -- Reports to Securityholders" in the prospectus.
ABOUT THE GUARANTEED RATE AGREEMENT COUNTERPARTY. The counterparty on the
interest rate swap will be [ ]. The guaranteed rate agreement counterparty
is rated [ ] by [ ] and [ ] by [ ].
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YEAR 2000 ISSUES AFFECTING FORD CREDIT
YEAR 2000 CONVERSION
An issue affecting Ford Credit and others is the inability of many computer
systems and applications to process the year 2000 and beyond. To address this
problem, in 1996, Ford Credit initiated a global Y2K program to manage Ford
Credit's overall Y2K compliance effort. As part of this program, Ford Credit
established a global Y2K Program Office to coordinate Ford Credit's compliance
efforts. Ford Credit participates closely with Ford Motor Company's Y2K Central
Program Office and the Ford Motor Company Y2K Steering Committee. Ford Motor
Company's Y2K program has been certified by the Information Technology
Association of America as meeting its Y2K best practices standards.
STATE OF READINESS
Ford Credit achieved all compliance objectives that it established for
1998. Ford Credit expects to complete most of the remediation efforts by the end
of June 1999. Ford Credit has identified the following six distinct areas for
its Y2K compliance efforts. A timetable showing the target dates for compliance
and the present status for each area follows.
Business Computer Systems: These include computer systems and applications
relating to operations such as retail and lease financing, commercial lending,
customer account processing, collections, insurance operations, treasury, and
financial reporting. In 1997 Ford Credit implemented a compliance plan focused
on critical systems. By year-end 1998, all critical systems had been repaired,
tested, independently verified and implemented into a production environment. In
addition, Ford Credit is participating in Ford Motor Company's enterprise test
plan for all key business processes. As of February 28, 1999, 91% of all
business computer systems were Y2K compliant.
External Alliances (Banks, Credit Bureaus, Trustees, Underwriters, etc.):
Ford Credit has deployed, in conjunction with an industry trade association (the
Automotive Industry Action Group), a process to pursue a common Y2K compliance
approach with the financial institutions in North America. Similar actions are
underway in Europe and the rest of the world. Ford Credit does business with
approximately 700 critical external alliances. Each of these has been asked to
respond to a Y2K compliance questionnaire, and a majority have responded.
Integration testing is being conducted with each highly critical financial
institution.
Affiliates: All managed affiliates have developed plans to address Y2K
compliance similar to those of Ford Credit. These affiliates are being monitored
to ensure timely Y2K compliance.
End-User Computing: Ford Credit's plan to ensure Y2K compliance of desktop
computers throughout the company includes the replacement or repair of all
non-compliant computers and related software and the distribution of an
assessment tool for end user developed applications. Through February 1999, 69%
of critical end user desktop programs were completed and 88% of the PCs and
workstations were compliant.
Technical Infrastructure: All Ford Credit's infrastructure hardware and
software has been inventoried and assessed and through February 1999, 70%
completed. Ford Motor Company's dedicated test facility will be used to test
selected critical systems infrastructure.
Physical Properties and Infrastructures: Ford Credit, in conjunction with
Ford Motor Company, is assessing the Y2K compliance of its significant building
systems, including energy and security systems. The landlords of leased office
facilities have been requested to assess the compliance of those facilities.
These facilities have minimal Y2K issues. As of February 28, 1999, approximately
50% of these landlords were conducting their assessments. Actions are being
taken to determine energy and other utility supplier preparedness.
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Set forth below is a timetable showing Ford Credit's internal target dates
for compliance and the present status of compliance (at February 28, 1999) for
each of the areas mentioned above. Ford Credit has established these target
dates well before December 31, 1999 to allow sufficient time to perform
enterprise-wide testing and further validation of Ford Credit's Y2K compliance.
Status as of February 28, 1999:
<TABLE>
<CAPTION>
Y2K PROGRAM TIMING
------------------------------------
2000
----
<S> <C> <C> <C> <C> <C>
Critical Business Computer Systems................. -- Plan: 100% compliant by 6/99 --
Status: 91%(a)
Critical External Alliances........................ -- Plan: 100% ready(b) by 6/99 --
Status: 97%
Affiliates......................................... -- Plan: 100% ready(b) by 6/99 --
Status: 100%
Critical End-User Computing........................ -- Plan: 100% compliant by 6/99 --
Status: 69%
Technical Infrastructure........................... -- Plan: 100% compliant by 6/99 --
Status: 70%
Physical Properties and Infrastructure............. -- Plan: 100% compliant by 6/99 --
Status: 50%
</TABLE>
- ---------------
(a) 100% of critical business computer systems were compliant at year-end 1998.
(b) "Ready" means having a comprehensive Y2K program in place and a plan that
will achieve compliance before January 1, 2000.
Y2K COSTS
Ford Credit is sharing many of Ford Motor Company's Y2K compliance tools.
Ford Credit estimates that its incremental costs will be about $25 million for
Y2K compliance efforts. This amount will be incurred over a three-year period
that commenced mid-1997 and will end mid-2000. Y2K compliance costs incurred
through December 31, 1998 are estimated at $15 million. Ford Credit's annual Y2K
costs relating to information technology have represented and are expected in
the future to represent less than 10% of Ford Credit's annual information
technology budget.
Y2K RISKS
The most reasonably likely worst case scenario for Ford Credit with respect
to the Y2K problem is the failure of an external alliance, particularly another
financial institution or energy supplier to that financial institution, to be
Y2K compliant. This could result in Ford Credit not being able to conduct
financial transfers such as payment of debt, selling commercial paper, or
collecting receivables, which in turn could result in lost revenue. The
preparedness of Ford Credit's utility suppliers is being monitored closely to
ensure plans are in place for uninterrupted service.
Y2K CONTINGENCY PLANS
Ford Credit has established a Y2K business resumption planning committee to
evaluate business disruption scenarios, coordinate the establishment of Y2K
contingency plans, and identify and implement preemptive strategies. Detailed
contingency plans for critical business processes are being developed and will
be validated by June 1999. In addition, Ford Credit is participating with the
Ford Motor Company business resumption steering committee.
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FEDERAL INCOME TAX MATTERS
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the notes and the
Class C Certificates. Unless otherwise indicated, this summary deals only with
the consequences to holders of notes and Class C Certificates that are U.S.
persons, as defined below, who acquired their notes or Class C Certificates at
their original issue price in the original issuance of those notes or Class C
Certificates and who hold these securities as capital assets.
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;
-- dealers in securities or currencies;
-- tax exempt entities;
-- persons holding certificates or notes as apart of a hedging,
integrated conversion, or constructive sale transaction or a straddle;
or
-- persons whose functional currency is not the U.S. Dollar.
Moreover, there are no cases or Internal Revenue Service 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 Class C 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 Class C Certificates.
The following summary is based upon current provisions of the tax code, the
Treasury regulations under the tax code and judicial or ruling authority, all of
which are subject to change, which change may be retroactive. Special Tax
Counsel will provide to the trust an opinion regarding certain federal income
tax matters discussed below. An opinion of Special Tax Counsel, however, is not
binding on the IRS or the courts. We have not sought, nor will we seek, a ruling
on any of the issues discussed below.
For purposes of this discussion, the term U.S. person means a beneficial
owner of a note or a Class C Certificate that is:
-- a citizen or resident of the United States;
-- a corporation or partnership created or organized in the United States
or under the laws of the United States or any political subdivision of
the United States;
-- an estate the income of which is subject to United States federal
income taxation regardless of its source; or
-- a trust that is subject to the supervision of a court within the
United States and the control of a United States person as described
in section 7701(a)(30) of the tax code or that has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a
United States person.
For purposes of this discussion, the term non-U.S. person means a
beneficial owner of a note or Class C Certificate who is not a U.S. person.
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SCOPE OF THE TAX OPINIONS
Upon issuance of the notes and certificates, Special Tax Counsel will
deliver its opinion that, under current law and subject to the discussion below,
the trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. Special
Tax Counsel will advise the trust that the Class A Notes will be classified as
debt for federal income tax purposes. While there is no authority directly
addressing analogous situations and the issue is not free from doubt, Special
Tax Counsel will advise the trust that the Class B Notes should be classified as
debt for federal income tax purposes. Class B Noteholders are advised that the
opinion of Special Tax Counsel is not binding on the IRS. In the event that the
Class B Notes were treated as equity interests in the trust, the consequences
governing the Class C Certificates described under the heading "-- Tax
Consequences to Holders of Class C Certificates" would apply to the Class B
noteholders. In particular, in such a case, income to certain tax-exempt
entities would be "unrelated business taxable income." Class B noteholders are
strongly urged to review the disclosure under the headings "-- Tax Consequences
to Holders of the Notes -- Possible Alternative Treatments of the Notes" and
"Tax Consequences to Holders of Class C Certificates" below, and to consult
their tax advisers regarding the treatment, for federal income tax purposes, of
the Class B Notes.
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" in this
prospectus supplement 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 notes and
Class C Certificates.
TAX CHARACTERIZATION OF THE TRUST
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 --
-- the trust is not an entity that is per se classified as an association
taxable as a corporation; and
-- either the nature of the income of the trust will exempt it from the
provisions of the Code requiring some publicly traded partnerships to
be taxed as corporations or the trust will otherwise qualify for an
exemption from the rules governing publicly traded partnerships.
However, as discussed above, this opinion will not be binding on the IRS.
Special Tax Counsel cannot give any assurances that this characterization will
prevail. 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. The
certificateholders and, possibly, the Class B noteholders could be liable for
any such tax that is unpaid by the trust.
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TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The noteholders will be deemed to
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 Class A Notes and the Class B Notes is correct.
ORIGINAL ISSUE DISCOUNT. Unless a note is a Short-Term Note, it will be
treated as issued with original issue discount 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, a holder of a note with OID must include the OID in its income before
the holder receives 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 noteholders for accrued interest, if any,
that relates to a period prior to the Closing Date. Under the Treasure
regulations governing OID, 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 which is prepayable by
the borrower, such as the notes, OID is computed by taking into account 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
1.5% 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
-- the present value of all payments remaining to be made on the note as
of the close of the accrual period; and
-- the payments during the accrual period of amounts included in the
stated redemption price of the note; over
-- the "adjusted issue price" of the note at the beginning of the accrual
period.
An "accrual period" is the period over which OID accrues, and may be of any
length, provided that each accrual period is no longer than one year and each
scheduled payment of interest or principal occurs on either the last day or the
first day of an accrual period. The trust intends to report OID on the basis of
an accrual period that corresponds to the interval between [Distribution]
[Payment] 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
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prior periods, other than qualified stated interest payments. The present value
of the remaining payments is determined on the basis of the following three
factors:
-- 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);
-- events which have occurred before the end of the accrual period; and
-- 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 note 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
-- the purchaser's adjusted basis in the note immediately after purchase
thereof; over
-- the adjusted issue price of the note,
and the denominator of which is the excess of
-- all amounts remaining to be paid on the note after the purchase date,
other than qualified stated interest; over
-- 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 (other
than a Short-Term Note, as described below) 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 --
-- the issue price of the note were equal to the noteholder's adjusted
basis in the note immediately after its acquisition by the noteholder;
-- the note were issued on the noteholder's acquisition date; and
-- 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 a Note Owner acquires a note at a market discount (that
is, a discount from its stated redemption price at
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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 --
-- recognizes gain upon a disposition; or
-- receives payments of principal,
then, the lesser of such gain or principal payment or 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.
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 remain a part of such
Note Owner's tax basis in such note and 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 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
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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 and any gain or loss realized upon prepayment of a
note (other than unamortized OID, whether or not accrued) will be capital gain
or loss if the noteholder held the note 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. A noteholder may generally only use capital losses incurred on sale or
disposition of a note to offset the noteholder's capital gains.
NON-U.S. PERSONS. In general, a non-U.S. person will not be subject to
United States federal income tax on interest (including OID) on a beneficial
interest in a note unless --
-- the non-U.S. person 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);
-- the non-U.S. person is a controlled foreign corporation that is
related to the seller (or the trust) through stock ownership,
-- the non-U.S. person is a bank receiving interest described in Code
Section 881(c)(3)(A);
-- such interest is contingent interest described in Code Section
871(h)(4);
-- the non-U.S. person (who is a noteholder) bears certain relationships
to any certificateholder.
To qualify for the exemption from taxation, the non-U.S. person must comply
with applicable certification requirements.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a non-U.S. person will be exempt from United
States federal income tax and withholding tax, provided that --
-- such gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. person; and
-- in the case of an individual non-U.S. person, the non-U.S. 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
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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 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 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 noteholders that
are non-U.S. persons generally would be subject to U.S. federal tax and U.S.
federal tax return filing and withholding requirements, individual holders might
be subject to certain limitations on their ability to deduct their share of
trust expenses, and taxpayers such as regulated investment companies and real
estate investment trusts could be adversely affected.
TAX CONSEQUENCES TO HOLDERS OF CLASS C CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The seller and the servicer will
agree, and the certificateholders will be deemed to 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 seller and the
certificateholders, 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 in this
prospectus supplement.
A variety of alternative characterizations of the certificates are
possible. For example, because the certificates generally will have certain
features characteristic of debt, the certificates might be considered debt of
the seller or the trust. Any such characterization would not result in
materially adverse tax consequences to certificateholders as compared to the
consequences from treatment of the certificates as equity in a partnership,
described below. The following discussion assumes that the certificates
represent equity interests in a partnership.
PARTNERSHIP TAXATION. Assuming that the trust is classified as a
partnership, the trust will not be subject to federal income tax, but each
certificateholder will be required to take into account separately such holder's
allocated share of income, gains, losses, deductions and credits of the trust.
The trust's income will consist primarily of interest accrued on the receivables
(including appropriate adjustments for market discount (as discussed below), and
any OID and bond premium), investment income from investments of collections
held between [Distribution] [Payment] 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 tax 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
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agreement will provide that, to the extent that such treatment is not respected,
the certificateholders of each class of certificates will be allocated ordinary
gross income of the trust for each interest period equal to the sum of --
-- the amount of interest that accrues on such class of certificates for
such interest period based on the rate of interest on that class of
certificates;
-- an amount equivalent to interest that accrues during such interest
period on amounts previously due on such class of certificates but not
yet distributed; and
-- any trust income attributable to discount on the receivables that
corresponds to any excess of the principal balance of such class of
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 losses allocated to certificateholders could be characterized as
capital losses, and the certificateholders generally would only be able to
deduct such losses against capital gain income, and deductions would be subject
to the limitations set forth below. Accordingly, a certificateholder's taxable
income from the trust could exceed the cash it is entitled to receive from the
trust.
Although the allocation of gross income to certificateholders described
above if the certificateholders are not treated as receiving a "guaranteed
payment" 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.
We believe that allocating partnership income on the foregoing basis should
comport with the certificateholders' economic interests in the trust, 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 of each class of certificates may be
allocated income equal to the amount of interest accruing on such class of
certificates based on the rate of interest on the certificates 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 but
certificateholders may be purchasing certificates at different times and at
different prices, certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the trust.
Certificateholders will be required to report items of income, loss and
deduction allocated to them by the trust in the taxable year in which or with
which the taxable year of the trust to which such allocations relate ends. The
tax 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
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constitute "unrelated business taxable income" generally taxable to such a
holder under the tax 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 on their investment in the trust.
LIMITATIONS ON LOSSES AND DEDUCTIONS. In the event that losses or
deductions are allocated to certificateholders in the circumstances described
above, the following rules will apply. Under the "passive activity" rules of the
tax 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." Moreover, any
losses allocated to a certificateholder may be capital losses.
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 that they exceed two percent of the
taxpayer'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 which the certificateholder is entitled to receive 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 original issue discount or imputed interest, and, therefore, the trust
should not have original issue discount 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 tax 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
have contributed all of its assets and liabilities to a new partnership in
exchange for an interest in the new partnership and immediately thereafter, the
terminated partnership will be considered to have distributed interests in the
new partnership to all of its partners (including the purchasing partner who
caused the termination) in proportion to their interests in the terminated
partnership in liquidation of the terminated 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 --
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-- recognize gain to the extent any money distributed exceeds the
certificateholder's adjusted basis in the certificates (as described
below under "-- Disposition of Certificates") immediately before the
distribution; and
-- 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 with respect to the certificates, 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
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or lesser amount of trust income than would be appropriate based on their own
purchase price for certificates.
ADMINISTRATIVE MATTERS. The Owner Trustee is required to keep or have kept
complete and accurate books of the trust. Such books will be maintained for
financial reporting and federal income tax purposes on an accrual basis and the
fiscal year of the trust will be the calendar year. The Owner 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:
-- the name, address and federal taxpayer identification number of the
nominee; and
-- as to each beneficial owner --
-- the name, address and federal taxpayer identification number of such
person;
-- 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
-- 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 Securities Exchange Act of 1934, as amended 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 trust
(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
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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 tax code.
NO NON-U.S. PERSONS. The Class C Certificates may not be purchased by
non-U.S. persons. For these purposes, non-U.S. person does include
certificateholders whose ownership of the certificates is effectively connected
with such person's conduct of a trade or business within the United States
(within the meaning of the tax code) and who provides the trust and the seller
with a Form 4224 (and such other certifications, representations, or opinions of
counsel as may be requested by the trust or the seller).
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of notes holding securities through Cedelbank 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:
Treasury regulations provide that as of January 1, 1999, in order to
qualify for reduced rates of withholding, non-U.S. Persons are obliged to file a
new unified Form W-8 that has replaced the former versions of Form 1001
(Ownership, Exemption or Reduced Rate Certificate), Form W-8 (Certificate of
Foreign Status), and Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States). Therefore, pursuant to those regulations, all beneficial owners of
notes who have a valid former version of Form W-8, Form 1001, or Form 4224, as
the case may be, on file with the appropriate party (as described above) must
file a new unified Form W-8 with such party before the earlier of (i) the
expiration of the Form W-8, Form 1001, or Form 4224 currently on file, (ii) a
change in circumstances that makes any of the information on the currently filed
former version of Form W-8, Form 1001, or Form 4224 incorrect, or (iii) December
31, 2000. Beneficial owners who are non-U.S. persons who do not currently have a
valid former version of Form W-8, Form 1001, or Form 4224, as the case may be,
on file, must file the new unified Form W-8 in order to obtain an exemption or
reduced tax rate on any of the bases addressed by the former versions of Form
W-8, Form 1001, or Form 4224.
Exemption for non-U.S. Persons (Former Form W-8). Beneficial owners of
notes that are non-U.S. persons can obtain a complete exemption from the
withholding tax if they currently have a signed and valid former version of the
Form W-8 on file with the appropriate party (as described above). If the
information shown on Form W-8 changes, a new unified Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Former
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 if it has a valid former version of Form 4224 on file
with the appropriate party (as discussed above).
S-75
<PAGE> 148
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Former Form 1001). Non-U.S. persons that are beneficial owners of 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) if they have a
valid current version of the Form 1001 on file with the correct party (as
discussed above). If the treaty provides only for a reduced rate, withholding
tax will be imposed at that rate unless the filer alternatively has a valid
current version of Form W-8 on file with the appropriate party (as described
above).
Exemption for U.S. Persons (Former 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).
Exemption for all non-U.S. Persons with no valid current version of Form
W-8, Form 1001, or Form 4224 on file (Form W-8). Beneficial owners who are
non-U.S. persons who do not currently have a valid former version of Form W-8,
Form 1001, or Form 4224, as the case may be, on file, must file the new unified
Form W-8 in order to obtain an exemption or reduced tax rate on any of the bases
addressed by the former versions of Form W-8, Form 1001, or Form 4224.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a note
files by submitting the new unified Form W-8 to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). The new unified Form W-8 is effective for three calendar
years.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to non-U.S. persons who are holders of the
notes. Investors are advised to consult their own tax advisers for specific tax
advice concerning their holding and disposing of the notes.
STATE TAX MATTERS
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 Class C 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 Class C
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
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 tax 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. However, in the event that the Class
B Notes were treated as equity interests in the trust, the consequences
governing the certificates described under the
S-76
<PAGE> 149
heading "-- Michigan Tax Consequences With Respect to the Certificates" would
apply to the Class B noteholders.
MICHIGAN TAX CONSEQUENCES WITH RESPECT TO THE CLASS C CERTIFICATES
Michigan Tax Counsel will deliver an opinion that if the arrangement
created by the trust agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, 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 of 4.4% 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, solely because of the certificateholder's ownership of the
certificates.
If the certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity would be subject to the Michigan
Single Business Tax (which would result in reduced distributions to
certificateholders). A certificateholder not otherwise subject to tax in
Michigan would not become subject to Michigan tax as a result of its mere
ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OFFERED NOTES AND CLASS C 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.
LEGAL INVESTMENT
The Class A-1 Notes and the Class A-2 Notes will be eligible securities for
purchase by money market funds under Rule 2a-7 under the Investment Company Act
of 1940, as amended. A money market fund should consult its legal advisors
regarding whether an investment by the money market fund in the Class A-1 Notes
or the Class A-2 Notes satisfies the money market fund's investment policies and
objectives.
ERISA CONSIDERATIONS
THE NOTES
The notes may, in general, be purchased by or on behalf of Benefit Plan
Investors. Although no assurance can be given in this regard, the notes should
be treated as "debt" and not as "Equity Interests" for purposes of the Plan
Assets Regulation because the notes --
-- are expected to be treated as indebtedness under local law and will,
in the opinion of Special Tax Counsel, be treated as debt, rather than
equity, for federal tax purposes (see "Federal Income Tax Consequences
in this prospectus supplement); and
S-77
<PAGE> 150
-- should not be deemed to have any "substantial equity features."
Accordingly, the notes may also, in general, be purchased by or on behalf
of Benefit Plan Investors. See "ERISA Considerations" in the prospectus.
However, the acquisition and holding of notes of any class by or on behalf
of a Benefit Plan Investor could be considered to give rise to a prohibited
transaction under ERISA and Section 4975 of the Code if the trust, the Owner
Trustee, the indenture trustee, any certificateholder 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 Benefit Plan
Investor. In such case, certain exemptions from the prohibited transaction rules
could be applicable to such acquisition and holding by a Benefit Plan Investor
depending on the type and circumstances of the Benefit Plan Investor 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 CLASS C CERTIFICATES
The Issuer intends to limit equity ownership in the Class C Certificates
(and each other class of equity securities issued by the trust) by Benefit Plan
Investors to less than 25% of the value of that class of certificates.
Accordingly, Benefit Plan Investors may not acquire the Class C Certificates (or
any other class of equity issued by the trust); provided, however, that an
insurance company using the assets of its general account may purchase Class C
Certificates on the condition that --
-- such insurance company is able to represent that, as of the date it
acquires an interest in a Class C Certificate, less than 25% of the
assets of such general account constitute "plan assets" for purposes
of Title I of ERISA and Section 4975 of the Code; and
-- such insurance company agrees that if at any time during any calendar
quarter while it is holding an interest in such Class C Certificate,
25% or more of the assets of such general account constitutes "plan
assets" for purposes of Title I of ERISA and Section 4975 of the Code,
and, at that time, if no exemption or exception applies to the
continued holding of the Class C Certificate under ERISA, by the end
of the next quarter such insurance company will dispose of all Class C
Certificates then held in its general account by the end of the next
quarter.
In addition, investors other than Benefit Plan Investors should be aware
that a prohibited transaction under ERISA and the Code could be deemed to occur
if any holder of the Class C Certificates or any of their respective affiliates
is or becomes a party in interest or a disqualified person with respect to any
Benefit Plan Investor that acquires and holds the notes without such Benefit
Plan Investor being covered by one or more exemptions from the prohibited
transaction rules. Each purchaser of the Class C Certificates will be required
to represent and certify that it either --
-- is not a Benefit Plan Investor nor acquiring such Class C Certificates
on behalf of any such Benefit Plan Investor; or
-- is an insurance company using the assets of its general account under
the limitations described above.
For additional information regarding treatment of the Class C Certificates
under ERISA, see "ERISA Considerations" in the prospectus.
S-78
<PAGE> 151
UNDERWRITING
In an underwriting agreement, the seller has agreed to cause the trust to
sell to the underwriter named below, and that underwriter has severally agreed
to purchase the initial principal amount of Class A-1 Notes and Class A-2 Notes
set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2
CLASS A-1 NOTE / A-2 NOTE UNDERWRITER NOTES NOTES
- ------------------------------------- --------- ---------
<S> <C> <C>
[Ford Financial Services, Inc.]............................. $ [] $ []
</TABLE>
The seller has been advised by the underwriter of the Class A-1 Note/Class
A-2 notes that it proposes initially to offer the Class A-1 Notes and Class A-2
Notes to the public at the prices set forth in this prospectus supplement. After
the initial public offering of the Class A-1 Notes and Class A-2 Notes, the
public offering price may change. [Ford Financial Services, Inc. is a wholly
owned subsidiary of the servicer and an affiliate of the seller.]
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to cause the trust to sell to each of the
underwriters named below, and each of those underwriters has severally agreed to
purchase, the initial principal amount of Class A-3 Notes and Class A-4 Notes
set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
CLASS [A-3] CLASS [A-4]
CLASS A-3 NOTE / A-4 NOTE UNDERWRITER NOTES NOTES
- ------------------------------------- ----------- -----------
<S> <C> <C>
[ ]...................................... $ [] $ []
[ ]...................................... [] []
[ ]...................................... [] []
[ ]...................................... [] []
[ ]...................................... [] []
------- -------
Total.................................................. $ [] $ []
======= =======
</TABLE>
The seller has been advised by the underwriters of the Class [A-3] Notes
and the Class [A-4] Notes that they propose initially to offer the Class [A-3]
Notes and the Class [A-4] Notes to the public at the prices set forth in this
prospectus supplement. After the initial public offering of the Class [A-3]
Notes and the Class [A-4] Notes, the public offering prices may change.
The seller has agreed to cause the trust to sell to Ford Credit the initial
principal amount of the Class [A-5] Notes and the Class [A-6] Notes. The Class
[A-5] Notes and the Class [A-6] Notes may be resold to third party investors
after the Closing Date. Any such sales will be made at prices related to
prevailing market prices at the time of sale.
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to cause the trust to sell to each of the
underwriters named below, and each of those has
S-79
<PAGE> 152
severally agreed to purchase, the initial principal amount of the [Class B]
Notes and the [Class C] Certificates set forth below opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
[CLASS B] [CLASS C]
[CLASS B] NOTE / [CLASS C] CERTIFICATE UNDERWRITERS NOTES CERTIFICATES
- --------------------------------------------------- ----------- ------------
<S> <C> <C>
[ ]................................................ $[ ] $[ ]
----------- -----------
[ ]................................................ [ ] [ ]
----------- -----------
Total.................................................. [ ] $[ ]
=========== ===========
</TABLE>
The seller has been advised by the underwriters of the [Class B] Notes and
the [Class C] Certificates that they propose initially to offer the [Class B]
Notes and the [Class C] Certificates to the public at the prices set forth in
this prospectus supplement. After the initial public offering of the [Class B]
Notes and the [Class C] Certificates, the public offering prices may change.
The underwriting discounts and commissions, the selling concessions that
the underwriters of the notes and the certificates may allow to certain dealers,
and the discounts that such dealers may reallow to certain other dealers,
expressed as a percentage of the principal amount of each class of notes and as
an aggregate dollar amount, shall be as follows:
<TABLE>
<CAPTION>
NET
UNDERWRITING PROCEEDS SELLING
DISCOUNT AND TO THE CONCESSIONS REALLOWANCE
COMMISSIONS SELLER(1)(2) NOT TO EXCEED NOT TO EXCEED
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Class A-1 Notes.............. [ ]% [ ]% [ ]% [ ]%
Class A-2 Notes.............. [ ]% [ ]% [ ]% [ ]%
Class A-3 Notes.............. [ ]% [ ]% [ ]% [ ]%
Class A-4 Notes.............. [ ]% [ ]% [ ]% [ ]%
Class B Notes................ [ ]% [ ]% [ ]% [ ]%
Class C Certificates......... [ ]% [ ]% [ ]% [ ]%
Total for the offered
notes and Class C
Certificates.......... $[ ] $[ ]
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from [ ].
(2) Before deducting other expenses estimated at $[ ].
Until the distribution of the Offered Notes and the [Class C] Certificates
is completed, rules of the SEC may limit the ability of the underwriters and
certain selling group members to bid for and purchase the Offered Notes and the
[Class C] Certificates. As an exception to these rules, the underwriters are
permitted to engage in certain transactions that stabilize the price of the
Offered Notes and the [Class C] Certificates. Such transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Offered Notes and the [Class C] Certificates.
If the underwriters create a short position in the Offered Notes or the
[Class C] Certificates in connection with this offering, (i.e., they sell more
Offered Notes or [Class C] Certificates than are set forth on the cover page of
this prospectus supplement), the underwriters may reduce that short position by
purchasing Offered Notes or the [Class C] Certificates, as the case may be, in
the open market.
S-80
<PAGE> 153
The underwriters may also impose a penalty bid on certain underwriters and
selling group members. This means that if the underwriters purchase Offered
Notes or [Class C] Certificates in the open market to reduce the underwriters'
short position or to stabilize the price of such Offered Notes or [Class C]
Certificates, they may reclaim the amount of the selling concession from any
underwriter or selling group member who sold those Offered Notes or [Class C]
Certificates, as the case may be, as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the seller nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Offered Notes or the [Class C]
Certificates. In addition, neither the seller nor any of the underwriters makes
any representation that the underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The notes and the certificates are new issues of securities and there
currently is no secondary market for the notes or the certificates. The
underwriters for the Offered Notes and the [Class C] Certificates expect to make
a market in such securities but will not be obligated to do so. There is no
assurance that a secondary market for the Offered Notes or the [Class C]
Certificates will develop. If a secondary market for the Offered Notes or the
[Class C] Certificates does develop, it might end at any time or it might not be
sufficiently liquid to enable you to resell any of your notes or certificates.
The indenture trustee may, from time to time, invest the funds in the
Collection Account and the Reserve Account in investments acquired from or
issued by the underwriters.
In the ordinary course of business, the underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with the servicer and its affiliates.
This prospectus supplement and the prospectus may be used by Ford Financial
Services, Inc. in connection with offers and sales related to market-making
transactions in the [Class A-1] Notes and the [Class A-2] Notes and may be used
by Ford Credit in connection with offers and sales of the [Class A-5] Notes or
the [Class A-6] Notes originally purchased by Ford Credit from the seller. Ford
Financial Services, Inc. may act as principal or agent in such transactions.
Such sales will be made at prices related to prevailing market prices at the
time of sale. Ford Financial Services, Inc. has no obligation to make a market
in the [Class A-1] Notes or the [Class A-2] Notes and any such market-making may
be discontinued at any time without notice, in its sole discretion.
The seller and Ford Credit have agreed to indemnify the underwriters
against certain liabilities, including civil liabilities under the Securities
Act of 1933, as amended, or to contribute to payments which the underwriters may
be required to make in respect thereof.
The closings of the sale of each class of the notes and each class of the
certificates are conditioned on the closing of the sale of each other class of
notes and certificates.
Upon receipt of a request by an investor who has received an electronic
prospectus from an underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a prospectus,
the seller or the underwriter will promptly deliver, or cause to be delivered,
without charge, a paper copy of the prospectus.
S-81
<PAGE> 154
LEGAL OPINIONS
Certain legal and state tax matters relating to the notes and the Class C
Certificates will be passed upon for the seller and the servicer by Hurley D.
Smith, Esq., Secretary and Corporate Counsel of the servicer. Certain legal
matters relating to the notes and the Class C Certificates will be passed upon
for the underwriters and certain federal income tax and other matters will be
passed upon for the seller by Skadden, Arps, Slate, Meagher & Flom LLP. Mr.
Smith is a full-time employee of Ford Credit and owns and holds options to
purchase shares of Common Stock of Ford Motor Company. Skadden, Arps, Slate,
Meagher & Flom LLP have from time to time represented Ford Motor Company, Ford
Credit and their affiliates in connection with other transactions.
S-82
<PAGE> 155
GLOSSARY OF TERMS FOR THE PROSPECTUS SUPPLEMENT
"ABS" means the Absolute Prepayment Model which we use to measure
prepayments on receivables.
"ABS TABLE" means the table captioned "Percent of Initial Note Principal
Amount or Initial Certificate Balance at Various ABS Percentages" on page of
this prospectus supplement.
"ACTUARIAL RECEIVABLES" are receivables which provide 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 annual
percentage rate 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.
"ADDITIONAL YIELD SUPPLEMENT AMOUNT" means with respect to any transfer of
Subsequent Receivables to the trust an amount (which amount may be discounted at
a rate to be specified in the sale and servicing agreement), if any, equal to
the aggregate Yield Supplement Amounts in respect of such 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.
"ADVANCES" means collectively Precomputed Advances and Simple Interest
Advances.
The "AVAILABLE COLLECTIONS" for a Distribution Date will be the sum of the
following amounts with respect to the Collection Period preceding that
Distribution Date (subject to the exclusions set forth below such amounts):
-- all scheduled payments and 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 all payments
collected with respect to Simple Interest Receivables;
-- all Liquidation Proceeds and all recoveries in respect of Liquidated
Receivables which were written off in prior Collection Periods;
-- all Precomputed Advances made by the servicer of principal due on the
Precomputed Receivables;
-- all Advances made by the servicer of interest due on the receivables;
-- all Advances, if any, of interest made by the servicer in respect of
receivables which were prepaid in full;
-- 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; and
-- 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
[applicable] Cutoff Date.
The Available Collections on any Distribution Date will exclude the
following:
-- amounts received on any receivables to the extent that the servicer
has previously made an unreimbursed Advance with respect to such
receivable;
-- Liquidation Proceeds with respect to a particular Precomputed
Receivable to the extent of any unreimbursed Precomputed Advances made
with respect to that Precomputed Receivable;
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<PAGE> 156
-- 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;
-- [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;]
-- [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 annual
percentage rates (assuming that a payment is received on each Simple
Interest Receivable on its due date)];
-- [amounts released from the Pre-Funding Account]; and
-- amounts constituting the Supplemental Servicing Fee.
The "AVAILABLE FUNDS" for a Distribution Date shall be the sum of the
Available Collections and the Reserve Account Excess Amount.
"BENEFIT PLAN INVESTOR" means:
-- "employee benefit plans" (as defined in Section 3(3) of ERISA
including without limitation governmental plans, foreign pension plans
and church plans;
-- "plans" described in Section 4975(e)(1) of the Code, including
individual retirement accounts and Keogh plans; or
-- entities whose underlying assets include plan assets by reason of a
plan's investment in such entity, including without limitation, as
applicable, an insurance company general account.
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 or the State of
Delaware are authorized by law, regulation or executive order to be closed.
"CERTIFICATE BALANCE" means:
-- with respect to the Class C Certificates, initially, $[ ]
and, thereafter, means the initial Certificate Balance of the Class
[C] Certificates, reduced by all amounts allocable to principal
previously distributed to the Class C certificateholders; and
-- with respect to the Class [D] Certificates, initially, $[ ] and,
thereafter, means the initial Certificate Balance of the Class D
Certificates, reduced by all amounts allocable to principal previously
distributed to the Class [D] certificateholders.
The "CERTIFICATE INTEREST DISTRIBUTION ACCOUNT" means the administrative
subaccount within the Certificate Distribution Account which the Owner Trustee
will create for the benefit of the certificateholders.
The "CERTIFICATE PREPAYMENT PREMIUM" is equal the excess, if any,
discounted as described below, of --
(1) the amount of interest that would accrue on the certificates' share of
any remaining Pre-Funded Amount at the rate of interest on the
certificates during the period commencing on and including the
Distribution Date on which that amount is required to be distributed to
certificateholders to but excluding [ ], over
(2) the amount of interest that would have accrued on the amount described
in clause (1) above over the same period at a per annum rate of
interest equal to the bond
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<PAGE> 157
equivalent yield to maturity on the Determination Date preceding such
Distribution Date on the [ ].
The excess described above will then be discounted to present value to such
Distribution Date at the yield described in clause (2) above.
"CERTIFICATE PRINCIPAL DISTRIBUTION ACCOUNT" means the administrative
subaccount within the Certificate Distribution Account which the Owner Trustee
will create for the benefit of the certificateholders.
"CLOSING DATE" means [ ].
"CODE" means Internal Revenue Code of 1986, as amended.
"COLLECTION ACCOUNT" means an account, held in the name of the indenture
trustee, into which the servicer is required to deposit collections on the
receivables.
A "COLLECTION PERIOD" means, with respect to the first Distribution Date,
the calendar month ending on [ ], and with respect to each subsequent
Distribution Date, the calendar month preceding the calendar month in which such
Distribution Date occurs.
"CUT-OFF DATE" means [either an Initial Cutoff Date or a Subsequent Cut-Off
Date] [the date as of which the seller will transfer the Receivables to the
trust].
"DELAWARE TRUSTEE" means [ ], as Delaware trustee under the
trust agreement.
"DETERMINATION DATE" means the Business Day immediately preceding each
[Payment] [Distribution] Date.
"DISTRIBUTION DATE" means the date on which the trust will pay interest and
principal on the [notes and] certificates, which will be the date occurring
[monthly] [quarterly] on [each , , and ]
[the [ ] day of each month] or, if any such day is not a Business Day, on the
next succeeding Business Day, commencing [ ].
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENTS OF SERVICING TERMINATION" means an Event of Servicing Termination
under the sale and servicing agreement, as described under "Description of the
Receivables Transfer and Servicing Agreements -- Event of Servicing Termination"
in the prospectus.
"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 --
-- payment in full in cash of such amount;
-- transfer of the vehicle to Ford Credit provided certain conditions are
satisfied; or
-- refinancing the final scheduled payment in accordance with certain
conditions.
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<PAGE> 158
"FINAL SCHEDULED [PAYMENT] [DISTRIBUTION] DATE" for any class of notes or
certificates has the meaning indicated opposite that class of notes or
certificates in the table below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
CLASS [PAYMENT] [DISTRIBUTION] DATE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class A-2 Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class A-3 Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class A-4 Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class A-5 Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class A-6 Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class B Notes [ ] [ ]
- -----------------------------------------------------------------------------------
Class C Certificates [ ] [ ]
- -----------------------------------------------------------------------------------
Class D Certificates [ ] [ ]
- -----------------------------------------------------------------------------------
</TABLE>
"FIRST PRIORITY PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount not less than zero equal to:
AN - (PB - YSOA)
Where:
<TABLE>
<S> <C> <C>
AN = the aggregate outstanding principal amount of the Class A
Notes as of the preceding Distribution Date, after giving
effect to any principal payments made on the Class A Notes
on such preceding Distribution Date;
PB = the Pool Balance at the end of the Collection Period
preceding such Distribution Date; and
YOSA = the Yield Supplement Overcollateralization Amount with
respect to such Distribution Date.
</TABLE>
Provided, however that:
-- the First Priority Principal Distribution Amount on or after the
Class A-1 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-1 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-2 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-2 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-3 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-3 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-4 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-4 Notes to zero;
-- the First Priority Principal Distribution Amount on or after the
Class A-5 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-5 Notes to zero; and
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<PAGE> 159
-- the First Priority Principal Distribution Amount on or after the
Class A-6 Final Scheduled Distribution Date shall not be less than
the amount that is necessary to reduce the outstanding principal
amount of the Class A-6 Notes to zero.
"FORD CREDIT" means Ford Motor Credit Company.
"FUNDING PERIOD" means the period from and including the Closing Date until
the earliest of:
-- the Determination Date on which the amount on deposit in the
Pre-Funding Account is equal to $[ ] or less;
-- the occurrence of an event of default under the indenture or an Event
of Servicing Termination under the sale and servicing agreement;
-- the occurrence of certain events of insolvency or dissolution with
respect to the seller, the General Partner or the servicer; and
-- the Determination Date with respect to the [ ] Distribution
Date.
"GENERAL PARTNER" means Ford Credit Auto Receivables Two, Inc., the general
partner of the seller.
"INITIAL CUT-OFF DATE" means [ ].
"INITIAL POOL BALANCE" is the Pool Balance as of the [Initial] Cutoff Date,
which is $[ ].
"INITIAL RECEIVABLES" means the receivables which the seller transfers to
the trust on the Closing Date.
"INITIAL RECEIVABLES POOL" means the pool of receivables consisting of the
Initial Receivables.
"INTEREST PERIOD" means:
-- with respect to the Class A-1 and Class A-2 Notes --
-- in the case of the first [Distribution] [Payment] Date, the period
from and including the Closing Date, or
-- in the case of any other [Distribution] [Payment] Date, the period
from and including the most recent [Distribution] [Payment] Date on
which interest has been paid to but excluding the following
[Distribution] [Payment] Date;
-- with respect to all other classes of notes and each class of
certificates, a one-month period in a 360-day year of 12 30-day
months.
"LIQUIDATION PROCEEDS" means all proceeds of 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 in accordance with the servicer's customary servicing procedures.
"LIQUIDATED RECEIVABLES" means defaulted receivables which the trust has
liquidated.
"MICHIGAN TAX COUNSEL" means Hurley D. Smith, Esq., Secretary and Corporate
Counsel of the servicer.
"NON-U.S. (CLASS A) NOTE OWNER" means a non-U.S. person that is a (Class A)
Note Owner.
"NOTE OWNER" means a person acquiring a beneficial ownership interest in
notes.
["NOTE PREPAYMENT AMOUNT" means the amount of interest that would accrue on
[the notes'] [such class'] Pre-Funded Percentage of any remaining Pre-Funded
Amount at the rate
S-87
<PAGE> 160
of interest on [the] [such class of] notes during the period commencing on and
including the Distribution Date on which such Note Prepayment Amount is required
to be distributed to the noteholders [of such class] to but excluding --
-- [ ], in the case of the Class A-1 Notes;
-- [ ], in the case of the Class A-2 Notes; and
-- [ ], in the case of the Class A-3 Notes].
["NOTE PREPAYMENT PREMIUM" [for each class of notes] will equal the excess,
if any, discounted as described below, of --
(1) the Note Prepayment Amount; over
(2) the amount of interest that would have accrued on the 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.
The excess described above will be discounted to present value to such
Distribution Date at the applicable yield described in clause (2) above.
"OFFERED NOTES" means collectively the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class B Notes.
"OID" means original issue discount.
"OID REGULATIONS" means the Treasury regulations governing OID.
"OWNER TRUSTEE" means [ ], as owner trustee under the trust
agreement under which the trust is formed.
"PAYAHEAD ACCOUNT" is an account which the servicer will establish in the
name of the related indenture trustee into which it will deposit Payaheads.
"PAYAHEADS" mean 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 will be
deposited until such time as the payment falls due.
"PAYMENT DATE" means the date occurring [monthly] [quarterly] on [each
, , and ] [the [ ] day of each month] or, if any such day is
not a Business Day, on the next succeeding Business Day, commencing
[ ].
"PERMITTED INVESTMENTS" means:
-- direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America or its agencies;
-- 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 rating the
notes or certificates;
-- commercial paper having, at the time of such investment, a rating in
the highest rating category from the applicable rating agency rating
the notes or certificates;
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-- investments in money market funds having the highest rating from the
applicable rating agency rating the notes or certificates;
-- 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 having the highest rating from the
applicable rating agency rating the notes or certificates; and
-- any other investment (which may include motor vehicle retail
installment sale contracts) acceptable to the rating agencies rating
the noters or certificates as being consistent with that rating.
Permitted Investments are generally limited to obligations or securities
that mature on or before the date of the next [Payment] [Distribution] Date.
"POOL [/PRE-FUNDING] BALANCE" [will represent [is the sum of (1)] the
aggregate principal balance of the receivables at the end of the preceding
Collection Period (or in the case of the first Collection Period, the [Initial]
Cutoff Date), 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 [and (2)
the amount on deposit in the Pre-Funding Account (excluding any investment
earnings on that amount].
"PRECOMPUTED ADVANCE" means an advance on a Precomputed Receivable made by
the Servicer, in its sole discretion, for a deficiency in a scheduled payment as
of the last day of a Collection Period.
"PRECOMPUTED RECEIVABLES" consist of either Actuarial Receivables or Rule
of 78's Receivables.
"PRE-FUNDED AMOUNT" means an amount equal to $[ ], which is
available to the trust to purchase Subsequent Receivables.
"PRE-FUNDING ACCOUNT" means an account in the name of the indenture trustee
into which amounts available to the trust to purchase Subsequent Receivables
will be deposited.
"PRE-FUNDING PERCENTAGE" is equal to:
PB
------------------------------------------------------------------------------
APB
<TABLE>
<CAPTION>
Where:
<S> <C> <C>
PB = the remaining principal amount of [that class of] notes or
[that class of] certificates, as the case may be; and
APB = the aggregate remaining principal balance of the notes and
the certificates.
</TABLE>
"PREPAYABLE OBLIGATION" means an obligation the principal on which is
subject to prepayment as a result of prepayments on the underlying collateral.
"PREPAYMENT ASSUMPTION" means the anticipated rate of prepayments assumed
in pricing a debt instrument.
"PRIMUS" means --
-- PRIMUS Automotive Financial Services, Inc., a wholly owned subsidiary
of Ford Credit until the time such entity's business operations are
transferred to and assumed by Ford Credit; and
-- thereafter, PRIMUS, a division of Ford Credit.
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<PAGE> 162
"PRINCIPAL DISTRIBUTION ACCOUNT" means the administrative subaccount within
the Collection Account created by the indenture trustee for the benefit of the
holders of notes and certificates entitled the "Principal Distribution Account".
"PURCHASE AMOUNT" means the purchase price of receivables repurchased by
the seller or the servicer.
"REALIZED LOSSES" means the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds to the extent allocable to
principal.
"RECEIVABLES POOL" means the pool of receivables which the trust owns at
any time.
"RECEIVABLES TRANSFER AND SERVICING AGREEMENTS" means collectively the
purchase agreement, the sale and servicing agreement, the trust agreement and
the administration agreement.
"RECORD DATE", with respect to any Distribution Date means --
-- with respect to the notes, the day immediately preceding such
Distribution Date or, if such notes are issued as Definitive Notes,
the last day of the preceding month;
-- and with respect to the certificates is the last day of the month
preceding the Distribution Date.
"REGULAR PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount not less than zero equal to the greater of --
A1 + A2 -- (FPDA + SPDA); and
(OS -- (PB -- [SOA + YSOA]) -- (FPDA + SPDA)
<TABLE>
<CAPTION>
Where:
<S> <C> <C>
A1 = the aggregate outstanding principal amount of the Class A-1
Notes as of the preceding Distribution Date (after giving
effect to any principal payments made on the Class A-1 Notes
on such preceding Distribution Date);
A2 = the aggregate outstanding principal amount of the Class A-2
Notes as of the preceding Distribution Date (after giving
effect to any principal payments made on the Class A-2 Notes
on such preceding Distribution Date and the Class A-2
Notes);
OS = the sum of the aggregate outstanding principal amount of all
the notes and the certificates as of the preceding
Distribution Date (after giving effect to any principal
payments to be made on the securities on such preceding
Distribution Date) or the Closing Date, as the case may be;
PB = the Pool Balance at the end of the Collection Period
preceding such Distribution Date;
SOA = the Specified Overcollateralization Amount with respect to
such Distribution Date;
[YSOA = the Yield Supplement Overcollateralization Amount];
FPDA = the First Priority Principal Distribution Amount, if any,
with respect to such Distribution Date; and
SPDA = the Second Priority Principal Distribution Amount, if any,
with respect to such Distribution Date.
</TABLE>
provided, however, that the Regular Principal Distribution Amount --
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-- shall not exceed the sum of the aggregate outstanding principal amount
of all the notes and the aggregate Certificate Balance of all the
certificates on such Distribution Date, after giving effect to any
principal payments made on the securities on such Distribution Date in
respect of the First Priority Principal Distribution Amount, if any,
and the Second Priority Principal Distribution Amount, if any;
-- on or after the Final Scheduled Distribution Date relating to the
Class C Certificates shall not be less than the amount that is
necessary to reduce the Certificate Balance of the Class C
Certificates to zero; and
-- on or after the Final Scheduled Distribution Date relating to the
Class D Certificates shall not be less than the amount that is
necessary to reduce the Certificate Balance of the Class D
Certificates to zero.
"REPLACEMENT GUARANTEED RATE AGREEMENT" means a guaranteed rate agreement
which meets the following conditions:
-- it is substantially similar to the original guaranteed rate agreement;
-- the obligor on the agreement 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 rating notes or certificates; and
-- the agreement 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 interest rates on the notes and the
certificates.
"RESERVE ACCOUNT EXCESS AMOUNT", with respect to any Distribution Date,
means an amount equal to the excess if any, of --
-- the amount of cash or other immediately available funds in the Reserve
Account on that Distribution Date, prior to giving effect to any
withdrawals from the Reserve Account relating to that Distribution
Date), over
-- the Specified Reserve Balance with respect to that Distribution Date.
"RESERVE INITIAL DEPOSIT" means the $ [ ] initially deposited into the
Reserve Account [together with the aggregate amount transferred from the
Pre-Funding Account to the Reserve Account on each Subsequent Transfer Date].
"RULE OF 78'S RECEIVABLES" are receivables providing 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 annual
percentage rate 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."
"SECOND PRIORITY PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Distribution Date, an amount not less than zero equal to:
(N -- (PB -- YSOA)) -- FPDA
Where:
N = the aggregate outstanding principal amount of the notes as
of the preceding Distribution Date (after giving effect to
any principal payments made on the notes on such preceding
Distribution Date);
PB = the Pool Balance at the end of the Collection Period
preceding such Distribution Date;
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<PAGE> 164
YSOA = the Yield Supplement Overcollateralization Amount; and
FPDA = the First Priority Principal Distribution Amount, if any, with
respect to such Distribution Date.
provided, however, that --
-- the Second Priority Principal Distribution Amount shall not exceed
the sum of the aggregate outstanding principal amount of all the
notes and the aggregate Certificate Balance of all the
certificates on such [Payment] [Distribution] Date (after giving
effect to any principal payments to be made on the securities on
such Distribution Date in respect of the First Priority Principal
Distribution Amount, if any); and
-- the Second Priority Principal Distribution Amount on or after the
Final Scheduled Distribution Date relating to the Class B Notes
shall not be less than the amount that is necessary to reduce the
outstanding principal amount of the Class B Notes to zero.
"SERVICER FEE" means the Servicing Fee together with the Supplemental
Servicing Fee.
"SERVICING FEE" means a fee payable to the servicer on each Distribution
Date for servicing the receivables which is equal to the product of one-twelfth
of 1.00% and the Pool Balance as of the first day of the related Collection
Period.
"SHORT-TERM NOTES" means notes that have a maturity of one year or less
from their date of original issuance.
"SIMPLE INTEREST ADVANCE" means an amount that the servicer shall deposit
into the related collection account, in its sole discretion, equal to the amount
of interest that would have been due on the related Simple Interest Receivables
at their respective annual percentage rates 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.
"SPECIAL TAX COUNSEL" means Skadden, Arps, Slate, Meagher & Flom LLP.
"SPECIFIED CREDIT ENHANCEMENT AMOUNT" means, with respect to any
Distribution Date, the greatest of --
-- $[ ];
-- [ ]% of the Pool Balance at the end of the Collection Period
preceding that Distribution Date; or
-- the aggregate principal balance of the receivables that are delinquent
91 days or more and are not Liquidated Receivables at the end of the
Collection Period preceding such Distribution Date;
provided, however, that the Specified Credit Enhancement Amount with
respect to any Distribution Date shall not exceed the sum of the aggregate
outstanding principal amount of all the notes and the aggregate Certificate
Balance of all the certificates as of the preceding Distribution Date
(after giving effect to any principal payments made on the securities on
such preceding Distribution Date).
"SPECIFIED OVERCOLLATERALIZATION AMOUNT" means, with respect to any
Distribution Date, the excess, if any, of --
-- the Specified Overcollateralization Amount with respect to such
Distribution Date, over
-- the Specified Reserve Balance with respect to such Distribution Date.
"SPECIFIED RESERVE BALANCE" means the lesser of --
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<PAGE> 165
-- $[ ]; and
-- the sum of the aggregate outstanding principal amount of all the notes
and the certificates as of the preceding Distribution Date, after
giving effect to any principal payments made on the securities on such
preceding Distribution Date.
"SUBSEQUENT CUTOFF DATE" means the date as of which the seller conveys
Subsequent Receivables to the trust.
"SUBSEQUENT RECEIVABLES" means the receivables which the seller will
transfer to the trust after the Closing Date and during the Funding Period.
"SUBSEQUENT TRANSFER DATE" each of the dates on which the seller conveys
Subsequent Receivables to the trust.
"SUPPLEMENTAL SERVICING FEE" means, for each Collection Period, the amount
of any late, prepayment, and other administrative fees and expenses collected
during that Collection Period[, plus any interest earned during the Collection
Period on deposits made with respect to the receivables].
"TOTAL REQUIRED PAYMENT" means, on any Distribution Date, the sum of --
-- the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
-- all interest payable on the Class A Notes, including any accrued
interest and interest on accrued interest;
-- the First Priority Principal Distribution Amount, if any;
-- all interest payable on the Class B Notes, including any accrued
interest and interest on accrued interest;
-- the Second Priority Principal Distribution Amount, if any;
-- all interest payable on the certificates, including any accrued
interest and interest on accrued interest;
provided, however, that 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, on any Distribution Date until the
Distribution Date on which the outstanding principal amount of all the
notes has been paid in full, the Total Required Payment shall mean the sum
of --
-- the Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods;
-- all interest payable on the Class A Notes, including any accrued
interest and interest on accrued interest;
-- all interest payable on the Class B Notes, including any accrued
interest and interest on accrued interest; and
-- the amount necessary to reduce the outstanding principal amount of all
the notes to zero.
["YIELD SUPPLEMENT ACCOUNT" means the account which Ford Credit will
establish with the indenture trustee for the benefit of the noteholders and
certificateholders which will be designed solely to hold funds to be applied to
provide payments to the noteholders and certificateholders in respect of
receivables which bear yield lower than the weighted average interest rates on
the notes and certificates.]
[The "YIELD SUPPLEMENT AGREEMENT" means the agreement which Ford Credit,
the seller and the indenture trustee will enter into relating to the Yield
Supplement Account.]
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<PAGE> 166
[The "YIELD SUPPLEMENT AMOUNT" means the aggregate amount[, discounted to
present value at [ ]% in the manner specified in the sale and servicing
agreement], by which --
-- interest on the principal balance of each [Initial Receivable]
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 described above;
exceeds
-- interest on the principal balance of that receivable at the annual
percentage rate of that receivable.]
["YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT" means, with respect to any
Distribution Date, the amount specified below with respect to such Distribution
Date:
<TABLE>
<S> <C>
Closing Date......................................... $[ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
[month] [year]....................................... [ ]
</TABLE>
[The YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT has been calculated for
each Distribution Date as the sum of the amount for each receivable equal to the
excess, if any, of --
-- the scheduled payments due on such receivable for each future
Collection Period discounted to present value as of the end of the
preceding Collection Period at the annual percentage rate of such
receivable, over
-- the scheduled payments due on the receivable for each future
Collection Period discounted to present value as of the end of the
preceding Collection Period at [ ]%.
For purposes of such calculation, future scheduled payments on the receivables
are assumed to be made on their scheduled due dates without any delays, defaults
or prepayments.]
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<PAGE> 167
ANNEX I
FORM OF INVESTMENT LETTER -- [CLASS C] CERTIFICATES
[Date]
Ford Credit Auto Owner Trust [ ],
as Issuer
[ ],
as Owner Trustee and
as Certificate Registrar
[ ]
[ ], [ ]
Ladies and Gentlemen:
In connection with our proposed purchase of the Class C [ ]% Asset
Backed Certificates (the "Certificates") of Ford Credit Auto Owner Trust
[ ] (the "Issuer"), a trust formed by Ford Credit Auto Receivables
Two L.P. (the "Depositor" or "Seller"), we confirm that:
1. We are either:
(a) not, and each account (if any) for which we are purchasing the
Certificates is not, (i) an employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is subject to Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code of 1986, as amended (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 Department of Labor
Regulation 29 C.F.R. Section 2510.3-101 or otherwise under ERISA) or (v) a
person investing "plan assets" of any such plan (including without limitation,
for purposes of this clause (v), an insurance company general account, but
excluding an entity registered under the Investment Company Act of 1940, as
amended), or
(b) an insurance company acting on behalf of a general account and (i) on
the date hereof less than 25% of the assets of such general account (as
reasonably determined by us) constitute "plan assets" for purposes of Title I of
ERISA and Section 4975 of the Code, (ii) the purchase and holding of such
Certificates are eligible for exemptive relief under Sections (I) and (III) of
Prohibited Transaction Class Exemption 95-60, and (iii) the undersigned agrees
that if, after the undersigned's initial acquisition of the Certificates, at any
time during any calendar quarter 25% or more of the assets of such general
account (as reasonably determined by us no less frequently than each calendar
quarter) constitute "plan assets" for purposes of Title I of ERISA or Section
4975 of the Code and no exemption or exception from the prohibited transaction
rules applies to the continued holding of the Certificates under Section 401(c)
of ERISA and the final regulations thereunder or under an exemption or
regulation issued by the United States Department of Labor under ERISA, we will
dispose of all Certificates then held in our general account by the end of the
next following calendar quarter.
2. We are, and each account (if any) for which we are purchasing the
Certificates is, a person who is (A) a citizen or resident of the United States,
(B) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, (C) an estate the income of which
is includible in gross income for United States tax purposes, regardless of its
source, (D) a trust if a U.S. court is able to exercise primary supervision over
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<PAGE> 168
the administration of such trust and one or more Persons meeting the conditions
of clause (A), (B), (C) or (E) of this paragraph 2 has the authority to control
all substantial decisions of the trust or (E) a Person not described in clauses
(A) through (D) above whose ownership of the Certificates is effectively
connected with such Person's conduct of a trade or business within the United
States (within the meaning of the Code) and who provides the Issuer and the
Depositor with an IRS Form 4224 (and such other certifications, representations,
or opinions of counsel as may be requested by the Issuer or the Depositor).
3. We understand that any purported resale, transfer, assignment,
participation, pledge, or other disposal of (any such act, a "Transfer") of any
Certificate (or any interest therein) to any person who does not meet the
conditions of paragraphs 1 and 2 above shall be null and void (each, a "Void
Transfer"), and the purported transferee in a Void Transfer shall not be
recognized by the Issuer or any other person as a Certificateholder for any
purpose.
4. We agree that if we determine to Transfer any of the Certificates we
will cause our proposed transferee to provide to the Issuer and the Certificate
Registrar a letter substantially in the form of this letter.
You are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By:
--------------------------------------
Name:
Title:
Securities To Be Purchased:
$[ ] principal balance of Certificates
Annex A attached hereto lists the name of the account and principal balance of
Certificates purchased for each account (if any) for which we are purchasing
Certificates.
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<PAGE> 169
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the offering described in this Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission.......................... $
Rating agency fee........................................... $
Printing.................................................... $
Legal fees and expenses..................................... $
Accountants' fees........................................... $
Fees and expenses of Indenture Trustee...................... $
Fees and expenses of applicable Trustee..................... $
Miscellaneous expenses...................................... $
----------
Total.................................................. $
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides as follows:
SECTION 17-108. INDEMNIFICATION.
Subject to such standards and restrictions, if any, as are set forth in its
partnership agreement, a limited partnership may, and shall have the power to,
indemnify and hold harmless any partner or other person from and against any and
all claims and demands whatsoever.
Section 4.2 of the Agreement of Limited Partnership of Ford Credit Auto
Receivables Two L.P. provides as follows:
Section 4.2. Exculpation and Indemnification.
(a) Neither the General Partner nor any director, officer, partner,
agent or legal representative of the General Partner or the Partnership,
nor any of their Affiliates or the respective directors, officers,
partners, stockholders, agents or legal representatives of any of their
Affiliates (collectively, the "Indemnified Parties") shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to
any Partner (or its Affiliates) for any losses, claims, damages,
liabilities or expenses, including, without limitation, judgments, interest
on such judgments, fines, charges, costs, amounts paid in settlement,
expenses and attorneys' fees incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or
any appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or commission, whether
pending or merely threatened, whether or not any Indemnified Party is or
may be a party thereto, including interest on any of the foregoing
(collectively, "Damages"), arising out of, or in connection with, the
management or conduct of the business and affairs of the Partnership,
except for any such Damages to the extent that they are found by a court of
competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Indemnified Parties or willful violations of the
express provisions hereof by the indemnified Parties. The Indemnified
Parties may consult with counsel and accountants with respect to the
affairs of the Partnership and shall be fully protected and justified, to
the extent allowed by law, in acting, or failing to act, if such action or
failure to act is in accordance with the advice or opinion of such counsel
or accountants.
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<PAGE> 170
(b) The Partnership will, to the extent permitted by law, indemnify and
hold harmless any and all of the Indemnified Parties for any and all
Damages arising out of or in connection with the management or conduct of
the business and affairs of the Partnership or their activities with
respect thereto, except to the extent that any such Damages are found by a
court of competent jurisdiction to have resulted from the gross negligence
or willful misconduct of the person seeking indemnification (or willful
violation of the express provisions hereof). No Indemnified Party may
satisfy any right of indemnity or reimbursement granted in this Section
4.3(b) or to which it may otherwise be entitled except out of the assets of
the Partnership, and no Partner shall be personally liable with respect to
any such claim for indemnity or reimbursement.
Section 145 of the General Corporation Law of Delaware provides as follows:
145. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a 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.
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<PAGE> 171
(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 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 a civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that 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
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<PAGE> 172
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Article Five of the Certificate of Incorporation of Ford Credit Auto
Receivables Two, Inc. provides as follows:
(a) A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law
or
(iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is amended after approval by the
stockholders of this Article FIFTH to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
(b) Any repeal or modification of paragraph (a) of this Article FIFTH
by the stockholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time of such
repeal or modification.
(c)(i) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative, investigative or otherwise (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he
or she is the legal representative, is or was a director, officer or
employee of the corporation or is or was serving at the request of the
corporation as a director, officer or employee of another corporation or of
a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer
or employee or in any other capacity while serving as a director, officer
or employee, shall be indemnified and held harmless by the corporation to
the fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation
to provide broader indemnification rights than said law permitted the
corporation to provide prior to such amendment), against all expense,
liability and loss (including penalties, fines, judgments, attorneys' fees,
amounts paid or to he paid in settlement and excise taxes imposed on
fiduciaries with respect to (i) employee benefit plans, (ii) charitable
organizations or (iii) similar matters) reasonably incurred or suffered by
such
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<PAGE> 173
person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer or employee and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that the corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person (other than pursuant to subparagraph (c)(ii) of
this Article FIFTH) only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this subparagraph (c)(i) of Article FIFTH
shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law so requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this subparagraph (c)(i)
of Article FIFTH or otherwise.
(ii) If a claim which the corporation is obligated to pay under
subparagraph (c)(i) of this Article FIFTH is not paid in full by the
corporation within 60 days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the
expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the
corporation) that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation Law for the
corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its Board of Directors, independent
legal counsel or its stockholders) to have made a determination prior to
the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor
an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the Claimant has not met the applicable
standard of conduct.
(iii) The provisions of this paragraph (c) of Article FIFTH shall cover
claims, actions, suits and proceedings, civil or criminal, whether now
pending or hereafter commenced, and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place.
If any part of this paragraph (c) of Article FIFTH should be found to be
invalid or ineffective in any proceeding, the validity and effect of the
remaining provisions shall not be affected.
(iv) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in
this paragraph (c) of Article FIFTH shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-Law, agreement, vote of
stockholders or disinterested directors or otherwise.
(v) The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or
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<PAGE> 174
not the corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.
(vi) The corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be
paid by the corporation the expenses incurred in defending any proceeding
in advance of its final disposition, to any agent of the corporation to the
fullest extent of the provisions of this paragraph (c) of Article FIFTH
with respect to the indemnification and advancement of expenses of
director, officers and employees of the corporation.
Similar indemnification provisions in Section 5 of Article NINTH of the
Certificate of Incorporation of both Ford Motor Company and Ford Motor Credit
Company are applicable to directors, officers and employees of Ford Credit Auto
Receivables Two, Inc. who serve as such at the request of Ford Motor Company or
Ford Motor Credit Company.
Ford Credit Auto Receivables Two, Inc. is insured for liabilities it may
incur pursuant to Article FIFTH of its Certificate of Incorporation relating to
the indemnification of its directors, officers and employees. In addition,
directors, officers and certain key employees are insured against certain losses
which may arise out of their employment and which are not recoverable under the
indemnification provisions of Ford Credit Auto Receivables Two, Inc.'s
Certificate of Incorporation. The premium for both insurance coverages is paid
by Ford Motor Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(A) Exhibits:
<TABLE>
<C> <S> <C>
1.1 -- *Form of Underwriting Agreement for the Notes and
Certificates.
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.
4.4 -- 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.
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 -- *Opinion of H.D. Smith, Esq., Secretary and Corporate
Counsel of the Servicer with respect to tax matters under
Michigan law.
</TABLE>
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<PAGE> 175
<TABLE>
<C> <S> <C>
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 -- *Consent of H.D. Smith, Esq., Secretary and Corporate
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.
</TABLE>
- ---------------
* To be filed by Amendment
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed 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
II-7
<PAGE> 176
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
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<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dearborn and the State of Michigan on the 14th day of
July, 1999.
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
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 Directors July 14, 1999
- --------------------------------------------------- and Director (principal
(Elizabeth S. Acton) executive officer)
/s/ DANIEL D. MEYER* Controller (principal accounting July 14, 1999
- --------------------------------------------------- officer)
(Daniel D. Meyer)
/s/ DAVID P. COSPER* Director and President and July 14, 1999
- --------------------------------------------------- Treasurer (principal financial
(David P. Cosper) officer)
/s/ HURLEY D. SMITH* Director July 14, 1999
- ---------------------------------------------------
(Hurley D. Smith)
</TABLE>
*By: /s/ R. P. CONRAD
--------------------------------------------------
(R. P. Conrad, Attorney in Fact)
II-9
<PAGE> 178
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
<C> <S> <C> <C>
1.1 -- *Form of Underwriting Agreement for the Notes and
Certificates.
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.
4.4 -- 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.
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 -- *Opinion of H.D. Smith, Esq., Secretary and Corporate
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 -- *Consent of H.D. Smith, Esq., Secretary and Corporate
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.
</TABLE>
<PAGE> 179
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
<C> <S> <C> <C>
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.
</TABLE>
- ---------------
* To be filed by Amendment
<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 September 1, 1998 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 14th day of
July, 1999.
/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 1998, 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 $16,000,000,000
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 P. Paillart, K. J. Coates, H. D.
Smith, D.P. Cosper, R. P. Conrad, and S.P. Thomas, 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 K. J. Coates, 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 September 1, 1998, 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 July, 1999.
/s/ E.S. Acton /S/ HURLEY D. SMITH
---------------------- --------------------------
(E.S. Acton) (Hurley D. Smith)
/s/ D.P. Cosper /s/ D.D. Meyer
--------------------- --------------------------
(D.P. Cosper) (D.D. Meyer)
6
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
FORD CREDIT AUTO RECEIVABLES TWO L.P.
(Exact name of obligor as specified in its charter)
DELAWARE 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. 333-76439, 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 12th day of July, 1999.
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 March 31, 1999, 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 ....................................... $ 15,364
Interest-bearing balances ............................... 3,811
Securities:
Held to maturity securities .................................. 1,084
Available for sale securities ................................ 49,894
Federal funds sold and securities purchased under
agreements to resell .................................... 27,638
Loans and lease financing receivables:
Loans and leases, net of unearned income ................ $131,839
Less: Allowance for loan and lease losses ............... 2,642
Less: Allocated transfer risk reserve ................... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve .................................. 129,197
Trading Assets ............................................... 45,483
Premises and fixed assets (including capitalized
leases) ................................................. 3,124
Other real estate owned ...................................... 242
Investments in unconsolidated subsidiaries and
associated companies .................................... 171
Customers' liability to this bank on acceptances
outstanding ............................................. 974
Intangible assets ............................................ 2,017
Other assets ................................................. 12,477
TOTAL ASSETS ................................................. $291,476
========
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices ........................................ $ 102,273
Noninterest-bearing ........................................ $ 39,135
Interest-bearing ........................................... 63,138
In foreign offices, Edge and Agreement,
subsidiaries and IBF's ..................................... 74,586
Noninterest-bearing ........................................ $ 4,221
Interest-bearing ........................................... 70,365
Federal funds purchased and securities sold under agree-
ments to repurchase ............................................. 41,039
Demand notes issued to the U.S. Treasury ........................ 1,000
Trading liabilities ............................................. 32,929
Otherborrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less .............. 4,353
With a remaining maturity of more than one year
through three years ................................... 14
With a remaining maturity of more than three years ......... 92
Bank's liability on acceptances executed and outstanding ........ 974
Subordinated notes and debentures ............................... 5,427
Other liabilities ............................................... 9,684
TOTAL LIABILITIES ............................................... 272,371
---------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................... 0
Common stock .................................................... 1,211
Surplus (exclude all surplus related to preferred stock) ....... 11,016
Undivided profits and capital reserves .......................... 7,040
Net unrealized holding gains (losses)
on available-for-sale securities ................................ (179)
Accumulated net gains (losses) on cash flow hedges .............. 0
Cumulative foreign currency translation adjustments ............. 17
TOTAL EQUITY CAPITAL ............................................ 19,105
---------
TOTAL LIABILITIES AND EQUITY CAPITAL ............................ $ 291,476
=========
</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-
