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REGISTRATION NO. 333-82895
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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(2)
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<S> <C> <C> <C> <C>
Asset Backed Securities........ $15,000,000,000 100% $15,000,000,000 $4,170,000
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) $278 of which was previously paid.
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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.
PURSUANT TO RULE 429 OF THE GENERAL RULES AND REGULATIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, THE PROSPECTUS WHICH IS A PART OF THIS
REGISTRATION STATEMENT IS A COMBINED PROSPECTUS RELATING ALSO TO REGISTRATION
STATEMENT NO. 333-63551 AND CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 333-63551. THE $1,750,000,000 OF UNISSUED ASSET
BACKED SECURITIES PREVIOUSLY REGISTERED UNDER REGISTRATION STATEMENT NO.
333-63551 MAY NOW BE OFFERED BY THE COMBINED PROSPECTUS. A REGISTRATION FEE OF
$516,250 WAS PREVIOUSLY PAID WITH RESPECT TO SUCH AMOUNT.
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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 9 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, the seller 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>
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FORD CREDIT AUTO FORD MOTOR CREDIT
RECEIVABLES TWO L.P. COMPANY
SELLER SERVICER
</TABLE>
THE TRUSTS --
-- may periodically issue asset-backed notes and
certificates 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 include one or more classes of notes.
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 include one or more classes of 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
FORD CREDIT................................. 17
PRIMUS...................................... 18
THE RECEIVABLES POOLS....................... 18
Property of the Trusts.................... 18
Origination............................. 18
Underwriting............................ 18
Subvention.............................. 19
Servicing and Collections............... 19
Repossession and Write-offs............. 19
Criteria for Selecting the
Receivables........................... 20
Simple Interest Receivables............. 20
Actuarial Receivables................... 21
Final Payment Receivables............... 21
We Will Provide More Specific Information
About the Receivables in the Prospectus
Supplement.............................. 21
MATURITY AND PREPAYMENT CONSIDERATIONS...... 21
USE OF PROCEEDS............................. 22
THE SELLER AND THE GENERAL PARTNER.......... 22
Description of the Seller and the General
Partner................................. 22
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...... 23
DESCRIPTION OF THE NOTES.................... 24
The Trust May Use Book-Entry Registration
Instead of Issuing Definitive Notes..... 24
Principal and Interest on the Notes....... 25
The Indenture............................. 26
The Indenture Trustee..................... 31
DESCRIPTION OF THE CERTIFICATES............. 31
The Trusts Might Not Issue Physical
Certificates Representing
Certificates............................ 31
Distributions of Principal and Interest... 32
List of Certificateholders................ 32
CERTAIN INFORMATION REGARDING THE
SECURITIES................................ 33
Fixed Rate Securities..................... 33
Floating Rate Securities.................. 33
Book-Entry Registration................... 34
Definitive Securities..................... 38
Reports to Securityholders................ 39
DESCRIPTION OF THE RECEIVABLES TRANSFER AND
SERVICING AGREEMENTS...................... 40
Sale and Assignment of Receivables........ 41
Accounts.................................. 42
Servicing Procedures...................... 43
Collections............................... 43
Advances.................................. 44
Servicing Compensation and Expenses....... 44
Distributions............................. 45
Credit and Cash Flow Enhancement.......... 45
Net Deposits.............................. 46
Statements to Trustees and Trusts......... 46
Evidence as to Compliance................. 47
Certain Matters Regarding the Servicer.... 47
Events of Servicing Termination........... 48
Rights Upon Event of Servicing
Termination............................. 48
Waiver of Past Events of Servicing
Termination............................. 49
Amendment................................. 49
Insolvency Event or Dissolution........... 49
Payment of Notes.......................... 50
Termination............................... 50
Administration Agreement.................. 51
SOME IMPORTANT LEGAL ISSUES RELATING TO THE
RECEIVABLES............................... 51
Security Interests in Vehicles............ 51
Repossession.............................. 52
Notice of Sale; Cure Rights............... 53
Deficiency Judgments and Excess
Proceeds................................ 53
Consumer Protection Laws.................. 53
Other Limitations......................... 54
Transfers of Vehicles..................... 55
TAX MATTERS................................. 55
Scope of the Tax Opinions................. 55
ERISA CONSIDERATIONS........................ 56
Prohibited Transaction Considerations..... 56
Investment in Notes....................... 57
Investment in Certificates................ 57
Special Considerations Applicable to
Insurance Company General Accounts...... 57
Plans Not Subject to ERISA or the tax
code.................................... 58
General Investment Considerations......... 58
PLAN OF DISTRIBUTION........................ 58
LEGAL OPINIONS.............................. 59
WHERE YOU CAN FIND MORE INFORMATION......... 59
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................. 59
GLOSSARY OF TERMS IN THE PROSPECTUS......... 61
</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 59 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(s) 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 each 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 are 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 immediately assigned them to Ford Credit),
and Ford Credit will in turn sell them to the seller. A receivables purchase
agreement will govern the sale of the receivables by Ford Credit to the seller
and will specify eligibility criteria for the receivables.
The seller will transfer the receivables to the trust on the closing date under
a sale and servicing agreement. 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 to the
pre-funding account. 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, and (2) when
and to whom any amount will be distributed if the balance exceeds this minimum
amount.
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 is required to 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
Ford Credit will make representations and warranties relating to the receivables
when it sells them to the seller. The seller will make
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similar representations and warranties when it sells the receivables to the
trust.
-- Ford Credit will be required to repurchase a receivable from the
seller or the trust if (1) one of Ford Credit's representations or
warranties is breached with respect to that receivable and (2) the
receivable is materially and adversely affected by the breach. The
seller has assigned its rights against Ford Credit to the trust.
-- The seller will be required to repurchase a receivable from the trust
if (1) one of the seller's representations or warranties is breached
with respect to that receivable and (2) the receivable is materially
and adversely affected by 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 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
have 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 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 or dissolves, 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.
The receivables generally need not be liquidated
if --
-- an objection to the liquidation is received
from a majority of (1) each Class of
noteholders, (2) each Class of
certificateholders and (3) any other persons
that may be specified in the related
prospectus supplement, in each case
excluding the seller; 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 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
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-- 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 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 an event of default occurs under
the related indenture, the indenture trustee may
sell the receivables owned by the related trust
either (1) with the consent of the Controlling
Class of notes or (2) if the proceeds of such
sale would be sufficient to pay all of the notes
(but not necessarily the certificates) in full,
except that the consent of the holders of the
certificates to a sale is required if the Event
of Default is neither a payment default nor an
insolvency event and the proceeds would not be
sufficient to pay all the notes and certificates
in full. 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. 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 Receivables
Transfer and Servicing Agreements -- Events of
Servicing Termination".
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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;
-- partial prepayments (including those related
to rebates of extended warranty contract
costs and insurance premiums);
-- liquidations due to default;
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<PAGE> 16
-- 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. Faster than expected prepayments on
the receivables will require the trust to make
payments on the notes and certificates earlier
than expected.
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 collection 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 Receivables
Transfer and Servicing Agreements -- Collections"
in this prospectus.
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THE CONTROLLING CLASS
CONTROLS 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
Controlling Class can remove the servicer if the
servicer --
-- does not deliver to the applicable trustee
the available funds for application to a
required payment;
-- defaults on a servicing obligation which
materially and adversely affects the trust;
or
-- the servicer becomes the subject of certain
insolvency proceedings.
A majority of the Controlling Class of notes (or,
if no notes are outstanding, the certificates)
may also waive a default by the servicer. The
holders of any subordinate Class of securities do
not have any rights to participate in such
determinations for so long as any of the more
senior Classes are outstanding, and the
subordinate Classes of securities may be
adversely affected by determinations made by the
more senior Classes.
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, unless 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;
-- in the case of Simple Interest Receivables, all payments due or
received thereunder on or after the applicable Cutoff Date; and
-- monies received prior to the applicable Cutoff Date on any receivable
that are due on or after the applicable Cutoff Date and were not used
to reduce the principal balance of the receivable.
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;
-- 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;
-- security interests in any other property securing the receivable
whether attaching prior to or subsequent to the purchase of the
receivable by Ford Credit; and
-- any and all proceeds of the above items.
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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.
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 (including any rights under the related
yield supplement agreement);
-- 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.
FORD CREDIT
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, Ford Credit provides 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. In
the United States, Ford Credit (exclusive of PRIMUS) purchases automotive retail
contracts from about 7,100 Ford dealers and associated non-Ford dealers through
approximately 140 automotive financing branches.
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 service plan contracts for new and used vehicles
manufactured by
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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.
PRIMUS
Primus Automotive Financial Services, Inc. a New York corporation, was
formed in October 1991 and is the successor corporation to Marine Midland
Automotive Financial Corporation, which was purchased by Ford Credit in 1990.
Approximately 1,800 Ford Credit employees conduct PRIMUS' operations in the
United States through 29 branch offices and its headquarters located in suburban
Nashville, Tennessee.
Commencing in 1991, and until August 1999, PRIMUS conducted its business as
a wholly owned subsidiary of Ford Credit. Until August 1999, PRIMUS assigned
receivables it generated, together with the related financing documents,
security interests in the related vehicles and any other property securing the
receivables, to Ford Credit immediately after being acquired by PRIMUS.
Commencing in August 1999, PRIMUS began conducting its operations as a part 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 non-Ford dealers
and their retail customers. These non-Ford dealers include those selling
vehicles manufactured by DaimlerChrysler, General Motors, Honda, Jaguar, Mazda,
Nissan, Saturn, Subaru, Suzuki, Toyota and Volkswagen. 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 and Kia Motors America, Inc. PRIMUS also is the
source of choice for The Hertz Corporation and Aston Martin Lagonda. In
addition, PRIMUS purchases receivables from other finance sources.
The retail installment sale contracts purchased by PRIMUS are usually
purchased without recourse to the dealer or the seller, subject to exceptions
for certain breaches of representations and warranties and delivery to PRIMUS of
a valid, enforceable and correctly issued lien on the related vehicle. PRIMUS
services the receivables it originates in accordance with substantially the same
servicing guidelines and criteria as Ford Credit.
THE RECEIVABLES POOLS
PROPERTY OF THE TRUSTS
ORIGINATION. The receivables in each trust consist of retail installment
sale contracts secured by new and used automobiles and light trucks. The
receivables have been or will be purchased directly by Ford Credit or by PRIMUS
from vehicle dealers in the ordinary course of business. 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 usually is paid or
credited to the dealer.
Generally, no more than 100% of the negotiated 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 of a new vehicle or published prices
for used vehicles. New vehicles generally can be purchased at a discount from
MSRP.
UNDERWRITING. Ford Credit and PRIMUS utilize common underwriting standards
and credit evaluation criteria which emphasize the obligor's ability to pay and
creditworthiness, as well as
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the asset value of the vehicle being produced. 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. Statistically-based retail credit risk rating
guidelines are used 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 is based on a
principle of offering the dealer or seller a minimum rate that reflects the
level of risk associated with the customer's credit evaluation. The dealer
establishes the retail rate with the obligor. 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 by Ford Credit or PRIMUS for accuracy
and regulatory compliance. The dealer is required to perfect the security
interest of either Ford Credit or PRIMUS, as applicable, in the vehicles.
SUBVENTION. 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 common servicing practices and procedures. Ford
Credit services over 4.2 million retail accounts. On June 15, 1999, Ford Credit
announced that it intended to restructure its servicing operations and move them
into seven regional service centers in the U.S. PRIMUS services over 0.5 million
retail accounts in the United States from its service center in Franklin,
Tennessee. Servicing personnel do not know if a receivable that they are
servicing has been sold to a third party.
Obligors are instructed to send their monthly payments to one of several
lock-box centers. Most of the receivables are paid without any additional
servicing. Collection accounts are rated by behavior evaluation and collection
assignments are initiated 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 a delinquent
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. A fee or additional interest, as appropriate,
is usually collected on extensions and rewrites 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 security interest in the vehicle is impaired; and/or
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-- the customer has not complied with specific contract provisions.
Upon repossession or voluntary surrender of a vehicle, a condition report
is prepared. A repossessed vehicle is sold at an auction and the proceeds are
applied to the outstanding balance of the receivable. Ford's Vehicle Remarketing
Department manages the disposal of repossessed vehicles and seeks to obtain the
highest net price for the vehicle, comprised of gross auction proceeds less
auction fees and costs for reconditioning and transportation.
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 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.
CRITERIA FOR SELECTING THE RECEIVABLES. The receivables to be held by each
trust will be selected from Ford Credit'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.
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.
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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. If a Simple Interest Receivable is prepaid, the obligor is required to
pay interest only to the date of prepayment. The servicer, however, is required
to make a non-reimbursable advance to the trust of interest which would have
accrued to the next scheduled due date of the receivable.
ACTUARIAL RECEIVABLES. Because interest and principal are not computed
separately on Actuarial Receivables, obligors under Actuarial Receivables will
be entitled to rebates of unearned finance charges if they prepay or if their
obligations are accelerated. If an Actuarial Receivable is prepaid in full, with
minor variations based upon state law, Actuarial Receivables require that any
rebate be calculated on the basis of a constant interest rate.
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 may also transfer the final
scheduled payments with respect to the related Final Payment Receivables to a
trust and cause that trust to issue certificates representing interests in such
final scheduled payments or indebtedness secured by such final scheduled
payments.
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 of such Receivables Pool originated by Ford Credit and by
PRIMUS;
-- the portion of such Receivables Pool consisting of Actuarial
Receivables and of Simple Interest Receivables;
-- the portion of such Receivables Pool secured by new vehicles and by
used vehicles;
-- the aggregate principal balance of all of the receivables;
-- the average principal balance of the receivables 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; and
-- the distribution by APR and by the states of origination.
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.
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-- 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 a receivable from the trust if certain breaches
of covenants occur or if the servicer extends or modifies the terms of
a receivable 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;
-- to make the initial deposit into any yield supplement account;
-- to make the initial deposit into any reserve account; and
-- for any other purposes specified in the related prospectus supplement.
The trust may also issue certain Classes of notes or certificates to the
seller in partial payment for the receivables. The seller will use the amount
each trust pays to it for the receivables to purchase the receivables from Ford
Credit. Additionally, the seller may transfer to Ford Credit certain Classes of
notes or certificates in partial payment for the receivables.
THE SELLER AND THE GENERAL PARTNER
DESCRIPTION OF THE SELLER AND THE GENERAL PARTNER
The seller was organized as a Delaware limited partnership in February
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,
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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 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
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receivables to the seller. The seller has received the advice of counsel to the
effect that, subject to certain facts, assumptions and qualifications, in the
event Ford Credit were to become the subject of a voluntary or involuntary case
under the United States Bankruptcy Code subsequent to the transfer of
receivables to the seller, the transfer of such receivables by Ford Credit to
the seller 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.
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 participating organizations 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.
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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.
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 at the end of any Funding Period,
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 of
interest to all noteholders of a particular Class or to one or more other
Classes 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 noteholder of a particular Class 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."
If a trust issues 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
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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
EVENTS OF DEFAULT. With respect to the notes issued by a given trust,
"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
notes not of the Controlling Class will not constitute an "Event
of Default" until the Controlling Class of notes have been paid in
full;
-- a default in the payment of the principal of or any installment of
the principal of any note when the same becomes due and payable;
-- a default in the observance or performance of any material
covenant or agreement of the trust made in the related indenture
other than those dealt with specifically elsewhere as an Event of
Default 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 the
Controlling Class of notes;
-- 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 any 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 the
Controlling Class of notes;
-- certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust as specified in the indenture;
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.
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 the Controlling Class then outstanding may declare the
principal of such notes to be immediately due and payable. Such declaration may
be rescinded by the holders of a majority in principal amount of the Controlling
Class then outstanding if both of the following occur:
(1) the issuer has paid or deposited with the indenture trustee enough
money to pay:
-- all payments of principal of and interest on all notes and all
other amounts that would then be due if the Event of Default
causing the acceleration of maturity had not occurred; and
-- all sums paid or advanced by the indenture trustee and the
reasonable compensation, expenses, disbursements and advances of
the indenture trustee and its agents and counsel; and
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(2) all Events of Default, other than the nonpayment of the principal
of the notes that has become due solely by the acceleration, have been
cured or waived.
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 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, the indenture trustee is prohibited from selling the
related receivables following an Event of Default (other than (1) 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 or (2) if required to sell the
receivables pursuant to the related trust agreement as a result of the
occurrence of an insolvency event with respect to the seller or the general
partner), unless
-- the holders of 100% of the Controlling Class of notes issued by such
trust consent to such sale (excluding notes held by the seller, the
servicer or their affiliates),
-- 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
-- the indenture trustee determines that the proceeds of the 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 Controlling Class of notes of such trust.
In addition, if the Event of Default relates to a default by a trust in
observing or performing any material covenant or agreement (other than an Event
of Default relating to non-payment of interest or principal, insolvency or any
other event which is otherwise specifically dealt with by the indenture), the
indenture trustee is prohibited from selling the receivables unless the holders
of all outstanding certificates consent to such sale or the proceeds of such
sale are sufficient to pay in full the principal of and the accrued interest on
the outstanding notes and certificates of such 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 Controlling Class 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 the Controlling Class 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 the holders of all of the outstanding notes of the related trust. 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 --
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-- 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
Controlling Class 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 after such notice, request and
offer of indemnity 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 the Controlling Class.
Each indenture trustee and the related noteholders, by accepting the
related notes, will covenant that they will not at any time institute against
the applicable trust any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
With respect to any trust, neither the related indenture trustee nor the
related trustee in its individual capacity, nor any holder of a certificate
representing an ownership interest in the trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will 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 and 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,
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-- 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 or
its property,
-- dissolve or liquidate in whole or in part,
-- permit the lien of the related indenture to be subordinated or
otherwise impaired,
-- 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.
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 indenture, the related certificates and 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
the Controlling Class may, by written request to the related indenture trustee
accompanied by a copy of the communication that the applicant proposes to send,
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.
MODIFICATION OF INDENTURE. Any trust; together with the related indenture
trustee, may, without the consent of the noteholders of the 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
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inconsistent with other provisions of the indenture provided that such action
will not materially adversely affect the interests of the noteholders.
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 modifying in any manner the rights of such noteholders (except with
respect to the matters listed in the next paragraph which require the approval
of the noteholders); provided that:
- - either (1) such action will not, as evidenced by an opinion of counsel,
materially adversely affect the interest of any noteholder or (2) such action
has been approved by the holders of a majority of the notes outstanding;
- - such action will not, 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
- - an opinion of counsel as to certain tax matters is delivered.
Without the consent of the holder of each such outstanding note affected
thereby (in addition to the satisfaction of each of the conditions set forth in
the preceding paragraph), 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, change the
application of the proceeds of a sale of the trust property to payment
of principal and interest on the notes 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 Controlling Class
or of the notes, 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 or events of default
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 the
Controlling Class, the consent of the holders of which is required to
direct the related indenture trustee to sell or liquidate the
receivables after an Event of Default 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 the
Controlling Class 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 any of the other Basic Documents;
-- affect the calculation of the amount of interest or principal payable
on any note on any distribution date (including the calculation of any
of the individual components of such calculation);
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-- affect the rights of the noteholders to the benefit of any provisions
for the mandatory redemption of the notes provided in the related
indenture; 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 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 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 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 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 its
participating organizations 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. See also
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"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 ARE SUBORDINATED TO NOTES. Distributions in respect of the
certificates of a trust are 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 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 accompanied by a copy of the
communication that the applicant proposes to send, obtain access to the list of
all certificateholders maintained by the trustee for the purpose of
communicating with other
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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.
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. 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; and
-- a minimum limitation, or floor, on the rate at which interest may
accrue during any interest period.
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
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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.
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
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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 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.
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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 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
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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 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
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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
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 (1) 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, (2) the administrator or the seller, as the case may be, at its option,
elects to terminate the book-entry system through DTC or (3) 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
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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 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) any overcollateralization amount or credit enhancement amount;
(6) the aggregate outstanding principal amount for each Class of such
notes and the Certificate Balance for each Class of such certificates
and any related factors needed to compute the principal amount
outstanding of the notes or certificates, each after giving effect to
all payments reported under clause (1) above on such date;
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(7) the amount of the servicing fee paid to the servicer and the amount of
any unpaid servicing fee with respect to the related Collection Period
or Collection Periods, as the case may be;
(8) the amount of the aggregate Realized Losses (as defined in the related
prospectus supplement), if any, for such Collection Period;
(9) 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;
(10) 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;
(11) the aggregate Purchase Amounts for receivables, if any, that were
repurchased in such Collection Period;
(12) the balance of any reserve account on such date, after giving effect
to changes therein on such date;
(13) the balance of any yield supplement account on such date, after giving
effect to changes therein on such date;
(14) the amount of Advances on such date;
(15) for each such date during any Funding Period, the amount remaining in
the pre-funding account;
(16) 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
(17) the amount of any cumulative shortfall between payments due in respect
of any credit or cash flow enhancement arrangement and payments
received in respect of such credit or cash flow enhancement
arrangement, and the change in any such shortfall from the preceding
statement.
Each amount set forth under clauses (1), (2), (7), (9) and (10) 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.
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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 in exchange for the net proceeds received by the
seller from the sale of the notes and the certificates of the trust and certain
classes of securities if so provided in the related prospectus supplement.
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, in exchange for the notes and certificates issued by the trust. 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 eligibility 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.
SALE AND ASSIGNMENT OF SUBSEQUENT RECEIVABLES. The related prospectus
supplement for the trust will specify whether, and the terms, conditions and
manner under which, Subsequent Receivables will be sold by Ford Credit to the
seller and by the seller to the applicable trust from time to time during any
Funding Period on each Subsequent Transfer Date.
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;
-- 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) Collection Period 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 the breach has been cured, will purchase such
receivable from the trust and Ford Credit will purchase such receivable from the
seller, at a price equal to the Purchase Amount. The purchase obligation will
constitute the sole remedy available to the certificateholders or the trustee
and any noteholders or indenture trustee in respect of the related 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,
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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
(which may be a subaccount of the collection 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 one or more certificate
distribution accounts, in the name of the trustee on behalf of such
certificateholders, into which amounts released from the collection account and
any pre-funding account, yield supplement account, reserve account or other
credit or cash flow enhancement for distribution to such certificateholders will
be deposited and from which all distributions to such certificateholders will be
made.
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 (1) there
exists no Event of Servicing Termination and (2) 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. Permitted Investments are generally limited to obligations or
securities that mature on or before the date of the next distribution for such
series. However, to the extent permitted by the Rating Agencies, funds in any
reserve account may be invested in securities that will not mature prior to the
date of the next distribution on the notes or certificates and which will not be
sold to meet any shortfalls. Thus, the amount of cash available in any reserve
account at any time may be less than the
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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 require 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 six months past the last
day of the Collection Period preceding the latest date that a receivable
matures, as 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.
Ford Credit may from time to time take additional security securing payment
of any receivable held by a trust.
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 of 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
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outstanding Advances made by the servicer with respect to such receivable and
then to the scheduled payment. To the extent that 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 may make an 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 related obligor, the Purchase Amount or
Liquidation Proceeds. 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 any related 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 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. The servicer may instruct the indenture trustee to withdraw such
Advances instead from the reserve account provided that the servicer within two
business days replaces in the reserve account any funds so used.
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.
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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 for distribution to noteholders, if any, and
to the certificate distribution account for distribution to 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 losses incurred in a Collection Period. The servicer
shall allocate collections to the interest and principal portion of scheduled
payments on the receivables in accordance with its customary servicing
procedures. 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 and will make the distributions as described in the related
prospectus supplement.
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
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credit enhancement, securityholders will bear their allocable share of
deficiencies, as described in the related prospectus supplement.
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 Rating Agencies confirm in
writing that substitution will not result in the reduction or withdrawal of the
rating of any 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 trust to be classified as an association (or
publicly traded partnership) taxable as a corporation for federal
income tax purposes; and
-- such transferee or assignee agrees in writing to take positions for
federal income tax purposes consistent with the federal income tax
positions previously 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."
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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.
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 some or substantially all of its duties as servicer under a
particular sale and servicing agreement to any corporation more than 50% of the
voting
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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.
EVENTS OF SERVICING TERMINATION
"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 trustee or indenture 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 trustee or indenture
trustee is received by the servicer or the seller, as the case may
be, or after discovery by an officer of the servicer or the
seller, as the case may be;
-- 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, the
seller and 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 the Certificate
Balance;
-- the occurrence of certain insolvency events specified in the sale
and servicing agreement with respect to the servicer or the
seller; and
-- such other events, if any, set forth in the related prospectus
supplement.
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 Controlling Class or the Class of notes specified in
the prospectus supplement (and after the notes have been paid in full, the
trustee or the holders of not less than a majority of the certificates or the
Class of certificates specified in the prospectus supplement) may terminate all
the rights and obligations of the servicer under such sale and servicing
agreement, whereupon such indenture trustee or trustee or a successor servicer
appointed by such indenture trustee or 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 Controlling Class or the
Class of notes specified in the prospectus supplement 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 indenture trustee and trustee
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 Controlling Class
of notes and each other Class of notes, voting separately 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 the 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 and certificates of such trust; and provided that an opinion
of counsel as to certain tax matters is delivered if required.
INSOLVENCY EVENT OR DISSOLUTION
If certain insolvency events specified in the sale and servicing agreement
occur, 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; 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 indenture trustee or trustee --
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-- 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 the noteholders, and certificateholders; provided that any failure to
give such required notice will not prevent or delay termination of the trust.
Upon termination of a 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
(excluding the seller, the servicer or their affiliates) of the trust and the
delivery to the trustee by each such certificateholder (excluding 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 indenture trustee will
continue to carry out its obligations under the sale and servicing agreement as
agent for the trustee(s) of the trust.
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.
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
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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 the consent of Ford Credit or PRIMUS, as the case may
be.
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."
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
or PRIMUS' 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 or PRIMUS 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
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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 would 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
and PRIMUS take steps to effect re-perfection upon receipt of notice of
re-registration or information from the obligor as to relocation. Similarly,
when an obligor sells a vehicle, Ford Credit or PRIMUS 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 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 or 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 a 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
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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 and
PRIMUS 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; CURE 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 to
cure may be exercised on a limited number of occasions.
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. In some states, a reinstatement right is permitted
by payment of delinquent installments. Repossessed vehicles are generally
disposed of by Ford's Vehicle Marketing Department at auction.
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 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 Credit Protection 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
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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.
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
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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 consent and permit acceleration of the maturity of the
receivable upon a sale or transfer without consent except where prohibited by
law. 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.
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
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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 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.
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INVESTMENT IN NOTES
The seller believes that the notes of a 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 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
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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.
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
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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 (some of which may not be registered or may
not be publicly offered).
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. 333-82895 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, Ford Credit, 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 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
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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 the 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.
"CLASS" means a Class of notes or certificates issued by a trust having the
same interest rate, maturity and alphabetical and numerical designation.
"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
period specified in the related prospectus supplement with respect to
calculating payments and proceeds of the related receivables.
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"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 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.
"CONTROLLING CLASS" means, with respect to any trust, the Class A Notes
described in the related prospectus supplement as long as any Class A Notes are
outstanding, and thereafter the Class B Notes described in the related
prospectus supplement as long as any Class B Notes are outstanding, and
thereafter each other Class of notes described in the prospectus supplement in
order of seniority.
"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 immediately preceding 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.
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"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.
"ELIGIBLE INSTITUTION" means, with respect to securities of the trust --
-- the corporate trust department of the 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 the events
specified under "Description of the Notes -- The Indenture" in this prospectus.
"EVENTS OF SERVICING TERMINATION" under each sale and servicing agreement
will consist of the events specified under "Description of the Transfer and
Servicing Agreements -- Events of Servicing Termination" in this prospectus.
"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.
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"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.
"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 specified in the related
prospectus supplement as of the applicable cutoff date.
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"INSOLVENCY LAWS" means the United States Bankruptcy Code or similar
applicable state laws.
"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. 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.
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"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 a receivable which:
-- by its terms, is in default; and
-- as to which the servicer has determined, in accordance with its
customary servicing procedures, that eventual payment in full is
unlikely or has repossessed and disposed of the related financed
vehicle.
"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 a motor vehicle, 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.
"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 applicable Rating
Agencies.
Permitted Investments are generally limited to obligations or securities which
mature on or before the next distribution date.
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"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 applicable 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 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.
"RESIDUAL CASH FLOW CERTIFICATES" are certificates which are entitled to
all or a portion of any remaining payments of principal and interest on the
related receivables after making all other distributions required on each
distribution date.
"RESIDUAL CASH FLOW NOTES" are notes which are entitled to all or a portion
of any remaining payments of principal and interest on the related receivables
after making all other distributions required on each distribution date.
"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)
68
<PAGE> 71
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.
"SPREAD" means the number of basis points (one basis point is equal to one
one-hundredth of a percentage point), as specified in the applicable prospectus
supplement, to be added to or subtracted from the Base Rate in determining the
interest rate applicable to a Floating Rate Security.
"SPREAD MULTIPLIER" means the percentage, if any, specified in the
applicable prospectus supplement, to be multiplied by the Base Rate in
determining the interest rate applicable to a Floating Rate Security.
"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" means additional receivables sold by the seller to
the applicable trust during a Funding Period 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 (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
69
<PAGE> 72
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.
70
<PAGE> 73
(This page intentionally left blank)
<PAGE> 74
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 S-15 OF THIS PROSPECTUS
SUPPLEMENT AND ON PAGE S-9 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, the servicer, the
seller 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> 75
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-41
[Mandatory Prepayment.............. S-42]
Optional Redemption................ S-43
DESCRIPTION OF THE CERTIFICATES...... S-43
Distributions of Interest Income... S-44
Distributions of Principal
Payments........................ S-44
[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-48
Servicing Compensation and
Expenses........................ S-49
Rights Upon Event of Servicing
Termination..................... S-49
Waiver of Past Events of Servicing
Termination..................... S-49
Distributions...................... S-50
Reserve Account.................... S-57
[Yield Supplement Account; Yield
Supplement Agreement............ S-59]
[Interest Rate Cap................. S-59]
[Interest Rate Swap................ S-60]
[Guaranteed Rate Agreement......... S-61]
YEAR 2000 ISSUES AFFECTING FORD
CREDIT............................. S-63
Year 2000 Conversion............... S-63
State of Readiness................. S-63
Y2K Costs.......................... S-64
Y2K Risks.......................... S-64
Y2K Contingency Plans.............. S-64
FEDERAL INCOME TAX MATTERS........... S-65
Scope of the Tax Opinions.......... S-66
Tax Characterization of the
Trust........................... S-66
Tax Consequences to Holders of
the Notes....................... S-67
Tax Consequences to Holders of
Class C Certificates............ S-71
Certain U.S. Federal Income Tax
Documentation Requirements...... S-76
STATE TAX MATTERS.................... S-77
Michigan Tax Consequences.......... S-77
Michigan Tax Consequences With
Respect to the Notes............ S-77
Michigan Tax Consequences With
Respect to the Class C
Certificates.................... S-78
LEGAL INVESTMENT..................... S-78
ERISA CONSIDERATIONS................. S-78
The Notes.......................... S-78
The Class C Certificates........... S-79
UNDERWRITING......................... S-80
LEGAL OPINIONS....................... S-83
GLOSSARY OF TERMS FOR THE PROSPECTUS
SUPPLEMENT......................... S-84
ANNEX I -- Form of Investment Letter,
Class C Certificates...... I-1
</TABLE>
S-2
<PAGE> 76
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-84 of this prospectus
supplement or in the Glossary on page 61 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> 77
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] [a common law
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 following securities are being offered 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> 78
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.]
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 Certificates will be
outstanding.
[MANDATORY PREPAYMENT
The 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"]
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
respective final maturity dates
S-5
<PAGE> 79
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 of
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;
-- Class B Notes should be treated as debt, although the issue is not
free from doubt; and
S-6
<PAGE> 80
-- 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> 81
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> 82
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> 83
-- 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 APRs 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 in prior months 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-93 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-93 of this
prospectus supplement]. This amount will be reduced by any amount
deposited in the principal distribution account in accordance with
clause (3) above;
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<PAGE> 84
(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-94 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) above; 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 of principal or interest on the Class C
S-11
<PAGE> 85
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 until a
liquidation, if any, of the property of the trust. 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; [insert other
type of credit support] 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
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<PAGE> 86
to "Description of the Certificates -- Priority of 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.
On each payment date, the trust will distribute funds on deposit in the reserve
balance in excess of the required balance in accordance with the priority of
payments.
[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
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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-93 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 APR 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 on the closing date. The
counterparty on the cap 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 on the closing date. The
counterparty on the swap 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 amount, if any, by which the swap counterparty is obligated
to pay to the trust will be based on the amount, if any, by which LIBOR exceeds
[ ]%. The amount, if any, which the trust is obligated to pay to the swap
counterparty will be based on the amount, if any, by which LIBOR is less than
[ ]%.
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.]
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<PAGE> 88
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 and
the receivable is materially and adversely
affected by the breach. 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 on which the receivables were
initially transferred to the trust.
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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 account.
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
APRs 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 receivables may
adversely
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<PAGE> 90
impact your notes or certificates by reducing
such interest payments available.
The target level of overcollateralization takes
into account the mix of receivables by APR, 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> 91
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
OR PRINCIPAL, OR FROM 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. Irrespective of the type
of
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<PAGE> 92
default, upon a sale of the receivables following
an Event of Default:
-- no amounts will be distributed to the Class
B noteholders until interest and principal
due on the Class A Notes has been paid in
full;
-- no amounts will be distributed to the Class
C certificateholders until all interest and
principal due on the Class B Notes has been
paid in full; and
-- no amounts will be distributed to the Class
D certificateholders until all interest and
principal due on the Class C Certificates
has been paid in full.
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.
See "Description of the Notes -- The
Indenture -- 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
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<PAGE> 93
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>
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
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<PAGE> 94
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 all or 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 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-funding
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 pre-funding 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
S-21
<PAGE> 95
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
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> 96
THE TRUST
LIMITED PURPOSE AND LIMITED ASSETS
Ford Credit Auto Owner Trust [ ] is a [business trust] [common law trust]
formed under the laws of [the State of Delaware] by 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 issue the notes and the
certificates in exchange for [(1)] 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) the initial
deposit to the Reserve Account] [, and [(2)][(3)] 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 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 "Some Important Legal Issues Relating to 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> 97
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> 98
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 purchased 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 APR
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 APR 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> 99
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 APR 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 APR of the
[Initial] Receivables Pool as of the [Initial] Cutoff Date are set forth in the
following tables.
S-26
<PAGE> 100
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> 101
DISTRIBUTION BY APR 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> 102
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........................................ [ ]%
Actuarial Receivables....................................... [ ]%
Simple Interest Receivables................................. [ ]%
[Final Payment Receivables.................................. [ ]%]
[Actuarial 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 Actuarial 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> 103
-- 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, APR, original term to
maturity and remaining term to maturity as of the [Initial] Cutoff Date) will be
such that each pool will be fully amortized by the end of its remaining term to
maturity. [State assumed characteristics with respect to hypothetical pools of
Subsequent Receivables.]
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- ---- ----------------- --- ------------- --------------
<S> <C> <C> <C> <C>
1.............................. $ %
2.............................. %
3.............................. %
4.............................. %
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> 104
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 [C]]
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> 105
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.
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> 106
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> 107
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> 108
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>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Number of Contracts Outstanding
During the Period...................... 4,833,211 4,189,348 4,359,281 4,000,754 3,917,263 3,655,309 3,595,861
Average Daily Delinquencies as a Percent
of Average Contracts Outstanding
31-60 Days(2).......................... 2.26% 2.57% 2.53% 2.80% 2.49% 2.17% 2.03%
61-90 Days(2).......................... 0.30% 0.34% 0.32% 0.32% 0.28% 0.23% 0.15%
Over 90 Days(3)........................ 0.13% 0.14% 0.14% 0.14% 0.09% 0.05% 0.03%
</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>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Portfolio Outstanding During
the Period (Millions) Gross.......... $63,019 $50,552 $54,106 $46,020 $43,760 $38,028 $35,639
Net.................................. $55,671 $43,703 $47,075 $39,288 $36,862 $32,134 $30,253
Repossessions as a Percent of Average
Number of Contracts Outstanding...... 2.26% 2.75% 2.65% 3.08% 3.07% 2.37% 2.13%
Net Losses as a Percent of Gross
Liquidations(2).................... 1.83% 2.29% 2.27% 2.61% 2.31% 1.45% 1.06%
Net Losses as a Percent of Average
Gross Portfolio Outstanding(2)..... 0.92% 1.22% 1.16% 1.44% 1.31% 0.83% 0.61%
Net Losses as a Percent of Average
Net Portfolio Outstanding(2)....... 1.05% 1.41% 1.34% 1.69% 1.56% 0.98% 0.72%
</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> 109
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, purchases of the receivables by the seller or the servicer 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.]
S-36
<PAGE> 110
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 --
-- of the Class [A-2] Notes until the Class [A-1] Notes have been paid in
full;
-- of the Class [A-3] Notes until the Class [A-2] Notes have been paid in
full;
-- of the Class [A-4] Notes until the Class [A-3] Notes have been paid in
full;
-- of the Class [A-5] Notes until the Class [A-4] Notes have been paid in
full;
-- of the Class [A-6] Notes until the Class [A-5] Notes have been paid in
full; or
-- of the Class [B] Notes until the Class [A-6] Notes have been paid in
full.
No distributions of principal of the certificates will be made until all
the notes have been paid in full. In addition, no distributions of principal of
the Class [D] Certificates will be made 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] [Distribution]
Date[s]. Failure to make final payment of [the] [any Class of] notes on or prior
to the [respective] Final Scheduled [Payment] [Distribution] Date[s] would
constitute an Event of Default under the indenture. See "Description of the
Notes -- The Indenture -- 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 [Payment] [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]
[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 alone will 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
S-37
<PAGE> 111
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.
S-38
<PAGE> 112
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-3 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).
S-39
<PAGE> 113
-- [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 [Payment] [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 [Payment] [Distribution] Date will not be an Event of
Default. See "Description of the Notes -- The Indenture -- Rights upon Event of
Default" 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
-- 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
S-40
<PAGE> 114
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).
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.
EVENT OF DEFAULT. Payments on the notes may be accelerated upon an Event of
Default. Upon an acceleration of the notes, the priority in which the trust
makes distributions to the noteholders and certificateholders will change. The
effect on the noteholders of an Event of Default depends on the type of default,
as described on page S-54 of this prospectus supplement.
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 MIGHT 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 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
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 -- Rights Upon Event of Default." The
indenture trustee may sell the receivables subject to certain conditions of the
Notes after an Event of Default. The conditions depend upon why the Event of
Default occurred. If the Event of Default occurred because of one of the
following reasons, the indenture trustee does not have to obtain any additional
consent to sell the receivables.
-- 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
S-41
<PAGE> 115
-- certain events of bankruptcy, insolvency, receivership or liquidation
of the applicable trust as specified in the indenture.
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 -- Rights upon Event of
Default" has been satisfied including one of the following:
-- the holders of all of the Controlling Class then outstanding 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.]
[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.
S-42
<PAGE> 116
[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 [for each Class of certificates] 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 funds received from the seller are insufficient to pay
the Note Prepayment Premium [for each Class of notes] and the Certificate
Prepayment Premium [for each Class of certificates] 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
All outstanding 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 notes outstanding 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
-- interest on any past due interest at the rate of interest on those
notes (to the extent lawful) [plus 2.00%].
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" in the prospectus and "Description of the Receivables Transfer
and
S-43
<PAGE> 117
Servicing Agreements" in the prospectus and in this prospectus supplement. We
refer you to those sections.
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 [plus 2.00%] (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
-- 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
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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 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 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 [for each Class of certificates] 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.]
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[In the event that such funds are insufficient to pay the Note Prepayment
Premium [for each Class of notes] and the Certificate Prepayment Premium [for
each Class of certificates] 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 your Class of certificates]
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 [plus 2.00%], 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.
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.
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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
(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.]
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[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 that Subsequent Receivable.
[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
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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.
WAIVER OF PAST EVENTS OF SERVICING TERMINATION
If an Event of Servicing Termination occurs, 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.
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DISTRIBUTIONS
DEPOSITS TO THE COLLECTION ACCOUNT AND DETERMINATION OF AVAILABLE
COLLECTIONS. On or before the Distribution Date, the servicer will cause all
collections on receivables, Actuarial 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 difference, if any, between (1) the sum of the Available Funds
plus the amount, if any, withdrawn from the Reserve Account for the
amount of the Total Required Payment which exceeds the Available Funds
for such Distribution Date over (2) the amount required to pay such
Class of notes or such Class of certificates in full in accordance
with the priorities described in "-- Priority of Payments" below; and
-- the amount of cash or other immediately available funds in the Reserve
Account on such [Payment] [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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[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 such shortfall [plus 2.00%] 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 on 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 such shortfall to the extent permitted by law
[plus 2.00%];
(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 such shortfall to the
extent permitted by law [plus 2.00%];
(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 such shortfall to the
extent permitted by law [plus 2.00%];
(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]
PRIORITY OF PAYMENTS MAY CHANGE UPON AN EVENT OF DEFAULT. Upon the
occurrence and continuation of any Event of Default described in the prospectus
under "Description of the Notes -- The Indenture -- Events of Default", the
indenture trustee or the holders of a majority of the Controlling Class may
accelerate the maturity of the notes. Acceleration of the notes will result in
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a change in the priority of payments, which will depend upon the type of
default, as described below.
-- DEFAULTS IN PAYMENT OF INTEREST AND PRINCIPAL AND INSOLVENCY RESULTING
IN ACCELERATION. 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 priority of payments changes and the 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 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 RESULTING IN
ACCELERATION. Following the occurrence of any Event of Default which
has resulted in an acceleration of the notes, the priority of
distributions changes and the 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.
INTEREST AND PRINCIPAL PAID IN ORDER OF SENIORITY UPON A SALE OF COLLATERAL
FOLLOWING AN EVENT OF DEFAULT. Following an Event of Default, the trustee may
elect to liquidate the receivables and the other property of the trust, subject
to the requirements set forth in the prospectus and this prospectus supplement
under "Description of the Notes -- The Indenture -- Rights Upon Event of
Default." Irrespective of the type of Event of Default, upon such a liquidation
of receivables (1) no amounts will be distributed to the Class B noteholders
until all interest and principal due on the Class A Notes has been paid in full,
(2) no amounts will be distributed to the Class C certificateholders until all
interest and principal due on the Class B Notes has been paid in full and (3) no
amounts will be distributed to the Class D certificateholders until all interest
and principal due on the Class C Certificates 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 (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.
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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 following
circumstances:
-- as the Pool Balance decreases as a result of principal payments on
the receivables, purchases of receivables by the seller or the
servicer, 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 the intended amount of overcollateralization;
and
-- on the respective Scheduled [Payment] [Distribution] Dates of the
notes and certificates to the extent that the principal amounts on
the applicable notes or certificates were not previously repaid.
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, late payments on Simple Interest Receivables or
Realized Losses 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. The principal amounts on the
notes and the certificates are generally expected to be repaid prior to the
applicable Final Scheduled [Payment] [Distribution] Date. Any remaining
principal amounts on a Class of notes or certificates will become immediately
due on its Final Scheduled [Payment] [Distribution] Date. However, if the
principal amount on any class of notes or certificates has not been fully repaid
prior to its Final Scheduled [Payment] [Distribution] Date, any remaining
principal amounts on that Class of securities will be immediately due on that
date, and will be payable before any payments or principal or interest are made
to more junior classes of securities.
-- On the Final Scheduled [Payment] [Distribution] Date relating to the
Class A Notes, no amounts will be distributed to the Class B
noteholders until all remaining principal due on the Class A Notes has
been paid in full.
-- On the Final Scheduled [Payment] [Distribution] Date relating to the
Class B Notes, no amounts will be distributed to the Class C
certificateholders until all remaining principal due on the Class B
Notes has been paid in full.
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Interest on more junior classes of notes or certificates may therefore be
delayed as a result. A substantial amount payable on a Final Scheduled [Payment]
[Distribution] Date would generally occur as a result of slower-than-expected
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.
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.
-- 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.
-- 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 by sufficient credit enhancement; 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 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;
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(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
(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
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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.]
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 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 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 APR 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.]
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[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 APR 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 APR 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 from the Yield Supplement Account into the
Collection Account 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.
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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.]
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] 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 swap counterparty, the swap counterparty is not
required to assign the swap 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
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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.
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 Rating
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
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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
guaranteed rate agreement 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 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, most 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 June 30, 1999, 97% 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 June 1999, 99% of
critical end user desktop programs were completed and 99% of the PCs and
workstations were compliant.
Technical Infrastructure: All Ford Credit's infrastructure hardware and
software has been inventoried and assessed and through June 1999, 99% 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 June 30, 1999, approximately 84%
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 June 30, 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 June 30, 1999:
<TABLE>
<CAPTION>
Y2K PROGRAM TIMING
------------------------------------
2000
----
<S> <C> <C> <C> <C> <C>
Critical Business Computer Systems................. -- Plan: 100% compliant by 6/99 --
Status: 97%
Critical External Alliances........................ -- Plan: 100% ready(a) by 6/99 --
Status: 99%
Affiliates......................................... -- Plan: 100% ready(a) by 6/99 --
Status: 100%
Critical End-User Computing........................ -- Plan: 100% compliant by 6/99 --
Status: 99%
Technical Infrastructure........................... -- Plan: 100% compliant by 6/99 --
Status: 99%
Physical Properties and Infrastructure............. -- Plan: 100% compliant by 6/99 --
Status: 84%
</TABLE>
- ---------------
(a) "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 June 30, 1999 are estimated at $22 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 have been developed and will
be validated by October 1999. Additionally, a Global Response Center is being
launched as a communications hub for the most current Y2K status during the
millennium rollover period.
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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.
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DISTRIBUTIONS TO CERTIFICATEHOLDERS. Certificateholders generally will not
recognize gain or loss with respect to distributions from the trust. A
certificateholder will, however --
-- recognize gain to the extent any money distributed exceeds the
certificateholder's adjusted basis in the certificates (as described
below under "-- Disposition of Certificates") immediately before 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).
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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
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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 Matters" in
this prospectus supplement); and
S-78
<PAGE> 152
-- 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 constitute "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 its 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.
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<PAGE> 153
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 Notes and
the 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
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<PAGE> 154
Underwriters has 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 [Class C] Certificates, as the case may be, in the
open market.
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<PAGE> 155
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.
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<PAGE> 156
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.
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<PAGE> 157
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 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.
"[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.]
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 collected with
respect to Actuarial 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 Actuarial Advances made by the servicer of principal due on the
Actuarial 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;
-- amounts received on any receivable to the extent that the servicer has
previously made an unreimbursed Advance on a receivable which is not
recoverable from collections on the particular receivable;
-- Liquidation Proceeds with respect to a particular Actuarial Receivable
to the extent of any unreimbursed Actuarial Advances made with respect
to that Actuarial Receivable;
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<PAGE> 158
-- 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 APRs
(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.
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 interest payment
account which the Owner Trustee will create for the benefit of the
certificateholders.
[The "CERTIFICATE PREPAYMENT PREMIUM" [for each Class of certificates] 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 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 principal payment
account which the Owner Trustee will create for the benefit of the
certificateholders.
"CLOSING DATE" means [ ].
"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.
S-85
<PAGE> 159
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 [ ].
"FINAL SCHEDULED [PAYMENT] [DISTRIBUTION] DATE" for any Class of notes or
certificates has the respective 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>
S-86
<PAGE> 160
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
-- 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.
["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.]
["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; and
S-87
<PAGE> 161
-- 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.
"MICHIGAN TAX COUNSEL" means Hurley D. Smith, Esq., Secretary and Corporate
Counsel of the servicer.
"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 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.
"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
[ ].
"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].
S-88
<PAGE> 162
["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.
"PRINCIPAL DISTRIBUTION ACCOUNT" means, so long as any of the notes are
outstanding, 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" and after the
principal of all the notes has been paid in full, the Certificate Principal
Distribution Account.
"PRINCIPAL DISTRIBUTION AMOUNT" means the First Priority Principal
Distribution Amount, the Second Priority Principal Distribution Amount or the
Regular Principal Distribution Amount, as applicable.
"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 the
Distribution Date or, if the notes are issued as Definitive Notes, the
last day of the preceding month;
-- and with respect to the certificates, 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)
S-89
<PAGE> 163
<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 --
-- 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.]
S-90
<PAGE> 164
"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].
"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;
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.
"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
S-91
<PAGE> 165
-- 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 Credit Enhancement 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 --
-- $[ ]; 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 amounts on deposit in the Collection Account and the Payahead Account
during the Collection Period.
"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;
S-92
<PAGE> 166
-- all interest payable on the Class A Notes, including any accrued
interest thereon;
-- all interest payable on the Class B Notes, including any accrued
interest thereon; 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.]
[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 APR 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 APR 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.]
S-93
<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
I-1
<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.
I-2
<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.......................... $4,170,000
Rating agency fee........................................... $2,000,000
Printing.................................................... $ 700,000
Legal fees and expenses..................................... $ 200,000
Accountants' fees........................................... $ 500,000
Fees and expenses of Indenture Trustee...................... $ 150,000
Fees and expenses of Owner Trustee.......................... $ 300,000
Miscellaneous expenses...................................... $ 300,000
----------
Total.................................................. $8,320,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides as follows:
SECTION 17-108. INDEMNIFICATION.
Subject to such standards and restrictions, if any, as are set forth in its
partnership agreement, a limited partnership may, and shall have the power to,
indemnify and hold harmless any partner or other person from and against any and
all claims and demands whatsoever.
Section 4.2 of the Agreement of Limited Partnership of Ford Credit Auto
Receivables Two L.P. provides as follows:
Section 4.2. Exculpation and Indemnification.
(a) Neither the General Partner nor any director, officer, partner,
agent or legal representative of the General Partner or the Partnership,
nor any of their Affiliates or the respective directors, officers,
partners, stockholders, agents or legal representatives of any of their
Affiliates (collectively, the "Indemnified Parties") shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to
any Partner (or its Affiliates) for any losses, claims, damages,
liabilities or expenses, including, without limitation, judgments, interest
on such judgments, fines, charges, costs, amounts paid in settlement,
expenses and attorneys' fees incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or
any appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or commission, whether
pending or merely threatened, whether or not any Indemnified Party is or
may be a party thereto, including interest on any of the foregoing
(collectively, "Damages"), arising out of, or in connection with, the
management or conduct of the business and affairs of the Partnership,
except for any such Damages to the extent that they are found by a court of
competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Indemnified Parties or willful violations of the
express provisions hereof by the indemnified Parties. The Indemnified
Parties may consult with counsel and accountants with respect to the
affairs of the Partnership and shall be fully protected and justified, to
the extent allowed by law, in acting, or failing to act, if such action or
failure to act is in accordance with the advice or opinion of such counsel
or accountants.
II-1
<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.
II-2
<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
II-3
<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
II-4
<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).
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.
</TABLE>
II-6
<PAGE> 175
<TABLE>
<C> <S> <C>
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>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed with or furnished
to the Commission, pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE> 176
(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 Amendment No. 1 to
the 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 3rd day of September, 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 Amendment
No. 1 to the Registration Statement has been signed below by the following
directors and officers of FORD CREDIT AUTO RECEIVABLES TWO, INC. in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ELIZABETH S. ACTON* Chairman of the Board of September 3, 1999
- --------------------------------------------------- Directors and Director
(Elizabeth S. Acton) (principal executive
officer)
/s/ DANIEL D. MEYER* Controller (principal September 3, 1999
- --------------------------------------------------- accounting officer)
(Daniel D. Meyer)
/s/ DAVID J. PRYSTASH Director and President and September 3, 1999
- --------------------------------------------------- Treasurer (principal
(David J. Prystash) financial officer)
/s/ HURLEY D. SMITH* Director September 3, 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).
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.
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.
</TABLE>
<PAGE> 179
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
<C> <S> <C> <C>
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>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
FORD CREDIT AUTO OWNER TRUST 1999-C
[CLASS A-1 [___]ASSET BACKED NOTES]
[CLASS A-2 [___]% ASSET BACKED NOTES]
CLASS A-3 [___]% ASSET BACKED NOTES
CLASS A-4 [___]% ASSET BACKED NOTES
CLASS B [___]% ASSET BACKED NOTES
CLASS C [___]% ASSET BACKED CERTIFICATES
FORD CREDIT AUTO RECEIVABLES TWO L.P.
(SELLER)
[___________], [1999][2000]
UNDERWRITING AGREEMENT
[________]
[________]
On behalf of themselves and
as representatives (the "Representatives")
of the several Underwriters
c/o [_________]
[_________]
[_________]
Ladies and Gentlemen:
1. Introductory. Ford Credit Auto Receivables Two L.P., a Delaware
limited partnership (the "Seller"), proposes to sell to the Underwriters named
herein:
(a) [$[___________] principal amount of Class A-1 [___]% Asset Backed
Notes (the "Class A-1 Notes")];
(b) [$[___________] principal amount of Class A-2 [___]% Asset Backed
Notes (the "Class A-2 Notes")];
(c) $[___________] principal amount of Class A-3 [___]% Asset Backed
Notes (the "Class A-3 Notes");
<PAGE> 2
(d) $[___________] principal amount of Class A-4 [___]% Asset Backed
Notes (the "Class A-4 Notes");
(e) $[___________] principal amount of Class B [___]% Asset Backed
Notes (the "Class B Notes" and, together with the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes, the "Underwritten Notes");
and
(f) $[___________] principal balance of Class C [___]% Asset Backed
Certificates (the "Class C Certificates"),
in each case issued by Ford Credit Auto Owner Trust [1999-_][2000-_] (the
"Trust"). Simultaneously with the issuance and sale of the Underwritten Notes
and the Class C Certificates as contemplated herein, the Trust will issue
[$[___________] principal amount of Class A-5 [___]% Asset Backed Notes (the
"Class A-5 Notes")], [$[___________] principal amount of Class A-6 [___]% Asset
Backed Notes (the "Class A-6 Notes" and, together with the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5
Notes, the "Class A Notes")] and [$[___________] principal balance of Class D
8.00% Asset Backed Certificates (the "Class D Certificates" and, together with
the Class C Certificates, the "Certificates")].
The Class A Notes and the Class B Notes (together, the "Notes") will be
secured by the Receivables (as hereinafter defined) and certain other property
of the Trust. The Notes will be issued pursuant to the Indenture to be dated as
of [___________] (the "Indenture") by and between the Trust and
[__________________] (the "Indenture Trustee"). Payments in respect of the Class
B Notes, to the extent specified in the Indenture and the Sale and Servicing
Agreement (as hereinafter defined), are subordinated to the rights of the
holders of the Class A Notes.
Each Certificate will represent a beneficial interest in the Trust, the
assets of which will include the Receivables and certain other property. The
Certificates will be issued pursuant to the Amended and Restated Trust
Agreement (the "Trust Agreement") to be dated as of [___________] among the
Seller, as deposi-
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<PAGE> 3
tor, [_____________________________] (the "Delaware Trustee") and
[__________________] (the "Owner Trustee"). Payments in respect of the
Certificates, to the extent specified in the Indenture, the Sale and Servicing
Agreement and the Trust Agreement, are subordinated to the rights of the
holders of the Notes.
The property of the Trust will include, among other things, a pool of
retail installment sale contracts for new and used automobiles and light trucks
(the "Receivables") and certain monies due or in some cases received thereunder
on or after [___________], such Receivables to be sold to the Trust by the
Seller and to be serviced for the Trust by Ford Motor Credit Company, a Delaware
corporation (the "Servicer" or "Ford Credit"), pursuant to the Sale and
Servicing Agreement (the "Sale and Servicing Agreement") to be dated as of
[___________] by and among the Seller, the Servicer and the Trust.
Capitalized terms used herein and not other wise defined shall have the
meanings given them in Appendix A to the Sale and Servicing Agreement.
2. Representations and Warranties of the Seller. The Seller represents
and warrants to and agrees with the several underwriters named in Schedule I
hereto (the "Underwriters") that:
(a) Registration statement on Form S-3 No. [________], including a
form of prospectus and such amendments thereto as may have been required to the
date hereof, relating to the Underwritten Notes and the Class C Certificates and
the offering thereof from time to time in accordance with Rule 415 under the
Securities Act of 1933, as amended (the "Act"), has been filed with the
Securities and Exchange Commission (the "Commission") and such registration
statement, as amended, has become effective. Such registration statement, as
amended at the Effective Time, including the exhibits thereto (but excluding
Form T-1) and any material incorporated by reference therein, is hereinafter
referred to as the "Registration Statement," and the prospectus (including the
base prospectus and any prospectus supplement) relating to the Underwritten
Notes and the Class C Certificates, as last filed, or mailed for filing, with
the Commission pursuant to Rule
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<PAGE> 4
424(b) ("Rule 424(b)") under the Act is hereinafter referred to as the
"Prospectus." For purposes of this Underwriting Agreement, "Effective Time"
means the date and time as of which such Registration Statement, or the most
recent post-effective amendment thereto, is declared effective by the
Commission, and "Effective Date" means the date of the Effective Time.
(b) On the Effective Date, the Registration Statement did conform in
all material respects to the requirements of the Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), where applicable, and the rules
and regulations of the Commission under the Act or the Exchange Act, as
applicable, and did not, as of the Effective Date, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
how ever, that this representation and warranty shall not apply to any statement
or omission made in reliance upon and in conformity with information furnished
in writing to the Seller by the Underwriters through the Representatives
expressly for use in the Registration Statement; when the Registration Statement
became effective the Indenture was, and at all times thereafter the Indenture
has been and will be, duly qualified under the Trust Indenture Act, and when the
Registration Statement be came effective the Indenture conformed, and at all
times thereafter the Indenture has conformed and will conform, in all material
respects to the requirements of the Trust Indenture Act. On the date of this
Underwriting Agreement, the Registration Statement conforms, and at the time of
the last filing of the Prospectus pursuant to Rule 424(b), the Registration
Statement and the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder (the "Rules and Regulations"), and, except as aforesaid, neither of
such documents includes, or will include, any untrue statement of a material
fact or omits, or will omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(c) Other than with respect to any Derived Information (as to which
the Seller makes no representation) the documents incorporated by reference
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<PAGE> 5
in the Prospectus, when they were filed with the Commission, conformed in all
material respects to the requirements of the Exchange Act and the rules and
regulations thereunder; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents are filed with the Commission,
will conform in all material respects to the requirements of the Exchange Act
and the rules and regulations thereunder.
(d) The Seller has been duly formed and is validly existing as a
limited partnership in good standing under the laws of the State of Delaware,
and is duly qualified to transact business and is in good standing in each
jurisdiction in the United States of America in which the conduct of its
business or the ownership of its property requires such qualification, other
than where the failure to be so qualified or in good standing would not have a
material adverse effect on the transactions contemplated herein or in the Basic
Documents.
(e) The consummation by the Seller of the transactions contemplated
by this Underwriting Agreement and the Basic Documents, and the fulfillment of
the terms hereof and thereof, will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation of any lien, charge, or encumbrance upon any of the property or
assets of the Seller pursuant to the terms of, any indenture, mortgage, deed of
trust, loan agreement, guarantee, lease financing agreement, or similar
agreement or instrument under which the Seller is a debtor or guarantor.
(f) This Underwriting Agreement has been duly authorized, executed
and delivered by the Seller; on the Closing Date (as hereafter defined), the
Notes will have been duly executed, authenticated, issued and delivered and will
constitute valid and binding obligations of the Trust entitled to the benefits
provided by the Indenture; on the Closing Date, the Certificates will have been
duly executed, authenticated, issued and delivered and entitled to the benefits
provided by the Trust Agreement; on the Closing Date, the Basic Documents to
which the Seller is a party will have been duly authorized, executed and
delivered
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<PAGE> 6
by and will constitute valid and binding obligations of the Seller enforceable
in accordance with their terms except as the same may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
equitable principles, regardless of whether such enforceability is considered in
a proceeding in equity or at law; and the Basic Documents will conform to the
description thereof in the Prospectus in all material respects.
(g) The computer tape with respect to the Receivables (the "Computer
Tape") to be delivered by Ford Credit as seller under the Purchase Agreement to
each of the Owner Trustee, the Indenture Trustee and the Representatives, will
be complete and accurate in all material respects as of the date thereof.
3. Purchase, Sale, and Delivery of Underwritten Notes and the Class C
Certificates. On the basis of the representations, warranties, and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Seller agrees to sell to the Underwriters, and the Underwriters agree, severally
and not jointly, to purchase from the Seller, the aggregate principal amounts of
the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, the Class B Notes and the Class C Certificates set forth opposite the
names of the Underwriters in Schedule I hereto. The Underwritten Notes and Class
C Certificates are to be purchased at the purchase prices set forth below:
<TABLE>
<CAPTION>
Purchase Price (as
a % of the aggregate
principal amount)
<S> <C>
[Class A-1 Notes [___________]]
[Class A-2 Notes [___________]]
Class A-3 Notes [___________]
Class A-4 Notes [___________]
Class B Notes [___________]
Class C Certificates [___________]
</TABLE>
Against payment of the purchase price in immediately available funds drawn
to the order of the Seller, the Seller will deliver the [Class A-1 Notes and
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<PAGE> 7
the Class A-2 Notes] to [___________________________], at the office of Skadden,
Arps, Slate, Meagher & Flom LLP on [___________], at 9:00 a.m., New York time,
or at such other time not later than seven full business days thereafter as the
Representatives and the Seller deter mine, such time being herein referred to as
the "Closing Date." Against payment of the purchase price in immediately
available funds drawn to the order of the Seller, the Seller will deliver the
Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class C
Certificates to the Representatives, for the account of the Underwriters, at the
office of Skadden, Arps, Slate, Meagher & Flom LLP on the Closing Date. Each of
the Underwritten Notes to be so delivered will be initially represented by one
or more Notes registered in the name of Cede & Co., the nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of such
Underwritten Notes will be represented by book entries on the records of DTC and
participating members thereof. The Class C Certificates to be so delivered will
be in definitive form, registered in such names and in such denominations as the
Representatives shall re quest in writing not later than two full Business Days
prior to the Closing Date.
4. Offering by Underwriters. It is understood that the Underwriters
propose to offer the Under written Notes and the Class C Certificates for sale
to the public (which may include selected dealers), as set forth in the
Prospectus.
5. Covenants of the Seller. The Seller covenants and agrees with the
Underwriters:
(a) If required, to file the Prospectus with the Commission pursuant
to and in accordance with Rule 424(b) not later than the time specified therein.
The Seller will advise the Underwriters promptly of any such filing pursuant to
Rule 424(b).
(b) To make no amendment or any supplement to the Registration
Statement or the Prospectus as amended or supplemented prior to the Closing
Date, with out furnishing the Representatives with a copy of the proposed form
thereof and providing the Representatives with a reasonable opportunity to
review the same; and during such same period to advise the
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<PAGE> 8
Representatives, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus as amended or supplemented or any amended
Prospectus has been filed or mailed for filing, of the issuance of any stop
order by the Commission, of the suspension of the qualification of the
Underwritten Notes or the Class C Certificates for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or the Prospectus as amended or supplemented or
for additional information; and, in the event of the issuance of any such stop
order or of any order preventing or suspending the use of any prospectus
relating to the Underwritten Notes or the Class C Certificates or suspending
any such qualification, to use promptly its best efforts to obtain its
withdrawal.
(c) Promptly from time to time to take such action as the
Representatives may reasonably request in order to qualify the Underwritten
Notes and the Class C Certificates for offering and sale under the securities
laws of such states as the Representatives may request and to continue such
qualifications in effect so long as necessary under such laws for the
distribution of such Underwritten Notes and Class C Certificates, provided that
in connection therewith the Seller shall not be required to qualify as a foreign
limited partnership to do business, or to file a general consent to service of
process in any jurisdiction, and provided further that the expense of
maintaining any such qualification more than one year from the Closing Date with
respect to such Underwritten Notes and Class C Certificates shall be at the
Representatives' expense.
(d) To furnish the Underwriters with copies of the Registration
Statement (including exhibits) and copies of the Prospectus as amended or
supplemented in such quantities as the Representatives may from time to time
reasonably request; and if, before a period of six months shall have elapsed
after the Closing Date and the delivery of a prospectus shall be at the time
required by law in connection with sales of any such Under written Notes or
Class C Certificates, either (i) any event shall have occurred as a result of
which the
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<PAGE> 9
Prospectus would include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or
(ii) for any other reason it shall be necessary during such same period to amend
or supplement the Prospectus as amended or supplemented, to notify the
Representatives and to prepare and furnish to the Representatives as the
Representatives may from time to time reasonably request an amendment or a
supplement to the Prospectus which will correct such statement or omission or
effect such compliance; and in case any Underwriter is required by law to
deliver a prospectus in connection with sales of any of such Underwritten Notes
or Class C Certificates at any time six months or more after the Closing Date,
upon the Representatives' request, but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as the Representatives
may request of an amended or supplemented prospectus complying with Section
10(a)(3) of the Act.
(e) To make generally available to Noteholders and Certificateholders
as soon as practicable, but in any event no later than eighteen months after
the Closing Date, an earnings statement of the Seller complying with Rule 158
under the Act and covering a period of at least twelve consecutive months
beginning after the Closing Date.
(f) To furnish to the Representatives copies of the Registration
Statement (one of which will be signed and will include all exhibits), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Representatives reasonably request.
(g) So long as any of the Underwritten Notes or Class C Certificates
are outstanding, to furnish the Representatives copies of all reports or other
communications (financial or other) furnished to Noteholders or Class C
Certificateholders, and to deliver to the Representatives during such same
period, (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission; (ii) copies of each
amendment to any of the
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<PAGE> 10
Basic Documents; (iii) on each Determination Date or as soon there after as
practicable, notice by facsimile of the Pool Factor as of the related Record
Date; and (iv) such additional information concerning the business and
financial condition of the Seller or the Trust as the Representatives may from
time to time reasonably request.
(h) To pay or cause to be paid the following costs and expenses
incident to the performance of its obligations hereunder: (i) the Commission's
filing fees with respect to the Notes and the Class C Certificates; (ii) all
fees of any rating agencies rating the Notes or the Class C Certificates; (iii)
all fees and expenses of the Indenture Trustee, the Delaware Trustee and the
Owner Trustee; (iv) all reasonable fees and expenses of
[______________________], counsel to the Indenture Trustee; (v) all reasonable
fees and expenses of [_________________________], counsel to the Owner Trustee;
(vi) all reasonable fees and expenses of [_______________________], special
Delaware counsel to the Delaware Trustee; (vii) all fees and expenses of
[________________________] relating to the letter referred to in Section 6(a)
hereof; (viii) all fees and expenses of accountants incurred in connection with
the delivery of any accountant's or auditor's reports required pursuant to the
Indenture or the Sale and Servicing Agreement; (ix) the cost of printing any
term sheets, computational materials and preliminary and final prospectuses
provided to investors (including any amendments and supplements thereto required
within six months from the Closing Date pursuant to Section 5(d) hereof)
relating to the Underwritten Notes or the Class C Certificates, and the
Registration Statement; and (x) any other fees and expenses incurred in
connection with the performance of its obligations hereunder.
The Underwriters shall pay the following costs and expenses incident
to the performance of their obligations hereunder: (i) all Blue Sky fees and
expenses as well as reasonable fees and expenses of counsel in connection with
state securities law qualifications and any legal investment surveys; and (ii)
the reasonable fees and expenses of Skadden, Arps, Slate, Meagher & Flom LLP.
Except as provided in this subsection (h) and Section 10 hereof, the
Underwriters will pay all their own costs and expenses, including, without
limitation, the cost of printing any agreement
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among underwriters, the fees and expenses of Skadden, Arps, Slate, Meagher &
Flom LLP, counsel to the Underwriters, transfer taxes on resale of the
Underwritten Notes or the Class C Certificates by the Underwriters, and any
advertising expenses connected with any offers that the Underwriters may make.
(i) For a period from the date of this Underwriting Agreement until
the retirement of the Under written Notes and the Class C Certificates, or until
such time as the Underwriters shall cease to maintain a secondary market in the
Underwritten Notes or the Class C Certificates, whichever occurs first, to
deliver to the Representatives (i) copies of each certificate, the annual
statements of compliance and the annual independent certified public
accountants' servicing reports furnished to the Owner Trustee and the Indenture
Trustee pursuant to Article III of the Sale and Servicing Agreement, by
first-class mail as soon as practicable after such statements and reports are
furnished to the Owner Trustee and the Indenture Trustee, (ii) copies of each
certificate and the annual statements of compliance delivered to the Indenture
Trustee pursuant to Article III of the Indenture, by first-class mail as soon as
practicable after such statements and reports are furnished to the Indenture
Trustee, (iii) copies of each amendment to any Basic Document and (iv) on or
about each Distribution Date, a copy of the statement furnished by the Indenture
Trustee to the Noteholders and by the Owner Trustee to the Certificateholders
pursuant to Section 4.9 of the Sale and Servicing Agreement, by express mail or
telecopy.
(j) On or before the Closing Date, the Seller shall cause Ford
Credit's computer records relating to the Receivables to be marked to show the
Trust's absolute ownership of the Receivables, and from and after the Closing
Date neither the Seller nor the Servicer shall take any action inconsistent with
the Trust's ownership of such Receivables, other than as permitted by the Basic
Documents.
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<PAGE> 12
(k) To the extent, if any, that the ratings provided with respect to
the Underwritten Notes or the Class C Certificates by the rating agency or
agencies that initially rate the Underwritten Notes or the Class C Certificates
are conditional upon the furnishing of documents or the taking of any other
actions by the Seller, the Seller shall furnish such documents and take any such
other actions.
6. Conditions of the Obligations of the Underwriters. The obligations
of the Underwriters to purchase and pay for the Underwritten Notes and the
Class C Certificates will be subject to the accuracy of the representations
and warranties on the part of the Seller herein, to the accuracy of the
statements of officers of Ford Credit Auto Receivables Two, Inc. (the
"General Partner") on behalf of the Seller, Ford Credit and the General Partner
made pursuant to the provisions hereof, to the performance by the Seller of its
obligations hereunder and to the following additional conditions precedent:
(a) On or prior to the Closing Date, [________________________] shall
have furnished to the Representatives a letter dated as of the Closing Date
substantially in the form and substance of the draft to which the
Representatives previously agreed.
(b) On the Closing Date, the Registration Statement shall be
effective and no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Seller, shall be contemplated by the Commission.
(c) The Representatives shall have received as of the Closing Date
an officer's certificate signed by the Chairman of the Board, the President, the
Executive Vice President - Finance or the Treasurer of the General Partner on
behalf of the Seller representing and warranting that, as of the Closing Date,
except to the extent that they relate expressly to another date in which case
they will be true and correct as of such date on the Closing Date, the
representations and warranties of the Seller in this Underwriting Agreement will
be true and correct in all material respects, that the Seller has
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<PAGE> 13
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date in all material
respects, that no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission and that neither the
Registration Statement nor the Prospectus as amended or supplemented contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that no such certificate shall apply to any
statements or omissions made in reliance upon and in conformity with (i)
information furnished by an Under writer through the Representatives expressly
for use therein or (ii) the Derived Information (as defined in Section 8).
(d) Since the respective dates as of which information is given in
the Prospectus as amended or supplemented, there shall not have occurred any
material adverse change, or any development involving a prospective material
adverse change, in or affecting particularly the business or assets of the
Seller, or any material adverse change in the financial position or results or
operations of the Seller, otherwise than as set forth or contemplated in the
Prospectus, which in any such case makes it impracticable or inadvisable in the
Representatives' reasonable judgment to proceed with the public offering or the
delivery of the Underwritten Notes or the Class C Certificates on the terms and
in the manner contemplated in the Prospectus as amended or supplemented.
(e) Since the respective dates as of which information is provided in
the Prospectus as amended or supplemented, there shall not have occurred any
material adverse change, or any development involving a prospective material
adverse change, in or affecting particularly the business or assets of Ford
Credit and its subsidiaries considered as a whole, or any material adverse
change in the financial position or results of operations of Ford Credit and its
subsidiaries considered as a whole, otherwise than as set forth or contemplated
in the Prospectus as amended or supplemented, which makes it impracticable or
inadvisable in the Representatives' reasonable judgment to proceed with the
public offering
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<PAGE> 14
or the delivery of the Underwritten Notes or the Class C Certificates on the
terms and in the manner contemplated in the Prospectus as amended or
supplemented.
(f) Subsequent to the execution and delivery of this Underwriting
Agreement, the United States shall not have become engaged in hostilities which
have resulted in the declaration of a national emergency or a declaration of
war, which makes it impracticable or inadvisable in the Representatives'
reasonable judgment to proceed with the public offering or the delivery of the
Underwritten Notes on the terms and in the manner contemplated in the Prospectus
as amended or supplemented.
(g) Hurley D. Smith, Esq., Secretary and Corporate Counsel of Ford
Credit, or other counsel satisfactory to the Representatives in their
reasonable judgment, shall have furnished to the Representatives, his written
opinion, dated as of the Closing Date, in form satisfactory to the
Representatives in their reasonable judgment, to the effect that:
(i) The Seller has been duly organized and is validly existing
as a limited partnership in good standing under the laws of the State
of Delaware, and is duly qualified to transact business and is in good
standing in each jurisdiction in the United States of America in
which the conduct of its business or the ownership of its property
requires such qualification.
(ii) This Underwriting Agreement has been duly authorized,
executed and delivered by the Seller.
(iii) The Purchase Agreement, the Trust Agreement and the Sale
and Servicing Agreement have been duly authorized, executed and
delivered by, and each constitutes a valid and binding obligation of,
the Seller.
(iv) The consummation of the transactions contemplated by this
Underwriting Agreement and the Basic Documents, and the fulfillment of
the terms hereof and thereof,
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<PAGE> 15
will not conflict with or result in a material breach of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any material lien, charge or encumbrance
upon any of the property or assets of the Seller pursuant to the terms
of, any indenture, mortgage, deed of trust, loan agreement, guarantee,
lease financing agreement or similar agreement or instrument known to
such counsel under which the Seller is a debtor or guarantor, nor will
such action result in any violation of the provisions of the
Certificate of Limited Partnership or the Limited Partnership
Agreement of the Seller.
(v) The Notes have been duly authorized; when executed by the
Owner Trustee and authenticated by the Indenture Trustee in accordance
with the Indenture and delivered and paid for by the purchasers
thereof, the Notes will constitute valid and binding obligations of
the Trust enforceable in accordance with their terms.
(vi) The Certificates have been duly authorized; when executed
by the Owner Trustee and authenticated by the Owner Trustee or its
authenticating agent in accordance with the Trust Agreement and
delivered and paid for by the purchasers thereof, the Certificates
will be duly issued and entitled to the benefits of the Trust
Agreement.
(vii) The Registration Statement has become effective under the
Act and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose has been instituted or
threatened by the Commission; the Registration Statement and the
Prospectus as amended or supplemented and any further amendments and
supplements thereto made by the Seller prior to the Closing Date
(other than the financial statements and other accounting information
contained in the Registration Statement or the Prospectus as amended
or
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<PAGE> 16
supplemented or any further amendments or supplements thereto, or
omitted therefrom, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of
the Act and the rules and regulations thereunder and the Trust
Indenture Act.
(viii) Such counsel believes that neither the Registration
Statement (other than the financial statements and other accounting
information contained therein or omitted therefrom, as to which such
counsel need express no opinion) nor any amendment thereto, at the
time the same became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(ix) Such counsel believes that at the Closing Date the
Prospectus as amended or supplemented (other than the financial
statements and the other accounting information contained therein or
omitted therefrom, as to which such counsel need express no opinion)
does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(x) Such counsel does not know of any contract or other
document of a character required to be filed as an exhibit to the
Registration Statement or required to be incorporated by reference
into the Prospectus as amended or supplemented or required to be de
scribed in the Registration Statement or the Prospectus as amended or
supplemented which is not filed or incorporated by reference or de
scribed as required.
(xi) Such counsel does not know of any legal or governmental
proceedings pending to which the Seller is a party or of
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which any property of the Seller is the subject, and no such
proceedings are known by such counsel to be threatened or contemplated
by governmental authorities or threatened by others, other than as
set forth or contemplated in the Prospectus as amended or
supplemented and other than such proceedings which, in his opinion,
will not have a material adverse effect upon the general affairs,
financial position, net worth or results of operations (on an annual
basis) of the Seller and will not materially and adversely affect the
performance by the Seller of its obligations under, or the validity
and enforceability of, this Underwriting Agreement, the Basic
Documents, the Notes or the Class C Certificates.
(xii) The Notes, the Class C Certificates, the Basic Documents
and this Underwriting Agreement each conform in all material respects
with the descriptions thereof contained in the Registration Statement
and the Prospectus.
(xiii) The Seller is not required to be registered under the
Investment Company Act of 1940, as amended.
(xiv) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of
the transactions contemplated herein or in the Basic Documents, except
such as may be required under the Act, the Trust Indenture Act and
other federal and state securities laws; filings with respect to the
trans fer of the Receivables to the Seller pursuant to the Purchase
Agreement and to the Trust pursuant to the Sale and Servicing
Agreement and the grant of a security interest in the Receivables to
the Indenture Trustee pursuant to the Indenture; and such other
approvals as have been obtained.
Such opinion may be made subject to the qualifications that the
enforceability of the terms of the Indenture, the Purchase Agreement, the Trust
17
<PAGE> 18
Agreement, the Sale and Servicing Agreement and the Notes may be limited by
bankruptcy, insolvency, reorganizations or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
equitable principles, regardless of whether such enforceability is considered
in a proceeding in equity or at law.
(h) Hurley D. Smith, Esq., Secretary and Corporate Counsel of Ford
Credit, or other counsel satisfactory to the Representatives in their
reasonable judgment, shall have furnished to the Representatives his written
opinion, dated as of the Closing Date, in form satisfactory to the
Representatives in their reasonable judgment, to the effect that:
(i) Ford Credit has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, and is duly qualified to transact business and is
in good standing in each jurisdiction in the United States of America
in which the conduct of its business or the ownership of its property
requires such qualification, with only such exceptions as are not
material to the business of Ford Credit and its subsidiaries
considered as a whole.
(ii) The indemnification agreement relating to the Underwritten
Notes and the Class C Certificates (the "Indemnification Agreement")
dated as of [______], [1999][2000] between Ford Credit and the
Underwriters, has been duly authorized, executed and delivered by Ford
Credit.
(iii) The Limited Partnership Agreement, the Purchase Agreement,
the Sale and Servicing Agreement and the Administration Agreement have
been duly authorized, executed and delivered by, and each constitutes
a valid and binding obligation of, Ford Credit.
(iv) The consummation of the transactions contemplated by this
Underwriting Agreement, the Indemnification Agreement and the Basic
Documents, and the
18
<PAGE> 19
fulfillment of the terms hereof and thereof, will not conflict with or
result in a breach of any of the terms or provisions of, or constitute
a default under (in each case material to Ford Credit and its
subsidiaries considered as a whole), or result in the creation or
imposition of any lien, charge or encumbrance (in each case material
to Ford Credit and its subsidiaries considered as a whole) upon any of
the property or assets of Ford Credit pursuant to the terms of, any in
denture, mortgage, deed of trust, loan agreement, guarantee, lease
financing agreement or similar agreement or instrument known to such
counsel under which Ford Credit is a debtor or guarantor, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of Ford Credit.
(v) Such counsel does not know of any legal or governmental
proceedings pending to which Ford Credit is a party or of which any
property of Ford Credit is the subject, and no such proceedings are
known by such counsel to be threatened or contemplated by governmental
authorities or threatened by others, other than as set forth or
contemplated in the Prospectus as amended or supplemented and other
than such proceedings which, in his opinion, will not have a material
adverse effect upon the general affairs, financial position, net worth
or results of operations (on an annual basis) of Ford Credit and its
subsidiaries considered as a whole and will not materially and
adversely affect the performance by Ford Credit of its obligations
under, or the validity and enforceability of, the Basic Documents or
the Indemnification Agreement.
(vi) Ford Credit has full power and authority to sell and
assign the property to be sold and assigned to the Seller pursuant to
the Purchase Agreement and has duly authorized such sale and
assignment to the Seller by all necessary corporate action.
19
<PAGE> 20
(vii) The Seller has full power and authority to sell and assign
the property to be sold and assigned to the Trust pursuant to the Sale
and Servicing Agreement and has duly authorized such sale and
assignment to the Trust by all necessary limited partnership action.
(viii) The Trust has full power and authority to grant a security
interest in the property to be pledged to the Indenture Trustee
pursuant to the Indenture and has duly authorized such grant by all
necessary trustee action.
(ix) The statements in the Prospectus under the caption
"Certain Legal Aspects of the Receivables," to the extent they
constitute matters of law or legal conclusions, are correct in all
material respects.
(x) Immediately prior to the sale of the Receivables to the
Seller, Ford Credit owned the Receivables free and clear of any lien,
security interest or charge; immediately prior to the assignment of
the Receivables to the Trust, the Seller owned the Receivables free
and clear of any lien, security interest or charge; and immediately
prior to the grant of a security interest in the Receivables to the
Indenture Trustee, the Trust owned the Receivables free and clear of
any lien, security interest or charge. With respect to each Receivable
constituting part of the Trust, such Receivable is secured by a
validly perfected first priority security interest in the vehicle
financed thereby in favor of Ford Credit as a secured party or Ford
Credit has instituted appropriate procedures that if followed (and
such counsel has no reason to believe that they will not be so
followed) will result in the perfection of a first priority security
interest in the vehicle financed thereby in favor of Ford Credit as a
secured party. Each such Receivable has been duly and validly assigned
to the Seller by Ford Credit and to the Trust by the Seller, and a
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<PAGE> 21
security interest in each such Receivable has been duly and validly
granted to the Indenture Trustee by the Trust.
(xi) All filings necessary under applicable law to perfect the
sale of the Receivables by Ford Credit to the Seller pursuant to the
Purchase Agreement, the sale of the Receivables by the Seller to the
Trust pursuant to the Sale and Servicing Agreement and the grant of a
security interest in the Receivables to the Indenture Trustee pursuant
to the Indenture have been made and, provided that neither Ford
Credit nor the Seller relocates its principal place of business in a
state other than Michigan, no other filings (other than the filing of
continuation statements) need be made to maintain the perfection of
the sale of the Receivables either to the Seller pursuant to the
Purchase Agreement or to the Trust pursuant to the Sale and Servicing
Agreement and of the grant of a security interest in the Receivables
to the Indenture Trustee pursuant to the Indenture.
(xii) The Trust Agreement is not required to be qualified under
the Trust Indenture Act, the Indenture has been duly qualified under
the Trust Indenture Act, and neither the Trust nor Ford Credit is
required to be registered under the Investment Company Act of 1940,
as amended.
(xiii) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of
the transactions contemplated herein or in the Basic Documents or the
Indemnification Agreement, except such as may be required under the
Act, the Trust Indenture Act and other federal and state securities
laws; filings with respect to the transfer of the Receivables to the
Seller pursuant to the Purchase Agreement and to the Trust pursuant
to the Sale and Servicing Agreement and the grant of a security
interest in the Receivables to the Indenture Trustee pursuant to the
21
<PAGE> 22
Indenture; and such other approvals as have been obtained.
(xiv) Such counsel does not know of any legal or governmental
proceedings pending to which either Ford Credit or the Seller is a
party or of which any property of either Ford Credit or the Seller is
the subject, and no such proceedings are known by such counsel to be
threatened or contemplated by governmental authorities or threatened
by others (1) seeking to prevent the issuance of the Notes or the
Class C Certificates or the consummation of any of the transactions
contemplated by this Underwriting Agreement, the Indemnification
Agreement or the Basic Documents, or (2) seeking adversely to affect
the federal income tax attributes of the Notes or the Class C
Certificates as described in the Prospectus under the heading "Certain
Federal Income Tax Consequences."
(xv) Neither the issuance or sale of the Notes or the Class C
Certificates, nor the execution and delivery of the Notes, the Class C
Certificates, this Underwriting Agreement, the Indemnification
Agreement or the Basic Documents, nor the consummation of any of the
other transactions contemplated herein or in the Indemnification
Agreement or the Basic Documents by Ford Credit or the Seller, as the
case may be, will contravene the terms of any material provision of
any statute, order, or regulation applicable to Ford Credit or the
Seller, as the case may be, the failure with which to comply could
have a material adverse effect on Ford Credit and its subsidiaries
considered as a whole or the Seller, as the case may be.
(i) Hurley D. Smith, Esq., Secretary and Corporate Counsel of
Ford Credit, or other counsel satisfactory to the Representatives in their
reasonable judgment, shall have furnished to the Representatives his written
opinion, dated as of the Closing Date, in form satisfactory to the
Representatives in their reasonable judgment, to the effect that:
22
<PAGE> 23
(i) The General Partner has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, and is duly qualified to transact business and is in good
standing in each jurisdiction in the United States of America in which
the conduct of its business or the ownership of its property requires
such qualification.
(ii) The Limited Partnership Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding
obligation of, the General Partner.
(iii) The Limited Partnership Agreement authorizes the General
Partner to execute and deliver on behalf of the Seller this
Underwriting Agreement, the Purchase Agreement, the Trust Agreement
and the Sale and Servicing Agreement.
(iv) The execution and delivery on behalf of the Seller of this
Underwriting Agreement, the Purchase Agreement, the Trust Agreement
and the Sale and Servicing Agreement and the performance by the
General Partner of its obligations under this Underwriting Agreement,
the Purchase Agreement, the Trust Agreement and the Sale and
Servicing Agreement have been duly authorized by all necessary
corporate action of the General Partner and each has been duly
executed and delivered by the General Partner.
(v) The consummation of the transactions contemplated by this
Underwriting Agreement and the Basic Documents, and the fulfillment of
the terms hereof and thereof, will not conflict with or result in a
material breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any material
lien, charge or encumbrance upon any of the property or assets of the
General Partner pursuant to the terms of, any indenture, mortgage,
deed of trust, loan agreement, guarantee, lease
23
<PAGE> 24
financing agreement or similar agreement or instrument known to such
counsel under which the General Partner is a debtor or guarantor, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the General Partner.
(vi) Such counsel does not know of any legal or governmental
proceedings pending to which the General Partner is a party or of
which any property of the General Partner is the subject, and no such
proceedings are known by such counsel to be threatened or contemplated
by governmental authorities or threatened by others, other than as set
forth or contemplated in the Prospectus as amended or supplemented and
other than such proceedings which, in his opinion, will not have a
material adverse effect upon the general affairs, financial position,
net worth or results of operations (on an annual basis) of the General
Partner and will not materially and adversely affect the performance
by the General Partner of its obligations under, or the validity and
enforceability of, this Underwriting Agreement, the Basic Documents,
the Notes or the Class C Certificates.
(vii) The General Partner is not required to be registered under
the Investment Company Act of 1940, as amended.
(viii) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of
the transactions contemplated herein or in the Basic Documents, except
such as may be required under the Act, the Trust Indenture Act and
other federal and state securities laws; filings with respect to the
trans fer of the Receivables to the Seller pursuant to the Purchase
Agreement and to the Trust pursuant to the Sale and Servicing
Agreement and the grant of a security interest in the Receivables to
the Indenture Trustee
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<PAGE> 25
pursuant to the Indenture; and such other approvals as have been
obtained.
(ix) Such counsel does not know of any legal or governmental
proceedings pending to which the General Partner is a party or of
which any property of the General Partner is the subject, and no such
proceedings are known by such counsel to be threatened or contemplated
by governmental authorities or threatened by others (1) seeking to
prevent the issuance of the Notes or the Class C Certificates or the
consummation of any of the transactions contemplated by this
Underwriting Agreement or the Basic Documents, or (2) seeking
adversely to affect the federal income tax attributes of the Notes or
the Class C Certificates as described in the Prospectus under the
heading "Certain Federal Income Tax Consequences."
(x) Neither the issuance or sale of the Notes or the Class C
Certificates, nor the execution and delivery of the Notes, the Class C
Certificates, this Underwriting Agreement or the Basic Documents, nor
the consummation of any of the other transactions contemplated
herein or in the Basic Documents by the General Partner, will
contravene the terms of any material provision of any statute, order,
or regulation applicable to the General Partner, the failure with
which to comply could have a material adverse effect on the General
Partner.
(j) Skadden, Arps, Slate, Meagher & Flom LLP (or such other
counsel satisfactory to the Representatives) shall have furnished their written
opinion, dated the Closing Date, with respect to the characterization of the
transfer of the Receivables by Ford Credit to the Seller as a sale and with
respect to the security interest of the Trust in the Receivables (which opinion
shall state that it may be relied upon by the Indenture Trustee), to the
Representatives and to Ford Credit, and such opinion shall be in substantially
the form previously discussed with the Representatives and counsel to the
Representatives and in any event
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<PAGE> 26
satisfactory in form and in substance to the Representatives and to counsel to
the Representatives and to Ford Credit.
(k) Skadden, Arps, Slate, Meagher & Flom LLP (or such other counsel
satisfactory to the Representatives), special counsel to Ford Credit, shall
have furnished their written opinion, dated the Closing Date, with respect to
the nonconsolidation under the Bankruptcy Code of the assets and liabilities of
either of the Seller or the General Partner with the assets and liabilities of
Ford Credit in the event that Ford Credit were to become the subject of a case
under the Bankruptcy Code to the Representatives and to Ford Credit, and such
opinion shall be in substantially the form previously discussed with the
Representatives and counsel to the Representatives and in any event satisfactory
in form and in substance to the Representatives and counsel to the
Representatives and to Ford Credit.
(l) Skadden, Arps, Slate, Meagher & Flom LLP, special tax counsel to
the Seller, shall have furnished to the Representatives their written opinion,
dated as of the Closing Date, in form and in substance satisfactory to the
Representatives in their reasonable judgment, to the effect that:
(i) The Trust will not be classified as an association taxable
as a corporation for federal income tax purposes, the Class A Notes
will be characterized as debt for federal income tax purposes and,
while the issue is not free from doubt, the Class B Notes should be
treated as debt for federal income tax purposes.
(ii) The statements in the Registration Statement and Prospectus
under the heading "Summary--Tax Status" as they relate to federal
income tax matters and under the heading "Certain Federal Income Tax
Consequences," to the extent that they constitute matters of law or
legal conclusions with respect thereto, have been prepared or reviewed
by such counsel and are correct in all material respects.
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<PAGE> 27
(m) Hurley D. Smith, Esq., Secretary and Corporate Counsel of Ford
Credit, or such other counsel satisfactory to the Representatives in their
reasonable judgment, shall have furnished to the Representatives his written
opinion, dated as of the Closing Date, in form satisfactory to the
Representatives in their reasonable judgment, to the effect that, assuming the
Seller and the Trust will each not be classified as an association taxable as a
corporation for federal income tax purposes and the Notes will be characterized
as debt for federal income tax purposes:
(i) The Trust should have no Michigan single business tax
liability.
(ii) The Notes will be characterized as debt for Michigan
income and single business tax purposes.
(iii) Note Owners not otherwise subject to tax in Michigan should
not be subject to tax in Michigan solely because of a Note Owner's
ownership of the Notes.
(iv) The statements in the Registration Statement and
Prospectus under the heading "Summary--Tax Status" as they relate to
Michigan tax matters and under the heading "Certain State Tax
Consequences," to the extent that they constitute matters of law or
legal conclusions with respect thereto, have been prepared or reviewed
by such counsel and are correct in all material respects.
(n) The Representatives shall have received an opinion addressed to
the Representatives of Skadden, Arps, Slate, Meagher & Flom LLP, dated the
Closing Date, with respect to the validity of the Notes and the Certificates and
such other related matters as the Representatives shall require and the Seller
shall have furnished or caused to be furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(o) The Representatives shall have received an opinion addressed to
the Representatives, the Seller and Ford Credit of [___________], counsel to the
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<PAGE> 28
Owner Trustee, dated the Closing Date and satisfactory in form and substance to
the Representatives and counsel to the Representatives, addressing such matters
as the Representatives may request and substantially to the effect that:
(i) The Owner Trustee is a banking corporation duly created,
validly existing and in good standing under the laws of the State of
New York.
(ii) The Owner Trustee has all necessary power and authority to
execute and deliver the Trust Agreement and the Certificate of Trust
and to execute and deliver, on behalf of the Trust, each of the
Indenture, the Sale and Servicing Agreement, the Administration
Agreement and the Control Agreement. The Owner Trustee has all
necessary power and authority to execute the Certificates and the
Notes on behalf of the Trust and to authenticate the Certificates.
(iii) Each of the Trust Agreement and the Certificate of Trust
has been duly executed and delivered by the Owner Trustee and each of
the Indenture, the Sale and Servicing Agreement, the Administration
Agreement and the Control Agreement has been duly executed and
delivered by the Owner Trustee on behalf of the Trust. Each of the
Certificates and each of the Notes has been duly executed and
delivered by the Owner Trustee, on behalf of the Trust, and each of
the Certificates has been duly authenticated by the Owner Trustee.
(iv) The execution and delivery of the Trust Agreement and the
Certificate of Trust by the Owner Trustee and the execution and
delivery of the Indenture, Sale and Servicing Agreement,
Administration Agreement, Control Agreement, the Notes and the
Certificates by the Owner Trustee, on behalf of the Trust, does not
conflict with or result in a breach of or constitute a default under
the Owner Trustee's organization certificate or by-
28
<PAGE> 29
laws, any federal or New York State law, rule or regulation governing
its banking or trust powers or, to the best of counsel's knowledge,
without independent investigation, any judgment or order applicable to
it or its acts, proper ties or, to the best of counsel's knowledge,
without independent investigation, any indenture, mortgage, contract
or other agreement or instrument to which the Owner Trustee in its
respective capacities is a party or by which it is bound.
(v) Neither the execution and delivery by the Owner Trustee, on
behalf of the Trust, of the Indenture, Sale and Servicing Agreement,
Administration Agreement, Control Agreement, the Certificates or the
Notes nor the execution and delivery of the Trust Agreement or the
Certificate of Trust by the Owner Trustee, requires the consent,
authorization, order or approval of, the giving of notice to, the
registration with, or the taking of any other action with respect to,
any governmental authority or agency under the laws of the State of
New York or the federal laws of the United States governing the
banking or trust powers of the Owner Trustee.
(vi) To the best of counsel's knowledge, without independent
investigation, there are no actions or proceedings pending or
threatened against the Owner Trustee in any court or before any
governmental authority, arbitration board or tribunal of the State of
New York which involve the Trust Agreement, the Indenture, the Sale
and Servicing Agreement, the Administration Agreement, the Control
Agreement, the Certificate of Trust, the Notes or the Certificates or
would question the right, power or authority of the Owner Trustee to
enter into or perform its obligations under the Trust Agreement or the
Certificate of Trust or to execute and deliver, on behalf of the
Trust, the Indenture, Sale and Servicing Agreement, Administration
Agreement, Control Agreement, the Certificates or the Notes.
29
<PAGE> 30
(p) The Representatives shall have received an opinion addressed to
the Representatives, the Seller and Ford Credit of [___________], counsel to the
Delaware Trustee, dated the Closing Date and satisfactory in form and substance
to the Representatives and counsel to the Representatives, addressing such
matters as the Representatives may request and substantially to the effect that:
(i) The Delaware Trustee is duly incorporated and validly
existing as a banking corporation under the laws of the State of
Delaware.
(ii) The Delaware Trustee has the power and authority to
execute, deliver and perform its obligations under the Trust
Agreement.
(iii) The Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee and constitutes a legal, valid and
binding agreement of the Delaware Trustee, enforceable against the
Delaware Trustee, in accordance with its terms.
(iv) Neither the execution, delivery and performance by the
Delaware Trustee of the Trust Agreement, nor the consummation by the
Delaware Trustee of any of the transactions contemplated thereby,
requires the consent, authorization, order or approval of, the giving
of notice to, the registration with or the taking of any other action
in respect of, any governmental authority or agency under the laws of
the State of Delaware or any federal law of the United States
governing the banking or trust powers of the Delaware Trustee, other
than the filing of the Certificate of Trust with the Secretary of
State (which Certificate of Trust has been duly filed).
(v) Neither the execution, delivery and performance by the
Delaware Trustee of the Trust Agreement, nor the consummation by the
Delaware Trustee of any of
30
<PAGE> 31
the transactions contemplated thereby, (i) conflicts with or
constitutes a breach of or default under the Certificate of Trust,
the Trust Agreement, the certificate of incorporation or by-laws of
the Delaware Trustee or, to the best of counsel's knowledge, without
independent investigation, any agreement, indenture or other
instrument to which the Delaware Trustee is a party or by which it or
any of its properties may be bound or (ii) violates any law,
governmental rule or regulation of the State of Delaware or any
federal law of the United States of America governing the banking or
trust powers of the Delaware Trustee, or, to the best of counsel's
knowledge, without independent investigation, any court decree
applicable to the Delaware Trustee.
(vi) To the best of counsel's knowledge, without independent
investigation, there are no actions or proceedings pending or
threatened against the Delaware Trustee in any court or before any
governmental authority, arbitration board or tribunal of the State of
Delaware which involve the Trust Agreement or would question the
right, power or authority of the Delaware Trustee to enter into or
perform its obligations under the Trust Agreement.
(vii) To the best of counsel's knowledge, without independent
investigation, there exist no liens, security interests or charges
affecting any of the property of the Trust resulting from acts of or
claims against the Delaware Trustee that are unrelated to the
transactions contemplated by the Trust Agreement.
(q) The Representatives shall have received an opinion addressed to
the Representatives, the Seller and Ford Credit of [___________], counsel to the
Trust, dated the Closing Date and satisfactory in form and substance to the
Representatives and counsel to the Representatives, addressing such matters as
the Representatives may request and substantially to the effect that:
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<PAGE> 32
(i) The Trust has been duly formed and is validly existing as a
business trust under the Delaware Business Trust Act, 12 Del. C. ss.
3801, et seq. (the "Delaware Act"), and has the power and authority
under the Trust Agreement and the Delaware Act to execute, deliver and
perform its obligations under the Trust Agreement, the Indenture, the
Sale and Servicing Agreement, the Administration Agreement, the
Control Agreement, the Note Depository Agreement, the Certificates
and the Notes.
(ii) The Trust Agreement is the legal, valid and binding
agreement of the Depositor and the Owner Trustee, enforceable against
the Depositor and the Owner Trustee, in accordance with its terms.
(iii) The Trust has the power and authority under the Trust
Agreement and the Delaware Act to Grant the Indenture Trust Estate to
the Indenture Trustee pursuant to the Indenture.
(iv) Each of the Trust Agreement, the Indenture, the Sale and
Servicing Agreement, the Administration Agreement, the Control
Agreement, the Note Depository Agreement and the Notes have been duly
authorized by the Trust.
(v) The issuance and sale of the Certificates have been duly
authorized by the Trust, and the Certificates, when duly executed by
the Owner Trustee on behalf of the Trust and authenticated by the
Owner Trustee in accordance with the Trust Agreement and delivered to
and paid for by the purchasers thereof in accordance with the Trust
Agreement, will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement.
(vi) Neither the execution, delivery and performance by the Trust
of the Trust Agreement, the Indenture, the Sale and
32
<PAGE> 33
Servicing Agreement, the Administration Agreement, the Control
Agreement, the Note Depository Agreement, the Certificates and the
Notes, nor the consummation by the Trust of any of the transactions
contemplated thereby, requires the consent or approval of, the giving
of notice to, the registration with, or the taking of any other action
with respect to, any court, or governmental or regulatory authority or
agency under the laws of the State of Delaware, except for the filing
of the Certificate of Trust with the Secretary of State (which
Certificate of Trust has been duly filed).
(vii) Neither the execution, delivery and performance by the
Trust of the Trust Agreement, the Indenture, the Sale and Servicing
Agreement, the Administration Agreement, the Control Agreement and
the Note Depository Agreement, including the execution and delivery
of such documents by the Owner Trustee on behalf of the Trust, nor the
consummation by the Trust or the Owner Trustee on behalf of the Trust
of any of the transactions contemplated thereby, is in violation of
the Trust Agreement or of any law, rule or regulation of the State of
Delaware applicable to the Trust or the Owner Trustee or, to the best
of counsel's knowledge, without independent investigation, any
agreement, indenture, instrument, order, judgment or decree to which
the Trust or any of its property is subject.
(viii) To the best of counsel's knowledge, without independent
investigation, there are no pending or threatened actions, suits or
proceedings affecting the Trust before any court or other governmental
authority of the State of Delaware which, if adversely decided, would
adversely affect the Trust Property or the ability of the Trust to
carry out the transactions contemplated by the Trust Agreement, the
Indenture, the Sale and Servicing Agreement, the Administration
33
<PAGE> 34
Agreement, the Control Agreement and the Note Depository
Agreement.
(ix) Under the Delaware Act, the Trust constitutes
a separate legal entity, separate and distinct from the holder of
any Certificate and any other entity and, insofar as the
substantive law of the State of Delaware is applicable, the Trust
rather than the holder of any Certificate in such Trust will hold
whatever title to such property as may be conveyed to it from time
to time pursuant to the Trust Agreement and the Sale and Servicing
Agreement, except to the extent that such Trust has taken action
to dispose of or otherwise transfer or encumber any such property.
(x) Except as otherwise provided in the Trust
Agreement, under Section 3805(c) of the Delaware Act, a holder of
a Certificate has no interest in specific business trust property.
(xi) Under Section 3805(b) of the Delaware Act, no
creditor of any holder of a Certificate shall have any right to
obtain possession of, or otherwise exercise legal or equitable
remedies with respect to, the property of the Trust except in
accordance with the terms of the Trust Agreement.
(xii) Under the Trust Agreement, the Owner Trustee
has the authority to execute and deliver on behalf of the Trust
the Basic Documents to which the Trust is a party.
(r) The Representatives shall have received an opinion
addressed to the Representatives, the Seller and Ford Credit of
[ ], counsel to the Indenture Trustee, dated the Closing
Date and satisfactory in form and substance to the Representatives and
counsel to the Representatives, to the effect that:
(i) The Indenture Trustee has been duly
incorporated and is validly existing as a bank and trust company
in good standing
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<PAGE> 35
under the laws of the State of New York with full corporate trust
power and authority to enter into and perform its obligations
under the Indenture.
(ii) The Indenture has been duly executed and
delivered by the Indenture Trustee, and, insofar as the laws
governing the trust powers of the Indenture Trustee are concerned
and assuming due authorization, execution and delivery thereof by
the Owner Trustee, the Indenture constitutes a legal, valid and
binding obligation of the Indenture Trustee, enforceable against
the Indenture Trustee in accordance with its terms, except (1) the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights, and (2) the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(iii) The Notes have been duly authenticated and
delivered by the Indenture Trustee.
(iv) Neither the execution nor delivery by the
Indenture Trustee of the Indenture nor the consummation of any of
the trans actions by the Indenture Trustee contemplated thereby
required the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action with respect
to, any governmental authority or agency under any existing
federal or New York State law governing the trust powers of the
Indenture Trustee, except such as have been obtained, made or
taken.
(v) The execution and delivery by the Indenture
Trustee of the Indenture and the performance by the Indenture
Trustee of its obligations thereunder do not conflict with or
35
<PAGE> 36
result in a breach or violation of any of the terms, conditions or
provisions of any law, governmental rule or regulation of the
United States or the State of New York governing the banking or
trust powers of the Indenture Trustee or the Certificate of
Incorporation or By-Laws of the Indenture Trustee or, to such
counsel's knowledge, any order, writ, injunction or decree of any
court or governmental authority against the Indenture Trustee or
by which it or any of its properties is bound or, to such
counsel's knowledge, any indenture, mortgage or contract or other
agreement or instrument to which the Indenture Trustee is a party
or by which it or any of its properties is bound, or constitute a
default thereunder.
(s) The Representatives shall have received an officer's
certificate dated the Closing Date of the Chairman of the Board, the
President, the Executive Vice President-Finance, the Treasurer or any
Assistant Treasurer of:
(i) Ford Credit, in which such officers shall state
that, to the best of their knowledge after reasonable
investigation, the representations and warranties of the Servicer
contained in the Sale and Servicing Agreement and of Ford Credit
contained in the Purchase Agreement are true and correct in all
material respects and that Ford Credit has complied with all
agreements and satisfied all conditions on its part to be
performed or satisfied under such agreements at or prior to the
Closing Date in all material respects.
(ii) The General Partner on behalf of the Seller,
in which such officers shall state that, to the best of their
knowledge after reasonable investigation, the representations and
warranties of the Seller contained in the Trust Agreement, the
Sale and Servicing Agreement and the Purchase Agreement are true
and correct in all material respects, and that the Seller has
complied with all agreements and satisfied all conditions on its
36
<PAGE> 37
part to be performed or satisfied under such agreements at or
prior to the Closing Date in all material respects.
(iii) The General Partner, in which such officers
shall state that, to the best of their knowledge after reasonable
investigation, the representations and warranties of the General
Partner contained in the Limited Partnership Agreement are true
and correct in all material respects, and that the General Partner
has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied under such agreement at or
prior to the Closing Date in all material respects.
(t) The Class A-1 Notes and the Class A-2 Notes shall
have been rated in the highest short-term rating category by each of
Moody's and Standard & Poor's; the Class A-3 Notes, the Class A-4
Notes, the Class A-5 Notes and the Class A-6 Notes shall have been
rated in the highest long-term rating category by each of Moody's and
Standard & Poor's; the Class B Notes shall have been rated at least in
the "A" category or its equivalent by each of Moody's and Standard &
Poor's; and the Class C Certificates shall have been rated at least in
the "BBB" category or its equivalent by each of Moody's and Standard
and Poor's.
(u) At the Closing Date, the Class A-5 Notes and the
Class A-6 Notes shall have been validly issued and paid for by Ford
Credit, and the Class D Certificates shall have been validly issued and
paid for by the Seller.
7. Indemnification and Contribution. (a) The Seller will
indemnify and hold each Underwriter harmless against any losses,
claims, damages, or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
related preliminary prospectus or any
37
<PAGE> 38
portion of the 8-K Information constituting Pool Information or
Prospectus Information or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or other
expenses reason ably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Seller will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (i) an untrue statement or alleged
untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information
furnished to the Seller by any Underwriter through the Representatives
specifically for use therein or (ii) the Derived Information; and
provided further, that the Seller shall not be liable to any
Underwriter or any person controlling any Underwriter under the
indemnity agreement in this subsection (a) with respect to any of such
documents to the extent that any such loss, claim, damage or liability
of such Underwriter or such controlling person results from the fact
that such Underwriter sold the Underwritten Notes or Class C
Certificates to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the
Prospectus or of the Prospectus as then amended or supplemented
(excluding documents incorporated by reference), whichever is most
recent, if the Seller has previously furnished copies thereof to such
Underwriter.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Seller may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act.
(b) Each Underwriter, severally and not jointly, will
indemnify and hold harmless the Seller against any losses, claims,
damages or liabilities to which the Seller may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus or any
amendment
38
<PAGE> 39
or supplement thereto, or any related preliminary prospectus or 8-K
Information, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made (i) in reliance upon and in conformity with written
information furnished to the Seller by such Underwriter through the
Representatives specifically for use therein or (ii) in the Derived
Information prepared by such Underwriter, and will reimburse any legal
or other expenses reasonably incurred by the Seller in connection with
investigating or defending any such action or claim.
The indemnity agreement in this subsection (b) shall be
in addition to any liability which each Underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each person,
if any, who controls the Seller within the meaning of the Act.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) of written notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under subsection (a) or (b)
above, notify the indemnifying party of the commencement thereof, and
in the event that such indemnified party shall not so notify the
indemnifying party within 30 days following receipt of any such notice
by such indemnified party, the indemnifying party shall have no further
liability under such subsection to such indemnified party unless the
indemnifying party shall have received other notice addressed and
delivered in the manner provided in Section 11 hereof of the
commencement of such action; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under such subsection. In
case any such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party in
39
<PAGE> 40
its reasonable judgment, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section
is unavailable or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Seller on the one hand and the Underwriters on the other from
the offering of the Underwritten Notes and the Class C Certificates.
If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Seller
on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims,
damages, or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received
by the Seller on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Seller bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page
of the Prospectus as amended or supplemented with respect to the Under
written Notes and the Class C Certificates. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Seller or by the Underwriters and the parties' relative intent,
40
<PAGE> 41
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission, including, with respect to any
Underwriter, the extent to which such losses, claims, damages or
liabilities (or actions in respect thereof) result from the fact that
such Underwriter sold such Underwritten Notes or Class C Certificates
to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Prospectus or the
Prospectus as then supplemented or amended (excluding documents
incorporated by reference), whichever is more recent, if the Seller has
previously furnished copies thereof to such Underwriter. The Seller and
the Underwriters, severally and not jointly, agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
above in this subsection (d). The amount paid by an indemnified party
as a result of the losses, claims, damages, or liabilities (or actions
in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending
any action or claim. Notwithstanding the provisions of this subsection
(d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Underwritten
Notes and the Class C Certificates underwritten by it and distributed
to the public were offered to the public exceeds the amount of any
damages which such Underwriter has other wise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Underwriters of the
Underwritten Notes and the Class C Certificates in this subsection (d)
to contribute are several and not joint in proportion to their
respective underwriting obligations with respect to such Notes and
Class C Certificates as set forth in Schedule I hereto.
8. 8-K Information and Derived Information.
41
<PAGE> 42
(a) Each Underwriter may prepare and provide to
prospective investors "Computational Materials," "ABS Term Sheets" and
"Collateral Term Sheets" (collectively, the "8-K Information") in
connection with its offering of the Notes, as described in the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder,
Peabody Acceptance Corporation I and certain affiliates, as made
applicable to other issuers and underwriters by the Commission in
response to the request of the Public Securities Association dated May
24, 1994 (collectively, the "Kidder/PSA Letter"), and the requirements
of the No-Action Letter of February 17, 1995 issued by the Commission
to the Public Securities Association (the "PSA Letter" and, together
with the Kidder/PSA Letter, the "No-Action Letters"); subject to the
following conditions: (i) such Underwriter shall comply with the
requirements of the No-Action Letters, (ii) for purposes hereof,
"Computational Materials" shall have the meaning given such term in the
No-Action Letters, but with respect to any Underwriter shall include
only those Computational Materials that have been prepared by such
Under writer for prospective investors and for purposes hereof and "ABS
Term Sheets" and "Collateral Term Sheets" shall have the meanings given
such terms in the PSA Letter but with respect to any Underwriter shall
include only those ABS Term Sheets or Collateral Term Sheets that have
been prepared by such Underwriter for prospective investors; (iii) each
Underwriter shall provide to the Seller any 8-K Information which is
provided to investors no later than the second Business Day preceding
the date such 8-K Information is required to be filed pursuant to the
applicable No-Action Letters and each Underwriter may provide copies of
the foregoing in a consolidated or aggregated form including all
information required to be filed; and (iv) in the event that the Seller
or any Underwriter discovers an error in the 8-K Information, the
Underwriter that prepared such material shall prepare corrected 8-K
Information and deliver it to the Seller for filing.
(b) The Seller will cause to be filed with the
Commission one or more current reports on Form 8-K with respect to the
8-K Information.
(c) Each Underwriter shall cause [____________________]
to furnish the Seller a letter
42
<PAGE> 43
dated no later than the Closing Date, in form and substance
satisfactory to the Seller, with respect to any 8-K Information
prepared by such Underwriter.
(d) Each Underwriter represents and warrants to, and
covenants with, the Seller that the Derived Information prepared by
such Underwriter for prospective investors, when read in conjunction
with the Prospectus, is not misleading and not inaccurate in any
material respect.
For purposes of this Underwriting Agreement, the term
"Derived Information" means such portion, if any, of 8-K Information
that is not Pool Information or Prospectus Information; provided,
however, that 8-K Information that is not Pool Information or
Prospectus Information shall not constitute Derived Information to the
extent such information is inaccurate or misleading in any material
respect directly as a result of it being based on Pool Information or
Prospectus Information that is inaccurate or misleading in any material
respect. "Pool Information" means the Computer Tape and the other
information furnished by magnetic tape, diskette or any other computer
readable format, or in writing to the Underwriters by the Seller, the
General Partner or Ford Credit regarding the Receivables and
"Prospectus Information" means the information contained in (but not
incorporated by reference in) any preliminary prospectus, provided,
however, that if any information that would otherwise constitute Pool
Information or Prospectus Information is presented in the 8-K
Information in a way that is either inaccurate or misleading in any
material respect when read in conjunction with the Prospectus and would
not be inaccurate or misleading in any material respect but for the
manner in which such information is presented, such information shall
not be Pool Information or Prospectus Information.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and
other statements (including, without limitation, Section 5(k) hereof)
of the Seller or the officers of the General Partner on behalf of the
Seller and of the Underwriters set forth in or made pursuant to this
Underwriting Agreement will remain in full force and effect, regardless
of any investigation or statement as to the results thereof,
43
<PAGE> 44
made by or on behalf of any Underwriter, the Seller or any of their
respective representatives, officers or directors of any controlling
person, and will survive delivery of and payment for the Underwritten
Notes and the Class C Certificates.
10. Failure to Purchase the Underwritten Notes or Class C
Certificates. If the purchase of the Underwritten Notes or the Class C
Certificates shall not be consummated because the circumstances
described in Section 6(f) shall have occurred, then the Seller shall
not have any liability to the Underwriters with respect to the
Underwritten Notes or the Class C Certificates except as provided in
Section 5(h) and Section 7 hereof; but if for any other reason the
Underwritten Notes or the Class C Certificates are not delivered to the
Underwriters as provided herein, the Seller will be liable to reimburse
the Underwriters, through the Representatives, for all out-of-pocket
expenses, including counsel fees and disbursements reasonably incurred
by the Underwriters in making preparations for the offering of the
Underwritten Notes and the Class C Certificates, but the Seller shall
not then have any further liability to any Underwriter with respect to
the Underwritten Notes or Class C Certificates except as provided in
Section 5(h) and Section 7 hereof. If any Underwriter or Underwriters
default on their obligations to purchase Underwritten Notes or Class C
Certificates hereunder and the aggregate principal amount of
Underwritten Notes or Class C Certificates that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not
exceed 10% of the total principal amount of the Underwritten Notes and
the Class C Certificates, the Representatives may make arrangements
satisfactory to the Seller for the purchase of such Underwritten Notes
or Class C Certificates by other persons, including the non-defaulting
Underwriter or Underwriters, but if no such arrangements are made by
the Closing Date, the non-defaulting Underwriter or Underwriters shall
be obligated, in proportion to their commitments hereunder, to
purchase the Underwritten Notes and Class C Certificates that such
defaulting Underwriter or Underwriters agreed but failed to purchase.
If any Underwriter or Underwriters so default and the aggregate
principal amount of Underwritten Notes or Certificate Balance of Class
C Certificates with respect to which such default or defaults occur
exceeds 10% of the total
44
<PAGE> 45
principal amount of the Underwritten Notes and the Class C Certificates
and arrangements satisfactory to the non-defaulting Underwriter or
Underwriters and the Seller for the purchase of such Underwritten Notes
and Class C Certificates by other persons are not made within 36 hours
after such default, this Underwriting Agreement will terminate without
liability on the part of any non-defaulting Underwriter and the Seller,
except as provided in Section 5(h) and Section 7 hereof. As used in
this Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Under writer or Underwriters from liability for
its default.
11. Notices. All communications hereunder will be in writing
and will be mailed, delivered or sent by facsimile transmission and
confirmed. Communications to the Representatives or the Underwriters
shall be given to the Representatives at [______________], Attention:
[___________] - facsimile number [____________]. Communications to the
Seller shall be given to it in care of the General Partner at The
American Road, Dearborn, Michigan 48121, attention of the Secretary -
facsimile number (313) 594-7742.
12. Successors. This Underwriting Agreement will inure to the
benefit of and be binding upon the Underwriters and the Seller and
their respective successors and the officers and directors and
controlling persons referred to in Section 7, and no other person will
have any right or obligations hereunder.
13. Applicable Law. This Underwriting Agreement shall be
governed by, and construed in accordance with, the laws of the State of
New York.
14. Counterparts. This Underwriting Agreement may be executed
by each of the parties hereto in any number of counterparts, and by
each of the parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one
and the same instrument.
45
<PAGE> 46
If the foregoing is in accordance with your under standing, please sign
and return to us a counterpart hereof, whereupon this letter and your acceptance
hereof shall constitute a binding agreement.
Very truly yours,
FORD CREDIT AUTO RECEIVABLES
TWO L.P.
By: FORD CREDIT AUTO RECEIVABLES
TWO, INC.,
as General Partner
By:
-------------------------------
Name:
Title:
Accepted in New York,
New York, as of the date hereof:
[ ]
-------------------
By:
-------------------------------
Name:
Title:
Acting on behalf of themselves and
as the Representatives of the
several Underwriters
<PAGE> 47
SCHEDULE I
<TABLE>
<CAPTION>
Initial Initial Initial Initial Initial Initial
Principal Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of Amount of
Class A-1 Class A-2 Class A-3 Class A-4 Class B Class C
Notes Notes Notes Notes Notes Certificates
----- ----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
[ ]
-----------
[ ]
-----------
[ ]
-----------
[ ]
-----------
Total................. $ $ $ $ $ $
</TABLE>
47
<PAGE> 1
EXHIBIT 4.2
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
among
FORD CREDIT AUTO RECEIVABLES TWO L.P.
as Depositor,
[ ],
-------------------------------
as Delaware Trustee
and
[ ],
--------------------
as Owner Trustee
Dated as of [ ]
------- ----, ----
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND USAGE
ARTICLE II ORGANIZATION OF THE TRUST
SECTION 2.1. Name..................................................2
SECTION 2.2. Offices...............................................2
SECTION 2.3. Purposes and Powers...................................2
SECTION 2.4. Appointment of Owner Trustee..........................3
SECTION 2.5. Appointment of Delaware Trustee.......................3
SECTION 2.6. Capital Contribution of Owner Trust
Estate................................................4
SECTION 2.7. Declaration of Trust..................................4
SECTION 2.8. Liability of the Depositor............................5
SECTION 2.9. Title to Trust Property...............................6
SECTION 2.10. Situs of Trust........................................6
SECTION 2.11. Representations and Warranties of the
Depositor.............................................6
SECTION 2.12. Federal Income Tax Matters............................8
ARTICLE III TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Beneficial Ownership.........................10
SECTION 3.2. Capital Accounts.....................................10
SECTION 3.3. The Certificates.....................................11
SECTION 3.4. Authentication of Certificates.......................11
SECTION 3.5. Registration of Certificates; Transfer
and Exchange of Certificates.........................12
SECTION 3.6. Mutilated, Destroyed, Lost or Stolen
Certificates.........................................19
SECTION 3.7. Persons Deemed Owners of Certificates................20
SECTION 3.8. Access to List of Certificateholders'
Names and Addresses..................................20
SECTION 3.9. Maintenance of Office or Agency......................21
SECTION 3.10. Appointment of Certificate Paying Agent..............21
SECTION 3.11. Certain Rights of Depositor..........................22
ARTICLE IV ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Prior Notice to Certificateholders with
Respect to Certain Matters...........................23
SECTION 4.2. Action by Certificateholders with
Respect to Certain Matters...........................24
SECTION 4.3. Action by Certificateholders with
Respect to Bankruptcy................................24
i
<PAGE> 3
SECTION 4.4. Restrictions on Certificateholders'
Power................................................25
SECTION 4.5. Majority Control.....................................25
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Establishment of Certificate
Distribution Account.................................25
SECTION 5.2. Application of Trust Funds...........................26
SECTION 5.3. Method of Payment....................................28
SECTION 5.4. No Segregation of Monies; No Interest................29
SECTION 5.5. Accounting and Reports to Noteholders,
Certificateholders, Internal Revenue
Service and Others...................................29
SECTION 5.6. Signature on Returns; Tax Matters
Partner..............................................30
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority....................................30
SECTION 6.2. General Duties.......................................31
SECTION 6.3. Action upon Instruction..............................31
SECTION 6.4. No Duties Except as Specified in this
Agreement or in Instructions.........................32
SECTION 6.5. No Action Except Under Specified
Documents or Instructions............................33
SECTION 6.6. Restrictions.........................................33
ARTICLE VII REGARDING THE OWNER TRUSTEE
SECTION 7.1. Acceptance of Trusts and Duties......................34
SECTION 7.2. Furnishing of Documents..............................36
SECTION 7.3. Representations and Warranties.......................36
SECTION 7.4. Reliance; Advice of Counsel..........................37
SECTION 7.5. Not Acting in Individual Capacity....................38
SECTION 7.6. Owner Trustee Not Liable for
Certificates or Receivables..........................38
SECTION 7.7. Co-Trustees May Own Certificates and Notes...........39
ARTICLE VIII COMPENSATION AND INDEMNITY OF OWNER TRUSTEE
SECTION 8.1. Owner Trustee's Fees and Expenses....................39
SECTION 8.2. Indemnification......................................40
SECTION 8.3. Payments to Co-Trustees..............................40
ii
<PAGE> 4
ARTICLE IX TERMINATION
SECTION 9.1. Termination of Trust Agreement.......................41
SECTION 9.2. Dissolution upon Insolvency or
Dissolution of Depositor or General Partner..........43
SECTION 9.3. Prepayment of Certificates...........................44
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL
OWNER TRUSTEES
SECTION 10.1. Eligibility Requirements for Owner Trustee...........46
SECTION 10.2. Resignation or Removal of Owner Trustee
or the Delaware Trustee..............................46
SECTION 10.3. Successor Owner Trustee or Delaware Trustee..........48
SECTION 10.4. Merger or Consolidation of Owner Trustee
or Delaware Trustee..................................49
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee........49
SECTION 10.6. Compliance with Business Trust Statute...............51
ARTICLE XI MISCELLANEOUS
SECTION 11.1. Supplements and Amendments...........................51
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders...................................53
SECTION 11.3. Limitation on Rights of Others.......................54
SECTION 11.4. Notices..............................................54
SECTION 11.5. Severability.........................................55
SECTION 11.6. Separate Counterparts................................55
SECTION 11.7. Successors and Assigns...............................55
SECTION 11.8. No Petition..........................................55
SECTION 11.9. No Recourse..........................................55
SECTION 11.10. Headings.............................................56
SECTION 11.11. Governing Law........................................56
SECTION 11.12. Sale and Servicing Agreement Obligations.............56
iii
<PAGE> 5
EXHIBIT A [FORM OF CLASS C CERTIFICATE]..................................A-1
EXHIBIT B [FORM OF CLASS D CERTIFICATE]..................................B-1
EXHIBIT C [FORM OF INVESTMENT LETTER -
CLASS C CERTIFICATES]..........................................C-1
EXHIBIT D [FORM OF INVESTMENT LETTER -
CLASS D CERTIFICATES QUALIFIED
INSTITUTIONAL BUYER]...........................................D-1
EXHIBIT E [FORM OF INVESTMENT LETTER -
CLASS D CERTIFICATES INSTITUTIONAL
ACCREDITED INVESTOR]...........................................E-1
EXHIBIT F FORM OF RULE 144A TRANSFEROR
CERTIFICATE - CLASS D CERTIFICATES.............................F-1
EXHIBIT G [FORM OF CERTIFICATE OF TRUST].................................G-1
APPENDIX A Definitions and Usage.........................................AA-1
iv
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT, dated as of [__________
__,_____] (as from time to time amended, supplemented or otherwise modified and
in effect, this "Agreement"), among FORD CREDIT AUTO RECEIVABLES TWO L.P., a
Delaware limited partnership, as Depositor, having its principal executive
office at The American Road, Dearborn, Michigan 48121; [_____________________],
a Delaware banking corporation not in its individual capacity but solely as
Delaware trustee under this Agreement (the "Delaware Trustee"), having its
principal corporate trust office at [___________________________]; and
[__________________], a [________] banking corporation (the "Bank"), not in its
individual capacity but solely as trustee under this Agreement (in such
capacity, the "Owner Trustee"), having its principal corporate trust office at
[___________________________] for the purpose of establishing the Ford Credit
Auto Owner Trust [1999- ][200 - ]. Each of the Delaware Trustee and the Owner
Trustee are referred to individually as a "Co- Trustee" and collectively as the
"Co-Trustees".
WHEREAS, the parties hereto intend to amend and restate that
certain Trust Agreement, dated as of [________,_____], among the Depositor, the
Delaware Trustee and the Owner Trustee, on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the Depositor, the Delaware Trustee and the Owner Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein are
defined in Appendix A hereto, which also contains rules as to usage that shall
be applicable herein.
<PAGE> 7
ARTICLE II
ORGANIZATION OF THE TRUST
SECTION 2.1. Name. The Trust created hereby shall be known as
"Ford Credit Auto Owner Trust [____-__]", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued on behalf of the Trust.
SECTION 2.2. Offices. The Delaware office of the Trust shall
be in care of the Delaware Trustee at the Corporate Trust Office or at such
other address in the State of Delaware as the Delaware Trustee may designate by
written notice to the Certificateholders and the Depositor. The New York office
of the Trust shall be in care of the Owner Trustee at the Corporate Trust Office
or at such other address in the State of New York as the Owner Trustee may
designate by written notice to the Certificateholders and the Depositor.
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust
is, and the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Notes pursuant to the Indenture, and the
Certificates pursuant to this Agreement, and to sell the Notes and the
Certificates upon the written order of the Depositor;
(ii) with the proceeds of the sale of the Notes and the
Certificates, to fund the Reserve Account, to pay the organizational,
start-up and transactional expenses of the Trust, and to pay the
balance to the Depositor pursuant to the Sale and Servicing Agreement;
(iii) to pay interest on and principal of the Notes and
distributions on the Certificates;
(iv) to Grant the Owner Trust Estate (other than each
Certificate Distribution Account and the proceeds thereof) to the
Indenture Trustee pursuant to the Indenture;
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(v) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vii) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Noteholders and the Certificateholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the other
Basic Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor
hereby appoints the Owner Trustee as trustee of the Trust effective as of the
date hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5. Appointment of Delaware Trustee. The Delaware
Trustee is appointed to serve as the trustee of the Trust in the State of
Delaware for the sole and limited purpose of satisfying the requirement of
Section 3807 of the Delaware Business Trust Statute that the Trust have at least
one trustee with a principal place of business in Delaware. It is understood and
agreed by the parties hereto and the Certificateholders that the Delaware
Trustee shall have none of the duties or liabilities of the Owner Trustee. The
duties of the Delaware Trustee shall be limited to (a) accepting legal process
served on the Trust in the State of Delaware and (b) the execution of any
certificates required to be filed with the Secretary of State of the State of
Delaware which the Delaware Trustee is required to execute pursuant to Section
3811 of the Business Trust Statute, and the Delaware Trustee shall provide
prompt notice to the Owner Trustee of its performance of any such acts. The
parties hereto and the Certificateholders understand and agree that the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the
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Delaware Trustee have any of the duties and liabilities, of the Owner Trustee.
The Delaware Trustee shall not be liable for the acts or omissions of the Owner
Trustee, the Depositor or the Trust. To the extent that, at law or in equity,
the Delaware Trustee has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to the Certificateholders, it is hereby
understood and agreed by the other parties hereto and the Certificateholders
that such duties and liabilities are replaced by the duties and liabilities of
the Delaware Trustee expressly set forth in this Trust Agreement. The Delaware
Trustee shall owe no fiduciary or other duties to the Trust or to the Depositor
except as expressly provided for herein.
SECTION 2.6. Capital Contribution of Owner Trust Estate. As of
[______ ___,_____], the Depositor sold, assigned, transferred, conveyed and set
over to the Owner Trustee the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of such date, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Distribution Account. The Depositor shall pay the
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee or the Delaware Trustee, promptly reimburse the
Owner Trustee or the Delaware Trustee for any such expenses paid by the Owner
Trustee or the Delaware Trustee. On the Closing Date, the Depositor shall convey
to the Trust the Trust Property and the Owner Trustee shall convey to the
Depositor the Notes and the Certificates.
SECTION 2.7. Declaration of Trust. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein for the use and benefit of the
Certificateholders, subject to the obligations of the Trust under the Basic
Documents. It is the intention of the parties hereto that (i) the Trust
constitute a business trust under the Business Trust Statute and that this
Agreement constitute the governing instrument of such business trust and (ii)
for income and franchise tax purposes, the Trust shall be treated as a
partnership, with the assets of the partnership being the Receivables and other
assets held by the Trust, the partners of the partnership being the
Certificateholders and the
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Depositor and the Notes constituting indebtedness of the partnership. The
parties agree that, unless otherwise required by the appropriate tax
authorities, the Depositor, on behalf of the Trust, will file or cause to be
filed annual or other necessary returns, reports and other forms consistent with
the characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have the rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust. Together with the Delaware Trustee, the
Owner Trustee has filed the Certificate of Trust with the Secretary of State.
SECTION 2.8. Liability of the Depositor. (a)
Notwithstanding Section 3803 of the Business Trust Statute, the Depositor in its
capacity as the holder of the interests described in Section 3.11 shall be
liable directly to, and will indemnify each injured party for, all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses, to
the extent that the assets of the Trust that would remain if all of the Notes
were paid in full would be insufficient to pay any such losses, claims, damages,
liabilities or expenses, or to the extent that such losses, claims, damages,
liabilities and expenses in fact are not paid out of the Owner Trust Estate)
that the Depositor would be liable for if the Trust were a partnership under the
Limited Partnership Act in which the Depositor were a general partner; provided,
however, that the Depositor shall not be liable to or indemnify Noteholders or
Note Owners for any losses incurred by Noteholders or Note Owners in their
capacity as holders of or beneficial owners of interests in limited recourse
debt secured by the Owner Trust Estate or be liable to or indemnify
Certificateholders for any losses incurred by the Certificateholders if such
losses would nevertheless have been incurred if the Certificates were limited
recourse debt secured by the Owner Trust Estate. In addition, any third-party
creditors of the Trust, or the arrangement between the Depositor and the Trust
(other than in connection with the obligations described in the preceding
sentence for which the Depositor shall not be liable), shall be deemed
third-party beneficiaries of this paragraph.
(b) No Certificateholder other than the Depositor to the
extent set forth in paragraph (a) of
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this Section 2.8, shall have any personal liability for any liability or
obligation of the Trust.
SECTION 2.9. Title to Trust Property. Legal title to the
entirety of the Owner Trust Estate shall be vested at all times in the Trust as
a separate legal entity, except where applicable law in any jurisdiction
requires title to any part of the Owner Trust Estate to be vested in a trustee
or trustees, in which case title shall be deemed to be vested in the Owner
Trustee, a co-trustee and/or a separate trustee, as the case may be.
SECTION 2.10. Situs of Trust. The Trust shall be administered
in the State of New York. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. The Trust shall not have any employees in any state other than the
State of Delaware; provided, however, that nothing herein shall restrict or
prohibit the Bank, the Delaware Trustee or the Owner Trustee from having
employees within or without the State of Delaware. Payments will be received by
the Trust only in Delaware or New York, and payments will be made by the Trust
only from Delaware or New York. The principal office of the Trust shall be in
care of the Delaware Trustee in the State of Delaware. The Trust shall also have
an office in care of the Owner Trustee in the State of New York.
SECTION 2.11. Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Owner Trustee and the
Delaware Trustee that:
(a) The Depositor is duly organized and validly existing as a
limited partnership in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently conducted.
(b) The Depositor is duly qualified to do business as a
foreign limited partnership in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such qualifications.
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(c) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms, and the Depositor has full
power and authority to sell and assign the property to be sold and assigned to,
and deposited with, the Trust, and the Depositor has duly authorized such sale
and assignment and deposit to the Trust; and the execution, delivery and
performance of this Agreement has been duly authorized by the Depositor.
(d) This Agreement constitutes a legal, valid, and binding
obligation of the Depositor, enforceable against the Depositor in accordance
with its terms, subject, as to enforceability, to applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership, liquidation and
other similar laws and to general equitable principles.
(e) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, the Certificate of
Limited Partnership or the Limited Partnership Agreement, or any indenture,
agreement or other instrument to which the Depositor is a party or by which it
is bound; nor result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any law
or, to the best of the Depositor's knowledge, any order, rule or regulation
applicable to the Depositor of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(f) There are no proceedings or investigations pending or, to
the Depositor's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Depositor or its properties: (i) asserting the invalidity of this
Agreement, the Indenture, any of the other Basic Documents, the Notes or the
Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Indenture or any of the other Basic Documents, (iii)
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seeking any determination or ruling that might materially and adversely affect
the performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement or (iv) which might adversely affect the
federal income tax attributes, or Applicable Tax State franchise or income tax
attributes, of the Notes and the Certificates.
(g) The representations and warranties of the Depositor in
Section 3.1 of the Purchase Agreement are true and correct.
SECTION 2.12. Federal Income Tax Matters. The
Certificateholders acknowledge that it is their intent and that they understand
it is the intent of the Depositor and the Servicer that, for purposes of federal
income, state and local income and franchise tax and any other income taxes, the
Trust will be treated as a partnership and the Certificateholders and the
Depositor will be treated as partners in that partnership. The Depositor hereby
agrees and the Certificateholders by acceptance of a Certificate agree to such
treatment and each agrees to take no action inconsistent with such treatment.
For purposes of federal income, State and local income and franchise tax and any
other income taxes each month:
(a) amounts paid to any Certificateholder pursuant to Section
5.2(a)(i) shall be treated as a guaranteed payment within the meaning
of Section 707(c) of the Code;
(b) to the extent the characterization provided for in
paragraph (a) of this Section 2.11 is not respected, gross ordinary
income of the Trust for such month as determined for federal income tax
purposes shall be allocated among the Certificateholders of each
Class of Certificates as of the Record Date occurring within such
month, in proportion to their ownership of the Aggregate Certificate
Balance on such date, in an amount up to the sum of (i) the Accrued
Class C Certificate Interest or Accrued Class D Certificate Interest,
as applicable, for such Class for such month, (ii) the portion of the
market discount on the Receivables accrued during such month that is
allocable to the excess, if any, of the aggregate Initial Certificate
Balance
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of such class of Certificates over the initial aggregate issue price of
such Class of Certificates and (iii) any amount expected to be
distributed to the Certificateholders of such Class pursuant to
Sections 4.6(c) and (d) of the Sale and Servicing Agreement (to the
extent not previously allocated pursuant to this paragraph (b)) to the
extent necessary to reverse any net loss previously allocated to
Certificateholders of such Class (to the extent not previously reversed
pursuant to this clause (iii)); and
(c) thereafter all remaining net income of the Trust (subject
to the modifications set forth below) for such month as determined for
federal income tax purposes (and each item of income, gain, credit,
loss or deduction entering into the computation thereof) shall be
allocated to the Depositor, to the extent thereof.
If the gross ordinary income of the Trust for any month is insufficient for the
allocations described in paragraph (b) above, subsequent gross ordinary income
shall first be allocated to make up such shortfall before any allocation
pursuant to paragraph (c) above. Net losses of the Trust, if any, for any month
as determined for federal income tax purposes (and each item of income, gain,
credit, loss or deduction entering into the computation thereof) shall be
allocated to the Depositor to the extent the Depositor, in its capacity as
"general partner," is reasonably expected to bear the economic burden of such
net losses, and any remaining net losses shall be allocated among the
Certificateholders as of the Record Date occurring within such month in
proportion to their ownership of the Aggregate Certificate Balance on such
Record Date. The Depositor is authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the Depositor
or the Certificateholders or as otherwise required by the Code.
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ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Beneficial Ownership. Upon the formation
of the Trust by the contribution by the Depositor pursuant to Section 2.5 and
until the issuance of the Certificates, the Depositor shall be the sole
beneficial owner of the Owner Trust Estate.
SECTION 3.2. Capital Accounts. (a) The Owner Trustee shall
establish and maintain a separate bookkeeping account (a "Capital Account") for
the Depositor and each Certificateholder. The initial balance of the Capital
Account for (i) each Certificateholder shall be the amount initially paid for
such Certificateholder's Certificates and (ii) the Depositor shall be (x) the
fair market value of the Receivables minus (y) the proceeds of the sale of Notes
and Certificates net of the Reserve Initial Deposit. The Capital Account of the
Depositor or each Certificateholder shall also be increased by (i) the dollar
amount of any additional cash contributions made by the Depositor or such
Certificateholder, as the case may be, (ii) the fair market value of any
property (other than cash) contributed to the Trust by the Depositor or such
Certificateholder, as the case may be (net of any liabilities to which the
property is subject), and (iii) allocations to the Depositor or such
Certificateholder, as the case may be, of income and gain (including income
exempt from tax). The Capital Account of the Depositor or each Certificateholder
shall be decreased by (i) the dollar amount of any cash distributions made to
the Depositor or such Certificateholder, as the case may be, (ii) the fair
market value of any property (other than cash) distributed to the Depositor or
such Certificateholder, as the case may be (net of any liabilities to which the
property is subject), (iii) allocations to the Depositor or such
Certificateholder, as the case may be, of loss or deductions (or items thereof),
and (iv) any allocations of expenditures of the Trust described in Section
705(a)(2)(B) of the Code.
(b) Notwithstanding any other provision of this
Agreement to the contrary, the foregoing provisions of this Section 3.2
regarding the maintenance of Capital Accounts shall be construed so as to comply
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with the provisions of the Treasury Regulations promulgated pursuant to Section
704 of the Code. The Depositor is hereby authorized to modify these provisions
to the minimum extent necessary to comply with such regulations.
SECTION 3.3. The Certificates. (a) The Class C Certificates
and the Class D Certificates shall each be issued in one or more registered,
definitive, physical certificates, in the form set forth in Exhibit A and
Exhibit B, respectively, in denominations of at least $20,000 and in integral
multiples of $1,000 in excess thereof. No Certificate may be sold, transferred,
as signed, participated, pledged, or otherwise disposed of (any such act, a
"Transfer") to any Person except in accordance with the provisions of Section
3.5 and any attempted Transfer in violation of Section 3.5 shall be null and
void (each a "Void Transfer").
(b) The Certificates shall be executed on behalf of the Trust
by manual or facsimile signature of an authorized officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefits of
this Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of authentication and
delivery of such Certificates.
(c) If Transfer of the Certificates is permitted pursuant to
Section 3.5, a transferee of a Certificate shall become a Certificateholder,
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 3.5.
SECTION 3.4. Authentication of Certificates. Concurrently with
the initial sale of the Receivables to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause the Class C Certificates, in
an aggregate principal balance equal to the Initial Certificate Balance of such
Class C Certificates, and the Class D Certificates, in an aggregate principal
balance
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equal to the Initial Certificate Balance of such Class D Certificates, to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by the chairman of the board, the
president, any executive vice president, any vice president, the secretary, any
assistant secretary, the treasurer or any assistant treasurer of the General
Partner, without further action by the Depositor, in authorized denominations.
No Certificate shall entitle its Certificateholder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit A or Exhibit B, as applicable, attached hereto executed by the Owner
Trustee by manual signature; such authentication shall constitute conclusive
evidence that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 3.5. Registration of Certificates; Transfer and
Exchange of Certificates. (a) The Certificate Registrar shall keep or cause to
be kept, at the office or agency maintained pursuant to Section 3.9, a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Trust shall provide for the registration of Certificates and of
Transfers and exchanges of Certificates as herein provided. [_______] shall be
the initial Certificate Registrar. No Transfer of a Certificate shall be
recognized except upon registration of such Transfer in the Certificate
Register.
(b) No Transfer of any Class C Certificate shall be permitted,
recognized or recorded unless the prospective transferee of such Class C
Certificate shall provide a letter in the form of Exhibit C hereof to the Trust,
the Owner Trustee and the Certificate Registrar, in which such prospective
transferee shall represent the following:
(i) It is either:
(A) not, and each account (if any) for which it is purchasing
the Class C Certificates is not (1) an employee benefit plan,
as defined in Section 3(3) of ERISA, that is subject to
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Title I of ERISA, (2) a plan described in Section 4975(e)(1)
of the Code that is subject to Section 4975 of the Code, (3) 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, (4) 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. ss. 2510.3-101 or otherwise under
ERISA) or (5) a person investing "plan assets" of any such
plan (including without limitation, for purposes of this
clause (5), an insurance company general account, but
excluding any entity registered under the Investment Company
Act of 1940, as amended); or
(B) an insurance company acting on behalf of a general account
and (1) on the date of purchase less than 25% of the assets of
such general account (as reasonably determined by it)
constitute "plan assets" for purposes of Title I of ERISA and
Section 4975 of the Code, (2) the purchase and holding of such
Class C Certificates are eligible for exemptive relief under
Sections (I) and (III) of Prohibited Transaction Class
Exemption 95-60, and (3) the purchaser agrees that if, after
the purchaser's initial acquisition of the Class C
Certificates, at any time during any calendar quarter 25% or
more of the assets of such general account (as reasonably
determined by it 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 Class C 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, it will dispose of all Class
C Certificates then held in its general account by the end of
the next following calendar quarter.
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(ii) It is, and each account (if any) for which it is purchasing the
Class C 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 the administration of such trust and
one or more Persons meeting the conditions of clause (A), (B), (C) or (E)
of this paragraph (ii) 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 Class C 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 Owner
Trustee and the Depositor with an IRS Form 4224 (and such other
certifications, representations, or opinions of counsel as may be requested
by the Owner Trustee or the Depositor).
(iii) It understands that any purported Transfer of any Class C
Certificate (or any interest therein) to any Person who does not meet the
conditions of paragraphs (i) and (ii) above shall be a Void Transfer, and
the purported transferee in a Void Transfer shall not be recognized by the
Trust or any other Person as a Certificateholder for any purpose.
(iv) It agrees that if it determines to Transfer any of the Class C
Certificates it will cause its proposed transferee to provide to the Trust,
the Owner Trustee and the Certificate Registrar a letter substantially in
the form of Exhibit C hereof or such other written statement as the
Depositor shall prescribe.
(c) Each Class D Certificate shall bear a legend to the following
effect unless determined otherwise by the Administrator (as certified to the
Owner Trustee in an Officer's Certificate) and the Owner Trustee consistent with
applicable law:
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"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES. THE
HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES FOR THE BENEFIT OF THE
TRUST AND THE DEPOSITOR THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS, AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN
EACH CASE, THAT THE REOFFER, RESALE, PLEDGE, OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, SUBJECT TO (A) THE RECEIPT BY THE TRUST AND THE
CERTIFICATE REGISTRAR OF A CERTIFICATE SUBSTANTIALLY IN THE FORM ATTACHED AS
EXHIBIT F TO THE TRUST AGREEMENT AND (B) THE RECEIPT BY THE TRUST AND THE
CERTIFICATE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM ATTACHED AS EXHIBIT
D TO THE TRUST AGREEMENT, WITH SUCH CHANGES THEREIN AS MAY BE APPROVED BY THE
DEPOSITOR, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), SUBJECT TO THE RECEIPT BY THE TRUST,
THE INITIAL PURCHASER AND THE CERTIFICATE REGISTRAR OF SUCH EVIDENCE ACCEPTABLE
TO THE TRUST AND THE INITIAL PURCHASER THAT SUCH REOFFER, RESALE, PLEDGE OR
TRANSFER IS IN COMPLIANCE WITH THE TRUST AGREEMENT AND THE SECURITIES ACT AND
OTHER APPLICABLE LAWS, (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING THEREOF IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUST AND
THE CERTIFICATE REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM ATTACHED AS
EXHIBIT E TO THE TRUST AGREEMENT OR (B) THE RECEIPT BY THE TRUST, THE INITIAL
PURCHASER AND THE CERTIFICATE REGISTRAR OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE
TRUST AND THE INITIAL PURCHASER THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS
IN COMPLIANCE WITH THE TRUST AGREEMENT AND THE SECURITIES ACT AND OTHER
APPLICABLE LAWS, OR (4) TO THE DEPOSITOR OR ITS AFFILIATES, IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND
SECURITIES AND BLUE SKY LAWS OF THE STATES OF THE UNITED STATES."
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As a condition to the registration of any Transfer of a Class
D Certificate, the prospective transferee of such a Class D Certificate shall be
required to represent in writing to the Owner Trustee, the Certificate Registrar
and the Initial Purchaser the following, unless determined otherwise by the
Administrator (as certified to the Owner Trustee in an Officer's Certificate):
(i) It understands that no subsequent Transfer of the
Class D Certificates is permitted unless it causes its proposed
transferee to provide to the Trust, the Certificate Registrar and the
Initial Purchaser a letter substantially in the form of Exhibit D or
Exhibit E hereof (with such changes therein as may be approved by the
Depositor), as applicable, or such other written statement as the
Depositor shall prescribe.
(ii) It is not, and each account (if any) for which
it is purchasing the Class D Certificates is not, (A) an employee
benefit plan, as defined in Section 3(3) of ERISA, that is subject to
Title I of ERISA, (B) a plan described in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, (C) 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, (D) 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 (E) a person investing "plan assets" of any such plan (including
without limitation, for purposes of this clause (E), subject to any
exceptions approved by the Depositor, an insurance company general
account, but excluding any entity registered under the Investment
Company Act of 1940, as amended).
(iii) It 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,
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regardless of its source, (D) a trust if a U.S. court is able to
exercise primary supervision over the administration of such trust and
one or more persons described in clause (A), (B), (C) or (E) of this
paragraph (iii) has the authority to control all substantial decisions
of the trust or (E) a person not described in clauses (A) though (D) of
this paragraph (iii) whose ownership of the Class D 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 Trust and the Depositor with an IRS Form 4224 (and such
other certifications, representations, or opinions of counsel as may be
requested by the Trust or the Depositor).
(iv) It understands that any purported Transfer of
any Class D Certificate (or any interest therein) in contravention of
any of the restrictions and conditions contained in this Section will
be a Void Transfer, and the purported transferee in a Void Transfer
will not be recognized by the Trust or any other person as a
Certificateholder for any purpose.
(d) By acceptance of any Class D Certificate, the
Certificateholder thereof specifically agrees with and represents to the
Depositor, the Trust and the Certificate Registrar, that no Transfer of such
Class D Certificate shall be made unless the registration requirements of the
Securities Act and any applicable State securities laws are complied with, or
such Transfer is exempt from the registration requirements under the Securities
Act because the Transfer satisfies one of the following:
(i) such Transfer is in compliance with Rule 144A
under the Securities Act ("Rule 144A"), to a transferee who the
transferor reasonably believes is a Qualified Institutional Buyer that
is purchasing for its own account or for the account of a Qualified
Institutional Buyer and to whom notice is given that such Transfer is
being made in reliance upon Rule 144A under the Securities Act and (x)
the transferor executes and delivers to the Trust and the Certificate
Registrar, a Rule 144A transferor certificate substantially in the form
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attached as Exhibit F and (y) the transferee executes and delivers to
the Trust and the Certificate Registrar an investment letter
substantially in the form attached as Exhibit D;
(ii) after the appropriate holding period, such
Transfer is pursuant to an exemption from registration under the
Securities Act provided by Rule 144 under the Securities Act and the
transferee, if requested by the Trust, the Certificate Registrar or
the Initial Purchaser, delivers an Opinion of Counsel in form and
substance satisfactory to the Trust and the Initial Purchaser; or
(iii) such Transfer is to an institutional accredited
investor as defined in rule 501(a)(1), (2), (3) or (7) of Regulation D
promulgated under the Securities Act in a transaction exempt from the
registration requirements of the Securities Act, such Transfer is in
accordance with any applicable securities laws of any State of the
United States or any other jurisdiction, and such investor executes and
delivers to the Trust and the Certificate Registrar an investment
letter substantially in the form attached as Exhibit E.
(e) The Depositor shall make available to the prospective
transferor and transferee of a Class D Certificate information requested to
satisfy the requirements of paragraph (d)(4) of Rule 144A (the "Rule 144A
Information"). The Rule 144A Information shall include any or all of the
following items requested by the prospective transferee:
(i) the private placement memorandum, if any,
relating to the Class D Certificates, and any amendments or supplements
thereto;
(ii) each statement delivered to Certificateholders
pursuant to Section 5.2(b) on each Distribution Date preceding such
request; and
(iii) such other information as is reasonably
available to the Owner Trustee in order to comply with requests for
information pursuant to Rule 144A under the Securities Act.
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None of the Depositor, the Certificate Registrar or the Owner
Trustee is under an obligation to register any Class D Certificate under the
Securities Act or any other securities law.
(f) Upon surrender for registration of Transfer of any
Certificate at the office or agency maintained pursuant to Section 3.9 and upon
compliance with any provisions of this Agreement relating to such Transfer, the
Owner Trustee shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates in
authorized denominations of a like Class and aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the option
of a Certificateholder, Certificates may be exchanged for other Certificates of
authorized denominations of a like Class and aggregate amount upon surrender of
the Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.9.
Every Certificate presented or surrendered for registration of
Transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar, duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company. Each Certificate surrendered for
registration of Transfer or exchange shall be cancelled and subsequently
disposed of by the Certificate Registrar in accordance with its customary
practice.
No service charge shall be made for any registration of
Transfer or exchange of Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or govern
mental charge that may be imposed in connection with any Transfer or exchange of
Certificates.
The preceding provisions of this Section 3.5 notwithstanding,
the Owner Trustee shall not make and the Certificate Registrar need not register
any Transfer or exchange of Certificates for a period of fifteen (15) days
preceding any Distribution Date for any payment with respect to the
Certificates.
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SECTION 3.6. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, the Owner Trustee on behalf of the Trust shall execute
and the Owner Trustee shall authenticate and deliver, in exchange for, or in
lieu of, any such mutilated, destroyed, lost or stolen Certificate a new
Certificate of like Class, tenor and denomination. In connection with the
issuance of any new Certificate under this Section 3.6, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section 3.6 shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found at any time.
SECTION 3.7. Persons Deemed Owners of Certificates. Prior to
due presentation of a Certificate for registration of Transfer, the Owner
Trustee, the Certificate Registrar and any Certificate Paying Agent may treat
the Person in whose name any Certificate shall be registered in the Certificate
Register as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.2 and for all other purposes whatsoever, and
none of the Owner Trustee, the Certificate Registrar or any Certificate Paying
Agent shall be bound by any notice to the contrary.
SECTION 3.8. Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Depositor, or to the Indenture Trustee, within fifteen (15)
days after receipt by the Owner Trustee of a written request therefor from the
Servicer or the Depositor, or the Indenture Trustee, as the case may be, a list,
in such form as the requesting party may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date. If
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three or more Certificateholders or one or more Certificateholders of
Certificates evidencing not less than 25% of the Aggregate Certificate Balance
apply in writing to the Owner Trustee, and such application states that the
applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates and such application
is accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five (5) Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each
Certificateholder, by receiving and holding a Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.9. Maintenance of Office or Agency. The Owner
Trustee shall maintain in the State of New York, an office or offices or agency
or agencies where Certificates may be surrendered for registration of Transfer
or exchange and where notices and demands to or upon the Owner Trustee in
respect of the Certificates and the Basic Documents may be served. The Owner
Trustee initially designates [ ] as its
principal corporate trust office for such purposes. The Owner Trustee shall
give prompt written notice to the Depositor and to the Certificateholders of any
change in the location of the Certificate Registrar or any such office or
agency.
SECTION 3.10. Appointment of Certificate Paying Agent. The
Certificate Paying Agent shall make distributions to Certificateholders from
each Certificate Distribution Account pursuant to Section 5.2 and shall report
the amounts of such distributions to the Owner Trustee. Any Certificate Paying
Agent shall have the revocable power to withdraw funds from each Certificate
Distribution Account for the purpose of making the distributions referred to
above. The Owner Trustee may revoke such power and remove the Certificate Paying
Agent if the Owner Trustee determines in its sole discretion that the
Certificate Paying Agent shall have failed to perform its obligations under this
Agreement in any
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material respect. The Certificate Paying Agent shall initially be the Owner
Trustee, and any co-paying agent chosen by the Owner Trustee. The Owner Trustee
shall be permitted to resign as Certificate Paying Agent upon thirty (30) days'
written notice to the Owner Trustee. In the event that [_______] shall no longer
be the Certificate Paying Agent, the Owner Trustee shall appoint a successor to
act as Certificate Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Certificate Paying Agent or any
additional Certificate Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee an instrument in which such successor
Certificate Paying Agent or additional Certificate Paying Agent shall agree with
the Owner Trustee that as Certificate Paying Agent, such successor Certificate
Paying Agent or additional Certificate Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Certificate Paying Agent shall return all unclaimed
funds to the Owner Trustee and upon removal of a Certificate Paying Agent such
Certificate Paying Agent shall also return all funds in its possession to the
Owner Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply to
the Owner Trustee also in its role as Certificate Paying Agent, for so long as
the Owner Trustee shall act as Certificate Paying Agent and, to the extent
applicable, to any other paying agent appointed hereunder. Any reference in this
Agreement to the Certificate Paying Agent shall include any co-paying agent
unless the context requires otherwise.
SECTION 3.11. Certain Rights of Depositor. The Depositor shall
be entitled to any amounts not needed on any Distribution Date to make payments
on the Notes or the Certificates or to make deposits to the Reserve Account
pursuant to Section 4.6 of the Sale and Servicing Agreement, and to receive
amounts remaining in the Reserve Account following the payment in full of the
aggregate principal amount of the Notes and the Aggregate Certificate Balance
and of all other amounts owing or to be distributed hereunder or under the
Indenture or the Sale and Servicing Agreement to Noteholders and
Certificateholders and the termination of the Trust. The Depositor may not
Transfer any such rights unless it shall have received an Opinion of Counsel
that such
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Transfer shall not cause the Trust to be classified as an association (or
publicly traded partnership) taxable as a corporation.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Prior Notice to Certificate holders with Respect
to Certain Matters. It is the intention of the Depositor and the
Certificateholders that the powers and duties of the Owner Trustee are
ministerial and non-ministerial; provided, however, that any non-ministerial
action (including the taking of any legal action) may only be taken by the Owner
Trustee in accordance with this Section 4.1. With respect to the following
matters, the Owner Trustee shall not take action unless, (I) at least thirty
(30) days before the taking of such action, the Owner Trustee shall have
notified the Certificateholders and the Rating Agencies in writing of the
proposed action and (II) Certificateholders holding not less than a majority of
the Aggregate Certificate Balance shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuits brought by the Servicer in connection
with the collection of the Receivables) and the settlement of any
material action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection by the Servicer of the Receivables);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute);
(c) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any Noteholder is
required;
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(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required
and such amendment materially adversely affects the interests of the
Certificateholders;
(e) the amendment, change or modification of the Sale and
Servicing Agreement or the Administration Agreement, except to cure any
ambiguity or to amend or supplement any provision in a manner or to add
any provision that would not materially adversely affect the interests
of the Certificateholders; or
(f) the appointment pursuant to the Indenture of a successor
Note Registrar, Note Paying Agent or Indenture Trustee, or pursuant to
this Agreement of a successor Certificate Registrar, or the consent to
the assignment by the Note Registrar, Note Paying Agent or Indenture
Trustee or Certificate Registrar of its obligations under the Indenture
or this Agreement, as applicable.
SECTION 4.2. Action by Certificateholders with Respect to
Certain Matters. The Owner Trustee may not, except upon the occurrence of an
Event of Servicing Termination subsequent to the payment in full of the Notes
and in accordance with the written direction of Certificateholders holding not
less than a majority of the Aggregate Certificate Balance, (a) remove the
Servicer under the Sale and Servicing Agreement pursuant to Article VIII
thereof, (b) appoint a successor Servicer pursuant to Article VIII of the Sale
and Servicing Agreement, (c) remove the Administrator under the Administration
Agreement pursuant to Section 9 thereof or (d) appoint a successor Administrator
pursuant to Section 9 of the Administration Agreement.
SECTION 4.3. Action by Certificateholders with Respect to
Bankruptcy. The Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust unless the Notes have been paid
in full and each Certificateholder (other than the Depositor) approves of such
commencement in advance and delivers to the Owner Trustee a certificate
certifying that such Certificateholder reasonably believes that the Trust is
insolvent.
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SECTION 4.4. Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the other Basic
Documents or would be contrary to Section 2.3, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
SECTION 4.5. Majority Control. Except as expressly provided
herein, any action that may be taken by the Certificateholders under this
Agreement may be taken by the Certificateholders of Certificates evidencing not
less than a majority of the Aggregate Certificate Balance. Except as expressly
provided herein, any written notice of the Certificateholders delivered
pursuant to this Agreement shall be effective if signed by Certificateholders of
Certificates evidencing not less than a majority of the Aggregate Certificate
Balance at the time of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Establishment of Certificate Distribution Account.
Pursuant to Section 4.1(c) of the Sale and Servicing Agreement, there has been
established and there shall be maintained two segregated trust accounts, each
in the name of "[__________________________], as Owner Trustee" at a Qualified
Institution or Qualified Trust Institution (which shall initially be
[____________________]), which shall be designated as the "Certificate Interest
Distribution Account" and the "Certificate Principal Distribution Account,"
respectively (each of the Certificate Interest Distribution Account and the
Certificate Principal Distribution Account, a "Certificate Distribution
Account"). Except as expressly provided in Section 3.10, each Certificate
Distribution Account shall be under the sole dominion and control of the Owner
Trustee. All monies deposited from time to time in each Certificate Distribution
Account pursuant to the Sale and Servicing Agreement shall be applied as
provided in the Basic
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Documents. In the event that either Certificate Distribution Account is no
longer to be maintained at [_____________________], the Servicer shall, with the
Owner Trustee's assistance as necessary, cause such Certificate Distribution
Account to be moved to a Qualified Institution or a Qualified Trust Institution
within ten (10) Business Days (or such longer period not to exceed thirty (30)
calendar days as to which each Rating Agency may consent). Each Certificate
Distribution Account will be established and maintained pursuant to an account
agreement which specifies New York law as the governing law.
SECTION 5.2. Application of Trust Funds. (a) On each Distribution
Date, the Owner Trustee shall, based on the information contained in the
Servicer's Certificate delivered on the relevant Determination Date pursuant to
Section 3.9 of the Sale and Servicing Agreement:
(i) withdraw the amounts deposited into the Certificate
Interest Distribution Account pursuant to Section 4.6(c) of the
Sale and Servicing Agreement on or prior to such Distribution Date
and make or cause to be made distributions and payments in the
following order of priority:
(1) first, to the Certificateholders of Class C
Certificates, an amount equal to the Accrued Class C
Certificate Interest, provided that if there are not
sufficient funds available to pay the entire amount of the
Accrued Class C Certificate Interest, the amounts available
shall be applied to the payment of such interest on the Class
C Certificates on a pro rata basis;
(2) second, to the Certificateholders of Class D
Certificates, an amount equal to the Accrued Class D
Certificate Interest; provided that if there are not
sufficient funds available to pay the entire amount of the
Accrued Class D Certificate Interest, the amounts available
shall be
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applied to the payment of such interest on the Class D
Certificates on a pro rata basis; and
(3) third, to the Depositor, any funds remaining on
deposit in the Certificate Interest Distribution Account.
(ii) withdraw the amounts deposited into the Certificate
Principal Distribution Account pursuant to Section 4.6(c) and (d)
of the Sale and Servicing Agreement on or prior to such
Distribution Date and make or cause to be made distributions and
payments in the following order of priority:
(1) first, to the Certificateholders of the Class C
Certificates 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; provided that
if there are not sufficient funds available to reduce the
Certificate Balance of the Class C Certificates to zero, the
amounts available shall be applied to the reduction of the
Certificate Balance of the Class C Certificates on a pro rata
basis;
(2) second, to the Certificateholders of the Class D
Certificates 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; provided that
if there are not sufficient funds available to reduce the
Certificate Balance of the Class D Certificates to zero, the
amounts available shall be applied to the reduction of the
Certificate Balance of the Class D Certificates on pro rata
basis; and
(3) third, to the Depositor, any funds remaining on
deposit in the
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Certificate Principal Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall, or shall
cause the Certificate Paying Agent to, send to each Certificateholder as of the
related Record Date the statement provided to the Owner Trustee by the Servicer
pursuant to Section 4.9 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Certificateholder, such tax
shall reduce the amount otherwise distributable to such Certificateholder in
accordance with this Section 5.2. The Owner Trustee and each Certificate Paying
Agent is hereby authorized and directed to retain from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment of any
such withholding tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed
with respect to a Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Owner Trustee may, in its sole discretion, withhold such
amounts in accordance with this paragraph (c). In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax, the
Owner Trustee shall reasonably cooperate with such Certificateholder in making
such claim so long as such Certificateholder agrees to reimburse the Owner
Trustee for any out-of-pocket expenses incurred.
SECTION 5.3. Method of Payment. Subject to Section 9.1(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if (i) such Certificateholder shall have
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provided to the Certificate Registrar appropriate written instructions at least
five (5) Business Days prior to such Distribution Date and such
Certificateholder's Certificates in the aggregate evidence a denomination of not
less than $1,000,000, or (ii) such Certificateholder is the Depositor or, if
not, by check mailed to such Certificateholder at the address of such
Certificateholder appearing in the Certificate Register. Notwithstanding the
foregoing, the final distribution in respect of any Certificate (whether on the
applicable Final Scheduled Distribution Date or otherwise) will be payable only
upon presentation and surrender of such Certificate at the office or agency
maintained for that purpose by the Owner Trustee pursuant to Section 3.9.
SECTION 5.4. No Segregation of Monies; No Interest. Subject to
Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law, the Indenture
or the Sale and Servicing Agreement, and may be deposited under such general
conditions as may be prescribed by law, and the Owner Trustee shall not be
liable for any interest thereon.
SECTION 5.5. Accounting and Reports to Noteholders,
Certificateholders, Internal Revenue Service and Others. The Owner Trustee
shall, based on information provided by or on behalf of the Depositor, (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis on the accrual method of accounting, (b) deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1) to enable each Certificateholder to prepare its federal and State
income tax returns, (c) file (or cause to be filed) such tax returns relating to
the Trust (including a partnership information return, IRS Form 1065), and make
such elections as may from time to time be required or appropriate under any
applicable State or federal statute or rule or regulation thereunder so as to
maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect (or cause to be collected) any withholding tax as described in
and in accordance with Section 5.2(c) with respect to income or distributions to
Certificateholders. The Owner
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Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Receivables. The
Owner Trustee shall not make the election provided under Section 754 of the
Code. Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Receivables. The
Owner Trustee shall not make the election provided under Section 754 of the
Code.
SECTION 5.6. Signature on Returns; Tax Matters Partner. (a) The
Depositor, as general partner for income tax purposes, shall prepare (or cause
to be prepared) and sign, on behalf of the Trust, the tax returns of the Trust.
(b) The Depositor shall be designated the "tax matters partner" of
the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority. The Owner Trustee is authorized
and directed to execute and deliver on behalf of the Trust the Basic Documents
to which the Trust is to be a party and each certificate or other document
attached as an exhibit to or contemplated by the Basic Documents to which the
Trust is to be a party and any amendment or other agreement, in each case, in
such form as the Depositor shall approve, as evidenced conclusively by the
Owner Trustee's execution thereof and the Depositor's execution of this
Agreement, and to direct the Indenture Trustee to authenticate and deliver (i)
Class A-1 Notes in the aggregate principal amount of $[________], (ii) Class A-2
Notes in the aggregate principal amount of $[________], (iii) Class A-3 Notes in
the aggregate principal amount of $[_____________], (iv) Class A-4 Notes in the
aggregate principal amount of $[________], (v) Class A-5 Notes in the aggregate
principal amount of $[________], (vi) Class A-6 Notes in the aggregate principle
amount of $[_________] and (vii) Class B Notes in the aggregate principal amount
of $[________]. In addition to the foregoing, the Owner Trustee is authorized to
take all actions required of the Trust pursuant to the Basic Documents. The
Owner Trustee is further authorized from time to time to take such action on
behalf of the Trust as is permitted by the
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Basic Documents and which the Servicer or the Administrator directs with respect
to the Basic Documents, except to the extent that this Agreement expressly
requires the consent of Certificateholders for such action.
SECTION 6.2. General Duties. Subject to Section 4.1 hereof, it
shall be the duty of the Owner Trustee to discharge (or cause to be discharged)
all of its responsibilities pursuant to the terms of this Agreement and the
other Basic Documents to which the Trust is a party and to administer the Trust
in the interest of the Certificateholders, subject to the lien of the Indenture
and in accordance with the provisions of this Agreement and the other Basic
Documents. Notwithstanding anything else to the contrary in this Agreement, the
Owner Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Basic Documents to the extent the Administrator is
required in the Administration Agreement to perform any act or to discharge such
duty of the Owner Trustee or the Trust hereunder or under any other Basic
Document, and the Owner Trustee shall not be held liable for the default or
failure of the Administrator to carry out its obligations under the
Administration Agreement. Except as expressly provided in the Basic Documents,
the Owner Trustee shall have no obligation to administer, service or collect the
Receivables or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Receivables.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV,
and in accordance with the terms of the Basic Documents, the Certificateholders
may, by written instruction, direct the Owner Trustee in the management of the
Trust.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any other Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or
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required by the terms of this Agreement or any other Basic Document, the Owner
Trustee shall promptly give notice (in such form as shall be appropriate under
the circumstances) to the Certificateholders requesting instruction as to the
course of action to be adopted, and to the extent the Owner Trustee acts in good
faith in accordance with any written instruction of the Certificateholders
received, the Owner Trustee shall not be liable on account of such action to any
Person. If the Owner Trustee shall not have received appropriate instruction
within ten (10) days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement or the other Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) In the event the Owner Trustee is unsure as to the application
of any provision of this Agreement or any other Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten (10) days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Agreement or the
other Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
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SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee or the Trust is a party, except as expressly provided
by the terms of this Agreement or in any document or written instruction
received by the Owner Trustee pursuant to Section 6.3; and no implied duties or
obligations shall be read into this Agreement or any other Basic Document
against the Owner Trustee. The Owner Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to prepare or file any Commission filing for
the Trust or to record this Agreement or any other Basic Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any lien (other than the lien
of the Indenture) on any part of the Owner Trust Estate that results from
actions by, or claims against, the Owner Trustee that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the other Basic
Documents to which the Trust or the Owner Trust is a party and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3. Neither the Depositor nor the Certificateholders shall
direct the Trustee to take any action that would violate the provisions of this
Section 6.5.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
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(i) affect the treatment of the Notes as indebtedness for federal income or
Applicable Tax State income or franchise tax purposes, (ii) be deemed to cause
a taxable exchange of the Notes for federal income or Applicable Tax State
income or franchise tax purposes or (iii) cause the Trust or any portion thereof
to be taxable as an association (or publicly traded partnership) taxable as a
corporation for federal income or Applicable Tax State income or franchise tax
purposes. The Certificateholders shall not direct the Owner Trustee to take
action that would violate the provisions of this Section 6.6.
ARTICLE VII
REGARDING THE OWNER TRUSTEE AND THE DELAWARE TRUSTEE
SECTION 7.1. Acceptance of Trusts and Duties. Each of the Owner
Trustee and the Delaware Trustee accept the trusts hereby created and each
agrees to perform its duties hereunder with respect to such trusts but only upon
the terms of this Agreement. Each Co-Trustee also agrees to disburse all monies
actually received by it constituting part of the Owner Trust Estate upon the
terms of this Agreement and the other Basic Documents to which each Co-Trustee
is a party. Each Co-Trustee shall not be answerable or accountable hereunder or
under any other Basic Document under any circumstances, except (i) for its own
willful misconduct, bad faith or negligence or (ii) in the case of the
inaccuracy of any representation or warranty contained in Section 7.3 expressly
made by either Co-Trustee. In particular, but not by way of limitation (and
subject to the exceptions set forth in the preceding sentence):
(a) the Co-Trustees shall not be liable for any error of judgment
made by a responsible officer of either of the Co-Trustees;
(b) the Co-Trustees shall not be liable with respect to any action
taken or omitted to be taken by them in accordance with the
instructions of any Certificateholder, the Indenture Trustee, the
Depositor, the Administrator or the Servicer;
(c) no provision of this Agreement or any other Basic Document
shall require the Co-Trustees
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to expend or risk funds or otherwise incur any financial liability in
the performance of any of their rights or powers hereunder or under any
other Basic Document if the Co-Trustees shall have reason able grounds
for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured or provided to
them;
(d) under no circumstances shall the Co-Trustees be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes or amounts
distributable on the Certificates;
(e) the Co-Trustees shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for
or in respect of the validity or sufficiency of the other Basic
Documents, other than the certificate of authentication on the
Certificates, and the Co-Trustees shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in
the other Basic Documents;
(f) the Co-Trustees shall not be liable for the default or
misconduct of the Servicer, the Administrator, the Depositor or the
Indenture Trustee under any of the Basic Documents or other wise and
the Co-Trustees shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the other Basic
Documents that are required to be performed by the Administrator under
the Administration Agreement, the Servicer under the Sale and Servicing
Agreement or the Indenture Trustee under the Indenture; and
(g) the Co-Trustees shall be under no obligation to exercise
any of the rights or powers vested in them by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this
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Agreement or any other Basic Document, at the request, order or
direction of any of the Certificateholders, unless such
Certificateholders have offered to the Co-Trustees security or
indemnity satisfactory to them against the costs, expenses and
liabilities that may be incurred by the Co-Trustees therein or thereby.
The right of the Co-Trustees to perform any discretionary act
enumerated in this Agreement or in any other Basic Document shall not
be construed as a duty, and the Co-Trustees shall not be answerable for
other than the willful misconduct, bad faith or negligence of either of
them in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders, promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.
SECTION 7.3. Representations and Warranties. (a) The Owner Trustee
hereby represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of New York. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will
be executed and delivered by one of its officers who is duly authorized
to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware State law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any
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judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
(b) The Delaware Trustee hereby represents and warrants to the
Depositor, for the benefit of the Certificateholders, that:
(i) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will
be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware State law, governmental rule or
regulation governing the banking or trust powers of the Delaware
Trustee or any judgment or order binding on it, or constitute any
default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Co-Trustees may
rely upon, shall be protected in relying upon, and shall incur no liability to
anyone in acting upon any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond, or other document or paper
believed by it to be genuine and believed by it to be signed by the proper party
or parties. The Co-Trustees may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly
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adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
prescribed herein, the Co-Trustees may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Co-Trustees for any
action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and
in the performance of its duties and obligations under this Agreement or the
other Basic Documents, the Co-Trustees (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
the Co-Trustees shall not be liable for the conduct or misconduct of such agents
or attorneys if such agents or attorneys shall have been selected by the
Co-Trustees with reasonable care, and (ii) may consult with counsel, accountants
and other skilled Persons to be selected with reasonable care and employed by
it. The Co-Trustees shall not be liable for anything done, suffered or omitted
in good faith by them in accordance with the written opinion or advice of any
such counsel, accountants or other such Persons and not contrary to this
Agreement or any other Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as
provided in this Article VII, in accepting the trusts hereby created,
[______________] acts solely as Owner Trustee hereunder and [_____________] acts
solely as Delaware Trustee hereunder and not in their individual capacities, and
all Persons having any claim against the Co-Trustees by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or
Receivables. The recitals contained herein and in the Certificates (other than
the signature and countersignature of the Owner Trustee on the Certificates)
shall be taken as the statements of the Depositor, and the Owner Trustee assumes
no
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responsibility for the correctness thereof. The Co-Trustees make no
representations as to the validity or sufficiency of this Agreement, of any
other Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) or the Notes, or of
any Receivable or related documents. The Owner Trustee, the Delaware Trustee,
[___________________] and [___________________] shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any security
interest created by any Receivable in any Financed Vehicle or the maintenance
of any such perfection and priority, or for or with respect to the sufficiency
of the Owner Trust Estate or its ability to generate the payments to be
distributed to Certificateholders under this Agreement or the Noteholders under
the Indenture, including, without limitation: the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Receivable on any computer
or other record thereof; the validity of the assignment of any Receivable to the
Trust or any intervening assignment; the completeness of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Depositor
or the Servicer with any warranty or representation made under any Basic
Document or in any related document, or the accuracy of any such warranty or
representation or any action of the Indenture Trustee, the Administrator or the
Servicer or any subservicer taken in the name of the Owner Trustee or the
Delaware Trustee.
SECTION 7.7. Co-Trustees May Own Certificates and Notes.
[_______________] and [_______________], in their individual or any other
capacities, may become the owner or pledgee of Certificates or Notes and may
deal with the Depositor, the Servicer, the Administrator and the Indenture
Trustee in banking transactions with the same rights as they would have if
either of them were not the Owner Trustee or the Delaware Trustee.
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ARTICLE VIII
COMPENSATION AND INDEMNITY OF OWNER TRUSTEE
SECTION 8.1. Owner Trustee's Fees and Expenses. The Co-Trustees
shall receive as compensation for their services hereunder such fees as have
been separately agreed upon before the date hereof between the Depositor and the
Co-Trustees, and the Co-Trustees shall be entitled to and reimbursed by the
Depositor for their other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Co-Trustees may employ in
connection with the exercise and performance of their rights and its duties
hereunder. Such amounts shall be treated for tax purposes as having been
contributed to the Trust by the Depositor and the tax deduction for such amounts
shall be allocated to the Depositor.
SECTION 8.2. Indemnification. The Depositor shall be liable as
prime obligor for, and shall indemnify the Co-Trustees, [__________________] and
[________________] and their respective successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Co-Trustees, [_______________________] and [___________________] or
any Indemnified Party in any way relating to or arising out of this Agreement,
the other Basic Documents, the Owner Trust Estate, the administration of the
Owner Trust Estate or the action or inaction of the Owner Trustee hereunder;
provided that the Depositor shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from (i) the
Indemnified Party's own willful misconduct, bad faith or negligence, or (ii) the
inaccuracy of any representation or warranty contained in Section 7.3 expressly
made by the Indemnified Party. The indemnities contained in this Section 8.2
shall survive the resignation or termination of the Co-Trustees or the
termination of this Agreement. In the event of any claim, action or proceeding
for which indemnity will be
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sought pursuant to this Section 8.2, the Co-Trustees' choice of legal counsel
shall be subject to the approval of the Depositor, which approval shall not be
unreasonably withheld.
SECTION 8.3. Payments to Co-Trustees. Any amounts paid to the
Co-Trustees pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION
SECTION 9.1. Termination of Trust Agreement. (a) This Agreement
(other than the provisions of Article VIII) shall terminate and be of no further
force or effect and the Trust shall wind up and dissolve, (i) upon the maturity
or other liquidation of the last remaining Receivable and the disposition of any
amounts received upon such maturity or liquidation, (ii) upon the payment to the
Noteholders and the Certificateholders of all amounts required to be paid to
them pursuant to the terms of the Indenture, the Sale and Servicing Agreement
and Article V or (iii) at the time provided in Section 9.2. Any Insolvency
Event, liquidation, dissolution, death or incapacity with respect to any
Certificateholder, other than the Depositor as described in Section 9.2, shall
not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto. Upon dissolution of
the Trust, the Owner Trustee shall wind up the business and affairs of the
Trust as required by Section 3808 of the Business Trust Statute.
(b) Except as provided in Section 9.1(a), neither the Depositor
nor any Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their
Certificates to
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the Certificate Paying Agent for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five (5) Business Days of receipt of notice of
such termination from the Servicer, stating (i) the Distribution Date upon or
with respect to which final payment of the Certificates shall be made upon
presentation and surrender of the Certificates at the office of the Certificate
Paying Agent therein designated, (ii) the amount of any such final payment
(after reservation of sums sufficient to pay all claims and obligations, if
any, known to the Owner Trustee and payable by the Trust) and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Certificate Paying Agent therein specified. The Owner Trustee
shall give such notice to the Certificate Registrar (if other than the Owner
Trustee) and the Certificate Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Certificate Paying Agent shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date pursuant to Section 5.2. Upon
the satisfaction and discharge of the Indenture, and receipt of a certificate
from the Indenture Trustee stating that all Noteholders have been paid in full
and that the Indenture Trustee is aware of no claims remaining against the Trust
in respect of the Indenture and the Notes, the Owner Trustee, in the absence of
actual knowledge of any other claim against the Trust, shall be deemed to have
made reasonable provision to pay all claims and obligations (including
conditional, contingent or unmatured obligations) for purposes of Section
3808(e) of the Business Trust Statute.
In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six (6) months after the
date specified in the above mentioned written notice, the Owner Trustee shall
give a second written notice to the remaining Certificateholders to surrender
their Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
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appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Subject to applicable
escheat laws, any funds remaining in the Trust after exhaustion of such remedies
shall be distributed by the Owner Trustee to the Depositor.
(d) Upon final distribution of any funds remaining in the
Trust, the Owner Trustee shall cause the Certificate of Trust to be cancelled by
filing a certificate of cancellation with the Secretary of State in accordance
with the provisions of Section 3810(c) of the Business Trust Statute.
SECTION 9.2. Dissolution upon Insolvency or Dissolution of
Depositor or General Partner. Notwithstanding the provisions of Section 3808 of
the Business Trust Statute, in the event that an Insolvency Event or a
dissolution shall occur with respect to the Depositor or the General Partner,
the Receivables shall be sold and this Agreement and the Trust shall be
terminated in accordance with Section 9.1 ninety (90) days after the date of
such Insolvency Event or the event giving rise to such dissolution, unless,
before the end of such 90-day period, the Owner Trustee shall have received
written instructions from (a) the Certificateholders (other than the Depositor)
of each Class of Certificates evidencing not less than a majority of the
Certificate Balance of such Class and a majority of the right to receive
distributions in respect of interest on the Certificate Balance of such Class
(including in each case the Certificate Balance of Certificates owned by the
Servicer and any of its Affiliates other than the Depositor), (b) the
Noteholders (other than the Depositor) of each Class of Notes evidencing not
less than a majority of the principal amount of the outstanding Notes of such
Class and a majority of the right to receive interest on the outstanding Notes
of such Class (including in each case the Notes owned by the Servicer and any of
its Affiliates other than the Depositor), with each of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes,
the Class A-6 Notes and the Class B Notes treated as a separate Class of
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Notes for this purpose, and (c) holders of other interests, if any (the
existence of which interests the Administrator will have advised the Owner
Trustee in writing), in the Reserve Account (other than the Depositor) having
interests with a value not less than a majority of the value of all interests in
the Reserve Account (other than any such interests held by the Depositor), to
the effect that each such party disapproves of the liquidation of the
Receivables and termination of the Trust and in connection therewith the
Indenture Trustee (i) appoints an entity acceptable to Ford Credit to acquire an
interest in the Trust and to act as substitute "general partner" of the Trust
for federal income tax purposes and (ii) obtains an Opinion of Counsel that the
Trust will not thereafter be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax and Applicable Tax
State purposes. Promptly after the occurrence of any Insolvency Event or
dissolution with respect to the Depositor or the General Partner, (A) the
Depositor shall give the Indenture Trustee and the Owner Trustee written notice
of such Insolvency Event, (B) the Owner Trustee shall, upon the receipt of such
written notice from the Depositor, give prompt written notice to the
Certificateholders, holders of interests, if any, in the Reserve Account and the
Indenture Trustee, of the occurrence of such event, (C) the Indenture Trustee
shall, upon receipt of written notice of such Insolvency Event or dissolution
from the Owner Trustee or the Depositor, give prompt written notice to the
Noteholders of the occurrence of such event, and (D) the Owner Trustee shall,
upon receipt of written instructions from the applicable percentages of
Noteholders, Certificateholders and holders of interests, if any, in the Reserve
Account disapproving of liquidation and termination, give prompt written notice
thereof to the Indenture Trustee; provided, however, that any failure to give a
notice required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section 9.2.
Upon a termination pursuant to this Section 9.2, the Owner Trustee shall direct
the Indenture Trustee promptly to sell the assets of the Trust (other than the
Trust Accounts and each Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds of such a
sale of the assets of the Trust shall be treated as collections of
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Receivables under the Sale and Servicing Agreement and deposited in the
Collection Account and the Notes and Certificates shall be paid in accordance
with Section 4.6 of the Sale and Servicing Agreement.
SECTION 9.3. Prepayment of Certificates. (a) The Certificates
shall be prepaid in whole, but not in part, at the direction of the Servicer
pursuant to Section 9.1 of the Sale and Servicing Agreement, on any
Distribution Date on which the Servicer exercises its option to purchase the
assets of the Trust pursuant to said Section 9.1, and the amount paid by the
Servicer shall be treated as collections of Receivables and applied to pay the
unpaid principal amount of the Notes and the Aggregate Certificate Balance plus
accrued and unpaid interest (including any overdue interest) thereon. The
Servicer shall furnish the Rating Agencies and the Owner Trustee notice of such
prepayment. If the Certificates are to be prepaid pursuant to this Section
9.3(a), the Servicer shall furnish notice of such election to the Owner Trustee
not later than twenty (20) days prior to the Prepayment Date and the Trust shall
deposit by 10:00 A.M. (New York City time) on the Prepayment Date in the
Certificate Distribution Account the Prepayment Price of the Certificates to be
redeemed, whereupon all such Certificates shall be due and payable on the
Prepayment Date.
(b) Notice of prepayment under Section 9.3(a) shall be given by
the Owner Trustee by first-class mail, postage prepaid, or by facsimile mailed
or transmitted immediately following receipt of notice from the Trust or
Servicer pursuant to Section 9.3(a), but not later than ten (10) days prior to
the applicable Prepayment Date, to each Certificateholder as of the close of
business on the Record Date preceding the applicable Prepayment Date, at such
Certificateholder's address or facsimile number appearing in the Certificate
Register.
All notices of prepayment shall state:
(i) the Prepayment Date;
(ii) the Prepayment Price; and
(iii) the place where such Certificates are to be surrendered for
payment of the
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Prepayment Price (which shall be the office or agency of the Owner
Trustee to be maintained as provided in Section 3.9).
Notice of prepayment of the Certificates shall be given by the Owner Trustee in
the name and at the expense of the Trust. Failure to give notice of prepayment,
or any defect therein, to any Certificateholder shall not impair or affect the
validity of the prepayment of any other Certificate.
(c) Following notice of prepayment as required by Section 9.3(b),
the Certificates shall on the Prepayment Date be paid by the Trust at the
Prepayment Price and (unless the Trust shall default in the payment of the
Prepayment Price) no interest shall accrue on the Prepayment Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Prepayment Price. Following payment in full of the Prepayment
Price, this Agreement and the Trust shall terminate.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1. Eligibility Requirements for Owner Trustee and
Delaware Trustee. (a) The Owner Trustee shall at all times (i) be authorized to
exercise corporate trust powers; (ii) have a combined capital and surplus of at
least $50,000,000 and shall be subject to supervision or examination by federal
or state authorities; and (iii) shall have (or shall have a parent that has) a
long-term debt rating of investment grade by each of the Rating Agencies or be
otherwise acceptable to the Rating Agencies. If such corporation shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section 10.1, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section 10.1,
the Owner Trustee shall
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resign immediately in the manner and with the effect specified in Section 10.2.
(b) The Delaware Trustee shall at all times be a corporation
satisfying the provisions of Section 3807(a) of the Business Trust Statute.
SECTION 10.2. Resignation or Removal of Owner Trustee or the
Delaware Trustee. The Owner Trustee or the Delaware Trustee may at any time
resign and be discharged from the trusts hereby created by giving written
notice thereof to the Administrator. Upon receiving such notice of resignation,
the Administrator shall promptly appoint a successor Owner Trustee or Delaware
Trustee, as applicable, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee or Delaware Trustee
and one copy to the applicable successor Owner Trustee or Delaware Trustee. If
no successor Owner Trustee or Delaware Trustee shall have been so appointed and
have accepted appointment within thirty (30) days after the giving of such
notice of resignation, the resigning Owner Trustee or Delaware Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Owner Trustee or Delaware Trustee; provided, however, that such right to appoint
or to petition for the appointment of any such successor shall in no event
relieve the resigning Owner Trustee or Delaware Trustee from any obligations
otherwise imposed on it under the Basic Documents until such successor has in
fact assumed such appointment.
If at any time the Owner Trustee or Delaware Trustee shall cease
to be eligible in accordance with the provisions of Section 10.1 or a Co-Trustee
resigns pursuant to Section 10.2 of this Agreement and the ineligible or
non-resigning Co-Trustee or either Co-Trustees shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee or Delaware Trustee shall be legally unable to act, or if at any time an
Insolvency Event with respect to the Owner Trustee or Delaware Trustee shall
have occurred and be continuing, then the Administrator may remove the Co-
Trustee that is insolvent or legally unable to act or may remove both
Co-Trustees. If the Administrator shall remove one or both of the Co-Trustees
under the authority of the immediately preceding
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sentence, the Administrator shall promptly appoint a successor Co-Trustee or Co-
Trustees, as applicable, by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Co-Trustee or Co-Trustees, as
applicable, so removed and one copy to the successor Co-Trustee or Co-Trustees,
as applicable, and shall pay all fees owed to the outgoing Co-Trustee or
Co-Trustees, as applicable.
Any resignation or removal of a Co-Trustee and appointment of a
successor Co-Trustee or Co-Trustees pursuant to any of the provisions of this
Section 10.2 shall not become effective until acceptance of appointment by the
successor Co-Trustee or Co-Trustees pursuant to Section 10.3, payment of all
fees and expenses owed to the outgoing Co-Trustee or Co-Trustees and the filing
of a certificate of amendment to the Certificate of Trust if required by the
Business Trust Statute. The Administrator shall provide notice of such
resignation or removal of the Co-Trustee or Co-Trustees to the
Certificateholders, the Indenture Trustee, the Noteholders, any remaining
Co-Trustee and each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee or Delaware Trustee. Any
successor Owner Trustee or Delaware Trustee appointed pursuant to Section 10.2
shall execute, acknowledge and deliver to the Administrator and to its
predecessor Owner Trustee or Delaware Trustee an instrument accepting such
appointment under this Agreement. Upon the resignation or removal of the
predecessor Owner Trustee or Delaware Trustee becoming effective pursuant to
Section 10.2, such successor Owner Trustee or Delaware Trustee, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties, and obligations of its predecessor under this Agreement, with
like effect as if originally named as Owner Trustee or Delaware Trustee. The
predecessor Owner Trustee or Delaware Trustee shall, upon payment of its fees
and expenses, deliver to the successor Owner Trustee or Delaware Trustee all
documents and statements and monies held by it under this Agreement, and the
Administrator and the predecessor Owner Trustee or Delaware Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting
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and confirming in the successor Owner Trustee or Delaware Trustee all such
rights, powers, duties, and obligations.
No successor Owner Trustee or Delaware Trustee shall accept
appointment as provided in this Section 10.3 unless, at the time of such
acceptance, such successor Owner Trustee or Delaware Trustee shall be eligible
pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee or
Delaware Trustee pursuant to this Section 10.3, the Administrator shall mail
notice of the successor of such Owner Trustee or Delaware Trustee to all
Certificateholders, the Indenture Trustee, the Noteholders, any remaining
Co-Trustee and the Rating Agencies. If the Administrator shall fail to mail such
notice within ten (10) days after acceptance of appointment by the successor
Owner Trustee or Delaware Trustee, the successor Owner Trustee or Delaware
Trustee shall cause such notice to be mailed at the expense of the
Administrator.
Any successor Delaware Trustee appointed here under shall file the
amendments to the Certificate of Trust with the Secretary of State identifying
the name and principal place of business of such successor Delaware Trustee in
the State of Delaware.
SECTION 10.4. Merger or Consolidation of Owner Trustee or Delaware
Trustee. Any corporation into which the Owner Trustee or Delaware Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Owner
Trustee or Delaware Trustee shall be a party, or any corporation succeeding to
all or substantially all of the corporate trust business of the Owner Trustee
or Delaware Trustee, shall, without the execution or filing of any instrument or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding, be the successor of the Owner Trustee or Delaware
Trustee hereunder; provided that such corporation shall be eligible pursuant to
Section 10.1; and provided further, that (i) the Owner Trustee or Delaware
Trustee shall mail notice of such merger or consolidation to the Rating Agencies
not less than fifteen (15) days prior to the effective date thereof and (ii) the
Delaware Trustee
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shall file an amendment to the Certificate of Trust as required by Section 10.3.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person, in such capacity, such title to the Owner
Trust Estate, or any part thereof, and, subject to the other provisions of this
Section 10.5, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within fifteen (15) days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor trustee pursuant to Section 10.1 and no notice of the appointment of
any co-trustee or separate trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties, and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties, and
obligations (including
50
<PAGE> 56
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Owner
Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Administrator and the Owner Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article X. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Owner Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 10.6. Compliance with Business Trust Statute.
Notwithstanding anything herein to the contrary,
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<PAGE> 57
the Trust shall at all times have at least one trustee which meets the
requirements of Section 3807(a) of the Business Trust Statute.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Supplements and Amendments. (a) This Agreement may be
amended by the Depositor and the Owner Trustee, with prior written notice to the
Rating Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement inconsistent with any other provision of this
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
satisfactory to the Owner Trustee and the Indenture Trustee adversely affect in
any material respect the interests of any Noteholder or Certificateholder; and
provided further that an Opinion of Counsel shall be furnished to the Indenture
Trustee and the Owner Trustee to the effect that such amendment (A) will not
materially adversely affect the federal or any Applicable Tax State income or
franchise taxation of any outstanding Note or Certificate, or any Noteholder or
Certificateholder and (B) will not cause the Trust to be taxable as a
corporation for federal or any Applicable Tax State income or franchise tax
purposes.
(b) This Agreement may also be amended from time to time by
the Depositor and the Owner Trustee, with prior written notice to the Rating
Agencies, with the consent of (i) the Noteholders of Notes evidencing not less
than a majority of the principal amount of the Notes Outstanding and (ii) the
Certificateholders of Certificates evidencing not less than a majority of the
Aggregate Certificate Balance, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of, or
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<PAGE> 58
change the allocation or priority of, collections of payments on Receivables or
distributions that are required to be made for the benefit of the Noteholders
or the Certificateholders, or (ii) reduce the aforesaid percentage of the
principal amount of the Notes Outstanding and the Aggregate Certificate Balance
required to consent to any such amendment, without the consent of all the
Noteholders and Certificateholders affected thereby; and provided further, that
an Opinion of Counsel shall be furnished to the Indenture Trustee and the Owner
Trustee to the effect that such amendment (A) will not materially adversely
affect the federal or any Applicable Tax State income or franchise taxation of
any outstanding Note or Certificate, or any Noteholder or Certificateholder and
(B) will not cause the Trust to be taxable as a corporation for federal or any
Applicable Tax State income or franchise tax purposes.
(c) Promptly after the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the substance
of such amendment or consent to each Certificateholder, the Indenture Trustee
and each of the Rating Agencies.
(d) It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section 11.1 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Agreement or in any other Basic
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
(e) Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such amendment
with the Secretary of State.
(f) Prior to the execution of any amendment to this Agreement
or the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to,
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<PAGE> 59
enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
(g) In connection with the execution of any amendment to this
Agreement or any amendment to any other agreement to which the Trust is a party,
the Owner Trustee shall be entitled to receive and conclusively rely upon an
Opinion of Counsel to the effect that such amendment is authorized or permitted
by the Basic Documents and that all conditions precedent in the Basic Documents
for the execution and delivery thereof by the Trust or the Owner Trustee, as the
case may be, have been satisfied.
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title
to any part of the Owner Trust Estate. The Certificateholders shall be entitled
to receive distributions with respect to their beneficial interests therein only
in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their beneficial interest in the Owner Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
SECTION 11.3. Limitation on Rights of Others. Except for
Sections 2.7 and 11.1, the provisions of this Agreement are solely for the
benefit of the Owner Trustee, the Delaware Trustee, the Depositor, the
Administrator, the Certificateholders, the Servicer and, to the extent expressly
provided herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement (other than Section 2.7), whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.4. Notices. (a) Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be in writing and
shall be deemed given upon receipt by the intended recipient or three (3)
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<PAGE> 60
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee and the Delaware Trustee shall be deemed given
only upon actual receipt by the Owner Trustee and the Delaware Trustee,
respectively), if to the Owner Trustee or the Delaware Trustee, addressed to the
respective Corporate Trust Office; if to the Depositor, addressed to Ford Credit
Auto Receivables Two L.P. at the address of its principal executive office first
above written; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.7. Successors and Assigns. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Depositor, the Owner Trustee and its successors and each Certificateholder
and its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by a
Certificateholder shall bind the successors and assigns of such
Certificateholder.
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SECTION 11.8. No Petition. The Owner Trustee (not in its
individual capacity but solely as Owner Trustee), by entering into this
Agreement, and each Certificateholder, by accepting a Certificate, hereby
covenants and agrees that it will not, until after the Notes have been paid in
full, institute against the Depositor, the General Partner or the Trust, or join
in any institution against the Depositor, the General Partner or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or State
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, this Agreement or any of the other Basic Documents.
SECTION 11.9. No Recourse. Each Certificateholder, by
accepting a Certificate, acknowledges that such Certificateholder's
Certificates represent beneficial interests in the Trust only and do not
represent interests in or obligations of the Depositor, the General Partner, the
Servicer, the Administrator, the Owner Trustee, the Indenture Trustee or any
Affiliate thereof, and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated in this Agreement,
the Certificates or the other Basic Documents.
SECTION 11.10. Headings. The headings of the various
Articles and Sections herein are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.
SECTION 11.11. Governing Law. This Agreement shall be
construed in accordance with the laws of the State of Delaware and the
obligations, rights and remedies of the parties hereunder shall be determined
in accordance with such laws.
SECTION 11.12. Sale and Servicing Agreement Obligations.
Notwithstanding any other provision of this Agreement, the Owner Trustee agrees
that it will comply with its obligations under Sections 3.1, 4.1 and 4.2 of the
Sale and Servicing Agreement.
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<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
FORD CREDIT AUTO RECEIVABLES
TWO L.P., as Depositor
By: FORD CREDIT AUTO RECEIVABLES
TWO, INC.,
as General Partner
By:
-----------------------------------------
Name:
Title:
[ ],
--------------------------------------
as Delaware Trustee
By:
-----------------------------------------
Name:
Title:
[ ],
-------------------
as Owner Trustee
By:
-----------------------------------------
Name:
Title:
<PAGE> 63
EXHIBIT A
[FORM OF CLASS C CERTIFICATE]
NUMBER $[_______]
R-[ ] CUSIP NO. [________]
THE PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE AS SET FORTH IN THE TRUST
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
FORD CREDIT AUTO OWNER TRUST [____-_]
CLASS C [___]% ASSET BACKED CERTIFICATE
evidencing a beneficial interest in the property of the Trust, as defined below,
which property includes a pool of motor vehicle retail installment sale
contracts, secured by security interests in the motor vehicles financed thereby,
conveyed to Ford Credit Auto Receivables Two L.P. by Ford Motor Credit Company
and conveyed by Ford Credit Auto Receivables Two L.P. to the Trust. The property
of the Trust has been pledged to the Indenture Trustee pursuant to the
Indenture to secure the payment of the Notes issued thereunder.
(This Certificate does not represent an interest in or obligation of Ford Motor
Credit Company, Ford Credit Auto Receivables Two L.P. or any of their respective
Affiliates, except to the extent described below.)
THIS CERTIFIES THAT __________ is the registered owner of
____ DOLLARS nonassessable, fully-paid, beneficial interest in Class C ]
Certificates of Ford Credit Auto Owner Trust [____-_] (the "Trust") formed by
Ford Credit Auto Receivables Two L.P., a Delaware limited partnership
(the "Depositor"). The Class C Certificates have an aggregate Initial
Certificate Balance of $[_______] and bear interest at a rate of [___]% per
annum (the "Class C Rate").
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<PAGE> 64
The Trust was created pursuant to an Amended and Restated
Trust Agreement, dated as of [_______,_____] (as from time to time amended,
supplemented or otherwise modified and in effect, the "Trust Agreement"), among
the Depositor, [____________________], not in its individual capacity but solely
as Delaware trustee (the "Delaware Trustee") and [___________________], not in
its individual capacity but solely as owner trustee (the "Owner Trustee"), a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as "Class C [___]% Asset Backed Certificates" (herein called the
"Class C Certificates") which, together with the Certificates designated as
"Class D [___]% Asset Backed Certificates" (the "Class D Certificates" and,
together with the Class C Certificates, the "Certificates") are issued under
and are subject to the terms, provisions and conditions of the Trust Agreement,
to which Trust Agreement the Certificateholder of this Certificate by virtue of
the acceptance hereof assents and by which such Certificateholder is bound. Also
issued under the Indenture, dated as of [__________,_____] (as from time to
time amended, supplemented or otherwise modified and in effect, the
"Indenture"), between the Trust and [__________________], as indenture trustee
(in such capacity, the "Indenture Trustee"), are the Notes designated as "Class
A-1 [____]% Asset Backed Notes", "Class A-2 [___]% Asset Backed Notes", "Class
A-3 [___]% Asset Backed Notes", "Class A-4 [___]% Asset Backed Notes", "Class
A-5 [___]% Asset Backed Notes", "Class A-6 [___]% Asset Backed Notes" and "Class
B [___]% Asset Backed Notes" (collectively, the "Notes"). The property of the
Trust includes (i) a pool of motor vehicle retail installment sale contracts
for new and used automobiles and light trucks and certain rights and obligations
thereunder (the "Receivables"); (ii) with respect to Actuarial Receivables, all
monies due thereunder on or after the Cutoff Date and, with respect to Simple
Interest Receivables, all monies due or received thereunder on or after the
Cutoff Date; (iii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables and any other
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interest of the Trust in the Financed Vehicles; (iv) rights to proceeds from
claims on certain physical damage, credit life, credit disability or other
insurance policies, if any, covering Financed Vehicles or Obligors; (v) Dealer
Recourse; (vi) all of the Seller's rights to the Receivable Files; (vii) such
amounts as from time to time may be held in one or more accounts maintained
pursuant to the Sale and Servicing Agreement, dated as of [_______ ___,_____]
(as from time to time amended, supplemented or otherwise modified and in effect,
the "Sale and Servicing Agreement"), by and among the Trust, the Depositor, as
seller (in such capacity, the "Seller"), and Ford Motor Credit Company, as
servicer (the "Servicer"), including the Reserve Account; (viii) the Seller's
rights under the Sale and Servicing Agreement; (ix) the Seller's rights under
the Purchase Agreement; (x) payments and proceeds with respect to the
Receivables held by the Servicer; (xi) all property (including the right to
receive Liquidation Proceeds) securing a Receivable (other than a Receivable
repurchased by the Servicer or purchased by the Seller); (xii) rebates of
premiums and other amounts relating to insurance policies and other items
financed under the Receivables in effect as of the Cutoff Date; and (xiii) any
and all proceeds of the foregoing. THE RIGHTS OF THE TRUST IN THE FOREGOING
PROPERTY OF THE TRUST HAVE BEEN PLEDGED TO THE INDENTURE TRUSTEE TO SECURE THE
PAYMENT OF THE NOTES.
Under the Trust Agreement, there will be distributed on the
fifteenth day of each month or, if such fifteenth day is not a Business Day, the
next Business Day (each, a "Distribution Date"), commencing [___], to the Person
in whose name this Certificate is registered at the close of business on the
last day of the preceding month (the "Record Date") such Certificateholder's
percentage interest in the amount to be distributed to Class C
Certificateholders on such Distribution Date; provided, however, that principal
will be distributed to the Class C Certificateholders on each Distribution Date
on (to the extent of funds remaining after all classes of the Notes have been
paid in full) and after the date on which all classes of the Notes have been
paid in full. Notwithstanding the foregoing, following the occurrence and
during the continuation of an event of default under the Indenture which has
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resulted in an acceleration of the Notes or following certain events of
insolvency or a dissolution with respect to the Depositor or the General
Partner, no distributions of principal or interest will be made on the
Certificates until all principal and interest on the Notes has been paid in
full.
THE HOLDER OF THIS CERTIFICATE ACKNOWLEDGES AND AGREES THAT
ITS RIGHTS TO RECEIVE DISTRIBUTIONS IN RESPECT OF THIS CERTIFICATE ARE
SUBORDINATED TO THE RIGHTS OF THE NOTEHOLDERS AS DESCRIBED IN THE SALE AND
SERVICING AGREEMENT, THE INDENTURE AND THE TRUST AGREEMENT.
It is the intent of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local
franchise and income tax and any other income taxes, the Trust will be treated
as a partnership and the Certificateholders (including the Depositor) will be
treated as partners in that partnership. The Depositor and the other
Certificateholders by acceptance of a Certificate agree to treat, and to take
no action inconsistent with the treatment of, the Certificates for such tax
purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not, until after the Notes
have been paid in full, institute against the Depositor, the General Partner or
the Trust, or join in any institution against the Depositor, the General Partner
or the Trust of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, the Certificates, the Trust Agreement or any of the other Basic
Documents.
Distributions on this Certificate will be made as provided in
the Trust Agreement by the Owner Trustee or the Certificate Paying Agent by wire
transfer or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation hereon. Except as otherwise provided in the
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<PAGE> 67
Trust Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in New York, New York.
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the Certificateholder hereof to
any benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
This Certificate shall be construed in accordance with the
laws of the State of Delaware and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
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<PAGE> 68
In WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Class C Certificate to be
duly executed.
FORD CREDIT AUTO OWNER
TRUST [ - ]
---- -
By: [ ],
--------------------
not in its individual
capacity but solely as
Owner Trustee
By:
------------------------------------------
Authorized Officer
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates referred to in the within-mentioned
Trust Agreement.
Dated: [ , ]
--------- --- -----
[ ],
----------------------
not in its individual capacity
but solely as Owner Trustee
By:
------------------------------------------
Authorized Officer
<PAGE> 69
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the General Partner, the Servicer, the
Administrator, the Owner Trustee or any Affiliates of any of them and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated herein, in the Trust Agreement or in the
other Basic Documents. In addition, this Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections with respect to the Receivables (and certain other amounts),
all as more specifically set forth herein and in the Sale and Servicing
Agreement. A registration statement, which includes the Trust Agreement as an
exhibit thereto, has been filed with the Securities and Exchange Commission with
respect to the Notes and the Class C Certificates.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the Owner Trustee with the
consent of the Noteholders and the Certificateholders evidencing not less than a
majority of the principal amount of the Notes Outstanding and the Aggregate
Certificate Balance, respectively. Any such consent by the Certificateholder of
this Certificate shall be conclusive and binding on such Certificateholder and
on all future Certificateholders of this Certificate and of any Certificate
issued upon the registration of Transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of any of the Certificateholders.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the Transfer of the Certificates are registrable
in the Certificate Register upon surrender of this Certificate for registration
of Transfer at the offices or agencies maintained by [____________________]
in its capacity as Certificate Registrar, or by any successor Certificate
Registrar, in New York, New York, accompanied
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by a written instrument of transfer in form satisfactory to the Owner Trustee
and the Certificate Registrar duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee.
The Certificates are issuable as registered Certificates
without coupons in denominations of at least $20,000 and in integral multiples
of $1,000 in excess thereof. Certificates are exchangeable for new Certificates
of like Class and authorized denominations evidencing the same aggregate
denomination, as requested by the Certificateholder surrendering the same. No
service charge will be made for any such registration of Transfer or exchange,
but the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of
the Owner Trustee or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The Class C Certificates may be acquired only by an entity
that is either: (a) not, and each account (if any) for which it is purchasing
the Class C 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. ss. 2510.3-101 or otherwise under ERISA) or (v) a
person investing "plan assets" of any such plan
A-8
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(including without limitation, for purposes of this clause (v), an insurance
company general account, but excluding any 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 of pur chase less than 25% of
the assets of such general account (as reasonably determined by it) constitute
"plan assets" for purposes of Title I of ERISA and Section 4975 of the Code,
(ii) the purchase and holding of such Class C Certificates are eligible for
exemptive relief under Sections (I) and (III) of Prohibited Transaction Class
Exemption 95-60, and (iii) the purchaser agrees that if, after the purchaser's
initial acquisition of the Class C Certificates, at any time during any calendar
quarter 25% or more of the assets of such general account (as reasonably
determined by it 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 Class C 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, it will dispose of all Class
C Certificates then held in its general account by the end of the next following
calendar quarter.
In addition, the Certificates may not be acquired by or on
behalf of a Person other than (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
the administration of such trust and one or more Persons meeting the conditions
of this paragraph 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 Owner Trustee and the Depositor with an IRS Form
4224 (and such other certifications, representations, or opinions of counsel
A-9
<PAGE> 72
as may be requested by the Owner Trustee or the Depositor).
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate (i) upon the maturity or
other liquidation of the last remaining Receivable and the disposition of any
amounts received upon such maturity or liquidation or (ii) upon the payment to
the Noteholders and the Certificateholders of all amounts required to be paid to
them pursuant to the Indenture, the Trust Agreement and the Sale and Servicing
Agreement, and upon such termination any remaining assets of the Trust shall be
distributed to the Depositor. The Servicer of the Receivables may at its option
purchase the assets of the Trust at a price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect early retirement of the Notes and the Certificates; however, such
right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to 10% of the Initial
Pool Balance.
A-10
<PAGE> 73
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby
sells, assigns and transfers unto
--------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------- Attorney to
transfer said Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
-------------
*/
----------------------------
Signature Guaranteed:
*/
----------------------------
- -----------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-11
<PAGE> 74
EXHIBIT B
[FORM OF CLASS D CERTIFICATE]
NUMBER $[________]
R-[ ] Private Placement
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES
OR BLUE SKY LAW OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY
PURCHASING THIS CERTIFICATE, AGREES FOR THE BENEFIT OF THE TRUST AND THE
DEPOSITOR THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS, AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")
TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER, WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT
THE REOFFER, RESALE, PLEDGE, OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, SUBJECT TO (A) THE RECEIPT BY THE TRUST AND THE CERTIFICATE REGISTRAR OF
A CERTIFICATE SUBSTANTIALLY IN THE FORM ATTACHED AS EXHIBIT F TO THE TRUST
AGREEMENT AND (B) THE RECEIPT BY THE TRUST AND THE CERTIFICATE REGISTRAR OF A
LETTER SUBSTANTIALLY IN THE FORM ATTACHED AS EXHIBIT D TO THE TRUST AGREEMENT,
(2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), SUBJECT TO THE RECEIPT BY THE TRUST, THE INITIAL
PURCHASER AND THE CERTIFICATE REGISTRAR OF SUCH EVIDENCE ACCEPTABLE TO THE TRUST
AND THE INITIAL PURCHASER THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN
COMPLIANCE WITH THE TRUST AGREEMENT AND THE SECURITIES ACT AND OTHER APPLICABLE
LAWS, (3) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF
IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT
PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUST AND THE CERTIFICATE
REGISTRAR OF A LETTER SUBSTANTIALLY IN THE FORM ATTACHED AS EXHIBIT E TO THE
TRUST AGREEMENT OR (B) THE RECEIPT BY THE TRUST, THE INITIAL PURCHASER AND THE
CERTIFICATE REGISTRAR OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUST AND THE
INITIAL PURCHASER THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE
WITH THE TRUST AGREEMENT AND THE SECURITIES ACT AND OTHER
B-1
<PAGE> 75
APPLICABLE LAWS, OR (4) TO THE DEPOSITOR, IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS
OF THE STATES OF THE UNITED STATES.
THE PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE AS SET FORTH IN THE TRUST
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
FORD CREDIT AUTO OWNER TRUST [____-_]
CLASS D [___]% ASSET BACKED CERTIFICATE
evidencing a beneficial interest in the property of the Trust, as defined below,
which property includes a pool of motor vehicle retail installment sale
contracts, secured by security interests in the motor vehicles financed thereby,
conveyed to Ford Credit Auto Receivables Two L.P. by Ford Motor Credit Company
and conveyed by Ford Credit Auto Receivables Two L.P. to the Trust. The property
of the Trust has been pledged to the Indenture Trustee pursuant to the
Indenture to secure the payment of the Notes issued thereunder.
(This Certificate does not represent an interest in or obligation of Ford Motor
Credit Company, Ford Credit Auto Receivables Two L.P. or any of their respective
Affiliates, except to the extent described below.)
THIS CERTIFIES THAT __________ is the registered owner of
______ DOLLARS nonassessable, fully-paid, beneficial interest in Class D
Certificates of Ford Credit Auto Owner Trust [____-_] (the "Trust") formed by
Ford Credit Auto Receivables Two L.P., a Delaware limited partnership
(the "Depositor"). The Class D Certificates have an aggregate Initial
Certificate Balance of $[_______] and bear interest at a rate of [___]% per
annum (the "Class D Rate").
B-2
<PAGE> 76
The Trust was created pursuant to an Amended and Restated
Trust Agreement, dated as of [_______ ___,_____] (as from time to time amended,
supplemented or otherwise modified and in effect, the "Trust Agreement"), among
the Depositor, [_________________], not in its individual capacity but solely as
Delaware trustee (the "Delaware Trustee") and [_______________], not in its
individual capacity but solely as owner trustee (the "Owner Trustee"), a summary
of certain of the pertinent provisions of which is set forth below. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates
designated as "Class D [___]% Asset Backed Certificates" (herein called the
"Class D Certificates") which, together with the Certificates designated as
"Class C [___]% Asset Backed Certificates" (the "Class C Certificates" and,
together with the Class D Certificates, the "Certificates") are issued under and
are subject to the terms, provisions and conditions of the Trust Agreement, to
which Trust Agreement the Certificateholder of this Certificate by virtue of the
acceptance hereof assents and by which such Certificateholder is bound. Also
issued under the Indenture, dated as of [________ ___,_____] (as from time to
time amended, supplemented or otherwise modified and in effect, the
"Indenture"), between the Trust and [______________________], as indenture
trustee (in such capacity, the "Indenture Trustee"), are the Notes designated
as "Class A-1 [____]% Asset Backed Notes", "Class A-2 [____]% Asset Backed
Notes", "Class A-3 [___]% Asset Backed Notes", "Class A-4 [___]% Asset Backed
Notes", "Class A-5 [___]% Asset Backed Notes", "Class A-6 [___]% Asset Backed
Notes" and "Class B [___]% Asset Backed Notes" (collectively, the "Notes"). The
property of the Trust includes (i) a pool of motor vehicle retail installment
sale contracts for new and used automobiles and light trucks and certain rights
and obligations thereunder (the "Receivables"); (ii) with respect to Actuarial
Receivables, all monies due thereunder on or after the Cutoff Date and, with
respect to Simple Interest Receivables, all monies due or received thereunder on
or after the Cutoff Date; (iii) the security interests in the Financed Vehicles
granted by Obligors pursuant to the Receivables and any other interest of the
Trust in the Financed Vehicles; (iv) rights to proceeds from claims on certain
physical damage, credit life, credit disability or other insurance policies, if
any, covering Financed Vehicles or Obligors; (v) Dealer Recourse; (vi) all of
the Seller's rights to the Receivable
B-3
<PAGE> 77
Files; (vii) such amounts as from time to time may be held in one or more
accounts maintained pursuant to the Sale and Servicing Agreement, dated as of
[____________,_____] (as from time to time amended, supplemented or otherwise
modified and in effect, the "Sale and Servicing Agreement"), by and among the
Trust, the Depositor, as seller (in such capacity, the "Seller"), and Ford Motor
Credit Company, as servicer (the "Servicer"), including the Reserve Account;
(viii) the Seller's rights under the Sale and Servicing Agreement; (ix) the
Seller's rights under the Purchase Agreement; (x) payments and proceeds with
respect to the Receivables held by the Servicer; (xi) all property (including
the right to receive Liquidation Proceeds) securing a Receivable (other than a
Receivable repurchased by the Servicer or purchased by the Seller); (xii)
rebates of premiums and other amounts relating to insurance policies and other
items financed under the Receivables in effect as of the Cutoff Date; and (xiii)
any and all proceeds of the foregoing. THE RIGHTS OF THE TRUST IN THE FOREGOING
PROPERTY OF THE TRUST HAVE BEEN PLEDGED TO THE INDENTURE TRUSTEE TO SECURE THE
PAYMENT OF THE NOTES.
Under the Trust Agreement, there will be distributed on the
fifteenth day of each month or, if such fifteenth day is not a Business Day, the
next Business Day (each, a "Distribution Date"), commencing [___], to the Person
in whose name this Certificate is registered at the close of business on the
last day of the preceding month (the "Record Date") such Certificateholder's
percent age interest in the amount to be distributed to Class D
Certificateholders on such Distribution Date; provided, however, that principal
will be distributed to the Class D Certificateholders on each Distribution Date
on (to the extent of funds remaining after all classes of the Notes and the
Class C Certificates have been paid in full) and after the date on which all
classes of the Notes and the Class C Certificates have been paid in full.
Notwithstanding the foregoing, following the occurrence and during the
continuation of an event of default under the Indenture which has resulted in an
acceleration of the Notes or following certain events of insolvency or a
dissolution with respect to the Depositor or the General Partner, no
distributions of principal or interest will be made on the Certificates until
all principal and interest on the Notes has been paid in full.
B-4
<PAGE> 78
THE HOLDER OF THIS CERTIFICATE ACKNOWLEDGES AND AGREES THAT
ITS RIGHTS TO RECEIVE DISTRIBUTIONS IN RESPECT OF THIS CERTIFICATE ARE
SUBORDINATED TO THE RIGHTS OF THE NOTEHOLDERS AND THE CLASS C CERTIFICATEHOLDERS
AS DESCRIBED IN THE SALE AND SERVICING AGREEMENT, THE INDENTURE AND THE TRUST
AGREEMENT.
It is the intent of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local
franchise and income tax and any other income taxes, the Trust will be treated
as a partnership and the Certificateholders (including the Depositor) will be
treated as partners in that partnership. The Depositor and the other
Certificateholders by acceptance of a Certificate agree to treat, and to take no
action inconsistent with the treatment of, the Certificates for such tax
purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not, until after the Notes
have been paid in full, institute against the Depositor, the General Partner or
the Trust, or join in any institution against the Depositor, the General Partner
or the Trust of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, the Certificates, the Trust Agreement or any of the other Basic
Documents.
Distributions on this Certificate will be made as provided in
the Trust Agreement by the Owner Trustee or the Certificate Paying Agent by wire
transfer or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation hereon. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Owner Trustee of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency maintained for the purpose by the Owner Trustee in New York, New York.
B-5
<PAGE> 79
Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the Certificateholder hereof to
any benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
This Certificate shall be construed in accordance with the
laws of the State of Delaware and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
B-6
<PAGE> 80
In WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Class D Certificate to be
duly executed.
FORD CREDIT AUTO OWNER
TRUST [ - ]
---- -
By:[ ],
--------------------------------
not in its individual capacity but
solely as Owner Trustee
By:
---------------------------------
Authorized Officer
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class D Certificates referred to in the
within-mentioned Trust Agreement.
Dated: [ , ]
---------- -- -----
[ ],
-----------------------------------
not in its individual capacity
but solely as Owner Trustee
By:
---------------------------------
Authorized Officer
<PAGE> 81
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the General Partner, the Servicer, the
Administrator, the Owner Trustee or any Affiliates of any of them and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated herein, in the Trust Agreement or in the
other Basic Documents. In addition, this Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections with respect to the Receivables (and certain other
amounts), all as more specifically set forth herein and in the Sale and
Servicing Agreement. A registration statement, which includes the Trust
Agreement as an exhibit thereto, has been filed with the Securities and Exchange
Commission with respect to the Notes and the Class C Certificates.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor and the Owner Trustee with the
consent of the Noteholders and the Certificateholders evidencing not less than a
majority of the principal amount of the Notes Outstanding and the Aggregate
Certificate Balance, respectively. Any such consent by the Certificateholder of
this Certificate shall be conclusive and binding on such Certificateholder and
on all future Certificateholders of this Certificate and of any Certificate
issued upon the registration of Transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of any of the Certificateholders.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the Transfer of the Certificates are registrable
in the Certificate Register upon surrender of this Certificate for registration
of Transfer at the offices or agencies maintained by [_________________] in its
capacity as Certificate Registrar, or by any successor Certificate Registrar,
in New York, New York, accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the holder hereof or
B-8
<PAGE> 82
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee.
The Certificates are issuable as registered Certificates
without coupons in denominations of at least $20,000 and in integral multiples
of $1,000 in excess thereof. Certificates are exchangeable for new Certificates
of like Class and authorized denominations evidencing the same aggregate
denomination, as requested by the Certificateholder surrendering the same. No
service charge will be made for any such registration of Transfer or exchange,
but the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of
the Owner Trustee or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The Class D Certificates may not be acquired by or on behalf
of (A) an employee benefit plan, as defined in Section 3(3) of ERISA, that is
subject to Title I of ERISA, (B) a plan described in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, (C) 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, (D) 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. ss. 2510.3-101 or otherwise under
ERISA) or (E) a person investing "plan assets" of any such plan (including
without limitation, for purposes of this clause (E), an insurance company
general account, but excluding any entity registered under the Investment
Company Act of 1940, as amended).
In addition, the Certificates may not be acquired by or on
behalf of a Person other than (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
B-9
<PAGE> 83
United States tax purposes, regardless of its source, (D) a trust if a U.S.
court is able to exercise primary supervision over the administration of such
trust and one or more Persons meeting the conditions of this paragraph 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
Owner Trustee and the Depositor with an IRS Form 4224 (and such other
certifications, representations, or opinions of counsel as may be requested by
the Owner Trustee or the Depositor).
The obligations and responsibilities created by the Trust
Agreement and the Trust created thereby shall terminate (i) upon the maturity or
other liquidation of the last remaining Receivable and the disposition of any
amounts received upon such maturity or liquidation or (ii) upon the payment to
the Noteholders and the Certificateholders of all amounts required to be paid to
them pursuant to the Indenture, the Trust Agreement and the Sale and Servicing
Agreement, and upon such termination any remaining assets of the Trust shall be
distributed to the Depositor. The Servicer of the Receivables may at its option
purchase the assets of the Trust at a price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect early retirement of the Notes and the Certificates; however, such
right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to 10% of the Initial
Pool Balance.
B-10
<PAGE> 84
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers unto
--------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to
- ------------------------------------------------------------------
transfer said Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
--------------------
*/
--------------------------------
Signature Guaranteed:
*/
--------------------------------
- ------------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
B-11
<PAGE> 85
EXHIBIT C
[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 de scribed 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
C-1
<PAGE> 86
(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 DOL 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 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
C-2
<PAGE> 87
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.
C-3
<PAGE> 88
EXHIBIT D
[FORM OF INVESTMENT LETTER - CLASS D CERTIFICATES
QUALIFIED INSTITUTIONAL BUYER]
[Date]
Ford Credit Auto Owner Trust [____-_]
as Issuer
[___________________]
as Owner Trustee and
Certificate Registrar
[__________________]
[_______________________]
Re: Ford Credit Auto Owner Trust [____-_]
Class D [___]% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our proposed purchase of the Class D [ ]%
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"), we confirm that:
1. The undersigned agrees to be bound by, and not to resell,
transfer, assign, participate, pledge or otherwise dispose of (any such act,
a "Transfer") the Certificates except in compliance with, the restrictions
and conditions set forth in the legend on the face of the Class D
Certificates and under the Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that no subsequent Transfer of the Certificates
is permitted unless we cause our proposed transferee to provide to the
Issuer, the Certificate Registrar and the Initial Purchaser a letter
substantially in the form of this letter or Exhibit E to the Trust Agreement,
as applicable, or such other written statement as the Depositor shall
prescribe.
3. We are a "qualified institutional buyer" (within the meaning
of Rule 144A under the Securities Act (a "QIB") and we are acquiring the
Certificates for our own account or for a single account (which is a QIB) as
to which we exercise sole investment discretion.
D-1
<PAGE> 89
4. We are not, and each account (if any) for which we are
purchasing the Certificates is not, (A) 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, (B) 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, (C) 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, (D) 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 (E) a person investing "plan assets" of any such
plan (including without limitation, for purposes of this clause (E), an
insurance company general account, but excluding any entity registered under
the Investment Company Act of 1940, as amended).
5. We are a person who is (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is includible in gross income for United States tax purposes,
regardless of its source, (iv) a trust if a U.S. court is able to exercise
primary supervision over the administration of such trust and one or more
persons described in clauses (i) to (iii) above or clause (v) below has the
authority to control all substantial decisions of the trust or (v) a person
not described in clauses (i) to (iv) 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 a Form 4224 (and such other
certifications, representations, or opinions of counsel as may be requested
by the Issuer or the Depositor).
6. We understand that any purported Transfer of any Certificate
(or any interest therein) in contravention of the restrictions and
conditions above will be null and void (each, a "Void Transfer"), and the
purported transferee in a Void Transfer will not be recognized by the Issuer
or any other person as a Certificateholder for any purpose.
You are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy
D-2
<PAGE> 90
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 amount of Certificates
D-3
<PAGE> 91
EXHIBIT E
[FORM OF INVESTMENT LETTER - CLASS D CERTIFICATES
INSTITUTIONAL ACCREDITED INVESTOR]
[Date]
Ford Credit Auto Owner Trust [____-_]
as Issuer
[___________________]
as Owner Trustee and
Certificate Registrar
[_________________]
[_______________________]
Re: Ford Credit Auto Owner Trust [____-_]
Class D [___]% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our proposed purchase of the Class D [ ]% 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"), we confirm that:
1. The undersigned agrees to be bound by, and not to resell,
transfer, assign, participate, pledge or otherwise dispose of (any such
act, a "Transfer") the Certificates except in compliance with, the
restrictions and conditions set forth in the legend on the face of the
Class D Certificates and under the Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that no subsequent Transfer of the Certificates
is permitted unless we cause our proposed transferee to provide to the
Issuer, the Certificate Registrar and the Initial Purchaser a letter
substantially in the form of this letter or Exhibit D to the Trust
Agreement, as applicable, or such other written statement as the
Depositor shall prescribe.
3. We are a "qualified institutional buyer" (within the meaning
of Rule 144A under the Securities
E-1
<PAGE> 92
Act (a "QIB") and we are acquiring the Certificates for our own account
or for a single account (which is a QIB) as to which we exercise sole
investment discretion.
4. We are not, and each account (if any) for which we are
purchasing the Certificates is not, (A) 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, (B)
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, (C) 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, (D) 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 (E) a person investing "plan assets" of any
such plan (including without limitation, for purposes of this clause
(E), an insurance company general account, but excluding any entity
registered under the Investment Company Act of 1940, as amended).
5. We are a person who is (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof, (iii) an
estate the income of which is includible in gross income for United
States tax purposes, regardless of its source, (iv) a trust if a U.S.
court is able to exercise primary supervision over the administration
of such trust and one or more persons described in clauses (i) to (iii)
above or clause (v) below has the authority to control all substantial
decisions of the trust or (v) a person not described in clauses (i) to
(iv) 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 a Form 4224 (and such other certifications,
representations, or opinions of counsel as may be requested by the
Issuer or the Depositor).
6. We understand that any purported Transfer of any Certificate
(or any interest therein) in contravention of the restrictions and
conditions above
E-2
<PAGE> 93
will be null and void (each, a "Void Transfer"), and the purported
transferee in a Void Transfer will not be recognized by the Issuer or
any other person as a Certificateholder for any purpose.
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 amount of Certificates
E-3
<PAGE> 94
EXHIBIT F
FORM OF RULE 144A TRANSFEROR CERTIFICATE -
CLASS D CERTIFICATES
[Date]
[__________________]
as Owner Trustee and
Certificate Registrar
[______________]
[______________________]
Re: Ford Credit Auto Owner Trust [____-_]
Class D [___]% Asset Backed Certificates
Ladies and Gentlemen:
This is to notify you as to the transfer of $ [*] in denomination of
Class D [___]% Asset Backed Certificates (the "Certificates") of Ford Credit
Auto Owner Trust [____-_] (the "Issuer").
The undersigned is the holder of the Certificates and with this notice
hereby deposits with the Owner Trustee $ [*] in denomination of Certificates and
requests that Certificates of the same class in the same aggregate denomination
be issued, executed and authenticated and registered to the purchaser on
, 199[ ], as specified in the Trust Agreement dated as of [_______ __,
____] relating to the Certificates, as follows:
Name: Denominations:
Address:
Taxpayer I.D. No:
The undersigned represents and warrants that the undersigned (i)
reasonably believes the purchaser is a "qualified institutional buyer," as
defined in Rule 144A under the Securities Act of 1933 (the "Act"), (ii) such
purchaser has acquired the Certificates in a transaction effected in accordance
with the exemption from the registration requirements of the Act provided by
Rule 144A, (iii) if the purchaser has purchased the Certificates for
F-1
<PAGE> 95
an account for which it is acting as fiduciary or agent, such account is a
qualified institutional buyer and (iv) the purchaser is acquiring Certificates
for its own account or for an institutional account for which it is acting as
fiduciary or agent.
Very truly yours,
[NAME OF HOLDER OF
CERTIFICATES]
By:
------------------------------
Name:
Title:
[*] authorized denomination
F-2
<PAGE> 96
EXHIBIT G
[FORM OF CERTIFICATE OF TRUST]
CERTIFICATE OF TRUST OF
FORD CREDIT AUTO OWNER TRUST [____-_]
This Certificate of Trust of Ford Credit Auto Owner Trust
[____-_] (the "Trust"), dated as of [________ __,_____], is being duly executed
and filed by [_____________________________], a Delaware banking corporation, as
Delaware trustee (the "Delaware Trustee") and [___________________], a [_______]
banking corporation, as owner trustee (the "Owner Trustee"), to form a business
trust under the Delaware Business Trust Act (12 Delaware Code, ss. 3801 et seq.)
(the "Act").
1. Name. The name of the business trust formed hereby
is Ford Credit Auto Owner Trust [____-_].
2. Delaware Trustee. The name and business address of
the trustee of the Trust in the State of Delaware is
[____________________________________].
3. Effective Date. This Certificate of Trust shall be
effective on [_______ __,_____].
IN WITNESS WHEREOF, the undersigned, being the sole trustees
of the Trust, have executed this Certificate of Trust as of the date first above
written in accordance with Section 3811(a)(1) of the Act.
[__________________],
not in its individual capacity but
solely as Owner Trustee under a Trust
Agreement dated as of [_____ ___,_____]
By: ___________________________
Name:
Title:
[__________________________],
not in its individual capacity but
solely as Delaware Trustee under a
Trust Agreement dated as of [_____ __,
_____]
By: ___________________________
Name:
Title:
G-1
<PAGE> 1
EXHIBIT 5.1
(FORD LOGO)
FORD MOTOR CREDIT COMPANY
Hurley D. Smith
Secretary and Corporate Counsel The American Road
Dearborn, Michigan 48121-6044
September 3, 1999
Ford Credit Auto Receivables Two, Inc.
The American Road
Dearborn, Michigan 48121
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Re: Registration Statement No. 333-82895 on Form S-3
Relating to Ford Credit Auto Owner Trusts (the
"Registration Statement")
Dear Sirs:
The undersigned, Hurley D. Smith, Corporate Counsel of Ford Credit Auto
Receivables Two, Inc. ("FCAR"), Ford Credit Auto Receivables Two L.P.
("Seller") and Ford Motor Credit Company ("Ford Credit") has acted as counsel
for FCAR, Seller and Ford Credit in connection with the Registration Statement,
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, respecting the issuance by various trusts (each a "Trust") to
be formed pursuant to an Owner Trust Agreement ("Owner Trust Agreement") to be
entered into between the Seller and the Owner Trustee (the "Owner Trustee") of
Asset Backed Securities consisting of Notes and Certificates. Any Asset Backed
Securities consisting of Notes are to be issued pursuant to a Trust Indenture
(the "Trust Indenture") to be entered into between the Trust and the Indenture
Trustee designated therein (the "Indenture Trustee").
In that connection, I have examined, or caused to be examined, originals
or copies certified to my satisfaction, of such documents, corporate and
partnership records and other instruments as I have deemed necessary or
appropriate for the purposes of this opinion. Based upon the foregoing, I am
of the opinion that the Asset Backed Securities, when duly executed and
authenticated by the Indenture Trustee or the Owner Trustee, as the case may
be, in accordance with the terms of the applicable Trust Indenture or Owner
Trust Agreement, and issued and delivered against payment thereof, will be
legally issued, fully paid and nonassessable.
I hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement. In giving this consent, I do not admit that I am in the
category of persons whose consent is required under Section 7 of the Securities
Act or the Rules and Regulations of the Commission issued thereunder.
Very truly yours,
/s/ Hurley D. Smith
<PAGE> 1
EXHIBIT 8.1
September 3, 1999
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Receivables Two L.P.
Registration Statement on Form S-3
-------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Ford Credit Auto Receivables Two L.P.,
as Seller (the "Seller"), in connection with Registration Statement on Form S-3
(the "Registration Statement") being filed with the Securities and Exchange
Commission concurrently herewith under the Securities Act of 1933, as amended,
respecting the issuance by various trusts (each, a "Trust") to be formed
pursuant to either an Amended and Restated Trust Agreement (the "Trust
Agreement") to be entered into by the Seller and the Owner Trustee (the "Owner
Trustee") designated therein of Asset Backed Securities consisting of Notes and
Certificates. Any Asset Backed Securities consisting of Notes are to be issued
pursuant to an Indenture (the "Indenture") to be entered into by the Trust and
the Indenture Trustee designated therein (the "Indenture Trustee") and any
Asset Backed Securities consisting of Certificates are to be issued pursuant to
the Trust Agreement. Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Registration Statement.
In this connection, we have examined and relied upon the Registration
Statement filed with the Securities
<PAGE> 2
Ford Credit Auto Receivables Two L.P.
September 3, 1999
Page 2
and Exchange Commission (the "SEC"), including (i) the form of prospectus
included therein (the "Prospectus"); (ii) the forms of prospectus supplement
included therein (the "Prospectus Supplement"); (iii) the form of Indenture;
(iv) the form of Trust Agreement; (v) the form of Purchase Agreement; (vi) the
form of Sale and Servicing Agreement; (vii) the form of Administration
Agreement; and (viii) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below, and we have assumed (i)
that such documents will not be amended and (ii) that the parties to such
documents will comply with the terms thereof.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to
any facts material to the opinions expressed herein which were not
independently established or verified, we have relied upon statements,
representations, and certifications of officers and other representatives of
the Seller, the Servicer, the Underwriters, and others, including, in
particular, (i) certain calculations performed by the Underwriters and (ii) a
representation of the Servicer regarding the reasonableness of certain fees
payable to it.
In rendering our opinion, we have also considered and relied upon the
Internal Revenue Code of 1986, as amended, and administrative rulings, judicial
decisions, regulations, and such other authorities as we have deemed
appropriate, all as in effect as of the date hereof. The statutory provisions,
regulations, interpretations, and other authorities upon which our opinion is
based are subject to change, and such changes could apply retroactively. In
addition, there can be no assurance that positions contrary to those stated in
our opinion will not be taken by the Internal Revenue Service.
<PAGE> 3
Ford Credit Auto Receivables Two L.P.
September 3, 1999
Page 3
We express no opinions as to the laws of any jurisdiction other than the
federal laws of the United States of America to the extent specifically
referred to herein.
Based upon and subject to the foregoing, we are of the opinion that the
statements in the Prospectus under the heading "Summary--Tax Status" to the
extent they relate to federal income tax matters and under the heading "Tax
Matters," subject to the qualifications set forth therein, accurately describe
the material federal income tax consequences to holders of Notes and/or
Certificates, under existing law and the assumptions stated therein.
We also note that the Prospectus and the Basic Documents do not relate to
a specific transaction. Accordingly, the above-referenced description of
federal income tax consequences may require modification in the context of an
actual transaction.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
<PAGE> 1
EXHIBIT 8.2
September 3, 1999
Ford Credit Auto Receivables Two L.P.
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Receivables Two L.P.
Registration Statement No. 333-82895 on Form S-3
(the "Registration Statement")
Ladies and Gentlemen:
The undersigned, H.D. Smith, Secretary and Corporate Counsel of Ford
Motor Credit Company ("Ford Credit") has acted as counsel to Ford Credit Auto
Receivables Two L.P., as Seller (the "Seller") in connection with the
Registration Statement, filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, respecting the issuance by various
trusts (each, a "Trust") to be formed pursuant to an Owner Trust Agreement
("Owner Trust Agreement") to be entered into among the Seller and the Owner
Trustee designated therein of Asset Backed Securities consisting of Notes and
Certificates. Any Asset Backed Securities consisting of Notes are to be issued
pursuant to a Trust Indenture to be entered into between the Trust and the
Indenture Trustee designated therein and any Asset Backed Securities consisting
of Certificates are to be issued pursuant to the Owner Trust Agreement.
I am admitted to the State Bar of Michigan and I express no opinion
as to the laws of any other jurisdiction except the laws of the United States
of America
<PAGE> 2
Ford Credit Auto Receivables Two L.P.
September 3, 1999
Page 2
and the State of Michigan.
I hereby confirm that the statements set forth in the Prospectus forming a
part of the Registration Statement under the caption "Summary--Tax Status" as
they relate to Michigan state tax matters accurately describe the material
Michigan state tax consequences to holders of the Certificates and/or the Notes.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me under the caption "Legal Opinions" in the
Prospectus included in the Registration Statement. In giving this consent, I do
not admit that I am in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the Rules and Regulations of the
Commission issued thereunder.
Very truly yours,
/s/ H.D. Smith
<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 3rd day of
September, 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
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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
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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.
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<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 23rd
day of August, 1999.
/s/ E.S. Acton /S/ HURLEY D. SMITH
---------------------- --------------------------
(E.S. Acton) (Hurley D. Smith)
/s/ D.J. Prystash /s/ D.D. Meyer
--------------------- --------------------------
(D.J. Prystash) (D.D. Meyer)
6
