As filed with the Securities and Exchange Commission on October 15, 1998
Registration No. 333-57305
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
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FORD CREDIT AUTO LOAN MASTER TRUST II
(In which the Certificates evidence undivided interests)
FORD CREDIT AUTO RECEIVABLES LLC
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
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Delaware 6146 38-3372243
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
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The American Road
Dearborn, Michigan 48121
(313-594-7742)
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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R.P. Conrad, Esq.
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
(313-594-7765)
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Stephen B. Esko, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048
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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, 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, as amended (the "Securities Act"), 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, 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, 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, check the following box. / /
CALCULATION OF REGISTRATION FEE
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Title of Proposed Proposed
each class Amount Maximum Maximum Amount of
of securities to be Offering Price Aggregate Registration
to be registered Registered Per Unit(1) Offering Price(1) Fee
- --------------------------------------------------------------------------------
Certificates...... $1,000,000 100% $1,000,000 $295(2)
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(1) Estimated solely for purpose of calculating the registration fee.
(2) 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, or until this Registration Statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
PROSPECTUS
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Ford Credit Auto Loan Master Trust II
ISSUER OF THE CERTIFICATES
Auto Loan Asset Backed Certificates
FORD CREDIT AUTO RECEIVABLES LLC
TRANSFEROR
FORD MOTOR CREDIT COMPANY
MASTER SERVICER
The Auto Loan Asset Backed Certificates (the "Certificates") offered
hereby from time to time in one or more series (each, a "Series") evidence
undivided interests in certain assets of the Ford Credit Auto Loan Master Trust
II (the "Trust") created pursuant to a Pooling and Servicing Agreement among
Ford Credit Auto Receivables LLC, as transferor ("FCAR" or the "Transferor"),
Ford Motor Credit Company, as master servicer ("Ford Credit" or the "Master
Servicer"), and The Chase Manhattan Bank, as trustee. The Certificates of each
Series will be issued by the Trust and will be offered on terms determined at
the time of sale and may have terms significantly different from other Series of
Certificates issued from time to time. The assets of the Trust (the "Trust
Assets") include wholesale receivables (the "Receivables") generated either
directly by Ford Credit or through its wholly-owned subsidiary, PRIMUS, from
time to time in a portfolio of revolving financing arrangements (the "Accounts")
with automobile dealers to finance their automobile and light duty truck
inventory and collections on Receivables, and may include certain Vehicles or
Related Security (each as defined herein) acquired by repossession. PRIMUS acts
as the agent of Ford Credit for the purpose of originating accounts primarily
with non-Ford associated dealers. Certain assets of the Trust will be allocated
to Certificateholders of each Series, including the right to receive a varying
percentage of each month's collections with respect to the Receivables at the
times and in the manner described herein and the related Prospectus Supplement
for such Series. The Transferor will own the remaining interest in the Trust not
represented by the Certificates (the "Transferor's Interest"). While the
specific terms of any Series in respect of which this Prospectus is being
delivered will be described in an accompanying Prospectus Supplement, the terms
of any additional Series will not be subject to prior review by or consent of
holders of the Certificates of any previously issued Series.
Interest will accrue on the unpaid principal amount of the Certificates
of each Series at the per annum rate either specified in or determined in the
manner specified in the related Prospectus Supplement and will be payable on
each Payment Date specified therein, or, in certain circumstances, more
frequently. Principal payments on each Series of Certificates will be made on
the applicable Expected Final Payment Date specified in the related Prospectus
Supplement and on such other date or dates as may be specified in such
Prospectus Supplement or earlier or later in certain circumstances.
Unless otherwise specified in the related Prospectus Supplement, the
Transferor's Interest will be subordinated to the rights of the
Certificateholders of a Series to the limited extent of the Available
Subordinated Amount (or, if so specified in the related Prospectus Supplement,
the Aggregate Available Subordinated Amount) as described herein.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE RISK FACTORS SET FORTH HEREIN
UNDER "RISK FACTORS" BEGINNING ON PAGE 17.
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THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND
DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, THE MASTER
SERVICER OR ANY AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE RECEIVABLES
ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Certificates of a Series may be sold by the Transferor directly to
purchasers, through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or more
acting alone. If underwriters or agents are involved in the offering of
Certificates, the name of the managing underwriter or underwriters or agents
will be set forth in the related Prospectus Supplement. If an underwriter, agent
or dealer is involved in the offering of any Certificates, the underwriter's
discount, agent's commission or dealer's purchase price will be set forth in, or
may be calculated from, the related Prospectus Supplement, and the net proceeds
to the Transferor from such offering will be the public offering price of the
Certificates less such discount, in the case of an underwriter, the purchase
price of the Certificates less such commission, in the case of an agent, or the
purchase price of the Certificates, in the case of a dealer, and less, in each
case, the other expenses of the Transferor associated with the issuance and
distribution of the Certificates. See "Underwriting".
Until 90 days after the date of the related Prospectus Supplement, all
dealers effecting transactions in the Certificates, whether or not participating
in this distribution, may be required to deliver such Prospectus Supplement and
this Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
This Prospectus does not contain complete information about the
offering of the Certificates. Additional information is contained in the related
Prospectus Supplement, and investors are urged to read both this Prospectus and
the related Prospectus Supplement in full. Sales of the Certificates may not be
consummated unless the purchaser has received both this Prospectus and the
related Prospectus Supplement.
The Certificates offered by this Prospectus and the related Prospectus
Supplement are offered by ___________ and the other underwriters set forth in
the related Prospectus Supplement, if any, subject to prior sale, to withdrawal,
cancellation or modification of the offer without notice, to delivery to and
acceptance by ____________ and the other underwriters, if any, and certain
further conditions. Retain this Prospectus for future reference. This Prospectus
may not be used to consummate sales of the Certificates offered hereby unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is __________, 199__
AVAILABLE INFORMATION
Ford Credit Auto Receivables LLC, as originator of the Trust, has filed
a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") with respect to the Certificates offered pursuant to this
Prospectus. This Prospectus, which forms a part of the Registration Statement,
and the Prospectus Supplement relating to each Series of Certificates contain
summaries of the material terms of the documents referred to herein and therein,
but do not contain all of the information contained in the Registration
Statement and the exhibits thereto. For further information, reference is made
to such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048. The
Commission also maintains a Web site at http://www.sec.gov, from which such
Registration Statement and exhibits may be obtained.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports, containing information concerning the Trust and prepared by
the Master Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"),
as nominee of The Depository Trust Company ("DTC") and registered holder of each
Series of Certificates, pursuant to the Pooling and Servicing Agreement and the
related Series Supplement (each as defined herein). See "Series
Provisions--Reports," "--Book-Entry Registration" and "--Evidence as to
Compliance". Such reports may be available to beneficial owners of Certificates
("Certificate Owners") in accordance with the regulations and procedures of DTC.
Copies of the Monthly Reports may be obtained free of charge upon request from
the Trustee. The Trust will file with the Commission such periodic reports with
respect to the Trust as are required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the rules and regulations of the Commission
thereunder.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Index of Principal
Terms beginning on page 69 for the location herein of the definitions of certain
capitalized terms used herein.
Issuer.............................. Ford Credit Auto Loan Master Trust II
(the "Trust").
Transferor ......................... Ford Credit Auto Receivables LLC (the
"Transferor" or "FCAR"), an affiliate of
Ford Motor Credit Company.
Master Servicer .................... Ford Motor Credit Company ("Ford Credit"
or, together with, as applicable, a
successor Master Servicer, the "Master
Servicer"), a wholly-owned subsidiary of
Ford Motor Company ("Ford").
Trustee ............................ The Chase Manhattan Bank (the
"Trustee").
The Trust .......................... The Trust was formed pursuant to a
Pooling and Servicing Agreement, dated
as of September 30, 1997, among FCAR, as
Transferor, Ford Credit, as Master
Servicer, and The Chase Manhattan Bank,
as Trustee, as supplemented from time to
time by a Supplement relating a Series
of Certificates (as supplemented or
amended from time to time, the "Pooling
and Servicing Agreement"). The assets of
the Trust (the "Trust Assets") include
(a) certain Receivables existing under
the Accounts at the close of business on
September 30, 1997 (the "Initial Cut-Off
Date"), certain Receivables generated
under the Accounts from time to time
thereafter during the term of the Trust
as well as certain Receivables generated
under any Accounts added to the Trust
from time to time (less Receivables paid
or charged off and excluding Receivables
generated in any Accounts removed from
the Trust from time to time after the
Initial Cut-Off Date), (b) all funds
collected in respect of such Receivables
after the Initial Cut-Off Date, (c) all
funds on deposit in certain accounts of
the Trust including funds on deposit in
one or more Excess Funding Accounts,
Principal Funding Accounts, Interest
Funding Accounts and the Reserve Fund,
(d) any Enhancement issued with respect
to a Series, (e) a security interest in
certain motor vehicles (the "Vehicles")
and, in the case of certain Accounts, a
security interest junior to that of Ford
Credit or PRIMUS, as the case may be, in
certain parts, inventory, equipment,
fixtures, service accounts, realty
and/or a personal guarantee
(collectively, the "Related Security")
securing the Receivables, and (f)
Vehicles or Related Security acquired as
a result of repossession. The drawing on
or payment of any Enhancement for the
benefit of a Series or Class of
Certificates will not be available to
the Certificateholders of any other
Series or Class. The term "Enhancement"
will mean, with respect to any Series or
class of Certificates, any letter of
credit, surety bond, cash collateral
account, spread account, guaranteed rate
agreement, maturity liquidity facility,
tax protection agreement, interest rate
swap agreement or other similar
arrangement. Enhancement shall also
include the subordination of any Series
or Class or of the Transferor's Interest
to any Series or Class. The Enhancement
applicable to a particular Series of
Certificates will be specified in the
related Prospectus Supplement.
The Accounts ....................... The accounts pursuant to which the
Receivables are generated (the
"Accounts") are established through
revolving credit agreements entered into
by or on behalf of motor vehicle dealers
most of which are franchised by Ford
and/or other motor vehicle manufacturers
(the "Dealers") to purchase or finance
automobile and light duty truck
inventory. The Accounts are selected
from all such credit agreements of Ford
Credit or PRIMUS that meet the criteria
provided in the Pooling and Servicing
Agreement (the "Eligible Accounts").
Initially, the Accounts were selected
from (i) the portfolio of accounts
originated directly by Ford Credit (or
by Ford and immediately thereafter
assigned to Ford Credit) for the
purchase of motor vehicles by
Ford-franchised Dealers and associated
non-Ford Dealers in the United States
(the "Ford Credit U.S. Wholesale
Portfolio") and (ii) the portfolio of
accounts originated by PRIMUS (and
immediately thereafter assigned to Ford
Credit) for the purchase of motor
vehicles by Dealers in the United States
franchised primarily by motor vehicle
manufacturers or distributors other than
Ford (the "PRIMUS U.S. Wholesale
Portfolio"). Under certain
circumstances, Accounts may be added to,
or removed from, the Trust. Upon the
satisfaction of certain conditions and
subject to the approval of the Rating
Agencies, accounts substantially similar
to the Accounts originated or acquired
by Ford Credit from one or more other
Ford affiliates may be sold by Ford
Credit to the Transferor for transfer to
the Trust. See "The Accounts", "Series
Provisions--Addition of Accounts" and
"--Removal of Accounts".
The Receivables .................... The Receivables arise in the Accounts
and consist of advances made directly or
indirectly by Ford Credit to Dealers.
Such advances are used by the Dealers to
purchase or finance the Vehicles, which
consist of primarily new and some used
automobiles, light duty trucks and
certain other vehicles manufactured or
distributed by Ford or other vehicle
manufacturers or distributors.
Generally, the principal amount of an
advance in respect of a new Vehicle is
equal to the wholesale purchase price of
the Vehicle and, subject to certain
exceptions, is due upon the retail sale
of the Vehicle. See "The Dealer
Floorplan Financing Business--Creation
of Receivables" and "--Payment Terms".
Collections of principal under the
Receivables are herein referred to as
"Principal Collections", and collections
of interest and other nonprincipal
charges (including insurance service
fees, amounts recovered with respect to
Defaulted Receivables and insurance
proceeds) are referred to herein as
"Interest Collections". The Receivables
bear interest at an adjustable rate
described herein. See "The Dealer
Floorplan Financing Business--Revenue
Experience".
FCAR has entered into a Receivables
Purchase Agreement, dated as of the date
of the Pooling and Servicing Agreement,
between FCAR, as purchaser, and Ford
Credit, as seller (the "Receivables
Purchase Agreement"). Pursuant to the
Receivables Purchase Agreement, Ford
Credit (a) sells to the Transferor all
of its right, title and interest in and
to all Receivables meeting certain
eligibility criteria contained in the
Receivables Purchase Agreement and the
Pooling and Servicing Agreement
("Eligible Receivables") and (b) assigns
its interests in the Vehicles and the
Related Security to the Transferor. The
Transferor in turn transfers such
Receivables and Related Security to the
Trust pursuant to the Pooling and
Servicing Agreement. The Transferor also
assigns to the Trust its rights with
respect to the Receivables under the
Receivables Purchase Agreement. See
"Description of the Receivables Purchase
Agreement".
All new Receivables arising under the
Accounts during the term of the Trust
will be sold by Ford Credit to the
Transferor and transferred by the
Transferor to the Trust. Accordingly,
the aggregate amount of Receivables in
the Trust will fluctuate from day to day
as new Receivables are generated and as
existing Receivables are collected,
charged off as uncollectable or
otherwise adjusted.
The Certificates.................... The Certificates of each Series will be
available for purchase in minimum
denominations of $1,000 and in integral
multiples thereof or such other minimum
denominations and integral multiples as
are set forth in the related Prospectus
Supplement. Unless otherwise specified
in the related Prospectus Supplement,
the Certificates of each Series will
only be available in book-entry form
except in certain limited circumstances
as described herein under "Series
Provisions--Definitive Certificates".
The Trust Assets will be allocated among
the interest of the Certificateholders
(each, a "Certificateholders' Interest")
of each Series, with the remainder
allocated to the Transferor (the
"Transferor's Interest"), as described
below. If the Certificates of a Series
include more than one class of
Certificates, the Trust Assets allocable
to the Certificateholders' Interest of
such Series will be further allocated
among the Certificateholders of each
class of such Series.
The Certificates of each Series will
evidence fractional undivided beneficial
interests in the Trust Assets allocated
to the Certificateholders' Interest of
that Series. With respect to each
Series, the Trust Assets allocable to
such Series shall be substantially
identical to the Trust Assets allocable
to the other Series, with the exception
of any Enhancement issued with respect
to such Series.
Unless otherwise provided in the related
Prospectus Supplement, a portion of the
Transferor's Interest will be
subordinated to the Certificateholders'
Interest of each Series as described
herein and the related Prospectus
Supplement.
Unless otherwise specified in the
related Prospectus Supplement, on the
date of the issuance of the Certificates
of a Series (each, a "Closing Date"),
the Invested Amount for such Series will
equal the related Initial Principal
Amount and represent the principal
amount of Certificates of such Series
invested in Receivables as of the
Closing Date (as to a Series, the
"Initial Invested Amount"). The Invested
Amount for a Series is subject to
reduction during, if applicable to such
Series as indicated in the related
Prospectus Supplement, the Accumulation
Period or the Amortization Period, the
Early Amortization Period and at such
other times as deposits are made to the
excess funding account (or similar
arrangement) for such Series (the
"Excess Funding Account") in connection
with the payment of Receivables as
described under "Series Provisions--
Excess Funding Account".
The principal amount of the Transferor's
Interest is expected to fluctuate as the
aggregate amount of the Receivables
balance changes from time to time and as
new Series are issued.
Registration of Certificates........ Unless otherwise specified in the
related Prospectus Supplement, the
Certificates of each Series will
initially be represented by one or more
Certificates registered in the name of
Cede, as the nominee of DTC. No person
acquiring an interest in such
Certificates will be entitled to receive
a definitive certificate representing
such person's interest except in the
event that Definitive Certificates are
issued under the limited circumstances
described herein. Certificateholders may
elect to hold their interests through
DTC, in the United States, or Cedel
Bank, societe anonyme ("Cedel") or the
Euroclear System ("Euroclear"), in
Europe. Transfers within DTC, Cedel or
Euroclear, as the case may be, will be
in accordance with the usual rules and
operating procedures of the relevant
system. Cross-market transfers between
persons holding directly or indirectly
through DTC, on the one hand, and
counterparties holding directly or
indirectly through Cedel or Euroclear,
on the other, will be effected in DTC
through Citibank, N.A. ("Citibank") or
Morgan Guaranty Trust Company of New
York ("Morgan"), the relevant
depositaries (collectively, the
"Depositaries") of Cedel or Euroclear,
respectively, and each a participating
member of DTC. See "Series
Provisions--Book-Entry Registration" and
"--Definitive Certificates".
Issuance of New Series ............. The Pooling and Servicing Agreement
provides that, pursuant to any one or
more supplements thereto (each, a
"Supplement"), the Transferor may cause
the Trustee to issue one or more new
Series of Certificates (a "New
Issuance"). However, at all times, the
interest in the principal balances of
Receivables ("Principal Receivables")
represented by the Transferor's Interest
must equal or exceed a specified amount.
The issuance of the Certificates of a
Series pursuant to the Supplement
related thereto will constitute a New
Issuance. The Pooling and Servicing
Agreement also provides that the
Transferor may specify, with respect to
any Series, the Principal Terms of the
Series. The Transferor may offer any
Series to the public or other investors
under this Prospectus and accompanying
Prospectus Supplement, a prospectus or
other disclosure document in
transactions either registered under the
Securities Act or exempt from
registration thereunder, directly or
through the Underwriters or one or more
other underwriters or placement agents.
Under the Pooling and Servicing
Agreement and pursuant to a Supplement,
a New Issuance may only occur upon
delivery to the Trustee of the
following: (a) a Supplement specifying
the Principal Terms of such Series, (b)
an opinion of counsel to the effect
that, for federal income tax purposes,
(i) such issuance will not adversely
affect the characterization of the
Certificates of any outstanding Series
or class as debt of the Transferor, (ii)
such issuance will not cause a taxable
event to any Certificateholders and
(iii) such new Series will be
characterized as debt and (c) letters
from the Rating Agencies confirming that
the issuance of the new Series will not
result in the reduction or withdrawal of
the rating of the Certificates of any
Series then outstanding. See "Series
Provisions--New Issuances".
Allocations......................... The Certificateholders' Interest of each
Series will include the right to receive
(but only to the extent needed to make
required payments under the Pooling and
Servicing Agreement) varying percentages
of Interest Collections and Principal
Collections collected during each
calendar month (each, a "Collection
Period"). Interest Collections,
Principal Collections and Defaulted
Receivables for any Collection Period
will be allocated to the
Certificateholders' Interest of a Series
as described below and as more fully
described in the related Prospectus
Supplement. Interest Collections,
Principal Collections and Defaulted
Receivables not allocated to the
Certificateholders' Interest of all
outstanding Series will be allocated to
the Transferor's Interest.
Interest Collections and Defaulted
Receivables will be allocated at all
times to the Certificateholders'
Interest of a Series based on the
Floating Allocation Percentage for such
Series applicable during the related
Collection Period. Unless otherwise
specified in the related Prospectus
Supplement, the Floating Allocation
Percentage for each Series for any
Collection Period is the percentage
obtained by dividing the related
Invested Amount on the last day of the
immediately preceding Collection Period
by the aggregate amount of the principal
balances of the Receivables (the "Pool
Balance") on the last day of the
immediately preceding Collection Period.
During the Revolving Period (as defined
herein) for a Series, subject to certain
limitations, Principal Collections
allocable to the related
Certificateholders' Interest will be
allocated and paid to the Transferor or
allocated to any other Series in
exchange for the allocation to such
Certificateholders' Interest of an equal
interest in Principal Receivables that
are new or that would otherwise be part
of the Transferor's Interest or the
Certificateholders' Interest of other
Series. During any Accumulation Period,
if applicable to such Series as
specified in the related Prospectus
Supplement, any Amortization Period and
any Early Amortization Period for a
Series, Principal Collections will be
allocated to the related
Certificateholders' Interest based on
the related Principal Allocation
Percentage. Unless otherwise specified
in the related Prospectus Supplement,
the Principal Allocation Percentage for
a Collection Period during any such
Accumulation Period, Amortization Period
and Early Amortization Period is the
percentage equivalent of a fraction, the
numerator of which is the Invested
Amount for such Series on the last day
of the related Revolving Period and the
denominator of which is the Pool Balance
on the last day of the immediately
preceding Collection Period. See "Series
Provisions--Allocation
Percentages--Principal Collections for
all Series".
Interest ........................... Interest on the unpaid principal balance
of the Certificates of a Series will
accrue at the per annum rate (the
"Certificate Rate") either specified in
or determined in the manner specified in
the related Prospectus Supplement and
will be payable to Certificates of such
Series on the dates specified in the
related Prospectus Supplement (each, a
"Payment Date"). If so specified in the
related Prospectus Supplement for a
Series, upon the occurrence of an Early
Amortization Event or an Asset
Composition Event, interest may be
distributed to the Certificateholders
monthly, commencing on the first
Distribution Date following such Early
Amortization Event or Asset Composition
Event (but, in the case of an Asset
Composition Event, only to the extent
needed to cure such event) and, subject
to certain exceptions, on each
subsequent Distribution Date until the
Certificates are retired. If Payment
Dates for a Series occur less frequently
than monthly, Certificateholder Interest
Collections allocable to such Series
will be deposited each month into a
trust account (the "Interest Funding
Account") and used to make interest
payments to the Certificateholders on
each Payment Date. Unless otherwise
specified in the related Prospectus
Supplement, interest payable on the
Certificates of a Series with respect to
a Payment Date will accrue from and
including the preceding Payment Date
(or, in the case of the first Payment
Date, from and including the related
Closing Date) to but excluding such
Payment Date. Unless otherwise specified
in the related Prospectus Supplement,
interest for any Payment Date will be
calculated on the basis of a 360-day
year consisting of twelve 30-day months
(for fixed-rate Certificates) or the
actual number of days elapsed divided by
360 (for floating-rate Certificates).
Interest with respect to such Series for
any Payment Date due but not paid on
such Payment Date will be due on the
next succeeding Payment Date together
with additional interest on such amount
at the rate specified in the related
Prospectus Supplement. Interest payments
on a Series of Certificates will be
derived from Certificate Interest
Collections for the related Collection
Period allocable to such Series,
withdrawals, if any, from the related
Reserve Fund, Investment Proceeds, if
any, receipts, if any, under any related
Enhancement and, under certain
circumstances, Available Transferor's
Collections to the extent of the
Available Subordinated Amount for such
Series.
Principal .......................... The final principal payment with respect
to each Series of Certificates will be
made on the applicable Payment Date
(each, an "Expected Final Payment Date")
specified in the related Prospectus
Supplement, provided that principal
payments on a Series of Certificates may
be made on such other date or dates as
shall be specified in such Prospectus
Supplement. If a Series has more than
one class of Certificates, a different
Expected Final Payment Date for the
payment of principal may be assigned to
each class. The final principal payment
with respect to any Series of
Certificates may be paid earlier than
the applicable Expected Final Payment
Date if an Early Amortization Event
occurs, or later under certain
circumstances described herein. If
applicable to a Series of Certificates,
upon the occurrence of an Asset
Composition Event, certain principal
amounts may be payable to the
Certificateholders.
Asset Composition Event ............ The Prospectus Supplement for a Series
will specify whether the Certificates
are subject to Asset Composition Events.
If so specified an "Asset Composition
Event" will occur during the Revolving
Period for such Series if the sum of all
Eligible Investments and amounts on
deposit in all of the deposit accounts
of all Series (the "Series Accounts")
represents more than a specified
percentage of the Trust Assets on each
of a specified number of consecutive
Determination Dates, after giving effect
to all payments made or to be made on
the Distribution Dates next succeeding
such respective Determination Dates. As
further specified in the related
Prospectus Supplement, upon the
occurrence of an Asset Composition Event
during the Revolving Period for the
related Series, distributions will be
made in respect of the Certificates of
such Series to the extent necessary to
result in compliance with the percentage
limitation the violation of which gave
rise to the Asset Composition Event.
Revolving Period ................... During the Revolving Period for a
Series, unless otherwise specified in
the related Prospectus Supplement,
Principal Collections otherwise
allocable to the related
Certificateholders' Interest generally
will be deposited to the related Excess
Funding Account, if any, or allocated to
another Series (in effect, in exchange
for the allocation to such
Certificateholders' Interest of an equal
interest in the Principal Receivables
that are new or that would otherwise be
part of the Transferor's Interest or the
Certificateholders' Interest of such
other Series) in order to maintain the
sum of the related Invested Amount and
the amount, if any, in the Excess
Funding Account at a constant level. The
"Revolving Period" for a Series will be
the period beginning on the dated
specified in the related Prospectus
Supplement (the "Series Cut-Off Date")
and ending on the earlier of (x) either
the Accumulation Period Commencement
Date, if applicable to such Series, or
such other date specified in the related
Prospectus Supplement and (y) the
business day immediately preceding the
day on which an Early Amortization Event
occurs. See "Series Provisions--Early
Amortization Events" for a discussion of
certain events which might lead to the
early termination of the Revolving
Period and, in certain limited
circumstances, the recommencement of the
Revolving Period.
Accumulation Period ................ If so specified in the related
Prospectus Supplement for a Series of
Certificates and unless an Early
Amortization Period commences with
respect thereto, the Certificates of
such Series will have an accumulation
period (each, an "Accumulation Period"),
which will commence at the close of
business on the date specified in the
related Prospectus Supplement (the
"Accumulation Period Commencement
Date"), and continue until the earlier
of (a) the commencement of the Early
Amortization Period with respect to such
Series and (b) the Expected Final
Payment Date for the Certificates of
such Series. Unless an Early
Amortization Event shall have occurred,
the length of the Accumulation Period
(the "Accumulation Period Length") will
be specified or calculated in the manner
described in the related Prospectus
Supplement. During any Accumulation
Period, Certificateholders' Principal
Collections and certain other amounts
allocable to the Certificateholders'
Interest of the related Series will be
deposited on each Distribution Date in a
trust account (the "Principal Funding
Account") and, together with any amounts
in the related Excess Funding Account,
used to make principal distributions to
Certificateholders of such Series when
due. The amount to be deposited in the
Principal Funding Account on any
Distribution Date for a Series of
Certificates will be limited to the
amount specified in the related
Prospectus Supplement.
Each Series issued by the Trust may have
either an Accumulation Period or an
Amortization Period. Such Accumulation
Periods or Amortization Periods may have
different lengths and begin on different
dates. Thus, certain Series may be in
their Revolving Period while others are
in periods during which Principal
Collections are distributed to, or
reserved for, such other Series. Under
certain circumstances, one or more
Series may be in their Accumulation
Periods, Amortization Periods or Early
Amortization Periods, while other Series
are not.
Amortization Period ................ If so specified in the Prospectus
Supplement for a Series and unless an
Early Amortization Event shall have
earlier occurred, during the period
commencing on the date specified in the
related Prospectus Supplement and ending
when the principal amount of the
Certificate of such Series has been
reduced to zero or when the Trust
otherwise terminates (the "Amortization
Period"), Principal Collections
allocated to the Certificateholders'
Interest of such Series will no longer
be paid to the Transferor but instead
will be distributed monthly to such
Certificateholders as provided herein
under "Series Provisions--Distributions
from the Collection Account" on each
Distribution Date beginning with the
Distribution Date in the month following
the month in which the Amortization
Period commences. Any Series of
Certificates with an Amortization Period
will not have an Accumulation Period.
See "Series Provisions--Early
Amortization Events" for a discussion of
the events which might lead to the early
commence of the Amortization Period.
Allocations based upon the Investor
Percentage during the Amortization
Period may result in distributions of
principal with respect to any Collection
Period to Certificateholders in amounts
that are greater relative to the
declining balance of the Certificate
Principal Balance than would be the case
if no fixed Investor Percentage were
used to determine the percentage of
Principal Collections distributed in
respect of the Investor Interest. See
"Series Provisions--Payments on
Receivables; Deposits to Collection
Account."
Early Amortization Period .......... With respect to each Series, during the
period beginning on the day on which an
Early Amortization Event is deemed to
have occurred and, except as described
below, ending on the earlier of the
payment in full of the outstanding
principal balance of the Certificates
for such Series and the related Series
Termination Date (an "Early Amortization
Period"), the Revolving Period or
Accumulation Period, as the case may be,
will terminate, and Principal
Collections and certain other amounts
allocable to the Certificateholders'
Interest of such Series and, if the
Early Amortization Event applies to
other Series, to the Certificateholders'
Interest of such other Series will be
distributed to such Certificateholders
monthly on each Distribution Date (each,
a "Special Payment Date") beginning with
the Distribution Date following the
Collection Period in which an Early
Amortization Period commences. See
"Series Provisions-Early Amortization
Events" for a description of events that
might result in the commencement of an
Early Amortization Period with respect
to a Series of Certificates. During an
Early Amortization Period, distributions
of principal on the Series of
Certificates will not be subject to any
Controlled Distribution Amount (as
defined herein). See "Series
Provisions--Distributions from the
Collection Account; Reserve
Fund--Principal Collections". In
addition, on the first Special Payment
Date for a Series (a) any amounts on
deposit in the related Interest Funding
Account will be paid to the
Certificateholders to pay accrued
interest on the Certificates and (b) any
amounts on deposit in the related Excess
Funding Account, the related Principal
Funding Account and the related Interest
Funding Account (after the payment of
accrued interest on such date) will be
paid to the Certificateholders of such
Series up to the outstanding principal
balance of the Certificates. See "Series
Provisions--Distributions".
Subordination of the
Transferor's Interest .............. If the Interest Collections, Investment
Proceeds, Enhancement proceeds, if any,
certain amounts in the related Reserve
Fund and certain other amounts allocable
to the Certificateholders of a Series
for any Collection Period are not
sufficient to cover the interest payable
on such Series of Certificates on the
next Distribution Date (plus any overdue
interest and interest thereon), the
Monthly Servicing Fee for such
Distribution Date, any Investor Default
Amount allocable to such Series for such
Distribution Date, and certain other
amounts, a portion of the Transferor's
Interest will be applied to make up such
deficiency. Generally, the amount of the
Transferor's Interest subject to such
subordination for a Series of
Certificates is the Available
Subordinated Amount. The "Available
Subordinated Amount" for the first
Determination Date generally will be
equal to the Required Subordinated
Amount. Unless otherwise specified in
the related Prospectus Supplement, the
"Required Subordinated Amount" for a
Series of Certificates will mean, as of
any date of determination, the sum of
(i) the product of the Subordinated
Percentage and the Invested Amount and
(ii) the Incremental Subordinated Amount
for such Series. The "Subordinated
Percentage" for each Series will be
specified in the related Prospectus
Supplement. The "Available Subordinated
Amount" for subsequent Distribution
Dates will be determined pursuant to the
calculation specified in the related
Prospectus Supplement. In general the
Available Subordinated Amount for a
Series will fluctuate based on the
increase and decrease, if any, in the
related Invested Amount and the
corresponding decrease and increase in
the amount, if any, in the related
Excess Funding Account and the additions
and subtractions specified in the
calculation referred to above. The
Transferor may, but is not obligated to,
increase at any time the Available
Subordinated Amount so long as the
cumulative amount of such increases does
not exceed the amount specified in the
related Prospectus Supplement for such
Series. Any such increase may have the
effect of avoiding an Early Amortization
Event for such Series. Unless otherwise
specified in the related Prospectus
Supplement, the Available Subordinated
Amount, to the extent it was reduced
because of any application of the
Transferor's Interest to cover a
deficiency, will be reinstated by the
amount, if any, for each Distribution
Date of Excess Servicing allocated and
available to be paid to the Transferor
as described under "Series
Provisions--Distributions from the
Collection Account; Reserve Fund--Excess
Servicing".
Servicing .......................... The Master Servicer (initially, Ford
Credit) is responsible for servicing,
managing and making collections on the
Receivables and will, except as provided
below and as otherwise specified in the
related Prospectus Supplement, deposit
such collections in the Collection
Account within two business days
following the receipt thereof, generally
up to the amount of such collections
required to be distributed to
Certificateholders of all Series with
respect to the related Collection
Period. In certain circumstances, the
Master Servicer will be permitted to use
for its own benefit and not segregate
collections on the Receivables received
by it during each Collection Period
until no later than the business day
prior to the related Distribution Date.
See "Series Provisions--Allocation of
Collections; Deposits in Collection
Account; Limited Subordination of
Transferor's Interest".
On the second business day preceding
each Distribution Date (each, a
"Determination Date"), the Master
Servicer will calculate the amounts to
be allocated as described herein in
respect of collections on Receivables
received with respect to the related
Collection Period to the
Certificateholders of all outstanding
Series or to the Transferor as described
herein. See "Series
Provisions--Allocation of Collections;
Deposits in Collection Account; Limited
Subordination of Transferor's Interest"
and "Risk Factors--Certain Legal
Aspects".
In certain limited circumstances Ford
Credit may resign or be removed as
Master Servicer, in which event either
the Trustee, or, so long as it meets
certain eligibility standards set forth
in the Pooling and Servicing Agreement,
a third-party servicer may be appointed
as successor servicer. Ford Credit is
permitted to delegate any of its duties
as Master Servicer to any of its
affiliates, but any such delegation will
not relieve the Master Servicer of its
obligations under the Pooling and
Servicing Agreement. The Master Servicer
will receive a monthly servicing fee and
certain other amounts as described
herein as servicing compensation from
the Trust. See "Series
Provisions--Servicing Compensation and
Payment of Expenses".
Mandatory Reassignment and
Transfer of Certain
Receivables ........................ The Transferor has made certain
representations and warranties in the
Pooling and Servicing Agreement with
respect to the Receivables in its
capacity as Transferor and Ford Credit
has made certain representations and
warranties in the Pooling and Servicing
Agreement in its capacity as Master
Servicer. If the Transferor breaches
certain of its representations and
warranties with respect to any
Receivables and such breach remains
uncured for a specified period and has a
materially adverse effect on the
Certificateholders' Interest of any
outstanding Series, the
Certificateholders' Interest of each
such Series in such Receivables will,
subject to certain conditions specified
herein, be reassigned to the Transferor.
If Ford Credit, as Master Servicer,
fails to comply in any material respect
with certain covenants or warranties
with respect to any Receivables and such
noncompliance is not cured within a
specified period after Ford Credit
becomes aware or receives notice thereof
from the Trustee and such noncompliance
has a materially adverse effect on the
Certificateholders' Interest of any
outstanding Series, all Receivables
affected will be purchased by Ford
Credit. In the event of a transfer of
servicing obligations to a successor
Master Servicer, such successor Master
Servicer, rather than Ford Credit, would
be responsible for any failure to comply
with the Master Servicer's covenants and
warranties arising thereafter.
Tax Status ......................... In the opinion of special tax counsel
for the Transferor and the Trust, the
Certificates of each Series will be
characterized as debt for federal income
tax purposes. Each Certificateholder, by
the acceptance of a Certificate, will
agree to treat the Certificates as debt
for tax purposes. See "Material Federal
Income Tax Considerations" and "State
and Local Tax Considerations" for
additional information concerning the
application of federal and state tax
laws.
ERISA Considerations ............... An employee benefit plan subject to the
requirements of the fiduciary
responsibility provisions of the
Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the
provisions of Section 4975 of the Code,
contemplating the purchase of
Certificates should consult its counsel
before making a purchase and the
fiduciary and such legal advisors should
consider whether the Certificates will
satisfy all of the requirements of the
"publicly offered security" exemption
described herein or the possible
application of other ERISA prohibited
transaction exemptions described herein.
See "ERISA Considerations".
RISK FACTORS
The risk factor discussion below summarizes all material risk factors
relating to an investment in a Series of Certificates. For further information
with respect to a particular Series of Certificates, see "Additional Risk
Factors" in the Prospectus Supplement relating to such Series.
Risk to Investors of Limited Liquidity of the Certificates. It is
anticipated that, to the extent permitted, the underwriters of any Series of
Certificates offered hereby will make a market in such Certificates, but will
not be under any obligation to do so. There can be no assurance that a secondary
market will develop with respect to the Certificates of any Series offered
hereby or, if such a secondary market does develop, that it will continue for
the life of such Certificates.
Certain Legal Matters Relating to the Receivables that may Pose a Risk
to Investors. There are certain limited circumstances under the Uniform
Commercial Code (the "UCC") and applicable federal law in which a prior or
subsequent transferee of Receivables could have an interest in such Receivables
having priority over the Trust's interest. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables". Under the Receivables Purchase Agreement,
Ford Credit has warranted to the Transferor and, under the Pooling and Servicing
Agreement, the Transferor has warranted to the Trust, that the Receivables have
been, and will be, transferred free and clear of the lien of any third party.
Each of Ford Credit and the Transferor also has covenanted that, except for the
conveyances under the Receivables Purchase Agreement and the Pooling and
Servicing Agreement, it will not sell, pledge, assign, transfer or grant any
lien on any Receivable (except as described under "Series Provisions--The
Transferor's Certificate"), other than to the Trust.
Ford Credit has warranted to the Transferor in the Receivables Purchase
Agreement that the sale of the Receivables by it to the Transferor is a valid
sale. In addition, Ford Credit and the Transferor will treat the transactions
described in the Receivables Purchase Agreement as a sale of the Receivables to
the Transferor. Ford Credit will take all actions required under applicable law
to perfect the Transferor's ownership interest in the Receivables. See "Certain
Legal Aspects of the Receivables--Transfer of Receivables". However, if Ford
Credit becomes a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor (or such debtor itself) asserts that the
sale of the Receivables to the Transferor should be recharacterized as a pledge
to secure a borrowing, then delays in payments on the Receivables to the
Transferor (and, thus, to the Trust and the Certificateholders) could occur.
Moreover, if a court rules in favor of any such trustee, debtor or creditor, the
amount of such payments could be reduced. If the sale of Receivables to the
Transferor is recharacterized as a pledge, a tax or government lien on the
property of Ford Credit arising before the creation of a given Receivable may
have priority over the Transferor's interest in such Receivable. See "Certain
Legal Aspects of the Receivables--Certain Matters Relating to Bankruptcy".
If the transactions contemplated in the Receivables Purchase Agreement
are treated as sales, the assets of the Transferor generally would not be part
of Ford Credit's estate in bankruptcy and, thus, would not be available to
satisfy Ford Credit's creditors. In a case decided in 1993, however, the United
States Court of Appeals for the Tenth Circuit concluded that accounts receivable
sold by a debtor prior to a filing for bankruptcy remain property of the
debtor's bankruptcy estate. If the principles underlying the conclusion in that
case were to be applied in a Ford Credit bankruptcy, the Receivables would be
subject to claims of certain creditors and, accordingly, would be subject to the
potential delays and payment reductions described in the preceding paragraph.
Furthermore, in the event Ford Credit becomes a debtor in a bankruptcy case, and
a creditor or trustee-in-bankruptcy of such debtor (or such debtor itself)
requests a bankruptcy court to order that Ford Credit be substantively
consolidated with the Transferor, the distributions on the Certificates could be
delayed and the amount of such distributions could be reduced.
The Transferor has warranted in the Pooling and Servicing Agreement
that the transfer of the Receivables to the Trust is either a sale of the
Receivables to the Trust or a grant of a first priority perfected "security
interest" (as defined in the UCC) in such property to the Trust. The Transferor
will take all actions required under applicable law to perfect the Trust's
interest in the Receivables. In addition, the Transferor has warranted that, if
the transfer by the Transferor to the Trust is a grant to the Trust of a
security interest in the Receivables, the Trust will at all times have a first
priority perfected security interest therein and, with certain exceptions, in
the proceeds thereof. Nevertheless, if the transfer of the Receivables to the
Trust were deemed to create a security interest therein under the UCC as in
effect in Michigan, a tax or statutory lien on property of Ford Credit or the
Transferor arising before a Receivable is transferred to the Trust may have
priority over the Trust's interest in such Receivable. If the Transferor becomes
a debtor in a bankruptcy case and a bankruptcy trustee or a creditor of the
Transferor takes the position that the transfer of the Receivables from the
Transferor to the Trust should be recharacterized as a pledge of such
Receivables, then distributions on the Certificates could be delayed. Should the
bankruptcy court rule in favor of any such trustee or creditor, such
distributions could be reduced.
If certain events relating to the bankruptcy of Ford, Ford Credit or
the Transferor occur, then an Early Amortization Event will occur. In this
event, under the terms of the Pooling and Servicing Agreement, additional
Receivables will not be transferred to the Trust, and distributions of principal
on the Certificates of a Series will not be subject to any applicable Controlled
Distribution Amount. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables" and "--Certain Matters Relating to Bankruptcy."
When Ford Credit or the Transferor repurchases Receivables pursuant to
the Pooling and Servicing Agreement, the payments made for such repurchases may
be recoverable by Ford Credit or the Transferor, as debtor in possession, or by
a creditor or a trustee-in-bankruptcy of Ford Credit or the Transferor, as
preferential transfers from Ford Credit or the Transferor, if such payments are
made within one year prior to the filing of a bankruptcy case in respect of Ford
Credit or the Transferor.
The application of federal and state bankruptcy and debtor relief laws
could affect the interests of the Certificateholders in the Receivables if such
application results in any Receivables being charged off as uncollectable or
results in delays in payments due on such Receivables . See "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Bankruptcy".
The Transferor has represented and warranted in the Pooling and
Servicing Agreement that each Receivable is at the time of creation secured by a
first priority perfected security interest in the related Vehicle. Generally,
under applicable state laws, a security interest in an automobile or light duty
truck securing wholesale financing obligations may be perfected by filing UCC
financing statements. Ford Credit takes all actions necessary under applicable
state laws to perfect its security interest in the Vehicles. However, at the
time a Vehicle is sold, Ford Credit's security interest in such Vehicle will
terminate. Therefore, if a Dealer fails to remit to Ford Credit amounts owed
with respect to Vehicles that have been sold, the related Receivables will no
longer be secured by Vehicles.
The Trust's interest in Related Security other than a Vehicle
("Non-Vehicle Related Security"), if any, securing a Receivable will be
subordinate to the interest of Ford Credit. See "The Dealer Floorplan Financing
Business--Intercreditor Agreement in respect of Security Interests in Vehicles
and Non-Vehicle Related Security".
Potential Risks to Investors Relating to Payments by Dealers in respect
of the Receivables. Receivables created relating to new Vehicles generally are
payable by Dealers upon the retail sale of the underlying Vehicle. However, the
timing of such sales is uncertain. Historically, receivables relating to used
Vehicles generally have been paid within 60 days. There is no assurance that
additional Receivables will be created under the Accounts or that any particular
pattern of Dealer repayments will occur. The payment of principal of the
Certificates is dependent on Dealer repayments, and the Certificates of a Series
may not be fully amortized on the applicable Expected Final Payment Date
specified in the related Prospectus Supplement. In addition, a significant
decline in the amount of Receivables generated could cause an Asset Composition
Event or Early Amortization Event. However, in the case of a Series for which an
Excess Funding Account has been established, a decline in the amount of
Receivables generated would be absorbed initially by an increase of amounts on
deposit in the related Excess Funding Account. The Receivables Purchase
Agreement provides that in the event that the Pool Balance is not maintained at
a specified minimum level, Ford Credit must designate additional Accounts, the
Receivables of which will be sold to the Transferor. The Pooling and Servicing
Agreement provides that the Transferor must transfer such Receivables to the
Trust. If additional Accounts are not designated, an Early Amortization Event
for one or more Series will occur, resulting in the commencement of an Early
Amortization Period for the related Series. In some cases, however, such Early
Amortization Period may end, and the Revolving Period may be reinstated. See
"The Dealer Floorplan Financing Business" and "Maturity and Principal Payment
Considerations."
Social, Economic and Other Factors that may Pose a Risk to Investors.
Payment of the Receivables is largely dependent upon the retail sale of the
related Vehicles. The level of retail sales of cars and light duty trucks may
change as the result of a variety of social and economic factors. Economic
factors include interest rates, unemployment levels, the rate of inflation and
consumer perception of economic conditions generally. The use of incentive
programs (e.g., manufacturers' rebate programs) also may affect retail sales.
However, the Transferor is unable to determine, and has no basis to predict,
whether or to what extent economic or social factors will affect the level of
Vehicle sales.
Risks Relating to the Receivables Inherent in the Trust's Relationship
to Ford and Ford Credit. Neither Ford Credit nor Ford is obligated to make any
payments in respect of any Series of Certificates or the Receivables (other than
the obligation of Ford Credit to purchase certain Receivables from the Trust
under certain limited circumstances, as described under "Series
Provisions--Master Servicer Covenants"). However, the Trust is 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 upon the sales of automobiles and light duty trucks (manufactured or
distributed primarily by Ford, in the case of the Ford Credit, and by certain
other automobile manufacturers or distributors, in the case of the PRIMUS).
Thus, no assurance can be given that Ford Credit or PRIMUS will continue to
generate Receivables at the same rate as in prior years. In addition, were Ford
Credit no longer the Master Servicer, payment and information processing for the
Receivables could be delayed and, as a result, payments to the
Certificateholders could be delayed.
In connection with the transfer of Receivables by Ford Credit to the
Transferor and the transfer of such Receivables by the Transferor to the Trust,
each of Ford Credit and the Transferor represents and warrants as to the
characteristics of such Receivables. Ford Credit and the Transferor must
purchase Receivables as to which such a breach has occurred, where such breach
has not been cured and has a materially adverse effect on the interests of the
Certificateholders. See "Series Provisions--Representations and Warranties". In
addition, subject to certain limitations, Ford Credit or PRIMUS, as the case may
be, has the ability to change the terms on the Accounts, including the sale and
the credit line, as well as underwriting procedures.
From time to time in certain instances, Ford has provided certain
financial assistance to Ford-franchised dealers, including the purchase of
vehicles upon voluntary dealership termination. However, Ford has no obligation
to provide such assistance. If Ford elects not to provide any such financial
assistance to Dealers or is unable to do so, losses with respect to the
Receivables may increase. See "The Dealer Floorplan Financing
Business--Relationship with Ford" herein. In addition, because a substantial
number of the Vehicles to be sold by the Dealers are manufactured or distributed
by Ford, if Ford were temporarily or permanently no longer in such business, the
rate of sales of Ford-manufactured Vehicles owned by the Dealers would decrease,
adversely affecting payment rates with respect to the Receivables. Moreover, if
Ford were temporarily or permanently no longer manufacturing or distributing
vehicles, the loss experience with respect to the Receivables will be adversely
affected. See "The Dealer Floorplan Financing Business".
Ford and Ford Credit are subject to the informational requirements of
the Exchange Act and in accordance therewith file reports and other information
with the Commission. For further information regarding Ford and Ford Credit,
reference is made to such reports and other information that are publicly
available at such government offices as described under "Available Information".
Risks Relating to Limitation of Credit Enhancement. Credit enhancement
of the Certificates will be provided by the subordination of the Transferor's
Interest to the extent of the Available Subordinated Amount, as described
herein, and amounts in the Reserve Fund. The amount of such credit enhancement
is limited and may be reduced from time to time as described herein. See "Series
Provisions--Allocation of Collections; Deposits in Collection Account; Limited
Subordination of Transferor's Interest".
Risks to Certificateholders Relating to Control Provisions. Under
certain circumstances, the consent or approval of the holders of a specified
percentage of the aggregate unpaid principal amount of all outstanding
Certificates of all outstanding Series will be required to direct certain
actions, including amending the Pooling and Servicing Agreement in certain
circumstances and directing a reassignment of the entire portfolio of
Receivables. In addition, following the occurrence of an insolvency event with
respect to the Transferor, the holders of Certificates evidencing more than 50%
of the aggregate unpaid principal amount of each Series or each Class of each
Series (and any holder of a Supplemental Certificate) will be required to direct
the Trustee not to sell or otherwise liquidate the Receivables.
Risks Resulting from the Provision for and/or Existence of Additional
Series of Certificates. The Trust, as a master trust, may issue from time to
time additional Series (which may be represented by different Classes within a
Series). A Supplement delivered in connection with the issuance of other Series
will specify certain Principal Terms applicable to such Series. Such Principal
Terms, which will be set forth in the related Prospectus Supplement for such
Series, may include methods for determining applicable allocation percentages
and allocating collections, provisions creating different or additional security
or other credit enhancement, different classes of certificates (including
subordinated classes of certificates) and any other amendment or supplement to
the Pooling and Servicing Agreement which is made applicable only to such
Series. No Supplement, however, may change the terms of the Certificates or the
terms of the Pooling and Servicing Agreement as applied to the Certificates. See
"Series Provisions--New Issuances". As a condition to the execution of any
Supplement, the Rating Agencies shall have advised the Trustee that the issuance
of such Series will not result in the reduction or withdrawal of their ratings
of the Series of Certificates then outstanding. There can be no assurance,
however, that the terms of a Series might not have an impact on the timing or
amount of payments received by a Certificateholder of another Series. The
issuance of an additional Series does not require the consent of the
Certificateholders of any Series then outstanding.
Risks Relating to Limitations of Ratings of Certificates. Unless
otherwise specified in the related Prospectus Supplement, it is a condition to
issuance of the Certificates of each Series that they have a credit rating in
one of the top four generic rating categories by at least one nationally
recognized rating agency (each as designated in the related Prospectus
Supplement in respect of the Certificates of the related Series, a "Rating
Agency"). The rating of the Certificates of any Series is based primarily on the
value of the Receivables, the Available Subordinated Amount of Receivables
required with respect to such Certificates, the circumstances in which funds may
be drawn under the Enhancement, if any, for the benefit of the
Certificateholders of such Series, the terms of any applicable Enhancement
described in the related Prospectus Supplement and the credit rating of the
Master Servicer.
The ratings of the Certificates of any Series are not a recommendation
to purchase, hold or sell such Certificates, inasmuch as such ratings do not
comment as to market price or suitability for a particular investor. There is no
assurance that the ratings of the Certificates of any Series will remain for any
given period of time or that such ratings will not be lowered or withdrawn
entirely by a Rating Agency if in its judgment circumstances in the future so
warrant. Although the ratings of the Certificates of any Series address the
respective likelihood of the ultimate payment of principal and interest on such
Certificates, such ratings do not address the likelihood that the outstanding
principal amount of a class of Certificates of such Series will be paid in full
on the applicable Expected Final Payment Date or on any other date specified in
the related Prospectus Supplement for the payment of such principal. The ratings
also do not address the possibility of the occurrence of any Early Amortization
Event (which could result in the payment of the outstanding principal amount of
a Series of Certificates prior to its Expected Final Payment Date).
Risks Inherent in Book-Entry Registration. Unless the Prospectus
Supplement for a Series of Certificates specifies that Certificates will be in
definitive form, the Certificates of each Series initially will be represented
by one or more Certificates registered in the name of Cede, the nominee of DTC,
and will not be registered in the names of the Certificateholders or their
nominees. Consequently, unless and until Definitive Certificates are issued,
Certificateholders will not be recognized by the Trustee as "Certificateholders"
(as such term is used in the Pooling and Servicing Agreement and the applicable
Supplement). Hence, until such time, Certificateholders will only be able to
exercise the rights of Certificateholders indirectly through DTC and its
participating organizations. See "Series Provisions--Book-Entry Registration"
and "--Definitive Certificates".
Risks to Investors Associated with Certain Financial Instruments. The
ability of the Trust to make interest payments to Certificateholders of a Series
at a fixed rate of interest or at an adjustable rate linked to a specified index
(e.g., three-month LIBOR) while the Receivables accrue interest on the basis of
an adjustable rate linked to a different index (e.g., the prime rate) may depend
on the operation of an interest rate swap agreement, a rate cap agreement or
comparable arrangement (a "Swap Agreement"), and the performance by the related
counterparty (the "Swap Counterparty") of its obligations under the Swap
Agreement. For a further description of the Swap Agreement and Swap Counterparty
applicable to a particular Series of Certificates, see "Series
Provisions--Interest Rate Swap" in the related Prospectus Supplement.
Certain events that are not entirely within the control of the Trust or
even of the Swap Counterparty may cause the termination of the related Swap
Agreement. Upon termination of the Swap Agreement, the Swap Available
Subordinated Amount will be added to the subordination otherwise available to
support payments on the Certificates and an Early Amortization Event will occur.
The effect of the foregoing would be to cause principal of the related Series of
Certificates to be payable prior to the related Expected Final Payment Date,
reducing the weighted average life of the affected Certificates and potentially
reducing the yield thereof. See "Description of the Certificates--Termination"
herein. In addition, the Trust may be obligated to make a swap termination
payment to the Swap Counterparty, which will be deducted from the amounts
otherwise available to make payments on the Certificates.
Because the ratings of a Series of Certificates may take into account
the provisions of the Swap Agreement and the ratings currently assigned to the
Swap Counterparty, a downgrade, suspension or withdrawal of any rating of the
Swap Counterparty by a Rating Agency may result in the downgrade, suspension or
withdrawal of the rating assigned by such Rating Agency to such Certificates,
with adverse consequences for the liquidity or market value thereof. See
"Ratings" in the related Prospectus Supplement.
The Certificates are intended for sale only to investors capable of
understanding the risks entailed in such instruments. Potential investors in any
Certificates are strongly encouraged to consult with their financial advisors
before making any investment decision.
THE RECEIVABLES
FORD CREDIT AUTO RECEIVABLES LLC AND THE TRUST
The Transferor, a limited liability company wholly owned by Ford
Credit, was formed in the State of Delaware on August 18, 1997. The Transferor
was organized for limited purposes, which include purchasing receivables and
transferring such receivables to third parties as well as any activities
incidental to and necessary or convenient for the accomplishment of such
purposes. The principal executive offices of the Transferor are located at The
American Road, Dearborn, Michigan 48121. The telephone number of such offices is
(313) 594-7765.
The Transferor has taken steps in structuring the transactions
contemplated hereby that are intended to ensure that the voluntary or
involuntary application for relief by Ford Credit under the United States
Bankruptcy Code or similar applicable laws ("Insolvency Laws") will not result
in consolidation of the assets and liabilities of the Transferor with those of
Ford Credit. These steps include the creation of the Transferor as a separate,
limited-purpose limited liability company pursuant to a Certificate of Formation
containing certain limitations (including restrictions on the nature of the
Transferor's business and a restriction on the Transferor's ability to commence
a voluntary case or proceeding under any Insolvency Law without the unanimous
affirmative vote of all of its members, including an independent member
thereof). No assurance can be given, however, that such a consolidation will not
occur under certain circumstances. See "Risk Factors--Certain Legal Aspects".
On the Initial Closing Date, Ford Credit transferred Receivables to the
Transferor as a capital contribution in an amount equal to the excess of the
purchase price of such Receivables over the proceeds of the sale of certificates
issued simultaneously therewith (the "Series 1997-A Certificates"). If
Additional Accounts are added to the Trust, Ford Credit may make additional
contributions of capital to the Transferor to fund a portion of the purchase
price of the Receivables arising in Additional Accounts.
In addition to purchasing the Receivables in connection with the
offering of any Series of Certificates, the Transferor may purchase other
receivables from Ford Credit in connection with other funding transactions.
THE TRUST
The Trust was formed in accordance with the laws of the State of New
York pursuant to the Pooling and Servicing Agreement. The Transferor has
conveyed and will convey to the Trust, without recourse, the Receivables arising
under the Accounts from time to time. The property of the Trust consists of the
Receivables existing in the Accounts on the Initial Cut-Off Date, all
Receivables generated in the Accounts from time to time thereafter during the
term of the Trust as well as Receivables generated in any Accounts added to the
Trust from time to time (less Receivables paid or charged off and excluding
Receivables in any Accounts that are removed from the Trust from time to time
after the Initial Cut-Off Date), an assignment of all the Transferor's rights
and remedies under the Receivables Purchase Agreement, all funds collected or to
be collected in respect of the Receivables, all funds on deposit in certain
accounts of the Trust including funds on deposit in the Excess Funding Account,
the Principal Funding Accounts, the Interest Funding Accounts and the Reserve
Fund), any Enhancement issued with respect to any other Series, and a security
interest in the Vehicles and any other Related Security described in the related
Prospectus Supplement. See "Description of the Receivables Purchase Agreement"
for a summary of certain terms of the Receivables Purchase Agreement.
The property of the Trust may include Enhancements for the benefit of
Certificateholders of certain Series; however, the Certificateholders of a given
Series will not have any interest in any Enhancements provided for the benefit
of the Certificateholders of other Series. Pursuant to the Pooling and Servicing
Agreement, the Transferor will be allowed (subject to certain limitations and
conditions), and in some circumstances will be obligated, to designate from time
to time Additional Accounts to be included as Accounts and to convey to the
Trust the Receivables of such Additional Accounts, and to designate from time to
time certain Accounts to be removed and to require the Trustee to convey
receivables in such accounts (the "Removal Accounts") to the Transferor. See
"Series Provisions--Addition of Accounts" and "--Removal of Accounts" herein.
The Trust has been formed pursuant to the Pooling and Servicing
Agreement and prior to formation had no assets or obligations. The Trust will
not engage in any business activity other than acquiring and holding the
Receivables and the other assets of the Trust and proceeds therefrom, issuing
the Certificates in Series and the Transferor's Certificate (and any
Supplemental Certificates) and making payments thereon, and related activities.
As a consequence, the Trust is not expected to have any need for, or source of,
capital resources other than the assets of the Trust.
Monthly and annual unaudited reports, containing information concerning
the Trust and prepared by the Master Servicer, will be sent on behalf of the
Trust to the Trustee and each Rating Agency pursuant to the Pooling and
Servicing Agreement. Such reports will be available to Certificateholders upon
request to the Trustee.
FORD MOTOR CREDIT COMPANY
Ford Credit was incorporated in Delaware in 1959 and is a wholly-owned
indirect subsidiary of Ford Motor Company ("Ford"). 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.
Ford Credit and its subsidiaries provide wholesale financing and
capital loans to Ford Motor Company retail dealerships and associated non-Ford
dealerships throughout the world, most of which are privately owned and
financed, and purchase retail installment sale contracts and retail leases from
them. Ford Credit also makes loans to vehicle leasing companies, the majority of
which are affiliated with such dealerships. In addition, subsidiaries of Ford
Credit provide these financing services in the United States, Europe, Canada and
Australia to non-Ford dealerships. A substantial majority of all New Vehicles
financed by Ford Credit and its subsidiaries are manufactured by Ford and its
affiliates. Ford Credit and its subsidiaries also provide retail financing for
Used Vehicles manufactured by Ford and other manufacturers. In addition to
Vehicle financing, Ford Credit makes loans to affiliates of Ford and finances
certain receivables of Ford and its subsidiaries.
PRIMUS AUTOMOTIVE FINANCIAL SERVICES, INC.
PRIMUS was formed as a wholly-owned subsidiary of Ford Credit in
December 1990. It provides wholesale financing and capital loans primarily to
non-Ford affiliated automotive vehicle dealerships and purchases retail
installment sale contracts or leases from them. Its U.S. operations are
conducted from 20 regional offices throughout the United States. The address of
its principal executive office is 9009 Carothers Parkway, Franklin, Tennessee
37068.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Transferor. The Transferor will use such proceeds for general corporate purposes
(including the transfer thereof to Ford Credit) and, if required, to pay any
payments then required with respect to any Enhancement described in the related
Prospectus Supplement for a Series. Ford Credit will use such proceeds for
general corporate purposes.
THE DEALER FLOORPLAN FINANCING BUSINESS
GENERAL
The receivables sold to the Trust from time to time are selected from
extensions of credit made either directly by Ford Credit or through its wholly
owned subsidiary, PRIMUS, to Dealers. The receivables are secured by the
vehicles and, in some cases, may be secured by certain parts inventory,
equipment, fixtures, service accounts, realty and/or personal guarantees.
Ford Credit is the primary source of financing for Ford-franchised
dealers in the United States. Pursuant to an Assignment, Brokerage and Service
Agreement, PRIMUS acts as the agent of Ford Credit for the purpose of
originating accounts primarily with non-Ford associated dealers that conform to
the applicable credit criteria agreed to from time to time between Ford Credit
and PRIMUS. Motor vehicles sold by such dealers include but are not limited to
those manufactured and distributed by Jaguar, Mazda, Subaru and Suzuki.
Simultaneous with the origination of such accounts, PRIMUS assigns to Ford
Credit the accounts, the related financing documents and the security interest
in the related vehicles and any other property of the dealers securing such
accounts. Pursuant to the Assignment Brokerage and Service Agreement, PRIMUS
continues to service such accounts for Ford Credit in accordance with general
industry standards and servicing guidelines established from time to time by
Ford Credit. See "The Dealer Floorplan Financing Business" in the related
Prospectus Supplement.
Vehicles related to the Receivables to be transferred to the Trust are
categorized by Ford Credit and PRIMUS under their respective policies and
procedures, as New or Used Vehicles. "New Vehicles" means those vehicles which
are presently (i) untitled vehicles or (ii) previously titled vehicles purchased
by a qualified dealer at closed auction conducted by Ford and (iii) vehicles
previously subject to retail leases under Ford Credit's Red Carpet Lease or
PRIMUS's retail lease programs that have been acquired by the related dealer at
such dealer's purchase option price. "Used Vehicles" means all other previously
titled vehicles. The categorization of New Vehicles and Used Vehicles may change
in the future based on the practices and policies of Ford Credit or PRIMUS.
CREATION OF RECEIVABLES
Both Ford Credit and PRIMUS finance 100% of the wholesale invoice price
of New Vehicles, including destination charges and a dealer holdback (currently
in the amount of approximately 3% of the balance of the invoice price), which
holdback amount is later returned to the dealer. Receivables related to
approximately two-thirds of Ford-manufactured or distributed New Vehicles are
originated by Ford concurrently with the shipment of such Vehicles to the
financed dealer. Such receivables are sold by Ford to Ford Credit on a daily
basis. In the case of receivables relating to the remaining New Vehicles
manufactured or distributed by Ford, Ford Credit advances funds directly to
Ford. In the case of receivables relating to all New Vehicles not manufactured
or distributed by Ford, funds are advanced directly to the related manufacturer
or the distributor, as applicable, on behalf of the dealer.
Once a dealer has commenced the floor planning of a manufacturer's or
distributor's vehicles, Ford Credit or PRIMUS generally will finance all
purchases of vehicles by such dealer from such manufacturer or distributor, as
the case may be. Either Ford Credit or PRIMUS may limit or cancel this
arrangement if, in its judgment, a dealer's inventory is significantly
overstocked or if a dealer is experiencing financial difficulties. In these
circumstances (referred to as a "suspended" condition), the branch or regional
office may approve additional financing on a vehicle-by-vehicle basis.
CREDIT UNDERWRITING PROCESS
Wholesale financing is extended pursuant to established credit lines.
Lines of credit may be established for dealers to finance purchases of New and
Used Vehicles. Dealers that have a credit line in place also may be eligible for
a Used Vehicle credit line. In some instances, dealers having no New Vehicle
lines in place are still eligible to receive Used Vehicle credit lines.
A new dealer requesting the establishment of a New Vehicle credit line
with Ford Credit or through PRIMUS must submit a request for financing to the
appropriate Ford Credit branch office or PRIMUS regional office. After receipt
of such request, the appropriate office will investigate the prospective dealer
by reviewing that dealer's credit reports, financial statements and bank
references and by evaluating the dealer's marketing capabilities, startup
financing resources and credit requirements. When an existing dealer requests
the establishment of a wholesale New Vehicle credit line, the Ford Credit local
branch office or PRIMUS regional office, as applicable, reviews the dealer's
credit reports (including the experience of the dealer's present financing
source), financial statements and bank references. It also investigates the
dealer's present state of operations and management (including an evaluation of
a factory reference) and marketing capabilities.
The Ford Credit local branch office or PRIMUS regional office, as
applicable, prepares a written recommendation either approving or disapproving
the request for financing and, depending on the amount of the requested credit
line, transmits such recommendation with the requisite documentation to the
central office. The Ford Credit branch manager or PRIMUS regional manager, as
applicable, can approve new wholesale financing requests for amounts up to $10
million in some cases. For greater amounts, the documentation is forwarded to a
regional office or the central office, as the case may be, for approval. Ford
Credit generally applies the same underwriting standards for dealers franchised
by other manufacturers as it applies to Ford-franchised dealers. PRIMUS applies
substantially the same underwriting standards as those applied by Ford Credit.
Upon credit approval, dealers execute a series of financing agreements
with Ford Credit or PRIMUS, as the case may be. Such agreements provide for a
first priority security interest in favor of Ford Credit or PRIMUS, as
applicable, in the vehicles and any applicable additional security. Together
with the assignment of the account by PRIMUS to Ford Credit, PRIMUS assigns such
financing agreements and related security interest in the vehicle and additional
security to Ford Credit.
The size of a credit line offered by either Ford Credit or PRIMUS to a
dealer is based upon the dealer's sales rate (or, in the case of a prospective
dealer, expected sales rate). The amount of a dealer's credit line for New
Vehicles is reviewed periodically for adjustment. Currently, such a credit line
is generally an amount sufficient to finance a 60-day supply of vehicles.
The amount advanced for New Vehicles is equal to (i) the amount
invoiced, in the case of untitled vehicles, (ii) the auction purchase price
(including auction fees), in the case of vehicles purchased at closed auction by
a qualified dealer, and (iii) the dealer's purchase option price in the case of
vehicles previously leased under Ford Credit's Red Carpet Lease program or
PRIMUS's retail lease program. The aggregate amount advanced for each Used
Vehicle is generally equal to the National Automotive Dealers Association's
("NADA") Official Wholesale Used Car Trade-in Guide wholesale book value for
such vehicle.
As more fully described below, the credit lines are guidelines, not
limits, which dealers may be permitted to exceed for business reasons. See "The
Dealer Floorplan Financing Business-Dealer Monitoring".
INTERCREDITOR AGREEMENT IN RESPECT OF SECURITY INTERESTS IN VEHICLES AND
NON-VEHICLE RELATED SECURITY
As stated above, the agreements constituting the credit lines,
including the Accounts, provide for a security interest in the related Vehicles
and any applicable additional security in favor of Ford Credit, and Ford Credit
will represent to the Transferor and the Trust that such security interest is a
first priority security interest. In the case of credit lines originated by
PRIMUS, the credit agreements also provide, in addition to a first priority
security interest in the related Vehicles, a security interest in all personal
property of the Dealer. Such security interests in the related Vehicles and any
other Related Security are, in turn, assigned by Ford Credit to the Transferor
pursuant to the Receivables Purchase Agreement and then by the Transferor to the
Trust pursuant to the Pooling and Servicing Agreement. In its other lending
activities, Ford Credit and PRIMUS may have made or originated capital loans,
real estate loans or other advances to Dealers that are also secured by a
security interest in the Vehicles. Ford Credit agrees in the Receivables
Purchase Agreement not to assert its security interest in any Vehicle until the
Trust shall have been paid in full in respect of the Receivables secured by the
Trust's security interest in such Vehicle. In addition, in connection with such
other loans or advances made by Ford Credit to a Dealer, Ford Credit also may
have a security interest in the Non-Vehicle Related Security, if any, securing
the Receivables of such Dealer. In such cases, Ford Credit, in its sole
discretion, may realize on the Non-Vehicle Related Security for its own benefit
in respect of such loans or advances before the Trust is permitted to realize
upon such Non-Vehicle Related Security. Because of the subordinate position of
the Trust in respect of Non-Vehicle Related Security, there is no assurance that
the Trust will realize any proceeds in respect of any Non-Vehicle Related
Security.
PAYMENT TERMS
Upon the retail sale or lease of a vehicle for which it has provided
floorplan financing, Ford Credit generally is entitled to receive payment in
full of the related advance plus any unpaid interest. Notwithstanding the
foregoing, an installment financing plan for New Vehicles manufactured or
distributed by Ford is available to eligible Ford-franchised dealers through
Ford Credit. These dealers may remit 90% of the amount of the related advance to
Ford Credit upon retail sale or lease of a New Vehicle. Payment of the remaining
10% balance (the " Installment Balance") is due on the first day of the second
month following the sale or lease of such related vehicles. The security
interest in the vehicle is terminated at the time of its sale. A dealer has the
option to pay an amount equal to the Installment Balance to Ford Credit at the
time of the sale or lease of the related vehicle. In such case, Ford Credit
credits such amount to the dealer's total wholesale outstandings. On the date
the Installment Balance is due, the credit is directed by the dealer to be
applied to the Installment Balance for the related Vehicle. PRIMUS does not
offer its Ford and non-Ford franchise dealers an installment financing plan
similar to that offered by Ford Credit to Ford-franchised dealers.
BILLING AND COLLECTION PROCEDURES
A statement setting forth billing and related account information is
prepared and distributed on a monthly basis to each dealer. Generally, each
dealer's bills are generated and mailed by the fourth calendar day of the month.
Interest and other non-principal charges are billed in arrears and are required
to be paid by the end of the month in which they are billed. Dealers remit
payment directly to Ford Credit's local branch offices or PRIMUS's regional
offices (or in some cases, lockboxes maintained by PRIMUS).
REVENUE EXPERIENCE
Currently, dealers are charged interest at a rate determined weekly,
which rate currently is based primarily on the "prime rate" designated from time
to time by certain selected financial institutions plus a spread of either 1%
(the "New Vehicle Base Rate") or 1.75% (the "Used Vehicle Base Rate"), less
certain promotional discounts offered from time to time, plus certain other
applicable charges.
Dealers participating in the installment payment plan who pay the
Installment Balance at the time of the sale of the vehicle are currently charged
a rate of 0.5% above the prime rate on the Installment Balance from the time of
sale to the time it is applied to the balance outstanding. As of January 1,
1998, the installment payment plan has not been offered with respect to any new
Accounts.
RELATIONSHIP WITH FORD
On all financing provided by Ford Credit for Ford-manufactured or
distributed New Vehicles, Ford reimburses dealers directly for the finance costs
for a specific period from the date of shipment.
Under an agreement between Ford and each Ford-franchised dealer, Ford
commits to repurchase unsold New Vehicles in inventory upon voluntary franchise
termination, at such vehicles' wholesale prices less a specified margin. Ford
only repurchases current year models that are new, undamaged and unused. Ford
also agrees to repurchase from dealers, at the time of voluntary franchise
termination, parts inventory at specified percentages of the invoice price. All
of such assistance, however, is provided by Ford for the benefit of its dealers
and does not relieve such dealers of any of their obligations to Ford Credit.
Much of such assistance is provided at the option of Ford, which may
terminate any such optional program in whole or in part at any time. If Ford is
unable or elects not to provide such assistance, the loss experience of Ford
Credit in respect of the Ford Credit U.S. Wholesale Portfolio may be adversely
affected. In addition, because a substantial number of the vehicles sold by such
dealers are manufactured or distributed by Ford, if Ford were temporarily or
permanently no longer in such business, the rate of sales of Ford-manufactured
and distributed vehicles would decrease, adversely affecting payment rates and
the loss experience of the Ford Credit U.S. Wholesale Portfolio. See "--Payment
Terms" for a discussion of an installment payment plan made available to
dealers. See also "Risk Factors--Trust's Relationship to Ford and Ford Credit;
Financial Condition of Ford".
Under the terms of agreements entered into by PRIMUS with certain
manufacturers and distributors other than Ford, PRIMUS provides private-label
automotive financing services to certain dealers similar to those offered to
Ford-franchised dealers by Ford Credit. In connection with such agreements and
other agreements entered into with other non-Ford manufacturers or distributors,
some of the manufacturers or distributors provide repurchase agreements which
commit such manufacturers or distributors to repurchase from certain dealers
unsold vehicles in inventory upon franchise termination, voluntary or otherwise.
Such agreements vary, but typically provide for repurchase of unused, current
models that are new, undamaged, and untitled. The repurchase price is the net of
wholesale cost less holdback, transportation and advertising fees. Assistance is
provided for the benefit of the dealer in the event of a voluntary termination
and for the benefit of PRIMUS in the event of an involuntary termination. If
certain of such manufacturers or distributors supplying vehicles to such dealer
were temporarily or permanently no longer in business, the rate of sale of
vehicles owned by such dealers would decrease and the payment rates and loss
experience of the PRIMUS U.S. Wholesale Portfolio might be adversely affected.
In connection with Ford Credit's wholesale financing to non-Ford franchised
dealers, Ford Credit enters into agreements similar to those of PRIMUS with
non-Ford manufacturers or distributors.
DEALER MONITORING
The level of each wholesale credit line is monitored on a periodic
basis. Because the wholesale lines are viewed as guidelines and not absolute
limits with respect to New Vehicles, dealers may be permitted to exceed such
lines for business reasons. For example, prior to a seasonal peak, a dealer may
purchase more vehicles than its existing credit lines would otherwise indicate.
Because of slow inventory turnover, a dealer's credit lines may be reduced until
a sufficient portion of its vehicle inventory is liquidated. Exception reports
of dealers that have exceeded their credit lines by a certain percentage are
reviewed on a weekly basis. Ford Credit or PRIMUS may evaluate a dealer's
financial position and may place the dealer in the suspended category. See
"--Credit Underwriting Process".
Audits of vehicle inventories are conducted on a regular basis by Ford
Credit and PRIMUS personnel. The timing of each visit varies and no advance
notice is given. Auditors review some dealer financial records and conduct a
physical inventory of the financed vehicles. Through the audit process, Ford
Credit and PRIMUS reconcile physical vehicle inventories with its records of
financed vehicles. Audits are intended to identify instances where vehicles are
sold by a dealer without immediately repaying the related wholesale advances.
DEALER "STATUS" AND FORD CREDIT'S WRITE-OFF POLICY
Under certain circumstances, Ford Credit or PRIMUS, will classify a
dealer as "Status". Such circumstances may include failure to remit any
principal or interest payment when due, any notifications of liens, levied, or
attachments or a general deterioration of its financial condition. Ford Credit
and PRIMUS work with dealers to resolve the circumstances for the dealer Status.
If, however, a dealer remains on Status, one of the following events usually
occurs: (a) an orderly liquidation in which the dealer voluntarily liquidates
its inventory through normal sales to retail customers, (b) a forced liquidation
in which the dealer s inventory is repossessed, or (c) a voluntary surrender of
the dealer's inventory. Generally, Ford attempts to locate third parties to
purchase a troubled dealership. Once liquidation has commenced, Ford Credit or
PRIMUS, as applicable, performs an analysis of its position, writes off any
amounts identified at such time as uncollectable and attempts to liquidate all
remaining collateral. During the course of a liquidation, Ford Credit or PRIMUS,
as applicable, may recognize additional losses or recoveries.
THE ACCOUNTS
The Receivables arise in the Accounts. The Accounts initially were
selected from wholesale accounts in the Ford Credit U.S. Wholesale Portfolio and
PRIMUS U.S. Wholesale Portfolio that were Eligible Accounts (the "Eligible
Portfolio") at the time of such selection. In order to be included in the
Eligible Portfolio, each Account must be an account established or acquired by
Ford Credit or PRIMUS in the ordinary course of business and meet certain other
criteria provided in the Pooling and Servicing Agreement. See "Series
Provisions--Representations and Warranties."
Pursuant to the Pooling and Servicing Agreement, the Transferor, and
pursuant to the Receivables Purchase Agreement, Ford Credit, each has the right
(subject to certain limitations and conditions), and in some circumstances is
obligated, to designate from time to time additional qualifying wholesale
Accounts to be included as Accounts and to convey to the Trust the Receivables
of such Additional Accounts, including Receivables thereafter created. These
accounts must meet the eligibility criteria set forth above as of the date such
accounts are designated as Additional Accounts. Ford Credit will convey the
Receivables then existing, with certain exceptions, or thereafter created under
such Additional Accounts to the Transferor, which will in turn convey them to
the Trust. See "Series Provisions--Addition of Accounts". In addition, as of any
Additional Cut-Off Date in respect of Additional Accounts and the date any new
Receivables are generated, Ford Credit will represent and warrant to the
Transferor, and the Transferor will represent and warrant to the Trust, that the
Receivables meet the eligibility requirements set forth in the Pooling and
Servicing Agreement. See "Series Provisions--Conveyance of Receivables". Under
certain circumstances specified in the Pooling and Servicing Agreement, the
Transferor has the right to remove Accounts, and the Receivables arising
therefrom, from the Trust. See "Series Provisions--Removal of Accounts".
Throughout the term of the Trust, the Accounts from which the Receivables arise
will be the same Accounts designated by the Transferor on the Initial Cut-Off
Date plus any Additional Accounts, minus any Accounts removed from the Trust.
For additional information regarding the Accounts, including loss
experience, aging experience and geographic distribution, see "The Accounts" in
the related Prospectus Supplement.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement for a
Series, principal with respect to the Certificates of a Series will not be
payable until the related Expected Final Payment Date, unless an Early
Amortization Event or an Asset Composition Event shall have occurred. Full
amortization of the Certificates on or prior to the Expected Final Payment Date
depends on, among other things, repayment by Dealers of the Receivables and may
not occur if Dealer payments are insufficient therefor. Because the Receivables
generally are paid upon retail sale of the underlying Vehicle, the timing of
such payments is uncertain. In addition, there is no assurance that Ford Credit
will generate additional Receivables under the Accounts or that any particular
pattern of Dealer payments will occur. See "Series Provisions-Interest and
Principal" and "The Dealer Floorplan Financing Business".
The amount of new Receivables generated in any month and monthly
payment rates on the Receivables may vary because of seasonal variations in
Vehicle sales and inventory levels, retail incentive programs provided by
Vehicle manufacturers and various economic factors affecting Vehicle sales
generally.
SERIES PROVISIONS
GENERAL
The Certificates of each Series will be issued pursuant to a Pooling
and Servicing Agreement and a Supplement thereto relating to such Series of
Certificates (as so supplemented and as further supplemented or amended from
time to time in connection with the issuance of additional Series, the "Pooling
and Servicing Agreement"), among FCAR, as Transferor of the Receivables, Ford
Credit, as Master Servicer of the Receivables, and the Trustee, substantially in
the form filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Trustee will make available for inspection a copy of
the Pooling and Servicing Agreement (without exhibits or schedules) to
Certificateholders on written request. The following discussion is a summary of
the material terms of the Pooling and Servicing Agreement. For further
information, see the Pooling and Servicing Agreement.
The Certificates of each Series will evidence undivided beneficial
interests in the assets of the Trust allocated to the Certificateholders'
Interest of that Series representing the right to receive from such Trust assets
funds up to (but not in excess of) the amounts required to make payments of
interest on and principal of the related Series of Certificates pursuant to the
Pooling and Servicing Agreement.
Unless the Prospectus Supplement with respect to a Series specifies
that Certificates will be issued in definitive form, the Certificates of each
Series will initially be represented by one or more certificates registered in
the name of the nominee of DTC (together with any successor depository selected
by the Transferor, the "Depository"), except as set forth below. The
Certificates of each Series will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form or in
such other denomination and form as is specified in the related Prospectus
Supplement. The Transferor has been informed by DTC that DTC's nominee will be
Cede. See "--Book-Entry Registration" and "--Definitive Certificates".
INTEREST
Interest on the principal balance of the Certificates of each Series
will accrue at the rate per annum specified in, or determined as provided in,
the related Prospectus Supplement (with respect to any Series of Certificates,
the "Certificate Rate") and, except as otherwise provided herein, will be
distributed to the Certificateholders of such Series on the date specified
therefor in the related Prospectus Supplement (each, a "Payment Date"); provided
that (a) if an Early Amortization Event shall have occurred with respect to such
Series, interest may thereafter be distributed to the Certificateholders of such
Series monthly as specified in the related Prospectus Supplement (each, a
"Distribution Date") or (b) if an Asset Composition Event shall have occurred
with respect to such Series, interest (to the extent described in the related
Prospectus Supplement) will be distributed to the Certificateholders of such
Series on the first Distribution Date following such Asset Composition Event.
Certificateholder Interest Collections allocable to a Series will be deposited
into the related Interest Funding Account and used to make interest payments to
the Certificateholders of such Series on each Payment Date. Unless otherwise
specified in the related Prospectus Supplement, interest due with respect to the
Certificates of any Series on a Payment Date or Distribution Date will accrue
during the related Interest Period. Interest due for any Payment Date or
Distribution Date will be calculated on the basis of a 360-day year consisting
of twelve 30-day months (for fixed-rate Certificates) or on the basis of the
actual number of days elapsed during the related Interest Period divided by 360
(for floating-rate Certificates), unless otherwise provided in the related
Prospectus Supplement. Interest with respect to such Certificate due but not
paid on any Payment Date or Distribution Date will be due on the next
Distribution Date together with, to the extent lawfully payable, interest on
such amount at the rate specified in the related Prospectus Supplement. Interest
payments on the Certificates of a Series will be derived from
Certificateholders' Interest Collections allocable to such Series for a
Collection Period, the amount, if any, in the related Reserve Fund, Investment
Proceeds, proceeds from any related Enhancements and, under certain
circumstances, Available Transferor's Collections to the extent of the related
Available Subordinated Amount (or, in some cases, the Aggregate Available
Subordinated Amount).
Unless otherwise specified in the related Prospectus Supplement,
"Interest Period" shall mean (a) with respect to any Payment Date, the period
from and including the Payment Date immediately preceding such Payment Date (or,
in the case of the first Payment Date, from and including the Closing Date) to
but excluding such Payment Date and (b) with respect to any Distribution Date,
the period from and including the Distribution Date immediately preceding such
Distribution Date to but excluding such Distribution Date.
INDICES APPLICABLE TO FLoATING-RATE CERTIFICATES
Three-Month LIBOR. Unless otherwise specified in the related Prospectus
Supplement, two business days preceding the Payment Date, or two business days
prior to the Closing Date, in the case of the first Payment Date, (each, an
"Interest Determination Date"), The Chase Manhattan Bank (the "Reference
Agent"), as agent for the Trust, will ascertain the Three-Month LIBOR Rate for
the Certificates of any Series as to which Certificate Rate is based upon the
Three-Month LIBOR Rate. Unless otherwise specified in the related Prospectus
Supplement, the Three-Month LIBOR Rate shall be the rate for deposits in United
States dollars having a three-month maturity which appears on the Telerate Page
3750 as of 11:00 A.M., London time, on such Interest Determination Date.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Markets Limited (or such other page as may replace that page on that service or
such other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates for
United States dollar deposits).
With respect to an Interest Determination Date for which the
Three-Month LIBOR Rate does not appear on the Telerate Page 3750, the
Three-Month LIBOR Rate will be determined on the basis of the rates at which
deposits in United States dollars are offered by four major banks in the London
interbank market selected by the Reference Agent (the "Reference Banks") at
approximately 11:00 A.M., London time, on such Interest Determination Date to
prime banks in the London interbank market having a three-month maturity and in
a principal amount equal to an amount of not less than U.S. $1,000,000 that is
representative for a single transaction in such market at such time. The
Reference Agent will request the principal London office of each such Reference
Bank to provide a quotation of its rate. If at least two such quotations are
provided, the Three-Month LIBOR Rate on such Interest Determination Date will be
the arithmetic mean (rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with 5 one-millionths of a percentage
point rounded upwards) of such quotations. If fewer than two quotations are
provided, the Three-Month LIBOR Rate on such Interest Determination Date will be
the arithmetic mean (rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with 5 one-millionths of a percentage
point rounded upwards) of the rates quoted by three major banks in New York City
selected by the Reference Agent at approximately 11:00 A.M., New York City time,
on such Interest Determination Date for loans in United States dollars to
leading European banks, having a three-month maturity and in a principal amount
equal to an amount of not less than U.S. $1,000,000 that is representative for a
single transaction in such market at such time; provided, however, that if the
banks in New York City selected as aforesaid by the Reference Agent are not
quoting as mentioned in this sentence, the Certificate Rate will be the
Certificate Rate in effect on the day immediately preceding such Interest
Determination Date.
Prime Rate. Unless otherwise specified in the related Prospectus
Supplement, on the Interest Determination Date for the Certificates of a Series
as to which Certificate Rate is based on the Prime Rate, the Reference Agent as
agent for the Trust will ascertain the Prime Rate for the related Interest
Period. Unless otherwise specified in the related Prospectus Supplement, Prime
Rate for an Interest Period shall be the prime rate or base lending rate for
such Interest Determination Date as published by the Federal Reserve Board in
its Statistical Release in H.15 (519) ("H.15 (519)") under the heading "Bank
Prime Loan". In the event that such rate is not so published for such Interest
Determination Date, then the Prime Rate shall be calculated by the Reference
Agent and shall be the arithmetic mean of the rates of interest publicly
announced by each bank that appeared on the Reuters Screen NYMF Page as such
bank's prime rate or base lending rate as in effect for such Interest
Determination Date as quoted on the Reuters Screen NYMF Page. If fewer than four
such rates appear on the Reuters Screen NYMF Page on such date, then the Prime
Rate shall be the arithmetic mean of the prime rates or base lending rates
(quoted on the basis of the actual number of days in the year divided by a
360-day year) as of the close of business on such Interest Determination Date by
three major banks in The City of New York selected by the Reference Agent;
provided, however, that if fewer than three such selected banks were quoted as
described in this sentence, the Certificate Rate shall be the Certificate Rate
in effect on the day prior to such Interest Determination Date. "Reuters Screen
NYMF Page" means the display page designated as page "NYMF" on the Reuters
Monitor Money Rates Service (or such other page as may replace the NYMF page on
that service for the purpose of displaying prime rates or base lending rates of
major United States banks).
The foregoing descriptions are for illustrative purposes only, and a
floating-rate transaction may be based upon any floating rate index set forth in
the applicable Prospectus Supplement.
The Certificate Rate and amount of interest to be paid on the
Certificates for each Interest Period will be determined by the Reference Agent.
All calculations made by the Reference Agent shall in the absence of manifest
error be final and binding.
PRINCIPAL
Except to the extent that the related Prospectus Supplement specifies
earlier principal payment dates, no principal payments will be made to the
Certificateholders of any Series of Certificates until the Expected Final
Payment Date for such Series or, upon the occurrence of an Early Amortization
Event as described herein, until the first Distribution Date following such
event. On each Distribution Date with respect to the Revolving Period for any
Series of Certificates, collections of Principal Receivables allocable to the
Certificateholders' Interest of such Series, subject to certain limitations,
will be (a) allocated to the related Excess Funding Account as described herein,
(b) allocated to one or more Series which are in amortization, early
amortization or accumulation periods to cover principal payments due to the
certificateholders of any such Series or which provide for excess funding
accounts or similar arrangements or (c) if no such Series is then amortizing or
accumulating principal or provides for excess funding accounts or similar
arrangements, paid to the Transferor to maintain the Certificateholders'
Interest or, under certain circumstances, held as Unallocated Principal
Collections. See "--Allocation Percentages--Principal Collections for all
Series" and "--Distributions from the Collection Account; Reserve
Fund--Principal Collections".
Unless and until an Early Amortization Event with respect to a Series
of Certificates shall have occurred and until the outstanding principal balance
of the Certificates of such Series is paid in full, on each Distribution Date
with respect to the Accumulation Period for such Series or, if the related
Prospectus Supplement specifies such Series will have an Amortization Period, on
each Distribution Date with respect to the Amortization Period for such Series,
collections of Principal Receivables allocable to the Certificateholders'
Interest of such Series plus certain other amounts comprising Monthly Principal
will no longer be paid for the benefit of another Series or to the Transferor as
described above but instead will be deposited in the Principal Funding Account
in an amount up to the Controlled Distribution Amount, if applicable to such
Series, or the Invested Amount of such Series. The funds on deposit in the
Principal Funding Account (including any amounts deposited therein from the
related Excess Funding Account) will be used to pay the outstanding principal
balance of the Certificates of such Series on the related Expected Final Payment
Date or such other date or dates as shall be specified in such Prospectus
Supplement. If on such date the amount in the Principal Funding Account is less
than the outstanding principal balance of the Certificates of such Series, the
amounts in such account will nevertheless be distributed to such
Certificateholders on such date, an Early Amortization Period will commence and
on each Special Payment Date thereafter the Certificateholders of such Series
will receive distributions of Monthly Principal and Monthly Interest until the
outstanding principal balance of such Certificates has been paid in full or the
Series Termination Date has occurred.
It is expected that the final principal payment with respect to the
Certificates of each Series will be made on the Expected Final Payment Date, but
the principal of the Certificates of any Series may be paid earlier or,
depending on the actual payment rate on the Receivables, later, as described
under "Risk Factors-- Payments". If the Receivables are sold or repurchased as
described below, principal payments on the Certificates of the affected Series
will be made on the Distribution Date following such sale or repurchase. See
"--Allocation Percentages--Principal Collections for all Series" and
"--Distributions from the Collection Account; Reserve Fund--Principal
Collections".
Distributions on the Certificates of each Series will be made on each
Payment Date or Distribution Date, as applicable, to the holders of Certificates
in whose names such Certificates were registered (expected to be Cede, as
nominee of DTC) at the close of business on the day preceding such Payment Date
or Distribution Date (or, if Definitive Certificates are issued, on the last day
of the preceding calendar month) (each, a "Record Date"). However, the final
distribution on the Certificates of each Series will be made only upon
presentation and surrender of such Certificates. Distributions will be made to
DTC in immediately available funds.
ASSET COMPOSITION EVENT; ASSET COMPOSITION PREMIUM
The Prospectus Supplement for a Series will specify whether the
Certificates are subject to Asset Composition Events. If so specified, an "Asset
Composition Event" will occur if during the Revolving Period for such Series the
sum of all Eligible Investments and amounts on deposit in all Series Accounts
represents more than a specified percentage (as indicated in the related
Prospectus Supplement) of the total assets of the Trust on each of a specified
number of consecutive Determination Dates, after giving effect to all payments
made or to be made on the respective Distribution Dates next succeeding such
Determination Dates. No Asset Composition Event will arise for a Series, and any
preexisting Asset Composition Event will be of no further effect, following the
occurrence of an Early Amortization Event with respect to such Series.
As further specified in the related Prospectus Supplement, upon the
occurrence of an Asset Composition Event during the Revolving Period for a
Series of Certificates, distributions will be made in respect of such
Certificates to the extent necessary to result in compliance with the percentage
limitation, the violation of which gave rise to the Asset Composition Event (the
"Asset Correction Amount"). If so specified in the related Prospectus
Supplement, an additional amount may be payable as an "Asset Composition
Premium."
BOOK-ENTRY REGISTRATION
Unless the Prospectus Supplement for any Series specifies that
Certificates of such Series shall be in definitive rather than book-entry form,
Certificateholders of such Series may hold their Certificates through DTC if
they are participants of such system, or indirectly through organizations which
are participants in such system.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
below, all references herein to action by Certificateholders will refer to
actions taken by DTC upon instructions from its Participants, and all references
herein to distribution, notices, reports and statements by Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as the
registered holder of the Certificates, for distribution to Certificateholders in
accordance with DTC procedures.
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 UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants include
the Underwriters specified in the related Prospectus Supplement, securities
brokers and dealers, 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 ("Indirect Participants").
Certificateholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificateholders will receive all distributions of
principal of and interest on the Certificates from the Trustee through DTC and
its Participants. Under a book-entry format, Certificateholders will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants which thereafter will be required
to forward them to Indirect Participants or Certificateholders. It is
anticipated that the only Certificateholder (as such term is used in the Pooling
and Servicing Agreement) will be Cede, as nominee of DTC, and that Certificate
Owners will not be recognized by the Trustee as Certificateholders under the
Pooling and Servicing Agreement. Certificate Owners will only be permitted to
exercise the rights of Certificateholders under the Pooling and Servicing
Agreement indirectly through DTC and its Participants who in turn will exercise
their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal of and interest on
the Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners.
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 Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
DTC has advised the Transferor that it will take any action permitted
to be taken by a Certificateholder under the Pooling and Servicing Agreement
only at the direction of one or more Participants to whose account with DTC the
Certificates are credited.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
counties. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several counties
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear 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 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.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to the Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Material Federal Income Tax Considerations". Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Certificateholder under the Pooling and Servicing Agreement on
behalf of a Cedel Participant or Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Holders of Certificates may hold their Certificates through DTC (in the
United States) or Cedel or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations which are participants in such
systems.
The Certificates held in book-entry form will initially be registered
in the name of Cede, the nominee of DTC. Cedel and Euroclear will hold omnibus
positions on behalf of their participants through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
which in turn will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A. ("Citibank") will act as
depositary for Cedel and Morgan Guaranty Trust Company of New York ("Morgan")
will act as depositary for Euroclear (in such capacities, individually the
"Depositary" and collectively the "Depositaries").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time zone differences, credits of securities received in
Cedel or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel Participant
or Euroclear Participant to a Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC. For information
with respect to tax documentation procedures relating to the Certificates, see
"Material Federal Income Tax Considerations--Foreign Investors".
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among participants
of DTC, Cedel and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement for any Series,
the Certificates of such Series will be issued in fully registered, certificated
form to Certificate Owners or their nominees ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee in
writing that DTC is no longer willing or able to properly discharge its
responsibilities as Depository with respect to such Series and the Transferor is
unable to locate a qualified successor, (ii) the Transferor, at its option,
elects to terminate the book-entry system with respect to such Series through
DTC or (iii) after the occurrence of a Master Servicer Default,
Certificateholders of such Series representing not less than 50% of the
aggregate unpaid principal amount of the Certificates of such Series advise the
Trustee and DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of such Certificateholders of such Series.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificates of such
Series. Upon surrender by DTC of the certificate or certificates representing
such Certificates of such Series and instructions for re-registration, the
Trustee will issue such Certificates in the form of Definitive Certificates, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Pooling and Servicing Agreement
("Holders"). In the event that Definitive Certificates are issued or DTC ceases
to be the clearing agency for the Certificates, the Pooling and Servicing
Agreement provides that the Certificateholders will be notified of such event.
Distributions of principal of and interest on the Certificates will be
made by the Trustee directly to Holders in accordance with the procedures set
forth herein and in the Pooling and Servicing Agreement. Distributions on each
Distribution Date will be made to Holders in whose names the Definitive
Certificates were registered at the close of business on the related Record
Date. Distributions will be made by check mailed to the address of such Holder
as it appears on the register maintained by the Trustee. The final distribution
on any Certificate (whether Definitive Certificates or the certificate or
certificates registered in the name of Cede representing the Certificates),
however, will be made only upon presentation and surrender of such Certificate
on the final payment date at such office or agency as is specified in the notice
of final distribution to Certificateholders. The Trustee will provide such
notice to registered Certificateholders not later than the first day of the
month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee, which shall initially be The Chase Manhattan Bank. No
service charge will be imposed for any registration of transfer or exchange, but
the Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
SUPPLEMENTAL CERTIFICATES
The Pooling and Servicing Agreement provides that the Transferor may
exchange a portion of the certificate evidencing the Transferor's Interest (the
"Transferor's Certificate") for another certificate (a "Supplemental
Certificate") for transfer or assignment to a person designated by the
Transferor upon the execution and delivery of a supplement to the Pooling and
Servicing Agreement (which supplement shall be subject to the amendment section
of the Pooling and Servicing Agreement to the extent that it amends any of the
terms of the Pooling and Servicing Agreement); provided that (a) the Transferor
shall after giving effect thereto have an interest in the Pool Balance of not
less than 2% of the Pool Balance, (b) the Transferor shall have delivered to the
Trustee, each applicable Rating Agency and any Enhancement Provider a Tax
Opinion (as defined below) with respect to such exchange and (c) the Transferor
shall have delivered to the Trustee written confirmation from the applicable
Rating Agencies that such exchange will not result in a reduction or withdrawal
of the rating of the Certificates of any outstanding Series. Any subsequent
transfer or assignment of a Supplemental Certificate is also subject to the
conditions described in clauses (b) and (c) in the preceding sentence.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that the Trust will issue
two types of certificates: (i) one or more Series of Certificates which are
transferable and have the characteristics described below and (ii) the
Transferor's Certificate (and any Supplemental Certificate) which will evidence
the Transferor's Interest and will be transferable only upon the satisfaction of
certain conditions described under "Supplemental Certificates". The Pooling and
Servicing Agreement provides that, pursuant to one or more Supplements, the
Transferor may cause the Trustee to issue one or more new Series. Under the
Pooling and Servicing Agreement, the Transferor will specify, among other
things, with respect to each Series: (a) its name or designation, (b) its
initial principal amount, (c) its Certificate Rate (or the method for
determining its Certificate Rate), (d) a date on which it will begin its
Accumulation Period, Amortization Period or Controlled Amortization Period, if
any, (e) the method for allocating principal and interest to Certificateholders
of such Series, (f) the percentage used to calculate monthly servicing fees, (g)
the issuer and terms of any Enhancement with respect thereto or the level of
subordination provided by the Transferor's Interest, (h) the terms on which the
certificates of such Series may be exchanged for certificates of another Series,
be subject to repurchase, optional redemption or mandatory redemption by the
Transferor or be remarketed by any remarketing agent, (i) the Series Termination
Date and (j) any other terms permitted by the Pooling and Servicing Agreement
(all such terms, the "Principal Terms" of such Series). The Transferor may offer
any Series under the Prospectus and an accompanying Prospectus Supplement or
other disclosure document in transactions either registered under the Securities
Act or exempt from registration thereunder, directly or through the Underwriters
specified in the accompanying Prospectus Supplement or one or more other
underwriters or placement agents. There is no limit to the number of Series that
may be issued under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement provides that the Transferor may
specify Principal Terms of a new Series such that each Series has an
Amortization Period or Accumulation Period which may have a different length and
begin on a different date than the Amortization Period or Accumulation Period
for any other Series. Further, one or more Series may be in their Amortization
Periods, Accumulation Periods or Early Amortization Periods while other Series
are not. Thus, certain Series may be amortizing or accumulating principal, while
other Series are not amortizing or accumulating principal. Moreover, different
Series may have the benefits of different forms of Enhancement issued by
different entities. Under the Pooling and Servicing Agreement, the Trustee will
hold each form of Enhancement only on behalf of the Series (or a particular
class within a Series) to which it relates. The Pooling and Servicing Agreement
also provides that the Transferor may specify different Certificate Rates and
Monthly Servicing Fees with respect to each Series (or a particular class within
a Series). In addition, the Transferor has the option under the Pooling and
Servicing Agreement to vary between Series (or classes within a Series) the
terms upon which a Series (or classes within a Series) may be repurchased by the
Transferor.
Under the Pooling and Servicing Agreement and pursuant to a Supplement,
a new Series may be issued only upon the satisfaction of certain specified
conditions. The Transferor may cause the issuance of a new Series by notifying
the Trustee at least five business days in advance of the applicable Series
Issuance Date. The notice shall state the designation of any Series (and classes
within a Series, if any) and with respect to such Series: (a) its initial
principal amount, (b) its Certificate Rate and (c) the issuer of any Enhancement
with respect to such Series (or classes within a Series). The Pooling and
Servicing Agreement provides that the Trustee will issue any such Series only
upon delivery to it of the following: (i) a Supplement in form satisfactory to
the Trustee signed by the Transferor and the Master Servicer and specifying the
Principal Terms of such Series, (ii) the form of any Enhancement and any related
agreement, (iii) an opinion of counsel to the effect that under federal income
tax laws (x) such issuance will not cause a taxable event to any
certificateholders (including the Certificateholders) and (y) such new Series of
certificates will be characterized as debt or an interest in a tax partnership
(which partnership will not be treated as a result of issuance of such
Certificates as a "publicly traded partnership" within the meaning of Section
7704 of the Code and applicable Treasury regulations) (such opinion, a "Tax
Opinion") and (iv) written confirmation from the applicable Rating Agencies that
such issuance will not result in a reduction or withdrawal of the rating of the
Certificates of any outstanding Series. Such issuance is also subject to the
conditions that (a) the Transferor shall have represented and warranted that
such issuance shall not, in the reasonable belief of the Transferor, cause an
Early Amortization Event to occur and (b) after giving effect to such issuance,
the Transferor's Interest in the Pool Balance shall not be less than 2% of the
Pool Balance. Upon satisfaction of all such conditions, the Trustee will issue
such Series.
CONVEYANCE OF RECEIVABLES AND RELATED SECURITY
Pursuant to the Pooling and Servicing Agreement, FCAR has sold and
assigned to the Trust all of its right, title and interest in and to the
Receivables and the Related Security as of the date the Series 1997-A
Certificates were issued (the "Initial Closing Date"), all receivables
thereafter created in the Accounts and its interests in the Related Security and
the Receivables Purchase Agreement, and the proceeds of all of the foregoing.
See "--Ford Credit Auto Receivables LLC and the Trust".
In connection with the sale of the Receivables to the Transferor by
Ford Credit and the transfer of the Receivables by the Transferor to the Trust,
Ford Credit indicated in its computer records that the Receivables in the
Accounts and the Related Security have been conveyed to the Trust. In addition,
the Transferor provided to the Trustee a computer file or microfiche or written
list containing a true and complete list showing for each Account, as of the
Initial Cut-Off Date, (i) its account number, (ii) the outstanding principal
balance of the Receivables in such Account and (iii) the outstanding balance of
the Receivables in such Account. Ford Credit will retain and will not deliver to
the Trustee any other records or agreements relating to the Receivables. Except
as set forth above, the records and agreements relating to the Receivables will
not be segregated from those relating to other accounts of Ford Credit, and the
physical documentation relating to the Receivables will not be stamped or marked
to reflect the transfer of the Receivables to the Trust. The Transferor filed
one or more financing statements in accordance with applicable state law to
perfect the Trust's interest in the Receivables, the Related Security, the
Receivables Purchase Agreement and the proceeds thereof. See "Risk
Factors--Certain Legal Aspects" and "Certain Legal Aspects of the Receivables".
The Trust's interest in the Non-Vehicle Related Security will, in the sole
discretion of Ford Credit, be subordinate to the interest of Ford Credit in such
Non-Vehicle Related Security. See "The Dealer Floorplan Financing
Business--Intercreditor Agreement in Respect of Security Interest in Vehicles
and Non-Vehicle Related Security".
As described below under "Addition of Accounts", the Transferor has the
right (subject to certain limitations and conditions), and in some circumstances
is obligated, to designate from time to time additional accounts to be included
as Additional Accounts, to purchase from Ford Credit the Receivables then
existing or thereafter created in such Additional Accounts and to convey such
Receivables to the Trust. Each such Additional Account must be an Eligible
Account. In respect of any conveyance of Receivables in Additional Accounts, the
Transferor will follow the procedures set forth in the preceding paragraph,
except that the list will show information for such Additional Accounts as of
the date such Additional Accounts are identified and selected (each, an
"Additional Cut-Off Date").
REPRESENTATIONS AND WARRANTIES
The Transferor has made representations and warranties to the Trust
relating to the Accounts, the Receivables and the Related Security to the
effect, among other things, that (a) as of each Series Cut-Off Date and Closing
Date (or, in the case of an Additional Account, as of the Additional Cut-Off
Date and the date the related Receivables are transferred to the Trust (an
"Addition Date")), each Account or Additional Account was or is an Eligible
Account or, if it was or is an Ineligible Account on such date, such Account is
being removed from the Trust in accordance with the requirements of the Pooling
and Servicing Agreement, (b) as of the Initial Cut-Off Date (or as of the
Additional Cut-Off Date, in the case of any Additional Accounts) or as of the
date any future Receivable is generated (each, a "Transfer Date"), each
Receivable is an Eligible Receivable or, if such Receivable is not an Eligible
Receivable, such Receivable is conveyed to the Trust as described below under
"--Ineligible Receivables, the Installment Balance Amount and the
Overconcentration Amount", (c) each Receivable and all Related Security conveyed
to the Trust on the Closing Date for the Series 1997-A Certificates and on each
Transfer Date or, in the case of Additional Accounts, on the Addition Date, and
all of the Transferor's right, title and interest in the Receivables Purchase
Agreement, have been conveyed to the Trust free and clear of any liens, and (d)
all appropriate consents and governmental authorizations required to be obtained
by the Transferor in connection with the conveyance of each such Receivable or
Related Security have been duly obtained. If the Transferor breaches any
representation and warranty described in this paragraph and such breach remains
uncured for 30 days or such longer period as may be agreed to by the Trustee,
after the earlier to occur of the discovery of such breach by the Transferor or
the Master Servicer or receipt of written notice of such breach by the
Transferor or the Master Servicer, and such breach has a materially adverse
effect on the Certificateholders' Interest of any outstanding Series in any
Receivable or Account, such Certificateholders' Interests in such Receivable or,
in the case of a breach relating to an Account, all Receivables in the related
Account ("Ineligible Receivables") will be reassigned to the Transferor on the
terms and conditions set forth below and such Account shall no longer be
included as an Account.
Each such Receivable shall be reassigned to the Transferor on or before
the end of the Collection Period in which such reassignment obligation arises by
the Transferor directing the Master Servicer to deduct the principal balance of
such Receivable from the Pool Balance. In the event that such deduction would
cause the Transferor's Participation Amount to be less than the Trust Available
Subordinated Amount on the preceding Determination Date (after giving effect to
the allocations, distributions, withdrawals and deposits to be made on such
Distribution Date), on the date on which such reassignment is to occur the
Transferor will be obligated to make a deposit into the Collection Account in
immediately available funds in an amount equal to the amount by which the
Transferor's Participation Amount would be less than the Trust Available
Subordinated Amount (the amount of any such deposit being referred to herein as
a "Transfer Deposit Amount"), provided that if the Transfer Deposit Amount is
not so deposited, the principal balance of the related Receivables will be
deducted from the Pool Balance only to the extent the Transferor's Participation
Amount is not reduced below the Trust Available Subordinated Amount and any
principal balance not so deducted will not be reassigned and will remain part of
the Trust. The reassignment of any such Receivable to the Transferor and the
payment of any related Transfer Deposit Amount will be the sole remedy
respecting any breach of the representations and warranties described in the
preceding paragraph with respect to such Receivable available to
Certificateholders or the Trustee on behalf of Certificateholders.
The Transferor also has made representations and warranties to the
Trust to the effect, among other things, that as of each Closing Date (a) it is
duly incorporated and in good standing, it has the authority to consummate the
transactions contemplated by the Pooling and Servicing Agreement, and the
Pooling and Servicing Agreement constitutes a valid, binding and enforceable
agreement of the Transferor and (b) the Pooling and Servicing Agreement
constitutes a valid sale, transfer and assignment to the Trust of all right,
title and interest of the Transferor in the Receivables and the Related
Security, whether then existing or thereafter created, the Receivables Purchase
Agreement, and the proceeds thereof (including proceeds in any of the accounts
established for the benefit of the Certificateholders), under the UCC as then in
effect in the State of Michigan, which is effective as to each Receivable
existing on each Closing Date (or as of the Addition Date, if applicable) or, as
to each Receivable arising thereafter, upon the creation thereof and until
termination of the Trust. In the event that the breach of any of the
representations and warranties described in this paragraph has a materially
adverse effect on the Certificateholders' Interest of any outstanding Series in
the Receivables, either the Trustee or the holders of Certificates of all
outstanding Series evidencing not less than 51% of the aggregate unpaid
principal amount of all outstanding Series, by written notice to the Transferor
and the Master Servicer (and to the Trustee and the issuer or provider of any
Enhancement (an "Enhancement Provider") if given by Certificateholders), may
direct the Transferor to accept the reassignment of the Certificateholders'
Interest of all outstanding Series within 60 days of such notice, or within such
longer period specified in such notice. The Transferor will be obligated to
accept the reassignment of such Certificateholders' Interests on a Distribution
Date occurring within such 60-day period. Such reassignment will not be required
to be made, however, if at the end of such applicable period, the
representations and warranties shall then be true and correct in all material
respects and any materially adverse effect caused by such breach shall have been
cured. The portion of the price for such reassignment in respect of the
Certificates will be equal to the sum of (i) the Invested Amount of the
Certificates of each Series then outstanding on the Determination Date preceding
the Distribution Date on which the purchase is scheduled to be made and (ii)
accrued and unpaid interest on the unpaid principal amount of the Certificates
of each Series then outstanding at the applicable Certificate Rate (together
with interest on overdue interest, to the extent lawfully payable). The payment
of the reassignment price for all outstanding Series, in immediately available
funds, will be considered a payment in full of the Certificateholders' Interest
of each outstanding Series. The portion of such funds allocable to the
Certificateholders' Interest of a Series will be distributed upon presentation
and surrender of the Certificates of such Series. If the Trustee or the
Certificateholders give a notice as provided above, the obligation of the
Transferor to make any such deposit will constitute the sole remedy respecting a
breach of the representations and warranties available to certificateholders or
the Trustee on behalf of the certificateholders.
ELIGIBLE ACCOUNTS AND ELIGIBLE RECEIVABLES
An "Eligible Account" is defined to mean each wholesale financing line
of credit extended by Ford Credit or PRIMUS, as applicable, to a Dealer, which
line of credit, as of the date of determination thereof (a) is established by
Ford Credit or PRIMUS in the ordinary course of business pursuant to a floorplan
financing agreement, (b) is in favor of a Dealer which is an eligible dealer
(which excludes dealers subject to voluntary or involuntary bankruptcy
proceedings or voluntary or involuntary liquidation and dealers otherwise
classified as being under Dealer Status or in which Ford or PRIMUS has an equity
interest), (c) is in existence and maintained and serviced by Ford Credit and
(d) in respect of which no amounts have been charged off as uncollectable.
An "Eligible Receivable" is defined to mean each Receivable: (a) which
was originated or acquired by Ford Credit or originated by PRIMUS and assigned
to Ford Credit, in each case in the ordinary course of business, (b) which arose
under an Account that at such time was an Eligible Account, (c) which is owned
by Ford Credit at the time of sale by Ford Credit to the Transferor, (d) which
represents the obligation of a Dealer to repay an advance made to or on behalf
of such Dealer to finance Vehicles or to return an Installment Balance to the
related Dealer, (e) which at the time of creation and at the time of transfer to
the Trust is secured by a perfected first priority interest in the Vehicle
relating thereto (exclusive of Receivables for which an Installment Balance is
outstanding), (f) which was created in compliance in all respects with all
requirements of law applicable thereto and pursuant to a floorplan financing
agreement which complies in all respects with all requirements of law applicable
to any party thereto, (g) with respect to which all consents and governmental
authorizations required to be obtained by Ford Credit, PRIMUS or the Transferor
in connection with the creation of such Receivable or the transfer thereof to
the Trust or the performance by Ford Credit of the floorplan financing agreement
pursuant to which such Receivable was created, have been duly obtained, (h) as
to which at all times following the transfer of such Receivable to the Trust,
the Trust will have good and marketable title thereto free and clear of all
liens arising prior to the transfer or arising at any time, other than liens
permitted pursuant to the Pooling and Servicing Agreement, (i) which has been
the subject of a valid transfer and assignment from the Transferor to the Trust
of all the Transferor's interest therein (including any proceeds thereof), (j)
which will at all times be the legal and assignable payment obligation of the
Dealer relating thereto, enforceable against such Dealer in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy or
other similar laws, (k) which at the time of transfer to the Trust is not
subject to any right of rescission, setoff, or any other defense (including
defenses arising out of violations of usury laws) of the Dealer, (l) as to
which, at the time of transfer of such Receivable to the Trust, Ford and Ford
Credit or PRIMUS, as applicable, and the Transferor have satisfied all their
respective obligations with respect to such Receivable required to be satisfied
at such time, (m) as to which, at the time of transfer of such Receivable to the
Trust, none of Ford, Ford Credit, PRIMUS or the Transferor has taken or failed
to take any action which would impair the rights of the Trust or the
Certificateholders therein, (n) which constitutes "chattel paper" as defined in
Article 9 of the UCC as then in effect the State of Michigan, (o) which was
transferred to the Trust with all applicable governmental authorization and (p)
with respect to Receivables originated by PRIMUS and assigned to Ford Credit, as
to which at the time of the transfer of such Receivable to the Trust and at all
times following such transfer, the related vehicle manufacturer or distributor
(if other than Ford) is not subject to voluntary or involuntary bankruptcy
proceedings or voluntary or involuntary liquidation.
It is not required or anticipated that the Trustee will make any
initial or periodic general examination of the Receivables or any records
relating to the Receivables for the purpose of establishing the presence or
absence of defects, compliance with representations and warranties of the
Transferor or for any other purpose. In addition, it is not anticipated or
required that the Trustee will make any initial or periodic general examination
of the Master Servicer for the purpose of establishing the compliance by the
Master Servicer with its representations or warranties, the observation of its
obligations under the Pooling and Servicing Agreement or for any other purpose.
The Master Servicer, however, will deliver to the Trustee on or before April 30
of each calendar year, an opinion of counsel with respect to the validity of the
interest of the Trust in and to the Receivables and certain other components of
the Trust.
INELIGIBLE RECEIVABLES, THE INSTALLMENT BALANCE AMOUNT AND THE OVERCONCENTRATION
AMOUNT
For the purpose of facilitating the administration and reporting
requirements of the Master Servicer under the Pooling and Servicing Agreement,
all Ineligible Receivables arising in an Eligible Account shall be transferred
to the Trust, provided that the Incremental Subordinated Amount for each Series
is adjusted by the portion of the aggregate principal amount of Receivables
included therein allocable to the Certificateholders' Interest of each such
Series. In addition, unless otherwise specified in the related Prospectus
Supplement, the Incremental Subordinated Amount for each Series shall be
adjusted to reflect, on each Distribution Date, the aggregate principal amount
of Receivables in the Trust on such Distribution Date which are either Dealer
Overconcentrations, Manufacturer Overconcentrations or PRIMUS Overconcentrations
(collectively, the "Overconcentration Amount") allocable to the
Certificateholders' Interest of each such Series and the portion of the
aggregate amount of Installment Balances in respect of which the Trust has not
received an offsetting payment from the related Dealer on such Distribution Date
(the "Installment Balance Amount") allocable to the Certificateholders'
Interest. As used herein, "Dealer Overconcentrations" on any Determination Date
means, with respect to any Dealer or group of affiliated Dealers (as determined
in accordance with the Master Servicer's standard procedures for identifying and
tracking Accounts of affiliated Dealers), the excess of (x) the aggregate of all
Principal Receivables included in all Accounts of such Dealer or group of
affiliated Dealers over (y) 2% (or such higher percentage, in no event to exceed
4%, as may be approved in writing from time to time by each Rating Agency,
subject to such conditions and limitations as each such Rating Agency may
require) of the Pool Balance on the last day of such immediately preceding
Collection Period. "Manufacturer Overconcentration" on any Determination Date
means the excess, if any, of (x) the aggregate Principal Receivables in the
Trust on the last day of the Collection Period immediately preceding such
Determination Date that were acquired by Ford Credit from all other Originators
and that relate to a particular vehicle manufacturer (other than Ford) over (y)
30% of the aggregate Principal Receivables on the last day of such Collection
Period that were acquired by Ford Credit from all other Originators. "PRIMUS
Overconcentration" on any Determination Date means the excess, it any, of (x)
the aggregate Principal Receivables included in the Trust on the last day of the
Collection Period immediately preceding such Determination Date that were
acquired by the Seller from PRIMUS over (y) 30% of the aggregate Principal
Receivables in the Trust on the last day of such Collection Period.
Notwithstanding the foregoing, the tests specified above with respect to the
Dealer Overconcentration, Manufacturer Overconcentration and PRIMUS
Overconcentration may be modified, provided that each Rating Agency shall have
indicated in writing that the applicable rating or ratings will not be adversely
affected by any such modification. See "--Allocation of Collections; Deposits in
Collection Account; Limited Subordination of Transferor's Interest--Available
Subordinated Amount".
ADDITION OF ACCOUNTS
Subject to the conditions described below, the Transferor has the right
to designate from time to time additional accounts to be included as Accounts
(the "Additional Accounts"). In addition, the Transferor is required to add the
Receivables of Additional Accounts if either (i) the Pool Balance on the last
day of any Collection Period is less than the Required Pool Balance or (ii) the
portion of the Transferor's Interest represented by the Transferor's Certificate
is less than 2% of the Pool Balance on such last day. In either case, unless
certain insolvency events have occurred with respect to the Transferor, Ford
Credit or Ford, Ford Credit under the Receivables Purchase Agreement will be
required to sell to the Transferor, and the Transferor under the Pooling and
Servicing Agreement will be required to transfer and assign to the Trust, within
10 business days after the end of such Collection Period, interests in all
Receivables arising in such Additional Accounts, whether such Receivables are
then existing or thereafter created. Any designation of Additional Accounts is
subject to the following conditions, among others: (i) each such Additional
Account must be an Eligible Account; (ii) the Transferor will represent and
warrant that the addition of such Additional Accounts will not, in the
reasonable belief of the Transferor, cause an Early Amortization Event to occur;
(iii) the Transferor will not select such Additional Accounts in a manner that
it believes is adverse to the interests of the Certificateholders of any Series
or any Enhancement Provider; (iv) the Transferor will deliver a Tax Opinion,
other than in the case of a required addition, and certain other opinions of
counsel with respect to the addition of such Additional Accounts to the Trustee,
the Rating Agencies and any Enhancement Provider; and (v) the applicable Rating
Agencies shall have provided written confirmation that such addition will not
result in a reduction or withdrawal of the rating of the Certificates of any
outstanding Series.
Each Additional Account must be an Eligible Account at the time of its
addition. However, since Additional Accounts may not have been a part of the
initial portfolio of Ford Credit, they may not be of the same credit quality as
the initial Accounts. Additional Accounts may have been originated by Ford
Credit at a later date using credit criteria different from those which were
applied to the initial Accounts.
"Required Participation Amount" for any date will mean an amount equal
to the sum of (a) the sum of the product for each Series of (i) the Required
Participation Percentage for such Series times (ii) the Invested Amount for such
Series at its Closing Date minus the amount of any deposits into any Excess
Funding Account for such Series in connection with a reduction in the Pool
Balance plus the amount of any withdrawals from any such Excess Funding Account
in connection with an increase in the Pool Balance plus (b) the Trust Available
Subordinated Amount on the immediately preceding Determination Date (after
giving effect to the allocations, distributions, withdrawals and deposits to be
made on the Distribution Date following such Determination Date).
"Required Participation Percentage" will mean, the percentage
applicable to such Series specified in the related Prospectus Supplement;
provided, however, that the Transferor may, upon ten days' prior notice to the
Trustee, the Rating Agencies and any Enhancement Provider reduce the Required
Participation Percentage for any Series to not less than 100%, so long as each
Rating Agency shall have notified the Transferor or the Master Servicer that any
such reduction will not result in a reduction or withdrawal of the rating of the
Certificates of any other Series rated by it at the request of the Transferor.
Notwithstanding the foregoing, the Transferor may from time to time, at its
discretion, and subject only to the limitations specified in this paragraph and
the conditions specified in clauses (i), (ii) and (iii) for Additional Accounts
in the second preceding paragraph, designate Additional Accounts (any Additional
Accounts designated in accordance with the provisions described in this
paragraph being referred to herein as "Automatic Additional Accounts"). Unless
the Rating Agencies otherwise consent, neither the number of Automatic
Additional Accounts nor the aggregate amount of Principal Receivables included
in such Automatic Additional Accounts as of the related Additional Cut-Off Date
that are designated during any calendar quarter shall exceed 10% of the number
of Accounts or 10% of the Pool Balance, as the case may be, as of the first day
of such calendar quarter and neither the number of Automatic Additional Accounts
nor the aggregate amount of Principal Receivables included in such Automatic
Additional Accounts as of the related Additional Cut-Off Dates that are
designated during any twelve month period commencing in October of any year
shall exceed 20% of the number of Accounts or 20% of the Pool Balance, as the
case may be, as of the first day of such twelve-month period. On or before 31
January, 30 April, 31 July and 31 October of each calendar year, the Trustee
shall have to the extent applicable, delivered notice to each applicable Rating
Agency with respect to the addition of all Automatic Additional Accounts
included as Accounts during the three consecutive Collection Periods ending in
the calendar month prior to such date. On or before 31 January and 31 July of
each calendar year (or quarterly or on or before the last day of each month in
certain circumstances), the Transferor shall have delivered to the Trustee, each
Rating Agency and any Enhancement Provider an opinion of counsel with respect to
the Automatic Additional Accounts included as Accounts during the preceding six
month period (or the preceding three month period or the preceding month in
certain circumstances) confirming the validity and perfection of each transfer
of such Automatic Additional Accounts. If such opinion of counsel with respect
to any Automatic Additional Accounts is not so received, such Automatic
Additional Accounts will be removed from the Trust.
REMOVAL OF ACCOUNTS
The Transferor shall have the right at any time to require the removal
from the Trust of Eligible Accounts, including all amounts then held by the
Trust or thereafter received by the Trust in respect of the Eligible Accounts to
be removed. To remove any Eligible Account and such amounts, the Transferor (or
the Master Servicer on its behalf) will, among other things, (a) on or before
the fifth business day prior to the date of removal (the "Removal Commencement
Date"), furnish to the Trustee, any Enhancement Provider and the Rating Agencies
a written notice (the "Removal Notice") specifying the Removal Commencement
Date; (b) on or before the fifth business day after the Removal Commencement
Date, the Transferor shall have furnished to the Trustee a computer file,
microfiche list or other list of the Removal Accounts that were removed on the
Removal Commencement Date, specifying for each Removed Account as of the date of
the Removal Notice its number, the aggregate amount outstanding in such Removed
Account and the aggregate amount of Principal Receivables therein; (c);
represent and warrant that the removal of any such Eligible Account on the
Removal Commencement Date will not, in the reasonable belief of the Transferor,
cause an Early Amortization Event to occur or cause the Pool Balance to be less
than the Required Participation Amount; (d) represent and warrant that no
selection procedures believed by the Transferor to be adverse to the interest of
the Certificateholders were utilized in selecting the Removal Accounts; (e)
represent and warrant that the Rating Agencies shall not have notified the
Transferor or the Master Servicer that such removal will result in a reduction
or withdrawal of the rating of the Certificates of any outstanding Series and
(f) on or before the related Removal Commencement Date, deliver to the Trustee
and any Enhancement Provider an officers' certificate confirming the items set
forth in clauses (c), (d) and (e) above and a Tax Opinion with respect to such
removal.
Upon satisfaction of the above conditions, the Trustee will execute and
deliver to the Transferor a written reassignment and will be deemed to sell,
transfer, assign, set over and otherwise convey to the Transferor or its
designee, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to the Receivables arising in the Removal Accounts,
all amounts received or to be received with respect thereto and all proceeds
thereof. Collections in respect of Receivables in any such Removal Account will
be allocated as follows: (i) Principal Collections will be allocated first to
the oldest outstanding principal balance of such Receivables and (ii) Defaulted
Receivables and Interest Collections will be allocated to the Trust on the basis
of the ratio of Principal Receivables owned by the Trust in such Removal Account
on the Removal Commencement Date to the total amount of Principal Receivables in
such Removal Account on such date. The remainder of any Principal Collections,
Defaulted Receivables and Interest Collections shall be allocated to the
Transferor.
COLLECTION ACCOUNT
The Master Servicer has established and is required to maintain, or
cause to be established and maintained, an Eligible Deposit Account for the
benefit of certificateholders in the name of the Trustee, on behalf of the Trust
(the "Collection Account"). "Eligible Deposit Account" means either (a) a
segregated account with an Eligible Institution or (b) a segregated trust
account with the corporate trust department of a depository institution or trust
company organized under the laws of the United States or any state thereof (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 or trust company has a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade. "Eligible Institution" means (a) the corporate trust department of the
Trustee or (b) a depository institution or trust company organized under the
laws of the United States or any one of the states thereof (or a domestic branch
of a foreign bank) which at all times (i) has either (x) a long-term unsecured
debt rating acceptable to each Rating Agency or (y) a certificate of deposit
rating acceptable to each Rating Agency and (ii) is a member of the FDIC. Funds
in the Collection Account generally will be invested in (i) obligations fully
guaranteed by the United States, (ii) demand deposits, time deposits or
certificates of deposit of depository institutions or trust companies, the
commercial paper of which has the highest rating from the applicable Rating
Agency, (iii) commercial paper having at the time of the Trust's investment, a
rating in the highest rating category from the applicable Rating Agency, (iv)
demand deposits, time deposits and certificates of deposit which are fully
insured by the FDIC, (v) bankers' acceptances issued by any depository
institution or trust company described in (ii) above, (vi) investments in money
market funds which have the highest rating from, or have otherwise been approved
in writing by, each Rating Agency and (vii) other investments acceptable to the
Rating Agency as being consistent with the then-current rating of the
Certificates (collectively, "Eligible Investments"). Any earnings (net of losses
and investment expenses) on funds in the Collection Account will be credited to
the Collection Account. The Master Servicer will have the revocable power to
instruct the Trustee to make withdrawals and payments from the Collection
Account for the purpose of carrying out its duties under the Pooling and
Servicing Agreement.
EXCESS FUNDING ACCOUNT
During the Revolving Period for each Series, as to which an Excess
Funding Account has been established, unless otherwise specified in the related
Prospectus Supplement, funds (to the extent available therefor as described
herein) will be deposited in the Excess Funding Account for such Series on a
Distribution Date in an amount equal to the excess, if any, of (i) the related
Invested Amount immediately prior to such Distribution Date over (ii) the
Certificateholders' Interest for such Series in Principal Receivables at the end
of the preceding Collection Period. In addition, if so specified in the related
Prospectus Supplement, a deposit will be made in the related Excess Funding
Account on or prior to the Closing Date for such Series in an amount equal to
the excess of the Initial Principal Amount of the Certificates of such Series
over the Initial Invested Amount allocable thereto. Funds on deposit in the
Excess Funding Account for a Series will be withdrawn and paid to the Transferor
or allocated to one or more other Series that are in their amortization,
accumulation or early amortization periods to the extent of any increases in the
Certificateholders' Interests of all outstanding Series in the Pool Balance as a
result of the addition of Receivables to the Trust. Under certain circumstances,
such deposits in and withdrawals from the Excess Funding Accounts may be made on
a daily basis. The allocation of additional Receivables to increase the Invested
Amount of each outstanding Series will be pro rata based on the proportion that
the amount on deposit in an Excess Funding Account bears to the aggregate
amounts in all of the Trust's Excess Funding Accounts and similar arrangements
for accommodating the fluctuation in the principal balances of the Receivables.
The deposit of amounts into the Excess Funding Account of the outstanding Series
will be based on the proportion that the Invested Amount of a Series bears to
the aggregate of the Invested Amounts for all Series.
Any funds on deposit in an Excess Funding Account at the beginning of
the Accumulation Period, Amortization Period or Early Amortization Period, as
applicable, for the related Series will be deposited in the Principal Funding
Account for such Series. In addition, no funds will be deposited in an Excess
Funding Account during the Accumulation Period, Amortization Period or Early
Amortization Period, as applicable, for the related Series.
Funds on deposit in the Excess Funding Account for such Series will be
invested by the Trustee at the direction of the Master Servicer in investments
rated in the highest short-term category of each Rating Agency or in such other
investments that are acceptable to each Rating Agency and any Enhancement
Provider. Such investments are required to mature by the next Distribution Date.
On each Distribution Date, all net investment income earned on amounts in an
Excess Funding Account since the preceding Distribution Date will be withdrawn
from such Excess Funding Account and applied as described herein.
ALLOCATION PERCENTAGES
Allocation to the Certificateholders' Interest. Unless otherwise
specified in the Prospectus Supplement for any Series, the Master Servicer will
allocate amounts to the Certificateholders' Interest of each Series for each
Collection Period as follows:
(a) Interest Collections and the Defaulted Amount will be allocated to
Certificateholders of each Series based on the applicable Floating Allocation
Percentage;
(b) during the Revolving Period for a Series, Principal Collections
will be allocated to Certificateholders of such Series based on the applicable
Floating Allocation Percentage (subject to the following sentence);
(c) during the Accumulation Period or Amortization Period, as
applicable, and any Early Amortization Period for a Series, Principal
Collections will be allocated to Certificateholders of such Series based on the
applicable Principal Allocation Percentage (subject to the following sentence);
and
(d) Miscellaneous Payments will at all times be allocated to
Certificateholders of each Series on the basis of the applicable Series
Allocation Percentage.
With respect to Principal Collections among Series for any Collection
Period, if the sum of (i) the sum of the Floating Allocation Percentages for
each Series in its Revolving Period and (ii) the Principal Allocation Percentage
for each Series in its Amortization, Accumulation or Early Amortization period
exceeds 100%, then Principal Collections for such Collection Period will be
allocated among the Series pro rata on the basis of such Floating Allocation
Percentages and Principal Allocation Percentages. Amounts not allocated to the
Certificateholders of outstanding Series as described above will be allocated to
the Transferor.
Unless otherwise specified in the accompanying Prospectus Supplement,
the following terms shall have the meanings specified below.
"Floating Allocation Percentage" for any Collection Period and Series
means the percentage equivalent (which shall never exceed 100%) of a fraction,
the numerator of which is the related Invested Amount as of the last day of the
immediately preceding Collection Period and the denominator of which is the Pool
Balance as of such last day; provided, however, that, with respect to the first
Collection Period for a Series, the Floating Allocation Percentage shall mean
the percentage equivalent of a fraction, the numerator of which is the Initial
Invested Amount of the Certificates of such Series and the denominator of which
is the Pool Balance on the Series Cut-Off Date.
"Principal Allocation Percentage" for any Collection Period and Series
means the percentage equivalent (which shall never exceed 100%) of a fraction,
the numerator of which is the related Invested Amount as of the last day of the
Revolving Period for such Series and the denominator of which is the Pool
Balance as of the last day of the immediately preceding Collection Period.
"Invested Amount" means for any date and Series, an amount equal to the
Initial Invested Amount of the Certificates of such Series, minus the amount,
without duplication, of principal payments (except principal payments made from
the related Excess Funding Account, if any, and any transfers from such Excess
Funding Account to the Principal Funding Account for such Series) made to
Certificateholders of such Series or deposited to the related Principal Funding
Account prior to such date from and after the applicable Closing Date minus the
excess, if any, of the aggregate amount of Investor Charge-Offs for such Series
for all Distribution Dates preceding such date, over the aggregate amount of any
reimbursements of Investor Charge-Offs for such Series for all Distribution
Dates preceding such dates.
"Initial Invested Amount" means the Initial Principal Amount of the
Certificates of a Series plus (a) the amount of any withdrawals from the related
Excess Funding Account, if any, in connection with an increase in Receivables in
the Trust since the Closing Date, minus (b) the amount of any additions to the
related Excess Funding Account in connection with a reduction in the Receivables
in the Trust since the Closing Date.
"Miscellaneous Payments" for any Collection Period means the sum of (a)
Adjustment Payments and Transfer Deposit Amounts received with respect to such
Collection Period and (b) Unallocated Principal Collections on such Distribution
Date available to be treated as Miscellaneous Payments as described below under
"Principal Collections for all Series".
"Series Allocation Percentage" means, for any Collection Period and
Series, the percentage equivalent of a fraction, the numerator of which is the
related Invested Amount as of the last day of the immediately preceding
Collection Period and the denominator of which is the Trust Invested Amount as
of such last day.
"Aggregate Available Subordinated Amount" means for a Series the sum of
the Available Subordinated Amount and any additional subordination specified for
such Series in the related Prospectus Supplement.
"Trust Invested Amount" means, with respect to any Collection Period,
the sum of the Invested Amounts for all outstanding Series.
"Trust Available Subordinated Amount" means the sum of the Aggregate
Available Subordinated Amounts for all outstanding Series.
The Floating Allocation Percentages and the Principal Allocation Percentages
will be adjusted for any Collection Period with respect to which Additional
Accounts are designated to reflect the additional Receivables added to the
Trust.
Principal Collections for all Series. Principal Collections allocated
to the Certificateholders' Interest of a Series, for any Collection Period with
respect to the Accumulation Period or Amortization Period, as applicable, or any
Early Amortization Period for such Series, will be allocated first to make
required payments of principal to the related Principal Funding Account during
the Accumulation Period, if applicable, and to the Certificateholders of such
Series during the Amortization Period or the Early Amortization Period. See
"--Distributions from the Collection Account; Reserve Fund--Principal
Collections" and "--Distributions". The Master Servicer will determine the
amount of related Available Certificateholder Principal Collections for any
Collection Period remaining after such required payments and the Available
Certificateholder Principal Collections for any other Series (collectively, the
"Excess Principal Collections"). The Master Servicer will allocate Excess
Principal Collections to cover any principal distributions to Certificateholders
for any Series that are either scheduled or permitted and that have not been
covered out of Principal Collections and certain other amounts allocated to such
Series (collectively, the "Principal Shortfalls"). Excess Principal Collections
generally will not be used to cover Investor Charge-Offs for any Series. If
Principal Shortfalls exceed Excess Principal Collections for any Collection
Period, Excess Principal Collections will be allocated pro rata among the
applicable Series based on the relative amounts of Principal Shortfalls. To the
extent that Excess Principal Collections exceed Principal Shortfalls, the
balance will be paid to the Transferor if the Transferor's Participation Amount
(determined after giving effect to any Receivables transferred to the Trust on
such date) exceeds the Trust Available Subordinated Amount for the immediately
preceding Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Distribution Date
immediately following such Determination Date). Any amount not allocated to the
Transferor because the Transferor's Participation Amount does not exceed the
Trust Available Subordinated Amount will be held unallocated ("Unallocated
Principal Collections") until the Transferor's Participation Amount exceeds the
Trust Available Subordinated Amount, at which time such amount will be allocated
to the Transferor, or until an Early Amortization Event occurs or an
Amortization Period commences for any Series, after which such amount will be
treated as a Miscellaneous Payment.
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT; LIMITED SUBORDINATION
OF TRANSFEROR'S INTEREST
The Master Servicer, no later than two business days after the
processing date, will deposit all collections received with respect to the
Receivables (excluding, with certain exceptions, certain portions thereof
allocable to the Transferor) in each Collection Period into the Collection
Account. Notwithstanding the foregoing requirement for daily deposits, for so
long as (a) Ford Credit remains the Master Servicer under the Pooling and
Servicing Agreement, (b) no Master Servicer Default has occurred and is
continuing and (c) (i) Ford Credit is a wholly-owned subsidiary of Ford and Ford
Credit has and maintains a short-term debt rating of at least A-1 by Standard &
Poor's and P-1 by Moody's, (ii) Ford Credit arranges for and maintains a letter
of credit or other form of Enhancement in respect of the Master Servicer's
obligation to make deposits of collections on the Receivables in the Collection
Account that is acceptable in form and substance to each Rating Agency or (iii)
Ford Credit otherwise obtains the Rating Agency confirmations described below,
then, subject to any limitations in the confirmations referred to below, Ford
Credit need not deposit collections into the Collection Account on the day
indicated in the preceding sentence but may use for its own benefit all such
collections until the business day immediately preceding the related
Distribution Date, at which time Ford Credit will make such deposits in an
amount equal to the net amount of such deposits and withdrawals which would have
been made had the conditions of this sentence not applied; provided, however,
that prior to ceasing daily deposits as described above the Transferor shall
have delivered to the Trustee written confirmation from the applicable Rating
Agencies that the failure by Ford Credit to make daily deposits will not result
in a reduction or withdrawal of the rating of the Certificates of any
outstanding Series or class of certificates. In addition, during any Collection
Period, the Master Servicer will generally be required to deposit Interest
Collections and Principal Collections into the Collection Account only to the
extent of the distributions required to be made to Certificateholders of all
Series, the amounts required to be deposited into any deposit, trust, reserve or
similar account maintained for the benefit of Certificateholders and the amounts
required to be paid to any Enhancement Provider on the Distribution Date
relating to such Collection Period and if, at any time prior to such
Distribution Date, the amount of collections deposited in the Collection Account
exceeds the amount required to be deposited, the Master Servicer will be
permitted to withdraw such excess from the Collection Account.
On any date on which collections are deposited in the Collection
Account, the Master Servicer will distribute directly to the Transferor an
amount equal to (a) the Excess Transferor's Percentage for the related
Collection Period of Interest Collections for such date and (b) the Excess
Transferor's Percentage for the related Collection Period of Principal
Collections for such date, if the Transferor's Participation Amount (determined
after giving effect to any Receivables transferred to the Trust on such date)
exceeds the Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Distribution Date immediately
following such Determination Date). In addition, during the Revolving Period,
subject to certain limitations, the Master Servicer will distribute directly to
the Transferor on each such date of deposit an amount equal to the Available
Transferor's Principal Collections for such date, if the Transferor's
Participation Amount (determined after giving effect to any Receivables
transferred to the Trust on such date) exceeds the Trust Available Subordinated
Amount for the immediately preceding Determination Date (after giving effect to
the allocations, distributions, withdrawals and deposits to be made on the
Distribution Date immediately following such Determination Date).
Unless otherwise specified in the accompanying Prospectus Supplement,
the following terms shall have the meanings specified below.
"Available Transferor's Collections" for any date means the sum of (a)
the Available Transferor's Interest Collections for such date and (b) the
Available Transferor's Principal Collections for such date; provided, however,
that the Available Transferor's Collections will be zero for any Collection
Period with respect to which the Available Subordinated Amount is zero on the
Determination Date immediately following the end of such Collection Period.
"Available Transferor's Interest Collections" for any date means an
amount equal to the result obtained by multiplying (a) the excess of (i) the
Transferor's Percentage for the related Collection Period over (ii) the Excess
Transferor's Percentage for such Collection Period by (b) Interest Collections
for such date.
"Available Transferor's Principal Collections" for any date means an
amount equal to the product of (a) the excess of (i) the Transferor's Percentage
for the related Collection Period over (ii) the Excess Transferor's Percentage
for such Collection Period and (b) Principal Collections for such date.
"Transferor's Percentage" means 100% minus (a) when used with respect
to Interest Collections, the aggregate of the Floating Allocation Percentages
for each outstanding Series, and (b) when used with respect to Principal
Collections, the sum of (i) the aggregate of the Floating Allocation Percentages
for each outstanding Series in its Revolving Period and (ii) the aggregate of
the Principal Allocation Percentages for each outstanding Series in its
Accumulation, Amortization or Early Amortization Period, but in each case shall
not be less than 0%.
"Excess Transferor's Percentage" for any Collection Period means a
percentage (which percentage shall never be less than 0% nor more than 100%)
equal to (a) 100% minus, when used with respect to Interest Collections, the sum
of (i) the aggregate of the Floating Allocation Percentages for each outstanding
Series with respect to such Collection Period and (ii) the percentage equivalent
of a fraction, the numerator of which is the Trust Available Subordinated Amount
as of the Determination Date occurring in the immediately preceding Collection
Period (after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Distribution Date immediately following such
Determination Date), and the denominator of which is the Pool Balance as of the
last day of such immediately preceding Collection Period and (b) 100% minus,
when used with respect to Principal Collections the sum of (i) the sum of the
aggregate of the Principal Allocation Percentages for each outstanding Series in
its Accumulation, Amortization or Early Amortization Period with respect to such
Collection Period and the aggregate of the Floating Allocation Percentages for
each outstanding Series in its Revolving Period with respect to such Collection
Period and (ii) the percentage described in clause (a)(ii) above for such
Collection Period.
"Transferor's Participation Amount" for any date means an amount equal
to the Pool Balance on such date minus the aggregate of Invested Amounts for all
outstanding Series on such date.
Deficiency Amount. On each such Determination Date, the Master Servicer
will determine for the Certificates of such Series the amount (the "Deficiency
Amount"), if any, by which (a) the sum of (i) Monthly Interest for such Series
for the following Distribution Date, (ii) Monthly Interest for such Series
accrued but not paid with respect to prior Distribution Dates (and interest
thereon), (iii) the Monthly Servicing Fee allocable to such Series for such
Distribution Date, (iv) the Investor Default Amount for such Series for such
Distribution Date, (v) the amount of any Adjustment Payment allocated to the
Certificates of such Series for such Distribution Date that has not been
deposited in the Collection Account as required under the Pooling and Servicing
Agreement and (vi) any other amounts required to be paid to an Enhancement
Provider for such Series exceeds (b) the sum of (i) related Certificateholder
Interest Collections, Investment Proceeds and proceeds of Enhancement for such
Distribution Date and (ii) the amount of funds in the related Reserve Fund on
such Distribution Date available to fund the amount by which the amount in
clause (a) exceeds the amount in clause (b)(i) as described under "Interest
Collections". The lesser of the Deficiency Amount and the Available Subordinated
Amount is the "Draw Amount".
"Monthly Interest" for any Distribution Date and Series shall mean an
amount equal to the product of (a) the Certificate Rate and (b) the outstanding
principal balance of the Certificates of such Series as of the close of business
on the preceding Distribution Date (or, in the case of the first Distribution
Date of such Series, on the Closing Date) after giving effect to all repayments
of principal made to the Certificateholders on such preceding Distribution Date,
multiplied by (i) in the case of fixed-rate Certificates, one-twelfth and (ii)
in the case of floating-rate Certificates, a fraction the numerator of which is
the actual number of days elapsed in the related Interest Period and the
denominator of which is 360.
Required Subordinated Amount. Unless otherwise specified in the related
Prospectus Supplement, the "Required Subordinated Amount" shall mean, as of any
date of determination and Series, the sum of (a) the product of the related
Subordinated Percentage and the Invested Amount for such Series and (b) the
Incremental Subordinated Amount for such Series.
Available Subordinated Amount. The Available Subordinated Amount with
respect to any Series and Determination Date will be calculated as specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the Available Subordinated Amount for the first
Determination Date is equal to the Required Subordinated Amount. The
"Incremental Subordinated Amount" for any Determination Date will be calculated
as specified in the related Prospectus Supplement.
The "Subordinated Percentage" for any Series will initially equal the
percentage specified therefore in the related Prospectus Supplement. The
Transferor may, in its sole discretion, at any time increase the Available
Subordinated Amount for so long as the cumulative amount of such increases does
not exceed the amount specified therefore in the related Prospectus Supplement.
The Transferor is not under any obligation to increase the Available
Subordinated Amount for any Series at any time. If for any Series the Available
Subordinated Amount were reduced to less than the Required Subordinated Amount,
an Early Amortization Event would occur. The Transferor could elect to increase
the Available Subordinated Amount for any Series at the time such an Early
Amortization Event would otherwise occur for such Series, thus preventing or
delaying the occurrence of the Early Amortization Event.
DISTRIBUTIONS FROM THE COLLECTION ACCOUNT; RESERVE FUND
Interest Collections. Unless otherwise specified in the related
Prospectus Supplement for any Series, on each Distribution Date, the Trustee
will apply Certificateholders' Interest Collections, Investment Proceeds and
proceeds of any Enhancement, if any, in respect of any Series of Certificates
and the preceding Collection Period to make the following distributions in the
following order of priority:
(a) an amount equal to Monthly Interest for such Series and
Distribution Date, plus any payments in respect of Net Trust Swap Receipts (as
specified in the related Prospectus Supplement), plus the amount of any Monthly
Interest with respect to such Series previously due but not distributed on a
prior Distribution Date (plus, but only to the extent permitted under applicable
law, interest at the applicable rate specified in the related Prospectus
Supplement on Monthly Interest previously due but not distributed), will be
deposited to the Interest Funding Account; then any required payments will be
paid to an Enhancement Provider with respect to such Series;
(b) an amount equal to the Monthly Servicing Fee for such Series and
such Distribution Date shall be distributed to the Master Servicer (unless such
amount has been netted against deposits to the Collection Account as described
above or waived as described below);
(c) an amount equal to the Reserve Fund Deposit Amount allocable to
such Series, if any, for such Distribution Date shall be deposited in the
Reserve Fund;
(d) an amount equal to the Investor Default Amount, if any, for such
Distribution Date shall be treated as a portion of Available Certificateholder
Principal Collections for such Distribution Date; and
(e) the balance shall constitute Excess Servicing.
If such Certificateholder Interest Collections, Investment Proceeds and
Enhancement proceeds, if any, are not sufficient to make the entire
distributions required by clauses (a) and (b) and (d) above, the Trustee shall
withdraw funds from the related Reserve Fund and apply such funds to complete,
to the extent available, the distributions pursuant to such clauses in the
numerical order thereof; provided that during an Early Amortization Period,
unless otherwise provided in the Prospectus Supplement for any Series, the
application of funds in the related Reserve Fund to cover the amount in clause
(d) will be reduced or eliminated to the extent necessary to maintain the amount
in the related Reserve Fund at least equal to the amount specified therefore in
such Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement for a
Series, if there is a Draw Amount for such Distribution Date, the Trustee shall
apply the amount of Available Transferor's Collections for the related
Collection Period on deposit in the Collection Account on such Distribution
Date, but only up to the Draw Amount, to make the distributions required by
clauses (a), (b) and (d) above that have not been made through the application
of funds from the related Reserve Fund as described in the preceding paragraph.
If the sum of the Draw Amounts for all Series in respect of a Distribution Date
exceeds such Available Transferor's Collections for the related Collection
Period, then such Available Transferor's Collections will be allocated among
those Series with Draw Amounts pro rata on the basis of such Draw Amounts. The
Available Subordinated Amount for any Series will be reduced by the amount of
Available Transferor's Collections so applied in respect of the Certificates of
such Series. If the Draw Amount exceeds such Available Transferor's Collections,
the Available Subordinated Amount for such Series will be reduced by the amount
of such excess, but not by more than the sum of the Investor Default Amount
allocated to such Series of Certificate for such Distribution Date and the
amount of any Adjustment Payments allocable to the Certificates and not paid by
the Transferor.
"Certificateholder Interest Collections" for any Series and
Distribution Date means the portion of Interest Collections for the related
Collection Period allocated to the Certificateholders' Interest for such Series
as described under "Allocation Percentages--Allocation to the
Certificateholders' Interest".
"Investment Proceeds" for any Series and Distribution Date means an
amount equal to the sum of (a) the net investment earnings credited to the
Collection Account on the related Determination Date with respect to funds held
in the Reserve Fund, (b) the Series Allocation Percentage of net investment
earnings credited to the Collection Account on the related Determination Date
with respect to funds held in the Collection Account and (c) all net investment
income earned on amounts in any Excess Funding Account, the Principal Funding
Account and the Interest Funding Account for such Series since the preceding
Distribution Date.
"Excess Servicing" for any Distribution Date means the amount described
in clause (e) of the fifth preceding paragraph.
Reserve Fund. Unless otherwise specified in the related Prospectus
Supplement, an Eligible Deposit Account for each Series will be established and
maintained in the name of the Trustee for the benefit of the Certificateholders
of such Series (the "Reserve Fund"). No deposit will be made into the Reserve
Fund prior to the first Distribution Date for such Series. The "Reserve Fund
Required Amount" means for each Series an amount which upon any Distribution
Date will equal a percentage (specified in the related Prospectus Supplement) of
the outstanding principal balance of the Certificates of such Series for such
Distribution Date (after giving effect to any change therein on such
Distribution Date). If, after giving effect to the allocations, distributions
and deposits in the Reserve Fund described above under "Interest Collections",
the amount in the Reserve Fund is less than the Reserve Fund Required Amount for
such Series for the following Distribution Date, the Trustee shall deposit any
remaining Available Transferor's Collections for the related Collection Period
into the Reserve Fund until the amount in the Reserve Fund is equal to such
Reserve Fund Required Amount. The "Reserve Fund Deposit Amount" for any Series
is the amount, if any, by which the related Reserve Fund Required Amount exceeds
the amount on deposit in the Reserve Fund. Funds in the Reserve Fund will be
invested in the same manner in which funds in the Collection Account may be
invested. On each Determination Date, the Master Servicer will credit to the
Collection Account for the benefit of the Certificateholders of the related
Series any investment earnings (net of losses and investment expenses) with
respect to the Reserve Fund. After the earlier of the payment in full of the
outstanding principal balance of the Certificates of such Series and the Series
Termination Date, any funds remaining on deposit in the related Reserve Fund
will be paid to the Transferor.
If, for any Distribution Date with respect to an Accumulation Period,
Amortization Period or Early Amortization Period, after giving effect to the
allocations, distributions and deposits described in the preceding paragraph,
the amount in the Reserve Fund for a Series is less than the Excess Reserve Fund
Required Amount for such Series and Distribution Date, the Trustee shall deposit
the remaining Available Transferor's Collections for the related Collection
Period into the Reserve Fund until the amount in the Reserve Fund is equal to
such Excess Reserve Fund Required Amount. The "Excess Reserve Fund Required
Amount" for any Series and Distribution Date, if applicable, will be specified
in the related Prospectus Supplement.
In connection with the allocations to Reserve Funds referred to in the
two preceding paragraphs, if the remaining Available Transferor's Collections
are not sufficient to fund the Reserve Funds for all outstanding Series, then,
unless otherwise specified in the related Prospectus Supplement, such remaining
Available Transferor's Collections will be allocated to such Reserve Funds pro
rata on the basis of the respective amounts required to be deposited in such
Reserve Funds.
Excess Servicing. Unless otherwise specified in the related Prospectus
Supplement for any Series, on each Distribution Date, the Master Servicer will
allocate Excess Servicing for such Series with respect to the Collection Period
immediately preceding such Distribution Date, in the following order of
priority:
(a) an amount equal to the aggregate amount of Investor Charge-Offs
allocable to such Series which have not been previously reimbursed (after giving
effect to the allocation on such Distribution Date of Series Allocation
Percentage of Miscellaneous Payments with respect to such Distribution Date)
will be allocated in the same manner as Available Certificateholder Principal
Collections for such Distribution Date;
(b) an amount equal to the aggregate outstanding amounts of the Monthly
Servicing Fee for such Series which have been previously waived as described
under "Servicing Compensation and Payment of Expenses" will be distributed to
the Master Servicer; and
(c) the balance, if any, shall be distributed to the Transferor and
will increase the Available Subordinated Amounts for such Series, to the extent
provided in the related Prospectus Supplement.
Principal Collections. Unless otherwise specified in the related
Prospectus Supplement for a Series, on each Distribution Date, the Master
Servicer will allocate Available Certificateholder Principal Collections with
respect to such Series as follows:
(a) for each Distribution Date with respect to the Revolving Period for
such Series, all Available Certificateholder Principal Collections will be
allocated, first, to make a deposit to the related Excess Funding Account, if
any, if the sum of (i) the Certificateholders' Interest of such Series in
Receivables and (ii) the amount on deposit in such Excess Funding Account prior
to the allocation on such Distribution Date is less than the outstanding
principal balance of the Certificates of such Series and, second, to Excess
Principal Collections as described under "Allocation Percentages--Principal
Collections for all Series"; and
(b) for each Distribution Date with respect to the Accumulation Period,
Amortization Period or any Early Amortization Period for such Series:
(i) an amount equal to Monthly Principal for such Series and
Distribution Date will be deposited to the related Principal Funding
Account; and
(ii) the balance, if any, will be allocated to Excess Principal
Collections.
In the event that the aggregate Invested Amount for a Series is greater
than zero on the Series Termination Date, any funds remaining in the related
Reserve Fund (after the application of funds in the Reserve Fund as described
above under "Interest Collections") will be treated as a portion of Available
Certificateholder Principal Collections for the Distribution Date occurring on
the Series Termination Date.
Unless otherwise specified in the related Prospectus Supplement, the
following terms will have the meanings described below.
"Available Certificateholder Principal Collections" for any Series and
Distribution Date means the sum of (a) the product of (i) the Floating
Allocation Percentage, with respect to the Revolving Period, or the Principal
Allocation Percentage, with respect to the Accumulation Period, Amortization
Period or any Early Amortization Period, for the related Collection Period and
(ii) Principal Collections deposited in the Collection Account for the related
Collection Period, (b) the amount, if any, of Interest Collections, funds in the
Reserve Fund and Available Transferor's Collections allocated to cover the
Investor Default Amount or reimburse Investor Charge-Offs allocated to such
Series, (c) the Series Allocation Percentage of Miscellaneous Payments on
deposit in the Collection Account for such Distribution Date and (d) Excess
Principal Collections, if any, from other Series allocated to such Series.
"Monthly Principal" with respect to any Series and Distribution Date
relating to the Accumulation Period, Amortization Period or any Early
Amortization Period will equal Available Certificateholder Principal Collections
for such Series and Distribution Date; provided, however, that for each
Distribution Date with respect to the Accumulation Period, Monthly Principal may
not exceed the Controlled Distribution Amount, if any, for such Distribution
Date; and provided, further, that Monthly Principal will not exceed the Invested
Amount for such Series.
"Controlled Distribution Amount" for a Series and Distribution Date
means the excess, if any, of (i) the product of the Controlled Amortization
Amount and the number of Distribution Dates with respect to the Accumulation
Period through and including such Distribution Date over (ii) the amount on
deposit in the Principal Funding Account (including any amounts deposited
therein from the Excess Funding Account, if any), before giving effect to any
withdrawals from or deposits to such account on such Distribution Date.
"Controlled Amortization Amount" means for a Series an amount equal to
the Invested Amount as of the date specified in the related Prospectus
Supplement (after giving effect to any changes therein on such date) divided by
the number of months comprising the Accumulation Period Length.
INTEREST FUNDING ACCOUNTS
Unless otherwise specified in the related Prospectus Supplement the
Master Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the
Certificateholders of each Series (each, an "Interest Funding Account"). On each
Distribution Date, Monthly Interest for a Series will be deposited in the
related Interest Funding Account as provided above under "Distributions from the
Collection Account; Reserve Fund"; provided that if an Early Amortization Event
occurs (unless, in limited circumstances with respect to the required addition
of Accounts, such Early Amortization Event shall have been cured), or, if
applicable, an Asset Composition Event shall have occurred, interest will be
distributed to the Certificateholders of such Series on the first Distribution
Date following such Early Amortization Event or Asset Composition Event (but, in
the case of an Asset Composition Event, only to the extent needed to cure such
event) and, to the extent provided herein in respect of an Early Amortization
Event, on subsequent Special Payment Dates.
All amounts on deposit in the Interest Funding Accounts on any
Distribution Date (after giving effect to distributions to be made on such
Distribution Date) will be invested from the date of their deposit to a date on
or prior to the next succeeding Distribution Date (or the next succeeding
Special Payment Date, if applicable) by the Trustee at the direction of the
Master Servicer in Eligible Investments. On each Distribution Date, the interest
and other investment income on the Interest Funding Accounts will be paid to the
Collection Account and distributed on such Distribution Date.
PRINCIPAL FUNdING ACCOUNTS
The Master Servicer will establish and maintain in the name of the
Trustee, on behalf of the Trust, an Eligible Deposit Account for the benefit of
the Certificateholders of each Series (each, a "Principal Funding Account"). On
each Distribution Date with respect to the Accumulation Period, or, if the
related Prospectus Supplement so specifies, the Amortization Period with respect
to a Series of Certificates, Monthly Principal will be deposited in the
Principal Funding Account for such Series as provided above under "Distributions
from the Collection Account; Reserve Fund"; provided that if an Early
Amortization Event occurs during the Accumulation Period with respect to a
Series (unless, in limited circumstances with respect to the required addition
of Accounts, such Early Amortization Event shall have been cured), the amount on
deposit in the Principal Funding Account (as defined below) shall be paid to the
Certificateholders of such Series on the first Special Payment Date.
All amounts on deposit in the Principal Funding Accounts on any
Distribution Date (after giving effect to distributions to be made on such
Distribution Date) will be invested from the date of their deposit to a date on
or prior to the succeeding Distribution Date (or the next succeeding Special
Payment Date, if applicable) by the Trustee at the direction of the Master
Servicer in Eligible Investments. On each Distribution Date, the interest and
other investment income on the Principal Funding Accounts will be applied as
provided above under "Distributions from the Collection Account; Reserve Fund".
DISTRIBUTIONS
Payments to Certificateholders of each Series will be made from the
Interest Funding Account, the Principal Funding Account and, if applicable, the
Excess Funding Account for such Series. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer shall instruct the Trustee to
apply the funds on deposit in the Interest Funding Account, the Principal
Funding Account and, if applicable, the Excess Funding Account for any Series
and shall instruct the Trustee or the Paying Agent to make, without duplication,
the following distributions:
(a) On each Payment Date, on each Special Payment Date and on each
Distribution Date following an Asset Composition Event with respect to such
Series, all amounts on deposit in the Interest Funding Account for such Series
to the extent required to pay accrued interest on the Certificates (or, in the
case of an Asset Composition Event, to the extent described above under "Asset
Composition Event, Asset Composition Premium") will be distributed to
Certificateholders;
(b) On each Special Payment Date and on the Expected Final Payment Date
with respect to such Series, the amount on deposit in the Principal Funding
Account for such Series, the amount on deposit in any related Excess Funding
Account and any amounts in the related Interest Funding Account after the
payment of accrued interest on the Certificates shall be distributed to
Certificateholders of such Series up to a maximum amount on any such date equal
to the excess of the outstanding principal amount of the Certificates over
unreimbursed Investor Charge-Offs allocated to such Certificates, each on such
date; and
(c) On any Distribution Date following an Asset Composition Event, the
Asset Correction Amount will be distributed to the Certificateholders of any
Series subject to Asset Composition Events, first, from amounts on deposit in
the Interest Funding Account for such Series and, second, from amounts on
deposit in the Excess Funding Account, if any, for such Series.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferor may at
any time designate a fixed percentage of the amount of collections in respect of
the Receivables arising in the Accounts (to the extent that such Receivables are
included in the Pool on and after the date of such designation) that otherwise
would be treated as Principal Collections to be treated as Interest Collections
with respect to one or more Series of Certificates, as specified in the related
Prospectus Supplement for such Series. The Transferor must provide 30 days'
prior written notice to the Master Servicer, the Trustee and each Rating Agency
of any such designation, and such designation will become effective on the date
specified therein only if (a) an officer's certificate is delivered to the
Trustee to the effect that in the reasonable belief of the Transferor such
designation would not result in an Early Amortization Event or have a materially
adverse effect on the Certificateholders of such Series and (b) each Rating
Agency shall have notified the Transferor, the Master Servicer and the Trustee
that such action will not result in a reduction or withdrawal of the then
existing rating of any outstanding Series or Class.
DEFAULTED RECEIVABLES AND RECOVERIES
"Defaulted Receivables" on any Determination Date are (a) all
Receivables which were charged off as uncollectable in respect of the
immediately preceding Collection Period and (b) all Receivables which were
Eligible Receivables when transferred to the Trust, which arose in an Account
which became an Ineligible Account after the date of transfer of such
Receivables to the Trust and which were not Eligible Receivables for any six
consecutive Determination Dates thereafter. The "Defaulted Amount" for any
Collection Period will be an amount (which shall not be less than zero) equal to
(i) the principal amount of Receivables that became Defaulted Receivables during
the preceding Collection Period less (ii) the full amount of any Defaulted
Receivables subject to reassignment to the Transferor or purchase by the Master
Servicer for such Collection Period unless certain events of bankruptcy,
insolvency, or receivership have occurred with respect to either of the
Transferor or the Master Servicer, in which event the Defaulted Amount will not
be reduced for those Defaulted Receivables. Receivables will be charged off as
uncollectable in accordance with the Master Servicer's customary and usual
policies and procedures for servicing its own comparable revolving dealer
wholesale loan accounts. Unless otherwise specified in the accompanying
Prospectus Supplement, a portion of the Defaulted Amount equal to the product of
(i) the Defaulted Amount for such Collection Period and (ii) the Floating
Allocation Percentage applicable to a Series for such Collection Period will be
allocated to the Certificateholders of such Series. The portion of the Defaulted
Amount allocated to the Certificateholders of a Series is referred to as the
"Investor Default Amount".
If the Master Servicer adjusts the amount of any Receivable because of
a rebate, billing error or certain other noncash items to a Dealer, or because
such Receivable was created in respect of inventory which was refused or
returned by a Dealer, the principal amount of the Transferor's Interest will be
reduced by the amount of the adjustment or charge-off. After any such reduction
in the amount of the Transferor's Interest occurs, the amount of such Receivable
described above will be deducted from the Pool Balance. Furthermore, to the
extent that the reduction in the Transferor's Interest would reduce the
Transferor's Participation Amount below the Trust Available Subordinated Amount
for the immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the
Distribution Date immediately following such Determination Date), the Transferor
will be required to deposit a cash amount equal to such deficiency into the
Collection Account in immediately available funds (an "Adjustment Payment") on
the day on which such adjustment occurs.
INVESTOR CHARGE-OFFS
Unless otherwise specified in the related Prospectus Supplement, if the
Available Subordinated Amount for a Series is reduced to zero, and on any
Distribution Date the Deficiency Amount with respect to such Series is greater
than zero, the Invested Amount for such Series will be reduced by such
Deficiency Amount, but not by more than the related Investor Default Amount for
such Distribution Date (an "Investor Charge-Off"). Any reduction in the Invested
Amount for a Series will have the effect of slowing or reducing the return of
principal to the Certificateholders of such Series. Unless otherwise specified
in the related Prospectus Supplement, if the Invested Amount for a Series has
been reduced by any Investor Charge-Offs allocable to such Series it will
thereafter be increased on any Distribution Date (but not by an amount in excess
of the aggregate Investor Charge-Offs) by the sum of (a) the Series Allocation
Percentage of Miscellaneous Payments for such Distribution Date and (b) the
amount of Excess Servicing allocated and available for such purpose as described
above.
OPTIONAL REPURCHASE
On any Distribution Date occurring after the Invested Amount of any
Series of the Certificates is reduced to 10% (or such other percentage as may be
specified in the related Prospectus Supplement) or less of the initial
outstanding principal amount of the Certificates of that Series, the Transferor
will have the option, subject to certain conditions, to repurchase the
Certificateholders' Interest of that Series. Unless a different price is
specified in the Prospectus Supplement for any Series of Certificates, the
purchase price will be equal to the sum of the unpaid principal amount of such
Certificates plus accrued and unpaid interest on the unpaid principal amount of
the Certificates of such Series (and accrued and unpaid interest with respect to
interest amounts that were due but not paid on a prior Payment Date,
Distribution Date or Special Payment Date) through the day preceding such
Distribution Date at the Certificate Rate for such Series. The purchase price
will be deposited in the Collection Account in immediately available funds on
the Distribution Date on which the Transferor exercises such option. Following
any such purchase, the Certificateholders will have no further rights with
respect to the Certificateholders' Interest, other than the right to receive the
final distribution on such Certificates. In the event that the Transferor fails
for any reason to deposit such purchase price, payments will continue to be made
to the Certificateholders of such Series as described under "Distributions from
the Collection Account; Reserve Fund".
EARLY AMORTIZATION EVENTS
Commencing on the first Distribution Date following the Collection
Period in which an Early Amortization Event has occurred with respect to any
Series, Principal Collections allocable to the Certificateholders' Interest of
such Series will no longer be paid to the Transferor or allocated to any other
Series but instead will be distributed to Certificateholders of such Series,
monthly on each Distribution Date, except as described below, and the Controlled
Distribution Amount, if applicable to such Series, will no longer apply to
distributions of principal on the Certificates of such Series. Unless otherwise
specified in the related Prospectus Supplement, an "Early Amortization Event"
refers to any of the following events:
(a) failure on the part of the Transferor, the Master Servicer or Ford
Credit, as applicable, (i) to make any payment or deposit required by the
Pooling and Servicing Agreement or the Receivables Purchase Agreement, including
but not limited to any Transfer Deposit Amount or Adjustment Payment, on or
before the date occurring two business days after the date such payment or
deposit is required to be made therein; or (ii) to deliver a Distribution Date
Statement on the date required under the Pooling and Servicing Agreement (or
within the applicable grace period which will not exceed five business days);
(iii) to comply with its covenant not to create any lien on a Receivable; or
(iv) to observe or perform any other covenants or agreements set forth in the
Pooling and Servicing Agreement or the Receivables Purchase Agreement, which
failure has a materially adverse effect on the Certificateholders and which
continues unremedied for a period of 45 days after written notice of such
failure;
(b) any representation or warranty made by Ford Credit in the
Receivables Purchase Agreement or by the Transferor in the Pooling and Servicing
Agreement or any information required to be given by the Transferor to the
Trustee to identify the Accounts proves to have been incorrect in any material
respect when made and continues to be incorrect in any material respect for a
period of 60 days after written notice and as a result the interests of the
Certificateholders of any Series are materially and adversely affected;
provided, however, that an Early Amortization Event shall not be deemed to occur
thereunder if the Transferor has repurchased the related Receivables or all such
Receivables, if applicable, during such period in accordance with the provisions
of the Pooling and Servicing Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to any of Ford Credit, the Transferor or Ford;
(d) the Trust or the Transferor becomes an investment company within
the meaning of the Investment Company Act of 1940, as amended;
(e) a failure by the Transferor to convey Receivables in Additional
Accounts to the Trust within five business days after the day on which it is
required to convey such Receivables pursuant to the Pooling and Servicing
Agreement;
(f) on any Determination Date, the Available Subordinated Amount for
the next Distribution Date will be reduced to an amount less than the Required
Subordinated Amount on such Determination Date after giving effect to the
distributions to be made on the next Distribution Date;
(g) any Master Servicer Default with respect to the Certificates
occurs;
(h) the failure to pay the outstanding principal amount of the
Certificates by the Expected Final Payment Date; and
(i) with respect to any Series, any other Early Amortization Event
specified in the Prospectus Supplement related thereto.
Upon the occurrence of any event described above, an Early Amortization
Event will be deemed to have occurred without any notice or other action on the
part of any other party immediately upon the occurrence of such event. The Early
Amortization Period will commence as of the day on which the Early Amortization
Event occurs. Monthly distributions of principal to the Certificateholders of
each affected Series will begin on the first Distribution Date following the
Collection Period in which an Early Amortization Period has commenced and will
continue, to the extent described under "Distributions" above, on subsequent
Distribution Dates (each, a "Special Payment Date").
Under certain limited circumstances, an Early Amortization Period which
commences prior to the scheduled end of the Revolving Period for a Series may
terminate and the Revolving Period recommence. Unless otherwise specified in the
related Prospectus Supplement, if an Early Amortization Period results from the
failure by the Transferor to convey Receivables in Additional Accounts to the
Trust as described in clause 5 above during the Revolving Period for such Series
and no other Early Amortization Event has occurred, the Early Amortization
Period resulting from such failure will terminate and the Revolving Period for
such Series will recommence (unless the scheduled termination date of the
Revolving Period for such Series has occurred) as of the end of the first
Collection Period during which the Transferor would no longer be required to
convey Receivables to the Trust. The Transferor may no longer be required to
convey Receivables as described above as a result of a reduction in the Invested
Amounts for the Series occurring due to principal payments made on the
Certificates of the outstanding Series during the Early Amortization Period or
as a result of the subsequent addition of Receivables to the Trust.
In addition to the consequences of an Early Amortization Event
discussed above, if an insolvency event occurs with respect to FCAR, or FCAR
violates its covenant not to create any lien on any Receivable, in each case as
provided in the Pooling and Servicing Agreement, on the day of such insolvency
event or such violation, as applicable, FCAR will (subject to the actions of the
Certificateholders) immediately cease to transfer Receivables to the Trust and
promptly give notice to the Trustee of such insolvency event or violation, as
applicable. Under the terms of the Pooling and Servicing Agreement, within 15
days the Trustee will publish a notice of such insolvency event or violation
stating that the Trustee intends to sell, liquidate or otherwise dispose of the
Receivables in a commercially reasonable manner and on commercially reasonable
terms, unless within a specified period of time holders of Certificates of each
outstanding Series representing more than 50% of the aggregate outstanding
principal amount of the Certificates of each such Series (or, in the case of any
Series with two or more classes, the certificates of each such class) and each
person holding a Supplemental Certificate, instruct the Trustee not to sell,
liquidate or dispose of the Receivables and to continue transferring Receivables
as before such insolvency event or violation, as applicable. If the portion of
such proceeds allocated to the Certificateholders' Interest of a Series and the
proceeds of any collections on the Receivables in the Collection Account
allocable to the Certificateholders' Interest of a Series are not sufficient to
pay the aggregate unpaid principal balance of the Certificates of such Series in
full plus accrued and unpaid interest thereon, Certificateholders of such Series
will incur a loss. Notwithstanding the above, in the case of the violation of
the covenant not to create a lien on any Receivable, the Trust will not sell the
Receivables unless the proceeds allocable to the Certificateholders' Interest of
all outstanding Series is sufficient to pay the aggregate unpaid principal
balance of such Series of Certificates in full plus accrued and unpaid interest
thereon.
TERMINATION
The Trust will terminate on the earlier to occur of (a) the day
following the Distribution Date on which the aggregate Invested Amounts for all
Series is zero, if the Transferor elects to terminate the Trust at such time,
and (b) September 30, 2018. Upon termination of the Trust, all right, title and
interest in the Receivables and other funds of the Trust (other than amounts in
the Collection Account for the final distribution of principal and interest to
Certificateholders) will be conveyed and transferred to FCAR.
In any event, the last payment of principal and interest on the
Certificates of a Series will be due and payable no later than the date
specified for such Series in the related Prospectus Supplement (the "Series
Termination Date"). In the event that the Invested Amount of such Series is
greater than zero on the Series Termination Date, the Trustee will sell or cause
to be sold (and apply the proceeds to the extent necessary to pay such remaining
amounts to all Certificateholders) an interest in the Receivables or certain
Receivables, as specified in the Pooling and Servicing Agreement, in an amount
equal to, unless otherwise specified in the Prospectus Supplement for such
Series, 110% of the Invested Amount of such Series (after giving effect to
deposits and distributions otherwise to be made on the Series Termination Date;
provided, however, that in no event shall such amount exceed the applicable
Series Allocation Percentage of Receivables on such Series Termination Date).
The net proceeds of such sale and any collections on the Receivables will be
paid pro rata to Certificateholders on the Series Termination Date as the final
payment of the Certificates.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Master Servicer
will indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of any acts or
omissions arising out of activities of the Trust or the Trustee or the Master
Servicer pursuant to the Pooling and Servicing Agreement; provided that the
Trust or the Trustee will not be so indemnified if such acts or omissions
constitute fraud, gross negligence, breach of fiduciary duty or willful
misconduct by the Trustee. In addition, the Master Servicer will not indemnify
the Trust, the Trustee or the Certificateholders for any act taken by the
Trustee at the request of the Certificateholders or for any tax required to be
paid by the Trust or the Certificateholders.
The Pooling and Servicing Agreement provides that, except as described
above and with certain other exceptions, neither the Transferor, the Master
Servicer nor any of their directors (or, in the case of the Transferor,
managers), officers, employees or agents will be under any liability to the
Trust, the Trustee, the Certificateholders or any other person for taking any
action, or for refraining from taking any action, pursuant to the Pooling and
Servicing Agreement. However, neither the Transferor, the Master Servicer nor
any of their directors (or, in the case of the Transferor, managers), officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement provides that the
Master Servicer is not under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its servicing responsibilities under
the Pooling and Servicing Agreement. The Master Servicer may, in its sole
discretion, undertake any such legal action which it may deem necessary or
desirable for the benefit of Certificateholders with respect to the Pooling and
Servicing Agreement and the rights and duties of the parties thereto and the
interest of the Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Master Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for servicing its
own revolving credit line dealer wholesale loans, except where the failure to so
act would not materially and adversely affect the rights of the Trust.
Ford Credit covenants that it may only change the terms relating to the
Accounts if (i) in the Master Servicer's reasonable judgment, no Early
Amortization Event with respect to any Series will occur as a result of the
change and (ii) the change is made applicable to the comparable segment of the
portfolio of revolving credit line dealer wholesale loan accounts with similar
characteristics owned or serviced by Ford Credit and not only to the Accounts.
Servicing activities to be performed by the Master Servicer include
collecting and recording payments, communicating with dealers, investigating
payment delinquencies, evaluating the increase of credit limits, and maintaining
internal records with respect to each Account. Managerial and custodial services
performed by the Master Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Accounts and Receivables by the Trustee pursuant to the Pooling and Servicing
Agreement, maintaining the agreements, documents and files relating to the
Accounts and Receivables as custodian for the Trust and providing related data
processing and reporting services for certificateholders and on behalf of the
Trustee.
MASTER SERVICER COVENANTS
In the Pooling and Servicing Agreement the Master Servicer covenants
that: (a) it will duly satisfy all obligations on its part to be fulfilled under
or in connection with the Receivables and Accounts, will maintain in effect all
qualifications required in order to service the Receivables and Accounts and
will comply in all material respects with all requirements of law in connection
with servicing the Receivables and the Accounts, the failure to comply with
which would have a materially adverse effect on the Certificateholders of any
outstanding Series; (b) it will not permit any rescission or cancellation of a
Receivable except as ordered by a court of competent jurisdiction or other
government authority; (c) it will do nothing to impair the rights of the
Certificateholders in the Receivables or Accounts; and (d) it will not
reschedule, revise or defer payments due on any Receivable except in accordance
with its guidelines for servicing revolving credit line dealer wholesale loans.
Under the terms of the Pooling and Servicing Agreement, if the
Transferor or the Master Servicer discovers, or receives written notice, that
any covenant of the Master Servicer set forth above has not been complied with
in all material respects and such noncompliance has not been cured within 30
days thereafter (or such longer period as the Trustee may agree to) and has a
materially adverse effect on the interests of Certificateholders in any
Receivable or Account, Ford Credit, as Master Servicer, will purchase such
Receivable or all Receivables in such Account, as applicable. If Ford Credit is
the Master Servicer, such purchase will be made on the Determination Date
following the expiration of the 30 day cure period and the Master Servicer will
be obligated to deposit into the Collection Account an amount equal to the
amount of such Receivable plus accrued and unpaid interest thereon in the
Collection Account. The amount of such deposit shall be deemed a Transfer
Deposit Amount. The purchase by the Master Servicer constitutes the sole remedy
available to the Certificateholders if such covenant or warranty of the Master
Servicer is not satisfied and the Trust's interest in any such purchased
Receivables shall be automatically assigned to the Master Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's compensation with respect to the Receivables for
its servicing activities and reimbursement for its expenses will be a monthly
servicing fee (the "Servicing Fee") in an amount payable in arrears on each
Distribution Date prior to the Termination Date generally equal to one-twelfth
of the product of (a) 1.0% or, if the Servicing Fee has been waived as described
below, 0% for the Distribution Date in respect of which the Servicing Fee has
been waived (the "Servicing Fee Rate"), and (b) the Pool Balance as of the last
day of the second preceding Collection Period. The share of the Servicing Fee
allocable to the Certificateholders of each Series with respect to any
Distribution Date (the "Monthly Servicing Fee") will generally be equal to
one-twelfth of the product of (a) the Servicing Fee Rate and (b) the Invested
Amount of such Series as of the last day of the second preceding Collection
Period. The remainder of the Servicing Fee shall be paid by the Transferor. The
Monthly Servicing Fee with respect to any Series shall be payable to the Master
Servicer solely to the extent amounts are available for distribution therefor in
accordance with the terms of the Pooling and Servicing Agreement.
The Master Servicer will be permitted to waive its right to receive the
Monthly Servicing Fee with respect to any Series on any Distribution Date, so
long as it believes that sufficient Interest Collections will be available on a
future Distribution Date to pay such Monthly Servicing Fee relating to such
waived Servicing Fee, in which case such Monthly Servicing Fee for such
Distribution Date shall be deemed to be zero.
The Master Servicer will pay from its servicing compensation certain
expenses incurred in connection with servicing the Accounts and the Receivables
including, without limitation, payment of fees and disbursements of the Trustee
and independent accountants and all other fees and expenses which are not
expressly stated in the Pooling and Servicing Agreement to be payable by the
Trust or the Certificateholders other than federal, state and local income and
franchise taxes, if any, of the Trust or the Certificateholders.
CERTAIN MATTERS REGARDING THE MASTER SERVICER
The Master Servicer may not resign from its obligations and duties
under the Pooling and Servicing Agreement, except upon determination that such
duties are no longer permissible under applicable law. No such resignation will
become effective until the Trustee or a successor to the Master Servicer has
assumed the Master Servicer's responsibilities and obligations under the Pooling
and Servicing Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Master Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which the Master Servicer is a
party, or any person succeeding to the business of the Master Servicer, will be
the successor to the Master Servicer under the Pooling and Servicing Agreement.
MASTER SERVICER DEFAULT
In the event of any Master Servicer Default, the Trustee, by written
notice to the Master Servicer, may terminate all of the rights and obligations
of the Master Servicer, as master servicer, under the Pooling and Servicing
Agreement and in and to the Receivables and the proceeds thereof and appoint a
new Master Servicer (a "Servicing Transfer"). The rights and interest of the
Transferor under the Pooling and Servicing Agreement in the Transferor's
Interest will not be affected by any Servicing Transfer. The Trustee shall as
promptly as possible appoint a successor Master Servicer and if no successor
Master Servicer has been appointed by the Trustee and has accepted such
appointment by the time the Master Servicer ceases to act as Master Servicer,
all rights, authority, power and obligations of the Master Servicer under the
Pooling and Servicing Agreement shall pass to and be vested in the Trustee.
Prior to any Servicing Transfer, the Trustee will review any bids obtained from
potential servicers meeting certain eligibility requirements set forth in the
Pooling and Servicing Agreement to serve as successor Master Servicer for
servicing compensation not in excess of the Servicing Fee plus certain excess
amounts payable to the Transferor.
A "Master Servicer Default" refers to any of the following events:
(a) failure by the Master Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any payment, transfer or
deposit, on the date the Master Servicer is required to do so under the Pooling
and Servicing Agreement, which is not cured within a five business day grace
period;
(b) failure by the Master Servicer duly to observe or perform any other
covenants or agreements of the Master Servicer in the Pooling and Servicing
Agreement (exclusive of breaches of covenants in respect of which the Master
Servicer repurchases the related Receivables, as described under "Master
Servicer Covenants"), which failure has a materially adverse effect on the
Certificateholders of any outstanding Series and which continues unremedied for
a period of 30 days after the earlier of written notice or actual knowledge, or
the Master Servicer delegates its duties under the Pooling and Servicing
Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Master
Servicer in the Pooling and Servicing Agreement or in any certificate delivered
pursuant to the Pooling and Servicing Agreement proves to have been incorrect in
any material respect when made, which has a materially adverse effect on the
rights of the Certificateholders of any outstanding Series, and which materially
adverse effect continues for a period of 60 days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Master Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause 1 above for a period of ten business days or referred
to under clauses 2 or 3 for a period of 60 business days, shall not constitute a
Master Servicer Default if such delay or failure was caused by an act of God or
other similar occurrence. Upon the occurrence of any such event, the Master
Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and the Master Servicer shall provide the Trustee, any
Enhancement Provider, the Transferor and the Certificateholders prompt notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Master Servicer shall immediately notify the
Trustee in writing of any Master Servicer Default reports.
On each Distribution Date (including each Distribution Date that
corresponds to a Payment Date (including any Expected Final Payment Date or
Special Payment Date), the Trustee will forward (or cause to be forwarded) to
each Certificateholder of a Series of record (which is expected to be Cede, as
nominee for DTC, unless Definitive Certificates are issued) a statement (the
"Distribution Date Statement") prepared by the Master Servicer setting forth the
following information (which, in the case of (c), (d) and (e) below, will be
stated on the basis of an original principal amount of $1,000 per Certificate if
the Accumulation Period, Amortization Period or an Early Amortization Period has
commenced) with respect to such Series: (a) the aggregate amount of collections,
the aggregate amount of Interest Collections and the aggregate amount of
Principal Collections processed during the immediately preceding Collection
Period; (b) the Series Allocation Percentage, the Floating Allocation Percentage
and the Principal Allocation Percentage for such Series and Collection Period;
(c) the total amount, if any, distributed on the Certificates of such Series;
(d) the amount of such distribution allocable to principal on the Certificates
of such Series; (e) the amount of such distribution allocable to interest on the
Certificates of such Series; (f) the Investor Default Amount allocable to such
Series for such Distribution Date; (g) the Draw Amount for such Series, if any,
for the preceding Collection Period; (h) the amount of the Investor Charge-Offs
allocable to such Series and the amounts of reimbursements thereof for the
preceding Collection Period; (i) the amount of the Monthly Servicing Fee
relating to such Series for the preceding Collection Period; (j) if applicable
to such Series, the Controlled Distribution Amount; (k) the Invested Amount, the
amount on deposit in the Excess Funding Account, if any, and the outstanding
principal balance of the Certificates for such Series and Distribution Date
(after giving effect to all distributions which will occur on each Distribution
Date); (l) the "pool factor" for the Certificates of such Series as of the
Determination Date with respect to such Distribution Date (consisting of an
eleven-digit decimal expressing the Invested Amount of such Series as of such
Determination Date (determined after taking into account any reduction in the
Invested Amount of such Series which will occur on such Distribution Date) as a
portion of the Initial Invested Amount of such Series); (m) the Available
Subordinated Amount for such Series and Determination Date; (n) the amount on
deposit in the Reserve Fund with respect to such Series and date; and (o) the
amounts on deposit in the Principal Funding Account and the Interest Funding
Account with respect to such Series and date.
On or before January 31 of each calendar year, the Trustee will furnish
(or cause to be furnished) to each person who at any time during the preceding
calendar year was a Certificateholder of record (which is expected to be Cede,
as nominee for DTC, unless Definitive Certificates are issued) a statement
containing the information required to be provided by an issuer of indebtedness
under the Code for such preceding calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information as is required to be provided by an issuer of
indebtedness under the Code and such other customary information as is necessary
to enable the Certificateholders to prepare their tax returns. Moreover, as long
as the Certificateholder of record is Cede, as nominee for DTC, Certificate
Owners will receive tax and other information from Participants and Indirect
Participants rather than from the Trustee. See "Material Federal Income Tax
Considerations".
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing provides that on or before April 30 of each
calendar year, the Master Servicer will cause a firm of nationally recognized
independent public accountants (who will also render other services to the
Master Servicer or the Transferor) to furnish a report relating to certain
matters in connection with the servicing of Ford Credit's portfolio of wholesale
receivables.
The Pooling and Servicing Agreement provides for delivery to the
Trustee on or before April 30 of each calendar year, of a statement signed by an
officer of the Master Servicer to the effect that the Master Servicer has fully
performed, or caused to be fully performed its obligations in all material
respects under the Pooling and Servicing Agreement throughout the preceding year
or, if there has been a default in the performance of any such obligation,
specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the
Trustee may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement may be amended by the Transferor,
the Master Servicer and the Trustee, without Certificateholder consent, so long
as any such action shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any Certificateholders.
The Pooling and Servicing Agreement may be amended by the Transferor,
the Master Servicer and the Trustee with the consent of the holders of
Certificates evidencing not less than 66 2/3% of the aggregate unpaid principal
amount of the Certificates of all adversely affected Series for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or of modifying in any manner
the rights of such Certificateholders. No such amendment, however, may (a)
reduce in any manner the amount of, or delay the timing of, distributions
required to be made on any Certificate, (b) change the definition or the manner
of calculating any Certificateholders' Interest, (c) reduce the amount available
under any Enhancement, (d) adversely affect the rating of any Series or class by
each Rating Agency without the consent of the holders of Certificates of such
Series or class evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of such Series or class or (e) reduce the
aforesaid percentage of the unpaid principal amount of Certificates, the holders
of which are required to consent to any such amendment, in the case of (a),
without the consent of the holder of such Certificate and, in the case of (b),
(c) and (e), without the consent of all Certificateholders of the adversely
affected Series. Promptly following the execution of any amendment to the
Pooling and Servicing Agreement (other than an amendment described in the
preceding paragraph), the Trustee will furnish written notice of the substance
of such amendment to each certificateholder.
The Pooling and Servicing Agreement may not be amended in any manner
which materially adversely affects the interests of any Enhancement Provider
without its prior consent.
LIST OF CERTIFICATEHOLDERS
Upon written request of any three or more Certificateholders of a
Series of record the Trustee will afford such Certificateholders access during
business hours to the current list of Certificateholders of such Series for
purposes of communicating with other Certificateholders of such Series with
respect to their rights under the Pooling and Servicing Agreement. See
"--Book-Entry Registration" and "--Definitive Certificates".
The Pooling and Servicing Agreement will not provide for any annual or
other meetings of Certificateholders.
THE TRUSTEE
Unless otherwise specified in the accompanying Prospectus Supplement,
The Chase Manhattan Bank, a New York banking corporation, will act as Trustee
under the Pooling and Servicing Agreement. The Trustee is located at 450 West
33rd Street, New York, New York 10001. The Transferor, the Master Servicer and
their respective affiliates may from time to time enter into normal banking and
trustee relationships with the Trustee and its affiliates. The Trustee may hold
Certificates in its own name with the same rights it would have if it were not
the Trustee. In addition, for purposes of meeting the legal requirements of
certain local jurisdictions, the Trustee shall have the power to appoint a
co-trustee or separate trustees of all or a part of the Trust. In the event of
such appointments, all rights, powers, duties and obligations shall be conferred
or imposed upon the Trustee and such separate trustee or co-trustee jointly, or
in any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts singly upon such separate trustee or co-trustee, who shall
exercise and perform such right powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will
be obligated to appoint a successor Trustee. The Master Servicer may also remove
the Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Master Servicer may appoint a successor Trustee. Any
resignation or removal of the Trustee and appointment of a successor Trustee
does not become effective until the acceptance of the appointment by the
successor Trustee.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The Receivables initially transferred to the Trust by FCAR were
acquired by FCAR from Ford Credit pursuant to the Receivables Purchase
Agreement. The following summary describes the material terms of the Receivables
Purchase Agreement; however, such summary does not purport to be complete. For
further information, see the Receivables Purchase Agreement.
SALE OR TRANSFER OF RECEIVABLES
Pursuant to the Receivables Purchase Agreement, Ford Credit has sold
and transferred to the Transferor all of its right, title and interest in and to
all of the Receivables and the Related Security as of the Initial Cut-Off Date
and all of the Receivables thereafter created. As described herein, pursuant to
the Pooling and Servicing Agreement, the Transferor has transferred to the Trust
all of its right, title and interest in and to the Receivables Purchase
Agreement.
In connection with the sale or transfer of the Receivables to the
Transferor, Ford Credit has indicated in its computer files that the Receivables
have been sold or transferred to the Transferor, and that such Receivables have
been transferred by the Transferor to the Trust. In addition, Ford Credit
provided to FCAR a computer file or microfiche or written list containing a true
and complete list of all such Receivables, identifying the balances of the
Receivables as of the Initial Cut-Off Date. The records and agreements relating
to the Accounts and Receivables have not been, and will not be, segregated by
Ford Credit from other documents and agreements relating to other accounts and
receivables and will not be stamped or marked to reflect the sale or transfer of
the Receivables to the Transferor, but the computer records of Ford Credit have
been marked to evidence such sale or transfer. Ford Credit has filed UCC
financing statements with respect to the Receivables meeting the requirements of
Michigan state law. See "Risk Factors--Certain Legal Aspects" and "Certain Legal
Aspects of the Receivables--Transfer of Receivables".
REPRESENTATIONS AND WARRANTIES
Ford Credit has made or will make certain representations and
warranties to the Transferor to the effect that, among other things, (a) as of
each Closing Date, it was duly incorporated and in good standing and that it has
the authority to consummate the transactions contemplated by the Receivables
Purchase Agreement and (b) as of the Initial Cut-Off Date and each Series
Cut-Off Date (or, in the case of an Additional Account, as of the Additional
Cut-Off Date and Addition Date), each Account or Additional Account was an
Eligible Account.
Ford Credit also has made or will make representations and warranties
to the Transferor relating to the Receivables to the effect, among other things,
that (a) as of the Initial Closing Date and each Closing Date, each of the
Accounts was or is an Eligible Account or, if it was or is an Ineligible Account
on such date, such Account is being removed from the Trust in accordance with
the requirements of the Pooling and Servicing Agreement, (b) the amount of
Receivables that are reported as Ineligible Receivables transferred to the
Transferor on the Initial Cut-Off Date, each Series Cut-Off Date or any
Additional Cut-Off Date for the purpose of facilitating the administration and
reporting obligations of the Master Servicer is true and correct and there are
no other Receivables that are Ineligible Receivables except as so reported and
(c) as of the date any new Receivable is created, such Receivable is an Eligible
Receivable. In the event of a breach of any representation and warranty set
forth in this paragraph which results in an Ineligible Receivable and the
requirement that the Transferor accept retransfer of such Ineligible Receivable
pursuant to the Pooling and Servicing Agreement, then Ford Credit will
repurchase such Ineligible Receivable from the Transferor on the date of such
retransfer. The purchase price for such Ineligible Receivable will be the face
amount thereof, of which at least the amount of any cash deposit required to be
made by the Transferor under the Pooling and Servicing Agreement in respect of
the retransfer of such Ineligible Receivable will be paid in cash.
Ford Credit also has made or will make representations and warranties
to the Transferor to the effect, among other things, that as of the Initial
Closing Date and each Closing Date, (a) the Receivables Purchase Agreement
constitutes a legal, valid and binding obligation of Ford Credit and (b) the
Receivables Purchase Agreement constitutes a valid sale or transfer to the
Transferor of all right, title and interest of Ford Credit in and to the
Receivables, whether then existing or thereafter created in the Accounts, the
Related Security and the proceeds thereof which is effective as to each
Receivable upon the creation thereof. If the breach of any of the
representations and warranties described in this paragraph results in the
obligation of the Transferor under the Pooling and Servicing Agreement to accept
retransfer of the Receivables, Ford Credit will be obligated to repurchase the
Receivables retransferred to Ford Credit for an amount of cash equal to the
amount of cash the Transferor is required to deposit under the Pooling and
Servicing Agreement in connection with such retransfer.
Ford Credit has agreed to indemnify the Transferor and to hold the
Transferor harmless from and against any and all losses, damages and expenses
(including reasonable attorneys' fees) suffered or incurred by the Transferor if
the foregoing representations and warranties are materially false.
CERTAIN COVENANTS
In the Receivables Purchase Agreement, Ford Credit has covenanted that
it will perform its obligations under the agreements relating to the Receivables
and the Accounts in conformity with its then-current policies and procedures
relating to the Receivables and the Accounts.
Ford Credit has covenanted further that, except for the sale and
conveyances under the Receivables Purchase Agreement and the interests created
under the Pooling and Servicing Agreement, Ford Credit will not sell, pledge,
assign or transfer any interest in the Receivables to any other person. Ford
Credit also has covenanted to defend and indemnify the Transferor for any loss,
liability or expense incurred by the Transferor in connection with a breach by
Ford Credit of any of its representations, warranties or covenants contained in
the Receivables Purchase Agreement.
Ford Credit has agreed not to realize upon any security interest in a
Vehicle that it may have in respect of advances or loans to Dealers other than
the related Receivable until the Trust has fully realized on its security
interest in such Receivable. See "The Dealer Floorplan Financing
Business--Intercreditor Agreement in respect of Security Interests in the
Vehicles and the Non-Vehicle Related Security."
In addition, Ford Credit has expressly acknowledged and consented to
the Transferor's assignment of its rights relating to the Receivables under the
Receivables Purchase Agreement to the Trustee.
TERMINATION
The Receivables Purchase Agreement will terminate immediately after the
Trust terminates. In addition, if Ford Credit becomes party to any bankruptcy or
similar proceeding (other than as a claimant) and, if such proceeding is not
voluntary and is not dismissed within 60 days of its institution, Ford Credit
will immediately cease to sell or transfer Receivables to the Transferor and
will promptly give notice of such event to the Transferor and to the Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Ford Credit has sold and assigned the Receivables to the Transferor,
and the Transferor in turn has sold and assigned the Receivables to the Trust.
The Transferor has represented and warranted and will represent and warrant on
each Closing Date that such sale to the Trust constituted a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to the Receivables and that, under the UCC (as in effect in Michigan), there
exists a valid, subsisting and enforceable first priority perfected ownership
interest in the Receivables, in existence at the time the Receivables are sold
and assigned to the Trust or at the date of addition of any Additional Accounts,
in favor of the Trust and a valid, subsisting and enforceable first priority
perfected ownership interest in the Receivables created thereafter in favor of
the Trust on and after their creation. However, the transfer of Receivables by
the Transferor to the Trust could be deemed to create a security interest under
the UCC. For a discussion of the Trust's rights arising from these
representations and warranties not being satisfied, see "Series
Provisions--Representations and Warranties".
Each of Ford Credit and the Transferor has represented that the
Receivables are "chattel paper" for purposes of the UCC as in effect in
Michigan. If the Receivables are deemed to be chattel paper and the transfer
thereof by either Ford Credit to the Transferor or by the Transferor to the
Trust is deemed either to be a sale or to create a security interest, the UCC as
in effect in Michigan applies and the transferee must either take possession of
the chattel paper or file an appropriate financing statement or statements in
order to perfect its interest therein. Financing statements covering the
Receivables will be filed under the UCC as in effect in Michigan by both the
Transferor and the Trust to perfect their respective interests in the
Receivables and continuation statements will be filed as required to continue
the perfection of such interests. The Receivables will not be stamped to
indicate the interest of the Transferor or the Trustee.
There are certain limited circumstances under the UCC and applicable
federal law in which prior or subsequent transferees of Receivables could have
an interest in such Receivables with priority over the Trust's interest. A
purchaser of the Receivables who gives new value and takes possession of the
instruments which evidence the Receivables (i.e., the chattel paper) in the
ordinary course of such purchaser's business may, under certain circumstances,
have priority over the interest of the Trust in the Receivables. A tax or other
government lien on property of Ford Credit or the Transferor arising prior to
the time a Receivable is conveyed to the Trust may also have priority over the
interest of the Trust in such Receivable. Under the Receivables Purchase
Agreement, Ford Credit has warranted to the Transferor, and under the Pooling
and Servicing Agreement the Transferor has warranted to the Trust, that the
Receivables have been transferred free and clear of the lien of any third party.
Each of Ford Credit and the Transferor has also covenanted that it will not
sell, pledge, assign, transfer or grant any lien on any Receivable or, except as
described under "Series Provisions--Supplemental Certificates", the Transferor's
Certificate (or any interest therein) other than to the Trust. In addition,
while Ford Credit is the Master Servicer, cash collections on the Receivables
may, under certain circumstances, be commingled with the funds of Ford Credit
prior to each Distribution Date and, in the event of the bankruptcy of Ford
Credit, the Trust may not have a perfected interest in such collections.
CERTAIN MATTERS RELATING TO BANKRUPTCY
Ford Credit has warranted to the Transferor in the Receivables Purchase
Agreement that the sale of the Receivables by it to the Transferor is a valid
sale of the Receivables to the Transferor. In addition, Ford Credit and the
Transferor have agreed to treat the transactions described herein as a sale of
the Receivables to the Transferor, and Ford Credit has taken or will take all
actions that are required under Michigan law to perfect the Transferor's
ownership interest in the Receivables. Notwithstanding the foregoing, if Ford
Credit were to become a debtor in a bankruptcy case and a creditor or trustee in
bankruptcy of such debtor or such debtor itself were to take the position that
the sale of Receivables from such debtor to the Transferor should be
recharacterized as a pledge of such Receivables to secure a borrowing from such
debtor, then delays in payments of collections of Receivables to the Transferor
could occur or (should the court rule in favor of any such trustee, debtor in
possession or creditor) reductions in the amount of such payments could result.
In a 1993 case decided by the United States Court of Appeals for the
Tenth Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts", as defined under the Uniform Commercial Code, and which would likely
include the Receivables, may properly be included in the bankruptcy estate of a
transferor regardless of whether the transfer of such Receivables is treated as
a sale or a secured loan. The circumstances under which the Octagon ruling would
apply are not fully known and the extent to which the Octagon decision will be
followed in other courts or outside of the Tenth Circuit is not certain. Much of
Ford Credit's business is conducted outside the geographic area subject to the
jurisdiction of the Tenth Circuit. If the findings in the Octagon case were
applied in a Ford Credit bankruptcy, however, the Receivables would be part of
its bankruptcy estate, would be subject to claims of certain creditors and would
be subject to the potential delays and reductions in payments to the Transferor
and Certificateholders described in the preceding paragraph even if the transfer
is treated as a sale.
In addition, if Ford Credit were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of such debtor or such debtor
itself were to request a court to order that Ford Credit should be substantively
consolidated with the Transferor, delays in payments on the Certificates could
result. Should the bankruptcy court rule in favor of any such creditor,
trustee-in-bankruptcy or such debtor, reductions in such payments could result.
The Transferor has warranted to the Trust that the transfer of the
Receivables to the Trust is a sale of the Receivables to the Trust. The
Transferor will be required to take all actions that are required under Michigan
law to perfect the Trust's ownership interest in the Receivables and the
Transferor has warranted to the Trust that the Trust will at all times have a
first priority perfected ownership interest therein and, with certain
exceptions, or proceeds thereof. Nevertheless, a tax or government lien on
property of Ford Credit or the Transferor arising prior to the time a Receivable
is conveyed to the Trust may have priority over the interest of the Trust in
such Receivable. FCAR's limited liability company agreement provides that, under
certain circumstances, FCAR is required to have at least one independent member
having at least two independent directors (as defined therein) in which event it
shall not file a voluntary application for relief under Title 11 of the United
States Code (the "Bankruptcy Code") without the affirmative vote of its
independent member. Pursuant to the Pooling and Servicing Agreement, the
Trustee, all certificateholders and any Enhancement Provider will covenant that
they will not at any time institute against the Transferor any bankruptcy,
reorganization or other proceedings under any federal or state bankruptcy or
similar law. In addition, certain other steps will be taken to avoid the
Transferor's becoming a debtor in a bankruptcy case. Notwithstanding such steps,
if the Transferor were to become a debtor in a bankruptcy case, and a bankruptcy
trustee for the Transferor or the Transferor as debtor in possession or a
creditor of the Transferor were to take the position that the transfer of the
Receivables from the Transferor to the Trust should be recharacterized as a
pledge of such Receivables, then delays in payments on the Certificates or
(should the court rule in favor of any such trustee, debtor in possession or
creditor) reductions in the amount of such payments could result.
The Transferor does not intend to file, and Ford Credit will agree that
it will not cause the Transferor to file, a voluntary application for relief
under the Bankruptcy Code or any similar applicable state law with respect to
the Transferor so long as the Transferor is solvent and does not foresee
becoming insolvent.
If Ford Credit or the Transferor were to become a debtor in a
bankruptcy case causing an Early Amortization Event to occur, then, pursuant to
the Receivables Purchase Agreement, new Receivables would no longer be
transferred to the Transferor and, pursuant to the Pooling and Servicing
Agreement, only collections on Receivables theretofore sold to the Transferor
and transferred to the Trust would be available to be applied to pay interest
accruing on the Certificates and to pay the principal amount of the
Certificates. Under such circumstances, the Master Servicer is obligated to
allocate all collections on Principal Receivables to the oldest principal
balance first. If such allocation method were to be altered by the bankruptcy
court, the rate of payment on the Certificates might be adversely affected. In
addition, distributions of principal on each Certificate would not be subject to
any applicable Controlled Distribution Amount.
The occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Master Servicer will result in a Master
Servicer Default, which Master Servicer Default, in turn, will result in an
Early Amortization Event. If no other Master Servicer Default other than the
commencement of such bankruptcy or similar event exists, a trustee-in-bankruptcy
of the Master Servicer may have the power to prevent either the Trustee or the
certificateholders from appointing a successor Master Servicer.
Payments made in respect of repurchases of Receivables by Ford Credit
or the Transferor pursuant to the Pooling and Servicing Agreement may be
recoverable by Ford Credit or the Transferor, as debtor in possession, or by a
creditor or a trustee-in-bankruptcy of Ford Credit or the Transferor as a
preferential transfer from Ford Credit or the Transferor if such payments are
made within one year prior to the filing of a bankruptcy case in respect of Ford
Credit.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a summary of the material federal income tax
consequences to Certificateholders in connection with the purchase, ownership
and disposition of the Certificates. Included in the summary is a description of
the opinion of Tax Counsel (defined below) as to (i) whether the Certificates
will be properly characterized as debt for federal income tax purposes and (ii)
whether the Trust will be subject to federal income tax. This discussion does
not purport to deal with all aspects of federal income taxation that may be
relevant to holders of the Certificates in light of their particular
circumstances, nor to certain types of holders subject to special treatment
under the federal income tax laws (for example, banks, life insurance companies
and tax-exempt organizations). It is recommended that prospective investors
consult their own tax advisors with regard to the federal income tax
consequences of purchasing, holding and disposing of the Certificates, as well
as the tax consequences arising under the laws of any state, foreign country or
other jurisdiction. This discussion is based upon present provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and 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 Internal Revenue Service (the
"IRS").
Treatment of the Certificates as Debt. The Transferor and the
Certificateholders will express in the Pooling and Servicing Agreement the
intent that, for federal, state and local income and franchise tax purposes, the
Certificates will be debt secured by the Receivables. FCAR, by initially
entering into, and by the acceptance of the assignment of, the Pooling and
Servicing Agreement, and each Certificateholder, by the acceptance of a
Certificate, will agree to treat the Certificates as debt for federal, state and
local income and franchise tax purposes. However, the Pooling and Servicing
Agreement generally refers to the transfer of the Receivables as a "sale", and
because different criteria are used in determining the non-tax accounting
treatment of the transaction, the Transferor will treat the Pooling and
Servicing Agreement, for certain non-tax purposes, as effecting a transfer of an
ownership interest in the Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic
substance of a transaction generally determines the tax consequences. The form
of a transaction, while a relevant factor, is not conclusive evidence of its
economic substance. In appropriate circumstances, the courts have allowed
taxpayers, as well as the IRS, to treat a transaction in accordance with its
economic substance, as determined under federal income tax law, even though the
participants in the transaction have characterized it differently for non-tax
purposes.
The determination of whether the economic substance of a property
transfer is a sale or a loan secured by the transferred property has been made
by the IRS and the courts on the basis of numerous factors designed to determine
whether the transferor has relinquished (and the transferee has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary factors examined are whether the transferee has the opportunity to gain
if the property increases in value, and has the risk of loss if the property
decreases in value. Based upon its analysis of such factors, Brown & Wood LLP,
special tax counsel to the Transferor and the Trust ("Tax Counsel"), is of the
opinion that the Transferor will properly be treated as the owner of the
Receivables for federal income tax purposes and, accordingly, the Certificates
will properly be characterized for federal income tax purposes as debt that is
secured by the Receivables.
Treatment of the Trust. The Trust could be viewed for federal income
tax purposes either as a collateral arrangement or as a separate entity that
owns the Receivables. However, in the opinion of Tax Counsel, in the former
event the Trust will be disregarded for federal income tax purposes and in the
latter event the Trust would not be an association (or publicly traded
partnership) taxable as a corporation. Therefore, in the opinion of Tax Counsel,
the Trust will not be subject to federal income tax.
As used herein, the term "U.S. Certificateholder" means a beneficial
owner of a Certificate that is for federal income tax purposes (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any state
thereof, or the District of Columbia (unless, in the case of a partnership,
Treasury regulations provide otherwise) (c) an estate the income of which is
subject to federal income taxation regardless of its source or (d) a trust if a
court within the United States is able to exercise primary supervision over the
administration of such trust and one or more United States persons have the
authority to control all substantial decisions of such trust. Notwithstanding
the preceding sentence, to the extent provided in Treasury regulations, certain
trusts in existence on August 20, 1996, and treated as United States persons
prior to such date, that elect to continue to be treated as United States
persons will also be a U.S. Certificateholder. As used herein, the term
"Non-U.S. Certificateholder" means a beneficial owner of a Certificate that is
not a U.S. Certificateholder.
U.S. Certificateholders. Assuming the Certificates are debt for federal
income tax purposes and are not issued with original issue discount, interest
thereon will be taxable as ordinary income for federal income tax purposes when
received by U.S. Certificateholders utilizing the cash basis method of
accounting and when accrued by U.S. Certificateholders utilizing the accrual
method of accounting. Certificateholders who are required to recognize income
under the accrual method may be required to recognize income in advance of the
receipt of a corresponding cash distribution. Interest on the Certificates may
also constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
Original Issue Discount. The following summary is a general discussion
of the federal income tax consequences to U.S. Certificateholders of the
purchase, ownership and disposition of Certificates issued with original issue
discount ("OID Certificates"). The following summary is based upon final
Treasury regulations (the "OID Regulations") issued by the IRS on January 27,
1994 as amended on June 11, 1996 under the original issue discount provisions of
the Code.
Original issue discount is the excess of the stated redemption price at
maturity of a Certificate over its issue price, if such excess equals or exceeds
a de minimis amount (generally 1/4 of 1% of the Certificate's stated redemption
price at maturity multiplied by the number of complete years to maturity or, in
the case of Certificates that do not pay qualified stated interest, multiplied
by its weighted average maturity). The issue price of a Series of Certificates
equals the first price at which a substantial amount of such Certificates is
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Certificate is the
sum of all payments provided by the Certificate other than "qualified stated
interest" payments. "Qualified stated interest" generally is stated interest
that is unconditionally payable in cash or property (other than debt instruments
of the issuer) at least annually at a single fixed rate. In addition, under the
OID Regulations, if a Certificate bears interest for one or more accrual periods
at a rate below the rate applicable for the remaining term of such Certificate
(e.g., Certificates with teaser rates or interest holidays), and if the greater
of either the resulting foregone interest on such Certificate or any "true"
discount on such Certificate (i.e., the excess of such Certificate's stated
principal amount over its issue price) equals or exceeds a specified de minimis
amount, then the stated interest on the Certificate would be treated as original
issue discount rather than qualified stated interest.
Payments of qualified stated interest on a Certificate are taxable to a
U.S. Certificateholder as ordinary interest income at the time such payments are
received or are accrued (in accordance with the U.S. Certificateholder's regular
method of tax accounting). Original issue discount is included in income as
ordinary interest for federal income tax purposes as it accrues under a constant
yield method in advance of receipt of the cash payments attributable to such
income, regardless of a U.S. Certificateholder's regular method of tax
accounting. In general, the amount of original issue discount included in income
by the initial U.S. Certificateholder of an OID Certificate is the sum of the
daily portions of original issue discount with respect to such OID Certificate
for each day during the taxable year (or portion of the taxable year) on which
such U.S. Certificateholder held such OID Certificate. The "daily portion" of
original issue discount on any OID Certificate is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the OID Certificate,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (a) the product of the OID Certificate's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(b) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of an OID Certificate at the
beginning of any accrual period is the sum of the issue price of the OID
Certificate plus the amount of original issue discount allocable to all prior
accrual periods minus the amount of any prior payments on the OID Certificate
that were not qualified stated interest payments. Under these rules, U.S.
Certificateholders generally will have to include in income increasingly greater
amounts of original issue discount in successive accrual periods.
The initial U.S. Certificateholder of a Certificate issued with de
minimis original issue discount will be required to include such de minimis
original issue discount in income, as gain recognized from the retirement of the
Certificate, as principal payments are made in the proportion that each such
principal payment bears to the stated principal amount of the Certificate.
Floating-rate Certificates are subject to special rules depending on
whether a floating-rate Certificate qualifies as a variable rate debt
instrument. A floating-rate Certificate will qualify as a "variable rate debt
instrument" if (a) its issue price does not exceed the total non-contingent
principal payments due under the floating-rate Certificate by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating-rates, (ii) a single fixed rate and one or more qualified
floating-rates, (iii) a single objective rate, or (iv) a single fixed rate and a
single objective rate that is a qualified inverse floating-rate.
A "qualified floating-rate" is any variable rate where variations in
the value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
floating-rate Certificate is denominated. Although a multiple of a qualified
floating-rate will generally not itself constitute a qualified floating-rate, a
variable rate equal to the product of a qualified floating-rate and a fixed
multiple that is greater than 0.65 but not more than 1.35 will constitute a
qualified floating-rate. A variable rate equal to the product of a qualified
floating-rate and a fixed multiple that is greater than 0.65 but not more than
1.35, increased or decreased by a fixed rate, will also constitute a qualified
floating-rate. In addition, under the OID Regulations, two or more qualified
floating-rates that can reasonably be expected to have approximately the same
values throughout the term of the floating-rate Certificate (e.g., two or more
qualified floating-rates with values within 25 basis points of each other as
determined on the floating-rate Certificate's issue date) will be treated as a
single qualified floating-rate. Notwithstanding the foregoing, a variable rate
that would otherwise constitute a qualified floating-rate but which is subject
to one or more restrictions such as a maximum numerical limitation (i.e., a cap)
or a minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating-rate under the OID
Regulations unless such cap or floor is fixed throughout the term of the
Certificate. An "objective rate" is a rate that is not itself a qualified
floating rate but is determined using a single fixed formula and that is based
on objective financial or economic information. A rate will not qualify as an
objective rate if it is based on information that is within the control of the
issuer (or a related party) or that is unique to the circumstances of the issuer
(or a related party), such as dividends, profits, or the value of the issuer's
stock (although a rate does not fail to be an objective rate merely because it
is based on the credit quality of the issuer). A "qualified inverse floating
rate" is any objective rate where such rate is equal to a fixed rate minus a
qualified floating rate, as long as variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the qualified
floating rate. The OID Regulations also provide that if a Variable Certificate
provides for stated interest at a fixed rate for an initial period of one year
or less followed by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on the Variable Certificate's issue
date is intended to approximate the fixed rate (e.g., the value of the variable
rate on the issue date does not differ from the value of the fixed rate by more
than 25 basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a floating-rate Certificate that qualifies as a "variable rate debt
instrument" provides for stated interest at a single qualified floating rate
which is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually, then any such stated interest will
constitute qualified stated interest and will be taxed accordingly. Thus, such
floating-rate Certificate will generally not be treated as having been issued
with original issue discount unless the stated principal amount exceeds the
issue price of such Certificate by a specified de minimis amount. The amount of
qualified stated interest and the amount of original issue discount, if any,
that accrues during an accrual period on such a Variable Certificate is
determined under the rules applicable to fixed rate debt instruments by assuming
that the variable rate is a fixed rate equal to (a) in the case of a qualified
floating rate or qualified inverse floating rate, the value, as of the issue
date, of the qualified floating rate or qualified inverse floating rate, or (b)
in the case of an objective rate (other than a qualified inverse floating rate),
a fixed rate that reflects the yield that is reasonably expected for the
Variable Certificate. The qualified stated interest allocable to an accrual
period is increased (or decreased) if the interest actually paid during an
accrual period exceeds (or is less than) the interest assumed to be paid during
the accrual period pursuant to the foregoing rules.
In general, any other Variable Certificate that qualifies as a
"variable rate debt instrument" will be converted into an "equivalent" fixed
rate debt instrument for purposes of determining the amount and accrual of
original issue discount and qualified stated interest on the Variable
Certificate. The OID Regulations generally require that such a Variable
Certificate be converted into an "equivalent" fixed rate debt instrument by
substituting any qualified floating rate or qualified inverse floating rate
provided for under the terms of the Variable Certificate with a fixed rate equal
to the value of the qualified floating rate or qualified inverse floating rate,
as the case may be, as of the Variable Certificate's issue date. Any objective
rate (other than a qualified inverse floating rate) provided for under the terms
of the Variable Certificate is converted into a fixed rate that reflects the
yield that is reasonably expected for the Variable Certificate. In the case of a
Variable Certificate that qualifies as a "variable rate debt instrument" and
provides for stated interest at a fixed rate in addition to either one or more
qualified floating rates or a qualified inverse floating rate, the fixed rate is
initially converted into a qualified floating rate (or a qualified inverse
floating rate, if the Variable Certificate provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Certificate as of the Variable
Certificate's issue date is approximately the same as the fair market value of
an otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate or
a qualified inverse floating rate, the Variable Certificate is then converted
into an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Certificate is converted into an "equivalent" fixed
rate debt instrument pursuant to the foregoing rules, the amount of original
issue discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S.
Certificateholder of the Variable Certificate will account for such original
issue discount and qualified stated interest as if the U.S. Certificateholder
held the "equivalent" fixed rate debt instrument. Each accrual period
appropriate adjustments will be made to the amount of qualified stated interest
or original issue discount assumed to have been accrued or paid with respect to
the "equivalent" fixed rate debt instrument in the event that such amounts
differ from the actual amount of interest accrued or paid on the Variable
Certificate during the accrual period.
If a Variable Certificate does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Variable Certificate would be
treated as a contingent payment debt obligation. U.S. Certificateholders should
be aware that on June 11, 1996, the Treasury Department issued final regulations
(the "CPDI Regulations") concerning the proper federal income tax treatment of
contingent payment debt instruments. In general, the CPDI Regulations would
cause the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current federal income tax law. Specifically, the CPDI
Regulations generally require a U.S. Certificateholder of such an instrument to
include future contingent and noncontingent interest payments in income as such
interest accrues based upon a projected payment schedule. Moreover, in general,
under the CPDI Regulations, any gain recognized by a U.S. Certificateholder on
the sale, exchange, or retirement of a contingent payment debt instrument will
be treated as ordinary income and all or a portion of any loss realized could be
treated as ordinary loss as opposed to capital loss (depending upon the
circumstances). The CPDI Regulations apply to debt instruments issued on or
after August 13, 1996. The proper federal income tax treatment of Variable
Certificates that are treated as contingent payment debt obligations will be
more fully described in the applicable Prospectus Supplement. Furthermore, any
other special federal income tax considerations, not otherwise discussed herein,
which are applicable to any particular issue of Certificates will be discussed
in the applicable Prospectus Supplement.
U.S. Certificateholders may generally elect to include in income all
interest (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis market
discount, and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a Certificate by using the constant yield
method applicable to original issue discount, subject to certain limitations and
exceptions.
If an Early Amortization Event or Asset Composition Event occurs, the
early payments of principal as a result of either such event could result in
accelerating income corresponding to a portion of the unaccrued original issue
discount.
Market Discount. If a U.S. Certificateholder purchases a Certificate
other than an OID Certificate for an amount that is less than its issue price
(or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of an OID Certificate, for an amount that is less than
its adjusted issue price as of the purchase date, the amount of the difference
will be treated as "market discount", unless such difference is less than a
specified de minimis amount.
Under the market discount rules, a U.S. Certificateholder will be
required to treat any partial principal payment (or, in the case of an OID
Certificate, any payment that does not constitute qualified stated interest) on,
or any gain realized on the sale, exchange, retirement or other disposition of,
a Certificate as ordinary income to the extent of the lesser of (a) the amount
of such payment or realized gain or (b) the market discount which has not
previously been included in income and is treated as having accrued on such
Certificate at the time of such payment or disposition. Market discount will be
considered to accrue ratably during the period from the date of acquisition to
the maturity date of the Certificate, unless the U.S. Certificateholder elects
to accrue market discount on the basis of semiannual compounding.
A U.S. Certificateholder may be required to defer the deduction of all
or a portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a Certificate with market discount until the
maturity of the Certificate or its earlier disposition in a taxable transaction,
because a current deduction is only allowed on a market discount obligation to
the extent the net direct interest expense with respect to such obligation
exceeds an allocable portion of the market discount accruing on such obligation.
A U.S. Certificateholder may elect to include market discount in income
currently as it accrues, in which case the rules described above regarding (a)
the treatment as ordinary income of gain upon the disposition of the Certificate
and upon the receipt of certain cash payments and (b) the deferral of interest
deductions will not apply. Generally, such currently included market discount is
treated as ordinary interest for federal income tax purposes. Such an election
will apply to all debt instruments acquired by the U.S. Certificateholder on or
after the first day of the first taxable year to which such election applies and
may be revoked only with the consent of the IRS.
Premium. If a U.S. Certificateholder purchases a Certificate for an
amount that is greater than its stated redemption price at maturity, the amount
of such excess will be treated as "amortizable bond premium". A U.S.
Certificateholder may elect to amortize such premium using a constant yield
method over the remaining term of the Certificate and may offset interest
otherwise required to be included in income in respect of the Certificate during
any taxable year by the amortized amount of such excess for the taxable year.
However, if the Certificate may be optionally redeemed after the U.S.
Certificateholder acquires it at a price in excess of its stated redemption
price at maturity, special rules would apply which could result in a deferral of
the amortization of some bond premium until later in the term of the
Certificate. Any election to amortize bond premium applies to all taxable debt
instruments acquired by the U.S. Certificateholder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Disposition of a Certificate. Except as discussed above, upon the sale,
exchange or retirement of a Certificate, a U.S. Certificateholder generally will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement of and such U.S.
Certificateholder's adjusted tax basis in the Certificate. A U.S.
Certificateholder's adjusted tax basis in a Certificate generally will equal
such U.S. Certificateholder's initial investment in the Certificate increased by
any original issue discount and accrued market discount that the U S.
Certificateholder included in income and decreased by the amount of any
payments, other than qualified stated interest payments, received and
amortizable bond premium taken with respect to such Certificate. Such gain or
loss generally would be long-term capital gain or loss if the Certificate were
held for more than one year.
Information Reporting and Backup Withholding. The Trustee will be
required to report annually to the IRS, and to each Certificateholder of record,
the amount of interest paid (and OID accrued, if any) on the Certificates (and
the amount withheld for federal income taxes, if any) for each calendar year,
except as to exempt holders (generally, holders that are corporations,
tax-exempt organizations, qualified pension and profit-sharing trusts,
individual retirement accounts, or nonresident aliens who provide certification
as to their status as non-residents). As long as the only "Certificateholder" of
record is Cede, as nominee for DTC, Certificateholders and the IRS will receive
tax and other information only from Participants and Indirect Participants
rather than from the Trustee. Each nonexempt Certificateholder will be required
to provide, under penalties of perjury, a certificate on IRS Form W-9 containing
such holder's name, address, federal taxpayer identification number and a
statement that such holder is not subject to backup withholding. Should a
nonexempt Certificateholder fail to provide the required certification, the
Trustee (or the Participants or Indirect Participants) will be required to
withhold (or cause to be withheld) 31% of the interest (and principal) otherwise
payable to the holder, and remit the withheld amounts to the IRS as a credit
against the holder's federal income tax liability.
Possible Classification of the Pooling and Servicing Agreement as a
Partnership or Association. Although, as described above, it is the opinion of
Tax Counsel that the Certificates will properly be characterized as debt for
federal income tax purposes, such opinion is not binding on the IRS and thus no
assurance can be given that such a characterization will prevail. If the IRS
were to contend successfully that the Certificates were not debt for federal
income tax purposes, the arrangement among the Transferor and the
Certificateholders might be classified for federal income tax purposes as a
partnership, an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation.
If the Certificates were treated as interests in such a partnership,
the partnership would in all likelihood be treated as a "publicly traded
partnership". A publicly traded partnership is, in general, taxable as a
corporation. If the Trust were in fact taxed as a publicly traded partnership,
the amount of income available for distribution to the Certificateholders could
be substantially reduced. If the partnership were nevertheless not taxable as a
corporation (because of an exception for an entity whose income is comprised of
certain "qualifying income" as defined in Section 7704 of the Code) it would not
be subject to federal income tax. Rather, each item of income, gain, loss,
deduction and credit generated through the ownership of the Receivables by the
partnership would be passed through to the partners in the partnership
(including the Certificateholders) according to their respective interests
therein.
The income reportable by the Certificateholders as partners in such a
partnership could differ from the income reportable by the Certificateholders as
holders of debt. However, except as provided below, it is not expected that such
differences would be material. If the Certificateholders were treated as
partners, a cash basis Certificateholder might be required to report income when
it accrues to the partnership rather than when it is received by the
Certificateholder. Moreover, if the Certificates were treated as interests in a
partnership, then in the case of a Certificateholder that is an individual,
estate or trust, the Certificateholder's share of expenses of the partnership
would be miscellaneous itemized deductions that in the aggregate are allowed
only to the extent they exceed two percent of the Certificateholder's adjusted
gross income (and, in the case of an individual Certificateholder, are subject
to certain other limitations). Finally, if the partnership were a "publicly
traded partnership" not taxable as a corporation, as discussed above, any
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) would constitute "unrelated business taxable
income" generally taxable to the holder under the Code.
If, alternatively, the Certificates were treated as interests in either
an association taxable as a corporation or a "publicly traded partnership"
taxable as a corporation, the resulting entity would be subject to federal
income tax at corporate tax rates on its taxable income generated by ownership
of the Receivables. Moreover, all or part of distributions to Certificateholders
would probably be treated as dividend income to the Certificateholders and such
amounts would probably not be deductible in computing the entity's taxable
income. Such an entity-level tax could result in reduced distributions to
Certificateholders and the Certificateholders could be liable for a share of
such a tax.
Because the Transferor will treat the Certificates as indebtedness for
federal income tax purposes, the Trustee (and Participants and Indirect
Participants) will not comply with the tax reporting requirements that would
apply under these alternative characterizations of the Certificates.
Non-U.S. Certificateholders. Tax Counsel has given its opinion that the
Certificates will properly be classified as debt for federal income tax
purposes. Assuming the Certificates are debt:
(a) interest paid to a Non-U.S. Certificateholder will be exempt from
United States withholding taxes (including backup withholding taxes), provided
the holder complies with applicable identification requirements (and does not
actually or constructively own 10% or more of the voting stock of the Transferor
and is not a controlled foreign corporation with respect to the Transferor).
Applicable identification requirements will be satisfied if there is delivered
to a securities clearing organization (or bank or other financial institution
that holds the Certificates on behalf of the customer in the ordinary course of
its trade or business) (i) IRS Form W-8 signed under penalties of perjury by the
beneficial owner of such Certificates stating that such owner is not a United
States person and providing such owner's name and address, (ii) IRS Form 1001
signed by the beneficial owner of such Certificates or such owner's agent
claiming exemption from withholding under an applicable tax treaty, or (iii) IRS
Form 4224 signed by the beneficial owner of such Certificates or such owner's
agent claiming exemption from withholding on income effectively connected with
the conduct of a trade or business in the United States; provided in any such
case (A) the applicable form is delivered pursuant to applicable procedures and
is properly transmitted to the United States entity otherwise required to
withhold tax and (B) none of the entities receiving the form has actual
knowledge that such owner is a United States person or that any certification on
the form is false;
(b) a Non-U.S. Certificateholder will not be subject to federal income
tax on gain realized on the sale, exchange or redemption of such Certificate,
provided that (i) such gain is not effectively connected with the conduct of a
trade or business in the United States, (ii) in the case of a holder that is an
individual, such holder is not present in the United States for 183 days or more
during the taxable year in which such sale, exchange or redemption occurs and
(iii) in the case of gain representing accrued interest, the conditions
described in clause (a) are satisfied; and
(c) a Certificate held by an individual who at the time of death is a
nonresident alien will not be subject to federal estate tax as a result of such
individual's death if, immediately before the individual's death, (i) the
individual did not actually or constructively own 10% or more of the voting
stock of the Transferor and (ii) the holding of such Certificate was not
effectively connected with the conduct by the decedent of a trade or business in
the United States.
If the IRS were to contend successfully that the Certificates are
interests in a partnership (not taxable as a corporation), a Certificateholder
that is a nonresident alien or foreign corporation might be required to file a
United States individual or corporate income tax return and pay tax on its share
of partnership income at regular United States rates, including, in the case of
a corporation, the branch profits tax (and would be subject to withholding tax
on its share of partnership income). If the Certificates were recharacterized as
interests in an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, to the extent distributions on the
Certificates were treated as dividends, a nonresident alien individual or
foreign corporation would generally be taxed on the gross amount of such
dividends (and subject to withholding) at a rate of 30% unless such rate were
reduced by an applicable treaty.
STATE AND LOCAL TAX CONSIDERATIONS
In addition to the federal income tax considerations described in
"Material Federal Income Tax Considerations," potential investors should
consider the state and local income tax consequences of the acquisition,
ownership, and disposition of the Certificates. The activities of servicing and
collecting the Receivables will be undertaken by the Master Servicer, which is a
Michigan corporation. Because of the variation in each state's tax laws based in
whole or in part upon income, state and local income tax law may differ
substantially from the corresponding federal law, and it is thus impossible to
predict tax consequences to holders of Certificates in all of the state taxing
jurisdictions in which they are already subject to tax. Hence, this discussion
does not purport to describe any aspect of the income tax laws of any state or
locality. Therefore, potential investors should consult their own tax advisors
with respect to the various state and local tax consequences of an investment in
the Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain restrictions on employee benefit plans subject to
ERISA ("Benefit Plans") and on persons who are parties in interest or
disqualified persons ("parties in interest") with respect to such Benefit Plans.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under section 410(d) of the Code), are not subject to
the restrictions of ERISA, and assets of such plans may be invested in the
Certificates without regard to the ERISA considerations described below, subject
to other applicable federal and state law. However, any such governmental or
church plan which is qualified under section 401(a) of the Code and exempt from
taxation under section 501(a) of the Code is subject to the prohibited
transaction rules set forth in section 503 of the Code. Any Benefit Plan
fiduciary which proposes to cause a Benefit Plan to acquire any of the
Certificates should consult with its counsel with respect to the potential
consequences under ERISA, and the Code, of the Benefit Plan's acquisition and
ownership of the Certificates.
Investments by Benefit Plans are also subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that a Benefit Plan's investments be made in
accordance with the documents governing the Benefit Plan.
PROHIBITED TRANSACTIONS
General
Section 406 of ERISA prohibits parties in interest with respect to a
Benefit Plan from engaging in certain transactions involving a Benefit Plan and
its assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes (or, in some
cases, a civil penalty may be assessed pursuant to section 502(i) of ERISA) on
parties in interest which engage in non-exempt prohibited transactions.
Benefit Plan Asset Regulation
The United States Department of Labor ("Labor") has issued final
regulations concerning the definition of what constitutes the assets of a
Benefit Plan for purposes of ERISA and the prohibited transaction provisions of
the Code (the "Benefit Plan Asset Regulation"). The Benefit Plan Asset
Regulation describes the circumstances under which the assets of an entity in
which a Benefit Plan invests will be considered to be "plan assets" such that
any person who exercises control over such assets would be subject to ERISA's
fiduciary standards. In such an event, the Trustee and other persons, in
providing services with respect to the Trust's assets, may be parties in
interest with respect to such Benefit Plans, subject to the fiduciary
responsibility provisions of Title I of ERISA, including the prohibited
transaction provisions of Section 406 of ERISA, and Section 4975 of the Code
with respect to transactions involving the Trust's assets. Accordingly, if
Benefit Plans purchase Certificates, the Trust could be deemed to hold plan
assets unless one of the exceptions under the Benefit Plan Asset Regulations is
applicable to the Trust.
AVAILABILITY OF EXEMPTIONS FOR CERTIFICATES
The Plan Assets Regulation contains an exception (the "Publicly-Offered
Securities Exception") that provides that if a Benefit Plan acquires a
"publicly-offered security", the issuer of the security is not deemed to hold
plan assets by reason of a Benefit Plan's purchase of such security. A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, at the conclusion of the offering,
by 100 or more investors independent of the issuer and of one another and (c)
either is (i) part of a class of securities registered under Section 12(b) or
12(g) of the Exchange Act or (B) sold to the plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred. If it is
anticipated that the Certificates for any Series will meet the criteria of the
Publicly-Offered Securities Exemption as set forth above, the Underwriters
specified in the accompanying Prospectus Supplement will notify the Trustee as
to whether or not the related Certificates will be held by 100 independent
persons at the conclusion of the offering. The Transferor will not, however,
determine whether the 100-investor requirement of the Publicly-Offered
Securities Exemption is satisfied with respect to the Certificates.
If the Certificates for any Series fail to meet the criteria of the
Publicly-Offered Securities Exemption and the Trust Assets are deemed to include
assets of Benefit Plans that are holders of such Certificates, transactions
involving the Trust and "parties in interest" or "disqualified persons" with
respect to such plans might be prohibited under Section 406 of ERISA and Section
4975 of the Code unless another ERISA prohibited transaction exemption is
applicable. Thus, for example, if a participant in any Benefit Plan is an
obligor or guarantor of one of the Receivables, under DOL interpretations the
purchase of the Certificates by such plan could constitute a prohibited
transaction. There are at least three class exemptions issued by the DOL that
may apply in such event: DOL Prohibited Transaction Exemptions 84-14 (Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers), 91-38 (Class Exemption for Certain Transactions
Involving Bank Collective Investment Funds), 90-1 (Class Exemption for
Transactions Involving Insurance Company Pooled Separate Accounts), and 96-23
(Class Exemption for Transactions Determined by In-House Asset Managers). There
is no assurance that these exemptions, even if all of the conditions specified
therein are satisfied, will apply to all transactions involving the Trust
Assets.
REVIEW BY BENEFIT PLAN FIDUCIARIES
Any Benefit Plan fiduciary considering whether to purchase any
Certificates on behalf of a Benefit Plan should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and the Code to such investment. Among other
things, before purchasing any Certificates, a fiduciary of a Benefit Plan
subject to the fiduciary responsibility provisions of ERISA or an employee
benefit plan subject to the prohibited transaction provisions of the Code should
make its own determination as to the availability of the exemptive relief
provided in the Benefit Plan Asset Regulations and also consider the
availability of any other prohibited transaction exemptions.
In particular, purchasers that are insurance companies should consult
with their counsel with respect to the United States Supreme Court case, John
Hancock Mutual Life Insurance Co. v. Harris Bank and Trust, 510 U.S. 86 (1993).
In Harris Trust, the Supreme Court ruled that assets held in an insurance
company's general account may be deemed to be "plan assets" under certain
circumstances. Purchasers should analyze whether the decision may have an impact
with respect to purchases of the Certificates.
UNDERWRITING
The Transferor may sell Certificates of any Series in any of three
ways: (a) through underwriters or dealers; (b) directly to one or more
purchasers; or (c) through agents. The applicable Prospectus Supplement will set
forth the terms of the offering of any Certificates of any Series, including,
without limitation, the names of any underwriters, the purchase price of such
Certificates and the proceeds to the Transferor from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.
If underwriters are used in a sale of any Certificates of any Series,
such Certificates will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
to be determined at the time of sale or at the time of commitment therefor. Such
Certificates may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable Prospectus Supplement, the
obligations of the underwriters to purchase such Certificates will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all of such Certificates is any of such Certificates are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Certificates of any Series also may be offered and sold, if so
indicated in the Prospectus Supplement, in connection with a remarketing upon
their purchase, in accordance with a redemption or repayment pursuant to their
terms, by one or more firms ("remarketing firms") acting as principals for their
own accounts or as agents for the Transferor. Any remarketing firm will be
identified and the terms of its agreement, if any, with the Transferor and its
compensation will be described in the Prospectus Supplement. Remarketing firms
may be deemed to be underwriters in connection with the Certificates remarketed
thereby.
Certificates of any Series also may be sold directly by the Transferor
or through agents designated by the Transferor from time to time. Any agent
involved in the offer or sale of Certificates of any Series will be named, and
any commissions payable by the Transferor to such agent will be set forth, in
the applicable Prospectus Supplement. Unless otherwise indicated in the
applicable Prospectus Supplement, any such agent will act on a best efforts
basis for the period of appointment.
Any underwriters, dealers or agents participating in the distribution
of Certificates of any Series may be deemed to be underwriters and any discounts
or commissions received by them on the sale or resale of Certificates of any
Series may be deemed to be underwriting discounts and commissions under the
Securities Act. Agents and underwriters may be entitled under agreements entered
into with the Transferor to indemnification by the Transferor against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for, the Transferor or
their affiliates in the ordinary course of business.
LEGAL MATTERS
Certain legal matters will be passed upon for the Transferor by Hurley
Smith, Esq., Secretary of the Master Servicer. Certain federal income tax
matters will be passed upon for the Transferor and the Trust by Brown & Wood
LLP. Certain legal matters relating to the Certificates will be passed upon for
the underwriters or agents by Brown & Wood LLP.
INDEX OF PRINCIPAL TERMS
Term Page
- ---- ----
Accounts...................................................................... 1
Accumulation Period...........................................................11
Accumulation Period Commencement Date.........................................11
Accumulation Period Length....................................................11
Addition Date.................................................................35
Additional Accounts...........................................................38
Adjustment Payment............................................................50
Aggregate Available Subordinated Amount.......................................42
Amortization Period...........................................................12
Asset Composition Event.......................................................10
Asset Correction Amount.......................................................29
Asset Composition Premium.....................................................29
Available Certificateholder Principal Collections.............................47
Available Transferor's Collections............................................43
Available Transferor's Interest Collections...................................43
Available Transferor's Principal Collections..................................43
Available Subordinated Amount.................................................13
Bankruptcy Code...............................................................61
Benefit Plans.................................................................69
Benefit Plan Asset Regulation.................................................70
Cede.......................................................................... 3
Cedel......................................................................... 7
Cedel Participants............................................................30
Certificate Owners............................................................ 3
Certificate Rate.............................................................. 9
Certificateholders' Interest.................................................. 6
Certificateholder Interest Collections........................................46
Certificates.................................................................. 1
Citibank...................................................................... 7
Closing Date.................................................................. 7
Code..........................................................................62
Collection Account............................................................39
Collection Period............................................................. 8
Commission.................................................................... 3
Controlled Amortization Amount................................................48
Controlled Distribution Amount................................................48
Cooperative...................................................................31
Dealers....................................................................... 5
Defaulted Amount..............................................................49
Defaulted Receivable..........................................................49
Deficiency Amount.............................................................44
Definitive Certificates.......................................................32
Depositaries.................................................................. 7
Depository....................................................................27
Determination Date............................................................14
Distribution Date.............................................................27
DTC........................................................................... 3
Draw Amount...................................................................44
Early Amortization Event......................................................51
Early Amortization Period.....................................................12
Eligible Accounts............................................................. 5
Eligible Deposit Account......................................................39
Eligible Institution..........................................................40
Eligible Investments..........................................................40
Eligible Portfolio............................................................25
Eligible Receivable........................................................... 6
Enhancement................................................................... 4
Enhancement Provider..........................................................36
ERISA.....................................................................15, 69
Euroclear..................................................................... 7
Euroclear Operator............................................................31
Euroclear Participants........................................................31
Excess Funding Account........................................................ 7
Excess Principal Collections..................................................42
Excess Transferor's Percentage................................................44
Excess Servicing..............................................................46
Exchange Act.................................................................. 3
Expected Final Payment Date...................................................10
Floating Allocation Percentage................................................41
Ford.......................................................................4, 21
Holders.......................................................................32
Indirect Participants.........................................................30
Ineligible Receivable.........................................................35
Initial Closing Date..........................................................34
Initial Invested Amount....................................................7, 41
Insolvency Laws...............................................................20
Installment Balance Amount....................................................37
Interest Determination Date...................................................27
Interest Funding Account...................................................9, 48
Interest Period...............................................................27
Invested Amount...............................................................41
Investment Proceeds...........................................................46
IRS...........................................................................63
Labor.........................................................................70
Master Servicer............................................................... 1
Master Servicer Default.......................................................54
Miscellaneous Payments........................................................42
Monthly Interest..............................................................44
Monthly Principal.............................................................48
Monthly Servicing Fee.........................................................54
Morgan.....................................................................7, 31
New Issuance.................................................................. 7
Non-U.S. Certificateholder....................................................63
Non-Vehicle Related Security..................................................17
OID Certificates..............................................................63
OID Regulations...............................................................63
Overconcentration Amount......................................................37
Participants..................................................................30
Payment Date...............................................................9, 27
Pooling and Servicing Agreement............................................4, 26
Pool Balance.................................................................. 8
Principal Allocation Percentage...............................................41
Principal Funding Account.................................................11, 48
Principal Receivables......................................................... 7
Principal Shortfalls..........................................................42
Publicly-Offered Securities Exception.........................................70
Qualified Stated Interest.....................................................63
Rating Agency.................................................................19
Receivables................................................................... 1
Receivables Purchase Agreement................................................ 6
Record Date...................................................................29
Reference Agent...............................................................27
Reference Banks...............................................................27
Related Security.............................................................. 4
Remarketing Firms.............................................................71
Removal Commencement Date.....................................................39
Removal Notice................................................................39
Removal Accounts..............................................................20
Required Participation Amount.................................................38
Required Participation Percentage.............................................38
Required Subordinated Amount..............................................13, 44
Reserve Fund..................................................................46
Reserve Fund Required Amount..................................................46
Reserve Fund Deposit Amount...................................................46
Revolving Period..............................................................11
Securities Act................................................................ 3
Series........................................................................ 1
Series Accounts...............................................................10
Series Allocation Percentage..................................................42
Series Cut-Off Date...........................................................11
Series Termination Date.......................................................52
Servicing Transfer............................................................55
Servicing Fee.................................................................54
Servicing Fee Rate............................................................54
Special Payment Date......................................................12, 52
Subordinated Percentage...................................................13, 45
Supplement.................................................................... 7
Supplemental Certificate......................................................33
Tax Counsel...................................................................62
Tax Opinion...................................................................34
Transfer Date.................................................................35
Transfer Deposit Amount.......................................................35
Transferor..................................................................1, 4
Transferor's Certificate......................................................33
Transferor's Interest.......................................................1, 6
Transferor's Participation Amount.............................................44
Transferor's Percentage.......................................................44
Trust.......................................................................1, 4
Trust Assets................................................................1, 4
Trust Available Subordinated Amount...........................................42
Trust Invested Amount.........................................................42
Trustee....................................................................... 4
UCC...........................................................................16
Unallocated Principal Collections.............................................42
U.S. Certificateholder........................................................62
Vehicles...................................................................... 4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION.*
The estimated expenses in connection with the issuance and distribution
of the securities being registered, other than underwriting compensation, are:
SEC Filing Fees.............................. $ 295
Legal Fees and Expenses...................... **
Accounting Fees and Expenses................. **
Blue Sky Fees and Expenses................... **
Trustee's Fees and Expenses.................. **
Rating Agency Fees........................... **
Printing and Engraving Fees.................. **
Miscellaneous................................ **
Total................................... $ **
------
- --------------------
* All amounts, except the SEC Filing Fee, are estimates for expenses incurred
in connection with the issuance and distribution of the Certificates in an
aggregate principal amount assumed for these purposes to be equal to the
aggregate of the $1,000,000 of Certificates registered hereby.
** To be completed by Amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 16 of the Limited Liability Company Agreement of the Transferor
sets forth certain rights of the managers, employees and agents of the
Transferor to indemnification.
Section 18-108 of the Delaware Limited Liability Act, 6 Del. C. ss.
18-101 et seq., provides as follows:
18-108. Indemnification.--Subject to such standards and
restrictions, if any, as are set forth in its limited
liability company agreement, a limited liability company may,
and shall have the power to, indemnify and hold harmless any
member or manager or other person from and against any and all
claims and demands whatsoever.
Section 16 of the Limited Liability Company Agreement of Ford Credit
Auto Receivables LLC provides as follows:
16. Indemnification. (a) Subject to Section 16(g), 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, by reason of the fact that he is or was a
Manager, employee or agent of the LLC, shall be indemnified
and held harmless by the LLC to the fullest extent legally
permissible against all expenses, liabilities and losses
(including attorneys' fees and disbursements), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit
or proceeding.
(b) To the extent that a Manager, employee or agent of the LLC
has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraph (a) of
this Section 16, or in defense of any claim, issue or matter
therein, he shall be indemnified by the LLC against expenses
(including attorneys' fees and disbursements) actually and
reasonably incurred by him in connection therewith without the
necessity of any action being taken by the LLC other than the
determination, in good faith, that such defense has been
successful. In all other cases wherein indemnification is
provided by this Section 16, unless ordered by a court,
indemnification shall be made by the LLC only as authorized in
the specific case upon a determination that indemnification of
the Manager, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct
specified in this Section 16. Such determination shall be made
(i) by the Board of Managers by a majority vote of a quorum
consisting of Managers who were not parties to such action,
suit or proceeding, or (ii) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested
Managers so directs, by independent legal counsel in a written
opinion.
(c) 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 seeking indemnification
did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the
LLC, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
Entry of a judgment by consent as part of a settlement shall
not be deemed a final adjudication of liability for negligence
or misconduct in the performance of duty, nor of any other
issue or matter.
(d) Subject to Section 16(g), expenses (including attorneys'
fees and disbursements) incurred by a Manager, employee or
agent of the LLC in defending any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the LLC in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of
Managers in the specific case upon receipt of an undertaking
by or on behalf of such Manager, employee or agent to repay
such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the LLC. Expenses (including
attorneys' fees and disbursements) incurred by other employees
or agents of the LLC in defending in any civil, criminal,
administrative or investigative action, suit or proceeding may
be paid by the LLC upon such terms and conditions, if any, as
the Board of Managers deems appropriate.
(e) No Manager of the LLC shall be personally liable to the
LLC for monetary damages for any breach of fiduciary duty by
such person as a Manager. Notwithstanding the foregoing
sentence, a Manager shall be liable to the extent provided by
applicable law (i) for breach of the Manager's duty of loyalty
to the LLC or the Member, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a
knowing violation of law or (iii) for any transaction from
which the Manager derived an improper personal benefit. No
amendment to or repeal of this Section 16(e) shall apply to or
have any effect on the liability or alleged liability of any
Manager of the LLC for or with respect to any acts or
omissions of such Manager occurring prior to such amendment.
(f) The indemnification and advancement of expenses provided
by this Section 16 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement
may be entitled under any agreement, vote of the Board of
Managers or otherwise, both as to action in an official
capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased
to be a Manager, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such
person.
(g) Any amounts payable by the LLC in accordance with this
Section 16 shall be payable solely to the extent of funds
actually received by the LLC under the Program Documents or in
connection with other Permitted Transactions.
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 managers, employees and agents of the Transferor who
serve as such at the request of Ford Motor Company or Ford Motor Credit Company.
The Transferor is insured for liabilities it may incur pursuant to
Section 16 of its Limited Liability Company Agreement relating to the
indemnification of its managers, employees or agents. In addition, managers and
certain key employees are insured against certain losses that may arise out of
their employment and that are not recoverable under the indemnification
provisions of the Transferor's Limited Liability Company Agreement. The premium
for both insurance coverages is paid by Ford Motor Company.
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement.*
3.1 Limited Liability Company Agreement of the Registrant.*
4.1 Pooling and Servicing Agreement among the Registrant, the Master
Servicer and the Trustee.*
4.2 Form of Supplement to the Pooling and Servicing Agreement,
including the form of the Certificates and other exhibits
thereto.*
4.3 Receivables Purchase Agreement between FCAR, as purchaser, and
Ford Credit, as seller.
5.1 Opinion of Brown & Wood LLP with respect to certain matters
involving the Certificates.**
8.1 Opinion of Brown & Wood LLP with respect to certain federal
income tax matters.*
23.1 Consent of Brown & Wood LLP (included in opinion filed as Exhibit
5.1).
23.2 Consent of Brown & Wood LLP (included in opinion filed as Exhibit
8.1).*
24.1 Powers of Attorney of Members of Registrant (included on Page
II-6).*
24.2 Power of Attorney of Principal Accounting/Financial Officer of
Registrant.
25.1 Statement of Eligibility and Qualification of Trustee.***
- ------------------
* Previously filed.
** This Exhibit 5.1 replaces the form previously filed as an exhibit
to this Registration Statement.
*** To be filed by Amendment.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes as follows:
(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;
(ii) to select 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; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the
Registration Statement.
(b) that, for the purpose of determining any liability under the
Securities Act, 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to managers, employees or agents of the Registrant pursuant
to the foregoing provisions, 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 Securities 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 manager, employee or agent of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such manager, employee or
agent 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
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, including that the security rating
requirement of Transaction Requirement B.5 will be met by the time of sale, and
has duly caused this Amendment No. 1 to Registration Statement on Form S-3 to be
signed on its behalf in the City of Dearborn, State of Michigan by the following
persons, thereunto duly authorized, in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ * Manager October 15, 1998
-------------------
(Paul E. Gipson)
/s/ * Manager October 15, 1998
-------------------
(Bernard J. Angelo)
/s/ * Manager October 15, 1998
-------------------
(Hurley D. Smith)
/s/ * Manager October 15, 1998
-------------------
(Richard P. Conrad)
/s/ * Manager October 15, 1998
-------------------
(James W. Bosscher)
/s/ Daniel E. Meyer Principal Accounting/Financial October 15, 1998
- -------------------- Officer
(Daniel E. Meyer)
*By: /s/ R.P. Conrad
--------------------------
R.P. Conrad
Attorney-in-fact.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED _______, ____
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated ________, 199__)
$___________________
Ford Credit Auto Loan Master Trust II
Series 199__-__ [Fixed Rate] [Floating Rate] Auto Loan
Asset Backed Certificates
[LOGO]
Ford Credit Auto Receivables LLC
Transferor
Ford Motor Credit Company
Master Servicer
--------------------
The [Fixed Rate] [Floating Rate] Auto Loan Asset Backed Certificates,
Series 199__-__ (the "Certificates"), offered hereby evidence undivided
interests in certain assets of the Ford Credit Auto Loan Master Trust II (the
"Trust") created pursuant to a Pooling and Servicing Agreement among Ford
Credit Auto Receivables LLC, as the transferor ("FCAR" or the "Transferor"),
Ford Motor Credit Company, as master servicer ("Ford Credit" or the "Master
Servicer"), and The Chase Manhattan Bank, as trustee. The Trust Assets include
wholesale receivables (the "Receivables") generated either directly by Ford
Credit or through its wholly-owned subsidiary, PRIMUS, from time to time in a
portfolio of revolving financing arrangements (the "Accounts") with automobile
dealers to finance their automobile and light duty truck inventory and
collections on the Receivables. Certain Trust Assets will be allocated to the
Certificateholders, including the right to receive a varying percentage of
each month's collections with respect to the Receivables at the times and in
the manner described herein. The Transferor will own the remaining interest
(the "Transferor's Interest") in the Trust not represented by the Certificates
or the certificates of any other Series issued by the Trust. From time to
time, subject to certain conditions, the Transferor may offer other series of
certificates (each, a "Series"), which may have terms significantly different
from the terms of the Certificates offered hereby.
(cover continued on next page)
SEE "ADDITIONAL RISK FACTORS" ON PAGE 11 HEREIN AND "RISK FACTORS"
BEGINNING ON PAGE 15 OF THE PROSPECTUS FOR CERTAIN FACTORS TO BE CONSIDERED IN
PURCHASING THE CERTIFICATES.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND
DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, THE MASTER
SERVICER OR ANY AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
=========================================================================================================================
Price to Underwriting Proceeds to
Public (1) Discount (2) Transferor(1)(3)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
% % %
Per Certificate....................................
- -------------------------------------------------------------------------------------------------------------------------
% % %
Total..............................................
=========================================================================================================================
</TABLE>
(1) Plus accrued interest at the applicable rate from and including
_________, 199__.
(2) Ford Credit has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933,
as amended.
(3) Before deducting expenses, estimated to be $__________.
----------------------
[Underwriters]
----------------------
The date of this Prospectus Supplement is ________, 199__.
(cover page continued)
Interest with respect to the Certificates will accrue from _________,
199__, and is payable [semi-annually] [quarterly] on or about the ________ day
of ________ and ________, commencing on _______, 199__ and ending on the
related maturity date or, under certain limited circumstances described
herein, monthly on or about the ______ day of each month. Principal of the
Certificates is scheduled to be paid on the _______ Distribution Date, but may
be paid earlier or later under certain circumstances described herein.
The Transferor's Interest will be subordinated to the rights of the
Certificateholders to the limited extent of the Available Subordinated Amount
[(or, in certain circumstances, the Aggregate Available Subordinated Amount)]
as described herein.
The Certificates are offered by _________ (the "Underwriters") when,
as and if issued, delivered to and accepted by the Underwriters and subject to
certain other conditions. It is expected that delivery of the Certificates
will be made in book-entry form only through the facilities of The Depository
Trust Company, Cedel Bank, societe anonyme or the Euroclear System on or about
________, 199__.
---------------
Until 90 days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus Supplement and Prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
---------------
The Certificates offered hereby constitute part of a separate Series
of Auto Loan Asset Backed Certificates being offered from time to time
pursuant to the Prospectus dated _________, 199__. This Prospectus Supplement
does not contain complete information about the offering of the Certificates.
Additional information is contained in the Prospectus and investors are urged
to read both this Prospectus Supplement and the Prospectus in full. Sales of
the Certificates may not be consummated unless the purchaser has received both
this Prospectus Supplement and the Prospectus.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
CERTIFICATES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH
THE OFFERING AND MAY BID FOR AND PURCHASE THE CERTIFICATES IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Capitalized terms used herein but not otherwise
defined have the meanings assigned to them in the Prospectus. Reference is
made to the Index of Principal Terms herein beginning on page ___ for the
location of the definition of certain capitalized terms used herein, and in
the Prospectus beginning on page 69 therein for the location therein of the
definitions of certain capitalized terms used herein.
Risk Factors............................There are material risks associated
with an investment in the
Certificates. For a description of
such risks, see "Additional Risk
Factors" on page 11 herein and "Risk
Factors" beginning on page 15 of the
Prospectus.
Trust...................................Ford Credit Auto Loan Master Trust II.
Title of Securities.....................$___________ [Fixed Rate] [Floating
Rate] Auto Loan Asset Backed
Certificates, Series 199__-__ (the
"Certificates").
Initial Invested Amount.................$____________.
Allocation Percentage...................____%.
Required Participation
Percentage............................____%.
Certificate Rate........................[___% per annum] [Three-Month LIBOR
plus ___ basis points per annum].
Accumulation Period
Commencement Date.....................___________, 199__.
Interest Payment Dates..................The _______ day of each _________ and
________ (or, if such day is not a
business day, the next succeeding
business day).
Expected Final Payment Date.............The __________ Distribution Date.
Cut-Off Date............................___________, 199__.
Closing Date............................___________, 199__.
The Receivables.........................The aggregate amount of Receivables
included in the Trust as of ________,
199__ was approximately $___________.
The Receivables are generated either
directly by Ford Credit or through its
wholly-owned subsidiary, PRIMUS, on
revolving credit agreements with
Ford-franchised and other automobile
dealers to finance the acquisition of
new and used automobiles and
light-duty trucks. The Receivables are
secured by security interests in the
Vehicles and, in the case of certain
Accounts, a security interest junior
to that of Ford Credit or PRIMUS, as
the case may be, in certain parts,
inventory, equipment, fixtures,
service accounts, realty and/or a
personal guarantee (collectively, the
"Related Security") securing the
Receivables. For a further description
of the Receivables, see "The
Receivables" in the Prospectus. PRIMUS
acts as the agent of Ford Credit for
the purpose of originating accounts
primarily with non-Ford associated
dealers, and acts as servicer with
respect to such accounts For a further
description of the role of PRIMUS as
an originator and servicer of
Receivables, see "The Dealer Floorplan
Financing Business" in the Prospectus.
Initial Principal Amount of
Certificates..........................$__________.
The Certificates........................Each of the Certificates offered
hereby represents an undivided
interest in the Trust. The Trust
Assets will be allocated in part to
the Certificateholders (the
"Certificateholders' Interest"), in
part to the holders of certificates of
any other outstanding Series (such
other holders, together with the
Certificateholders, are referred to
herein as "certificateholders"), with
the remainder allocated to the
Transferor (the "Transferor's
Interest"). The Trust Assets include
the Receivables and may include
certain Vehicles or Related Security
acquired by repossession. For a
further description of the Trust
Assets, see "Summary--The Trust" in
the Prospectus. The Certificates will
evidence an undivided beneficial
interest in the Trust Assets allocated
to the Certificateholders' Interest
and will represent the right to
receive from such assets funds up to
(but not in excess of) the amounts
required to make [quarterly]
[semi-annual] (or in some cases
monthly) payments of interest on the
Certificates at the Certificate Rate
and to make the payment of principal
on the Expected Final Payment Date or
earlier or later under certain limited
circumstances.
On the Closing Date, the Invested
Amount will equal the Initial
Principal Amount, and will represent
the principal amount of Certificates
invested in Receivables as of the
Closing Date (the "Initial Invested
Amount"). The Invested Amount is
subject to reduction during the
Accumulation Period, the Early
Amortization Period and at such other
times as deposits are made to the
Excess Funding Account in connection
with the payment of Receivables as
described under "Series
Provisions--Excess Funding Account" in
the Prospectus.
Allocations.............................The Certificateholders' Interest will
include the right to receive (but only
to the extent required to make
payments under the Pooling and
Servicing Agreement) varying
percentages of Interest Collections
and Principal Collections collected
during each calendar month (each, a
"Collection Period"). Interest
Collections, Principal Collections and
Defaulted Receivables for any
Collection Period will be allocated to
the Certificateholders' Interest as
described below and as more fully
described under "Series
Provisions--Allocation Percentage"
herein and in the Prospectus. Interest
Collections, Principal Collections and
Defaulted Receivables not allocated to
the Certificates will be allocated to
the Transferor's Interest and the
interests of certificateholders of
other Series.
Interest Collections and Defaulted
Receivables will be allocated at all
times to the Certificateholders'
Interest based on the Floating
Allocation Percentage applicable
during the related Collection Period.
The Floating Allocation Percentage for
any Collection Period is the
percentage obtained by dividing the
Invested Amount on the last day of the
immediately preceding Collection
Period by the aggregate amount of the
principal balances of the Receivables
(the "Pool Balance") on the last day
of the immediately preceding
Collection Period.
During the Revolving Period, subject
to certain limitations, Principal
Collections allocable to the
Certificateholders' Interest will be
allocated and paid to the Transferor
or allocated to any other Series in
exchange for the allocation to the
Certificateholders' Interest of an
equal interest in the Receivables
balances that are new or that would
otherwise be part of the Transferor's
Interest or the interest of the
certificateholders of such other
Series.
During the Accumulation Period and any
Early Amortization Period, Principal
Collections will be allocated to the
Certificateholders' Interest based on
the Principal Allocation Percentage.
The Principal Allocation Percentage
for a Collection Period during the
Accumulation Period and any Early
Amortization Period is the percentage
equivalent of a fraction, the
numerator of which is the Invested
Amount on the last day of the
Revolving Period and the denominator
of which is the Pool Balance on the
last day of the immediately preceding
Collection Period. Unless an Early
Amortization Event shall have
occurred, monthly deposits in respect
of principal of the Certificates to
the Principal Funding Account will not
exceed the Controlled Distribution
Amount and, subject to certain
limitations, any Principal Collections
allocated to but not paid to the
Principal Funding Account will be paid
to the Transferor or allocated to any
other Series as described herein. See
"Series Provisions--Allocation
Percentages" herein and "Series
Provisions--Allocation
Percentages--Principal Collections for
all Series" in the Prospectus.
Subordination of the Transferor's
Interest..............................If the Interest Collections,
Investment Proceeds, [Enhancement
Payments, if any,] certain amounts in
the Reserve Fund and certain other
amounts allocable to the
Certificateholders for any Collection
Period are not sufficient to cover
interest payable on the Certificates
on the next Distribution Date (plus
any overdue interest and interest
thereon, to the extent lawful), the
Monthly Servicing Fee for such
Distribution Date, any Investor
Default Amount for such Distribution
Date, [Enhancement Payments, if any,]
for such Distribution Date and certain
other amounts, a portion of the
Transferor's Interest will be applied
to make up such deficiency. Generally,
the amount of the Transferor's
Interest subject to such subordination
is the Available Subordinated Amount.
The Available Subordinated Amount for
the first Determination Date will
equal $_______________. See "Series
Provisions--Available Subordinated
Amount" herein and "Series
Provisions--Distributions from the
Collection Account; Reserve
Fund--Excess Servicing" in the
Prospectus.
[Asset Composition
Event.................................An "Asset Composition Event" will
occur if during the Revolving Period
(a) the sum of all Eligible
Investments and amounts on deposit in
all of the deposit accounts (the
"Accounts") represents more than ___%
of the total Trust Assets on each of
______ or more consecutive
Determination Dates, after giving
effect to all payments made or to be
made on the Distribution Date next
succeeding each such respective
Determination Date; or (b) on each of
_____ consecutive Determination Dates,
the sum of all Eligible Investments
and amounts on deposit in all Accounts
represents more than ___% of the total
Trust Assets, in each case after
giving effect to all payments to be
made on the next succeeding
Distribution Date. Upon the occurrence
of an Asset Composition Event during
the Revolving Period, an amount equal
to the Allocation Percentage of the
Asset Correction Amount will be
distributed in respect of the
Certificates on the next succeeding
Distribution Date. At any time, the
"Asset Correction Amount" will equal
the amount that, if distributed, would
result in compliance with the
percentage limitation the violation of
which gave rise to the Asset
Composition Event.]
[Asset Composition
Premium...............................Withrespect to any distribution of an
Asset Correction Amount, an additional
payment equal to the Asset Composition
Premium for the Certificates shall be
paid to the Certificateholders to the
extent that funds are available
therefor as described under "Series
Provisions--Distributions from the
Collection Account; Reserve Fund" in
the Prospectus. The "Asset Composition
Premium" will equal the excess
(discounted as described below), if
any, of (a) the amount of interest
that would have accrued at the
Certificate Rate on the principal
portion of such Asset Correction
Amount paid to the Certificateholders
from the Distribution Date on which
such amount was distributed to the
Expected Final Payment Date over (b)
the amount of interest that would
accrue on such principal portion over
the same period at a per annum rate of
interest (the "Asset Composition
Discount Rate") equal to the sum of
(i) an amount equal to the yield
(determined on the Determination Date
prior to the Distribution Date on
which the Asset Composition Premium is
required to be distributed) on the
United States Treasury Notes to be
auctioned on ________ 199__ with a
settlement date of _________, 199__,
and a maturity date of _________,
199__ plus (ii) _____%. Such excess
amount will be discounted at the Asset
Composition Discount Rate from the
Expected Final Payment Date to such
Distribution Date.]
[Interest Rate Swap.....................On the Closing Date, the Trustee, on
behalf of the Trust, will enter into
one or more interest rate swap
agreements (collectively, the
"Interest Rate Swap") with Ford Credit
(the "Swap Counterparty"). In
accordance with the terms of the
Interest Rate Swap, the Swap
Counterparty will pay to the Trust, on
each Distribution Date, interest at
the Certificate Rate on the
outstanding principal balance of the
Certificates as of the preceding
Distribution Date (after giving effect
to all distributions on such date). In
exchange for such payments, the Trust
will pay to the Swap Counterparty, on
each Distribution Date, interest at a
per annum rate equal to [the lesser of
(a) ___________ and (b) ____________
less _____%,] on the outstanding
principal balance of the Certificates
as of the preceding Distribution Date
(after giving effect to all
distributions on such Distribution
Date), which rates will be reset on
various dates in each month. With
respect to each Distribution Date, any
difference between the monthly
obligation of the Swap Counterparty to
the Trust and the monthly obligation
of the Trust to the Swap Counterparty
will be referred to herein as the "Net
Trust Swap Receipt", if such
difference is a positive number, and
the "Net Trust Swap Payment", if such
difference is a negative number. Net
Trust Swap Receipts, if any, will be
distributed in the same manner in
which Certificateholder Interest
Collections are distributed on each
Distribution Date and Net Trust Swap
Payments, if any, will be paid out of
Certificateholder Interest Collections
and Investment Proceeds on each
Distribution Date.
In the event that the Interest Rate
Swap is terminated in accordance with
its terms, any Deficiency Amount will
be paid to the extent funds are
available therefor by applying, in
addition to any amounts allocated with
respect to the Available Subordinated
Amount, Interest Collections and
Principal Collections allocated to the
Transferor to the extent of the Swap
Available Subordinated Amount. See
"Series Provisions--Interest Rate
Swap" herein.]
Revolving Period........................The "Revolving Period" will be the
period beginning on ________, 199__
(the "Cut-Off Date") and ending on the
earlier of (a) the day immediately
preceding the Accumulation Period
Commencement Date and (b an Early
Amortization Event occurs.
Accumulation Period.....................The "Accumulation Period" will be the
period beginning on the close of
business on ________ 199__ (the
"Accumulation Period Commencement
Date") and continuing until the
earlier of (a) an Early Amortization
Event, and (b) the Expected Final
Payment Date. See "Series
Provisions--Accumulation Period"
herein and "Series
Provisions--Distributions from the
Collection Account; Reserve
Fund--Principal Collections" in the
Prospectus.
Optional Repurchase.....................The Invested Amount will be subject to
optional repurchase by the Transferor
on any Distribution Date after the
Invested Amount is reduced to an
amount less than or equal to
$____________ (i.e., ____% of the
Initial Invested Amount). The purchase
price (the "Reassignment Amount") will
be equal to the sum of the Invested
Amount and accrued and unpaid interest
on the Certificates (and accrued and
unpaid interest with respect to
interest amounts that were due but not
paid on prior Distribution Dates)
through the day preceding such
Distribution Date. See "Series
Provisions -- Optional Termination".
Registration of Certificates............The Certificates will initially be
represented by one or more
certificates registered in the name of
Cede & Co., as the nominee of DTC. No
purchaser of a Certificate will be
entitled to receive a definitive
certificate except under certain
limited circumstances described herein
under "Series Provisions -- Definitive
Certificates" in the Prospectus. In
addition, there is currently no
intention to list the Certificates on
any exchange or quote the Certificates
in the automated quotation system of a
registered securities association.
There can be no assurance that a
liquid secondary market for the
Certificates will develop or continue.
See "Risk Factors - Risk to Investors
of Limited Liquidity in the
Certificates" in the Prospectus.
Tax Matters.............................In the opinion of Brown & Wood LLP,
special tax counsel for the Transferor
and the Trust, the Certificates will
be characterized as debt for federal
income tax purposes, and the Trust
will not be treated as an association
or a publicly-traded partnership
taxable as a corporation. In addition,
in the opinion of Hurley Smith, Esq.,
Michigan counsel for the Transferor
and the Trust, the Certificates will
be characterized as debt for Michigan
income and single business tax
purposes. Each Certificateholder, by
acceptance of a Certificate, will
agree to treat the Certificates as
debt for tax purposes. See "Material
Federal Income Tax Considerations" and
"State and Local Tax Considerations"
in the Prospectus for additional
information concerning the application
of federal and state tax laws.
ERISA Considerations....................Although there is no certainty on the
matter, it is anticipated that the
Certificates will be eligible for
purchase by Benefit Plans. See "ERISA
Considerations" in the Prospectus.
Certificate Ratings.....................It is a condition to the issuance of
the Certificates that they be rated in
the highest long-term rating category
by at least one nationally recognized
rating agency. The rating of the
Certificates addresses the likelihood
of the ultimate payment of the
principal of and interest on the
Certificates. However, a Rating Agency
does not evaluate, and the rating of
the Certificates will not address, the
likelihood of payment of the
outstanding principal of the
Certificates by the Expected Final
Payment Date. [The rating of the
Certificates also will not address the
likelihood of payment of the Asset
Composition Premium.] A rating is
based primarily on the credit
underlying the Receivables and the
level of subordination of the
Transferor's Interest. A security
rating is not a recommendation to buy,
sell or hold securities and is subject
to revision or withdrawal in the
future by the assigning Rating Agency.
See "Risk Factors--Ratings of
Certificates" in the Prospectus.
ADDITIONAL RISK FACTORS
The risk factor discussions below and in the Prospectus summarize all
material risk factors relating to an investment in the Certificates.
Limited Amounts of Available Subordination
Credit enhancement of the Certificates will be provided by the
subordination of the Transferor's Interest to the extent of the Available
Subordinated Amount (as described in the Prospectus) and amounts on deposit in
the Reserve Fund. The amount of such credit enhancement is limited, and will
be reduced from time to time as described in the Prospectus. See "Series
Provisions--Available Subordinated Amount" herein and "Series
Provisions--Allocation of Collections; Deposits in Collection Account; Limited
Subordination of Transferor's Interest" in the Prospectus.
[Asset Composition Premium
The Asset Composition Premium will be payable to the extent certain
funds are available after the occurrence of an Asset Composition Event. Any
unpaid Asset Composition Premium will be payable on each Distribution Date
following an Asset Composition Event to the extent funds are available
therefor after making all required distributions and deposits with respect to
the Certificates, including payments with respect to principal (including
payments to the Excess Funding Account), Net Trust Swap Payments, Monthly
Interest, the Monthly Servicing Fee, the Reserve Fund Deposit Amount and the
Investor Default Amount for such date as described in "Series
Provisions--Distributions from the Collection Account; Reserve Fund" in the
Prospectus. The rating of the Certificates does not address the likelihood of
payment of the Asset Composition Premium.]
Year 2000 Date Conversion
Ford Credit provides computer services to the Trust and the
Transferor as Master Servicer, and in certain other circumstances. In this
capacity, an issue affecting Ford Credit and most other companies is whether
computer systems and applications will recognize and process the year 2000 and
beyond. Ford Credit has a Year 2000 Program Office to coordinate the
identification, evaluation, and implementation of changes to systems and
applications globally to achieve compliance with the year 2000 date
conversion. Ford Credit is in the process of assessing and implementing
necessary changes for all areas of its business that could be impacted, such
as business computer applications, technical infrastructure, end-user
computing, building facilities, and vendor-supplied applications and services.
Ford Credit has investigated the impact of the year 2000 issue on all
critical business applications and many are already compliant. Those which are
not will be modified or replaced. Plans have been established to complete all
necessary modifications to critical applications by the end of 1998. Ford
Credit, however, has little or no control over whether its vendors will make
the appropriate modifications to applications on a timely basis. Ford Credit
is working actively through the Automotive Industry Action Group with other
financial services companies in assessing and monitoring supplier readiness.
In addition, all vendors will be expected to ensure compliance of business
applications and technical services they supply.
Based on assessments completed to date and compliance plans in
process, Ford Credit does not expect that the year 2000 issue, including the
cost of making its critical systems and applications compliant on a timely
basis, will have a material adverse effect on the business operations,
consolidated financial condition, cash flows, or results of operations of Ford
Credit, the Trust or the Transferor. However, if appropriate modifications are
not made by Ford Credit's vendors, or if Ford Credit's actual costs or timing
for the year 2000 date conversion differ materially from its present
estimates, the operations and financial results of Ford Credit, the Trust or
the Transferor could be significantly adversely affected.
THE DEALER FLOORPLAN FINANCING PORTFOLIOS
Ford Credit
Ford Credit is the primary source of financing for Ford-franchised
dealers in the United States. In the first six months of 1998, Ford Credit
provided financing for approximately 82.2% of new factory sales to Ford
dealers in the U.S, compared with approximately 78.4% for the first six months
of 1997. In the first six months of 1998, Ford Credit provided financing to
approximately 5,753 domestic automotive dealers. In the first six months of
1998, Ford Credit arranged wholesale financing for approximately 2.4 million
vehicles, up approximately 3.7% from the first six months of 1997. Ford Credit
services the Ford Credit U.S. Wholesale Portfolio through its home office in
Dearborn, Michigan and through its 150 branch and regional offices throughout
the United States.
As of June 30, 1998, average credit lines per dealer in the Ford
Credit U.S. Wholesale Portfolio for New and Used Vehicles were $2.07 million
and $0.30 million, respectively, and the average balance of principal
receivables per account was $1.86 million. As of June 30, 1998, the aggregate
total receivables balance in the Ford Credit U.S. Wholesale Portfolio as a
percentage of the aggregate total credit lines was 121% As more fully
described in the Prospectus, the credit lines are guidelines, not limits,
which dealers are permitted to exceed for business reasons. See "The Dealer
Floorplan Financing Business-Dealer Monitoring" in the Prospectus.
As of June 30, 1998, Used Vehicles represented approximately 2.7% of
the aggregate principal amount of receivables in the Ford Credit U.S.
Wholesale Portfolio.
For the six month period ended June 30, 1998, the weighted average
yield on the Ford Credit U.S. Wholesale Portfolio (calculated on the basis of
interest payments actually received thereon during such period over the
average aggregate principal balance thereof at the beginning and end of each
month therein) was 8.40%. However, the weighted average yield is likely to
fluctuate from time to time and it is possible that such yield will occur at
levels significantly different from that currently experienced.
PRIMUS
PRIMUS services the PRIMUS U.S. Wholesale Portfolio through its home
office in Franklin, Tennessee and through 29 regional offices throughout the
United States. In the first six months of 1998, PRIMUS provided wholesale
financing for approximately 885 automotive dealers. In the first six months of
1998, PRIMUS arranged wholesale financing for approximately 0.26 million
automobiles and light trucks, essentially unchanged from the first six months
of 1997.
As of June 30, 1998, average credit lines per dealer in the PRIMUS
U.S. Wholesale Portfolio of Eligible Accounts for New and Used Vehicles were
$1.4 million and $0.4 million, respectively, and the average balance of
principal receivables per account was $0.53 million. As of June 30, 1998, the
aggregate total receivables balance in the PRIMUS U.S. Wholesale Portfolio as
a percentage of the aggregate total credit lines was 65.03%.
As of June 30, 1998, Used Vehicles represented approximately 11.70%
of the aggregate principal amount of receivables in the PRIMUS U.S. Wholesale
Portfolio.
For the six month period ended June 30, 1998, the weighted average
yield on the PRIMUS U.S. Wholesale Portfolio (calculated on the basis of
interest payments actually received thereon during such period over the
average daily aggregate principal balance thereof) was 8.46%. However, the
weighted average yield is likely to fluctuate from time to time and it is
possible that such yield will occur at levels significantly different from
that currently experienced.
Dealer "Status"
Under certain circumstances, Ford Credit and PRIMUS will classify a
dealer as "Status". Such circumstances may include failure to remit any
principal or interest payment when due, any notifications of liens, levies or
attachments, or a general deterioration of its financial condition.
The following table sets forth the dealer Status experience at the
dates indicated with respect to the Combined Ford Credit and PRIMUS U.S.
Wholesale Portfolios. Once a dealer is classified as Status, any further
extension of credit is rare.
<TABLE>
<CAPTION>
Dealer Status Experience for the Combined Ford Credit and PRIMUS U.S. Wholesale Portfolios
Six Months Ended
June 30 Year Ended December 31
---------------- ----------------------
1998 1997 1997 1996 1995 1994(1) 1993(1)
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of "Status" dealers 46 52 51 58 42 29 46
% of Total number of dealers in Portfolio 0.69% 0.80% 0.77% 0.89% 0.62% 0.50% 0.89%
----- ----- ----- ----- ----- ----- -----
</TABLE>
- -----------------
(1) Reflects the Ford Credit U.S. Wholesale Portfolio only.
As of June 30, 1998, 1.13% of the total dealers in the Ford Credit
U.S. Wholesale Portfolio were suspended, compared with 1.35% as of June 30,
1997. As of June 30, 1998, 3.7% of the total dealers in the PRIMUS U.S.
Wholesale Portfolio were suspended, compared with 4.92% as of June 30, 1997.
See "The Dealer Floorplan Financing Business--General" in the Prospectus.
Loss Experience
The following table sets forth the average principal receivables
balance and loss experience for each of the periods shown with respect to the
combined Ford Credit and PRIMUS U.S. Wholesale Portfolios. Because the initial
Eligible Accounts will represent only a portion of the entire combined Ford
Credit and PRIMUS U.S. Wholesale Portfolios, actual loss experience with
respect to the Eligible Accounts may be different. There can be no assurance
that the loss experience for the Receivables in the future will be similar to
the historical experience set forth below with respect to such Portfolios. In
addition, the historical experience set forth below reflects financial
assistance to Dealers provided by Ford and other manufacturers and
distributors in certain limited instances, in the case of the Ford Credit U.S.
Wholesale Portfolio, and primarily by non-Ford manufacturers or distributors
in certain limited circumstances, in the case of the PRIMUS U.S. Wholesale
Portfolio, as described above under "The Dealer Floorplan Financing Portfolios
- -- Relationship with Ford and Other Manufacturers". If a manufacturer or
distributor is unable to or elects not to provide such assistance in the
future, the loss experience in respect of the Ford Credit and/or PRIMUS U.S.
Wholesale Portfolios may be adversely affected. See "Risk Factors--Trust's
Relationship to Ford and Ford Credit; Financial Condition of Ford" in the
Prospectus.
<TABLE>
<CAPTION>
Loss Experience for the Combined Ford Credit and PRIMUS U.S. Wholesale Portfolios
Six Months Ended
June 30, Year Ended December 31,
---------------- -----------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Average Principal
Receivables Balance(1)........ $18,186 $17,074 $17,392 $17,488 $14,855 $12,411
Net Losses
(Recoveries)(2)............... $3.9 $10.0 $3.5 $5.5 $1.6 $(1.4)
Net Losses/Liquidations......... 0.012% 0.011% 0.004% 0.007% 0.002% (0.002)%
Net Losses/Average
Principal Receivables
Balance....................... 0.043%(3) 0.059%(3) 0.020% 0.032% 0.011% (0.012)%
</TABLE>
- ---------------------
(1) Average Principal Receivables Balance is the average of the monthly
average principal balances (based on beginning and ending balances) for
the twelve months ending on the last day of the period.
(2) Net losses in any period are gross losses less recoveries for such
period. Recoveries include recoveries from Related Security in addition
to the vehicles. With respect to the Receivables of certain dealers to
which Ford Credit has made loans in addition to the advances under the
Accounts, the Trust's interest in Non-Vehicle Related Security, if any,
will be subordinate to the interest of Ford Credit in such Non-Vehicle
Related Security. See "The Dealer Floorplan Financing
Business-Intercreditor Agreement in respect of Security Interests in
Vehicles and Non-Vehicle Related Security" in the Prospectus.
Consequently, the Net Losses experienced by Ford Credit as shown above
may be more favorable than the Net Losses to be experienced by the
Trust.
(3) The Net Losses/Average Principal Receivables Balance for the PRIMUS U.S.
Wholesale Portfolio was 0.111% for the year ended December 31, 1997 and
0.164% for the six months ended June 30, 1998. This increase in the loss
ratio for the PRIMUS U.S. Wholesale Portfolio is due primarily to one
large charge-off and is not indicative of a wider deterioration in the
credit quality of receivables in the related portfolio. This upward
trend in the loss ratio is not expected to continue.
Aging Experience
The following table provides the age distribution of vehicle
inventory for all dealers in the combined Ford Credit and PRIMUS U.S.
Wholesale Portfolios as a percentage of total principal outstanding at the
dates indicated. Because the Eligible Accounts will represent only a portion
of the entire combined Ford Credit and PRIMUS U.S. Wholesale Portfolios, the
actual age distribution with respect to the Eligible Accounts may be
different.
<TABLE>
<CAPTION>
Age Distribution for the Combined Ford Credit and PRIMUS U.S. Wholesale Portfolios(1)
Six Months Ended
June 30, Year ended December 31,
Days 1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1-120...................... 78.0% 81.6% 77.1% 73.6% 77.3% 79.9%
121-180.................... 8.7% 7.4% 11.2% 9.2% 10.5% 9.9%
181-270.................... 7.9% 5.6% 6.2% 10.6% 5.2% 5.9%
Over 270................... 5.4% 5.4% 5.5% 6.6% 7.0% 4.4%
</TABLE>
- ---------------------
(1) Measured from the date of shipment with respect to New Vehicles.
THE ACCOUNTS
As of June 30, 1998, with respect to the Accounts in the Trust: (a)
there were 6,539 Accounts (4,131 of which were originated by Ford Credit and
2,408 by PRIMUS), and the principal balance of Receivables was approximately
$8.17 billion (of which approximately $6.8 billion (or 83.7%) were originated
by Ford Credit and $1.3 billion (or 16.3%) were originated by PRIMUS); (b) the
average credit line per Account was $1.7 million (based on the average New
Vehicle credit line of $1.95 million and the average Used Vehicle credit line
of $0.36 million); (c) the average balance of Principal Receivables per
Account was $1.48 million; (d) the aggregate total Principal Receivables
balance as a percentage of the aggregate total credit line was approximately
110%; (e) Used Vehicles represented approximately 4.09% of the aggregate
principal amount of Receivables in the Trust; and (f) the weighted average
spread over the prime rate charged to Dealers (calculated on the basis of the
New Vehicle Base Rate and Used Vehicle Base Rate, as applicable) was 1.03%. As
more fully described above, the credit lines are guidelines, not limits, which
dealers are permitted to exceed for business reasons. See "The Dealer
Floorplan Financing Business--Dealer Monitoring" in the Prospectus.
Geographic Distribution
The following table provides the geographic distribution of the
vehicle inventory for all Receivables in the Trust on the basis of Receivables
outstanding and the number of Accounts in which such Receivables were
generated.
<TABLE>
<CAPTION>
Geographic Distribution of Receivables in the Trust
As of June 30, 1998
Receivables
Outstanding Percentage of Total Percentage of
(thousands of Receivables Number of Number of
State dollars) Outstanding Accounts Accounts
----- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C>
California................................ $948,122 11.6% 602 9.2%
Texas..................................... $927,912 11.4%(1) 645 9.9%
New York.................................. $592,324 7.2%(1) 578 8.8%
Florida................................... $409,020 5.0% 277 4.2%
Michigan.................................. $262,892 3.2% 157 2.4%
Other(2).................................. $5,029,159 61.6% 4,280 65.5%
Total..................................... $8,169,429 100% 6,539 100%
</TABLE>
- ----------------------
(1) As of June 30, 1998, the percentages of Trust Receivables originated by
PRIMUS in the States of Texas and New York were 18.3% and 14.1%, respectively.
(2) No other state includes more than 4.4% of the total outstanding
Receivables.
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement provides that the
Certificateholders will not receive payments of principal until the Expected
Final Payment Date, or earlier in the event of an Early Amortization Event
which results in the commencement of the Early Amortization Period.
Certificateholders will receive payments of principal on each Distribution
Date following the monthly period in which an Early Amortization Event occurs
(each, a "Special Payment Date") until the Invested Amount has been paid in
full.
On each Distribution Date during the Accumulation Period,
Certificateholders' Principal Collections and certain other amounts allocable
to the Certificateholders' Interest will be deposited on each Distribution
Date in a trust account (the "Principal Funding Account") and, together with
any amounts in the Excess Funding Account, used to make principal
distributions to Certificateholders when due. [The amount to be deposited in
the Principal Funding Account on any Distribution Date will be limited to an
amount equal to the Controlled Distribution Amount.] See "Series
Provisions--Distributions from the Collection Account; Reserve Fund--Principal
Collections" in the Prospectus.
Should an Early Amortization Event occur with respect to the
Certificates and the Early Amortization Period should commence, any amount on
deposit in the Principal Funding Account will be paid to the
Certificateholders on the first Special Payment Date, and the
Certificateholders will be entitled to receive Available Principal Collections
on each Distribution Date with respect to such Early Amortization Period or
following the Expected Final Payment Date, as the case may be, as described
herein, until the Invested Amount is paid in full. See "Series
Provisions--Early Amortization Events" in the Prospectus.
The ability of Certificateholders to receive payments of principal on
the Expected Final Payment Date depends on the amount of outstanding
Receivables, delinquencies, charge-offs and the generation of new Receivables
by the Transferor and the potential issuance by the Trust of additional
Series. The Transferor cannot predict, and no assurance can be given, as to
the actual rate of payment of principal of the Certificates or whether the
terms of any subsequently issued Series might have an impact on the amount or
timing of any such payment of principal. See "Risk Factors--Payments" in the
Prospectus.
In addition, the amount of outstanding Receivables and the
delinquencies, charge-offs and the generation of new Receivables may vary from
month to month due to seasonal variations, legal factors and various economic
factors affecting vehicle sales generally. There can be no assurance that
collections of Receivables with respect to the Trust, and thus the rate at
which the Certificateholders could expect to receive payments of principal of
the Certificates during an Early Amortization Period, or the rate at which the
Principal Funding Account could be funded during the Accumulation Period, will
be similar to the historical experience set forth in the tables contained in
this Prospectus Supplement. In addition, the Trust, as a master trust, may
issue additional Series from time to time, and there can be no assurance that
the terms of any such Series might not have an impact on the timing or amount
of payments received by the Certificateholders.
Monthly Payment Rates
The following table sets forth the highest and lowest monthly payment
rates for the Ford Credit and PRIMUS U.S. Wholesale Portfolios, respectively,
during any month in the periods shown and the average of the monthly payment
rates for all months during the periods shown, in each case calculated as the
percentage equivalent of a fraction, the numerator of which is the aggregate
of all collections of principal during the period and the denominator of which
is the average aggregate principal balance for such period. There can be no
assurance that the rate of Principal Collections will be similar to the
historical experience set forth below. Because the Accounts will be only a
portion of the combined Ford Credit and PRIMUS U.S. Wholesale Portfolio,
actual monthly payment rates with respect to the Accounts may be different.
<TABLE>
<CAPTION>
Monthly Payment Rates for the Combined Ford Credit and PRIMUS U.S. Wholesale Portfolios
Six Months
Ended
June 30, Year Ended December 31,
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Highest Month.............. 59.0% 67.3% 53.0% 54.6% 61.7% 64.0%
Lowest Month............... 47.5% 40.1% 39.6% 33.1% 36.4% 43.8%
Average of the Months in
the Period................. 51.9% 49.1% 45.8% 42.5% 48.7% 49.7%
</TABLE>
Because an Early Amortization Event may occur which would initiate an
Early Amortization Period, the final distribution of principal of the
Certificates may be made prior to the scheduled termination of the Revolving
Period or prior to the Expected Final Payment Date. See "Series
Provisions--Additional Early Amortization Events" herein and "Series
Provisions--Early Amortization Events" in the Prospectus.
SERIES PROVISIONS
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement, the forms of which have been filed as exhibits to the Registration
Statement of which the Prospectus and this Prospectus Supplement are a part.
The following summary describes certain terms applicable to the Certificates.
Reference should be made to the Prospectus for additional information
concerning the Certificates and the Pooling and Servicing Agreement.
Interest
Interest on the Certificates will accrue from the Closing Date on the
unpaid principal amount thereof at the Certificate Rate. Interest will be
distributed on ________, 199__ and on the _______ day of each ________ and
________ thereafter [(each, a "Semi-Annual Payment Date")] [(each, a
"Quarterly Payment Date")], to Certificateholders in whose names the
Certificates were registered at the close of business on the last day of the
calendar month preceding the date of such payment (each, a "Record Date");
provided, that if an Early Amortization Event [or an Asset Composition Event]
shall have occurred, interest will be distributed to the Certificateholders on
the first Distribution Date following such Early Amortization Event [or Asset
Composition Event (but, in the case of an Asset Composition Event, only to the
extent needed to cure such event)] and, subject to certain exceptions, on each
subsequent Distribution Date until the Certificates are retired. "Distribution
Date" shall mean the _________ day of each month (or, if such date is not a
business day, the next succeeding business day). Interest for any [Quarterly]
[Semi-Annual] Payment Date will accrue from and including the preceding
[Quarterly] [Semi-Annual] Payment Date (or, in the case of the first
[Quarterly] [Semi-Annual] Payment Date, from and including the Closing Date)
but excluding the next [Quarterly] [Semi-Annual] Payment Date and will be
calculated on the basis of [the actual number of days elapsed during the
related Accrual Period and a 360-day year] [a 360-day year consisting of
twelve 30-day months].
Interest payments in respect of the Certificates on any [Quarterly]
[Semi-Annual] Payment Date will be funded from Certificateholder Interest
Collections, withdrawals, if any, from the Reserve Fund, Investment Proceeds,
if any, [receipts, if any, under the Interest Rate Swap] and, under certain
circumstances, Available Transferor Collections to the extent of the Available
Subordinated Amount.
Principal
In general, no principal payments will be made to the
Certificateholders until the Expected Final Payment Date or, upon the
occurrence of an Early Amortization Event [or an Asset Composition Event],
each as described in the Prospectus, until the first Distribution Date
following such event. On each Distribution Date in the Revolving Period,
collections of Principal Receivables allocable to the Certificateholders'
Interest, subject to certain limitations, will either be (a) allocated to the
Excess Funding Account as described in the Prospectus, (b) allocated to one or
more Series that are in amortization, early amortization or accumulation
periods to cover principal payments due to the certificateholders of any such
Series or that provide for excess funding accounts or similar arrangements or
(c) if no such Series is then amortizing or accumulating principal or
otherwise does not provide for excess funding accounts or similar
arrangements, paid to the Transferor to maintain the Certificateholders'
Interest or held as Unallocated Principal Collections. See "Allocation
Percentages--Principal Collections for all Series" and "Distributions from the
Collection Account; Reserve Fund--Principal Collections" in the Prospectus.
Unless and until an Early Amortization Event shall have occurred and
until the outstanding principal balance of the Certificates is paid in full,
on each Distribution Date in the Accumulation Period, collections of Principal
Receivables allocable to the Certificateholders' Interest, plus certain other
amounts comprising Monthly Principal, will no longer be paid for the benefit
of another Series or to the Transferor as described above but instead [an
amount thereof up to the Controlled Distribution Amount for each such
Distribution Date] will be deposited in the Principal Funding Account. The
funds on deposit in the Principal Funding Account (including any amounts
deposited therein from the Excess Funding Account) will be used to pay the
outstanding principal balance of the Certificates on the Expected Final
Payment Date. If on such date the amount in the Principal Funding Account is
less than the outstanding principal balance of the Certificates, the amounts
in such accounts will nevertheless be distributed to Certificateholders on
such date, the Early Amortization Period will commence and on each Special
Payment Date thereafter the Certificateholders will receive distributions of
Monthly Principal and Monthly Interest until the outstanding principal balance
of the Certificates has been paid in full or the Termination Date has
occurred.
["Controlled Distribution Amount" means, for any Distribution Date in
the Accumulation Period, $_____________.]
Unless an Early Amortization Period will have occurred, the
Accumulation Period will be [one, two, three, four or five] month(s) long. On
__________, 199__, the Master Servicer will determine the Accumulation Period
Length. The "Accumulation Period Length" will be calculated as the product,
rounded upwards to the nearest integer, of (a) _______ and (b) a fraction, the
numerator of which is the Invested Amount as of ___________, 199__ (after
giving effect to all changes therein on such date) and the denominator of
which is the sum of the Invested Amount and the Invested Amount as of
____________, 199__ (after giving effect to all changes therein on such date)
of all other outstanding Series the respective revolving periods of which are
not scheduled to end before the last day of the ___________ 199__ Collection
Period. If the Accumulation Period Length [is one month, two months, three
months, four months or five months], the "Accumulation Period Commencement
Date" will be the first day of the _____________ 199__ Collection Period, the
___________ 199__ Collection Period, the ___________ 199__ Collection Period,
the ___________ 199__ Collection Period or the ___________ 199__ Collection
Period, respectively. Notwithstanding the foregoing, the Accumulation Period
Commencement Date will be ____________, 199__ if, prior to such date, any
other outstanding Series shall have entered into an early amortization period.
In addition, if the Accumulation Period Length shall have been determined to
be less than [five] months and, thereafter, any outstanding Series shall enter
into an early amortization period, the Accumulation Period Commencement Date
shall be the earlier of (i) the date that such outstanding Series shall have
entered into an early amortization period and (ii) the Accumulation Period
Commencement Date as previously determined.
Other Series issued by the Trust may have either an accumulation
period or an amortization period. Such accumulation periods or amortization
periods may have different lengths and begin on different dates. Thus, certain
Series may be in their revolving periods, while others are in periods during
which Principal Collections are distributed to, or reserved for, such other
Series. Under certain circumstances, one or more Series may be in their early
amortization periods or accumulation periods, while other Series are not.
Allocation Percentages
Available Subordinated Amount. The Available Subordinated Amount for
the first Determination Date is equal to the Required Subordinated Amount. The
"Required Subordinated Amount" will mean, as of any date of determination, the
sum of (a) the product of the Subordinated Percentage and the Invested Amount
and (b) the Incremental Subordinated Amount. On the Closing Date, such amount
will be $____________.
The Available Subordinated Amount for a Determination Date will equal
(a) the lesser of (i) the Available Subordinated Amount for the preceding
Determination Date, minus, with certain limitations, the Draw Amount for such
preceding Determination Date, minus funds from the Reserve Fund applied toward
any portion of the Investor Default Amount, plus the amount of Excess
Servicing available to be paid to the Transferor as described under "Series
Provisions--Distributions from the Collection Account; Reserve Fund--Excess
Servicing" in the Prospectus, [plus any amounts distributed as Asset
Composition Premium,] minus the Incremental Subordinated Amount for such
preceding Determination Date, plus the Incremental Subordinated Amount for the
current Determination Date and (ii) the sum of (A) the product of the
Subordinated Percentage and the Invested Amount plus (B) the Incremental
Subordinated Amount for the current Determination Date, minus (ii) the
Subordinated Percentage of funds added or to be added to the Excess Funding
Account since the prior Distribution Date to the succeeding Distribution Date,
plus (c) the Subordinated Percentage of funds withdrawn or to be withdrawn
from the Excess Funding Account since the prior Distribution Date to the
succeeding Distribution Date and paid to the Transferor or allocated to one or
more Series.
The "Incremental Subordinated Amount" on any Determination Date will
equal an amount equal to the product of (a) a fraction, the numerator of which
is the sum of the Invested Amount on the last day of the immediately preceding
Collection Period and the Available Subordinated Amount for such Determination
Date (calculated without subtracting or adding the Incremental Subordinated
Amount for such Determination Date as described in clause (a) above), and the
denominator of which is the Pool Balance on such last day and (b) the excess,
if any, of (i) the sum of the Overconcentration Amount, the Installment
Balance Amount and the aggregate amount of Ineligible Receivables on such
Determination Date over (ii) the aggregate amount of Ineligible Receivables,
Receivables in Accounts containing Dealer Overconcentrations and Receivables
in Installment Balances, in each case that became Defaulted Receivables during
the preceding Collection Period and are subject to reassignment from the
Trust, unless certain insolvency events relating to the Transferor have
occurred, as further described in the Pooling and Servicing Agreement.
The "Subordinated Percentage" will initially equal the percentage
equivalent of a fraction, the numerator of which is ___% and the denominator
of which will be the excess of 100% over ____%. The Transferor may, in its
sole discretion, at any time increase the Available Subordinated Amount for so
long as the cumulative amount of such increases does not exceed the lesser of
(a) $_________ or (b) ____% of the Invested Amount on such date. The
Transferor is not under any obligation to increase the Available Subordinated
Amount at any time. If the Available Subordinated Amount were reduced to less
than the Required Subordinated Amount, an Early Amortization Event would
occur. The Transferor could elect to increase the Available Subordinated
Amount at the time such an Early Amortization Event would otherwise occur,
thus preventing or delaying the occurrence of the Early Amortization Event.
[Swap Available Subordinated Amount. In the event that the Interest
Rate Swap is terminated in accordance with its terms (which event shall result
in an Early Amortization Event), any Deficiency Amount shall be paid to the
extent funds are available therefor by applying, in addition to any amounts
allocated with respect to the Available Subordinated Amount, Interest
Collections and Principal Collections allocated to the Transferor to the
extent of the Swap Available Subordinated Amount. The Swap Available
Subordinated Amount for the first Determination Date is $__________ (the
"Initial Swap Subordinated Amount"). The Swap Available Subordinated Amount
for each subsequent Determination Date will be the Swap Available Subordinated
Amount for the previous Determination Date minus the amount, if any, of such
draws made on the Swap Available Subordinated Amount.]
[Interest Rate Swap
On the Closing Date, the Trustee, on behalf of the Trust, will enter
into the Interest Rate Swap with Ford Credit (the "Swap Counterparty"). In
accordance with the terms of the Interest Rate Swap, the Swap Counterparty
will pay to the Trust, on each Distribution Date, interest accrued from and
including the preceding Distribution Date at the Certificate Rate on the
outstanding principal balance of the Certificates as of such preceding
Distribution Date. In exchange for such payments, the Trust will pay to the
Swap Counterparty, as of each Distribution Date, interest accrued from and
including the preceding Distribution Date at a per annum rate equal to the
lesser of (c) _________ and (b) ___________ less ____% on the outstanding
principal balance of the Certificates on such preceding Distribution Date,
which rates will be reset on various dates within each month. Amounts payable
under the Interest Rate Swap will be calculated on the basis of the actual
number of days in the related period of accrual and a 360-day year. Net Trust
Swap Receipts (obligations of the Swap Counterparty to the Trust) will be paid
to the Collection Account on each Distribution Date and Net Trust Swap
Payments (obligations of the Trust to the Swap Counterparty) will be paid of
Certificateholder Interest Collections, Investment Proceeds, the Reserve Fund
and Available Transferor Collections (in the case of Available Transferor
Collections, to the extent of the Available Subordinated Amount) on each
Distribution Date.
In the event that the Interest Rate Swap is terminated in accordance
with its terms, any Deficiency Amount will be paid by applying, in addition to
any amounts allocated with respect to the Available Subordinated Amount,
Interest Collections and Principal Collections allocated to the Transferor to
the extent of the Swap Available Subordinated Amount.
In the event that the Interest Rate Swap is terminated in accordance
with its terms, any Deficiency Amount will be paid by applying, in addition to
any amounts allocated with respect to the Available Subordinated Amount,
Interest Collections and Principal Collections allocated to the Transferor to
the extent of the Swap Available Subordinated Amount.
"Adjustment Date" shall mean the second London Business Day preceding
the first day of each Interest Period.
"London Business Day" shall mean any business day on which dealings
in deposits in United States dollars are transacted in the London interbank
market.
Pursuant to the terms of the Interest Rate Swap, an initial payment
will be made on the Closing Date. In the event such payment is to be made by
the Trust, the amount of such payment will be contributed to the Trust by the
Transferor.]
[Additional Early Amortization Events
An "Amortization Event" refers to the following events which is in
addition to the other events specified in the Prospectus:
(a)......on any Determination Date, as of the last day of the preceding
Collection Period, the aggregate amount of Principal Receivables relating to
Used Vehicles exceeds ____% of the Pool Balance on such day; or
(b) on any Determination Date, the average of the Monthly Payment Rates for
the ______ preceding Collection Periods, where the Monthly Payment Rate for a
Collection Period is the percentage obtained by dividing Principal Collections
for such Collection Period by the daily average Pool Balance for such
Collection Period, is less than ____%.]
Servicing Compensation
Unless the Servicing Fee has been waived as described in the
Prospectus, the Monthly Servicing Fee shall be an amount equal to one-twelfth
of the product of (a) ____% and (b) the Pool Balance as of the last day of the
second preceding Collection Period. See "Series Provisions--Servicing
Compensation" and "--Payment of Expenses" in the Prospectus.
Series Termination
The final payment of principal of and interest on the Certificates
will be due and payable no later than the _________ 199__ Distribution Date
(the "Termination Date"). In the event that the Invested Amount is greater
than zero on the Termination Date, the Trustee will sell or cause to be sold
(and apply the proceeds to the extent necessary to pay such remaining amounts
to all Certificateholders) an interest in the Receivables or certain
Receivables, as specified in the Pooling and Servicing Agreement, in an amount
equal to ____% of the Invested Amount (after giving effect to deposits and
distributions otherwise to be made on the Termination Date; provided, however,
that in no event shall such amount exceed the Allocation Percentage of
Receivables on such Termination Date). The net proceeds of such sale and any
collections on the Receivables will be paid pro rata to Certificateholders on
the Termination Date as the final payment of the Certificates.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Brown & Wood LLP, special tax counsel to the
Transferor and the Trust, for United States federal income tax purposes, (a)
the Certificates will constitute indebtedness and (b) the Trust will not be
classified as an association or publicly traded partnership taxable as a
corporation. Each Certificateholder, by its acceptance of a Certificate, will
agree to treat the Certificates as indebtedness for United States federal,
state and local income and franchise tax purposes. Assuming the Certificates
are debt for federal income tax purposes and are not issued with original
issue discount, interest thereon will be taxable as ordinary income for
federal income tax purposes when received by U.S. Certificateholders utilizing
the cash basis method of accounting and when accrued by U.S.
Certificateholders utilizing the accrual method of accounting.
Certificateholders who are required to recognize income under the accrual
method may be required to recognize income in advance of the receipt of a
corresponding cash distribution. Interest on the Certificates may also
constitute "investment income" for purposes of certain limitations of the Code
concerning the deductibility of investment interest expense. See "Material
Federal Income Tax Considerations" and "State and Local Tax Considerations" in
the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement dated ______, 199__ (the "Underwriting Agreements"), FCAR has agreed
to cause the Trust to sell to the underwriters named below (the
"Underwriters"), for which ________ is acting as representative (the
"Representative"), and the Underwriters have agreed to purchase the principal
amount of Certificates set forth below:
Principal Amount
Underwriters of Certificates
------------ ----------------
[Underwriter].............................................. $_______________
[Underwriter].............................................. $_______________
Total.............................................. $_______________
FCAR has been advised by the Underwriters that they propose initially
to offer the Certificates to the public at the public offering price set forth
on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of _____% of the principal amount
of the Certificates. The Underwriters may allow and such dealers may reallow
to other dealers a discount not in excess of _____% of such principal amount.
After the initial public offering, such public offering price, concession and
reallowance may be changed.
The Underwriting Agreement provides that FCAR will indemnify the
Underwriters against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriters may be
required to make in respect thereof. The Indemnification Agreement provides
that Ford Credit will indemnify the Underwriters against certain liabilities,
including liabilities under applicable securities laws, or contribute to
payments the Underwriters may be required to make in respect thereof.
In connection with the offering of the Certificates, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Certificates. Specifically, the Underwriters may overallot the
offering, creating a syndicate short position. The Underwriters may bid for
and purchase the Certificates in the open market to cover syndicate short
positions. In addition, the Underwriters may bid for and purchase the
Certificates in the open market to stabilize the price of the Certificates.
These activities may stabilize of maintain the market price of the
Certificates above independent market levels. The Underwriters are not
required to engage in these activities, and may end these activities at any
time.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed
upon for the Transferor by ___________ and for the Representative by Brown &
Wood LLP, New York, New York.
RATINGS
It is a condition to issuance that the Certificates be rated in the
highest long-term rating category by at least one nationally recognized rating
agency. A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Receivables generated from the
Accounts. The rating takes into consideration the structural, legal and tax
aspects associated with the Certificates. The ratings on the Certificates do
not, however, constitute statements regarding the possibility that
Certificateholders might realize a lower than anticipated yield. A securities
rating is not a recommendation to buy, sell or hold securities, and may be
subject to revision or withdrawal at any time by the assigning rating
organization. Each securities rating should be evaluated independently of
similar ratings on different securities.
ANNEX 1
PRIOR ISSUANCE OF INVESTOR CERTIFICATES
This Annex I sets forth the principal characteristics of the Series
1997-A Certificates issued by the Trust. For more specific information with
respect to such Series, prospective investors should contact FCAR at (313)
594-7742. FCAR will provide to any prospective purchaser, without charge, a
copy of the disclosure document with respect to such Series.
Series 1997-A
-------------
Initial Principal Amount $566,350,000
Current Principal Amount $566,350,000
Scheduled Interest Payment Dates The fifteenth
day of each January, April, July and
October (or, if such day is not a
business day, the next succeeding
business day)
Required Participation Percentage 104%
Initial Swap Subordinated Amount $1,416,000
Revolving Period From September 30, 1997 to the
earlier of (x) the first day of May,
June, July, August or September 2000,
as applicable, and (y) the occurrence
of an Early Amortization Event.
Expected Payment Date October 2000 Distribution Date
Termination Date October 2002 Distribution Date
<TABLE>
<CAPTION>
===================================================== ============================================================
<S> <C>
No person has been authorized to give any
information or to make any representation other than
those contained in this Prospectus Supplement or the
Prospectus and, if given or made, such information Ford Credit Auto Loan Master Trust II
or representation must not be relied upon. This Issuer of the Certificates
Prospectus Supplement and the Prospectus do not
constitute an offer to sell or a solicitation of an
offer to buy any securities other than the
Certificates offered hereby, nor an offer of the
Certificates in any State or jurisdiction in which, [Fixed Rate] [Floating-Rate]
or to any person to whom, such offer would be Auto Loan
unlawful. The delivery of this Prospectus Supplement Asset Backed Certificates,
or any Prospectus at any time does not imply that Series 199__-__,
information herein or therein is correct as of any
time subsequent to its date; however, if any
material change occurs while this Prospectus
Supplement or the Prospectus is required by law to
be delivered, this Prospectus Supplement or the [LOGO]
Prospectus will be amended or supplemented
accordingly.
TABLE OF CONTENTS Ford Credit Auto Receivables LLC
Transferor
Ford Motor Credit Company
Page Master Servicer
----
Prospectus Supplement
- ---------------------
Summary of Series Terms........................S-4
Additional Risk Factors.......................S-11
The Dealer Floorplan Financing Portfolios.....S-11
The Accounts..................................S-12
Maturity Considerations.......................S-14
Series Provisions.............................S-15
Material Federal Income Tax Considerations....S-19
Underwriting..................................S-19
Legal Matters.................................S-20
Ratings.......................................S-20 PROSPECTUS SUPPLEMENT
Prospectus
- ----------
Available Information........................... 3
Risk Factors....................................16 [Underwriters]
The Receivables.................................20
Ford Motor Credit Company.......................21 ________, 199__
PRIMUS Automotive Financial Services, Inc.......23
Use of Proceeds.................................21
The Dealer Floorplan Financing Business.........21
The Accounts....................................25
Maturity and Principal Payment Considerations...25
Series Provisions...............................25
Description of the Receivables
Purchase Agreement.............................58
Certain Legal Aspects of the Receivables........59
Material Federal Income Tax Considerations......62
State and Local Tax Considerations..............69
ERISA Considerations............................69
Underwriting....................................71
Legal Matters...................................72
Index of Principal Terms........................73
===================================================== ============================================================
</TABLE>
Exhibit 4.3
EXECUTION
FORD CREDIT AUTO RECEIVABLES LLC
Buyer
and
FORD MOTOR CREDIT COMPANY
Seller
RECEIVABLES PURCHASE AGREEMENT
Dated as of September 30, 1997
Table of Contents
-----------------
Page
----
Exhibit A Form of Assignment
Exhibit B Form of Opinion of Counsel
Exhibit C Form of Opinion of Counsel
Exhibit D Form of Reassignment
Schedule 1 - List of Accounts
RECEIVABLES PURCHASE AGREEMENT, dated as of September 30, 1997,
between FORD CREDIT AUTO RECEIVABLES LLC, a Delaware limited liability
company, as Buyer, and FORD MOTOR CREDIT COMPANY, a Delaware corporation, as
Seller.
W I T N E S S E T H :
WHEREAS the Seller in the ordinary course of its business finances
the purchase of floorplan inventory by automotive dealers thereby generating
certain payment obligations under revolving credit account agreements
established with such dealers;
WHEREAS the Seller wishes to sell certain of such existing and future
payment obligations generated under such accounts from time to time to the
Buyer; and
WHEREAS the Buyer desires to sell such payment obligations to the
Ford Credit Auto Loan Master Trust II pursuant to a Pooling and Servicing
Agreement, dated as of September 30, 1997 (as the same may from time to time
be amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement"), among the Buyer, as transferor, the Seller, as master servicer,
and The Chase Manhattan Bank, as trustee (the "Trustee").
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I.
Definitions
-----------
Section 1.01. Definitions. Capitalized terms used herein but not
otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. In addition, the term "Agreement" means this Receivables
Purchase Agreement, as the same may from time to time be amended, supplemented
or otherwise modified.
Section 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; Article, Section, Schedule, and Exhibit
references are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
ARTICLE II.
Conveyance of Receivables
-------------------------
Section 2.01. Conveyance of Receivables. By execution of this
Agreement, the Seller does hereby sell, transfer, assign, set over and
otherwise convey, without recourse (except as expressly provided herein), to
the Buyer on the first Closing Date, in the case of Initial Accounts, and on
the applicable Addition Date, in the case of Additional Accounts, all of its
right, title and interest in, to and under the Receivables in each Account and
all Related Security with respect thereto owned by the Seller at the close of
business on the Cut-Off Date, in the case of the Initial Accounts, and on the
applicable Additional Cut-Off Date, in the case of Additional Accounts, and
all monies due or to become due and all amounts received with respect thereto
and all proceeds (including "proceeds" as defined in Section 9-306 of the UCC
as in effect in the State of Michigan) and Recoveries thereof. Subject to
Article VI, as of each Business Day prior to the earlier of (x) the occurrence
of an Early Amortization Event specified in Section 9.01(b), (c), (d), or (e)
of the Pooling and Servicing Agreement and (y) the Trust Termination Date, on
which Receivables are created in the Accounts (a "Transfer Date"), the Seller
does hereby sell, transfer, assign, set over and otherwise convey, without
recourse (except as expressly provided herein), to the Buyer, all of its
right, title and interest in, to and under the Receivables in each Account
(other than any Receivables created in any Removal Accounts from and after the
applicable Removal Date) and all Related Security with respect thereto owned
by the Seller at the close of business on such Transfer Date and not
theretofore conveyed to the Buyer, all monies due or to become due and all
amounts received with respect thereto and all proceeds (including "proceeds"
as defined in Section 9-306 of the UCC as in effect in the State of Michigan)
and Recoveries thereof. The foregoing sale, transfer, assignment, set-over and
conveyance and any subsequent sales, transfers, assignments, set-overs and
conveyances do not constitute, and are not intended to result in, the creation
or an assumption by the Buyer of any obligation of the Master Servicer, the
Seller, Ford, any Originator or any other Person in connection with the
Accounts, the Receivables or under any agreement or instrument relating
thereto, including any obligation to any Dealers.
In connection with such sales, the Seller agrees to record and file,
at its own expense, a financing statement on form UCC-1 or any other
applicable form (and continuation statements when applicable) naming the
Seller as "seller" and the Buyer as "buyer" thereon with respect to the
Receivables now existing and hereafter created for the sale of chattel paper
(as defined in Section 9-105 of the UCC as in effect in any state where the
Seller's or the Master Servicer's chief executive offices or books and records
relating to the Receivables are located) meeting the requirements of
applicable law in such manner and in such jurisdictions as are necessary to
perfect the sale and assignment of the Receivables and the Related Security to
the Buyer, and to deliver a file-stamped copy of such financing statements or
other evidence of such filing to the Buyer on or prior to the first Closing
Date, in the case of Initial Accounts, and (if any additional filing is so
necessary) the applicable Addition Date, in the case of Additional Accounts.
In addition, the Seller shall cause to be timely filed in the appropriate
filing office any form UCC-1 financing statement and continuation statement
necessary to perfect any sale of Receivables to the Buyer. The Buyer shall be
under no obligation whatsoever to file such financing statement, or a
continuation statement to such financing statement, or to make any other
filing under the UCC in connection with such sales. The parties hereto intend
that the transfers of Receivables effected by this Agreement be sales.
In connection with such sales, the Seller further agrees, at its own
expense, on or prior to the first Closing Date, in the case of Initial
Accounts, the applicable Addition Date, in the case of Additional Accounts,
and the applicable Removal Date, in the case of Removal Accounts, (a) to
indicate in its computer files that the Receivables created in connection with
the Accounts (other than Removal Accounts) have been sold, and the Related
Security assigned, to the Buyer pursuant to this Agreement and sold to the
Trust pursuant to the Pooling and Servicing Agreement for the benefit of the
Certificateholders and the other Beneficiaries and (b) to deliver to the Buyer
a computer file or microfiche or written list containing a true and complete
list of all such Accounts (other than Removal Accounts) specifying for each
such Account, as of the Cut-Off Date, in the case of Initial Accounts, and the
applicable Additional Cut-Off Date, in the case of Additional Accounts, (i)
its account number and (ii) the aggregate amount of Principal Receivables in
such Account. Such file or list, as supplemented from time to time to reflect
Additional Accounts and Removal Accounts, shall be marked as Schedule 1 to
this Agreement and is hereby incorporated into and made a part of this
Agreement.
In consideration for the sale of $8,942,603,070.65 of the
Receivables, together with the Related Security, transferred to the Buyer on
the first Closing Date, the Buyer shall pay to the Seller $566,350,000.00 in
cash. The remaining $8,376,253,070.65 of Receivables, together with the
Related Security, transferred to the Buyer on the first Closing Date is a
capital contribution to the Buyer. Subject to Article VI, the purchase price
for the Receivables sold by the Seller to the Buyer on each Addition Date and
on each Transfer Date thereafter shall be a price agreed to by the Buyer and
the Seller at the time of acquisition by the Buyer, which price shall not, in
the opinion of the Buyer, be materially less favorable to the Buyer than
prices for transactions of a generally similar character at the time of the
acquisition taking into account the quality of such Receivables and other
pertinent factors; provided that such consideration shall in any event not be
less than reasonably equivalent value therefor.
Section 2.02. Representations and Warranties of the Seller Relating
to the Seller and the Agreement. The Seller hereby represents and warrants to
the Buyer as of each Closing Date that:
(a) Organization and Good Standing. The Seller is a corporation duly
------------------------------
organized and validly existing and in good standing under the law of the State
of Delaware and has, in all material respects, full corporate power, authority
and legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted, and
to execute, deliver and perform its obligations under this Agreement.
(b) Due Qualification. The Seller is duly qualified to do business
------------------
and, where necessary, is in good standing as a foreign corporation (or is
exempt from such requirement) and has obtained all necessary licenses and
approvals in each jurisdiction in which the conduct of its business requires
such qualification except where the failure to so qualify or obtain licenses
or approvals would not have a material adverse effect on its ability to
perform its obligations hereunder.
(c) Due Authorization. The execution and delivery of this Agreement
------------------
and the consummation of the transactions provided for or contemplated by this
Agreement have been duly authorized by the Seller by all necessary corporate
action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement, the
-----------
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof and thereof, will not conflict with, result in
any breach of any of the material terms and provisions of, or constitute (with
or without notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust, or other instrument
to which the Seller is a party or by which it or its properties are bound.
(e) No Violation. The execution and delivery of this Agreement, the
------------
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof and thereof applicable to the Seller, will not
conflict with or violate any material Requirements of Law applicable to the
Seller.
(f) No Proceedings. There are no proceedings or, to the best
---------------
knowledge of the Seller, investigations, pending or threatened against the
Seller, before any Governmental Authority (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, (iii) seeking any determination or ruling
that, in the reasonable judgment of the Seller, would materially and adversely
affect the performance by the Seller of its obligations under this Agreement,
(iv) seeking any determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement or (v) seeking to
affect adversely the income tax attributes of the Trust under the United
States Federal or any other applicable state, local or foreign jurisdiction's
income, single business or franchise tax systems.
(g) All Consents Required. All appraisals, authorizations, consents,
---------------------
orders, approvals or other actions of any Person or of any governmental body
or official required in connection with the execution and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement,
and the fulfillment of the terms hereof or thereof, have been obtained.
(h) Enforceability. This Agreement constitutes a legal, valid and
--------------
binding obligation of the Seller enforceable against the Seller in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
(i) Record of Accounts. As of the first Closing Date, in the case of
------------------
Initial Accounts, as of the applicable Addition Date, in the case of the
Additional Accounts, and, as of the applicable Removal Date, in the case of
Removal Accounts, Schedule 1 to this Agreement is an accurate and complete
listing in all material respects of all the Accounts as of the Cut-Off Date,
the applicable Additional Cut-Off Date or the applicable Removal Date, as the
case may be, and the information contained therein with respect to the
identity of such Accounts and the Receivables existing thereunder is true and
correct in all material respects as of the Cut-Off Date, such applicable
Additional Cut-Off Date or such Removal Date, as the case may be.
(j) Valid Transfer. This Agreement or, in the case of Additional
---------------
Accounts, the related Assignment constitutes a valid sale, transfer and
assignment to the Buyer of all right, title and interest of the Seller in the
Receivables and the Related Security and the proceeds thereof. Upon the filing
of the financing statements described in Section 2.01 with the Secretary of
State of the State of Michigan and, in the case of the Receivables hereafter
created and the proceeds thereof, upon the creation thereof, the Buyer shall
have a first priority perfected ownership interest in such property. Except as
otherwise provided in the Pooling and Servicing Agreement, neither the Seller
nor any Person claiming through or under the Seller has any claim to or
interest in the Trust Assets.
The representations and warranties set forth in this Section 2.02
shall survive the transfer and assignment of the Receivables to the Buyer.
Upon discovery by the Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other party.
In the event of any breach of any of the representations and
warranties set forth in this Section 2.02 and if, in connection therewith, the
Buyer shall be obligated to purchase the Certificateholders' Interest pursuant
to Section 2.03 of the Pooling and Servicing Agreement, the Seller shall
repurchase the Receivables and the Related Security and shall pay to the Buyer
on the Business Day preceding the Distribution Date on which such purchase of
the Certificateholders' Interest is to be made an amount equal to the purchase
price for the Certificateholders' Interest as specified in the Pooling and
Servicing Agreement. The obligation of the Seller to purchase the Receivables
pursuant to this Section 2.02 shall constitute the sole remedy against the
Seller respecting an event of the type specified in the first sentence of this
Section 2.02 available to the Buyer and to the Investor Certificateholders (or
the Trustee on behalf of the Investor Certificateholders).
Section 2.03. Representations and Warranties of the Seller Relating
to the Receivables.
(a) Representations and Warranties. The Seller hereby represents and
------------------------------
warrants to the Buyer that:
(i) Each Receivable and all Related Security existing on the
first Closing Date or, in the case of Additional Accounts, on the
applicable Addition Date, and on each Transfer Date, has been
conveyed to the Buyer free and clear of any Lien.
(ii) With respect to each Receivable and all Related Security
existing on the first Closing Date or, in the case of Additional
Accounts, on the applicable Addition Date, and on each Transfer Date,
all consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Seller in
connection with the conveyance of such Receivable or Related Security
to the Buyer have been duly obtained, effected or given and are in
full force and effect.
(iii) On the Cut-Off Date and each Closing Date, each Initial
Account is an Eligible Account and, in the case of Additional
Accounts, on the applicable Additional Cut-Off Date and each
subsequent Closing Date, each such Additional Account is an Eligible
Account.
(iv) On the first Closing Date, in the case of the Initial
Accounts, and, in the case of the Additional Accounts, on the
applicable Additional Cut-Off Date, and on each Transfer Date, each
Receivable conveyed to the Buyer on such date is an Eligible
Receivable or, if such Receivable is not an Eligible Receivable, such
Receivable is conveyed to the Buyer in accordance with Section 2.08.
(b) Notice of Breach. The representations and warranties set forth in
----------------
this Section 2.03 shall survive the transfer and assignment of the Receivables
to the Buyer. Upon discovery by the Seller or the Buyer of a breach of any of
the representations and warranties set forth in this Section 2.03, the party
discovering such breach shall give prompt written notice to the other party.
(c) Repurchase. In the event any representation or warranty under
----------
Section 2.03(a) is not true and correct as of the date specified therein with
respect to any Receivable or Account and the Buyer is, in connection
therewith, required to purchase such Receivable or all Receivables in such
Account pursuant to Section 2.04(c) of the Pooling and Servicing Agreement,
then, within 30 days (or such longer period as may be agreed to by the Buyer)
of the earlier to occur of the discovery of any such event by the Seller or
the Buyer, or receipt by the Seller or the Buyer of written notice of any such
event given by the Trustee or any Enhancement Providers, the Seller shall
repurchase the Receivable or Receivables of which the Buyer is required to
accept reassignment pursuant to the Pooling and Servicing Agreement on the
Business Day preceding the Determination Date on which such reassignment is to
occur.
The Seller shall purchase each such Receivable by making a payment to
the Buyer in immediately available funds on the Business Day preceding the
Distribution Date on which such reassignment is to occur in an amount equal to
the Purchase Price for such Receivable. Upon payment of the Purchase Price,
the Buyer shall automatically and without further action be deemed to sell,
transfer, assign, set over and otherwise convey to the Seller, without
recourse, representation or warranty, all the right, title and interest of the
Buyer in and to such Receivable, all Related Security and all monies due or to
become due with respect thereto and all proceeds thereof. The Buyer shall
execute such documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Seller to effect the
conveyance of such Receivables pursuant to this Section. The obligation of the
Seller to repurchase any such Receivable shall constitute the sole remedy
respecting the event giving rise to such obligation available to the Buyer and
to the Certificateholders (or the Trustee on behalf of Certificateholders).
Section 2.04. Addition of Accounts. (a) The Seller may from time to
time offer to voluntarily designate additional Eligible Accounts to be
included as Accounts, subject to the conditions specified in paragraph (b)
below. If any such offer is accepted by the Buyer, Receivables and the Related
Security from such Additional Accounts shall be sold to the Buyer effective on
a date (the "Addition Date") specified in a written notice provided by the
Seller (or the Master Servicer on its behalf) to the Buyer and any Enhancement
Providers specifying the Additional Cut-Off Date and the Addition Date for
such Additional Accounts (the "Addition Notice") on or before the fifth
Business Day but not more than the 30th day prior to the related Addition Date
(the "Notice Date").
(b) The Seller shall be permitted to convey to the Buyer the
Receivables and all Related Security related thereto in any Additional
Accounts designated by the Seller as such pursuant to Section 2.04(a) only
upon satisfaction of each of the following conditions on or prior to the
related Addition Date; provided, however, conditions (vi), (viii) and (ix)
below shall be inapplicable to Accounts designated by the Buyer as Automatic
Additional Accounts under Section 2.05(b)(ii) of the Pooling and Servicing
Agreement:
(i) The Seller shall provide the Buyer and any Enhancement
Providers with a timely Addition Notice.
(ii) Such Additional Accounts shall all be Eligible Accounts.
(iii) The Seller shall have delivered to the Buyer a duly
executed written assignment (including an acceptance by the Buyer) in
substantially the form of Exhibit A (the "Assignment") and the
computer file or microfiche or written list required to be delivered
pursuant to Section 2.01.
(iv) The Seller shall have delivered to the Buyer for deposit in
the Collection Account all Collections with respect to such
Additional Accounts since the Additional Cut-Off Date.
(v) (A) No selection procedures believed by the Seller to be
adverse to the interests of the Buyer or the Beneficiaries were used
in selecting such Additional Accounts; (B) the list of Additional
Accounts delivered pursuant to clause (iii) above is true and correct
in all material respects as of the Additional Cut-Off Date and (C) as
of each of the Notice Date and the Addition Date, neither the Seller,
the Buyer nor the Master Servicer are insolvent nor will have been
made insolvent by such transfer nor are aware of any pending
insolvency.
(vi) The Rating Agency Condition shall have been satisfied with
respect to such addition.
(vii) The addition of the Receivables arising in such Additional
Accounts shall not result in the occurrence of an Early Amortization
Event.
(viii) The Seller shall have delivered to the Buyer and any
Enhancement Providers a certificate of a Vice President or more
senior officer confirming the items set forth in paragraphs (ii)
through (vii) above.
(ix) On or before each Addition Date, the Seller shall deliver
to the Buyer and any Enhancement Providers an Opinion of Counsel for
the Seller with respect to the Receivables in the Additional Accounts
substantially in the form of Exhibit B.
(c) The Seller hereby represents and warrants as of the applicable
Addition Date as to the matters set forth in Section 2.04(b)(v). The
representations and warranties set forth in Section 2.04(b)(v) shall survive
the sale and assignment of the respective Receivables and the Related Security
to the Buyer. Upon discovery by the Seller or the Buyer of a breach of any of
the foregoing representations and warranties, the party discovering the breach
shall give prompt written notice to the other party and to any Enhancement
Providers.
(d) At least 20 days prior to each Addition Date in respect of the
designation of any Additional Accounts pursuant to this Section 2.04, the
Seller shall have given written notice of such designation to the Rating
Agencies.
Section 2.05. Covenants of the Seller. The Seller hereby covenants
that:
(a) No Liens. Except for the conveyances hereunder, the Seller will
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not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on, any Receivable or any Related
Security, whether now existing or hereafter created, or any interest therein,
and the Seller shall defend the right, title and interest of the Buyer and the
Trust in, to and under the Receivables and the Related Security, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Seller.
(b) Floorplan Financing Agreements and Guidelines. The Seller shall
----------------------------------------------
comply with and perform its master servicing obligations with respect to the
Accounts and Receivables in accordance with the applicable Floorplan Financing
Agreements relating to the Accounts and the applicable Floorplan Financing
Guidelines, except insofar as any failure to so comply or perform would not
materially and adversely affect the rights of the Buyer, Trust or any of the
Beneficiaries. Subject to compliance with all Requirements of Law, the Seller,
in its capacity of Master Servicer, may change the terms and provisions of the
Floorplan Financing Agreement or the Floorplan Financing Guidelines in any
respect (including the calculation of the amount or the timing of charge-offs
and the rate of the finance charge assessed thereon) only if such change would
be permitted pursuant to Section 3.01(d) of the Pooling and Servicing
Agreement.
(c) Account Allocations. In the event that the Seller is unable for
--------------------
any reason to transfer Receivables to the Buyer, then the Seller agrees that
it shall allocate, after the occurrence of such event, payments on each
Account with respect to the principal balance of such Account first to the
oldest principal balance of such Account and to have such payments applied as
Collections in accordance with the terms of the Pooling and Servicing
Agreement. The parties hereto agree that Non-Principal Receivables, whenever
created, accrued in respect of Principal Receivables which have been conveyed
to the Buyer and by the Buyer to the Trust shall continue to be a part of the
Trust notwithstanding any cessation of the transfer of additional Principal
Receivables to the Buyer and Collections with respect thereto shall continue
to be allocated and paid in accordance with Article IV of the Pooling and
Servicing Agreement.
(d) Delivery of Collections. In the event that the Seller receives
------------------------
Collections, the Seller agrees to pay the Master Servicer or any Successor
Master Servicer all payments received by the Seller in respect of the
Receivables as soon as practicable after receipt thereof by the Seller, but in
no event later than two Business Days after the receipt by the Seller thereof.
(e) Notice of Liens. The Seller shall notify the Buyer and the
----------------
Trustee promptly after becoming aware of any Lien on any Receivable other than
the conveyances hereunder or under the Pooling and Servicing Agreement.
(f) Compliance with Law. The Seller hereby agrees to comply in all
--------------------
material respects with all Requirements of Law applicable to the Seller.
Section 2.06. Removal of Eligible Accounts. (a) On each Determination
Date on which Accounts, including all amounts then held by the Trust or
thereafter received by the Trust with respect to such Accounts, are removed
from the Trust pursuant to Section 2.07 of the Pooling and Servicing
Agreement, the Buyer shall be deemed to have offered to the Seller
automatically and without notice to or action by or on behalf of the Buyer,
the right to remove Eligible Accounts from the operation of this Agreement in
the manner prescribed in Section 2.06(b).
(b) To accept such offer and remove Accounts, including all amounts
then held by the Trust or thereafter received by the Trust with respect to
such Accounts, the Seller (or the Master Servicer on its behalf) shall take
the following actions and make the following determinations:
(i) not less than five Business Days prior to the Removal Date,
furnish to the Buyer, the Trustee, any Enhancement Providers and the
Rating Agencies a written notice (the "Removal Notice") specifying
the Determination Date (which may be the Determination Date on which
such notice is given) on which removal of the Receivables of one or
more Accounts (the "Removal Accounts") will occur (a "Removal Date");
(ii) from and after such Removal Date, cease to transfer to the
Buyer any and all Receivables arising in such Removal Accounts;
(iii) represent and warrant that the removal of any such
Eligible Account on any Removal Date shall not, in the reasonable
belief of the Seller, cause an Early Amortization Event to occur or
cause the Pool Balance to be less than the Required Participation
Amount;
(iv) represent and warrant that no selection procedures believed
by the Seller to be adverse to the interests of the Beneficiaries
were utilized in selecting the Accounts to be removed; and
(v) on or before the fifth Business Day after the Removal Date,
furnish to the Trustee a computer file, microfiche list or other list
of the Removal Accounts that were removed on the Removal Date,
specifying for each Removal Accounts as of the date of the Removal
Notice its number, the aggregate amount outstanding in such Removal
Accounts and the aggregate amount of Principal Receivables therein
and represent that such computer file, microfiche list or other list
of the Removal Accounts is true and complete in all material
respects.
(c) Subject to Section 2.06(b), on the Removal Date with respect to
any such Removal Accounts, such Removal Accounts shall be deemed removed by
operation of this Agreement for all purposes. After the Removal Date and upon
the written request of the Master Servicer, the Buyer shall deliver to the
Seller a reassignment in substantially the form of Exhibit D (the
"Reassignment").
Section 2.07. Removal of Ineligible Accounts. (a) On the fifth
Business Day after any date on which an Account becomes an Ineligible Account
(such fifth Business Day shall be deemed to be the Removal Date) the Seller
shall commence removal of the Receivables of such Ineligible Account in the
manner prescribed in Section 2.07(b).
(b) With respect to each Account that becomes an Ineligible Account,
the Seller (or the Master Servicer on its behalf) shall take the following
actions and make the following determinations:
(i) furnish to the Buyer, the Trustee, any Agent and any
Enhancement Providers a Removal Notice specifying the Removal Date
and the Ineligible Accounts to be removed;
(ii) from and after such Removal Date, cease to transfer to the
Buyer any and all Receivables arising in such Removal Accounts; and
(iii) within five Business Days after the Removal Date, amend
Schedule 1 by delivering to the Trustee a computer file or microfiche
or written list containing a true and complete list of the Removal
Accounts specifying for each such Account, as of the Removal Date,
its account number and the aggregate amount of Receivables
outstanding in such Account.
(c) On the Removal Date with respect to any such Account to be
removed, the Seller shall cease to allocate any Collections therefor in
accordance herewith and such Account shall be deemed a Removal Account. After
the Removal Date and upon the written request of the Master Servicer, the
Buyer shall deliver to the Seller a Reassignment.
Section 2.08. Sale of Ineligible Receivables. The Seller shall sell
to the Buyer on each Transfer Date any and all Receivables arising in any
Eligible Accounts that are Ineligible Receivables, provided that on the
Cut-Off Date or, in the case of Receivables arising in Additional Accounts, on
the related Additional Cut-Off Date, and on the applicable Transfer Date, the
Account in which such Receivables arise is an Eligible Account.
ARTICLE III.
Administration and Servicing
of Receivables
--------------
Section 3.01. Acceptance of Appointment and Other Matters Relating to
the Master Servicer. (a) The Seller agrees to act as the Master Servicer under
this Agreement and the Pooling and Servicing Agreement, and the Buyer consents
to the Seller acting as the Master Servicer. The Seller will have ultimate
responsibility for servicing, managing and making collections on the
Receivables and will have the authority to make any management decisions
relating to such Receivables, to the extent such authority is granted to the
Master Servicer under this Agreement and the Pooling and Servicing Agreement.
(b) The Master Servicer shall service and administer the Receivables
in accordance with the provisions of the Pooling and Servicing Agreement.
Section 3.02. Servicing Compensation. As full compensation for its
servicing activities hereunder and under the Pooling and Servicing Agreement,
the Master Servicer shall be entitled to receive the Servicing Fee on each
Distribution Date. The Servicing Fee shall be paid in accordance with the
terms of the Pooling and Servicing Agreement.
ARTICLE IV.
Rights of Certificateholders and
Allocation and Application of Collections
-----------------------------------------
Section 4.01. Allocations and Applications of Collections and Other
Funds. The Master Servicer will apply all Collections with respect to the
Receivables and all funds on deposit in the Collection Account as described in
Article IV of the Pooling and Servicing Agreement.
ARTICLE V.
Other Matters Relating
to the Seller
-------------
Section 5.01. Merger or Consolidation of, or Assumption, of the
Obligations of the Seller. The Seller shall not consolidate with or merge into
any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(a) the corporation formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Seller substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia and, if the Seller is not the
surviving entity, such corporation shall assume, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, the performance of every covenant and obligation of the Seller
hereunder; and
(b) the Seller has delivered to the Buyer and the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer comply with this Section 5.01
and that all conditions precedent herein provided for relating to such
transaction have been complied with.
Section 5.02. Seller Indemnification of the Buyer. The Seller shall
indemnify and hold harmless the Buyer, from and against any loss, liability,
expense, claim, damage or injury suffered or sustained by reason of any acts,
omissions or alleged acts or omissions arising out of activities of the Seller
pursuant to this Agreement arising out of or based on the arrangement created
by this Agreement and the activities of the Seller taken pursuant thereto,
including any judgment, award, settlement, reasonable attorneys' fees and
other costs or expenses incurred in connection with the defense of any actual
or threatened action, proceeding or claim; provided, however, that the Seller
shall not indemnify the Buyer if such acts, omissions or alleged acts or
omissions constitute fraud, gross negligence or wilful misconduct by the
Buyer; and provided further, that the Seller shall not indemnify the Buyer for
any liabilities, cost or expense of the Buyer with respect to any Federal,
state or local income or franchise taxes or the Michigan Single Business tax
(or any interest or penalties with respect thereto) required to be paid by the
Buyer in connection herewith to any taxing authority. Any indemnification
under this Article V shall survive the termination of the Agreement.
ARTICLE VI.
Termination
-----------
This Agreement will terminate immediately after the Trust terminates
pursuant to the Pooling and Servicing Agreement. In addition, the Buyer shall
not purchase Receivables nor shall the Seller designate Additional Accounts if
the Seller shall become an involuntary party to (or be made the subject of)
any proceeding provided for by any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Seller or relating to all or substantially all of its property (an
"Involuntary Case") and such Involuntary Case shall have continued for a
period of ten Business Days from and including the day of receipt by the
Seller at its principal corporate office of notice of such Involuntary Case;
provided, that during such ten Business Day period, the Buyer shall suspend
its purchase of Receivables and shall hold all Collections of Principal
Receivables that would have been available to purchase Receivables in the
Collection Account and (a) if by the first Business Day after such ten
Business Day period, the Buyer has not obtained an order from the court having
jurisdiction of such case or filing which order approves the continuation of
the sale of Receivables by the Seller to the Buyer and which provided that the
Buyer and any of its transferees (including the Trustee) may rely on such
order for the validity and nonavoidance of such transfer (the "Order"), the
Buyer shall hold such Collections in the Collection Account until such time as
they may be paid as elsewhere provided herein and shall not purchase
Receivables thereafter or designate Additional Accounts for transfer to the
Buyer, or (b) if by such first Business Day, the Buyer has obtained such
Order, the Seller may continue selling Receivables, and the Buyer may continue
purchasing Receivables, pursuant to the terms hereof, as modified by the
immediately succeeding sentence. During the period after the ten Business Day
period described above and before the end of the 60-day period described
below, the purchase price of the Receivables transferred during such period,
notwithstanding anything in this Agreement to the contrary, shall be paid to
the Seller by the Buyer in cash not later than the same Business Day of any
sale of Receivables. During such period, Receivables will be considered
transferred to the Buyer only to the extent that the purchase price therefor
has been paid in cash on the same Business Day. If an Order is obtained but
subsequently is reversed or rescinded or expires, the Seller shall immediately
cease selling Receivables to the Buyer and the Buyer shall immediately cease
buying Receivables. The Seller shall give prompt written notice to each of the
Buyer and the Trustee immediately upon becoming a party to an Involuntary
Case. If by the first Business Day after the 60-day period after such
involuntary filing, such Involuntary Case has not been dismissed, the Buyer
shall not purchase thereafter Receivables or designated Additional Accounts
for transfer to the Issuer.
ARTICLE VII.
Intercreditor Provisions
------------------------
With respect to a Dealer which is the obligor under Receivables that
have been or will be sold to the Buyer hereunder, the Seller may be or become
a lender to such Dealer under an agreement or arrangement (a "Nonfloorplan
Agreement") other than a Floorplan Financing Agreement pursuant to which the
Seller (either directly, or as assignee of PRIMUS or other Originator of the
Account) has been granted a security interest in the same collateral (the
"Common Collateral") in which the Floorplan Financing Agreement for such
Dealer creates a security interest, which Common Collateral may include the
same Vehicle (the "Common Vehicle Collateral") in which such Floorplan
Financing Agreement creates a security interest. The Common Collateral other
than the related Common Vehicle Collateral is referred to herein as the
"Common Non-Vehicle Collateral". The Seller agrees that with respect to each
Receivable of each such Dealer (i) the security interest in such Common
Vehicle Collateral granted to the Seller pursuant to any Nonfloorplan
Agreement is junior and subordinate to the security interest created by the
related Floorplan Financing Agreement, (ii) the Seller has no legal right to
realize upon such Common Vehicle Collateral or exercise its rights under the
Nonfloorplan Agreement in any manner that is materially adverse to the Buyer
or the Trust and the Certificateholders in respect of the Common Vehicle
Collateral until all required payments in respect of such Receivable under the
Floorplan Financing Agreement have been paid, and (iii) in realizing upon such
Common Vehicle Collateral, neither the Buyer nor the Trust shall have any
obligation to protect or preserve the rights of the Seller in such Common
Vehicle Collateral. The Buyer agrees that with respect each Receivable of each
such Dealer (i) the security interest in such Common Non-Vehicle Collateral
created by the Floorplan Financing Agreement and hereby assigned to the Buyer
is junior and subordinate to the security interest therein created by the
Nonfloorplan Agreement, (ii) the Buyer has no legal right to realize upon such
Common Non-Vehicle Collateral or exercise its rights under the Floorplan
Financing Agreement in any manner that is materially adverse to the Seller
until all required payments in respect of the obligation created or secured by
the Nonfloorplan Agreement have been made, and (iii) in realizing on such
Common Non-Vehicle Collateral, the Seller shall not be obligated to protect or
preserve the rights of the Buyer or the Trust in such Common Non-Vehicle
Collateral. The Pooling and Servicing Agreement shall provide that the Trust
is subject to the preceding sentence. If the Seller in any manner assigns or
transfers any rights under, or any obligation evidenced or secured by, a
Nonfloorplan Agreement, the Seller shall make such assignment or transfer
subject to the provisions of this Article VII and shall require such assignee
or transferee to acknowledge that it takes such assignment or transfer subject
to the provisions of this Article VII and to agree that it will require the
same acknowledgment from any subsequent assignee or transferee.
ARTICLE VIII.
Miscellaneous Provisions
------------------------
Section 8.01. Amendment. (a) This Agreement may be amended from time
to time by the Seller and the Buyer; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel for the Seller addressed and
delivered to the Trustee, adversely affect in any material respect the
interests of any Investor Certificateholder. The absence of such material
adverse effect may be evidenced by (i) a certificate from each applicable
Rating Agency that the ratings then in effect with respect to the affected
Investor Certificates has not been reduced, suspended or withdrawn or (ii) an
Opinion of Counsel for the Seller, addressed and delivered to the Trustee.
(b) This Agreement may also be amended from time to time by the Buyer
and Seller with the consent of the Holders of Investor Certificates evidencing
not less than 66-2/3% of the aggregate unpaid principal amount of the Investor
Certificates of all materially adversely affected Series, 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
Seller; provided, however, that no such amendment shall (i) reduce in any
manner the amount of or delay the timing of any distributions to be made to
Investor Certificateholders or deposits of amounts to be so distributed with
the amount available under any Enhancement without the consent of each
affected Investor Certificateholder, (ii) change the definition of or the
manner of calculating the interest of any Investor Certificateholders without
the consent of each affected Certificateholder, (iii) reduce the aforesaid
percentage required to consent to any such amendment without the consent of
each Certificateholder or (iv) adversely affect the rating of any Series or
Class by any Rating Agency without the consent of the Holders of Investor
Certificates of such Series or Class evidencing not less than 66-2/3% of the
aggregate unpaid principal amount of the Investor Certificates of such Series
or Class. Any amendment to be effected pursuant to this paragraph shall be
deemed to materially adversely affect all outstanding Series, other than any
Series with respect to which such action shall not, as evidenced by an Opinion
of Counsel for the Seller, addressed and delivered to the Trustee, adversely
affect in any material respect the interests of any Investor Certificateholder
of such Series. The Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Trustee's rights, duties or immunities under
this Agreement or otherwise.
(c) Promptly after the execution of any such amendment or consent
(other than an amendment pursuant to paragraph (a)), the Seller shall furnish
notification of the substance of such amendment to each Investor
Certificateholder, each Enhancement Provider, each Agent and each Rating
Agency.
(d) It shall not be necessary for the consent of Investor
Certificateholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Investor Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe.
(e) Notwithstanding anything in this Section to the contrary, no
amendment may be made to this Agreement which would adversely affect in any
material respect the interests of any Enhancement Provider without the consent
of such Enhancement Provider.
Section 8.02. Protection of Right, Title and Interest to Receivables.
(a) The Seller shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the Buyer's right, title and interest to the Receivables
and Related Security relating thereto to be promptly recorded, registered and
filed, and at all times to be kept recorded, registered and filed, all in such
manner and in such places as may be required by law fully to preserve and
protect the right, title and interest of the Buyer hereunder. The Seller shall
deliver to the Buyer file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. The Buyer shall cooperate
fully with the Seller in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent
of this Section 8.02(a).
(b) Within 30 days after the Seller makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with Section 8.02(a) seriously
misleading within the meaning of Section 9-402(7) of the UCC as in effect in
the State of Michigan (or, if applicable, the corresponding Section of the UCC
as may be in effect in such other jurisdiction where the Seller's Chief
Executive Officers or books or records relating to the Receivables are
located), the Seller shall give the Buyer and any Agent notice of any such
change and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Buyer's security interest in the
Receivables and the proceeds thereof.
(c) The Seller will give the Buyer prompt written notice of any
relocation of any office at which it keeps records concerning the Receivables
or of its principal executive office and whether, as a result of such
relocation, the applicable provisions of the UCC would require the filing of
any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall file such financing statements or
amendments as may be necessary to perfect or to continue the perfection of the
Buyer's security interest in the Receivables and the proceeds thereof. The
Seller will at all times maintain its principal executive officer within the
United States of America.
(d) The Seller will deliver to the Buyer: (i) upon the execution and
delivery of each amendment of this Agreement, an Opinion of Counsel to the
effect specified in Exhibit B; (ii) on each Addition Date on which any
Additional Accounts are to be included as the Accounts pursuant to Section
2.04 hereof, an Opinion of Counsel substantially in the form of Exhibit C; and
(iii) on or before April 30 of each year, beginning with April 30, 1998, an
Opinion of Counsel dated as of a date during such 90-day period, substantially
in the form of Exhibit C.
Section 8.03. Limited Recourse. Notwithstanding anything to the
contrary contained herein, the obligations of the Buyer hereunder shall not be
recourse to the Buyer (or any person or organization acting on behalf of the
Buyer or any affiliate, officer or director of the Buyer), other than to (a)
the portion of the Transferor's Interest on any date of determination which is
in excess of the Required Participation Amount and (b) any other assets of the
Buyer not pledged to third parties or otherwise encumbered in a manner
permitted by the Buyer's Certificate of Incorporation; provided, however, that
any payment by the Buyer made in accordance with this Section 8.03 shall be
made only after payment in full of any amounts that the Seller is obligated to
deposit in the Collection Account pursuant to this Agreement; provided further
that the Investor Certificateholders shall be entitled to the benefits of the
subordination of the Collections allocable to the Transferor's Interest to the
extent provided in the Supplements.
Section 8.04. No Petition. The Seller hereby covenants and agrees
that it will not at any time institute against the Buyer any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar
law.
Section 8.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 8.06. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, return receipt
requested, to the parties at such addresses specified in the Pooling and
Servicing Agreement.
Section 8.07. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or rights of the Certificateholders.
Section 8.08. Assignment. Notwithstanding anything to the contrary
contained herein, this Agreement may not be assigned by the Seller without the
prior consent of the Buyer and the Trustee. The Buyer may assign its rights,
remedies, powers and privileges under this Agreement to the Trust pursuant to
the Pooling and Servicing Agreement.
Section 8.09. Further Assurances. The Seller agrees to do and
perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Buyer more fully
to effect the purposes of this Agreement, including the execution of any
financing statements or continuation statements relating to the Receivables
for filing under the provisions of the UCC of any applicable jurisdiction.
Section 8.10. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Buyer, any right, remedy, power
or privilege under this Agreement shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege under
this Agreement preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers
and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 8.11. Counterparts. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
Section 8.12. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders
and the other Beneficiaries and their respective successors and permitted
assigns. Except as otherwise provided in this Agreement, no other Person will
have any right or obligation hereunder.
Section 8.13. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section 8.14. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Receivables Purchase Agreement to be duly executed by their respective
officers as of the day and year first above written.
FORD CREDIT AUTO RECEIVABLES LLC,
Buyer,
By________________________________________
Name:
Title:
FORD MOTOR CREDIT COMPANY,
Seller,
By________________________________________
Name:
Title:
EXHIBIT A
TO RPA
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Section 2.04
of the Receivables Purchase Agreement)
ASSIGNMENT No. OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated as of
, , among FORD CREDIT AUTO RECEIVABLES LLC, as buyer (the
"Buyer"), and FORD MOTOR CREDIT COMPANY, as seller (the "Seller"), pursuant to
the Receivables Purchase Agreement referred to below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS the Seller and the Buyer are parties to a Receivables
Purchase Agreement dated as of ___________, 19__ (as amended or supplemented,
the "Receivables Purchase Agreement"):
WHEREAS, pursuant to the Receivables Purchase Agreement, the Seller
wishes to designate Additional Accounts to be included as Accounts and to
convey the Receivables and Related Security of such Additional Accounts,
whether now existing or hereafter created, to the Buyer as part of the corpus
of the Trust (as each such term is defined in the Receivables Purchase
Agreement); and
WHEREAS the Buyer is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW, THEREFORE, the Seller and the Buyer hereby agree as follows:
1. Defined Terms. All capitalized terms used herein shall have the
-------------
meanings ascribed to them in the Receivables Purchase Agreement unless
otherwise defined here i n
"Addition Date" shall mean, with respect to the Additional Accounts
-------------
designated hereby, __________, 19__.
2. Designation of Additional Accounts. The Seller hereby delivers
-----------------------------------
herewith a computer file or microfiche or written list containing a true and
complete list of all such Additional Accounts specifying for each such
Account, as of the Additional Cut-Off Date, its account number, the aggregate
amount of Receivables outstanding in such Account and the aggregate amount of
Principal Receivables in such Account. Such file or list shall, as of the date
of this Assignment, supplement Schedule 1 to the Receivables Purchase
Agreement.
3. Conveyance of Receivables. (a) The Seller does hereby sell,
---------------------------
transfer, assign, set over and otherwise convey, without recourse (except as
expressly provided in the Receivables Purchase Agreement), to the Buyer, on
the Addition Date all of its right, title and interest in, to and under the
Receivables in such Additional Accounts and all Related Security with respect
thereto, owned by the Seller and existing at the close of business on the
Additional Cut-Off Date and thereafter created from time to time, all monies
due or to become due and all amounts received with respect thereto and all
proceeds (including "proceeds" as defined in Section 9-306 of the UCC as in
effect in the State of Michigan) and Recoveries thereof. The foregoing sale,
transfer, assignment, set-over and conveyance does not constitute and is not
intended to result in the creation or an assumption by the Buyer of any
obligation of the Master Servicer, the Seller, Ford or any other Person in
connection with the Accounts, the Receivables or under any agreement or
instrument relating thereto, including any obligation to any Dealers.
(b) In connection with such sale, the Seller agrees to record and
file, at its own expense, a financing statement on form UCC-1 (and
continuation statements when applicable) with respect to the Receivables now
existing and hereafter created for the sale of chattel paper (as defined in
Section 9-105 of the UCC as in effect in any state where the Seller's or the
Master Servicer's chief executive offices or books and records relating to the
Receivables are located) meeting the requirements of applicable state law in
such manner and in such jurisdictions as are necessary to perfect the sale and
assignment of the Receivables and the Related Security to the Buyer, and to
deliver a file-stamped copy of such financing statements or other evidence of
such filing to the Buyer on or prior to the Addition Date. In addition, the
Seller shall cause to be timely filed in the appropriate filing office any
form UCC-1 financing statement and continuation statement necessary to perfect
any sale of Receivables to the Seller. The Buyer shall be under no obligation
whatsoever to file such financing statement, or a continuation statement to
such financing statement, or to make any other filing under the UCC in
connection with such sale. The parties hereto intend that the sales of
Receivables effected by this Agreement be sales.
(c) In connection with such sale, the Seller further agrees, at its
own expense, on or prior to the Addition Date, to indicate in its computer
files that the Receivables created in connection with the Additional Accounts
designated hereby have been sold and the Related Security assigned to the
Buyer pursuant to this Assignment and sold to the Trust pursuant to the
Pooling and Servicing Agreement for the benefit of the Certificateholders and
the other Beneficiaries.
4. Acceptance by Buyer. Subject to the satisfaction of the conditions
-------------------
set forth in Section 6 of this Assignment, the Buyer hereby acknowledges its
acceptance of all right, title and interest to the property, now existing and
hereafter created, conveyed to the Buyer pursuant to Section 3(a) of this
Assignment. The Buyer further acknowledges that, prior to or simultaneously
with the execution and delivery of this Assignment, the Seller delivered to
the Buyer the computer file or microfiche or written list relating to the
Additional Accounts described in Section 2 of this Assignment.
5. Representations and Warranties of the Seller. The Seller hereby
----------------------------------------------
represents and warrants to the Buyer, on behalf of the Trust, as of the date
of this Assignment and as of the Addition Date that:
(a) Legal, Valid and Binding Obligation. This Assignment constitutes
-----------------------------------
a legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting creditors' rights in
general and except as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity);
(b) Organization and Good Standing. The Seller is a corporation duly
------------------------------
organized and validly existing and in good standing under the law of the State
of Delaware and has, in all material respects, full corporate power, authority
and legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted, and
to execute, deliver and perform its obligations under this Assignment;
(c) Due Qualification. The Seller is duly qualified to do business
------------------
and, where necessary, is in good standing as a foreign corporation (or is
exempt from such requirement) and has obtained all necessary licenses and
approvals in each jurisdiction in which the conduct of its business requires
such qualification except where the failure to so qualify or obtain licenses
or approvals would not have a material adverse effect on its ability to
perform its obligations hereunder;
(d) Eligible Accounts. Each Additional Account designated hereby is
------------------
an Eligible Account;
(e) Selection Procedures. No selection procedures believed by the
---------------------
Seller to be adverse to the interests of the Beneficiaries were utilized in
selecting the Additional Accounts designated hereby;
(f) Insolvency. As of the Notice Date and the Addition Date, the
----------
Seller is not insolvent nor, after giving effect to the conveyance set forth
in Section 3 of this Assignment, will it have been made insolvent, nor is it
aware of any pending insolvency;
(g) Valid Transfer. This Assignment constitutes a valid sale,
---------------
transfer and assignment to the Buyer of all right, title and interest of the
Seller in the Receivables and the Related Security and the proceeds thereof
and upon the filing of the financing statements described in Section 3 of this
Assignment with the Secretary of State of the State of Michigan and other
applicable states and, in the case of the Receivables and the Related Security
hereafter created and the proceeds thereof, upon the creation thereof, the
Buyer shall have a first priority perfected ownership interest in such
property;
(h) Due Authorization. The execution and delivery of this Assignment
-----------------
and the consummation of the transactions provided for or contemplated by this
Assignment have been duly authorized by the Seller by all necessary corporate
action on the part of the Seller;
(i) No Conflict. The execution and delivery of this Assignment, the
-----------
performance of the transactions contemplated by this Assignment and the
fulfillment of the terms hereof, will not conflict with, result in any breach
of any of the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a material default under, any indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which the
Seller is a party or by which it or its properties are bound;
(j) No Violation. The execution and delivery of this Assignment by
------------
the Seller, the performance of the transactions contemplated by this
Assignment and the fulfillment of the terms hereof will not conflict with or
violate any material Requirements of Law applicable to the Seller;
(k) No Proceedings. There are no proceedings or, to the best
---------------
knowledge of the Seller, investigations pending or threatened against the
Seller before any Governmental Authority (i) asserting the invalidity of this
Assignment, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Assignment, (iii) seeking any determination
or ruling that, in the reasonable judgment of the Seller, would materially and
adversely affect the performance by the Seller of its obligations under this
Assignment, (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Assignment or (v)
seeking to affect adversely the income tax attributes of the Trust under the
United States Federal or any State income, single business or franchise tax
systems;
(l) Record of Accounts. As of the Addition Date, Schedule 1 to this
------------------
Assignment is an accurate and complete listing in all material respects of all
the Additional Accounts as of the Additional Cut-Off Date and the information
contained therein with respect to the identity of such Accounts and the
Receivables existing thereunder is true and correct in all material respects
as of the Additional Cut-Off Date;
(m) No Liens. Each Receivable and all Related Security existing on
--------
the Addition Date has been conveyed to the Buyer free and clear of any Lien;
(n) All Consents Required. With respect to each Receivable and all
----------------------
Related Security existing on the Addition Date, all consents, licenses,
approvals or authorizations of or registrations or declarations with any
Governmental Authority required to be obtained, effected or given by the
Seller in connection with the conveyance of such Receivable or Related
Security to the Trust, the execution and delivery of this Assignment and the
performance of the transactions contemplated hereby have been duly obtained,
effected or given and are in full force and effect; and
(o) Eligible Receivables. On the Additional Cut-Off Date, each
---------------------
Receivable conveyed to the Trust as of such date is an Eligible Receivable or,
if such Receivable is not an Eligible Receivable, such Receivable is conveyed
to the Buyer in accordance with Section 2.08 of the Receivables Purchase
Agreement.
6. Conditions Precedent. The acceptance of the Trustee set forth in
---------------------
Section 4 of this Assignment is subject to the satisfaction, on or prior to
the Addition Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
-------------------------------
warranties made by the Seller in Section 5 of this Assignment shall be true
and correct as of the date of this Assignment and as of the Addition Date;
(b) Agreement. Each of the conditions set forth in Section 2.04(b) of
---------
the Receivables Purchase Agreement (other than Sections 2.04 (vi), (viii) and
(ix) in the case of Automatic Additional Accounts designated by the Seller
pursuant to Section 2.05 (b)(ii) of the Pooling and Servicing Agreement)
applicable to the designation of the Additional Accounts to be designated
hereby shall have been satisfied; and
(c) Addition Information. The Seller shall have delivered to the
---------------------
Buyer such information as was reasonably requested by the Buyer to satisfy
itself as to the accuracy of the representation and warranty set forth in
Section 5(d) of this Assignment.
7. Ratification of Agreement. As supplemented by this Assignment, the
-------------------------
Receivables Purchase Agreement is in all respects ratified and confirmed and
the Receivables Purchase Agreement as so supplemented by this Assignment shall
be read, taken and construed as one and the same instrument.
8. Counterparts. This Assignment may be executed in two or more
------------
counterparts (and by different parties in separate counterparts), each of
which shall be an original but all of which together shall constitute one and
the same instrument
9. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, AND THE OBLIGATIONS RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Assignment to be duly executed and delivered by their respective duly
authorized officers as of the day and the year first above written.
FORD CREDIT AUTO RECEIVABLES
LLC, as Buyer,
By:______________________________________
Name:
Title:
FORD MOTOR CREDIT COMPANY, as
Seller,
By:______________________________________
Name:
Title:
EXHIBIT B
TO RPA
FORM OF OPINION OF COUNSEL
(As required by Section 8.02(d)(i)
----------------------------------
of the Receivables Purchase Agreement)
--------------------------------------
(a) The Amendment to the Receivables Purchase Agreement, attached
hereto as Schedule 1 (the "Amendment"), has been duly authorized, executed and
delivered by the Seller and constitutes the legal, valid and binding agreement
of the Seller, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally from time to time in effect. The enforceability of the Seller's
obligations is also subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(b) The Amendment has been entered into in accordance with the terms
and provisions of Section 7.01 of the Receivables Purchase Agreement.
(c) The Amendment will not adversely affect in any material respect
the interests of the Investor Certificateholders. [Include this clause (iii)
only in the case of amendments effected pursuant to Section 8.01(a) of the
Receivables Purchase Agreement.]
EXHIBIT C
TO RPA
FORM OF OPINION OF COUNSEL
Provisions to be Included in Opinion of Counsel to be
-----------------------------------------------------
Delivered Pursuant to Section 8.02(d)(ii) or (iii) of the
---------------------------------------------------------
Receivables Purchase Agreement*
-------------------------------
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in the
opinion of counsel to Ford Motor Credit Company (the "Seller"), delivered on
any Closing Date. Capitalized terms used but not defined herein are used as
defined in the Receivables Purchase Agreement, dated as of ______________,
1997 (the "Receivables Purchase Agreement"), between Ford Credit Auto
Receivables LLC, as buyer (the "Buyer") and the Seller.
[(a) The Assignment has been duly authorized, executed and delivered
by the Seller, and constitutes the valid and legally binding obligation of the
Seller, enforceable against the Seller in accordance with its terms.]
(b) Assuming the Receivables [in the Additional Accounts] are created
under, and are evidenced solely by, Floorplan Financing Agreements, such
Receivables will constitute "chattel paper" as defined under Section 9-105 of
the UCC.
(c) With respect to Receivables [in the Additional Accounts] in
existence on the date hereof and with respect to Receivables in the Additional
Accounts] that come into existence after the date hereof, upon the creation of
such Receivables and the subsequent transfer of such Receivables to the Buyer
free and clear of any Liens in accordance with the Receivables Purchase
Agreement and receipt by the Seller of the consideration therefor required
pursuant to the Receivables Purchase Agreement, a bankruptcy court having
jurisdiction over the Seller (i) would not be entitled to compel the turnover
of such Receivables or the proceeds thereof to the Seller under Section 542 of
the Bankruptcy Code and (ii) would not be entitled to treat such Receivables
or the proceeds thereof as assets included in the estate of the Seller
pursuant to Section 541 of the Bankruptcy Code or subject to the automatic
stay provision of Section 362(a) of the Bankruptcy Code.
_______________
* Include bracketed language only in the case of additions of Accounts
effected pursuant to Section 2.04 of the Receivables Purchase Agreement.
EXHIBIT D
TO RPA
FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVAL ACCOUNTS
(As required by Section 2.06 of the Receivables
Purchase Agreement referred to below)
REASSIGNMENT NO. OF RECEIVABLES, dated
as of , , by and between FORD
CREDIT AUTO RECEIVABLES LLC, as buyer (the
"Buyer"), and FORD MOTOR CREDIT COMPANY, as
seller (the "Seller"), pursuant to the
Receivables Purchase Agreement referred to
below.
WITNESSETH:
WHEREAS the Seller and the Buyer are parties to the Receivables
Purchase Agreement dated as of ___________, 1997 (as amended or supplemented,
the "Receivable Purchase Agreement");
WHEREAS, pursuant to the Receivables Purchase Agreement, the Seller
wishes to remove all Receivables from certain Accounts and the Related
Security thereof (the "Removal Accounts") and to cause the Buyer to reconvey
the Receivables of such Removal Accounts and such Related Security, whether
now existing or hereafter created, and all amounts currently held by the Buyer
or thereafter received by the Trust in respect of such Removal Accounts, from
the Buyer to the Seller (as each such term is defined in the Receivables
Purchase Agreement); and
WHEREAS the Buyer is willing to accept such removal and to reconvey
the Receivables in the Removal Accounts, such Related Security and any related
amounts held or received by the Trust subject to the terms and conditions
hereof.
NOW, THEREFORE, the Seller and the Buyer hereby agree as follows:
1. Defined Terms. All terms defined in the Agreement and used herein
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shall have such defined meanings when used herein, unless otherwise defined
herein.
"Removal Date" shall mean, with respect to the Removal Accounts
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designated hereby,_____________________, _______________.
2. Notice of Removal Accounts. (a) Not less than five Business Days
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prior to the Removal Date, the Seller shall furnish to the Buyer, any Agent,
any Enhancement Providers and the Rating Agencies a written notice specifying
the Determination Date (which may be the Determination Date on which such
notice is given) on which removal of the Receivables of one or more Accounts
will occur, such date being a Removal Date.
(b) On or before the fifth business day after the Removal Date, the
Seller shall furnish to the Trustee a computer file, microfiche list or other
list of the Removal Accounts that were removed on the Removal Date, specifying
for each Removal Accounts as of the date of the Removal Notice its number, the
aggregate amount outstanding in such Removal Accounts and the aggregate amount
of Principal Receivables therein and represent that such computer file,
microfiche list or other list of the Removal Accounts is true and complete in
all material respects. Such file or list shall be marked as Schedule 1 to this
Reassignment and shall be incorporated into and made a part of this
Reassignment as of the Removal Date and shall amend Schedule 1 to the
Receivables Purchase Agreement.
3. Conveyance of Receivables and Accounts. (a) The Buyer does hereby
transfer, assign, set over and otherwise convey to the Seller, without
recourse, representation or warranty on and after the Removal Date, all right,
title and interest of the Trust in, to and under all Receivables now existing
at the close of business on the Removal Date and thereafter created from time
to time until the termination of the Trust in Removal Accounts designated
hereby, all Related Security thereof, all monies due or to become due and all
amounts received with respect thereto (including all Non-Principal
Receivables), all proceeds (as defined in Section 9-306 of the UCC as in
effect in the State of Michigan and Recoveries) thereof relating thereto.
(b) If requested by the Seller, in connection with such transfer, the
Buyer agrees to execute and deliver to the Seller on or prior to the date of
this Reassignment, a termination statement with respect to the Receivables
existing at the close of business on the Removal Date and thereafter created
from time to time and Related Security thereof in the Removal Accounts
reassigned hereby (which may be a single termination statement with respect to
all such Receivables and Related Security) evidencing the release by the Trust
of its lien on the Receivables in the Removal Accounts and the Related
Security, and meeting the requirements of applicable state law, in such manner
and such jurisdictions as are necessary to remove such lien.
4. Acceptance by Buyer. The Buyer hereby acknowledges that, prior to
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or simultaneously with the execution and delivery of this Reassignment, the
Seller delivered to the Buyer the computer file or such microfiche or written
list described in Section 2(b) of this Reassignment.
5. Representations and Warranties of the Seller. The Seller hereby
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represents and warrants to the Buyer as of the date of this Reassignment and
as of the Removal Date:
(a) Legal, Valid and Binding Obligation. This Reassignment
-----------------------------------------
constitutes a legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights generally and except as such enforceability
may be limited by general principles of equity (whether considered in a suit
at law or in equity);
(b) No Early Amortization Event. The removal of the Accounts hereby
-----------------------------
removed shall not, in the reasonable belief of the Seller, cause an Early
Amortization Event to occur or cause the Pool Balance to be less than the
Required Participation Amount;
(c) Selection Procedures. No selection procedures believed by the
---------------------
Seller to be adverse to the interests of the Beneficiaries were utilized in
selecting the Accounts to be removed; and
(d) True and Complete List. The list of Removal Accounts described in
----------------------
Section 2(b) of this Assignment is, as of the Removal Date, true and complete
in all material respects.
provided, however, that in the event that the removal on such Removal Date
relates solely to Ineligible Accounts, the Seller shall be deemed to make only
the representations and warranties contained in paragraph 5(a) above.
6. Condition Precedent. In addition to the conditions precedent set
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forth in Section 2.06 of the Receivables Purchase Agreement, the obligation of
the Buyer to execute and deliver this Reassignment is subject to the Seller
having delivered on or prior to the Removal Date to the Buyer, any Agent, and
any Enhancement Providers an Officers' Certificate certifying that (i) as of
the Removal Date, all requirements set forth in Section 2.06 of the Agreement
for removing such Accounts and reconveying the Receivables of such Removal
Accounts and the Related Security, whether existing at the close of business
on the Removal Date or thereafter created from time to time until the
termination of the Trust, have been satisfied, and (ii) each of the
representations and warranties made by the Seller in Section 5 hereof is true
and correct as of the date of this Reassignment and as of the Removal Date.
The Buyer may conclusively rely on such Officers' Certificate shall have no
duty to make inquiries with regard to the matters set forth therein and shall
incur no liability in so relying.
7. Ratification of Agreement. As supplemented by this Reassignment,
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the Receivables Purchase Agreement is in all respects ratified and confirmed
and the Receivables Purchase Agreement as so supplemented by this Reassignment
shall be read, taken and construed as one and the same instrument.
8. Counterparts. This Reassignment may be executed in two or more
------------
counterparts, and by different parties on separate counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.
9. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE
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WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the undersigned have caused this Reassignment to
be duly executed and delivered by their respective duly authorized officer on
the day and year first above written.
FORD CREDIT AUTO RECEIVABLES LLC,
Buyer
By:____________________________________
Name:
Title:
FORD MOTOR CREDIT COMPANY, Seller
By:____________________________________
Name:
Title:
EXHIBIT 5.1
October __, 1998
Ford Credit Auto Receivables LLC
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Loan Master Trust II
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel for Ford Credit Auto Receivables LLC,
a Delaware limited liability company (the "Company"), in connection with the
preparation of the registration statement on Form S-3 (the "Registration
Statement") relating to the proposed issuance of the Ford Credit Auto Loan
Master Trust II Auto Loan Asset Backed Certificates (the "Certificates") from
time to time in one or more series (each, a "Series"). Amendment No. 1 to the
Registration Statement is being filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). As set forth in the Registration Statement, each Series of Certificates
will be issued under and pursuant to the terms and conditions of a separate
supplement (each, a "Series Supplement") to the pooling and servicing agreement
dated as of September 30, 1997 (the "Agreement"), among the Company, as
transferor, Ford Motor Credit Company, as master servicer, and The Chase
Manhattan Bank, as trustee (the "Trustee").
We have examined a copy of the Agreement and the form of Series
Supplement, as filed as exhibits to the Registration Statement, and the forms of
Certificates included therein and such other records, documents and statutes as
we have deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that when a Series of
Certificates has been duly authorized by all necessary action on the part of the
Company (subject to the terms thereof being otherwise in compliance with
applicable law at such time), duly executed and authenticated by the Trustee in
accordance with the terms of the Agreement and the related Series Supplement and
issued and delivered against payment therefor as described in the Registration
Statement, such Series of Certificates will be legally and validly issued, fully
paid and nonassessable, and the holders thereof will be entitled to the benefits
of the Agreement and the related Series Supplement.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the laws of the State of New York (excluding
choice of law principles therein) and the federal laws of the United States of
America.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Legal Matters" in each Prospectus forming a part of the Registration Statement,
without admitting that we are "experts" within the meaning of the Act or the
Rules and Regulations of the Commission issued thereunder, with respect to any
part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Brown & Wood LLP
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Daniel E. Meyer, being the
Principal Accounting/Financial Officer of Ford Credit Auto Receivables LLC, a
Delaware limited liability company (the "Company"), hereby makes H.D. Smith,
R.P. Conrad, S.P. Thomas, J.P. Burkhard and J.W. Bosscher, and each of them, his
attorneys-in-fact and agents, with full power and authority of substitution and
resubstitution, in any and all capacities, to execute for him and on his behalf
the Registration Statement on Form S-3 relating to which this power of attorney
is filed as an exhibit, and any and all pre-effective and post-effective
amendments or supplements to the foregoing Registration Statement and any other
documents and instruments incidental thereto, and to deliver and file the same,
with all exhibits thereto, and all documents and instruments in connection
therewith, with the Securities and Exchange Commission, and with each exchange
on which any class of securities of the Company is registered, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing that said attorneys-in-fact and
agents, and each of them, deem advisable or necessary to enable the Company to
effectuate the intents and purposes hereof, and Daniel E. Meyer hereby fully
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, or their respective substitutes, if any, shall do or cause to be done by
virtue hereof.
/s/ Daniel E. Meyer
Daniel E. Meyer
