<PAGE> 1
REGISTRATION NO. 33-54673
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
ON
FORM S-1
TO
REGISTRATION STATEMENT
ON
FORM S-3
UNDER
THE SECURITIES ACT OF 1933
------------------------
FORD CREDIT AUTO LOAN MASTER TRUST
(IN WHICH THE CERTIFICATES EVIDENCE UNDIVIDED INTERESTS)
FORD CREDIT AUTO RECEIVABLES CORPORATION
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
Delaware 6146 38-2973806
(State of Incorporation) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
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)
------------------------
J.D. BRINGARD, ESQ.
FORD MOTOR CREDIT COMPANY
The American Road
Dearborn, Michigan 48121
(313-594-7742)
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
STEPHEN B. ESKO, ESQ.
BROWN & WOOD
One World Trade Center
New York, New York 10048
------------------------
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 any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed
Certificates............. $1,000,000,000 100% $1,000,000,000 $344,827.59(2)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee.
(2) Of this amount, $344.83 has already been paid.
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET TO FORM S-1 FURNISHED
PURSUANT TO ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Front Cover Page of Registration Statement;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Special Considerations
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ *
6. Dilution................................... *
7. Selling Security Holders................... *
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Description of the Certificates;
Underwriting
9. Description of Securities to be
Registered................................. Prospectus Summary; Description of the
Certificates
10. Interests of Named Experts and Counsel..... *
11. Information with Respect to the
Registrant................................. Prospectus Summary; Ford Credit Auto
Receivables Corporation and the Trust; The
Dealer Floorplan Financing Business; The
Accounts; Ford Motor Credit Company
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ *
</TABLE>
- -------------------------
* Not Applicable
<PAGE> 3
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 26, 1994
$1,000,000,000
FORD CREDIT AUTO LOAN MASTER TRUST
SERIES 1994-1, FLOATING RATE AUTO LOAN
ASSET BACKED CERTIFICATES
(LOGO)
FORD CREDIT AUTO RECEIVABLES CORPORATION
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
------------------------
The Series 1994-1, Floating Rate Auto Loan Asset Backed Certificates (the
"Certificates") offered hereby evidence undivided interests in certain assets of
the Ford Credit Auto Loan Master Trust (the "Trust") created pursuant to a
Pooling and Servicing Agreement among Ford Credit Auto Receivables Corporation,
as the seller ("FCAR" or the "Seller"), Ford Motor Credit Company, as servicer
("Ford Credit" or the "Servicer"), and Chemical Bank, as trustee. The Trust
assets include wholesale receivables (the "Receivables") generated 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 assets of the Trust will be
allocated to 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 Seller will own the remaining
interest in the Trust not represented by the Certificates or the certificates of
any other Series issued by the Trust (the "Seller's Interest"). From time to
time, subject to certain conditions, the Seller may offer other series of
certificates (each, a "Series"), which may have terms significantly different
from the terms of the Certificates.
Interest with respect to the Certificates will accrue from the Closing Date, and
is payable quarterly on or about the fifteenth day of January, April, July and
October, commencing in October 1994, and on the related maturity date or, under
certain limited circumstances described herein, monthly on or about the
fifteenth day of each month. The principal of the Certificates is scheduled to
be paid on the July 1999 Distribution Date.
The Seller's Interest will be subordinated to the rights of the
Certificateholders to the limited extent of the Available Subordinated Amount
(or, in some circumstances, the Aggregate Available Subordinated Amount) as
described herein.
Prospective investors should consider the factors set forth under "Special
Considerations".
------------------------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE 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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) THE SELLER(1)(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Certificate......................... % % %
- ---------------------------------------------------------------------------------------------------------------
Total................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, at the Certificate Rate from August , 1994.
(2) Ford Credit has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting expenses, estimated to be $700,000.
------------------------
The Certificates are offered subject to prior sale, and subject to the
Underwriters' right to reject orders in whole or in part. 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 S.A. and the Euroclear System
on or about August , 1994.
------------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
---------------------
The date of this Prospectus is July , 1994.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Seller has filed a Registration Statement (the "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 part of the Registration Statement, does not contain all of the
information contained in the Registration Statement and the exhibits thereto.
For further information, reference is made to the Registration Statement and
amendments thereof and exhibits thereto, which are available for inspection
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549; 75 Park Place, New York, New
York 10007; and Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of the Registration Statement and amendments thereof and
exhibits thereto may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports, containing information concerning the Trust and prepared by
the 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 the
Certificates, pursuant to the Pooling and Servicing Agreement. Such reports may
be available to beneficial owners of Certificates ("Certificate Owners") in
accordance with the regulations and procedures of DTC. See "Description of the
Certificates -- Reports" and "-- Evidence as to Compliance". 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.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Reference is made
to the Index of Principal Terms for the location herein of the definitions of
certain capitalized terms used herein.
Title of Securities........... Series 1994-1, Floating Rate Auto Loan Asset
Backed Certificates (the "Certificates" or
"Series 1994-1").
Issuer........................ Ford Credit Auto Loan Master Trust (the
"Trust").
Seller........................ Ford Credit Auto Receivables Corporation (the
"Seller" or "FCAR"), a wholly-owned subsidiary
of Ford Motor Credit Company.
Servicer...................... Ford Motor Credit Company ("Ford Credit" or,
together with, as applicable, a successor
servicer, the "Servicer"), a wholly-owned
subsidiary of Ford Motor Company ("Ford").
Trustee....................... Chemical Bank (the "Trustee").
The Trust..................... The Trust was formed pursuant to a Pooling and
Servicing Agreement, dated as of December 31,
1991, among FCAR, as Seller, Ford Credit, as
Servicer, and Manufacturers Hanover Trust
Company, predecessor trustee to Chemical Bank,
as supplemented by the Supplement relating to
the Certificates (as supplemented and amended
from time to time, the "Pooling and Servicing
Agreement"). The assets of the Trust include
(a) certain Receivables existing under the
Accounts at the close of business on December
31, 1991 (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 or to be collected in respect
of such Receivables, (c) all funds on deposit
in certain accounts of the Trust, including
funds on deposit in the Excess Funding Account,
the Principal Funding Account, the Interest
Funding Account and the Reserve Fund, (d) the
Interest Rate Swap, (e) any other Enhancement
issued with respect to any other Series (the
drawing on or payment of such Enhancement not
being available to Certificateholders) and (f)
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 in certain parts inventory,
equipment, fixtures, service accounts, realty
and/or a personal guarantee (collectively, the
"Collateral Security") securing the
Receivables. The term "Enhancement" shall mean,
with respect to any Series, any letter of
credit, surety bond, cash collateral account,
guaranteed rate agreement, maturity liquidity
facility, tax protection agreement, interest
rate swap agreement or other similar
arrangement for the benefit of
certificateholders of such Series.
The Accounts.................. The Accounts pursuant to which the Receivables
have been or will be generated are revolving
credit agreements entered into with Ford Credit
by dealers to purchase or finance automobile
and light
3
<PAGE> 6
duty truck inventory. The Accounts are selected
from all such credit agreements of Ford Credit
which meet the criteria provided in the Pooling
and Servicing Agreement (the "Eligible
Accounts"). Under certain circumstances
Accounts may be added to, or removed from, the
Trust. See "The Accounts", "Description of the
Certificates -- Addition of Accounts" and "--
Removal of Accounts".
The Receivables............... The Receivables have arisen or will arise in
the Accounts. The Receivables consist of
advances made directly or indirectly by Ford
Credit to domestic automobile dealers
franchised by Ford and/or other automobile
manufacturers or automobile distributors (the
"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
such automobile manufacturers. 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) has sold and will sell to the Seller 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) has
assigned and will assign its interests in the
Vehicles and the Collateral Security to the
Seller. The Seller in turn has transferred and
will transfer such Receivables and Collateral
Security to the Trust pursuant to the Pooling
and Servicing Agreement. The Seller has also
assigned 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 Seller and transferred by
the Seller 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
uncollectible or otherwise adjusted.
The Certificates.............. The Certificates will be issued in the
aggregate initial principal amount of
$1,000,000,000 (the "Initial Principal
Amount"), in minimum denominations of $1,000
and in integral multiples
4
<PAGE> 7
thereof. Except in certain limited
circumstances as described herein under
"Description of the Certificates -- Definitive
Certificates", the Certificates will only be
available in book-entry form. The Trust's
assets will be allocated in part to the
Certificateholders (the "Certificateholders'
Interest") and to the certificateholders of any
other outstanding Series (such other
certificateholders, together with the
Certificateholders, are referred to as
"certificateholders"), with the remainder
allocated to the Seller (the "Seller's
Interest"). A portion of the Seller's Interest
will be subordinated to the Certificateholders'
Interest, as described below. The Certificates
will evidence an undivided beneficial interest
in assets of the Trust 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 (or in some cases monthly)
payments of interest on the Certificates and to
make the payment of principal on the Expected
Final Payment Date or earlier or later under
certain limited circumstances in an amount up
to the outstanding principal amount of the
Certificates. Interest on the Certificates will
be calculated at a per annum rate (the
"Certificate Rate") equal to Three-Month LIBOR
(calculated as provided herein) plus
basis points ( %). See "Description of the
Certificates -- Interest".
On the date of the initial issuance of the
Certificates (the "Closing Date") the Invested
Amount will equal the Initial Principal Amount
and 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 "Description of the
Certificates -- Excess Funding Account".
The principal amount of the Seller's Interest
may fluctuate as the aggregate amount of the
Receivables balance changes from time to time
and as new Series are issued.
The Certificates will represent beneficial
interests in the Trust only and will not
represent interests in or obligations of Ford
Credit, FCAR or any affiliate thereof. Neither
the Certificates nor the Receivables are
insured or guaranteed by Ford Credit, FCAR or
any affiliate thereof.
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
person acquiring an interest in the
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
Centrale de Livraison de Valeurs Mobilieres
S.A. ("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
5
<PAGE> 8
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 "Description
of the Certificates -- 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 Seller 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 Seller's
Interest must equal or exceed a specified
amount. The issuance of the Certificates
pursuant to the Supplement related thereto will
constitute a New Issuance. The Pooling and
Servicing Agreement also provides that the
Seller may specify, with respect to any Series,
the Principal Terms of the Series. The Seller
may offer any Series to the public or other
investors under 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 United
States federal income and Michigan income and
single business tax purposes, (x) such issuance
will not adversely affect the characterization
of the certificates of any outstanding Series
or class as debt, (y) such issuance will not
cause a taxable event to any certificateholders
and (z) 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 or
any other Series or class of certificates then
outstanding. See "Description of the
Certificates -- New Issuances".
Other Series Issuances........ As of the date hereof the Trust has issued
three Series, the Series 1992-1, 6 7/8% Auto
Loan Asset Backed Certificates ("Series 1992-1"
and with respect to the certificates of such
Series, the "Series 1992-1 Certificates"), the
Series 1992-2, 7 3/8% Auto Loan Asset Backed
Certificates ("Series 1992-2" and with respect
to the certificates of such Series, the "Series
1992-2 Certificates") and the Series 1992-3,
5 5/8% Auto Loan Asset Backed Certificates
("Series 1992-3" and with respect to
certificates of such Series, the "Series 1992-3
Certificates"). See "Annex 1: Other Issuances
of Investor Certificates" for a summary of the
Series 1992-1 Certificates, the Series 1992-2
Certificates and the Series 1992-3
Certificates.
6
<PAGE> 9
Allocations................... The Certificateholders' Interest 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 (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 "Description of the
Certificates -- Allocation Percentages".
Interest Collections, Principal Collections and
Defaulted Receivables not allocated to Series
1994-1 will be allocated to the Seller's
Interest and the certificateholders' interests
in 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 Seller 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 Seller'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 of principal with
respect to 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 Seller or
allocated to any other Series as described
herein. See "Description of the Certificates --
Allocation Percentages -- Principal Collections
for all Series".
Interest...................... Interest on the principal balance of the
Certificates will accrue at the Certificate
Rate and will be payable quarterly to
Certificateholders on the fifteenth day of
January, April, July and October (or, if such
day is not a business day, on the next
succeeding business day) (each, a "Quarterly
Payment Date"), commencing in October 1994;
provided, that, if an Early Amortization Event
or an Asset Composition Event shall have
occurred, interest will be
7
<PAGE> 10
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 fifteenth day of each month (or,
if such date is not a business day, the next
succeeding business day). Certificateholder
Interest Collections will be deposited each
month into a trust account (the "Interest
Funding Account") and used to make interest
payments to the Certificateholders on each
Quarterly Payment Date. Interest payable on a
Quarterly Payment Date will accrue from and
including the preceding Quarterly Payment Date
(or, in the case of the first Quarterly Payment
Date, from and including the Closing Date) to
but excluding such Quarterly Payment Date.
Interest for any Quarterly Payment Date or
Distribution Date will be calculated on the
basis of the actual number of days elapsed
during the related Interest Period and a year
assumed to consist of 360 days, and interest
due but not paid on any Quarterly Payment Date
or Distribution Date will be due on the next
Quarterly Payment Date or Distribution Date, as
the case may be, together with, to the extent
lawfully payable, interest on such amount at
the Certificate Rate plus 200 basis points
(2%). Interest payments on the Certificates
will be derived from Certificateholder Interest
Collections for the related Collection Period,
withdrawals, if any, from the Reserve Fund,
Investment Proceeds, if any, Net Trust Swap
Receipts, if any, and, under certain
circumstances, Available Seller's Collections
to the extent of the Available Subordinated
Amount.
Principal..................... It is expected that the final principal payment
with respect to the Certificates will be made
on the July 1999 Distribution Date (the
"Expected Final Payment Date"). The final
principal payment with respect to the
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. Upon
the occurrence of an Asset Composition Event
described herein, certain principal amounts may
be payable to the Certificateholders.
Asset Composition Event....... An "Asset Composition Event" will occur if
during the Revolving Period for any Series (a)
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 25% of the total assets of the Trust
on each of twelve 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 two
consecutive Determination Dates the sum of all
Eligible Investments and amounts on deposit in
all Series Accounts represents more than 45% of
the total assets of the Trust, 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 for any Series, an
amount equal to the Series 1994-1 Allocation
Percentage of the Asset Correction Amount shall
be distributed in
8
<PAGE> 11
respect of the Certificates on the next
following Distribution Date. At any time, the
"Asset Correction Amount" shall equal the
amount which, if distributed, would result in
compliance with the percentage limitation the
violation of which gave rise to the Asset
Composition Event.
Revolving Period.............. During the Revolving Period, Principal
Collections allocable to the
Certificateholders' Interest generally will be
paid to the Seller, deposited to the Excess
Funding Account or allocated to another Series
(in effect, 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
Seller's Interest or the interest of the
certificateholders of such other Series) in
order to maintain the sum of the Invested
Amount and the amount, if any, in the Excess
Funding Account at a constant level. The
"Revolving Period" will be the period beginning
on June 30, 1994 (the "Series Cut-Off Date")
and ending on the earlier of (x) the day
immediately preceding the Accumulation Period
Commencement Date and (y) the business day
immediately preceding the day on which an Early
Amortization Event occurs. See "Description of
the Certificates -- 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........... Unless an Early Amortization Period commences,
the Certificates will have an accumulation
period (the "Accumulation Period"), which will
commence on the Accumulation Period
Commencement Date, and continue until the
earlier of (a) the commencement of an Early
Amortization Period and (b) the Expected Final
Payment Date. Unless an Early Amortization
Event shall have occurred, the Accumulation
Period will be one, two, three, four or five
month(s) long as described in the following
paragraph. 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 "Description of the Certificates --
Distributions from the Collection Account;
Reserve Fund -- Principal Collections".
On January 15, 1999, the Servicer shall
determine the Accumulation Period Length. The
"Accumulation Period Length" will be one, two,
three, four or five month(s) and will be
calculated as the product, rounded upwards to
the nearest integer, of (a) five and (b) a
fraction, the numerator of which is the
Invested Amount as of January 15, 1999, (after
giving effect to all changes therein on such
date) and the denominator of which is the sum
of such Invested Amount and the invested
amounts as of January 15, 1999, (after giving
effect to all changes therein on such date) of
all other
9
<PAGE> 12
outstanding Series whose respective revolving
periods are not scheduled to end before the
last day of the June 1999 Collection Period. If
the Accumulation Period Length is one month,
two months, three months, four months or five
months, the "Accumulation Period Commencement
Date" shall be the first day of the June 1999
Collection Period, the May 1999 Collection
Period, the April 1999 Collection Period, the
March 1999 Collection Period or the February
1999 Collection Period, respectively.
Notwithstanding the foregoing, the Accumulation
Period Commencement Date shall be February 1,
1999, 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 its
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.
Early Amortization Period..... During the period beginning on the day on which
an Early Amortization Event has occurred and,
except as described below, ending on the
earlier of the payment in full of the
outstanding principal balance of the
Certificates and the Termination Date (the
"Early Amortization Period"), the Revolving
Period or the Accumulation Period, as the case
may be, will terminate and Principal
Collections and certain other amounts allocable
to the Certificateholders' Interest will no
longer be paid to the Seller or the holders of
any other outstanding Series as described above
but instead will be distributed to the
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 "Description
of the Certificates -- Early Amortization
Events" for a description of events that might
result in the commencement of an Early
Amortization Period. During an Early
Amortization Period, distributions of principal
on the Certificates will not be subject to the
Controlled Distribution Amount. See
"Description of the Certificates --
Distributions from the Collection Account;
Reserve Fund -- Principal Collections". In
addition, on the first Special Payment Date (a)
any amounts on deposit in the Interest Funding
Account (as needed to pay accrued interest on
the Certificates) will be paid to the
Certificateholders and (b) any amounts on
deposit in the Excess Funding Account, the
Principal Funding Account and the Interest
Funding Account (after the payment of accrued
interest
10
<PAGE> 13
on such date) will be paid to the
Certificateholders up to the outstanding
principal balance of the Certificates. See
"Description of the Certificates --
Distributions".
The Seller is required to add Receivables to
the Trust under certain circumstances described
under "Description of the Certificates --
Addition of Accounts". The failure of the
Seller to add Receivables when required will
result in the occurrence of an Early
Amortization Event. However, if no other Early
Amortization Event has occurred, the Early
Amortization Period resulting from such failure
will terminate and the Revolving Period will
recommence when the Seller would no longer be
required to add Receivables to the Trust, so
long as the scheduled termination date of the
Revolving Period has not occurred.
Subordination of the Seller's
Interest...................... If the Interest Collections, Investment
Proceeds, Net Trust Swap Receipts, 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 the interest
payable on the 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 for such Distribution Date, Net
Trust Swap Payments, if any, for such
Distribution Date and certain other amounts, a
portion of the Seller's Interest will be
applied to make up such deficiency. Generally,
the amount of the Seller's Interest subject to
such subordination is the Available
Subordinated Amount. The Available Subordinated
Amount for the first Determination Date will be
equal to the Required Subordinated Amount. The
"Required Subordinated Amount" 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. The "Subordinated
Percentage" will initially equal the percentage
equivalent of a fraction, the numerator of
which is 10% and the denominator of which will
be the excess of 100% over 10%. The Available
Subordinated Amount for subsequent Distribution
Dates will be determined pursuant to the
calculation described under "Description of the
Certificates -- Allocation of Collections;
Deposits in Collection Accounts; Limited
Subordination of Seller's Interest". The
Available Subordinated Amount will fluctuate
based on the increase and decrease, if any, in
the Invested Amount and the corresponding
decrease and increase in the amount, if any, in
the Excess Funding Account and the additions
and subtractions specified in the calculation
referred to above. The Seller 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 lesser of (i) $11,111,111 or (ii)
1.11% of the Invested Amount on such date. Any
such increase may have the effect of avoiding
an Early Amortization Event. The Available
Subordinated Amount, to the extent it was
reduced because of any application of the
Seller'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 Seller as
11
<PAGE> 14
described under "Description of the
Certificates -- Distributions from the
Collection Account; Reserve Fund -- Excess
Servicing".
Servicing..................... The Servicer (initially, Ford Credit) is
responsible for servicing, managing and making
collections on the Receivables and will, except
as provided below, 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 with respect
to the related Collection Period. In certain
circumstances, the 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 "Description of the
Certificates -- Allocation of Collections;
Deposits in Collection Account; Limited
Subordination of Seller's Interest".
On the second business day preceding each
Distribution Date (each a "Determination
Date"), the 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, to the holders of other
outstanding Series or to the Seller as
described herein. See "Description of the
Certificates -- Allocation of Collections;
Deposits in Collection Account; Limited
Subordination of Seller's Interest" and
"Special Considerations -- Certain Legal
Aspects".
In certain limited circumstances Ford Credit
may resign or be removed as 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 Servicer to any
of its affiliates, but any such delegation will
not relieve the Servicer of its obligations
under the Pooling and Servicing Agreement. The
Servicer will receive a monthly servicing fee
and certain other amounts as described herein
as servicing compensation from the Trust. See
"Description of the Certificates -- Servicing
Compensation and Payment of Expenses".
Mandatory Reassignment and
Transfer of Certain
Receivables................. The Seller has made certain representations and
warranties in the Pooling and Servicing
Agreement with respect to the Receivables in
its capacity as Seller and Ford Credit has made
certain representations and warranties in the
Pooling and Servicing Agreement in its capacity
as Servicer. If the Seller 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 or the interests
of the holders of other outstanding Series
therein, the Certificateholders' Interest and
such other certificateholders' interests in
such Receivables will, subject to certain
conditions specified herein, be reassigned to
the Seller. If Ford Credit, as Servicer, fails
12
<PAGE> 15
to comply in all material respects 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 or such other
certificateholders' interests therein, all
Receivables affected will be purchased by Ford
Credit. In the event of a transfer of servicing
obligations to a successor Servicer, such
successor Servicer, rather than Ford Credit,
would be responsible for any failure to comply
with the Servicer's covenants and warranties
arising thereafter.
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
Quarterly Payment Date, interest at the
Certificate Rate on the outstanding principal
balance of the Certificates as of the preceding
Quarterly Payment 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 (x) One-Month LIBOR (calculated as
described herein) and (y) the Prime Rate less
1.5%, on the outstanding principal balance of
the Certificates as of the preceding
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 Seller to the extent of the Swap
Available Subordinated Amount. See "Allocation
of Collections; Deposits in Collection Account;
Limited Subordination of Seller's Interest --
Swap Available Subordinated Amount".
Tax Matters................... In the opinion of special tax counsel for the
Seller and the Trust, the Certificates will be
characterized as debt for United States federal
income tax purposes and, in the opinion of
Michigan counsel for the Seller and the Trust,
the Certificates will be characterized as debt
for Michigan income and single business tax
purposes. Each Certificateholder, by the
acceptance of a Certificate,
13
<PAGE> 16
will agree to treat the Certificates as debt
for United States federal, state and local
income and single business tax purposes. See
"Certain Tax Matters" for additional
information concerning the application of
United States federal and Michigan 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
securities" exemption described herein or the
possible application of other ERISA prohibited
transaction exemptions described herein. See
"ERISA Considerations".
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 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. 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 "Special
Considerations -- Ratings of the Certificates".
Series Cut-Off Date........... June 30, 1994.
14
<PAGE> 17
SPECIAL CONSIDERATIONS
Limited Liquidity. There is currently no market for the Certificates.
Merrill Lynch & Co., CS First Boston Corporation, Goldman, Sachs & Co., J.P.
Morgan Securities Inc. and Salomon Brothers Inc (the "Underwriters") currently
intend to make a market in the Certificates, but no Underwriter is under an
obligation to do so. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide the
Certificateholders with liquidity of investment or that it will continue for the
life of the Certificates.
Certain Legal Aspects. There are certain limited circumstances under the
Uniform Commercial Code (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. See "Certain Legal Aspects of the
Receivables -- Transfer of Receivables". Under the Receivables Purchase
Agreement, Ford Credit has warranted to the Seller and, under the Pooling and
Servicing Agreement, the Seller has warranted to the Trust that the Receivables
have been or will be transferred free and clear of the lien of any third party.
Each of Ford Credit and the Seller has also covenanted that it will not sell,
pledge, assign, transfer or grant any lien on any Receivable or, except as
described under "Description of the Certificates -- The Seller's Certificate",
the Seller's Certificate (or any interest therein) other than to the Trust.
Ford Credit has warranted to the Seller in the Receivables Purchase
Agreement that the sale of the Receivables by it to the Seller is a valid sale
of the Receivables to the Seller. In addition, Ford Credit and the Seller have
and will treat the transactions described herein as a sale of the Receivables to
the Seller and Ford Credit has and will take all actions that are required under
Michigan law to perfect the Seller's ownership interest in the Receivables. See
"Certain Legal Aspects of the Receivables -- Transfer of 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 to the
Seller should be recharacterized as a pledge of such Receivables to secure a
borrowing of such debtor, then delays in payments of collections of Receivables
to the Seller could occur or (should the court rule in favor of any such
trustee, debtor or creditor) reductions in the amount of such payments could
result. If the transfer of Receivables to the Seller is recharacterized as a
pledge, a tax or government lien on the property of Ford Credit arising before
any Receivables come into existence may have priority over the Seller's interest
in such Receivables. See "Certain Legal Aspects of the Receivables -- Certain
Matters Relating to Bankruptcy". If the transactions contemplated herein are
treated as a sale, the Receivables would not be part of Ford Credit's bankruptcy
estate and would not be available to Ford Credit's creditors.
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 bankruptcy court to order that Ford Credit be substantively
consolidated with the Seller, delays in and reductions in the amount of
distributions on the Certificates could occur.
The Seller has warranted in the Pooling and Servicing Agreement that the
transfer of the Receivables to the Trust is a valid sale of the Receivables to
the Trust. The Seller has and will take all actions that are required under
Michigan law to perfect the Trust's interest in the Receivables and the Seller
has warranted that the Trust will at all times have a first priority perfected
ownership interest therein and, with certain exceptions, in the proceeds
thereof. However, the transfer of the Receivables to the Trust could be deemed
to create a security interest therein. 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
Seller arising before a Receivable is transferred to the Trust may have priority
over the Trust's interest in such Receivables. If the Seller were to become a
debtor in a bankruptcy case and a bankruptcy trustee or the Seller as debtor in
possession or a creditor of the Seller were to take the position that the
transfer of the Receivables from the Seller to the Trust should be
recharacterized as a pledge of such Receivables, then delays in distributions on
the Certificates or, should the bankruptcy court rule in favor of any such
trustee, debtor in possession or creditor, reductions in such distributions,
could result.
If certain events relating to the bankruptcy of Ford, Ford Credit or the
Seller were to occur, then an Early Amortization Event would occur and, pursuant
to the terms of the Pooling and Servicing Agreement, additional Receivables
would not be transferred to the Trust and distributions of principal on the
Certificates
15
<PAGE> 18
would not be subject to the Controlled Distribution Amount. See "Certain Legal
Aspects of the Receivables -- Transfer of Receivables" and "-- Certain Matters
Relating to Bankruptcy".
Payments made in respect of repurchases of Receivables by Ford Credit or
the Seller pursuant to the Pooling and Servicing Agreement may be recoverable by
Ford Credit or the Seller as debtor in possession or by a creditor or a
trustee-in-bankruptcy of Ford Credit or the Seller as a preferential transfer
from Ford Credit or the Seller if such payments are made within one year prior
to the filing of a bankruptcy case in respect of Ford Credit or the Seller.
Application of federal and state bankruptcy and debtor relief laws could
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible or result in delays
in payments due on such Receivables. See "Description of the Certificates --
Defaulted Receivables and Recoveries".
The Seller 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
which secures wholesale financing obligations may be perfected by the filing of
UCC financing statements. Ford Credit takes all actions necessary under
applicable state laws to perfect Ford Credit's security interest in the
Vehicles. However, at the time a Vehicle is sold, Ford Credit's security
interest in the 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 Collateral Security other than a Vehicle (referred
to herein as "Non-Vehicle Collateral Security"), if any, securing a Receivable
will be subordinate to the interest of Ford Credit therein. See "The Dealer
Floorplan Financing Business -- Intercreditor Agreement in respect of Security
Interests in Vehicles and Non-Vehicle Collateral Security".
Payments. Receivables are generally payable by Dealers upon retail sale of
the underlying Vehicle in the case of new Vehicles. Historically, receivables
created in respect of used Vehicles have generally been paid within 60 days. The
timing of such sales is uncertain. In addition, there is no assurance that there
will be additional Receivables created under the Accounts or that any particular
pattern of Dealer repayments will occur. The payment of principal on the
Certificates is dependent on Dealer repayments and the Certificates may not be
fully amortized in five payments following the commencement of the Accumulation
Period. In addition, a significant decline in the amount of Receivables
generated could cause an Asset Composition Event or Early Amortization Event.
However, a decline in the amount of Receivables generated would initially be
absorbed by an increase in the Excess Funding Account. The Receivables Purchase
Agreement provides that Ford Credit will be required to designate additional
Accounts, the Receivables of which will be sold to the Seller, and the Pooling
and Servicing Agreement provides that the Seller will be required to transfer
such Receivables to the Trust in the event that the amount of the Pool Balance
is not maintained at a certain minimum level. If additional Accounts are not
designated by Ford Credit when required, an Early Amortization Event will occur
and result in the commencement of an Early Amortization Period, although in
certain circumstances the resulting Early Amortization Period may terminate and
the Revolving Period recommence. If an insolvency event relating to Ford Credit,
the Seller or Ford were to occur, then an Early Amortization Event would occur,
additional Receivables would not be transferred to the Trust and distributions
of principal on the Certificates would not be subject to the Controlled
Distribution Amount. See "The Dealer Floorplan Financing Business" and "Maturity
and Principal Payment Considerations" and see also "Description of the
Certificates -- Early Amortization Events" for a discussion of other events
which might lead to the commencement of an Early Amortization Period.
Social, Economic and Other Factors. 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) may affect retail sales. However, the Seller is unable to determine
and has no basis to predict whether or to what extent economic or social factors
will affect the level of Vehicle sales.
16
<PAGE> 19
Trust's Relationship to Ford and Ford Credit. Neither Ford Credit nor Ford
is obligated to make any payments in respect of the Certificates or the
Receivables (other than the obligation of Ford Credit to purchase certain
Receivables from the Trust due to the failure to comply with certain covenants,
as described under "Description of the Certificates -- Servicer Covenants").
However, the Trust is completely dependent upon Ford Credit for the generation
of new Receivables. The ability of Ford Credit to generate Receivables is in
turn dependent to a large extent on the sales of automobiles and light duty
trucks manufactured or distributed by Ford. There can therefore be no assurance
that Ford Credit will continue to generate Receivables at the same rate as in
prior years. In addition, if Ford Credit were to cease acting as Servicer,
delays in processing payments on the Receivables and information in respect
thereof could occur and result in delays in payments to the Certificateholders.
In connection with the transfer of Receivables by Ford Credit to the Seller
and the transfer of such Receivables by the Seller to the Trust, each of Ford
Credit and the Seller make representations and warranties with respect to the
characteristics of such Receivables. Ford Credit and the Seller are required to
purchase Receivables with respect to which such representations and warranties
have been breached, have not been cured and have a materially adverse effect on
the interest of the Certificateholders or certificateholders of other Series.
See "Description of the Certificates -- Representations and Warranties". In
addition, subject to certain limitations, Ford Credit has the ability to change
the terms on the Accounts including the sale and the credit line, as well as
underwriting procedures.
Ford has, from time to time in certain instances, provided certain
financial assistance to Ford-franchised dealers, including the purchase of
vehicles upon voluntary dealership termination, but has no obligation to do so.
If Ford elects not, or is unable, to provide any such financial assistance to
Dealers, losses with respect to the Receivables may increase. See "The Dealer
Floorplan Financing Business -- Relationship with Ford". 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 which are publicly
available at such government offices as described under "Available Information".
Credit Enhancement. Credit enhancement of the Certificates will be provided
by the subordination of the Seller'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 will be reduced from time to
time as described herein. See "Description of the Certificates -- Allocation of
Collections; Deposits in Collection Account; Limited Subordination of Seller's
Interest".
Control. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate unpaid principal amount of
all outstanding investor 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 Seller, the holders of investor 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.
Additional Series. The Trust, as a master trust, is expected to issue
additional Series (which may be represented by different classes within a
Series) from time to time. A Supplement delivered in connection with the
issuance of other Series will specify certain Principal Terms applicable to such
Series. Such Principal Terms 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
17
<PAGE> 20
(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 "Description of the Certificates -- New Issuances". As long as
the Certificates are outstanding, a condition to the execution of any Supplement
will be that the Rating Agency shall have advised the Trustee that the issuance
of such Series will not result in the reduction or withdrawal of their rating of
the Certificates. There can be no assurance, however, that the terms of any
other Series might not have a impact on the timing or amount of payments
received by a Certificateholder. The issuance of an additional Series does not
require the consent of any Certificateholders.
Ratings of the Certificates. 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 (such rating agency and each other
rating agency designated by the Seller in the related Supplement in respect of
any outstanding Series or class, a "Rating Agency"). The rating of the
Certificates addresses the likelihood of the ultimate payment of principal and
interest on the Certificates. However, a Rating Agency does not evaluate, and
the rating of the Certificates does not address, the likelihood that the
outstanding principal amount of the Certificates will be paid by the Expected
Final Payment Date. There is no assurance that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely
by a Rating Agency if in its judgment circumstances so warrant.
Book-Entry Registration. The Certificates will be initially represented by
one or more certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Certificateholders or their
nominees. Because of this, unless and until Definitive Certificates are issued
Certificateholders will not be recognized by the Trustee as "Certificateholders"
(as that term is used in the Pooling and Servicing Agreement). Consequently,
until such time beneficial owners of the Certificates ("Certificate Owners")
will only be able to exercise the rights of Certificateholders indirectly
through DTC, CEDEL, Euroclear and their participating organizations. See
"Description of the Certificates -- Book-Entry Registration" and "-- Definitive
Certificates".
FORD CREDIT AUTO RECEIVABLES CORPORATION AND THE TRUST
FORD CREDIT AUTO RECEIVABLES CORPORATION
The Seller, a wholly-owned subsidiary of Ford Credit, was incorporated in
the State of Delaware on February 13, 1991. The Seller was organized for limited
purposes, which include purchasing receivables from Ford Credit and transferring
such receivables to third parties and any activities incidental to and necessary
or convenient for the accomplishment of such purposes. The principal executive
offices of the Seller are located at The American Road, Dearborn, Michigan
48121. The telephone number of such offices is (313) 322-1989.
The Seller 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 state laws ("Insolvency Laws") will not result in consolidation of
the assets and liabilities of the Seller with those of Ford Credit. These steps
include the creation of the Seller as a separate, limited-purpose subsidiary
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the unanimous affirmative vote of all of its directors).
The Seller's Certificate of Incorporation includes a provision that, under
certain circumstances, requires the Seller to have two directors who qualify
under the Certificate of Incorporation as "Independent Directors". No assurance
can be given, however, that such a consolidation will not occur. See "Special
Considerations -- Certain Legal Aspects".
To the extent that the proceeds of the sale of the Series 1992-1
Certificates were less than the purchase price of the Receivables sold to the
Seller at the Initial Closing Date, Ford Credit (the owner of all the common
stock of the Seller) contributed Receivables in an amount equal to such
deficiency to the Seller as capital on the Initial Closing Date. If Additional
Accounts are added to the Trust, Ford Credit may make
18
<PAGE> 21
additional contributions of capital to the Seller 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 Seller has purchased 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 Seller has and will convey
to the Trust, without recourse, the Receivables arising under the Accounts. 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 Seller'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 Account, the Interest Funding
Account and the Reserve Fund), the Interest Rate Swap and any other Enhancement
issued with respect to any other Series, a security interest in the Vehicles and
any other Collateral Security. See "Description of the Certificates -- Addition
of Accounts". 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 other Series. The Certificateholders 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 Seller 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 Removed
Accounts to the Seller.
The Trust has been formed for this and like transactions 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 and the Seller's Certificate (and
any Supplemental Certificates), issuing additional Series 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.
19
<PAGE> 22
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Seller. The Seller 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 the Interest Rate Swap. Ford Credit will
use such proceeds for general corporate purposes.
THE DEALER FLOORPLAN FINANCING BUSINESS
GENERAL
The receivables sold or to be sold to the Trust have been or will be
selected from extensions of credit made by Ford Credit to domestic motor vehicle
dealers (the accounts for which are referred to as the "U.S. Wholesale
Portfolio"). 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. In 1993, Ford Credit provided financing for 81.5% of new
factory sales to Ford dealers in the U.S. Through the first three months of
1994, Ford Credit provided financing for 79.7% of new factory sales to Ford
dealers in the U.S. As of March 31, 1994, Ford Credit provided financing to
approximately 6,200 domestic automotive dealers, including approximately 1,500
non-Ford dealerships affiliated with Ford-franchised dealers. In the first three
months of 1994, Ford Credit arranged wholesale financing for approximately
825,000 vehicles, up approximately 17% from the same period a year ago. Ford
Credit services the wholesale portfolio through its home office in Dearborn,
Michigan and through its 138 branch offices throughout the United States.
The receivables are categorized by Ford Credit, under its 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
at closed auction conducted by Ford Credit and vehicles previously subject to
retail leases under Ford Credit's Red Carpet Lease program that have been
acquired by the related dealer at the 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 Ford Credit's practices and
policies.
CREATION OF RECEIVABLES
Ford Credit finances 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 most 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 new vehicles not manufactured or
distributed by Ford, Ford Credit advances funds directly to the manufacturer or
the distributor on behalf of the dealer.
Once a dealer has commenced the floorplanning of a manufacturer's or
distributor's vehicles through Ford Credit, Ford Credit will finance all
purchases of vehicles by such dealer from such manufacturer or distributor. Ford
Credit may limit or cancel this arrangement if a dealer's inventory is seriously
overstocked in Ford Credit's opinion or if a dealer is experiencing financial
difficulties. In these circumstances (referred to as a "suspended" condition),
the branch or regional office will approve additional financing on a vehicle-by-
vehicle basis. As of March 31, 1994, 0.8% of the total dealers in the U.S.
Wholesale Portfolio were suspended, compared with 1.1% as of December 31, 1993.
CREDIT UNDERWRITING PROCESS
Ford Credit extends credit to dealers pursuant to established credit lines.
Lines of credit may be established for dealers to finance purchases of new
(including auction) and used vehicles. Ford-franchised dealers and affiliates
that have a new vehicle line in place may also be eligible for a used vehicle
credit line.
A newly franchised dealer requesting the establishment of a new vehicle
credit line must submit a request for financing to a Ford Credit branch office.
After receipt of such request, the local branch office investigates the
prospective dealer by reviewing that dealer's credit reports and bank references
and by evaluating the dealer's marketing capabilities, start-up financing
resources, and credit requirements. When an existing dealer
20
<PAGE> 23
requests the establishment of a wholesale new vehicle credit line, the local
branch office reviews the dealer's credit reports (including the experience of
the dealer's present financing source) 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 local branch office prepares a written recommendation either approving
or disapproving the dealer's request and, depending on the amount of the
requested credit line, transmits such recommendation with the requisite
documentation to the central office. The branch manager can approve new
wholesale financing requests for amounts up to $6 million, in some cases. For
greater amounts, the documentation will be forwarded to the central office for
approval. Ford Credit generally applies the same underwriting standards for
dealers franchised by other manufacturers.
Upon approval, dealers execute a series of financing agreements with Ford
Credit and, in the case of Ford-franchised dealers, Ford. Such agreements
provide for a first priority security interest in favor of Ford Credit in the
vehicles and, in certain cases, in certain other collateral and require a
wholesale installment note in favor of Ford Credit.
The size of a credit line offered 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, and (iii)
the purchase option price in the case of vehicles previously leased under Ford
Credit's Red Carpet Lease program. The aggregate amount advanced for each Used
Vehicle is equal to the National Automotive Dealers Association's Official
Wholesale Used Car Trade-In Guide wholesale book value for such vehicle. Used
Vehicles represented approximately 1% of the aggregate principal amount of
receivables in the U.S. Wholesale Portfolio as of March 31, 1994. As of the
Series Cut-Off Date, Used Vehicles represented approximately 0.8% of the
aggregate principal amount of Receivables in the Trust.
As of March 31, 1994, average credit lines per dealer in the U.S. Wholesale
Portfolio for new and used vehicles were $1.59 million and $0.16 million,
respectively, and the average balance of principal receivables per account was
$1.60 million. The aggregate total receivables balance as a percentage of the
aggregate total credit lines was 131.7%. As more fully described below, the
credit lines are guidelines, not limits, which dealers are 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 COLLATERAL SECURITY
As stated above, the agreements constituting the credit lines, including
the Accounts, provide for a security interest in the vehicles in favor of Ford
Credit, which security interest Ford Credit has represented is a first priority
security interest. The security interests in the Vehicles in favor of Ford
Credit have been and will be assigned by Ford Credit to the Seller pursuant to
the Receivables Purchase Agreement and then by the Seller to the Trust pursuant
to the Pooling and Servicing Agreement. In its other lending activities, Ford
Credit may have made capital loans, real estate loans or other advances to
Dealers that are also secured by a security interest in the Vehicles. Ford
Credit has agreed 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 may also have a security interest in the
Non-Vehicle Collateral Security, if any, securing the Receivables of such
Dealer. In such cases, Ford Credit, in its sole discretion, may realize on the
Non-Vehicle Collateral Security for its own benefit in respect of such loans or
advances before the Trust is permitted to realize upon such Non-Vehicle
Collateral Security. Because of the subordinate position of the Trust in respect
of Non-Vehicle Collateral Security, there is no assurance that the Trust will
realize any proceeds in respect of any Non-Vehicle Collateral Security.
21
<PAGE> 24
PAYMENT TERMS
Upon the sale 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. Under an installment plan available only for
new Ford vehicles, eligible Ford-franchised dealers may remit 90% of the amount
of the related advance to Ford Credit upon retail sale of the related vehicle.
Payment of the remaining 10% balance (the "Installment Balance") is due on the
first day of the second month following the sale 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 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.
BILLING AND COLLECTION PROCEDURES
A statement setting forth billing and related account information is
prepared by Ford Credit and distributed on a monthly basis to each dealer. Each
dealer's bills are generated and mailed by the fourth calendar day of the month.
Interest and other nonprincipal 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.
REVENUE EXPERIENCE
Ford Credit charges dealers interest at a rate determined weekly by Ford
Credit. Ford Credit is currently determining the rate to be the "prime rate"
designated from time to time by certain financial institutions selected by Ford
Credit 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 by Ford Credit, plus certain other charges, including insurance service
fees. The interest rate is reset by Ford Credit on a weekly basis and is applied
to all balances outstanding during the applicable period. 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 designated spread of 0.5% on the
Installment Balance from the time of sale to the time it is applied to the
balance outstanding. For the three months ended March 31, 1994, the weighted
average yield on the U.S. Wholesale Portfolio (calculated on the basis of
interest payments actually received thereon during such three-month period over
the average aggregate principal balance thereof at the beginning and end of each
such month) was 6.88%. However, the weighted average yield is likely to
fluctuate from time to time and there is no assurance that such yield will not
occur at levels significantly different from that currently experienced.
RELATIONSHIP WITH FORD
On all New Vehicle financings, 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 of such optional programs 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 U.S. Wholesale Portfolio may be adversely affected. In
addition, because a substantial number of the vehicles 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 would
decrease, adversely affecting payment rates and the loss experience of the U.S.
Wholesale Portfolio. See "Payment Terms" for a discussion of an installment
payment plan made available to dealers. See also "Special Considerations --
Trust's Relationship to Ford and Ford Credit; Financial Condition of Ford".
22
<PAGE> 25
DEALER MONITORING
The level of each dealer's wholesale credit line is monitored on a periodic
basis. Because the wholesale lines are not limits, dealers are 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 may evaluate a dealer's
financial position and may place the dealer in the suspended category. See
"Creation of Receivables".
Audits of dealer vehicle inventories are conducted on a regular basis by
branch office employees. The timing of each visit varies and no advance notice
is given to the audited dealer. Auditors review some dealer financial records
and conduct a physical inventory of the vehicles on the dealer's premises.
Through the audit process, Ford Credit reconciles each dealer's physical
inventory with its records of financed vehicles. Audits are intended to identify
instances where a dealer sells vehicles without immediately repaying the related
advances.
DEALER "STATUS" AND FORD CREDIT'S WRITE-OFF POLICY
Under certain circumstances, Ford Credit 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. As of March 31, 1994, the
number of dealers assigned to dealer Status was 41 (0.7% of the total number of
dealers in the U.S. Wholesale Portfolio); as of December 31, 1993, 46 dealers
(0.8% of the total number of dealers in the U.S. Wholesale Portfolio); as of
December 31, 1992, 78 dealers (1.4% of the total number of dealers in the U.S.
Wholesale Portfolio); as of December 31, 1991, 110 dealers (2.1% of the total
number of dealers in the U.S. Wholesale Portfolio); as of December 31, 1990, 111
dealers (2.1% of the total number of dealers in the U.S. Wholesale Portfolio);
and as of December 31, 1989, 79 dealers (1.5% of the total number of dealers in
the U.S. Wholesale Portfolio). Once a dealer is classified as dealer Status, any
further extension of credit is rare.
Ford Credit works 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 performs an analysis of its position, writes off any amounts identified
at such time as uncollectible and attempts to liquidate all remaining
collateral. During the course of a liquidation, Ford Credit may recognize
additional losses or recoveries.
THE ACCOUNTS
GENERAL
The Receivables arise in the Accounts. The Accounts have been selected from
all the wholesale accounts in the 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 by Ford Credit in the ordinary course of business and meet certain
other criteria provided in the Pooling and Servicing Agreement. See "Description
of the Certificates -- Representations and Warranties."
Pursuant to the Pooling and Servicing Agreement, the Seller, and pursuant
to the Receivables Purchase Agreement, Ford Credit, 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 Seller, which will in turn convey them to the Trust.
See "Description of the Certificates -- 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
Seller, and the Seller will represent and warrant to the
23
<PAGE> 26
Trust, that the Receivables meet the eligibility requirements set forth in the
Pooling and Servicing Agreement. See "Description of the Certificates --
Conveyance of Receivables". Under certain circumstances specified in the Pooling
and Servicing Agreement, the Seller has the right to remove Accounts, and the
Receivables arising therefrom, from the Trust. See "Description of the
Certificates -- Removal of Accounts". Throughout the term of the Trust, the
Accounts from which the Receivables arise will be the same Accounts designated
by the Seller on the Initial Cut-Off Date plus any Additional Accounts, minus
any Accounts removed from the Trust.
As of the Series Cut-Off Date, with respect to the Accounts in the Trust:
(a) there were 4,310 Accounts and the Principal Receivables balance was
approximately $7.023 billion; (b) the average credit line per Account was $1.23
million (based on the average New Vehicle credit line of $1.63 million and the
average Used Vehicle credit line of $0.14 million); (c) the average balance of
Principal Receivables per Account was $1.63 million; (d) the aggregate total
Principal Receivables balance as a percentage of the aggregate total credit line
was approximately 131.7%; and (e) 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 1.01%. 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."
LOSS EXPERIENCE
The following tables set forth Ford Credit's average principal receivables
balance and loss experience for each of the periods shown with respect to the
U.S. Wholesale Portfolio. Because the Eligible Accounts will be only a portion
of the entire U.S. Wholesale Portfolio, 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 the U.S. Wholesale Portfolio. In
addition, the historical experience set forth below reflects financial
assistance provided by Ford in certain limited instances to Ford-franchised
dealers as described above under "The Dealer Floorplan Financing Business --
Relationship with Ford". If Ford is not able to or elects not to provide such
assistance in the future, the loss experience in respect of the U.S. Wholesale
Portfolio may be adversely affected. See "Special Considerations -- Trust's
Relationship to Ford and Ford Credit; Financial Condition of Ford".
LOSS EXPERIENCE FOR THE U.S. WHOLESALE PORTFOLIO
<TABLE>
<CAPTION>
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ---------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Principal
Receivables
Balance(1)............ $12,785 $11,032 $11,602 $9,596 $8,618 $7,965 $8,491
Net Losses
(Recoveries)(2)....... $ (0.7) $ (1.9) $ (1.4) $ 7.8 $ 28.7 $ 22.6 $ 25.1
Net
Losses/Liquidations... (0.004)% (0.012)% (0.002)% 0.014% 0.062% 0.051% 0.057%
Net Losses/Average
Principal Receivables
Balance(3)............ (0.022)% (0.069)% (0.012)% 0.081% 0.333% 0.284% 0.296%
</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, except for the periods ended
March 31, 1994 and March 31, 1993, each of which is based on a three-month
average.
(2) Net losses in any period are gross losses less recoveries for such period.
Recoveries include recoveries from collateral 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 Collateral Security, if any, will be
subordinate to the interest of Ford Credit in such Non-Vehicle Collateral
Security. See "The Dealer Floorplan Financing Business -- Intercreditor
Agreement in respect of Security Interests in Vehicles and Non-Vehicle
Collateral Security". Consequently, the Net Losses experienced by Ford
Credit and shown above may be more favorable than the Net Losses to be
experienced by the Trust.
(3) Percentages for the three month periods ended March 31, 1994 and March 31,
1993 are expressed on an annualized basis.
24
<PAGE> 27
AGING EXPERIENCE
The following table provides the age distribution of vehicle inventory for
all dealers in the U.S. Wholesale Portfolio, as a percentage of total principal
outstanding at the date indicated. Because the Eligible Accounts will only be a
portion of the entire U.S. Wholesale Portfolio, actual age distribution with
respect to the Eligible Accounts may be different.
AGE DISTRIBUTION FOR THE U.S. WHOLESALE PORTFOLIO(1)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------- --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
DAYS
1-120............................. 77.4% 74.3% 83.0% 81.1% 75.8% 76.4% 79.0%
121-180........................... 12.0 12.7 6.2 9.6 12.7 11.2 8.2
181-270........................... 7.1 9.6 5.9 4.9 5.7 6.3 5.6
Over 270.......................... 3.5 3.4 4.9 4.4 5.8 6.1 7.2
</TABLE>
- -------------------------
(1) Measured from the date of shipment.
GEOGRAPHIC DISTRIBUTION
The following table provides the geographic distribution of the vehicle
inventory for all dealers in the Trust on the basis of receivables outstanding
and the number of dealers generating such portfolio.
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS IN THE TRUST
AS OF JUNE 30, 1994
<TABLE>
<CAPTION>
RECEIVABLES
OUTSTANDING PERCENTAGE OF PERCENTAGE OF
(THOUSANDS OF RECEIVABLES TOTAL NUMBER NUMBER OF
DOLLARS) OUTSTANDING OF ACCOUNTS ACCOUNTS
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Texas............................. $ 657,588 9.4% 382 8.9%
California........................ 653,440 9.3 236 5.5
Florida........................... 473,346 6.7 157 3.6
Illinois.......................... 368,704 5.3 219 5.1
Michigan.......................... 367,088 5.2 167 3.9
Other(1).......................... 4,502,412 64.1 3,149 73.0
</TABLE>
- -------------------------
(1) No other state includes more than 5% of the outstanding Receivables.
FORD MOTOR CREDIT COMPANY
Ford Credit was incorporated in Delaware in 1959 and is a wholly-owned
subsidiary of Ford Motor Company ("Ford").
Ford Credit provides wholesale financing and capital loans to franchised
Ford Motor Company vehicle dealers and other dealers associated with such
dealers and purchases retail installment sale contracts and retail leases from
them. Ford Credit also makes loans to vehicle leasing companies, the majority of
which are affiliated with such dealers. More than 85% of all new vehicles
financed by Ford Credit are manufactured by Ford or its affiliates. In addition,
a wholly-owned subsidiary of Ford Credit provides these financing services in
the U.S. to other vehicle dealers. In addition to vehicle financing, Ford Credit
makes loans to affiliates of Ford, finances certain receivables of Ford and its
subsidiaries, and offers diversified financing services which are managed by USL
Capital Corporation, a wholly-owned subsidiary of Ford Holdings, Inc. ("Ford
Holdings"). Ford Credit also manages the insurance businesses of The American
Road Insurance Company, a wholly-owned subsidiary of Ford Holdings. Ford Credit
also is a significant equity participant in Ford Holdings, which primarily is
engaged in consumer and commercial finance and insurance businesses.
25
<PAGE> 28
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.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Principal with respect to the Certificates will not be payable until the
July 1999 Distribution Date (the "Expected Final Payment Date"), unless an Early
Amortization Event or, in some instances, an Asset Composition Event has
occurred. Full amortization of the Certificates by 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 "Description of the
Certificates -- 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.
The following table sets forth the highest and lowest monthly payment rates for
the U.S. Wholesale Portfolio 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 Eligible
Accounts will be only a portion of the entire U.S. Wholesale Portfolio, actual
monthly payment rates with respect to the Eligible Accounts may be different.
MONTHLY PAYMENT RATES FOR THE U.S. WHOLESALE PORTFOLIO
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Highest Month..................... 53.1% 50.2% 64.4% 56.2% 53.8% 61.7% 60.2%
Lowest Month...................... 44.9 44.5 44.5 42.0 35.4 23.3 26.1
Average of the Months in the
Period.......................... 48.2 46.7 50.1 48.4 44.6 47.2 43.6
</TABLE>
Because an Early Amortization Event may occur which would initiate an Early
Amortization Period, the final distribution of principal on the Certificates may
be made prior to the scheduled termination of the Revolving Period or prior to
the Expected Final Payment Date. See "Description of the Certificates -- Early
Amortization Events".
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement, as supplemented by the Supplement relating to the Certificates (as so
supplemented and as further supplemented or amended from time to time, the
"Pooling and Servicing Agreement"), among FCAR, as Seller of the Receivables,
Ford Credit, as 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 summary describes certain
terms of the Pooling and Servicing Agreement, does not purport to be complete
and is qualified in its entirety by reference to the Pooling and Servicing
Agreement.
26
<PAGE> 29
The Certificates will evidence undivided beneficial interests in the assets
of the Trust allocated to the Certificateholders' Interest 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
Certificates pursuant to the Pooling and Servicing Agreement.
The Certificates 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 Seller, the "Depository"), except as set forth below.
The Certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples thereof in book-entry form. Each $1,000 principal
amount of the Certificates will represent 1/1,000,000 of the Certificateholders'
Interest. The Seller has been informed by DTC that DTC's nominee will be Cede &
Co. ("Cede"). Accordingly, Cede is expected to be the holder of record of the
Certificates. No Certificate Owner will be entitled to receive a certificate
representing such person's beneficial interest in the Certificates. Unless and
until Definitive Certificates are issued under the limited circumstances
described herein, all references herein to actions by Certificateholders shall
refer to actions taken by DTC upon instructions from its Participants (as
defined below), and all references herein to distributions, notices, reports and
statements to Certificateholders shall refer to distributions, notices, reports
and statements to Cede, as the registered holder of the Certificates. See
"Book-Entry Registration" and "Definitive Certificates".
INTEREST
Interest on the principal balance of the Certificates will accrue at a per
annum rate (the "Certificate Rate") equal to Three-Month LIBOR plus basis
points ( %) and will be payable to the Certificateholders on each Quarterly
Payment Date, commencing in October 1994; provided that (a) if an Early
Amortization Event shall have occurred, interest shall thereafter be distributed
to the Certificateholders on each Special Payment Date or (b) if an Asset
Composition Event shall have occurred, interest (to the extent described herein)
will be distributed to the Certificateholders on the first Distribution Date
following such Asset Composition Event. Certificateholder Interest Collections
will be deposited into the Interest Funding Account and used to make interest
payments to the Certificateholders on each Quarterly Payment Date. Interest due
on a Quarterly Payment Date will accrue from and including the preceding
Quarterly Payment Date (or, in the case of the first Quarterly Payment Date,
from and including the Closing Date) to but excluding such Quarterly Payment
Date. Interest due for any Quarterly Payment Date or Distribution Date will be
calculated on the basis of the actual number of days elapsed during the related
Interest Period and a year assumed to consist of 360 days and interest due but
not paid on any Quarterly Payment Date or Distribution Date will be due on the
next Quarterly Payment Date or Distribution Date, as the case may be, together
with, to the extent lawfully payable, interest on such amount at the Certificate
Rate plus 200 basis points (2.00%). Interest payments on the Certificates will
be derived from Certificateholder Interest Collections for a Collection Period,
the amount, if any, in the Reserve Fund, Investment Proceeds, Interest Rate Swap
Receipts and, under certain circumstances, Available Seller's Collections to the
extent of the Available Subordinated Amount (or, in some cases, the Aggregate
Available Subordinated Amount).
"Interest Period" shall mean (a) with respect to any Quarterly Payment
Date, the period from and including the Quarterly Payment Date, immediately
preceding such Quarterly Payment Date (or, in the case of the first Quarterly
Payment Date, from and including the Closing Date) to but excluding such
Quarterly 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.
Three-Month LIBOR will be calculated on each Interest Determination Date in
the following manner. Two London Business Days (as defined herein) preceding the
first day of an Interest Period (or two business days preceding the Closing
Date, in the case of the first Interest Period) (each, an "Interest
Determination Date"), Chemical Bank (the "Reference Agent"), as agent for the
Trust, will ascertain the Three-Month LIBOR Rate. The Three-Month LIBOR Rate
shall be the rate for deposits in U.S. 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 Telerate Service (or such other page as may replace
that page on that service or such other service or services as may be
27
<PAGE> 30
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. 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 U.S. 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, commencing on the second London Business Day immediately following such
Interest Determination Date and 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 five 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 five 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 U.S.
dollars to leading European banks, commencing on the second London Business Day
immediately following such Interest Determination Date and 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.
The establishment of Three-Month LIBOR on each Interest Determination Date
by the Reference Agent and its calculation of the rate of interest for the
Certificates for the related Interest Period shall (in the absence of manifest
error) be final and binding.
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 herein,
until the first Distribution Date following such event. On each Distribution
Date with respect to 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 herein,
(b) allocated to one or more Series which are in amortization, early
amortization or accumulation periods to cover principal payments due to the
investor 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 otherwise does not provide for excess
funding accounts or similar arrangements, paid to the Seller 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".
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 with respect to 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 Seller 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,
28
<PAGE> 31
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.
It is expected that the final principal payment with respect to the
Certificates will be made on the Expected Final Payment Date, but the principal
of the Certificates may be paid earlier or, depending on the actual payment rate
on the Receivables, later, as described under "Special Considerations --
Payments". If the Receivables are sold or repurchased as described below,
principal payments on the Certificates 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 will be made on each Quarterly Payment
Date or Distribution Date to the holders of Certificates in whose names the
Certificates were registered (expected to be Cede, as nominee of DTC) at the
close of business on the day preceding such Quarterly 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 will be made only upon presentation and
surrender of the Certificates. Distributions will be made to DTC in immediately
available funds.
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 Series
Accounts represents more than 25% of the total assets of the Trust on each of
twelve 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 any two consecutive Determination Dates
the sum of all Eligible Investments and amounts on deposit in all Series
Accounts represents more than 45% of the total assets of the Trust, after giving
effect to all payments to be made on the next succeeding Distribution Date.
Upon the occurrence of an Asset Composition Event, the Servicer will
calculate the Asset Correction Amount, which equals the amount that would be
necessary to be paid first out of the Interest Funding Account and interest
funding accounts for other Series and second out of the Excess Funding Account
and excess funding accounts, if any, for other Series on the next Distribution
Date to achieve compliance with the tests specified above, after giving effect
to such payment and to all payments that otherwise would have been made on such
Distribution Date. Interest on and, if necessary, principal of the Certificates
will become payable on such Distribution Date to the extent of the Series 1994-1
Allocation Percentage of the Asset Correction Amount.
BOOK-ENTRY REGISTRATION
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, 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
29
<PAGE> 32
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 Seller 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 countries
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
30
<PAGE> 33
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 "Certain Tax Matters -- United States Federal Income Tax
Consequences". 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 will initially be registered in the name of CEDE & Co.,
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,
31
<PAGE> 34
see "Certain Tax Matters -- United States Federal Income Tax Consequences --
Non-U.S. Certificateholders".
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
The Certificates 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 Seller advises the Trustee in writing that
DTC is no longer willing or able to properly discharge its responsibilities as
Depository with respect to the Certificates and the Seller is unable to locate a
qualified successor, (ii) the Seller, at its option, elects to terminate the
book-entry system through DTC, or (iii) after the occurrence of a Servicer
Default, Certificateholders representing not less than 50% of the aggregate
unpaid principal amount of the Certificates 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.
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. Upon
surrender by DTC of the certificate or certificates representing such
Certificates 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 exchangeable at the offices of
the Trustee, which shall initially be Chemical 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 Seller may exchange a
portion of the certificate evidencing the Seller's Interest (the "Seller's
Certificate") for another certificate (a "Supplemental Certificate") for
transfer or assignment to a person designated by the Seller 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 Seller shall after giving effect
thereto have an interest in the Pool Balance of not less than 2% of the Pool
Balance, (b) the Seller shall have delivered to the Trustee, the Rating Agency
and any Enhancement Provider a Tax Opinion (as defined below) with respect to
such exchange and (c) the Seller 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 or any
32
<PAGE> 35
other outstanding Series or class of certificates. 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 investor certificates
(including the Certificates) which are transferable and have the characteristics
described below and (ii) the Seller's Certificate (and any Supplemental
Certificate) which will evidence the Seller'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 Seller may cause the Trustee to issue one or more
new Series. Under the Pooling and Servicing Agreement, the Seller may specify,
among other things, with respect to any 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
amortization period or controlled amortization period, if any, (e) the method
for allocating principal and interest to certificateholders, (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
Seller'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 Seller 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 Seller may offer any Series under 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. 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 Seller 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 early amortization periods
or accumulation 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 Seller may
specify different certificate rates and monthly servicing fees with respect to
each Series (or a particular class within a Series). In addition, the Seller 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 Seller.
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 Seller 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 Seller and the 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, for United States federal income
and Michigan income and single business tax purposes, (x) such issuance will not
adversely affect the characterization of the certificates (including the
Certificates) of any outstanding Series or class as debt, (y) such issuance will
not cause a taxable event to any certificateholders (including the
Certificateholders) (an opinion of counsel to the effect referred to in clauses
(x) and (y) with respect to any action is referred to herein as a "Tax Opinion")
and (z) such new Series will be characterized as debt 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 or any
other outstanding Series or class of certificates. Such issuance is also subject
to the conditions that (a) the Seller shall have represented and warranted that
such
33
<PAGE> 36
issuance shall not, in the reasonable belief of the Seller, cause an Early
Amortization Event to occur and (b) after giving effect to such issuance, the
Seller'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 COLLATERAL SECURITY
On the date on which the Series 1992-1 Certificates were originally issued
(the "Initial Closing Date"), FCAR sold and assigned to the Trust all of its
right, title and interest in and to the Receivables and the related Collateral
Security as of the Initial Cut-Off Date, all receivables thereafter created in
the Accounts and its interests in the related Collateral Security and the
Receivables Purchase Agreement, and the proceeds of all of the foregoing. See
"Ford Credit Auto Receivables Corporation and the Trust".
In connection with the sale of the Receivables to the Seller by Ford Credit
and the transfer of the Receivables by the Seller to the Trust, Ford Credit
indicated in their computer records that the Receivables in the Accounts and the
related Collateral Security had been conveyed to the Trust. In addition, the
Seller 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 balance of the
Receivables in such Account and (iii) the outstanding balance of Principal
Receivables in such Account. Ford Credit has and will retain and has not 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 have not and will not be segregated from those relating to other
accounts of Ford Credit, and the physical documentation relating to the
Receivables has not and will not be stamped or marked to reflect the transfer of
the Receivables to the Trust. The Seller filed one or more financing statements
in accordance with applicable state law to perfect the Trust's interest in the
Receivables, the Collateral Security, the Receivables Purchase Agreement and the
proceeds thereof. See "Special Considerations -- Certain Legal Aspects" and
"Certain Legal Aspects of the Receivables". The Trust's interest in the
Non-Vehicle Collateral Security will, in the sole discretion of Ford Credit, be
subordinate to the interest of Ford Credit in such Non-Vehicle Collateral
Security. See "The Dealer Floorplan Financing Business -- Intercreditor
Agreement in respect of Security Interest in Vehicles and Non-Vehicle Collateral
Security".
As described below under "Addition of Accounts", the Seller 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 Seller will
follow the procedures set forth in the preceding paragraph, except the list will
show information for such Additional Accounts as of the date such Additional
Accounts are identified and selected (the "Additional Cut-Off Date").
REPRESENTATIONS AND WARRANTIES
The Seller has made representations and warranties to the Trust relating to
the Accounts, the Receivables and the Collateral Security to the effect, among
other things, that (a) as of the Series Cut-Off Date, the Closing Date and the
date of issuance of any other Series (a "Series Issuance 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 (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
Collateral Security conveyed to the Trust on the Closing Date and on each
Transfer Date or, in the case of Additional Accounts, on the Addition Date, and
all of the Seller'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
34
<PAGE> 37
consents and governmental authorizations required to be obtained by the Seller
in connection with the conveyance of each such Receivable or Collateral Security
have been duly obtained. If the Seller 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 Seller or the Servicer or receipt of written
notice of such breach by the Seller or the Servicer, and such breach has a
materially adverse effect on the Certificateholders' Interest or the interests
of the holders of other outstanding Series in any Receivable or Account, the
Certificateholders' Interest and such other 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 Seller 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 Seller on or before the end
of the Collection Period in which such reassignment obligation arises by the
Seller directing the Servicer to deduct the principal balance of such Receivable
from the Pool Balance. In the event that such deduction would cause the Seller'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 Seller 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 Seller'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 Seller'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 Seller 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 Seller has also made representations and warranties to the Trust to the
effect, among other things, that as of the Closing Date and each Series Issuance
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 Seller 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 Seller in the Receivables and the Collateral 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 the
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 or the interests of the holders of all other
outstanding Series in the Receivables, either the Trustee or the holders of
certificates of all outstanding Series (including the Certificates) evidencing
not less than 51% of the aggregate unpaid principal amount of all outstanding
Series, by written notice to the Seller and the Servicer (and to the Trustee and
the issuer or provider of any Enhancement (an "Enhancement Provider") if given
by certificateholders), may direct the Seller to accept the reassignment of the
Certificateholders' Interest and the certificateholders' interests of other
Series within 60 days of such notice, or within such longer period specified in
such notice. The Seller will be obligated to accept the reassignment of the
Certificateholders' Interest and such other 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 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 at the applicable Certificate Rate
(together with interest on
35
<PAGE> 38
overdue interest at the Certificate Rate plus 200 basis points (2%), 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 and such other certificateholders'
interests. The portion of such funds allocable to the Certificateholders'
Interest will be distributed upon presentation and surrender of the
Certificates. If the Trustee or the certificateholders give a notice as provided
above, the obligation of the Seller 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 to a Dealer, which line of credit, as of the date
of determination thereof (a) is established by Ford Credit 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 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 uncollectible.
An "Eligible Receivable" is defined to mean each Receivable: (a) which was
originated or acquired by Ford Credit 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 Seller,
(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 or the Seller
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 Seller to the Trust of
all the Seller'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, Ford Credit and the
Seller 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, neither Ford, Ford Credit nor the
Seller 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 in the State of
Michigan and (o) which was transferred to the Trust with all applicable
governmental authorization.
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 Seller 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 Servicer for the purpose
of establishing the compliance by the Servicer with its representations or
warranties, the observation of its obligations under the Pooling and Servicing
Agreement or for any other purpose. The 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.
36
<PAGE> 39
INELIGIBLE RECEIVABLES, THE INSTALLMENT BALANCE AMOUNT AND THE OVERCONCENTRATION
AMOUNT
For the purpose of facilitating the administration and reporting
requirements of the 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 is adjusted by the
portion of the aggregate principal amount of Receivables included therein
allocable to the Certificateholders' Interest. In addition, the Incremental
Subordinated Amount shall be adjusted to reflect, on each Distribution Date, the
aggregate principal amount of Receivables in the Trust on such Distribution Date
which are Dealer Overconcentrations (the "Overconcentration Amount") allocable
to the Certificateholders' Interest and the portion of the aggregate amount of
Installment Balances in respect of which Ford Credit 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 Distribution Date means, with
respect to any Account, the excess of (x) the aggregate principal amount of
Receivables in such Account on the last day of the Collection Period immediately
preceding such Distribution Date over (y) 2% of the Pool Balance on the last day
of such immediately preceding Collection Period. See "Allocation of Collections;
Deposits in Collection Account; Limited Subordination of Seller's Interest --
Available Subordinated Amount".
ADDITION OF ACCOUNTS
Subject to the conditions described below, the Seller has the right to
designate from time to time additional accounts to be included as Accounts (the
"Additional Accounts"). In addition, the Seller 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 Participation Amount or
(ii) the portion of the Seller's Interest represented by the Seller'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 Seller,
Ford Credit or Ford, Ford Credit under the Receivables Purchase Agreement will
be required to sell to the Seller, and the Seller 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 Seller shall represent and warrant
that the addition of such Additional Accounts shall not, in the reasonable
belief of the Seller, cause an Early Amortization Event to occur; (iii) the
Seller shall not select such Additional Accounts in a manner that it believes is
adverse to the interests of the certificateholders or any Enhancement Provider;
(iv) the Seller shall 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 or any other outstanding Series or
class of certificates.
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 of such Series at its Series Issuance Date minus the amount of any
deposits into its excess funding account in connection with a reduction in
the Pool Balance plus the amount of any withdrawals from its 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).
37
<PAGE> 40
"Required Participation Percentage" will mean, with respect to Series
1994-1, 104%; provided, however, that the Seller may, upon ten days' prior
notice to the Trustee, the Rating Agencies and any Enhancement Provider
reduce the Required Participation Percentage to not less than 100%, so long
as each Rating Agency shall have notified the Seller or the Servicer that
any such reduction will not result in a reduction or withdrawal of the
rating of the Certificates or any other outstanding Series or class of
certificates rated by it at the request of the Seller.
REMOVAL OF ACCOUNTS
The Seller 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 Seller (or the
Servicer on its behalf) shall, among other things, (a) on or before the fifth
business day prior to the date of removal (the "Removal Date"), furnish to the
Trustee, any Enhancement Provider and the Rating Agencies a written notice (the
"Removal Notice") specifying the Removal Date; (b) on or before the fifth
business day after the Removal Date, the Seller shall have furnished to the
Trustee a computer file, microfiche list or other list of the Accounts (the
"Removed Accounts") that were removed on the Removal 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 Date will 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; (d) represent and warrant that
no selection procedures believed by the Seller to be adverse to the interest of
the certificateholders were utilized in selecting the Removed Accounts; (e)
represent and warrant that the Rating Agencies shall not have notified the
Seller or the Servicer that such removal will result in a reduction or
withdrawal of the rating of the Certificates or any other outstanding Series or
class of certificates; and (f) on or before the related Removal 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 shall execute and
deliver to the Seller a written reassignment and shall be deemed to sell,
transfer, assign, set over and otherwise convey to the Seller 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 Removed Accounts, all
amounts received or to be received with respect thereto and all proceeds
thereof.
COLLECTION ACCOUNT
The 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 one of the states 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
38
<PAGE> 41
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 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.
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 initially will
pay to the Trust, on each Quarterly Payment Date, interest accrued from and
including the preceding Quarterly Payment Date at the Certificate Rate on the
outstanding principal balance of the Certificates as of such preceding Quarterly
Payment 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 (x)
One-Month LIBOR and (y) the Prime Rate less 1.5%, 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 year assumed to consist of 360 days. Net
Trust Swap Receipts (obligations of the Swap Counterparty to the Trust) will be
paid to the Collection Account on each Quarterly Payment Date (or, under certain
circumstances, on each Distribution Date) and Net Trust Swap Payments
(obligations of the Trust to the Swap Counterparty) will be paid out of
Certificateholder Interest Collections, Investment Proceeds, the Reserve Fund
and Available Seller's Collections (in the case of Available Seller's
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 Seller to the extent of
the Swap Available Subordinated Amount. See "Allocation of Collections; Deposits
in Collection Account; Limited Subordination of Seller's Interest -- Swap
Available Subordinated Amount".
"One-Month LIBOR" shall mean, with respect to any Distribution Date,
the offered rates for deposits in United States dollars having a maturity
of one month (the "Index Maturity") commencing on the related Adjustment
Date which appears on the Reuters Screen LIBO Page as of approximately
11:00 A.M., London time, on such date of calculation. If at least two such
offered rates appear on the Reuters Screen LIBO Page, One-Month LIBOR will
be the arithmetic mean (rounded upwards, if necessary, to the nearest
one-sixteenth of a percent) of such offered rates. If fewer than two such
quotations appear, One-Month LIBOR with respect to such Interest Period
will be determined at approximately 11:00 A.M., London time, on such
Adjustment Date on the basis of the rate at which deposits in United States
dollars having the Index Maturity are offered to prime banks in the London
interbank market by four major banks in the London interbank market
selected by the Calculation Agent and in a principal amount equal to an
amount of not less than U.S. $1,000,000 and that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided,
One-Month LIBOR will be the arithmetic mean (rounded upwards as aforesaid)
of such quotations. If fewer than two quotations are provided, One-Month
LIBOR with respect to such Interest Period will be the arithmetic mean
(rounded upwards as aforesaid) of the rates quoted at approximately 11:00
A.M., New York City time, on such Adjustment Date by three major banks in
New York, New York selected by the Calculation Agent for loans in United
States dollars to leading European banks having the Index Maturity and in a
principal amount equal to an amount of not less than U.S. $1,000,000 and
that is representative for a single transaction in such market at such
time; provided, however, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, One-Month LIBOR in effect for the
applicable period will be One-Month LIBOR in effect for the previous
period.
39
<PAGE> 42
"Adjustment Date" shall mean, with respect to any Distribution Date,
the second London Business Day preceding the prior Distribution Date.
"London Business Day" shall mean any business day on which dealings in
deposits in United States dollars are transacted in the London interbank
market.
"Prime Rate" shall mean the median of the rates of interest publicly
announced from time to time by each of Chase Manhattan Bank N.A., Chemical
Bank, Citibank, N.A., Morgan Guaranty Trust Company of New York and Bank of
America, San Francisco, as its U.S. Dollar "prime rate" or "base rate".
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 Seller.
EXCESS FUNDING ACCOUNT
During the Revolving Period, funds (to the extent available therefor as
described herein) will be deposited in the Excess Funding Account on a
Distribution Date in an amount equal to the excess, if any, of (i) the Invested
Amount immediately prior to such Distribution Date over (ii) the
Certificateholders' Interest in the principal balances of the Receivables at the
end of the preceding Collection Period. Funds on deposit in the Excess Funding
Account will be withdrawn and paid to the Seller or allocated to one or more
Series which are in amortization, early amortization or accumulation periods to
the extent of any increases in the Certificateholders' Interest in 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 Account
may be made on a daily basis. The allocation of additional Receivables to
increase the Invested Amount and the invested amounts of such other Series will
be pro rata based on the proportion that the amount on deposit in the Excess
Funding Account bears to the aggregate amounts in all of the Trust's excess
funding accounts (including the Excess Funding Account) and similar arrangements
for accommodating the fluctuation in the principal balances of the Receivables.
The deposit of amounts into the Excess Funding Account and the excess funding
accounts and such similar arrangements for other Series will be based on the
proportion that the Invested Amount bears to the aggregate of the invested
amounts (including the Invested Amount) for all Series.
Any funds on deposit in the Excess Funding Account at the beginning of the
Accumulation Period will be deposited in the Principal Funding Account. In
addition, no funds will be deposited in the Excess Funding Account during the
Accumulation Period or any Early Amortization Period.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee at the direction of the Servicer in One-Month LIBOR based 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 the Swap Counterparty.
Such investments are required to mature by the next Distribution Date. On each
Distribution Date, all net investment income earned on amounts in the Excess
Funding Account since the preceding Distribution Date will be withdrawn from the
Excess Funding Account and applied as described herein.
ALLOCATION PERCENTAGES
Allocation to the Certificateholders' Interest. The Servicer will allocate
amounts to the Certificateholders' Interest for each Collection Period as
follows:
(i) Interest Collections and the Defaulted Amount will be allocated to
Certificateholders based on the Floating Allocation Percentage;
(ii) during the Revolving Period, Principal Collections will be
allocated to Certificateholders based on the Floating Allocation Percentage
(subject to the following paragraph);
(iii) during the Accumulation Period and any Early Amortization
Period, Principal Collections will be allocated to Certificateholders based
on the Principal Allocation Percentage (subject to the following
paragraph); and
40
<PAGE> 43
(iv) Miscellaneous Payments will at all times be allocated to
Certificateholders on the basis of the Series 1994-1 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 (including the
Floating Allocation Percentage, if applicable) for each Series in its revolving
period and (ii) the principal allocation percentage (including the Principal
Allocation Percentage, if applicable) 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 as
described above will be allocated to the Seller and the other outstanding Series
of certificates, if any.
"Aggregate Available Subordinated Amount" means the sum of the
Available Subordinated Amount and the Swap Available Subordinated Amount.
"Floating Allocation Percentage" for any Collection Period means the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the 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, the Floating Allocation Percentage shall mean
the percentage equivalent of a fraction, the numerator of which is the
Initial Principal Amount of the Certificates and the denominator of which
is the Pool Balance on the Series Cut-Off Date.
"Initial Invested Amount" means the Initial Principal Amount of the
Certificates plus (x) the amount of any withdrawals from the Excess Funding
Account in connection with an increase in Principal Receivables in the
Trust since the Closing Date, minus (y) the amount of any additions to the
Excess Funding Account in connection with a reduction in the Principal
Receivables in the Trust since the Closing Date.
"Invested Amount" means for any date an amount equal to the Initial
Invested Amount of the Certificates, minus the amount, without duplication,
of principal payments (except principal payments made from the Excess
Funding Account and any transfers from the Excess Funding Account to the
Principal Funding Account) made to Certificateholders or deposited to the
Principal Funding Account prior to such date from and after the Closing
Date minus the excess, if any, of the aggregate amount of Investor
Charge-Offs for all Distribution Dates preceding such date, over the
aggregate amount of any reimbursements of Investor Charge-Offs for all
Distribution Dates preceding such dates.
"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".
"Principal Allocation Percentage" for any Collection Period means the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Invested Amount as of the last day of the
Revolving Period and the denominator of which is the Pool Balance as of the
last day of the immediately preceding Collection Period.
"Series 1994-1 Allocation Percentage" means, for any Collection
Period, the percentage equivalent of a fraction, the numerator of which is
the 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.
"Trust Available Subordinated Amount" means the sum of the Aggregate
Available Subordinated Amount and the aggregate available subordinated
amounts for all other outstanding Series.
"Trust Invested Amount" means, with respect to any Collection Period,
the sum of the Invested Amount and the invested amounts for all other
outstanding Series.
The Floating Allocation Percentage and the Principal Allocation Percentage will
be adjusted for any Collection Period in which Additional Accounts are
designated to reflect the additional Receivables added to the Trust.
41
<PAGE> 44
Principal Collections for all Series. Principal Collections allocated to
the Certificateholders' Interest, for any Collection Period with respect to the
Accumulation Period or any Early Amortization Period, will first be allocated to
make required payments of principal to the Principal Funding Account during the
Accumulation Period and to the Certificateholders during the Early Amortization
Period. See "Distributions from the Collection Account; Reserve Fund --
Principal Collections" and "Distributions". The Servicer will determine the
amount of Available Certificateholder Principal Collections for any Collection
Period remaining after such required payments and the amount of any similar
excess for any other Series ("Excess Principal Collections"). The Servicer will
allocate Excess Principal Collections to cover any principal distributions to
certificateholders for any Series which are either scheduled or permitted and
which have not been covered out of Principal Collections and certain other
amounts allocated to such Series ("Principal Shortfalls"). Excess Principal
Collections will generally 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 Seller if the Seller's Participation Amount
(determined after giving effect to any Principal 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 Seller because the Seller's Participation Amount does not
exceed the Trust Available Subordinated Amount will be held unallocated
("Unallocated Principal Collections") until the Seller's Participation Amount
exceeds the Trust Available Subordinated Amount, at which time such amount will
be allocated to the Seller, 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 SELLER'S INTEREST
The 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
Seller) in each Collection Period into the Collection Account. Notwithstanding
the foregoing requirement for daily deposits, for so long as (i) Ford Credit
remains the Servicer under the Pooling and Servicing Agreement, (ii) no Servicer
Default has occurred and is continuing and (iii) (x) 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, (y) Ford
Credit arranges for and maintains a letter of credit or other form of
Enhancement in respect of the 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 (z) 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 Seller 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 or any other outstanding Series or class of
certificates. In addition, during any Collection Period the 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, 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 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 Servicer will distribute directly to the Seller an amount equal to (a) the
Excess Seller's Percentage for the related Collection Period
42
<PAGE> 45
of Interest Collections for such date and (b) the Excess Seller's Percentage for
the related Collection Period of Principal Collections for such date, if the
Seller's Participation Amount (determined after giving effect to any Principal
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
Servicer will distribute directly to the Seller on each such date of deposit an
amount equal to the Available Seller's Principal Collections for such date, if
the Seller's Participation Amount (determined after giving effect to any
Principal 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).
"Available Seller's Collections" for any date means the sum of (a) the
Available Seller's Interest Collections for such date and (b) the Available
Seller's Principal Collections for such date; provided, however, that the
Available Seller'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 Seller's Interest Collections" for any date means an amount
equal to the result obtained by multiplying (a) the excess of (i) the
Seller's Percentage for the related Collection Period over (ii) the Excess
Seller's Percentage for such Collection Period by (b) Interest Collections
for such date.
"Available Seller's Principal Collections" for any date means an
amount equal to the product of (a) the excess of (i) the Seller's
Percentage for the related Collection Period over (ii) the Excess Seller's
Percentage for such Collection Period and (b) Principal Collections for
such date.
"Excess Seller'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 aggregate of the aggregate available subordinated amounts for
each outstanding Series 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
amortization, accumulation 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.
"Seller'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.
"Seller's Percentage" means 100% minus (a) when used with respect to
Interest Collections, the aggregate of the floating allocation percentages
for each outstanding Series (including the Certificates), and (b) when used
with respect to Principal Collections, the sum of (i) the aggregate of the
floating allocation percentages for each outstanding Series (including the
Certificates, if applicable) in its revolving period and (ii) the aggregate
of the principal allocation percentages for each outstanding Series
(including the Certificates, if applicable) in its amortization,
accumulation or early amortization period, but in each case shall not be
less than 0%.
Deficiency Amount. On each Determination Date, the Servicer will determine
for the Certificates the amount (the "Deficiency Amount"), if any, by which (a)
the sum of (i) Monthly Interest for the following Distribution Date, (ii)
Monthly Interest accrued but not paid with respect to prior Distribution Dates
(and interest thereon), (iii) the Monthly Servicing Fee for such Distribution
Date, (iv) the Investor Default
43
<PAGE> 46
Amount for such Distribution Date, (v) the amount of any Adjustment Payment
allocated to the Certificates for such Distribution Date that has not been
deposited in the Collection Account as required under the Pooling and Servicing
Agreement and (vi) Net Trust Swap Payments, exceeds (b) the sum of (i)
Certificateholder Interest Collections, Investment Proceeds and Net Trust Swap
Receipts, if any, for such Distribution Date and (ii) the amount of funds in the
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 shall mean an amount
equal to (a) the actual number of days in the related Interest Period
divided by 360 multiplied by (b) the product of (x) the Certificate Rate
and (y) the outstanding principal balance of the Certificates as of the
close of business on the preceding Distribution Date (or, in the case of
the first Distribution Date, on the Closing Date) after giving effect to
all repayments of principal made to the Certificateholders on such
preceding Distribution Date, if any.
Required Subordinated Amount. The "Required Subordinated Amount" shall
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. On the Closing Date such amount is $111,111,111.
Available Subordinated Amount. The Available Subordinated Amount for a
Determination Date is equal to (i) the lesser of (a) 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 to cover any portion of the Investor Default Amount, plus
the amount of Excess Servicing available to be paid to the Seller as described
under "Distributions from the Collection Account; Reserve Fund -- Excess
Servicing", minus the Incremental Subordinated Amount for such preceding
Determination Date, plus the Incremental Subordinated Amount for the current
Determination Date and (b) the sum of (1) the product of the Subordinated
Percentage and the Invested Amount plus (2) 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 (iii) 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 Seller or allocated to one or more Series. The Available
Subordinated Amount for the first Determination Date is equal to the Required
Subordinated Amount. The "Incremental Subordinated Amount" on any Determination
Date will equal the result obtained by multiplying (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 by (b)
the excess, if any, of (x) the sum of the Overconcentration Amount, the
Installment Balance Amount and the aggregate amount of Ineligible Receivables on
such Determination Date over (y) 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 Seller or Ford Credit 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 10% and the denominator of
which will be the excess of 100% over 10%. The Seller 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 (i)
$11,111,111 or (ii) 1.11% of the Invested Amount on such date. The Seller 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 Seller 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.
44
<PAGE> 47
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 Seller to the extent of the Swap
Available Subordinated Amount. The Swap Available Subordinated Amount for the
first Determination Date is $11,500,000 (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.
DISTRIBUTIONS FROM THE COLLECTION ACCOUNT; RESERVE FUND
Interest Collections. On each Distribution Date, the Trustee will apply
Certificateholder Interest Collections, Investment Proceeds and Net Trust Swap
Receipts, if any, in respect of the related Collection Period to make the
following distributions in the following order of priority:
(i) an amount equal to Monthly Interest for such Distribution Date
(net of any Net Trust Swap Receipts not required to be paid on such date),
plus the amount of any Monthly Interest previously due but not distributed
on a prior Distribution Date (plus, but only to the extent permitted under
applicable law, interest at the applicable Certificate Rate plus 200 basis
points (2.0%) on Monthly Interest previously due but not distributed),
shall be deposited to the Interest Funding Account; and Net Trust Swap
Payments, if any, will be paid to the Swap Counterparty;
(ii) an amount equal to the Monthly Servicing Fee for such
Distribution Date shall be distributed to the Servicer (unless such amount
has been netted against deposits to the Collection Account as described
above or waived as described below);
(iii) an amount equal to the Reserve Fund Deposit Amount, if any, for
such Distribution Date shall be deposited in the Reserve Fund;
(iv) 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
(v) the balance shall constitute Excess Servicing.
If such Certificateholder Interest Collections, Investment Proceeds and Net
Trust Swap Receipts, if any, are not sufficient to make the entire distributions
required by clauses (i) and (ii) and (iv), the Trustee shall withdraw funds from
the 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, the application of funds in the
Reserve Fund to cover the amount in clause (iv) will be reduced or eliminated to
the extent necessary to maintain the amount in the Reserve Fund at least equal
to $1,000,000.
If there is a Draw Amount for such Distribution Date, the Trustee shall
apply the amount of Available Seller'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 (i), (ii)
and (iv) above that have not been made through the application of funds from the
Reserve Fund as described in the preceding paragraph. If the sum of the draw
amounts (including the Draw Amount) for all Series in respect of a Distribution
Date exceeds such Available Seller's Collections for the related Collection
Period, then such Available Seller's Collections will be allocated among those
Series with draw amounts pro rata on the basis of such draw amounts. The
Available Subordinated Amount will be reduced by the amount of Available
Seller's
45
<PAGE> 48
Collections so applied in respect of the Certificates. If the Draw Amount
exceeds such Available Seller's Collections, the Available Subordinated Amount
will be reduced by the amount of such excess, but not by more than the sum of
the Investor Default Amount for such Distribution Date and the amount of any
Adjustment Payments allocable to the Certificates and not paid by the Seller.
"Certificateholder Interest Collections" for any Distribution Date
means the portion of Interest Collections for the related Collection Period
allocated to the Certificateholders' Interest as described under
"Allocation Percentages -- Allocation to the Certificateholders' Interest".
"Investment Proceeds" for any 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 1994-1 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 the Excess Funding Account, the
Principal Funding Account and the Interest Funding Account since the
preceding Distribution Date.
"Excess Servicing" for any Distribution Date means the amount
described in clause (vi) above.
Reserve Fund. An Eligible Deposit Account will be established and
maintained in the name of the Trustee for the benefit of the Certificateholders
(the "Reserve Fund"). No deposit will be made into the Reserve Fund prior to the
first Distribution Date. The "Reserve Fund Required Amount" means an amount
which upon any Distribution Date will equal 0.35% of the outstanding principal
balance of the Certificates 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 the next following Distribution Date, the
Trustee shall deposit any remaining Available Seller'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" is the amount, if any, by which the 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 Servicer will credit to the Collection
Account 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 and the Termination Date, any
funds remaining on deposit in the Reserve Fund will be paid to the Seller.
If, for any Distribution Date with respect to an Early Amortization Period,
after giving effect to the allocations, distributions and deposits described in
the preceding paragraph, the amount in the Reserve Fund is less than the Excess
Reserve Fund Required Amount for such Distribution Date, the Trustee shall
deposit the remaining Available Seller'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 Distribution Date means an amount equal to the greater of (a) 5%
of the Initial Principal Amount of the Certificates and (b) the excess of (i)
the sum of (x) the Available Subordinated Amount on the preceding Determination
Date (after giving effect to the allocations, distributions, withdrawals and
deposits to be made on such Determination Date) and (y) an amount equal to (A)
the excess of the Required Participation Percentage over 100%, multiplied by (B)
the outstanding principal balance of the Certificates on such Determination Date
(after giving effect to any changes therein on such Determination Date) over
(ii) the Seller's Interest on such Determination Date (after giving effect to
changes therein on such Determination Date); provided that the Excess Reserve
Fund Required Amount shall not exceed such Available Subordinated Amount.
In connection with the allocations to reserve funds referred to in the two
preceding paragraphs, if the remaining Available Seller's Collections are not
sufficient to fund the reserve funds for all outstanding Series (including the
Certificates), then such remaining Available Seller's Collections will be
allocated to such reserve funds (including the Reserve Fund, if applicable) pro
rata on the basis of the respective amounts required to be deposited in such
reserve funds.
46
<PAGE> 49
Excess Servicing. On each Distribution Date, the Servicer will allocate
Excess Servicing 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
which have not been previously reimbursed (after giving effect to the
allocation on such Distribution Date of Series 1994-1 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 which have been previously waived as described under
"Servicing Compensation and Payment of Expenses" will be distributed to the
Servicer; and
(c) the balance, if any, shall be distributed to the Seller and shall
increase the Available Subordinated Amount as described in the definition
thereof.
Principal Collections. On each Distribution Date, the Servicer will
allocate Available Certificateholder Principal Collections as follows:
(a) for each Distribution Date with respect to the Revolving Period,
all Available Certificateholder Principal Collections will be allocated,
first, to make a deposit to the Excess Funding Account if the sum of (i)
the Certificateholders' Interest in Principal Receivables and (ii) the
amount on deposit in the Excess Funding Account prior to the allocation on
such Distribution Date is less than the outstanding principal balance of
the Certificates 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
or any Early Amortization Period:
(i) an amount equal to Monthly Principal for such Distribution Date
will be deposited to the Principal Funding Account; and
(ii) the balance, if any, will be allocated to Excess Principal
Collections.
In the event that the aggregate Invested Amount is greater than zero on the
Termination Date, any funds remaining in the 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 Termination Date.
"Available Certificateholder Principal Collections" for any
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 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 Seller's Collections allocated to cover
the Investor Default Amount or reimburse Investor Charge-Offs, (c) the
Series 1994-1 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 Series 1994-1.
"Monthly Principal" with respect to any Distribution Date relating to
the Accumulation Period or any Early Amortization Period will equal
Available Certificateholder Principal Collections for such Distribution
Date; provided, however, that for each Distribution Date with respect to
the Accumulation Period, Monthly Principal may not exceed the Controlled
Distribution Amount for such Distribution Date; and provided, further, that
Monthly Principal will not exceed the Invested Amount.
"Controlled Distribution Amount" for a 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
47
<PAGE> 50
Account), before giving effect to any withdrawals from or deposits to such
account on such Distribution Date.
"Controlled Amortization Amount" means an amount equal to the Invested
Amount as of January 15, 1999 (after giving effect to any changes therein
on such date) divided by the number of months comprising the Accumulation
Period Length.
INTEREST FUNDING ACCOUNT
The 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 (the "Interest Funding Account"). On each Distribution Date
Monthly Interest will be deposited in the 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 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, 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 Account on any Distribution
Date (after giving effect to distributions to be made on such Distribution Date)
(the "Interest Funding Account Balance") 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 Servicer in Eligible Investments. On each Distribution Date,
the interest and other investment income on the Interest Funding Account Balance
will be paid to the Collection Account and distributed on such Distribution
Date.
PRINCIPAL FUNDING ACCOUNT
The 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 (the "Principal Funding Account"). On each Distribution Date
with respect to the Accumulation Period, Monthly Principal will be deposited in
the Principal Funding Account as provided above under "Distributions from the
Collection Account; Reserve Fund"; provided that if an Early Amortization Event
occurs during the Accumulation Period (unless, in limited circumstances with
respect to the required addition of Accounts, such Early Amortization Event
shall have been cured), the Principal Funding Account Balance (as defined below)
shall be paid to the Certificateholders on the first Special Payment Date.
All amounts on deposit in the Principal Funding Account on any Distribution
Date (after giving effect to distributions to be made on such Distribution Date)
(the "Principal Funding Account Balance") 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 Servicer in One-Month LIBOR based 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 the Swap Counterparty. On each
Distribution Date, the interest and other investment income on the Principal
Funding Account Balance will be applied as provided above under "Distributions
from the Collection Account; Reserve Fund".
DISTRIBUTIONS
Payments to Certificateholders will be made from the Interest Funding
Account, the Principal Funding Account and the Excess Funding Account. The
Servicer shall instruct the Trustee to apply the funds on deposit in the
Interest Funding Account, the Principal Funding Account and the Excess Funding
Account and shall instruct the Trustee or the Paying Agent to make, without
duplication, the following distributions:
(a) On each Quarterly Payment Date, on each Special Payment Date and
on each Distribution Date following an Asset Composition Event, all amounts
on deposit in the Interest Funding Account to
48
<PAGE> 51
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") will be distributed to Certificateholders;
(b) On each Special Payment Date and on the Expected Final Payment
Date, the Principal Funding Account Balance, the amount on deposit in the
Excess Funding Account and any amounts in the Interest Funding Account
after the payment of accrued interest on the Certificates shall be
distributed to Certificateholders 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, 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,
first, from amounts on deposit in the Interest Funding Account and, second,
from amounts on deposit in the Excess Funding Account.
DEFAULTED RECEIVABLES AND RECOVERIES
"Defaulted Receivables" on any Determination Date are (i) all Receivables
which were charged off as uncollectible in respect of the immediately preceding
Collection Period and (ii) 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 (a) the principal amount of
Receivables that became Defaulted Receivables during the preceding Collection
Period less (b) the full amount of any Defaulted Receivables subject to
reassignment to the Seller or purchase by the Servicer for such Collection
Period unless certain events of bankruptcy, insolvency, or receivership have
occurred with respect to either of the Seller or the Servicer, in which event
the Defaulted Amount will not be reduced for those Defaulted Receivables.
Receivables will be charged off as uncollectible in accordance with the
Servicer's customary and usual policies and procedures for servicing its own
comparable revolving dealer wholesale loan accounts. A portion of the Defaulted
Amount equal to the product of (x) the Defaulted Amount for such Collection
Period and (y) the Floating Allocation Percentage for such Collection Period
will be allocated to the Certificateholders. The portion of the Defaulted Amount
allocated to the Certificateholders is referred to as the "Investor Default
Amount".
If the 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 Seller's Interest will be reduced by the
amount of the adjustment or charge-off. After any such reduction in the amount
of the Seller'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 Seller's Interest would reduce the Seller'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 Seller 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
If the Available Subordinated Amount is reduced to zero, and on any
Distribution Date the Deficiency Amount is greater than zero, the Invested
Amount will be reduced by the Deficiency Amount, but not by more than the
Investor Default Amount for such Distribution Date (an "Investor Charge-Off").
Any reduction in the Invested Amount will have the effect of slowing or reducing
the return of principal to the Certificateholders. If the Invested Amount has
been reduced by any Investor Charge-Offs, 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 1994-1 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.
49
<PAGE> 52
OPTIONAL REPURCHASE
On any Distribution Date occurring after the Invested Amount of the
Certificates is reduced to 10% of the initial outstanding principal amount of
the Certificates or less, the Seller will have the option, subject to certain
conditions, to repurchase the Certificateholders' Interest. The purchase price
will be equal to the Reassignment Amount. The purchase price will be deposited
in the Collection Account in immediately available funds on the Distribution
Date on which the Seller 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 the Certificates. In the event that the Seller fails for any
reason to deposit such purchase price, payments will continue to be made to the
Certificateholders 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, Principal Collections
allocable to the Certificateholders' Interest will no longer be paid to FCAR or
allocated to any other Series but instead will be distributed to
Certificateholders monthly on each Distribution Date, except as described below,
and the Controlled Distribution Amount will no longer apply to distributions of
principal on the Certificates. An "Early Amortization Event" refers to any of
the following events:
1. failure on the part of FCAR, the 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;
2. any representation or warranty made by Ford Credit in the
Receivables Purchase Agreement or by FCAR in the Pooling and Servicing
Agreement or any information required to be given by FCAR 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 are materially and adversely affected; provided,
however, that an Early Amortization Event shall not be deemed to occur
thereunder if FCAR 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;
3. the occurrence of certain events of bankruptcy, insolvency or
receivership relating to any of Ford Credit, FCAR or Ford;
4. the Trust or FCAR becomes an investment company within the meaning
of the Investment Company Act of 1940, as amended;
5. a failure by FCAR 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;
6. 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;
7. any Servicer Default with respect to the Certificates occurs;
50
<PAGE> 53
8. 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 10% of the Pool Balance on such last day;
9. on any Determination Date, the average of the Monthly Payment Rates
for the three 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 20%;
10. the termination of the Interest Rate Swap in accordance with its
terms; and
11. the failure to pay the outstanding principal amount of the
Certificates by the Expected Final Payment Date.
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 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 may terminate and
the Revolving Period recommence. If an Early Amortization Period results from
the failure by FCAR to convey Receivables in Additional Accounts to the Trust as
described in paragraph 5 above during the Revolving Period and no other Early
Amortization Event has occurred, the Early Amortization Period resulting from
such failure will terminate and the Revolving Period will recommence (unless the
scheduled termination date of the Revolving Period has occurred) as of the end
of the first Collection Period during which the Seller would no longer be
required to convey Receivables to the Trust. The Seller may no longer be
required to convey Receivables as described above as a result of a reduction in
the Invested Amount occurring due to principal payments made on the Certificates
and the certificates of other 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 and
certificates of each other outstanding Series representing more than 50% of the
aggregate outstanding principal amount of the certificates of each such Series
(or, with respect to 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 and the proceeds of any collections on the Receivables in the
Collection Account allocable to the Certificateholders' Interest are not
sufficient to pay the aggregate unpaid principal balance of the Certificates in
full plus accrued and unpaid interest thereon, Certificateholders 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 is sufficient
to pay the aggregate unpaid principal balance of the Certificates in full plus
accrued and unpaid interest thereon.
51
<PAGE> 54
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 Seller elects to terminate the Trust at such time, and (b) December
31, 2012. 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 will be due and payable no later than the July 2001, 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 110%
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 Series 1994-1 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.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the 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 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 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 Seller, the Servicer nor
any of their directors, 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 Seller, the Servicer nor
any of their directors, 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 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 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 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 Servicer's reasonable judgment, no Early Amortization
Event will occur as a result of the change and (ii) the change is
52
<PAGE> 55
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 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 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.
SERVICER COVENANTS
In the Pooling and Servicing Agreement the 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 Seller or
the Servicer discovers, or receives written notice, that any covenant of the
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 all certificateholders in any Receivable or Account, Ford Credit,
as Servicer, will purchase such Receivable or all Receivables in such Account,
as applicable. If Ford Credit is the Servicer, such purchase will be made on the
Determination Date following the expiration of the 30 day cure period and the
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 Servicer constitutes the sole remedy
available to the certificateholders if such covenant or warranty of the Servicer
is not satisfied and the Trust's interest in any such purchased Receivables
shall be automatically assigned to the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The 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 with respect to any Distribution Date (the
"Monthly Servicing Fee") generally will be equal to one-twelfth of the product
of (a) the Servicing Fee Rate and (b) the Invested Amount as of the last day of
the second preceding Collection Period. The remainder of the Servicing Fee shall
be paid by the Seller and the certificateholders of other Series. The Monthly
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution therefor in accordance with the terms of the Pooling
and Servicing Agreement.
The Servicer will be permitted to waive its right to receive the Servicing
Fee on any Distribution Date, so long as it believes that sufficient Interest
Collections will be available on a future Distribution Date to pay the
53
<PAGE> 56
Monthly Servicing Fee relating to such waived Servicing Fee, in which case the
Servicing Fee and the Monthly Servicing Fee for such Distribution Date shall be
deemed to be zero.
The 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 SERVICER
The 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 Servicer has assumed the
Servicer's responsibilities and obligations under the Pooling and Servicing
Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any person
succeeding to the business of the Servicer, will be the successor to the
Servicer under the Pooling and Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default, the Trustee, by written notice to the
Servicer, may terminate all of the rights and obligations of the Servicer, as
servicer, under the Pooling and Servicing Agreement and in and to the
Receivables and the proceeds thereof and appoint a new Servicer (a "Service
Transfer") The rights and interest of the Seller under the Pooling and Servicing
Agreement in the Seller's Interest will not be affected by any Service Transfer.
The Trustee shall as promptly as possible appoint a successor Servicer and if no
successor Servicer has been appointed by the Trustee and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all rights,
authority, power and obligations of the Servicer under the Pooling and Servicing
Agreement shall pass to and be vested in the Trustee. Prior to any Service
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 Servicer for servicing compensation not in
excess of the Servicing Fee plus certain excess amounts payable to the Seller.
A "Servicer Default" refers to any of the following events:
1. failure by the 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 Servicer is required to do so under the Pooling
and Servicing Agreement, which is not cured within a five business day
grace period;
2. failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer in the Pooling and Servicing
Agreement (exclusive of breaches of covenants in respect of which the
Servicer repurchases the related Receivables, as described under "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 Servicer delegates its duties under the Pooling and
Servicing Agreement, except as specifically permitted thereunder;
3. any representation, warranty or certification made by the 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
4. the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
54
<PAGE> 57
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 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
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 Servicer shall provide the Trustee, any Enhancement
Provider, the Seller 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 Servicer shall immediately notify the Trustee in writing of any
Servicer default reports.
On each Distribution Date (including each Distribution Date that
corresponds to a Quarterly Payment Date (including the Expected Final Payment
Date) or Special Payment Date), the Trustee will forward (or cause to be
forwarded ) to each Certificateholder 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 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 or an Early Amortization Period has commenced): (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 1994-1 Allocation
Percentage, the Floating Allocation Percentage and the Principal Allocation
Percentage for such Collection Period; (c) the total amount, if any, distributed
on the Certificates; (d) the amount of such distribution allocable to principal
on the Certificates; (e) the amount of such distribution allocable to interest
on the Certificates; (f) the Investor Default Amount for such Distribution Date;
(g) the Draw Amount, if any, for the preceding Collection Period; (h) the amount
of the Investor Charge-Offs and the amounts of reimbursements thereof for the
preceding Collection Period; (i) the amount of the Monthly Servicing Fee for the
preceding Collection Period; (j) the Controlled Distribution Amount; (k) the
Invested Amount, the Excess Funding Account balance and the outstanding
principal balance of the Certificates for such distribution (after giving effect
to all distributions which will occur on each Distribution Date); (l) the "pool
factor" for the Certificates as of the Determination Date with respect to such
Distribution Date (consisting of an eleven-digit decimal expressing the Invested
Amount as of such Determination Date (determined after taking into account any
reduction in the Invested Amount which will occur on such Distribution Date) as
a portion of the Initial Invested Amount); (m) the Available Subordinated Amount
for such Determination Date; (n) the Reserve Fund balance for such date; and (o)
the Principal Funding Account Balance and the Interest Funding Account Balance
with respect to such date.
On or before January 31 of each calendar year, beginning with January 31,
1995, 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 United States federal income tax returns. Moreover, as long as the
Certificateholder of record is Cede, as nominee for DTC, Certificate Owners will
receive such tax information from Participants and Indirect Participants rather
than from the Trustee. See "Certain Tax Matters".
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing provides that on or before April 30 of each
calendar year the Servicer will cause a firm of nationally recognized
independent public accountants (who will also render other services to the
Servicer or the Seller) 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 Servicer to the effect that the Servicer has fully performed, or caused to
be fully performed its obligations in all material respects under the Pooling
and
55
<PAGE> 58
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 Seller, the
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 the certificateholders.
The Pooling and Servicing Agreement may be amended by the Seller, the
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
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 record the
Trustee will afford such certificateholders access during business hours to the
current list of certificateholders for purposes of communicating with other
certificateholders 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
Chemical Bank, a New York banking corporation, as successor trustee to
Manufacturers Hanover Trust Company, 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 Seller, the 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 rights,
powers, duties and obligations solely at the direction of the Trustee.
56
<PAGE> 59
The Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor Trustee. The 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 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 certain terms of the Receivables Purchase Agreement
and is qualified in its entirety by reference to the Receivables Purchase
Agreement.
SALE OR TRANSFER OF RECEIVABLES
Pursuant to the Receivables Purchase Agreement, Ford Credit has sold and
transferred to the Seller all of its right, title and interest in and to all of
the Receivables and the Collateral 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 Seller will transfer 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 Seller,
Ford Credit has and will continue to indicate in its computer files that the
Receivables have been sold or transferred to the Seller, and that such
Receivables have been transferred by the Seller 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 Seller, but the computer records of Ford
Credit have been marked to evidence such sale or transfer. Ford Credit will file
UCC financing statements with respect to the Receivables meeting the
requirements of Michigan state law. See "Special Considerations -- Certain Legal
Aspects" and "Certain Legal Aspects of the Receivables -- Transfer of
Receivables".
REPRESENTATIONS AND WARRANTIES
Ford Credit has or will make certain representations and warranties to the
Seller to the effect that, among other things, (a) as of the Initial Closing
Date, the Closing Date and each Series Issuance 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 the 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 has or will also make representations and warranties to the
Seller relating to the Receivables to the effect, among other things, that (a)
as of the Initial Closing Date, the Closing Date and each Series Issuance 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 Seller on the Initial Cut-Off Date, the Series Cut-Off Date or any
Additional Cut-Off Date for the purpose of facilitating the administration and
reporting obligations of the 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 Seller accept retransfer of such Ineligible Receivable
pursuant to the Pooling and Servicing Agreement, then Ford Credit shall
repurchase such Ineligible Receivable from the Seller on the date of such
retransfer. The purchase price for such Ineligible Receivable shall be the face
amount thereof, of
57
<PAGE> 60
which at least the amount of any cash deposit required to be made by the Seller
under the Pooling and Servicing Agreement in respect of the retransfer of such
Ineligible Receivable shall be paid in cash.
Ford Credit has or will also make representations and warranties to the
Seller to the effect, among other things, that as of the Initial Closing Date,
the Closing Date and each Series Issuance 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 Seller of all right, title and interest of Ford Credit in and to the
Receivables, whether then existing or thereafter created in the Accounts, the
Collateral 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 Seller 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 Seller is required to deposit under the Pooling and Servicing
Agreement in connection with such retransfer.
Ford Credit will agree to indemnify the Seller and to hold the Seller
harmless from and against any and all losses, damages and expenses (including
reasonable attorneys' fees) suffered or incurred by the Seller 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 Seller for any loss,
liability or expense incurred by the Seller 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 Collateral Security".
In addition, Ford Credit has expressly acknowledged and consented to the
Seller'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 Seller and will
promptly give notice of such event to the Seller and to the Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
On the Initial Closing Date, Ford Credit sold and assigned the Receivables
to the Seller, which Receivables were immediately sold and assigned to the
Trust. The Seller has represented and warranted and will represent and warrant
on the 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 Seller 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
58
<PAGE> 61
ownership interest in the Receivables, in existence at the time of the formation
of 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 Seller
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 "Description of the Certificates --
Representations and Warranties".
Each of Ford Credit and the Seller 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 Seller or by the Seller 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 Seller 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 Seller 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 Seller 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 Seller, and under the Pooling and
Servicing Agreement the Seller 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 Seller has also covenanted that it will not sell, pledge,
assign, transfer or grant any lien on any Receivable or, except as described
under "Description of the Certificates -- Supplemental Certificates", the
Seller's Certificate (or any interest therein) other than to the Trust. In
addition, while Ford Credit is the 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 Seller in the Receivables Purchase
Agreement that the sale of the Receivables by it to the Seller is a valid sale
of the Receivables to the Seller. In addition, Ford Credit and the Seller have
agreed to treat the transactions described herein as a sale of the Receivables
to the Seller, and Ford Credit has or will take all actions that are required
under Michigan law to perfect the Seller'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 Seller 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 Seller 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 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 Seller, 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 Seller has warranted to the Trust that the transfer of the Receivables
to the Trust is a sale of the Receivables to the Trust. The Seller 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 Seller has warranted to
the Trust that the
59
<PAGE> 62
Trust will at all times have a first priority perfected ownership interest
therein and, with certain exceptions, the proceeds thereof. Nevertheless, a tax
or government lien on property of Ford Credit or the Seller 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 certificate of incorporation provides
that, under certain circumstances, FCAR is required to have 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 two independent directors. 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 Seller 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 Seller's becoming a debtor in a bankruptcy case.
Notwithstanding such steps, if the Seller were to become a debtor in a
bankruptcy case, and a bankruptcy trustee for the Seller or the Seller as debtor
in possession or a creditor of the Seller were to take the position that the
transfer of the Receivables from the Seller 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 Seller does not intend to file, and Ford Credit will agree that it will
not cause the Seller to file, a voluntary application for relief under the
Bankruptcy Code or any similar applicable state law with respect to the Seller
so long as the Seller is solvent and does not foresee becoming insolvent.
If Ford Credit or the Seller 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 Seller
and, pursuant to the Pooling and Servicing Agreement, only collections on
Receivables theretofore sold to the Seller 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 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 the applicable Controlled Distribution Amount.
The occurrence of certain events of bankruptcy, insolvency or receivership
with respect to the Servicer will result in a Servicer Default, which Servicer
Default, in turn, will result in an Early Amortization Event. If no other
Servicer Default other than the commencement of such bankruptcy or similar event
exists, a trustee-in-bankruptcy of the Servicer may have the power to prevent
either the Trustee or the certificateholders from appointing a successor
Servicer.
Payments made in respect of repurchases of Receivables by Ford Credit or
the Seller pursuant to the Pooling and Servicing Agreement may be recoverable by
Ford Credit or the Seller, as debtor in possession, or by a creditor or a
trustee-in-bankruptcy of Ford Credit or the Seller as a preferential transfer
from Ford Credit or the Seller if such payments are made within one year prior
to the filing of a bankruptcy case in respect of Ford Credit.
CERTAIN TAX MATTERS
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a general discussion of United States federal income tax
consequences of the purchase, ownership and disposition of the Certificates.
This discussion does not purport to deal with all aspects of United States
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 United States federal income tax laws (for
example, banks, life insurance companies and tax-exempt organizations).
Prospective investors are advised to consult their own tax advisors with regard
to the United States 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
60
<PAGE> 63
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 Seller and the
Certificateholders will express in the Pooling and Servicing Agreement the
intent that, for United States 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 United States
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 nontax
accounting treatment of the transaction, the Seller will treat the Pooling and
Servicing Agreement, for certain nontax purposes, as effecting a transfer of an
ownership interest in the Receivables and not as creating a debt obligation.
A basic premise of United States 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 United States federal income tax law,
even though the participants in the transaction have characterized it
differently for nontax 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, special tax counsel to
the Seller and the Trust ("Tax Counsel"), is of the opinion that the Seller will
properly be treated as the owner of the Receivables for United States federal
income tax purposes and, accordingly, the Certificates will properly be
characterized for United States federal income tax purposes as debt that is
secured by the Receivables.
Treatment of the Trust. The Trust could be viewed for United States 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 United States 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 United States federal income
tax.
As used herein, the term "U.S. Certificateholder" means a beneficial owner
of a Certificate that is for United States federal income tax purposes (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source or (iv) any other person whose income or gain in respect of a Certificate
is effectively connected with the conduct of a United States trade or business.
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 United
States federal income tax purposes and are not issued with original issue
discount, interest thereon will be taxable as ordinary income for United States
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. Interest on the Certificates may
also constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid on the Certificates
(and the amount withheld for United States federal income taxes,
61
<PAGE> 64
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 nonresidents). 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 United States federal income
tax liability.
U.S. Certificateholders may generally elect to include in income all
interest (including stated interest, 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.
Market Discount. If a U.S. Certificateholder purchases a 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), 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 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 (i) the amount of such payment or realized gain
or (ii) 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 accrue in the manner to be provided in
Treasury regulations, but the Conference Report accompanying the Tax Reform Act
of 1986 states that, until such regulations are issued, it is intended that
Certificateholders may elect to accrue market discount either (i) under a
constant yield method or (ii) in the proportion that the stated interest paid on
the Certificate for the current period bears to the total remaining interest on
the Certificate as of the beginning of the period.
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 (i)
the treatment as ordinary income of gain upon the disposition of the Certificate
and upon the receipt of certain cash payments and (ii) the deferral of interest
deductions will not apply. Generally, such currently included market discount is
treated as ordinary interest for United States federal income tax purposes.
Premium. If a U.S. Certificateholder purchases a Certificate for an amount
that is greater than the principal balance of the Certificate on the purchase
date, 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.
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 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 accrued market discount
62
<PAGE> 65
that the U.S. Certificateholder has included in income and decreased by the
amount of any principal payments received and amortizable bond premium taken
with respect to such Certificate. Such gain or loss generally will be long-term
capital gain or loss if the Certificate were held for more than one year.
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
United States 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 United States federal income tax purposes, the arrangement among the
Seller and the Certificateholders might be classified for United States 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 partnership were nevertheless not taxable as a corporation
(because of an exception for an entity whose income is interest income that is
not derived in the conduct of a financial business) it would not be subject to
United States 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 United States 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 Seller will treat the Certificates as indebtedness for United
States 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 United States federal
income tax purposes. Assuming the Certificates are debt:
(a) interest paid to a Non-U.S. Certificateholder will be exempt from
U.S. 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
Seller and is not a controlled foreign corporation with respect to the
Seller). 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
63
<PAGE> 66
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 U.S.
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 (x) the applicable form is delivered
pursuant to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the
entities receiving the form has actual knowledge that such owner is a U.S.
person or that any certification on the form is false;
(b) a Non-U.S. Certificateholder will not be subject to United States
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 United States 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 Seller 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
nonresident alien or foreign corporation might be required to file a U.S.
individual or corporate income tax return and pay tax on its share of
partnership income at regular U.S. 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 CONSEQUENCES
The activities to be undertaken by the Servicer in servicing the
Receivables generally will be centered in Michigan. The State of Michigan
imposes a state individual income tax and a single business tax which is based
partially upon the net income of corporations, partnerships and other entities
doing business in the State of Michigan. This discussion is based upon present
provisions of Michigan statutes and the regulations promulgated thereunder, and
applicable judicial or ruling authority, all of which are subject to change,
which change may be retroactive. No ruling on any of the issues discussed below
will be sought from the Michigan Department of Treasury.
If the Certificates are treated as debt for United States federal income
tax purposes, in the opinion of J.D. Bringard, Esq., Vice President -- General
Counsel of the Seller ("Michigan Tax Counsel"), this treatment will also apply
for Michigan tax purposes. Pursuant to this treatment, Certificateholders not
otherwise subject to Michigan tax would not become subject to such tax solely
because of their ownership of the Certificates. Certificateholders already
subject to tax in Michigan, however, could be required to pay tax on the income
from the Certificates.
If, for United States federal income tax purposes, the Trust is treated as
a collateral arrangement that is disregarded or as a separate entity treated as
a grantor trust, in the opinion of Michigan Tax Counsel, this treatment will
also apply for Michigan tax purposes. Pursuant to this treatment, the Trust will
not be subject to the Michigan single business tax.
64
<PAGE> 67
Possible Classification of the Pooling and Servicing Agreement as a
Partnership or Association. If the Certificates were treated as interests in a
partnership (not taxable as a corporation) for United States federal income tax
purposes, in the opinion of Michigan Tax Counsel, the same treatment would also
apply for Michigan tax purposes. Such a partnership would be treated as doing
business in Michigan and, as a result, would be subject to the Michigan single
business tax possibly resulting in reduced distributions to Certificateholders.
The Certificateholders would not be subject to Michigan single business tax on
the partnership income.
Individual Certificateholders, whether Michigan residents or non-residents,
who were partners in such a partnership would be subject to Michigan income tax
on the income from the partnership. Under current law corporate
Certificateholders are not subject to Michigan income tax. Certificateholders
not otherwise subject to Michigan income tax would not become subject to such
tax on income other than that derived from the Certificates solely because of
their ownership of the Certificates.
If the Certificates were treated as interests in an association taxable as
a corporation or a "publicly traded partnership" taxable as a corporation, then
the entity could be subject to the Michigan single business tax. Such taxes
could result in reduced distributions to Certificateholders. Certificateholders
not otherwise subject to tax in Michigan would not become subject to such tax
solely because of their ownership of the Certificates.
Because the income and franchise tax laws of each state and locality vary,
it is impossible to predict the income and franchise tax consequences to the
Certificateholders in all of the state and local taxing jurisdictions,
particularly if the Certificates were treated as interests in a partnership (not
taxable as a corporation). Certificateholders are urged to consult their own tax
advisors with respect to state and local income and franchise taxes.
ERISA CONSIDERATIONS
GENERAL
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such person. For example, a
prohibited transaction would arise, unless an exemption were available, if the
Certificates were viewed as debt of the Seller and the Seller were a
disqualified person or party in interest with respect to a plan that acquired
Certificates.
Moreover, additional prohibited transactions could arise if the assets of
the Trust were deemed to constitute assets of any plan that owned Certificates.
The Department of Labor ("DOL") has issued a final regulation (the "Plan Assets
Regulation") concerning the definition of what constitutes the "plan assets" of
an employee benefit plan subject to ERISA or the Code, or an individual
retirement account ("IRA") (collectively referred to as "Benefit Plans"). Under
the Plan Assets Regulation the assets and properties of certain corporations,
partnerships and certain other entities in which a Benefit Plan acquires an
"equity interest" could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if Benefit Plans purchase Certificates, the Trust
could be deemed to hold plan assets of such Benefit Plan unless one of the
exceptions under the Plan Assets Regulation 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. A publicly-offered security is a security that is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another and (iii) either is (A)
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
65
<PAGE> 68
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.
It is anticipated that the Certificates will meet the criteria of the
Publicly-Offered Securities Exemption as set forth above. The Underwriters
expect (although no assurance can be given) that the Certificates will be held
by at least 100 independent persons at the conclusion of the offering; there are
no restrictions imposed on the transfer of the Certificates; and the
Certificates will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act, and then will be timely
registered under the Exchange Act. The Underwriters will notify the Trustee as
to whether or not the Certificates will be held by 100 independent persons at
the conclusion of the offering. The Seller 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 fail to meet the criteria of the Publicly-Offered
Securities Exemption and the Trust's assets are deemed to include assets of
Benefit Plans that are holders of 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 three class
exemptions issued by the DOL that may apply in such event: DOL Prohibited
Transaction Exemption 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)
and 90-1 (Class Exemption for Transactions Involving Insurance Company Pooled
Separate Accounts). 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's assets.
REVIEW BY BENEFIT PLAN FIDUCIARIES
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is especially important that any Benefit
Plan fiduciary who proposes to cause a Benefit Plan to purchase Certificates
should consult with its own counsel with respect to the potential consequences
under ERISA and the Code of the Benefit Plan's acquisition and ownership of
Certificates. Assets of a Benefit Plan should not be invested in the
Certificates unless it is clear that the assets of the Trust will not be plan
assets or unless it is clear that a prohibited transaction class exemption will
apply and exempt all potential prohibited transactions.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), FCAR has agreed to cause the Trust to sell to
the underwriters named below (the "Underwriters"), and each of the Underwriters
has severally agreed to purchase the principal amount of Certificates set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF CERTIFICATES
----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................... $
CS First Boston Corporation...................................
Goldman, Sachs & Co. .........................................
J.P. Morgan Securities Inc. ..................................
Salomon Brothers Inc..........................................
--------------
Total............................................ $1,000,000,000
==============
</TABLE>
66
<PAGE> 69
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, and to certain dealers at such price less a
concession not in excess 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 % 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.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Seller by J.D. Bringard, Esq., Vice President-General Counsel of the
Servicer, and for the Underwriters by Brown & Wood. Certain United States
federal income tax matters will be passed upon for the Seller and the Trust by
Brown & Wood.
67
<PAGE> 70
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounts.............................................................................. 1
Accumulation Period................................................................... 9
Accumulation Period Commencement Date................................................. 10
Accumulation Period Length............................................................ 9
Addition Date......................................................................... 34
Additional Accounts................................................................... 37
Additional Cut-Off Date............................................................... 34
Adjustment Date....................................................................... 40
Adjustment Payment.................................................................... 49
Aggregate Available Subordinated Amount............................................... 41
Asset Composition Event............................................................... 8
Asset Correction Amount............................................................... 9
Available Certificateholder Principal Collections..................................... 47
Available Seller's Collections........................................................ 43
Available Seller's Interest Collections............................................... 43
Available Seller's Principal Collections.............................................. 43
Available Subordinated Amount......................................................... 44
Bankruptcy Code....................................................................... 60
Benefit Plans......................................................................... 65
Cede.................................................................................. 2
CEDEL................................................................................. 5
CEDEL Participants.................................................................... 30
Certificateholder Interest Collections................................................ 46
Certificateholders' Interest.......................................................... 5
Certificate Owners.................................................................... 2
Certificate Rate...................................................................... 5
Certificates.......................................................................... 1
Citibank.............................................................................. 6
Closing Date.......................................................................... 5
Code.................................................................................. 60
Collateral Security................................................................... 3
Collection Account.................................................................... 38
Collection Period..................................................................... 7
Commission............................................................................ 2
Controlled Amortization Amount........................................................ 48
Controlled Distribution Amount........................................................ 47
Cooperative........................................................................... 30
Dealer Overconcentrations............................................................. 37
Dealers............................................................................... 4
Defaulted Amount...................................................................... 49
Defaulted Receivables................................................................. 49
Deficiency Amount..................................................................... 43
Definitive Certificates............................................................... 32
Depositary............................................................................ 31
Depository............................................................................ 27
Determination Date.................................................................... 12
Distribution Date..................................................................... 8
Distribution Date Statement........................................................... 55
DOL................................................................................... 65
Draw Amount........................................................................... 44
</TABLE>
68
<PAGE> 71
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DTC................................................................................... 2
Early Amortization Event.............................................................. 50
Early Amortization Period............................................................. 10
Eligible Accounts..................................................................... 4
Eligible Deposit Account.............................................................. 38
Eligible Institution.................................................................. 38
Eligible Investments.................................................................. 39
Eligible Portfolio.................................................................... 23
Eligible Receivable................................................................... 4
Enhancement........................................................................... 3
Enhancement Provider.................................................................. 35
ERISA................................................................................. 14
Euroclear............................................................................. 5
Euroclear Operator.................................................................... 30
Euroclear Participant................................................................. 30
Excess Principal Collections.......................................................... 42
Excess Reserve Fund Required Amount................................................... 46
Excess Seller's Percentage............................................................ 43
Excess Servicing...................................................................... 47
Exchange Act.......................................................................... 2
Expected Final Payment Date........................................................... 8
FCAR.................................................................................. 1
Floating Allocation Percentage........................................................ 41
Ford.................................................................................. 3
Ford Credit........................................................................... 1
Ford Holdings......................................................................... 25
Holders............................................................................... 32
Incremental Subordinated Amount....................................................... 44
Index Maturity........................................................................ 39
Indirect Participants................................................................. 29
Ineligible Receivables................................................................ 35
Initial Closing Date.................................................................. 34
Initial Cut-Off Date.................................................................. 3
Initial Invested Amount............................................................... 5
Initial Principal Amount.............................................................. 4
Initial Swap Subordinated Amount...................................................... 45
Insolvency Laws....................................................................... 18
Installment Balance................................................................... 22
Installment Balance Amount............................................................ 37
Interest Collections.................................................................. 4
Interest Determination Date........................................................... 27
Interest Funding Account.............................................................. 8
Interest Funding Account Balance...................................................... 48
Interest Period....................................................................... 27
Interest Rate Swap.................................................................... 13
Invested Amount....................................................................... 41
Investment Proceeds................................................................... 46
Investor Charge-Off................................................................... 49
Investor Default Amount............................................................... 49
IRA................................................................................... 65
IRS................................................................................... 61
</TABLE>
69
<PAGE> 72
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
London Business Day................................................................... 40
Michigan Tax Counsel.................................................................. 64
Miscellaneous Payments................................................................ 41
Monthly Interest...................................................................... 44
Monthly Principal..................................................................... 47
Monthly Servicing Fee................................................................. 53
Morgan................................................................................ 6
Net Trust Swap Payment................................................................ 13
Net Trust Swap Receipt................................................................ 13
New Issuance.......................................................................... 6
New Vehicle........................................................................... 20
New Vehicle Base Rate................................................................. 22
Non-U.S. Certificateholder............................................................ 61
Non U.S. Person....................................................................... 75
Non-Vehicle Collateral Security....................................................... 16
One-Month LIBOR....................................................................... 39
Overconcentration Amount.............................................................. 37
Participants.......................................................................... 29
Plan Assets Regulation................................................................ 65
Pool Balance.......................................................................... 7
Pooling and Servicing Agreement....................................................... 3
Prime Rate............................................................................ 40
Principal Allocation Percentage....................................................... 41
Principal Collections................................................................. 4
Principal Funding Account............................................................. 9
Principal Funding Account Balance..................................................... 48
Principal Receivables................................................................. 6
Principal Shortfalls.................................................................. 42
Principal Terms....................................................................... 33
Publicly Offered Security Exception................................................... 65
Quarterly Payment Date................................................................ 7
Rating Agency......................................................................... 18
Receivables........................................................................... 1
Receivables Purchase Agreement........................................................ 4
Record Date........................................................................... 29
Reference Agent....................................................................... 27
Registration Statement................................................................ 2
Removal Date.......................................................................... 38
Removal Notice........................................................................ 38
Removed Accounts...................................................................... 38
Required Participation Amount......................................................... 37
Required Participation Percentage..................................................... 38
Required Subordinated Amount.......................................................... 11
Reserve Fund.......................................................................... 46
Reserve Fund Deposit Amount........................................................... 46
Reserve Fund Required Amount.......................................................... 46
Revolving Period...................................................................... 9
Securities Act........................................................................ 2
Seller................................................................................ 1
Seller's Certificate.................................................................. 32
Seller's Interest..................................................................... 1
</TABLE>
70
<PAGE> 73
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Seller's Participation Amount......................................................... 43
Seller's Percentage................................................................... 43
Series................................................................................ 1
Series 1992-1......................................................................... 6
Series 1992-1 Certificates............................................................ 6
Series 1992-2......................................................................... 6
Series 1992-2 Certificates............................................................ 6
Series 1992-3......................................................................... 6
Series 1992-3 Certificates............................................................ 6
Series 1994-1......................................................................... 3
Series 1994-1 Allocation Percentage................................................... 41
Series Accounts....................................................................... 8
Series Cut-Off Date................................................................... 9
Series Issuance Date.................................................................. 34
Service Transfer...................................................................... 54
Servicer.............................................................................. 1
Servicing Fee......................................................................... 53
Servicing Fee Rate.................................................................... 53
Special Payment Date.................................................................. 10
Status................................................................................ 23
Subordinated Percentage............................................................... 11
Supplement............................................................................ 6
Supplemental Certificate.............................................................. 32
Swap Counterparty..................................................................... 13
Tax Counsel........................................................................... 61
Tax Opinion........................................................................... 33
Termination Date...................................................................... 52
Terms and Conditions.................................................................. 31
Three-Month LIBOR..................................................................... 27
Transfer Date......................................................................... 34
Transfer Deposit Amount............................................................... 35
Trust................................................................................. 1
Trust Available Subordinated Amount................................................... 41
Trust Invested Amount................................................................. 41
Trustee............................................................................... 3
UCC................................................................................... 15
Unallocated Principal Collections..................................................... 42
Underwriters.......................................................................... 15
Underwriting Agreement................................................................ 66
Used Vehicle.......................................................................... 20
Used Vehicle Base Rate................................................................ 22
U.S. Certificateholder................................................................ 61
U.S. Person........................................................................... 75
U.S. Wholesale Portfolio.............................................................. 20
Vehicles.............................................................................. 3
</TABLE>
71
<PAGE> 74
ANNEX 1
OTHER ISSUANCES OF INVESTOR CERTIFICATES
This Annex I sets forth the principal characteristics of Series 1992-1,
Series 1992-2 and Series 1992-3. For more specific information with respect to
any Series, any prospective investor should contact FCAR at (313) 594-7742. FCAR
will provide, without charge, to any prospective purchaser, a copy of the
Disclosure Document with respect to such Series.
<TABLE>
<S> <C>
Series 1992-1
Initial Principal Amount............. $1,000,000,000
Scheduled Interest Payment Date...... The fifteenth day of each January and July (or, if
such day is not a business day, the next succeeding
business day)
Current Principal Amount............. $1,000,000,000
Required Participation Percentage.... 104%
Initial Swap Subordinated Amount..... $16,400,000
Revolving Period..................... December 30, 1991 to the earlier of July 31, 1996 or
an Early Amortization Event
Expected Payment Date................ January 1997 Distribution Date
Termination Date..................... January 1999 Distribution Date
Series 1992-2
Initial Principal Amount............. $700,000,000
Scheduled Interest Payment Date...... The fifteenth day of each April and October (or, if
such day is not a business day, the next succeeding
business day)
Current Principal Amount............. $700,000,000
Required Participation Percentage.... 104%
Initial Swap Subordinated Amount..... $14,350,000
Revolving Period..................... March 31, 1992 to the earlier of October 31, 1996 or
an Early Amortization Event
Expected Payment Date................ April 1997 Distribution Date
Termination Date..................... April 1999 Distribution Date
Series 1992-3
Initial Principal Amount............. $1,000,000,000
Scheduled Interest Payment........... The fifteenth day of each April and October (or, if
such day is not a business day, the next succeeding
business day)
Current Principal Amount............. $1,000,000,000
Required Participation Percentage.... 104%
Initial Swap Subordinated Amount..... $10,000,000
Revolving Period..................... September 30, 1992 to the earlier of Accumulation
Period Commencement Date or an Early Amortization
Event
Expected Payment Date................ October 1995 Distribution Date
Termination Date..................... October 1997 Distribution Date
</TABLE>
72
<PAGE> 75
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Certificates
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of The
Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global Securities will
be tradeable as home market instruments in both the European and U.S. domestic
markets. Initial settlements and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior asset backed certificates issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
CEDE & CO. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior asset backed certificates issues.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior asset
backed certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct the respective Depositary, as the-case may be, to receive the
Global Securities against payment. Payment will
73
<PAGE> 76
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of a
calendar year consisting of twelve 30-day calendar months. Payment will then be
made by the respective Depositary of the DTC Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the CEDEL
Participant's or Euroclear Participant's account. The securities credit will
appear the next day (European time) and the cash debt will be back-valued to,
and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the CEDEL or Euroclear cash debt will be valued instead as of the actual
settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of a calendar
year consisting of twelve 30-day calendar months. The payment will then be
reflected in the account of the CEDEL Participant or Euroclear Participant the
following day, and receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debt in anticipation of receipt of
the sale proceeds in its account, the back-valuation will extinguish any
overdraft incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would
74
<PAGE> 77
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
CERTAIN UNITED STATES FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest on registered debt issued by U.S. Persons, unless (i) each clearing
system, bank or other financial institution that holds customers' securities in
the ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must
be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
Exemption of U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
United States Federal Income Tax Reporting Procedure. The Certificate
Owner of a Global Security or, in the case of a Form 1001 or a Form 4224
filer, his agent, files by submitting the appropriate form to the person
through whom it holds (the clearing agency, in the case of persons holding
directly on the books of the clearing agency). Form W-8 and Form 1001 are
effective for three calendar years and Form 4224 is effective for one
calendar year.
U.S. Person. As used herein the term "U.S. Person" means a beneficial
owner of a Certificate that is for United States federal income tax
purposes (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof,
(iii) an estate or trust the income of which is subject to United States
federal income taxation regardless of its source or (iv) any other person
whose income or gain in respect of a Certificate is effectively connected
with the conduct of a United States trade or business. As used herein, the
term "Non-U.S. Person" means a beneficial owner of a Certificate that is
not a U.S. Person.
75
<PAGE> 78
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY FORD CREDIT OR THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Reports to Certificateholders......... 2
Prospectus Summary.................... 3
Special Considerations................ 15
Ford Credit Auto Receivables
Corporation and the Trust........... 18
Use of Proceeds....................... 20
The Dealer Floorplan Financing
Business............................ 20
The Accounts.......................... 23
Ford Motor Credit Company............. 25
Maturity and Principal Payment
Considerations...................... 26
Description of the Certificates....... 26
Description of the Receivables
Purchase Agreement.................. 57
Certain Legal Aspects of the
Receivables......................... 58
Certain Tax Matters................... 60
ERISA Considerations.................. 65
Underwriting.......................... 66
Legal Matters......................... 67
Index of Principal Terms.............. 68
Annex 1............................... 72
Global Clearance, Settlement and Tax
Documentation Procedures............ 73
</TABLE>
------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
FORD CREDIT AUTO
LOAN MASTER TRUST
$1,000,000,000
SERIES 1994-1,
FLOATING RATE AUTO LOAN
ASSET BACKED CERTIFICATES
K(LOGO)
FORD CREDIT AUTO
RECEIVABLES CORPORATION
SELLER
FORD MOTOR CREDIT COMPANY
SERVICER
-----------------------
PROSPECTUS
-----------------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. 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:
<TABLE>
<S> <C>
SEC Filing Fees........................................................... $344,828
Accounting Fees and Expenses.............................................. 40,000
Blue Sky Fees and Expenses................................................ 15,000
Trustee's Fees and Expenses............................................... 4,000
Rating Agency Fees........................................................ 170,000
Printing and Engraving Fees............................................... 80,000
Miscellaneous............................................................. 46,172
--------
Total................................................................ $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Five, Section (a) of the Certificate of Incorporation of the
Depositor sets forth certain rights of the directors and officers of the
Depositor to indemnification. In addition, Section 145 of the General
Corporation Law of Delaware provides as follows:
145. Indemnification of officers, directors, employees and agents;
insurance --
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employees or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, or itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
II-1
<PAGE> 80
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsection (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the Corporation shall
include any service as a director, officer, employee, or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided, or
granted pursuant to this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be
II-2
<PAGE> 81
a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Article Five of the Certificate of Incorporation of Ford Credit Auto
Receivables Corporation provides as follows:
(a) A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is amended after approval by the
stockholders of this Article Fifth to authorize corporate section further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
(b) Any repeal or modification of paragraph (a) of this Article Fifth
by the stockholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time of such
repeal or modification.
(c) (i) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative, investigative or otherwise (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he
or she is the legal representative, is or was a director, officer or
employee of the corporation or is or was serving at the request of the
corporation as a director, officer or employee of another corporation or of
a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer
or employee or in any other capacity while serving as a director, officer
or employee, shall be indemnified and held harmless by the corporation to
the fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation
to provide broader indemnification rights than said law permitted the
corporation to provide prior to such amendment), against all expense,
liability and loss (including penalties, fines, judgments, attorneys' fees,
amounts paid or to be paid in settlement and excise taxes imposed on
fiduciaries with respect to (i) employee benefit plans, (ii) charitable
organizations or (iii) similar matters) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue
as to a person who has ceased to be a director, officer or employee and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that the corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person (other than pursuant to subparagraph
(c)(ii) of this Article Fifth) only if such proceeding (or part thereof)
was authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this subparagraph (c)(i) of Article Fifth
shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in
advance of its final disposition, provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by
a director or officer in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this subparagraph (c)(i)
of Article Fifth or otherwise.
II-3
<PAGE> 82
(ii) if a claim which the corporation is obligated to pay under
subparagraph (c)(i) of this Article Fifth is not paid in full by the
corporation within 60 days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense
to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards
of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because
he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
corporation (including its Board of Directors, independent legal counsel
or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of
conduct.
(iii) The provisions of this paragraph (c) of Article Fifth shall
cover claims, actions, suits and proceedings, civil or criminal, whether
now pending or hereafter commenced, and shall be retroactive to cover
acts or omissions or alleged acts or omissions which heretofore have
taken place. If any part of this paragraph (c) of Article Fifth should
be found to be invalid or ineffective in any proceeding, the validity
and effect of the remaining provisions shall not be affected.
(iv) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this paragraph (c) of Article Fifth shall not be exclusive
of any other right which any person may have or hereafter acquire under
any statute, provision of the Certificate of Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
(v) The corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General
Corporation Law.
(vi) The corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and
rights to be paid by the corporation the expenses incurred in defending
any proceeding in advance of its final disposition, to any agent of the
corporation to the fullest extent of the provisions of this paragraph
(c) of Article Fifth with respect to the indemnification and advancement
of expenses of directors, officers and employees of the corporation.
Similar indemnification provisions in Section 5 of Article Ninth of the
Certificate of Incorporation of both Ford Motor Company and Ford Motor Credit
Company are applicable to directors, officers and employees of the Seller who
serve as such at the request of Ford Motor Company or Ford Motor Credit Company.
The Seller is insured for liabilities it may incur pursuant to Article
Fifth of its Certificate of Incorporation relating to the indemnification of its
directors, officers and employees. In addition, directors, officers and certain
key employees are insured against certain losses which may arise out of their
employment and which are not recoverable under the indemnification provisions of
the Seller's Certificate of Incorporation. The premium for both insurance
coverages is paid by Ford Motor Company.
II-4
<PAGE> 83
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Certificate of Incorporation of the Registrant.**
3.2 -- By-Laws of the Registrant.**
4.1 -- Pooling and Servicing Agreement among the Registrant, the 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.
5.1 -- Opinion of J.D. Bringard, Esq. with respect to certain matters involving the
Certificates.
8.1 -- Opinion of Brown & Wood with respect to certain federal income tax matters.
8.2 -- Opinion of J.D. Bringard, Esq. with respect to tax matters under Michigan law.
10.1 -- Form of Interest Rate Swap Agreement.
23.1 -- Consent of J.D. Bringard, Esq. (included in opinions filed as Exhibits 5.1 and
8.2).
23.2 -- Consent of Brown & Wood (included in opinion filed as Exhibit 8.1).
24.1 -- Powers of Attorney (including corporate resolutions).*
</TABLE>
- -------------------------
* Previously filed.
** Incorporated by reference to the same exhibit in Registration Statement No.
33-44432.
*** Incorporated by reference to the same exhibit in Registration Statement No.
33-47582.
(b) Financial Statement Schedules:
Not applicable with respect to the Registrant.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the 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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Detroit, State of Michigan, on the 26th day of July, 1994.
FORD CREDIT AUTO RECEIVABLES
CORPORATION
By W.E. ODOM*
------------------------------------
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
WILLIAM E. ODOM* Chairman of the Board and Director July 26, 1994
- -----------------------------------
(William E. Odom)
DIRECTOR:
EDSEL B. FORD II* President and Director July 26, 1994
- -----------------------------------
(Edsel B. Ford II)
PRINCIPAL FINANCIAL OFFICER:
KENNETH J. COATES* Executive Vice President -- July 26, 1994
- ----------------------------------- Finance and Director
(Kenneth J. Coates)
PRINCIPAL ACCOUNTING OFFICER:
PAUL W. LEWIS* Controller July 26, 1994
- -----------------------------------
(Paul W. Lewis)
*By /s/ HURLEY SMITH
- -----------------------------------
(Hurley Smith, Attorney-in-Fact)
</TABLE>
II-6
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Certificate of Incorporation of the Registrant.**
3.2 -- By-Laws of the Registrant.**
4.1 -- Pooling and Servicing Agreement among the Registrant, the 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.
5.1 -- Opinion of J.D. Bringard, Esq. with respect to certain matters involving the
Certificates.
8.1 -- Opinion of Brown & Wood with respect to certain federal income tax matters.
8.2 -- Opinion of J.D. Bringard, Esq. with respect to tax matters under Michigan law.
10.1 -- Form of Interest Rate Swap Agreement.
23.1 -- Consent of J.D. Bringard, Esq. (included in opinions filed as Exhibits 5.1 and
8.2).
23.2 -- Consent of Brown & Wood (included in opinion filed as Exhibit 8.1).
24.1 -- Powers of Attorney (including corporate resolutions).*
</TABLE>
- -------------------------
* Previously filed.
** Incorporated by reference to the same exhibit in Registration Statement No.
33-44432.
*** Incorporated by reference to the same exhibit in Registration Statement No.
33-47582.
<PAGE> 1
EXHIBIT 4.2
FORD CREDIT AUTO RECEIVABLES CORPORATION
Seller
FORD MOTOR CREDIT COMPANY
Servicer
and
CHEMICAL BANK
Trustee
SERIES 1994-1 SUPPLEMENT
Dated as of ___________ __, 1994
to
POOLING AND SERVICING AGREEMENT
Dated as of December 31, 1991
$_____________
FORD CREDIT AUTO LOAN MASTER TRUST
SERIES 1994-1
FLOATING RATE
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION> PAGE
----
<S> <C>
ARTICLE I
Creation of the Series 1994-1 Certificates
SECTION 1.01. Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Definitions . . . . . . . . . . . . . . . . . 1
SECTION 2.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
Servicing Fee
SECTION 3.01. Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
Rights of Series 1994-1 Certificateholders and
Allocation and Application of Collections
SECTION 4.01. Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.02. Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.03. Determination of Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.04. Establishment of Reserve Fund and
Funding Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.05. Deficiency Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.06. Application of Investor Non-Principal
Collections, Investment Proceeds, Net
Trust Swap Receipts and Available Investor
Principal Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.07. Distributions to Series 1994-1
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.08. Application of Reserve Fund and
Available Subordinated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.09. Investor Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.10. Excess Servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.11. Excess Principal Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.12. Asset Composition Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.13. Excess Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V
Distributions and Reports to
Series 1994-1 Certificateholders
SECTION 5.01. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.02. Reports and Statements to Series
1994-1 Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 5.03. Determination of Three-Month LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI
Amortization Events
SECTION 6.01. Additional Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII
Optional Repurchase
SECTION 7.01. Optional Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
Final Distributions
SECTION 8.01. Sale of Certificateholders' Interest
Pursuant to Section 2.03 of the
Agreement; Distributions Pursuant
to Section 7.01 of the Series
Supplement or Section 2.03 or
12.02(c) of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.02. Distribution of Proceeds of Sale, Disposition
or Liquidation of the Receivables Pursuant
to Section 9.02 of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX
Miscellaneous Provisions
SECTION 9.01. Execution and Delivery of the Interest
Rate Swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.02. Registration of the Series 1994-1
Certificates under the Securities
Exchange Act of 1934 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.03. Ratification of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.04. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
ii
<PAGE> 4
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Certificate
Exhibit B-1 Form of Distribution Date Statement for the Trustee
Exhibit B-2 Form of Distribution Date Statement for Persons other than the Trustee
Exhibit C Form of Interest Rate Swap
Schedule 1 List of Series 1994-1 Accounts
</TABLE>
iii
<PAGE> 5
SERIES 1994-1 SUPPLEMENT dated as of _________ __, 1994 (the "Series
Supplement"), among FORD CREDIT AUTO RECEIVABLES CORPORATION, a Delaware
corporation, as Seller, FORD MOTOR CREDIT COMPANY, a Delaware corporation, as
Servicer, and CHEMICAL BANK, a New York banking corporation, as Trustee.
Pursuant to Section 6.03 of the Pooling and Servicing Agreement dated as of
December 31, 1991 (as amended and supplemented, the "Agreement"), among the
Seller, the Servicer and the Trustee, the Seller may from time to time direct
the Trustee to issue, on behalf of the Trust, one or more new Series of
Investor Certificates representing fractional undivided interests in the Trust.
The Principal Terms of any new Series are to be set forth in a Supplement to
the Agreement.
Pursuant to this Series Supplement, the Seller and the Trustee shall create
a new Series of Investor Certificates and specify the Principal Terms thereof.
ARTICLE I
Creation of the Series 1994-1 Certificates
SECTION 1.01. Designation. (a) There is hereby created a Series of
Investor Certificates to be issued pursuant to the Agreement and this Series
Supplement to be known as the "Series 1994-1, Floating Rate Auto Loan Asset
Backed Certificates".
(b) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, the terms and provisions of this Series Supplement shall govern.
ARTICLE II
Definitions
SECTION 2.01. Definitions. (a) Whenever used in this Series Supplement
the following words and phrases shall have the following meanings.
"Accumulation Period" shall mean, unless an Early Amortization Event shall
have occurred prior thereto (other than an Early Amortization Event which has
resulted in an Early Amortization Period which has ended as described in clause
(c) of the definition thereof), the period commencing on the
<PAGE> 6
Accumulation Period Commencement Date and ending upon the first to occur of (a)
the commencement of an Early Amortization Period or (b) the Expected Final
Payment Date.
"Accumulation Period Commencement Date": The date which is, with respect
to an Accumulation Period Length of (i) one calendar month, the first day of
the ________ 199__ Collection Period, (ii) two calendar months, the first day
of the ________ 199__ Collection Period, (iii) three calendar months, the
first day of the ________ 199__ Collection Period, (iv) four calendar months,
the first day of the ________ 199__ Collection Period and (v) five calendar
months, the first day of the ________ 199__ Collection Period; provided,
however, that the Accumulation Period Commencement Date shall be (x) ________
__, 199__, if, prior to such date, any other outstanding Series of Investor
Certificates shall have entered into an early amortization period or (y) in the
case of an Accumulation Period Length of less than five months, the earlier of
(A) the date an early amortization period has commenced with respect to any
other outstanding Series of Investor Certificates and (B) the Accumulation
Period Commencement Date as determined above.
"Accumulation Period Determination Date": ________ __, 199__.
"Accumulation Period Length": As determined by the Servicer on the
Accumulation Period Determination Date, a period of not less than one calendar
month nor more than five calendar months, equal to the product (rounded
upwards to the nearest whole number) of (i) five multiplied by (ii) a
fraction, the numerator of which is the Invested Amount as of such Accumulation
Period Determination Date (after giving effect to all changes therein on such
date) and the denominator of which is equal to the sum of such Invested Amount
and the Outstanding Series Invested Amount as of such Accumulation Period
Determination Date (after giving effect to all changes therein on such date).
"Additional Early Amortization Event" shall have the meaning specified in
Section 6.01.
"Additional Interest" shall have the meaning specified in Section 4.02(a).
"Adjustment Date" shall mean the second London Business Day preceding the
first day of each Interest Period.
"Aggregate Available Subordinated Amount" shall mean the sum of the
Available Subordinated Amount and the Swap Available Subordinated Amount.
2
<PAGE> 7
"Allocable Miscellaneous Payments" shall mean, with respect to any
Distribution Date, the product of (a) the Series 1994-1 Allocation Percentage
for the related Collection Period and (b) Miscellaneous Payments with respect
to the related Collection Period.
"Asset Composition Event" shall have the meaning specified in Section 4.12.
"Asset Composition Premium" shall mean, with respect to any portion of the
Asset Correction Amount comprising principal, the excess (discounted as
described below), if any, of (a) the amount of interest that would have accrued
at the Certificate Rate on such principal portion of the Asset Correction
Amount from the period commencing with and including the Distribution Date on
which such amount was distributed to but excluding the Expected Final Payment
Date over (b) the amount of interest that would accrue on such principal
portion of the Asset Correction Amount 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 shall be discounted at the
Asset Composition Discount Rate from the Expected Final Payment Date to such
Distribution Date.
"Asset Correction Amount" shall have the meaning specified in Section 4.12.
"Available Investor Principal Collections" shall mean, with respect to any
Distribution Date, the sum of (a) an amount equal to Investor Principal
Collections for such Distribution Date, (b) Allocable Miscellaneous Payments
with respect to such Distribution Date, (c) Series 1994- 1 Excess Principal
Collections on deposit in the Collection Account for such Distribution Date and
(d) on the Termination Date, any funds in the Reserve Fund after giving effect
to Section 4.08.
"Available Seller's Collections" shall mean, with respect to any Deposit
Date, the sum of (a) the Available Sellers Non-Principal Collections for such
Deposit Date and (b) the Available Seller's Principal Collections for such
Deposit Date; provided, however, that the Available Sellers Collections shall
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.
3
<PAGE> 8
"Available Seller's Non-Principal Collections" shall mean, with respect to
any Deposit Date, an amount equal to the result obtained by multiplying (a) the
excess of (i) the Seller's percentage for the related Collection Period over
(ii) the Excess Seller's Percentage for such Collection Period by (b) Non-
Principal Collections for such Deposit Date.
"Available Seller's Principal Collections" shall mean, with respect to any
Deposit Date, an amount equal to the result obtained by multiplying (a) the
excess of (i) the Seller's Percentage for the related Collection Period over
(ii) the Excess Seller's Percentage for such Collection Period by (b) Principal
Collections for such Deposit Date.
"Available Subordinated Amount" for the first Determination Date shall
mean an amount equal to the Required Subordinated Amount. The Available
Subordinated Amount for any subsequent Determination Date shall mean an amount
equal to the sum of
(i) the lesser of (x) the Available Subordinated Amount for the
preceding Determination Date, minus (A) the Required Subordination Draw
Amount with respect to the preceding Distribution Date to the extent provided
in Section 4.08, minus (B) withdrawals from the Reserve Fund pursuant to
Section 4.08 on the preceding Distribution Date to make distributions
pursuant to Section 4.06(a)(iv) (but excluding any other withdrawals from the
Reserve Fund), plus (C) the portion of Excess Servicing for such preceding
Distribution Date distributed to the Seller pursuant to Section 4.10(c), plus
(D) any amounts distributed as Asset Composition Premium pursuant to Section
4.07(b) on the preceding Distribution Date minus (E) the Incremental
Subordinated Amount for such preceding Determination Date, plus (F) the
Incremental Subordinated Amount for the current Determination Date and (y)
the Required Subordinated Amount;
plus (ii) the Subordinated Percentage of funds withdrawn from the Excess
Funding Account since the prior Distribution Date and to be withdrawn from
the Excess Funding Account up to and including the succeeding Distribution
Date and paid to the Seller or allocated to one or more Series; and
minus (iii) the Subordinated Percentage of funds deposited in the Excess
Funding Account since the prior Distribution Date and to be deposited into
the Excess Funding Account up to and including the succeeding Distribution
Date;
4
<PAGE> 9
provided, however, that once the Accumulation Period or any Early Amortization
Period (other than an Early Amortization Period which has ended as described in
clause (c) of the definition thereof) shall have commenced, the Required
Subordinated Amount shall be calculated based on the Invested Amount as of the
close of business on the day preceding such Accumulation Period or Early
Amortization Period.
"Calculation Agent" shall mean the Trustee or any other Calculation Agent
selected by the Seller which is reasonably acceptable to the Trustee.
"Certificate Rate: With respect to the first Interest Period _____%, and
for any subsequent Interest Period, Three-Month LIBOR on the related Adjustment
Date and (ii) ______%.
"Certificateholders Monthly Servicing Fee" shall have the meaning specified
in Section 3.01.
"Closing Date" shall mean ________ __, 1994.
"Controlled Amortization Amount" shall mean the quotient obtained by
dividing the Invested Amount as of the Accumulation Period Determination Date
(after giving effect to any changes therein on such date) by the
Accumulation Period Length.
"Controlled Distribution Amount" shall mean, for any Distribution Date
with respect to the Accumulation Period, 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 sum of amounts on deposit in the Excess Funding Account and the
Principal Funding Account, in each case before giving effect to any withdrawals
from or deposits to such accounts on such Distribution Date.
"Deficiency Amount" shall have the meaning specified in Section 4.05.
"Early Amortization Event" shall mean any Early Amortization Event specified
in Section 9.01 of the Agreement, together with any Additional Early
Amortization Event specified in Section 6.01 of this Series Supplement.
"Early Amortization Period" shall mean an Early Amortization Period with
respect to Series 1994-1.
5
<PAGE> 10
"Excess Principal Collections" shall mean the amounts equal to the balances
referred to as such in Sections 4.06(b)(ii) and 4.06(c)(ii).
"Excess Reserve Fund Required Amount" shall mean, for any Distribution Date
with respect to an Early Amortization Period, an amount equal to the greater
of (a) 5% of the initial principal balance of the Series 1994-1 Certificates
and (b) the excess of (i) the sum of (x) the 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)
and (y) (A) a percentage equal to the excess of the Required Participation
Percentage over 100%, multiplied by (B) the outstanding principal balance of
the Certificates on such Distribution Date (after giving effect to any changes
therein on such Distribution Date) over (ii) the Seller's Interest on such
Distribution Date (after giving effect to changes therein on such Distribution
Date); provided that the Excess Reserve Fund Required Amount shall not exceed
such Available Subordinated Amount.
"Excess Seller's Percentage" shall mean, with respect to any Collection
Period, a percentage (which percentage shall never be less than 0% nor more
than 100%) equal to (a) 100% minus, when used with respect to Non-Principal
Receivables and Defaulted Receivables, the sum of (i) the Floating Allocation
Percentage with respect to such Collection Period and the sum of the floating
allocation percentages for all other outstanding Series of Investor
Certificates for such Collection Period and (ii) the percentage equivalent of a
fraction, the numerator of which is the sum of the Aggregate Available
Subordinated Amount as of the Determination Date occurring in such Collection
Period and the sum of the aggregate available subordinated amounts for all
other outstanding Series of Investor Certificates as of such Determination Date
(in each case, 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 the immediately preceding Collection Period or
(b) 100% minus, when used with respect to Principal Receivables, the sum of (i)
the floating allocation percentages for all outstanding Series that are in
their revolving periods with respect to such Collection Period and the sum of
the principal allocation percentages for all outstanding Series of Investor
Certificates that are not in their revolving periods with respect to such
Collection Period and (ii) the percentage equivalent of a fraction, the
numerator of which is the sum of the Aggregate Available Subordinated Amount as
of the Determination Date Occurring in such Collection Period and the sum of
the aggregate available subordinate amounts for all other Series of Investor
6
<PAGE> 11
Certificates as of such Determination Date (in each case, 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.
"Excess Servicing" shall mean, with respect to any Distribution Date, the
amount, if any, specified pursuant to Section 4.06(a)(vi) with respect to such
Distribution Date.
"Expected Final Payment Date" shall mean the ________ 199__ Distribution
Date.
"Floating Allocation Percentage" shall mean, with respect to any Collection
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Invested Amount as of the last day of
the immediately preceding Collection Period (after giving effect to the
reinvestment to occur on the next succeeding Distribution Date) and the
denominator of which is the Pool Balance as of such last day; provided,
however, that, with respect to the first Collection Period, the Floating
Allocation Percentage shall mean the percentage equivalent of a fraction, the
numerator of which is the Initial Invested Amount and the denominator of which
is the Pool Balance on the Cut-Off Date.
"Incremental Subordinated Amount" shall mean, with respect to any
Determination Date, the result obtained by multiplying (a) a fraction, the
numerator of which is the sum of the Invested Amount on the last day of the
immediately preceding Collection Period (or with respect to the first
Determination Date, the Invested Amount on the Closing Date) and the Available
Subordinated Amount for such Determination Date (calculated without subtracting
or adding the Incremental Subordinated Amount for such Distribution Date as
described in clause (E) or (F), respectively, of the definition thereof and
without adding the Incremental Subordinated Amount in the definition of
Required Subordinated Amount as used in the definition of Available
Subordinated Amount) (or with respect to the first Determination Date, the
product of the Invested Amount on the Closing Date and the Subordinated
Percentage) and the denominator of which is the Pool Balance on such last day
by (b) the Trust Incremental Subordinated Amount.
"Initial Invested Amount" shall mean the initial principal amount of the
Series 1994-1 Certificates, which is $_____________, plus (a) the amount of any
withdrawals from the Excess Funding Account pursuant to Section 4.13(b) in
connection with an increase in the Pool Balance, minus (b) the amount of any
7
<PAGE> 12
additions to the Excess Funding Account pursuant to Section 4.06(b)(i) in
connection with a reduction in the Pool Balance.
"Initial Principal Amount" shall mean $_____________.
"Initial Swap Subordinated Amount" shall mean $__________.
"Interest Period" shall mean, with respect to any Distribution Date, the
period from and including the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date.
"Interest Rate Swap" shall mean the interest rate swap agreement, the form
of which is attached hereto as Exhibit C, dated as of ________ __, 1994,
between the Swap Counterparty and the Trust in connection with Series 1994-1.
"Interest Shortfall" shall have the meaning specified in Section 4.02.
"Invested Amount" shall mean, when used with respect to any date, an amount
equal to (a) the Initial Invested Amount minus (b) the amount, without
duplication, of principal payments (except principal payments made from the
Excess Funding Account and any transfers from the Excess Funding Account to the
Principal Funding Account) made to Series 1994-1 Certificateholders or
deposited to the Principal Funding Account prior to such date minus (c) the
excess, if any, of the aggregate amount of Investor Charge-Offs over Investor
Charge-Offs reimbursed pursuant to Section 4.08 prior to such date. In
addition, for purposes of the definition of "Early Amortization Period", the
Invested Amount shall be an amount equal to the outstanding principal amount of
the Certificates.
"Investment Proceeds" shall mean, with respect to any Determination Date,
all interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Series 1994-1 Accounts, together with an
amount equal to the Series 1994-1 Allocation Percentage of the interest and
other investment earnings on funds held in the Collection Account credited as
of such date to the Collection Account pursuant to Section 4.02 of the
Agreement.
"Investor Charge-Offs" shall have the meaning specified in Section 4.09.
8
<PAGE> 13
"Investor Default Amount" shall mean, with respect to any Distribution
Date, an amount equal to the product of (a) the Defaulted Amount for the
related Collection Period and (b) the Floating Allocation Percentage for the
related Collection Period.
"Investor Non-Principal Collections" shall mean, with respect to any
Distribution Date, an amount equal to the product of (i) the Floating
Allocation Percentage for the related Collection Period and (ii) Non-Principal
Collections deposited in the Collection Account for the related Collection
Period.
"Investor Principal Collections" shall mean, with respect to any
Distribution Date, 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 or an Early
Amortization Period, for the related Collection Period (or any partial
Collection Period which occurs as the first Collection Period during an Early
Amortization Period), and (ii) Principal Collections deposited in the
Collection Account for the related Collection Period (or any partial Collection
Period which occurs as the first Collection Period during an Early
Amortization Period) and (b) the amount, if any, of Collections of Non-Principal
Receivables, Excess Servicing and Available Seller's Collections to be
distributed pursuant to Section 4.06(a)(iv), 4.08(b) (to the extent Section
4.08(b) relates to a shortfall in distributions pursuant to Section
4.06(a)(iv)) or 4.10(a) on such Distribution Date; provided that in the case of
clause (a), if for any Distribution Date the sum of the Floating Allocation
Percentage (if the Revolving Period is in effect), the Principal Allocation
Percentage (if the Early Amortization Period or the Accumulation Period is in
effect), the floating allocation percentage for all other outstanding Series of
Investor Certificates in their revolving period and the principal allocation
percentage for all other outstanding Series of Investor Certificates in their
early amortization or accumulation period exceeds 100%, then Principal
Collections shall be allocated among such Series (including Series 1994-1) pro
rata on the basis of such floating allocation percentages and principal
allocation percentages.
LIBOR: As to any date of determination, the rate for United States dollar
deposits for one month which appear on the Telerate Screen Page 3875 (as
defined below) as of 11:00 A.M., London time such date. "Telerate Screen LIBO
Page 3750" means the display designated as page 3875 on the Telerate Service
(or such other page as may replace page 3875 on that service for the purpose of
displaying London inter-bank offered rates of major banks). If such rate does
not appear on such page (or such other page as may replace that page on that
service, or if such service
9
<PAGE> 14
is no longer offered, such other service for displaying LIBOR or comparable
rates as may be selected by the Depositor after consultation with the Trustee),
the rate will be the Reference Bank Rate.
"LIBOR Business Day" shall mean any day other than (i) a Saturday or a
Sunday or (ii) a day on which banking institutions in the State of New York or
in the city of London, England are required or authorized by law to be closed.
"Monthly Interest" shall have the meaning specified in Section 4.02.
"Monthly Payment Rate" shall mean, for any Collection Period, the percentage
derived from dividing the Principal Collections for such Collection Period by
the average daily Pool Balance for such Collection Period.
"Monthly Principal" shall have the meaning specified in Section 4.03.
"Monthly Servicing Fee" shall have the meaning specified in Section 3.01.
"Net Trust Swap Payment" shall mean, for any Collection Period, the monthly
payment, if any, made by the Trust to the Swap Counterparty pursuant to the
Interest Rate Swap to the extent that such monthly payment exceeds the amount
owed by the Swap Counterparty to the Trust pursuant to the Interest Rate Swap
for such Collection Period.
"Net Trust Swap Receipt" shall mean, for any Collection Period, the amount
owed, if any, made by the Swap Counterparty to the Trust pursuant to the
Interest Rate Swap to the extent that such amount exceeds the monthly payment
made by the Trust to the Swap Counterparty pursuant to the Interest Rate Swap
for such Collection Period and, following the termination of the Interest Rate
Swap in accordance with its terms, the net amount of any such receipt that
would have benefitted the Trust in the absence of such a termination shall be
paid by applying Collections allocated to the Swap Available Subordinated
Amount.
"Outstanding Series Invested Amount": The aggregate "Invested Amounts",
as defined in the applicable Supplement, with respect to any other outstanding
Series of Investor Certificates for which the revolving period for such other
outstanding Series of Investor Certificates is not scheduled to end before the
last day of the ________ ____ Collection Period.
10
<PAGE> 15
"Pool Factor" shall mean, with respect to any Determination Date, a number
carried out to eleven decimals representing the ratio of the Invested Amount as
of such Determination Date (determined after taking into account any increases
or decreases in the Invested Amount which will occur on the following
Distribution Date) to the Initial Invested Amount.
"Principal Allocation Percentage" shall mean, with respect to any
Collection Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Invested Amount as of
the last day of the Revolving Period and the denominator of which is the Pool
Balance as of the last day of the immediately preceding Collection Period;
provided, however, that with respect to that portion of any Collection Period
that falls after the date on which any Early Amortization Event occurs (other
than an Early Amortization Event which has resulted in an Early Amortization
Period which has ended as described in clause (c) thereof), the Principal
Allocation Percentage shall be reset using the Pool Balance as of the close
of business on the date on which such Early Amortization Event shall have
occurred and Principal Collections shall be allocated for such portion of
such Collection Period using such reset Principal Allocation Percentage.
"Quarterly Payment Date" shall mean the 15th day of January, April, July and
October (or, if any such day is not a business day, the next succeeding
business day) commencing October 16, 1994.
"Reassignment Amount" shall mean, with respect to any Distribution Date,
after giving effect to any deposits and distributions otherwise to be made on
such Distribution Date, the sum of (i) the Invested Amount on such Distribution
Date, (ii) accrued and unpaid interest on the unpaid principal balance of the
Series 1994-1 Certificates (calculated on the basis of the outstanding
principal balance of the Series 1994-1 Certificates at the Certificate Rate
through the day preceding such Distribution Date), (iii) the amount of
Additional Interest, if any, for such Distribution Date and any Additional
Interest previously due but not distributed to the Series 1994-1
Certificateholders on a prior Distribution Date and (iv) the amount of the
Asset Composition Premium, if any, previously due but not previously
distributed to the Series 1994-1 Certificateholders.
"Reference Agent": Chemical Bank or any Successor.
"Reference Bank" shall mean at any time, any one of the four major banks in
the London interbank market selected by the
11
<PAGE> 16
Reference Agent acting as a reference bank at such time pursuant to Section
5.03.
"Required Participation Percentage" shall mean, with respect to Series
1994-1, 104%; provided, however, that the seller may, upon 10 days' prior
notice to the Trustee, each Rating Agency and any Enhancement Provider, reduce
the Required Participation Percentage to a percentage which shall not be less
than 100%, provided that each Rating Agency shall have notified the seller or
the Servicer that any such reduction will not result in a reduction or
withdrawal of the rating of any outstanding Series or Class with respect to
which it is a Rating Agency.
"Required Subordinated Amount" shall mean, as of any date of determination,
the sum of (a) the product of (i) the Subordinated Percentage and (ii) the
Invested Amount on such date and (b) the Incremental Subordinated Amount.
"Required Subordination Draw Amount" shall have the meaning specified in
Section 4.05.
"Reserve Fund" shall have the meaning specified in Section 4.04.
"Reserve Fund Deposit Amount" shall mean, with respect to any Distribution
Date, the amount, if any, by which (i) the Reserve Fund Required Amount for
such Distribution Date exceeds (ii) the amount of funds in the Reserve Fund
after giving effect to any withdrawals therefrom on such Distribution Date.
"Reserve Fund Required Amount" shall mean, with respect to any Distribution
Date, an amount equal to the product of (a) 0.35% and (b) the outstanding
principal balance of the Certificates on such Distribution Date (after giving
effect to any changes therein on such Distribution Date).
"Reuters Screen LIBO Page" shall mean the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that Service for the purpose of displaying London interbank
offered rates of major banks).
"Revolving Period" shall mean the period beginning at the close of business
on the Business Day immediately preceding the Series Cut-Off Date and ending on
the earlier of (a) the close of business on the day immediately preceding the
Accumulation Period Commencement Date, and (b) the close of business on the day
an Early Amortization Period commences; provided, however, that, if any Early
Amortization Period ends as described in clause (c) of the definition thereof,
the Revolving period will recommence as of the close of business on the day
such Early Amortization Period ends.
"Seller's Collections" shall mean, with respect to any Collection Period,
the sum of (a) the Seller's Percentage of
12
<PAGE> 17
Non-Principal Collections for the related Collection Period, plus (b) the
Seller's Percentage of Principal Collections for the related Collection Period.
"Seller's Percentage" for any Collection Period shall mean (i) with respect
to Non-Principal Receivables and Defaulted Receivables, 100% minus the
aggregate of the floating allocation percentages for each outstanding Series
and (ii) with respect to Principal Receivables, 100% minus the sum of (a) the
aggregate of the floating allocation percentages for all Series in their
revolving periods and (b) the aggregate of the principal allocation percentages
for all Series that are not in their revolving periods, but in any case shall
not be less than 0%.
"Series Cut-Off Date" shall mean June 30, 1994.
"Series 1994-1" shall mean the Series of Investor Certificates, the terms of
which are specified in this Series Supplement.
"Series 1994-1 Accounts" shall have the meaning specified in Section
4.04(e)(i).
"Series 1994-1 Allocation Percentage" for a Collection Period shall mean the
percentage derived from the fraction the numerator of which is the Invested
Amount on the last Business Day preceding such Collection Period and the
denominator of which is the Trust Invested Amount on the last Business Day
preceding such Collection Period.
"Series 1994-1 Certificateholders" shall mean the Holders of Series 1994-1
Certificates.
"Series 1994-1 Certificateholders' Interest" shall mean that portion of the
Certificateholders' Interest evidenced by the Series 1994-1 Certificates.
"Series 1994-1 Certificates" shall mean any one of the certificates executed
by the Seller and authenticated by the Trustee, substantially in the form of
Exhibit A.
"Series 1994-1 Excess Principal Collections" shall mean that portion of
Excess Principal Collections allocated to Series 1994-1 pursuant to Section
4.11.
"Series 1994-1 Principal Shortfall" shall have the meaning specified in
Section 4.11.
13
<PAGE> 18
"Servicing Fee Rate" shall mean, with respect to Series 1994-1, 1.0% or, for
any Distribution Date in respect of which the Monthly Servicing Fee has been
waived, 0%.
"Special Payment Date" shall mean each Distribution Date with respect to any
Early Amortization Period (other than an Early Amortization Period which has
ended as described in clause (c) thereof).
"Subordinated Percentage" shall mean the percentage equivalent of a
fraction, the numerator of which is 10% and the denominator of which is the
excess of 100% over 10%.
"Swap Available Subordinated Amount" shall mean (a) with respect to the
first Determination Date, the Initial Swap Subordinated Amount, and (b) with
respect to each subsequent Determination Date, the Swap Available Subordinated
Amount for the immediately preceding Determination Date minus the aggregate
amount, if any, of prior payments of Required Subordination Draw Amounts made
from Available Seller's Collections applied to reduce the Swap Available
Subordinated Amount in accordance with Section 4.08(b).
"Swap Counterparty" shall mean _________________.
"Telerate Page 3875" shall mean the display designated as such on the Dow
Jones Telerate Service (or such other page as may replace the 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
rate for U.S. dollar deposits).
"Termination Date" shall mean the ________ 199__ Distribution Date.
"Termination Proceeds" shall mean any Termination proceeds arising out of
a sale of Receivables (or interests herein) pursuant to Section 12.02(c) of the
Agreement with respect to Series 1994-1.
"Three-Month LIBOR" shall mean the London interbank offered rate for
three-month United States dollar deposits established by the Reference Agent on
each Adjustment Date pursuant to Section 5.03.
"Trust Available Subordinated Amount" shall mean the sum of the Aggregate
Available Subordinated Amount for Series 1994-1 and the aggregate available
subordinated amounts for all other outstanding Series.
14
<PAGE> 19
(a) Notwithstanding anything to the contrary in this Series Supplement or
the Agreement, the term "Rating Agency" shall mean, whenever used in this
Series Supplement or the Agreement with respect to Series 1994-1, Standard &
Poor's and Moody's. As used in this Series Supplement and in the Agreement
with respect to Series 1994-1, "highest investment category" shall mean (i) in
the case of Standard & Poor's, AAA and A-1+, as applicable, and (ii) in the
case of Moody's, Aaa and P-1, as applicable.
(b) Notwithstanding anything to the contrary in this Series Supplement or
the Agreement, the terms "Enhancement Provider" and "Beneficiary" shall exclude
the Swap Counterparty for purposes of such party's (i) receipt of any notices,
Opinions of Counsel, Officer's Certificates, statements or the like and (ii)
required consent to the appointment of any Successor Servicer.
(c) All capitalized terms used herein and not otherwise defined herein
have the meanings ascribed to them in the Agreement. The definitions in
Section 2.01 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.
(d) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Series Supplement shall refer to this Series
Supplement as a whole and not to any particular provision of this Series
Supplement; references to any Article, Section or Exhibit are references to
Articles, Sections and Exhibits in or to this Series Supplement unless
otherwise specified; and the term "including" means "including without
limitation".
ARTICLE III
Servicing Fee
SECTION 3.01. Servicing Compensation. The monthly servicing fee (the
"Monthly Servicing Fee") shall be payable to the Servicer, in arrears, on
each Distribution Date in respect of any Collection Period (or portion
thereof) occurring prior to the earlier of the first Distribution Date
following the Series 1994-1 Termination Date and the first Distribution Date on
which the Invested Amount is zero, in an amount equal to one-twelfth of the
product of (a) the Servicing Fee Rate and (b) the Series 1994-1, Allocation
Percentage of the Pool Balance as of the last day of the second Collection
Period preceding such Distribution Date (or with respect to the first
Distribution Date, as of the
15
<PAGE> 20
Series Cut-Off Date). The share of the Servicing Fee allocable to the Series
1994-1 Certificateholders with respect to any Distribution Date (the
"Certificateholders Monthly Servicing Fee") shall be equal to one-twelfth of
the product of (a) the Servicing Fee Rate and (b) the Invested Amount as of the
last day of the Collection Period second preceding such Distribution Date;
provided, however, that with respect to the first Distribution Date, the
Certificateholders Monthly Servicing Fee shall be equal to $_________. The
remainder of the Monthly Servicing Fee shall be paid by the Seller and in no
event shall the Trust, the Trustee or the Series 1994-1 Certificateholders be
liable for the share of the Monthly Servicing Fee to be paid by the Seller; and
the remainder of the Servicing Fee shall be paid by the Seller and the Investor
Certificateholders of other Series and the Series 1994-1 Certificateholders
shall in no event be liable for the share of the Servicing Fee to be paid by
the Seller or the Investor Certificateholders of other Series. The
Certificateholders Monthly Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for distribution in accordance with
the terms of this Series Supplement.
The Servicer will be permitted, in its sole discretion, to waive the
Monthly Servicing Fee for any Distribution Date by notice to the Trustee on or
before the related Determination Date; provided that the Servicer believes
that sufficient Collections of Non-Principal Receivables will be available on
any future Distribution Date to pay the Certificateholders Monthly Servicing
Fee relating to the waived Monthly Servicing Fee. If the Servicer so waives
the Monthly Servicing Fee for any Distribution Date, the Monthly Servicing Fee
and the Certificateholders Monthly Servicing Fee for such Distribution Date
shall be deemed to be zero for all purposes of this Series Supplement and the
Agreement; provided, however, that such Certificateholders Monthly Servicing
Fee shall be paid on a future Distribution Date solely to the extent amounts
are available therefor pursuant to Section 4.10(b); provided further that, to
the extent any such Waived Certificateholders Monthly Servicing Fee is so paid,
the related portion of the Monthly Servicing Fee to be paid by the Seller shall
be paid by the Seller to the Servicer.
ARTICLE IV
Rights of Series 1994-1 Certificateholders and
Allocation and Application of Collections
SECTION 4.01. Allocations. Payments to Seller. (a) Collections of
Non-Principal Receivables and Principal Receivables, Miscellaneous Payments and
Defaulted Amounts, as
16
<PAGE> 21
they relate to Series 1994-1, shall be allocated and distributed as set forth
in this Article.
(b) The Servicer shall instruct the Trustee to withdraw from the
Collection Account and pay to the Seller on the dates set forth below the
following amounts:
(i) on each Deposit Date:
(A) an amount equal to the Excess Seller's Percentage for the related
Collection Period of Non-Principal Collections deposited in the Collection
Account for such Deposit Date; and
(B) an amount equal to the Excess Seller's Percentage for the related
Collection Period of Principal Collections deposited in the Collection
Account for such Deposit Date, if the Seller's Participation Amount
(determined after giving effect to any Principal Receivables transferred
to the Trust on such Deposit 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); and
(ii) on each Deposit Date with respect to the Revolving Period or the
revolving period for any other Series of Investor Certificates, an amount
equal to the Available Seller's Principal Collections for such Deposit Date,
if the Seller's Participation Amount (determined after giving effect to any
Principal Receivables transferred to the Trust on such Deposit Date) exceeds
the Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawal, and deposits to be made on the Distribution Date immediately
following such Deposit Date); provided, however, that Available Seller's
Principal Collections shall be paid to the Seller with respect to any
Collection Period only after an amount equal to the sum of (A) the
Deficiency Amount, if any, relating to the immediately preceding Collection
Period and (B) the excess, if any, of the Reserve Fund Required Amount over
the amount in the Reserve Fund on the immediately preceding Distribution
Date (after giving effect to the allocations of, distributions from, and
deposits in, the Reserve Fund on such Distribution Date), has been
17
<PAGE> 22
deposited in the Collection Account from such Available Seller's Principal
Collections.
The withdrawals to be made from the Collection Account pursuant to this
Section 4.01(b) do not apply to deposits into the Collection Account that do
not represent Collections, including Miscellaneous Payments, payment of the
purchase price for the Certificateholders' Interest pursuant to Section 2.03 of
the Agreement, payment of the purchase price for the Series 1994-1
Certificateholders' Interest pursuant to Section 7.01 of this Series Supplement
and proceeds from the sale, disposition or liquidation of Receivables pursuant
to Section 9.02 or 12.02 of the Agreement.
By way of clarification of Section 2.08(c) of the Agreement, any Principal
Receivables arising in a Removed Account after the Removal Date shall be the
subject of the Reassignment referred to in such Section 2.08(c) and shall
therefore not be included in the Trust, and Collections in respect of the
Receivables in such Ineligible Account shall be allocated as follows: (i)
Principal Collections shall be allocated first to the oldest outstanding
principal balance of such Receivables and (ii) Defaulted Receivables and
Non-Principal Collections in respect of such Ineligible Account shall be
allocated to the Trust on the basis of the ratio of the Principal Receivables
owned by the Trust in such Ineligible Account on the related Business Day to
the total amount of Principal Receivables in such ineligible Account on such
Business Day, and the remainder of such collections of principal, Defaulted
Receivables and Non-Principal Collections shall be allocated to the Seller;
(c) The Servicer shall instruct the Trustee to withdraw from the
Collection Account and deposit into the Reserve Fund on Deposit Dates with
respect to the Revolving Period Available Seller's Principal Collections for
such Deposit Date, up to the amount of the excess, if any, determined pursuant
to Section 4.01(b)(ii)(B).
SECTION 4.02. Monthly Interest. (a) The amount of monthly interest
("Monthly Interest") with respect to the Series 1994-1 Certificates on any
Distribution Date shall be an amount equal to one-twelfth of the product of (i)
the Certificate Rate and (ii) the outstanding principal balance of the Series
1994-1 Certificates as of the close of business on the preceding Distribution
Date (after giving effect to all repayments of principal made to
Certificateholders on such preceding Distribution Date, if any); provided,
however, with respect to the first Distribution Date, Monthly Interest shall be
equal to $_______. Monthly Interest shall be calculated on the basis of
18
<PAGE> 23
the actual number of days elapsed during the related Interest Period and a year
assumed to consist of 360 days.
On the Determination Date preceding each Distribution Date, the Servicer
shall determine the excess, if any (the "Interest Shortfall"), of (x) the
aggregate Monthly Interest for the Interest Period applicable to such
Distribution Date over (y) the amount which will be available to be deposited
in the Interest Funding Account on such Distribution Date in respect thereof
pursuant to this Series Supplement. If, on any Quarterly Payment Date or any
Special Payment Date, an amount covering any Interest Shortfall for any prior
Distribution Date shall not have been deposited into the Interest Funding
Account pursuant to Section 4.06(a)(i), then an additional amount ("Additional
Interest") equal to one-twelfth of the product of (i) the Certificate Rate and
(ii) such Interest Shortfall (or the portion thereof which has not been paid or
deposited in the Interest Funding Account) shall be payable as provided herein
with respect to the Series 1994-1 Certificates on each Distribution Date
following such Distribution Date to and including the Distribution Date on
which such Interest Shortfall is paid or deposited in the Interest Funding
Account. Notwithstanding anything to the contrary herein, Additional Interest
shall be payable to the Interest Funding Account or distributed to Series
1994-1 Certificateholders only to the extent permitted by applicable law.
SECTION 4.03. Determination of Monthly Principal. The amount of monthly
principal ("Monthly Principal") distributable with respect to the Series 1994-1
Certificates on each Distribution Date with respect to an Early Amortization
Period and the Accumulation Period shall be equal to the Available Investor
Principal Collections with respect to such Distribution Date; provided,
however, that for each Distribution Date with respect to the Accumulation
Period, Monthly Principal shall not exceed the Controlled Distribution Amount
for such Distribution Date; and provided further that Monthly Principal shall
not exceed the outstanding principal balance of the Series 1994-1 Certificates.
SECTION 4.04. Establishment of Reserve Fund and Funding Accounts. (a)(i)
The Servicer, for the benefit of the Series 1994-1 Certificateholders, shall
cause to be established and maintained in the name of the Trustee, on behalf of
the Trust, an Eligible Deposit Account (the "Reserve Fund") which shall be
identified as the "Reserve Fund for the Ford Credit Auto Loan Master Trust,
Series 1994-1" and shall bear a designation clearly indicating that the funds
deposited therein are held for the benefit of the Series 1994-1
Certificateholders.
19
<PAGE> 24
(ii) At the direction of the Servicer, funds on deposit in the Reserve
Fund shall at the direction of the Servicer be invested by the Trustee in
Eligible Investments selected by the Servicer that will mature so that such
funds will be available at the close of business on or before the Business Day
next preceding the following Distribution Date. All Eligible Investments shall
be held by the Trustee for the benefit of the Series 1994-1 Certificateholders.
On each Distribution Date, all interest and other investment earnings (net of
losses and investment expenses) on funds on deposit in the Reserve Fund
received prior to such Distribution Date shall be applied as set forth in
Section 4.06(a) of this Series Supplement. Funds deposited in the Reserve Fund
on a Business Day (which immediately precedes a Distribution Date) upon the
maturity of any Eligible Investments are not required to be invested overnight.
(b)(i) The Servicer, for the benefit of the Series 1994-1
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account (the "Interest Funding
Account"), which shall be identified as the "Interest Funding Account for the
Ford Credit Auto Loan Master Trust, Series 1994-1" and shall bear a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Series 1994-1 Certificateholders.
(ii) At the direction of the Servicer, funds on deposit in the Interest
Funding Account shall be invested by the Trustee in Eligible Investments
selected by the Servicer. All such Eligible Investments shall be held by the
Trustee for the benefit of the Series 1994-1 Certificateholders. On each
Distribution Date, all interest and other investment earnings (net of losses
and investment expenses) on funds on deposit in the Interest Funding Account
shall be applied as set forth in Section 4.06(a) of this Series Supplement.
Funds deposited in the Interest Funding Account on any Distribution Date (which
are not distributed to Certificateholders pursuant to Section 4.07 on such
Distribution Date) shall be invested at the direction of the Servicer in
Eligible Investments that will mature so that such funds will be available on
or before the close of business on the Business Day preceding the next
following Distribution Date or, if an Early Amortization Event shall have
occurred, the next following Special Payment Date. Funds deposited in the
Interest Funding Account on a Business Day (which immediately precedes a
Quarterly Payment Date) upon the maturity of any Eligible Investments are not
required to be invested overnight.
(c)(i) The Servicer, for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee, on behalf of the Trust, an
Eligible Deposit Account
20
<PAGE> 25
(the "Principal Funding Account"), which shall be identified as the "Principal
Funding Account for Ford Credit Auto Loan Master Trust Series 1994-1" and shall
bear a designation clearly indicating that the funds deposited therein are held
for the benefit of the Series 1994-1 Certificateholders.
(ii) At the direction of the Servicer, funds on deposit in the Principal
Funding Account shall be invested by the Trustee in Eligible Investments
selected by the Servicer; provided that (unless otherwise agreed to by the
Rating Agencies) such investments bear interest at a rate based on LIBOR,
payable on a monthly basis with the interest rate thereon reset monthly. All
such Eligible Investments shall be held by the Trustee for the benefit of the
Series 1994-1 Certificateholders. On each Distribution Date all interest and
other investment earnings (net of losses and investment expenses) on funds on
deposit therein shall be applied as set forth in Section 4.06(a) of this Series
Supplement. Funds on deposit in the Principal Funding Account shall be
invested at the direction of the Servicer in Eligible Investments that will
mature so that such funds will be available on or before the close of business
on the Business Day next preceding the following Distribution Date or, if an
Early Amortization Event shall have occurred, the next Special Payment Date.
Funds deposited in the Principal Funding Account on a Business Day (which
immediately precedes the Expected Payment Date) upon the maturity of any
Eligible Investments are not required to be invested overnight.
(d)(i) The Servicer, for the benefit of the Series 1994-1
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account (the "Excess Funding
Account"), which shall be identified as the "Excess Funding Account for Ford
Credit Auto Loan Master Trust, Series 1994-1" and shall bear a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Series 1994-1 Certificateholders.
(ii) At the direction of the Servicer, funds on deposit in the Excess
Funding Account shall be invested by the Trustee in Eligible Investments
selected by the Servicer; provided that (unless otherwise agreed to by the
Rating Agencies) such investments bear interest at a rate based on LIBOR,
payable on a monthly basis with the interest rate thereon reset monthly. All
such Eligible Investments shall be held by the Trustee for the benefit of the
Series 1994-1 Certificateholders. On each Distribution Date, all interest and
other investment earnings (net of losses and investment expenses) on funds on
deposit in the Excess Funding Account shall be applied as set forth in Section
4.06(a) of this Series Supplement. Funds deposited in the Excess Funding
Account on any Distribution Date shall be
21
<PAGE> 26
invested in Eligible Investments that will mature so that such funds will be
available on or before the close of business on the Business Day next preceding
the following Distribution Date; provided that if, pursuant to Section 4.13,
deposits to and withdrawals from the Excess Funding Account are being made on a
weekly or daily basis, then such Eligible Investments shall mature on each
Business Day on a weekly or daily basis, as the case may be; provided further
that such Eligible Investments shall still mature so that funds will be
available on or before the close of business on the Business Day next
preceding the following Distribution Date. Funds deposited in the Excess
Funding Account on a Business Day (which immediately precedes a Distribution
Date) upon the maturity of any Eligible Investments are not required to be
invested overnight.
(e)(i) The Trustee shall possess all right, title and interest in and to
all funds on deposit from time to time in, and all Eligible Investments
credited to, the Reserve Fund, the Interest Funding Account, the Principal
Funding Account and the Excess Funding Account (collectively, the "Series
1994-1 Accounts") and in all proceeds thereof. The Series 1994-1 Accounts
shall be under the sole dominion and control of the Trustee for the benefit of
the Certificateholders. If, at any time, any of the Series 1994-1 Accounts
ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its
behalf) shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency may consent) establish a new
Series 1994-1 Account meeting the conditions specified in paragraph (a)(i),
(b)(i), (c)(i) or (d)(i) above, as applicable, as an Eligible Deposit Account
and shall transfer any cash and/or any investments to such new Series 1994-1
Account. Neither the Seller, the Servicer nor any person or entity claiming
by, through or under the Seller, the Servicer or any such person or entity
shall have any right, title or interest in, or any right to withdraw any amount
from, any Series 1994-1 Account, except as expressly provided herein. Schedule
1, which is hereby incorporated into and made part of this Series Supplement,
identifies each Series 1994-1 Account by setting forth the account number of
each such account, the account designation of each such account and the name of
the institution with which such account has been established. If a substitute
Series 1994-1 Account is established pursuant to this Section, the Servicer
shall provide to the Trustee an amended Schedule 1, setting forth the relevant
information for such substitute Series 1994-1 Account.
(ii) Pursuant to the authority granted to the Servicer in Section 3.01(a)
of the Agreement, the Servicer shall have the power, revocable by the Trustee,
to make withdrawals and payments or to instruct the Trustee to take withdrawals
and payments from
22
<PAGE> 27
the Series 1994-1 Accounts for the purposes of carrying out the Servicer's or
Trustee's duties hereunder.
(f) Unless otherwise agreed to by the Rating Agencies, at no time may
greater than ___% of the outstanding principal balance of the Certificates be
invested in Eligible Investments (other than obligations of the United States
government) of any single entity or its Affiliates.
SECTION 4.05. Deficiency Amount. With respect to each Distribution Date,
on the related Determination Date, the Servicer shall determine the amount (the
"Deficiency Amount"), if any, by which
(a) the sum of
(i) Monthly Interest for such Distribution Date,
(ii) any Monthly Interest previously due but not deposited in the
Interest Funding Account on a prior Distribution Date,
(iii) Additional Interest, if any, for such Distribution Date and any
Additional Interest previously due but not deposited into the Interest
Funding Account on a prior Distribution Date,
(iv) the Certificateholders Monthly Servicing Fee for such Distribution
Date,
(v) the Investor Default Amount, if any, for such Distribution Date,
(vi) the Series 1994-1 Allocation Percentage of the amount of any
Adjustment Payment required to be deposited in the Collection Account
pursuant to Section 3.09(a) of the Agreement with respect to the related
Collection Period that has not been so deposited as of such Determination
Date and,
(vii) the Net Trust Swap Payment, if any, with respect to such
Distribution Date,
exceeds (b) the sum of
(i) Investor Non-Principal Collections for such Distribution Date plus
any Investment Proceeds plus the Net Trust Swap Receipt, if any, with
respect to such Distribution Date and
23
<PAGE> 28
(ii) the amount of funds in the Reserve Fund which are available
pursuant to Section 4.08(a) to cover any portion of the amount, if any, by
which the amount of clause (a) exceeds the amount of clause (b)(i).
The "Required Subordination Draw Amount" shall be the lesser of (x) the
Deficiency Amount and (y) either the Available Subordinated Amount or, in the
event of an Early Amortization Event (other than an Early Amortization Event
which has resulted in an Early Amortization Period which has ended as described
in clause (c) of the definition thereof), the Aggregate Available Subordinated
Amount on the related Determination Date. Following an Early Amortization
Event, any Required Subordination Draw Amount shall reduce the Swap Available
Subordinated Amount in its entirety before any reduction to the Available
Subordinated Amount.
SECTION 4.06. Application of Investor Non-Principal Collections, Investment
Proceeds, Net Trust Swap Receipts and Available Investor Principal Collections.
The Servicer shall cause the Trustee to make the following distributions on
each Distribution Date:
(a) On each Distribution Date, an amount equal to the sum of Investor
Non-Principal Collections, and any Investment Proceeds and the Net Trust Swap
Receipt, if any, with respect to such Distribution Date will be distributed in
the following priority:
(i) first, an amount equal to Monthly Interest for such Distribution
Date, plus the amount of any Monthly Interest previously due but not
deposited in the Interest Funding Account or distributed to the Series
1994-1 Certificateholders on a prior Distribution Date, plus the amount of
any Additional Interest for such Distribution Date and any Additional
Interest previously due but not deposited in the Interest Funding Account or
distributed to the Series 1994-1 Certificateholders on a prior Distribution
Date, shall be deposited to the Interest Funding Account; then, the Net Trust
Swap Payment, if any, shall be paid to the Swap Counterparty;
(ii) second, an amount equal to the Certificateholders Monthly Servicing
Fee for such Distribution Date shall be distributed to the Servicer (unless
such amount has been netted against deposits to the Collection Account or
waived);
24
<PAGE> 29
(iii) third, an amount equal to the Reserve Fund Deposit Amount, if any,
for such Distribution Date shall be deposited in the Reserve Fund;
(iv) fourth, an amount equal to the Investor Default Amount for such
Distribution Date shall be treated as a portion of Investor Principal
Collections for such Distribution Date;
(v) fifth, an amount equal to the Asset Composition Premium for such
Distribution Date, if any, plus the amount of any Asset Composition Premium
previously due but not distributed to the Series 1994-1 Certificateholders on
a prior Distribution Date, shall be distributed to the Series 1994-1
Certificateholders; and
(vi) sixth, the balance, if any, shall constitute Excess Servicing and
shall be allocated and distributed as set forth in Section 4.10.
(b) On each Distribution Date with respect to the Revolving Period, an
amount equal to Available Investor Principal Collections deposited in the
Collection Account for the related Collection Period shall be applied in the
following priority:
(i) first, if (A) the Pool Balance at the end of the preceding
Collection Period is less than the Pool Balance at the end of the second
preceding Collection Period and (B) the Pool Balance at the end of the
preceding Collection Period is less than the Required Participation Amount
for such Distribution Date (calculated before giving effect to any deposits
to the Excess Funding Account and any excess funding account for any other
Series in their revolving periods to be made on such Distribution Date),
then the Servicer shall cause to be deposited into the Excess Funding
Account an amount which will reduce the Invested Amount such that, together
with the deposits to the excess funding accounts (and the resulting
reductions in the invested amounts) for other outstanding Series in their
revolving periods for such Distribution Date, the Pool Balance is equal to
the Required Participation Amount, and
(ii) second, an amount equal to the balance (such balance being part of
"Excess Principal Collections"), if any, of such Available Investor Principal
Collections shall be applied in accordance with Section 4.04 of the
Agreement.
For purposes of determining the amount to be applied pursuant to subparagraph
(i) above, allocations of the amounts to be deposited in the Excess Funding
Account and the excess funding
25
<PAGE> 30
account for other outstanding Series shall be made pro rata on the basis of the
invested amounts (including the Invested Amount) for such Series.
If the Servicer has elected in respect of a Collection Period to make
withdrawals from the Excess Funding Account on a daily or weekly basis pursuant
to Section 4.13(b), then deposits into the Excess Funding Account required by
this Section 4.06(b) shall be made on each Business Day in such Collection
Period (if daily withdrawals and deposits have been elected) or on each
Wednesday (or the next succeeding Business Day if such Wednesday is not a
Business Day) in such Collection Period (if weekly withdrawals and deposits
have been elected). In the case of such election, the Pool Balance referred to
in clause (B) above shall be the Pool Balance on the preceding Business Day, in
the case of an election to make daily deposits and withdrawals, and on the
Monday next preceding the related Wednesday, in the case of an election to make
weekly deposits and withdrawals.
(c) On each Distribution Date with respect to the Accumulation Period or
an Early Amortization Period, an amount equal to Available Investor Principal
Collections will be distributed in the following priority:
(i) first, an amount equal to Monthly Principal for such Distribution Date
shall be deposited by the Servicer or the Trustee into the Principal Funding
Account; and
(ii) second, for each Distribution Date with respect to the Accumulation
Period unless an Early Amortization Event has occurred, after giving effect
to the deposit referred to in clause (i) above, an amount equal to the
balance (such balance being part of "Excess Principal Collections"), if any,
of such Available Investor Principal Collections shall be applied in
accordance with Section 4.04 of the Agreement and Section 4.11 hereof.
SECTION 4.07. Distributions to Series 1994-1 Certificateholders. (a) The
Servicer shall cause the Trustee to make the following distributions at the
following times from the Interest Funding Account, the Principal Funding
Account and the Excess Funding Account:
(i) on each Quarterly Payment Date and on each Special Payment Date, all
amounts on deposit in the Interest Funding Account (other than Investment
Proceeds) shall be distributed to the Series 1994-1 Certificateholders to pay
accrued interest on the Series 1994-1 Certificates plus any accrued
Additional Interest that has not been previously distributed to the Series
1994-1 Certificateholders;
26
<PAGE> 31
(ii) on each Special Payment Date and on the Expected Final Payment
Date, all amounts on deposit in the Principal Funding Account, the Excess
Funding Account and (after giving effect to the application pursuant to
Section 4.07(a)(i)) the Interest Funding Account, up to a maximum amount on
any such day equal to the excess of the outstanding principal balance of the
Series 1994-1 Certificates over the unreimbursed Investor Charge-Offs, shall
be distributed to the Series 1994-1 Certificateholders; and
(iii) on each Distribution Date following an Asset Composition Event, the
Asset Composition Amount will be distributed to Series 1994-1
Certificateholders as set forth in Section 4.12(b) of this Series Supplement.
(b) On each Distribution Date following an Asset Composition Event, the
Asset Composition Premium shall be paid to Series 1994-1 Certificateholders
pursuant to Section 4.06(a).
(c) The distributions to be made pursuant to this Section are subject to
the provisions of Sections 2.03, 9.02, 10.01 and 12.02 of the Agreement and
Sections 8.01 and 8.02 of this Series Supplement.
SECTION 4.08. Application of Reserve Fund and Available Subordinated
Amount. (a) If the portion of Investor Non-Principal Collections, Investment
Proceeds and Net Trust Swap Receipts, if any, allocated to Series 1994-1
Certificateholders on any Distribution Date pursuant to Section 4.06(a) is not
sufficient to make the entire distributions required on such Distribution Date
by Section 4.06(a)(i), (ii) and (iv), the Servicer shall cause the Trustee to
withdraw funds from the Reserve Fund to the extent available therein, and apply
such funds to complete the distributions pursuant to Section 4.06(a)(i), (ii)
and (iv); provided, however, that during any Early Amortization Period (other
than an Early Amortization Period which has ended as described in clause (c) of
the definition thereof) funds shall not be withdrawn from the Reserve Fund to
make distributions otherwise required by Section 4.06(a)(iv) to the extent
that, after giving effect to such withdrawal, the amount on deposit in the
Reserve Fund shall be less than $_________.
(b) If there is a Required Subordination Draw Amount for such
Distribution Date, the Servicer shall, subject to the following paragraph,
apply or cause the Trustee to apply the Available Seller's Collections on
deposit in the Collection Account on such Distribution Date, but only up to the
amount of the Required Subordination Draw Amount, to make up the shortfall in
the distributions required by Sections 4.06(a)(i), (ii) and
27
<PAGE> 32
(iv) that have not been made through the application of funds from the Reserve
Fund in accordance with Section 4.08(a). Any such Available Seller's
Collections remaining after the application thereof pursuant to the preceding
sentence shall be treated as a portion of Investor Principal Collections for
such Distribution Date, but only up to the amount of unpaid Adjustment Payments
allocated to Series 1994-1 as described in Section 4.05(a)(vi). The amount of
the Available Sellers Collections applied in accordance with the two preceding
sentences shall reduce (i) if an Early Amortization Event shall have occurred,
to first the Swap Available Subordinated Amount to the extent thereof and then
the Available Subordinated Amount, or (ii) if an Early Amortization Event shall
not have occurred, the Available Subordinated Amount as described in clause
(i)(x)(A) of the definition thereof. If the Required Subordination Draw Amount
exceeds Available Seller's Collections for such Distribution Date, (i) to the
Swap Available Subordinated Amount to the extent thereof and then the Available
Subordinated Amount or (ii) the Available Subordinated Amount, as the case may
be, shall be further reduced by the amount of such excess, but not by more than
the sum of (x) the Investor Default Amount and (y) the amount of unpaid
Adjustment Payments allocated to Series 1994-1 as described in Section
4.05(a)(vi).
If for such Distribution Date the sum of the Required Subordination Draw
Amount and the aggregate of the required subordination draw amounts for all
other Series outstanding exceeds the Available Seller's Collections on deposit
in the Collection Account on such Distribution Date, then such Available
Seller's Collections shall be allocated to such Series (including Series
1994-1) pro rata on the basis of such required subordination draw amounts
(including the Required Subordination Draw Amount).
(c) After giving effect to the allocations of, distributions from, and
deposits in, the Reserve Fund made pursuant to Sections 4.01(c), 4.04, 4.06(a)
and 4.08(a) and (d), (i) if the amount in the Reserve Fund is greater than the
Reserve Fund Required Amount (or, for any Distribution Date with respect to an
Early Amortization Period, the Excess Reserve Fund Required Amount) for such
Distribution Date, then the Servicer shall cause the Trustee to distribute
such excess amount to the Seller and (ii) if the amount in the Reserve Fund is
less than such Reserve Fund Required Amount, then the Trustee shall, subject to
the following paragraph, deposit any remaining Available Seller's Collections
on deposit in the Collection Account for such Distribution Date after giving
effect to paragraph (b) of Section 4.08 into the Reserve Fund until the amount
in the Reserve Fund is equal to such Reserve Fund Required Amount. On the
Termination Date, any funds in the Reserve Fund will be treated as
28
<PAGE> 33
Available Investor Principal Collections. Upon payment in full of the
outstanding principal balance of the Series 1994-1 Certificates, any funds
remaining on deposit in the Reserve Fund shall be paid to the Seller.
If for such Distribution Date the sum of the amount required to be deposited
into the Reserve Fund and the aggregate of the amounts required to be deposited
into the reserve funds for all other Series outstanding exceeds the Available
Seller's collections that remain available to make such deposits on such
Distribution Date, then such remaining Available Seller's Collections shall be
allocated to such Series (including Series 1994-1) pro rata on the basis of the
amounts required to be deposited in each such reserve fund (including the
Reserve Fund).
(d) If, for any Distribution Date with respect to an Early Amortization
Period, after giving effect to the allocations of, distributions from, and
deposits in, the Reserve Fund and the reserve funds for other Series made
pursuant to Sections 4.01(c), 4.04, 4.06(a) and 4.08(a), the amount in the
Reserve Fund is less than the Excess Reserve Fund Required Amount for such
Distribution Date, the Trustee shall, subject to the following paragraph,
deposit any remaining Available Seller's Collections on deposit in the
Collection Account for such Distribution Date into the Reserve Fund until the
amount in the Reserve Fund is equal to such Excess Reserve Fund Required
Amount.
If for any Distribution Date the sum of the amount required to be deposited
into the Reserve Fund to fund the Excess Reserve Fund Required Amount and the
aggregate of the amounts required to be deposited into the reserve funds for
all other Series outstanding to fund the excess reserve fund required amounts
for such Series exceeds the remaining Available Seller's Collections available
to make such deposits for such Distribution Date, then such remaining Available
Seller's Collections shall be allocated to such Series (including Series
1994-1) pro rata on the basis of such amounts required to be deposited in each
such reserve fund (including the Reserve Fund) to fund the excess reserve fund
required amount.
(e) The balance of Available Seller's Collections on any Distribution
Date, after giving effect to any distributions thereof pursuant to Sections
4.08(b), (c) and (d) and the distributions in respect of other Series referred
to in Sections 4.08(b), (c) and (d), shall be distributed to the Seller on such
Distribution Date; provided that if the Trust Available Subordinated Amount for
the immediately preceding Determination Date exceeds the Seller's
Participation Amount on such date (determined after giving effect to any
Principal Receivables transferred to the Trust on such Distribution Date),
Section
29
<PAGE> 34
4.08(c) hereof shall not apply and such balance of Available Seller's
Collections shall be deposited into the Reserve Fund to the extent of such
excess. Any remaining Available Seller's Principal Collections shall be paid
to the Seller.
SECTION 4.09. Investor Charge-Offs. If, on any Distribution Date on
which the 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) is zero and the Deficiency
Amount for such Distribution Date is greater than zero, the Invested Amount
shall be reduced by the amount of the excess of such Deficiency Amount over any
remaining Available Subordinated Amount on such Determination Date, but not by
more than the Investor Default Amount. Investor Charge-Offs shall thereafter
be reimbursed and the Invested Amount increased (but not by an amount in excess
of the aggregate unreimbursed Investor Charge-Offs) on any Distribution Date by
the sum of (a) Allocable Miscellaneous Payments with respect to such
Distribution Date and (b) the amount of Excess Servicing allocated and
available for that purpose pursuant to Section 4.10(a).
SECTION 4.10. Excess Servicing. The Servicer shall cause the Trustee to
apply, on each Distribution Date, Excess Servicing with respect to the
Collection Period immediately preceding such Distribution Date, to make the
following distributions in the following priority:
(a) an amount equal to the aggregate amount of Investor Charge-Offs which
have not been previously reimbursed as provided in Section 4.09 (after giving
effect to the allocation on such Distribution Date of any amount for that
purpose pursuant to Section 4.09) shall be treated as a portion of Available
Investor Principal Collections with respect to such Distribution Date;
(b) an amount equal to the aggregate outstanding amounts of the
Certificateholders Monthly Servicing Fee which have been previously waived
pursuant to Section 3.01 shall be distributed to the Servicer; and
(c) the balance, if any, shall be distributed to the Seller.
SECTION 4.11. Excess Principal Collections.
"Series 1994-1 Excess Principal Collections", with respect to any
Distribution Date, shall mean Excess Principal Collections for such
Distribution Date in an amount equal to the lesser of (a) the Series 1994-1
Principal Shortfall, if any, for
30
<PAGE> 35
such Distribution Date and (b) an amount equal to the product of (x) Excess
Principal Collections for all Series for such Distribution Date and (y) a
fraction, the numerator of which is the Series 1994-1 Principal Shortfall for
such Distribution Date and the denominator of which is the aggregate amount of
Principal Shortfalls for all Series for such Distribution Date. The Series
1994-1 Principal Shortfall, with respect to any Distribution Date, shall equal
the excess of (i) (x) for any Distribution Date with respect to the
Accumulation Period, the Controlled Distribution Amount or (y) for any
Distribution Date with respect to an Early Amortization Period, the Invested
Amount, over (ii) Available Investor Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Excess
Principal Collections).
SECTION 4.12. Asset Composition Event. (a) "Asset Composition Event" shall
mean and will occur if during the revolving period for any Series (a) the sum
of all Eligible Investments and amounts on deposit in all Series Accounts
represents more than 25% of the Trust Assets on each of twelve or more
consecutive Determination Dates; or (b) on each of two consecutive
Determination Dates the sum of all Eligible Investments and amounts on deposit
in all Series Accounts represents more than 45% of the total assets of the
Trust, in each case after giving effect to all payments made or to be made on
the Distribution Date next succeeding each such respective Determination Date.
No Asset Composition Event will arise, and any pre-existing Asset Composition
Event will be of no further effect, following the beginning of the Accumulation
Period or the Early Amortization Period.
(b) Upon the occurrence of an Asset Composition Event, the Servicer shall
calculate the minimum additional amount that would be necessary to be paid out
of the Series 1994-1 Accounts on the next Distribution Date to achieve
compliance with the percentages set forth in Sections 4.12 (a)(i) and (ii),
after giving effect to such additional payment and to all other payments that
would otherwise have been made on such Distribution Date pursuant to Section
4.06 and Section 4.07, and interest on and principal of the Series 1994-1
Certificates will become payable on such Distribution Date, and the Servicer
shall cause the Trustee to make such payment in the amount required (the "Asset
Correction Amount") to achieve compliance with the percentages set forth in
Sections 4.12(a)(i) and (ii) by applying amounts on deposit in the Interest
Funding Account and the Excess Funding Account in the following order of
priority:
31
<PAGE> 36
(i) first, amounts shall be withdrawn from the Interest Funding Account to
pay all or a portion of accrued but unpaid interest on the Certificates; and
(ii) second, amounts shall be withdrawn from the Excess Funding Account to
repay a portion of the outstanding principal balance of the Certificates.
SECTION 4.13. Excess Funding Account. (a) Any funds on deposit in the
Excess Funding Account at the beginning of the Accumulation Period or upon the
occurrence of an Early Amortization Event will be deposited in the Principal
Funding Account. In addition, no funds will be deposited in the Excess Funding
Account during the Accumulation Period or any Early Amortization Period.
(b) If (i) on any Determination Date during the Revolving Period there are
any funds in the Excess Funding Account and (ii) the Pool Balance at the end of
the preceding Collection Period is greater than the Pool Balance at the end of
the second preceding Collection Period, then, subject to the other provisions
of this Section 4.13(b) and to Sections 4.13(c) and (d), the Invested Amount
and the invested amounts (but, in each case, not in excess of the initial
principal amount of such Series) for all other outstanding Series that provide
for an excess funding account or similar arrangement and are in their revolving
periods shall be increased such that, after giving effect to such increases,
the Required Participation Amount is at least equal to the Pool Balance. On
such Determination Date the Servicer shall notify the Trustee of the amount, if
any, of such increase in the Invested Amount and the Trustee shall withdraw
from the Excess Funding Account and pay to the Seller or allocate to one or
more other Series, on the immediately succeeding Distribution Date, an amount
equal to the amount of such increase in the Invested Amount. Such payment
shall be in payment or partial payment pursuant to the Receivables Purchase
Agreement for additional Principal Receivables transferred to the Trust or
allocated to Series 1994-1. To the extent that the Invested Amount is
increased by any payment to the Seller or any allocation to one or more other
Series, the Seller's Interest or such other Series' invested amount, as
applicable, shall be reduced by the amount of such payment. In addition, any
increase in the Invested Amount is subject to the condition that after giving
effect to such increase the Pool Balance equals or exceeds the sum of (A) the
Required Participation Amount (exclusive of the amount in clause (b) of the
definition thereof), (B) the sum of the Required Subordinated Amount and the
sum of the required subordinated amounts for all other Series (or, if such
other series shall have no required subordinated amount, the available
subordinated amount with respect to such Series) and (C) the sum
32
<PAGE> 37
of the Swap Available Subordinated Amount and any other subordinated amounts
supporting any other Enhancement for all other Series. In connection with the
foregoing, the Seller shall endeavor (taking into account any seasonality
experienced in the Accounts in the Trust) to minimize the amounts on deposit,
from time to time, in the Excess Funding Account.
The Seller may elect to make such withdrawals from the Excess Funding
Account and the excess funding accounts or similar arrangements for other
Series on a daily or weekly basis during a Collection Period by giving the
Trustee notice of such election at least two Business Days and no more than
five Business Days prior to the commencement of such daily or weekly
withdrawals. If such election is made, then deposits into the Excess Funding
Account and excess funding accounts or similar arrangements for other Series
shall be made on a similar basis for the related Collection Period. If such
election is for withdrawals on a daily basis, then such withdrawals shall be
made on each Business Day and the Pool Balance to be referenced shall be the
Pool Balance on the next preceding Business Day. If such election is for
withdrawals on a weekly basis, then such withdrawals shall be made on each
Wednesday (or if such Wednesday is not a Business Day, then on the Business Day
next succeeding such Wednesday) and the Pool Balance to be referenced shall be
the Pool Balance on the preceding Monday.
(c) In the event that other Series issued by the Trust provide for excess
funding accounts or other arrangements similar to the Excess Funding Account
involving fluctuating levels of investments in Principal Receivables, (i) the
allocation of additional Principal Receivables to increase the Invested Amount
and the invested amounts of such other Series (and the related withdrawals from
the Excess Funding Account and the other excess funding or similar accounts)
will be based on the proportion that the amount on deposit in the Excess
Funding Account bears to amounts on deposit in the excess funding accounts
(including the Excess Funding Account) of all Series providing for excess
funding accounts or such similar arrangements or to amounts otherwise similarly
available and (ii) the deposit of amounts into the Excess Funding Account and
the excess funding accounts of such other Series will be pro rata based on the
proportion that the Invested Amount bears to the invested amounts (including
the Invested Amount) of all Series providing for excess funding accounts or
such similar arrangements.
(d) In the event that any other Series is in an amortization period, early
amortization period or accumulation period, the amounts of any withdrawals from
the Excess Funding Account shall be applied first to satisfy in full any then
applicable funding or payment requirements of such Series and
33
<PAGE> 38
second to make a payment to the Seller. In the event that more than one other
Series is in an amortization period, early amortization period or accumulation
period, the amounts of any withdrawals from the Excess Funding Account shall be
allocated (and, if necessary, reallocated) among such Series as specified in
the related Series Supplement, to meet the funding or payment requirements of
each such Series first to satisfy in full all then applicable funding or
payment requirements of each such Series and second to make a payment to the
Seller.
ARTICLE V
Distributions and Reports to
Series 1994-1 Certificateholders
SECTION 5.01. Distributions. (a) On each Distribution Date, the Trustee
shall distribute to each Series 1994-1 Certificateholder of record on the
preceding Record Date (other than as provided in Section 12.02 of the Agreement
respecting a final distribution) such Certificateholder's pro rata share (based
on the aggregate fractional undivided interests represented by the Series
1994-1 Certificates held by such Certificateholder) of the amounts on deposit
in the Series 1994-1 Accounts as is payable to the Series 1994-1
Certificateholders on such Distribution Date pursuant to Section 4.07.
(b) Except as provided in Section 12.02 of the Agreement with respect to a
final distribution, distributions to Series 1994-1 Certificateholders hereunder
shall be made by check mailed to each Series 1994-1 Certificateholder at such
Certificateholder's address appearing in the Certificate Register without
presentation or surrender of any Series 1994-1 Certificate or the making of any
notation thereon; provided, however, that with respect to Series 1994-1
Certificates registered in the name of a Depository, such distributions shall
be made to such Depository in immediately available funds.
SECTION 5.02. Reports and Statements to Series 1994-1 Certificateholders.
(a) At least two Business Days prior to each Distribution Date, the Servicer
will provide to the Trustee statements substantially in the forms of Exhibits
B-1 and B-2, and on each Distribution Date the Trustee shall forward to each
Series 1994-1 Certificateholder the statement substantially in the form of
Exhibit B-2 prepared by the Servicer setting forth certain information relating
to the Trust and the Series 1994-1 Certificates.
34
<PAGE> 39
(b) A copy of each statement provided pursuant to paragraph (a) will be made
available for inspection at the Corporate Trust Office.
(c) On or before January 31, of each calendar year, beginning with calendar
year 1995, the Trustee shall furnish or cause to be furnished to each Person
who at any time during the preceding calendar year was a Series 1994-1
Certificateholder, a statement prepared by the Servicer containing the
information which is required to be contained in the statement to Series 1994-1
Certificateholders as set forth in paragraph (a) above, aggregated for such
calendar year or the applicable portion thereof during which such Person was a
Series 1994-1 Certificateholder, together with other information as is required
to be provided by an issuer of indebtedness under the Internal Revenue Code and
such other customary information as is necessary to enable the Series 1994-1
Certificateholders (or Certificate Owners) to prepare their tax returns. Such
obligation of the Trustee shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Trustee
pursuant to any requirements of the Internal Revenue Code as from time to time
in effect.
SECTION 5.03. Determination of Three-Month LIBOR.
(a) On each Adjustment Date so long as the Series 1994-1 Certificates are
outstanding, the Reference Agent shall determine Three-Month LIBOR rate
applicable to the calculation of the Certificate Rate for the next Interest
Period and provide such rate to the Trustee. Except as otherwise provided
herein, Three-Month LIBOR shall equal the rate appearing for deposits in U.S.
dollars having a three-month maturity which appears on Telerate Page 3875 as of
11:00 A.M., London time, on an Adjustment Date.
(b) If on any Adjustment Date no such rate appears on Telerate Page 3875,
the Reference Agent shall request the principal London office of each Reference
Bank to provide a quotation of the rate at which it is offering at
approximately 11:00 A.M., London time, on such Adjustment Date, to prime banks
in the London interbank market having a Three-Month maturity and in a principal
amount of not less than U.S. $1,000,000 that is representative for a single
transaction in such market at such time. If at least two such quotations are
provided, Three-Month LIBOR for such Adjustment Date shall be calculated by the
Reference Agent and shall equal 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 less than two
such quotations are provided, the three-month LIBOR rate on such Adjustment
Date
35
<PAGE> 40
shall be calculated by the Reference Agent and shall be equal 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 time, on such Adjustment
Date for loans in U.S. dollars to leading European banks, having a three-month
maturity and in a principal amount equal to an amount not less than U.S
$1,000,000 that is representative for a single transaction in such market at
such time.
(c) If on any Adjustment Date the Reference Agent is unable to establish
Three-Month LIBOR in the manner provided in paragraph (a) or (b) above,
Three-Month LIBOR shall be the Three-Month LIBOR established on the preceding
Adjustment Date.
(d) The establishment of Three-Month LIBOR and each Certificate Rate for
the Series 1994-1 Certificates by the Reference Agent and the Trustee, as the
case may be, shall (in the absence of manifest error) be final, conclusive and
binding upon each Holder of a Series 1994-1 Certificate.
ARTICLE VI
Amortization Events
SECTION 6.01. Additional Amortization Events. The occurrence of any of the
following events shall, immediately upon the occurrence thereof without notice
or other action on the part of the Trustee or the Series 1994-1
Certificateholders, be deemed to be an Early Amortization Event solely with
respect to Series 1994-1:
(a) on any Determination Date, the average of the Monthly Payment Rates for
the three preceding Collection Periods is less than 20%;
(b) 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 10% of the Pool Balance on such last day; or
(c) the Interest Rate Swap is terminated in accordance with its terms.
36
<PAGE> 41
ARTICLE VII
Optional Repurchase
SECTION 7.01. Optional Repurchase. (a) On any Distribution Date occurring
after the date on which the Invested Amount is reduced to 10% of the principal
amount of the Certificates on the Closing Date or less, the Seller shall have
the option, subject to the condition set forth in paragraph (c), to purchase
the entire, but not less than the entire, Series 1994-1 Certificateholders'
Interest, at a purchase price equal to the Reassignment Amount for such
Distribution Date.
(b) The Seller shall give the Servicer and the Trustee at least 10 days'
prior written notice of the Distribution Date on which the Seller intends to
exercise such purchase option. Not later than 12:00 noon, New York City time,
on such Distribution Date the Seller shall deposit the Reassignment Amount into
the Collection Account in immediately available funds. Such purchase option is
subject to payment in full of the Reassignment Amount. The Reassignment Amount
shall be distributed as set forth in Section 8.01(b).
(c) If at the time the Seller exercises its purchase option hereunder the
Seller's long-term unsecured debt has a rating lower than the lowest investment
grade rating of the Rating Agency, the Seller shall deliver to the Trustee on
such Distribution Date an Opinion of Counsel (which must be an independent
outside counsel) to the effect that, in reliance on certain certificates to the
effect that the Series 1994-1 Certificateholders' Interest purchased by the
Seller constitutes fair value for the consideration paid therefor and as to the
solvency of the Seller, the purchase of the Series 1994-1 Certificateholders'
Interest would not be considered a fraudulent conveyance under applicable law.
ARTICLE VIII
Final Distributions
SECTION 8.01. Sale of Certificateholders' Interest Pursuant to Section 2.03
of the Agreement; Distributions Pursuant to Section 7.01 of the Series
Supplement or Section 2.03 or 12.02(c) of the Agreement. (a) The amount to be
paid by the Seller to the Collection Account with respect to Series 1994-1 in
connection with a purchase of the Certificateholders' Interest pursuant to
Section 2.03 of the Agreement shall equal the Reassignment Amount for the
Distribution Date on which such repurchase occurs.
37
<PAGE> 42
(b) With respect to the Reassignment Amount deposited into the Collection
Account pursuant to Section 7.01 or 8.01 of this Series Supplement or Section
2.03 of the Agreement or any Termination Proceeds deposited into the Collection
Account pursuant to Section 12.02(c) of the Agreement, the Trustee shall, not
later than 12:00 noon, New York City time, on the Distribution Date on which
such amounts are deposited (or, if such date is not a Distribution Date, on the
immediately following Distribution Date) (in the priority set forth below): (i)
first, (x) deposit the Invested Amount on such date into the Principal Funding
Account and (y) deposit the amount of accrued and unpaid interest on the unpaid
balance of the Certificates, plus the amount of Additional Interest, if any,
for such Distribution Date and any Additional Interest or Asset Composition
Premium previously due but not deposited into the Interest Funding Account or
paid to Series 1994-1 Certificateholders on any prior Distribution Date, into
the Interest Funding Account, up to the Reassignment Amount for Series 1994-1
and (ii) second, pay the remainder of any Termination Proceeds to the Seller.
(c) Notwithstanding anything to the contrary in this Series Supplement or
the Agreement, the entire amount deposited in the Principal Funding Account and
the Interest Funding Account pursuant to Section 7.01 or 8.01 and all other
amounts on deposit therein shall be distributed in full to the Series 1994-1
Certificateholders on such date and any distribution made pursuant to paragraph
(b) above shall be deemed to be a final distribution pursuant to Section 12.02
of the Agreement with respect to Series 1994-1.
SECTION 8.02. Distribution of Proceeds of Sale, Disposition or Liquidation
of the Receivables Pursuant to Section 9.02 of the Agreement. (a) Not later
than 12:00 noon, New York City time, on the Distribution Date following the
date on which the Insolvency Proceeds are deposited into the Collection Account
pursuant to Section 9.02(b) of the Agreement, the Trustee shall first (in each
case, after giving effect to any deposits and distributions otherwise to be
made on such Distribution Date) deduct an amount equal to the Invested Amount
on such Distribution Date from the portion of the Insolvency Proceeds allocated
to the Series 1994-1 Allocation Percentage of Principal collections and deposit
such amount in the Principal Funding Account, provided that the amount of such
deposit shall not exceed the product of (x) the portion of the Insolvency
Proceeds allocated to the Series 1994-1 Allocation Percentage of Principal
Collections and (y) 100% minus the Excess Seller's Percentage with respect to
the related Collection Period. The remainder of the portion of the Insolvency
Proceeds allocated to the Series 1994-1 Allocation Percentage of Principal
Collections shall be
38
<PAGE> 43
allocated to the Seller's Interest and shall be released to the Seller on such
Distribution Date.
(b) Not later than 12:00 noon, New York City time, on such Distribution
Date, the Trustee shall first (in each case, after giving effect to any
deposits and distributions otherwise to be made on such Distribution Date)
deduct an amount equal to the sum of (i) Monthly Interest for such Distribution
Date, (ii) any Monthly Interest previously due but not deposited into the
Interest Funding Account on any prior Distribution Date, (iii) the amount of
Additional Interest, if any, for such Distribution Date and any Additional
Interest previously due but not deposited into the Interest Funding Account on
a prior Distribution Date, from the portion of the Insolvency Proceeds
allocated to the Series 1994-1 Allocation Percentage of Non-Principal
Collections and deposit such amount in the Interest Funding Account, provided
that the amount of such distribution shall not exceed (x) the product of (A)
the portion of the Insolvency Proceeds allocated to the Series 1994-1
Allocation Percentage of Non-Principal Collections and (B) 100% minus the
Excess Seller's Percentage. The remainder of the portion of the Insolvency
Proceeds allocated to Non-Principal Collections shall be allocated to the
Seller's Interest and shall be released to the Seller on such Distribution
Date.
(c) Notwithstanding anything to the contrary in this Series Supplement or
the Agreement, the entire amount deposited in the Principal Funding Account and
the Interest Funding Account pursuant to this Section and all other amounts on
deposit therein shall be distributed in full to the Series 1994-1
Certificateholders on the Distribution Date on which funds are deposited
pursuant to this Section (or, if not so deposited on a Distribution Date, on
the immediately following Distribution Date) and any distribution made pursuant
to this Section shall be deemed to be a final distribution pursuant to Section
12.02 of the Agreement with respect to Series 1994-1.
ARTICLE IX
Miscellaneous Provisions
SECTION 9.01. Execution and Delivery of the Interest Rate Swap. On the
Closing Date the Trustee shall execute and deliver the Interest Rate Swap. On
the Closing Date the Seller shall contribute the amount of the Initial Exchange
Amount (as defined in the Interest Rate Swap) to the Trust by paying such
amount to the Swap Counterparty on behalf of the Trust.
39
<PAGE> 44
SECTION 9.02. Registration of the Series 1994-1 Certificates under the
Securities Exchange Act of 1934. The Seller shall cause the Series 1994-1
Certificates to be registered under the Securities Exchange Act of 1934, as
amended, on or before ________ __, 199__ and thereafter maintain such
registration until the Series 1994-1 Certificates are no longer outstanding.
SECTION 9.03. Ratification of Agreement. As supplemented by this Series
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Series Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 9.04. Counterparts. This Series Supplement 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 9.05. Governing Law. This Series Supplement 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.
40
<PAGE> 45
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused
this Series Supplement to be duly executed by their respective officers as of
the day and year first above written.
FORD CREDIT AUTO RECEIVABLES
CORPORATION,
Seller
By:______________________________
Name:
Title:
FORD MOTOR CREDIT COMPANY,
Servicer
By:______________________________
Name:
Title:
CHEMICAL BANK,
Trustee
By:______________________________
Name:
Title:
41
<PAGE> 46
EXHIBIT A
FORM OF FACE OF CERTIFICATE
Initial
REGISTERED Principal Balance: */
$
Certificate No. R-[ ] CUSIP NO. _________
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the issuer or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
FORD CREDIT AUTO LOAN MASTER TRUST
SERIES 1994-1
VARIABLE RATE AUTO LOAN
ASSET BACKED CERTIFICATES
evidencing a fractional undivided interest in certain
assets of the
FORD CREDIT AUTO LOAN MASTER TRUST
the corpus of which consists primarily of wholesale (i.e., dealer floorplan)
receivables (the "Receivables") generated from time to time in the ordinary
course of business in a portfolio of revolving financing arrangements (the
"Accounts") of Ford Motor Credit Company ("Ford Credit") meeting certain
eligibility criteria. This certificate (a "Certificate") does not represent
any interest in, or obligation of, Ford Credit Auto Receivables Corporation
("FCAR" or the "Seller"), Ford Credit or any affiliate thereof.
______________________
*/ Denominations of $1,000 and integral multiples of $1,000 in excess thereof.
<PAGE> 47
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Pooling and Servicing Agreement referred to
on the reverse side hereof or be valid for any purpose.
THIS CERTIFICATE 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 has caused this Certificate to be duly
executed.
FORD CREDIT AUTO RECEIVABLES
CORPORATION
By:_________________________
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates described in the within-mentioned Pooling and
Servicing Agreement.
____________________________,
as Trustee,
by
__________________________
Authorized Officer
2
<PAGE> 48
FORM OF THE REVERSE OF CERTIFICATE
This certifies that _________________________ (the "Series 1994-1
Certificateholder"), is the registered owner of a fractional undivided interest
in certain assets of the FORD CREDIT AUTO LOAN MASTER TRUST (the "Trust")
created pursuant to a Pooling and Servicing Agreement (the "P&S") dated as of
________ __, 199__, as supplemented by the Series 1994-1 Series Supplement
dated as of September 30, 1992, among Ford Credit Auto Receivables Corporation
("FCAR"), as Seller (the "Seller"), Ford Motor Credit Company ("Ford Credit"),
as servicer (the "Servicer"), and Chemical Bank, as trustee (the "Trustee"),
that are allocated to the Series 1994-1 Certificateholders' Interest pursuant
to the P&S and the Series Supplement. The P&S and the Series Supplement are
hereinafter collectively referred to as the Pooling and Servicing Agreement.
The corpus of the Trust will include (a) all of the Seller's right, title
and interest in, to and under the Receivables in each Account and all
Collateral 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, (b) all of the
Seller's rights, remedies, powers and privileges with respect to such
Receivables under the Receivables Purchase Agreement, (c) all of the Seller's
right, title and interest in, to and under the Receivables in each Account and
all Collateral Security with respect thereto owned by the Seller at the close
of business on each Transfer Date and not theretofore conveyed to the Trust,
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, (d) all monies
on deposit in, and Eligible Investments credited to, the Collection Account or
any Series Account, (e) any Enhancements and (f) all other assets and interests
constituting the Trust. In addition to the Certificates, the Seller's
Certificate will be issued pursuant to the Pooling and Servicing Agreement
which will represent the Seller's Interest in the Trust. The Seller's
Certificate will represent the interest in the Trust Assets not represented by
the Investor Certificates.
The Receivables consist of advances made directly or indirectly by Ford
Credit to domestic automobile dealers franchised by Ford Motor Company and/or
other automobile manufacturers or distributors.
3
<PAGE> 49
Subject to the terms and conditions of the Pooling and Servicing Agreement,
the Seller may from time to time direct the Trustee, on behalf of the Trust, to
issue one or more new Series of Investor Certificates, which will represent
fractional undivided interests in certain of the Trust Assets.
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement to which, as amended and
supplemented from time to time, the Series 1994-1 Certificateholder by virtue
of the acceptance hereof assents and is bound. Although a summary of certain
provisions of the Pooling and Servicing Agreement is set forth below, this
Certificate does not purport to summarize the Pooling and Servicing Agreement
and reference is made to the Pooling and Servicing Agreement for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of the Trustee.
A copy of the Pooling and Servicing Agreement (without schedules) may be
requested from the Trustee by writing to the Trustee at 450 West 33rd Street,
New York, New York 10001, Attention: Corporate Trust Department. To the extent
not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Pooling and Servicing Agreement.
The Seller has entered into the Pooling and Servicing Agreement and the
Series 1994-1 Certificates have been (or will be) issued with the intention
that the Series 1994-1 Certificates will qualify under applicable tax law as
indebtedness of FCAR secured by the Receivables. The Seller, each Beneficiary
and each Certificateholder and Certificate Owner, by the acceptance of its
Certificate or Book-Entry Certificate, as applicable, agrees to treat the
Series 1994-1 Certificates as indebtedness of FCAR secured by the Receivables
for Federal income taxes, state and local income, single business and franchise
taxes and any other taxes imposed on or measured by income.
On each Distribution Date, the Trustee shall distribute to each Series
1994-1 Certificateholder of record at the close of business [on the day
preceding such Distribution Date](1) [the last day of the month preceding the
month in which such Distribution Date occurs](2) (each a "Record Date") such
Certificateholder's pro rata share (based on the aggregate fractional undivided
interest represented by the Series 1994-1 Certificates held by such
Certificateholder, except as otherwise provided in the Pooling and Servicing
Agreement) of such amounts
______________
(1) Applicable to Book-Entry Certificates.
(2) Applicable to Definitive Certificates.
4
<PAGE> 50
on deposit in the Collection Account or the Series 1994-1 Accounts as are
payable in respect of the Series 1994-1 Certificates pursuant to the Pooling
and Servicing Agreement. Distributions with respect to this Certificate will
be made by the Trustee by check mailed to the address of the Certificateholder
of record appearing in the Certificate Register without the presentation or
surrender of this Certificate or the making of any notation thereon (except for
the final distribution in respect of this Certificate) except that with respect
to Series 1994-1 Certificates registered in the name of a Depository, including
Cede & Co., the nominee for The Depository Trust Company, distributions will be
made in immediately available funds. Final payment of this Certificate will be
made only upon presentation and surrender of this Certificate at the office or
agency specified in the notice of final distribution delivered by the Trustee
to the Certificateholder in accordance with the Pooling and Servicing
Agreement.
On the Distribution Date occurring after the Invested Amount is reduced to
10% of the original principal amount of the Certificates or less, the Seller
has the option, subject to the condition set forth in Section 7.01(c) of the
Series Supplement, to purchase the entire Series 1994-1 Certificateholders'
Interest in the Trust. The purchase price will be equal to the Reassignment
Amount (as defined in the Series Supplement).
This Certificate does not represent an obligation of, or an interest in,
Ford Motor Company, the Seller, the Servicer, or any affiliate of any of them
and is not insured or guaranteed by any governmental agency or instrumentality.
This Certificate is limited in right of payment to certain Collections with
respect to the Receivables (and certain other amounts), all as more
specifically set forth herein and in the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement may be amended from time to time
(including in connection with the issuance of a Supplemental Certificate) by
the Servicer, the Seller and the Trustee, without the consent of any of the
Series 1994-1 Certificateholders, so long as any such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of the Certificateholders of any outstanding 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 the Pooling and Servicing
Agreement or otherwise. Notwithstanding anything contained therein to the
contrary, the Trustee, with the consent of any Enhancement Providers, may at
any time and from time to time amend, modify or supplement the form of
Distribution Date Statement.
5
<PAGE> 51
The Pooling and Servicing Agreement may also be amended from time to time
(including in connection with the issuance of a Supplemental Certificate) by
the Servicer, the Seller and the Trustee with the consent of the Holders of
Investor Certificates evidencing not less than 66-2/3% of the aggregate unpaid
principal amount of the certificates of the Investor 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 the Investor
Certificateholders; provided, however, that no such amendment to the Pooling
and Servicing Agreement shall (i) reduce in any manner the amount of or delay
the timing of distributions to be made to Investor Certificateholders or
deposits of amounts to be so distributed without the consent of each such
affected Investor Certificateholder; (ii) change the definition or the manner
of calculating any certificateholders' interest without the consent of each
affected Investor Certificateholder; (iii) reduce the amount available under
any Enhancement without the consent of each affected Investor
Certificateholder; (iv) 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 Investor Certificates of such Series or Class; or (v)
reduce the aforesaid percentage required to consent to any such amendment
without the consent of all Investor Certificateholders. The Pooling and
Servicing Agreement may not be amended in any manner which adversely affects
the interests of any Enhancement Provider without its prior consent.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register of the Trustee upon surrender of this Certificate
for registration of transfer at the office or agency maintained by the Trustee
in New York, New York, accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized, and thereupon one or more new Series 1994-1
Certificates of authorized denominations evidencing the same aggregate
fractional undivided interest will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Series 1994-1 Certificates are exchangeable for
new Series 1994-1 Certificates
6
<PAGE> 52
evidencing like aggregate fractional undivided interests as requested by the
Certificateholder surrendering such Certificates. No service charge may be
imposed for any such exchange but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
The Servicer, the Trustee, the Transfer Agent and Registrar and any agent of
any of them, may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Servicer nor the Trustee,
the Transfer Agent and Registrar, nor any agent of any of them, shall be
affected by notice to the contrary except in certain circumstances described in
the Pooling and Servicing Agreement.
7
<PAGE> 53
ASSIGNMENT
Social Security or other identifying number of assignee
________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________________________________________
_______________________________________________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints _________________________, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ____________ _____________________________*
Signature Guaranteed:
______________________________
_______________
(*) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the reverse of the within Certificate in
every particular, without alteration, enlargement or any change whatsoever.
8
<PAGE> 54
EXHIBIT B-1
DISTRIBUTION DATE STATEMENT
(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 Floating Allocation Percentage and the Principal Allocation
Percentage for such Collection Period;
(c) The total amount, if any, distributed on the Series 1994-1 Certificates;
(d) The amount of such distribution allocable to principal on the Series
1994-1 Certificates;
(e) The amount of such distribution allocable to interest on the 1994-1
Certificates;
(f) The Investor Default Amount for such Distribution Date;
(g) The Required Subordination Draw Amount, if any, for the preceding
Collection Period;
(h) The amount of the Investor Charge-Offs and the amounts of reimbursements
thereof for the preceding Collection Period;
(i) The amount of the Monthly Servicing Fee for the preceding Collection
Period;
(j) The Invested Amount, the Excess Funding Amount and the outstanding
principal balance of the Series 1994-1 Certificates for such distribution
(after giving effect to all distributions which will occur on such Distribution
Date);
(k) The "pool factor" for the Series 1994-1 Certificates as of the
Determination Date with respect to such Distribution Date (consisting of an
eight-digit decimal expressing the Invested Amount as of such Determination
Date (determined after taking into account any reduction in the Invested Amount
which will occur on such Distribution Date) as a proportion of the Initial
Invested Amount);
(l) The Available Subordinated Amount for such Determination Date;
<PAGE> 55
(m) The Reserve Fund balance for such date;
(n) The Collection Account balance with respect to such date; and
(o) A list of the Accounts that are in "Status".
10
<PAGE> 56
EXHIBIT B-2
DISTRIBUTION DATE STATEMENT
(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 Floating Allocation Percentage and the Principal Allocation
Percentage for such Collection Period;
(c) The total amount, if any, distributed on the Series 1994-1 Certificates;
(d) The amount of such distribution allocable to principal on the Series
1994-1 Certificates;
(e) The amount of such distribution allocable to interest on the 1994-1
Certificates;
(f) The Investor Default Amount for such Distribution Date;
(g) The Required Subordination Draw Amount, if any, for the preceding
Collection Period;
(h) The amount of the Investor Charge-Offs and the amounts of reimbursements
thereof for the preceding Collection Period;
(i) The amount of the Monthly Servicing Fee for the preceding Collection
Period;
(j) The Invested Amount, the Excess Funding Amount and the outstanding
principal balance of the Series 1994-1 Certificates for such distribution
(after giving effect to all distributions which will occur on such Distribution
Date);
(k) The "pool factor" for the Series 1994-1 Certificates as of the
Determination Date with respect to such Distribution Date (consisting of an
eight-digit decimal expressing the Invested Amount as of such Determination
Date (determined after taking into account any reduction in the Invested Amount
which will occur on such Distribution Date) as a proportion of the Initial
Invested Amount);
(l) The Available Subordinated Amount for such Determination Date;
(m) The Reserve Fund balance for such date; and
(n) The Collection Account balance with respect to such date.
<PAGE> 57
SCHEDULE 1
<TABLE>
<CAPTION>
Name of Series Depository Institution
1994-1 Account and Account No.
- -------------- -----------------------
<S> <C>
Interest Funding Account
Principal Funding Account
Excess Funding Account
Reserve Fund
</TABLE>
<PAGE> 1
EXHIBIT 5.1
LOGO
FORD MOTOR CREDIT COMPANY The American Road
P. O. Box 6044
Dearborn, MI 48121-6044
Jerry D. Bringard
Vice President-General Counsel
July 26, 1994
Ford Credit Auto Receivables Corporation
The American Road
Dearborn, Michigan 48121
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Trade Center
New York, NY 10281
Gentlemen:
Re: Registration Statement No. 33-54673 on Form S-1
relating to Ford Credit Auto Loan Master
Trust (the "Registration Statement:")
------------------------------------------------
I am Vice President - General Counsel of each of Ford Credit Auto
Receivables Corporation, a Delaware corporation, as seller (the "Seller") and
Ford Motor Credit Company, a Delaware corporation, as servicer (the
"Servicer"), in connection with (a) the transfer and assignment of certain
wholesale loans of automotive dealers (the "Receivables") by the Seller to
Chemical Bank, as trustee (the "Trustee") for a trust (the "Trust") formed
pursuant to a Pooling and Servicing Agreement, dated as of December 31, 1991
(the "Agreement"), among the Seller, the Servicer and the Trustee, and the
Series 1994-1 Supplement to the Agreement to be dated as of June 30, 1994 (the
"Supplement"; the Agreement and the Supplement are collectively referred to as
the "Pooling and Servicing Agreement"), among the Seller, the Servicer and the
Trustee, in exchange for Series 1994-1, Floating Rate Auto Loan Asset Backed
Certificates (the "Certificates"), each such Certificate evidencing a
fractional undivided interest in the Trust and (b) the sale of the Certificates
to the underwriters, pursuant to a certain underwriting agreement (the
"Underwriting Agreement") between the Seller and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, as representatives of the several underwriters.
<PAGE> 2
I am admitted to the State Bar of Michigan and I express no opinion as
to the laws of any other jurisdiction except the laws of the United States of
America to the extent specifically referred to herein.
I have examined, or caused to be examined, the forms of the Pooling
and Servicing Agreement and the Underwriting Agreement previously filed or
filed herewith, as the case may be, as exhibits to the Registration Statement.
In addition, I have examined, or caused to be examined, executed originals or
counterparts, or certified or other copies identified to my satisfaction as
being true copies of such certificates, instruments, documents and other
corporate records of the Seller and matters of fact and law as I deem necessary
for the purposes of the opinion expressed below. Capitalized terms not
otherwise defined herein have the meanings given in the Underwriting Agreement.
I have assumed the genuineness of all signatures, the authenticity of
all documents submitted to the Seller or Servicer as originals, the conformity
to original documents of all documents submitted to the Seller and Servicer as
certified or photostatic copies and the authenticity of the originals of such
letter documents. As to any facts material to the opinions expressed herein
which were not independently established or verified, I have relied upon
statements and representations of officers and other representatives of the
Seller, the Servicer and others.
Based on and subject to the foregoing, I am of the opinion that the
Certificates to be sold under the Registration Statement have been duly and
validly authorized by the Seller and, when issued, will be legally issued,
fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ Jerry D. Bringard
2
<PAGE> 1
EXHIBIT 8.1
[BROWN & WOOD LETTERHEAD]
July 25, 1994
Ford Credit Auto Receivables
Corporation
The American Road
Dearborn, Michigan 48121
Re: Ford Credit Auto Loan Master Trust
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special tax counsel to Ford Credit Auto Receivables
Corporation, a Delaware corporation ("FCAR"), in connection with the
above-referenced Registration Statement relating to the issuance and sale
of certain of the Series 1994-1, Floating Rate Auto Loan Asset Backed
Certificates (the "Certificates") issued by the Ford Credit Auto Loan Master
Trust and evidencing undivided interests in a pool of receivables generated
from time to time pursuant to certain wholesale automobile loan revolving
credit agreements. The Certificates will be issued pursuant to the Pooling and
Servicing Agreement dated as of December 31, 1991 (the "Pooling and Servicing
Agreement"), among FCAR, as seller (the "Seller"), Ford Motor Credit Company,
as servicer (the "Servicer"), and Manufacturers Hanover Trust Company, as
trustee, and the Series 1994-1 Supplement to the Pooling and Servicing
Agreement, entered into among the Seller, the Servicer and Chemical Bank, as
successor by merger to Manufacturers Hanover Trust Company, as trustee. We
have advised the Seller with respect to certain federal income tax consequences
of the proposed issuance of the Certificates. This advice is summarized under
the headings "Prospectus Summary -- Tax Matters" and "Certain Tax Matters --
United States Federal Income Tax Consequences" in the prospectus relating to
the Certificates (the "Prospectus"), all a part of the Registration Statement
(File No. 33-54673) on Form S-1 (the "Registration Statement"), filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), for the registration of the
Certificates under the Act. Such description does not purport to discuss all
possible federal income tax ramifications of the proposed issuance, but with
respect to those tax consequences which are discussed, in our opinion, the
description is accurate in all material respects.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as special tax counsel
to the Seller) under the heading "Certain Tax Matters -- Federal Income Tax
Consequences" in the Prospectus, without implying or 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
<PAGE> 1
EXHIBIT 8.2
LOGO
FORD CREDIT AUTO RECEIVABLES CORPORATION The American Road
P. O. Box 6044
Dearborn, MI 48121-6044
Jerry D. Bringard
Vice President-General Counsel
July 26, 1994
Ford Credit Auto Receivables Corporation
The American Road
Dearborn, Michigan 48121
Ford Motor Credit Company
The American Road
Dearborn, Michigan 48121
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Trade Center
New York, NY 10281
Gentlemen:
Re: Registration Statement No. 33-54673 on Form S-1
relating to Ford Credit Auto Loan Master
Trust (the "Registration Statement:")
------------------------------------------------
I am Vice President - General Counsel of each of Ford Credit Auto
Receivables Corporation, a Delaware corporation, as seller (the "Seller") and
Ford Motor Credit Company, a Delaware corporation, as servicer (the
"Servicer"), in connection with (a) the transfer and assignment of certain
wholesale loans of automotive dealers (the "Receivables") by the Seller to
Chemical Bank, as trustee (the "Trustee") for a trust (the "Trust") formed
pursuant to a Pooling and Servicing Agreement, dated as of December 31, 1991
(the "Agreement"), among the Seller, the Servicer and the Trustee, and the
Series 1994-1 Supplement to the Agreement to be dated as of June 30, 1994 (the
"Supplement"; the Agreement and the Supplement are collectively referred to as
the "Pooling and Servicing Agreement"), among the Seller, the Servicer and the
Trustee, in exchange for Series 1994-1 Floating Rate Auto Loan Asset Backed
Certificates (the "Certificates"), each such Certificate evidencing a
fractional undivided interest in the Trust and (b) the sale of the Certificates
to the underwriters, pursuant to a certain underwriting agreement (the
"Underwriting Agreement") between the Seller and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, as representatives of the several underwriters.
<PAGE> 2
I am admitted to the State Bar of Michigan and I express no opinion as
to the laws of any other jurisdiction except the laws of the United States of
America to the extent specifically referred to herein.
I hereby (i) confirm to you that the statements set forth under the
heading "Certain Tax Matters - State and Local Tax Consequences" in the
Prospectus contained in the Registration Statement to which this opinion
relates, to the extent that they constitute matters of law or legal conclusions
with respect thereto are correct in all material respects and (ii) consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the reference to me under the caption "Legal Matters" in the Prospectus
included in the Registration Statement.
Very truly yours,
/s/ Jerry D. Bringard
Jerry D. Bringard
2
<PAGE> 1
EXHIBIT 10.1
ISDA (R)
INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.
INTEREST RATE
AND
CURRENCY EXCHANGE AGREEMENT
Dated as of_________________
Ford Credit Auto Loan Master Trust,
Chemical Bank
Ford Motor Credit Corporation and as Trustee
have entered and/or anticipate entering into one or more transactions (each a
"Swap Transaction"). The parties agree that each Swap Transaction will be
governed by the terms and conditions set forth in this document (which includes
the schedule (the "Schedule")) and in the documents (each a "Confirmation")
exchanged between the parties confirming such Swap Transactions. Each
Confirmation constitutes a supplement to and forms part of this document and
will be read and construed as one with this document, so that this document and
all the Confirmations constitute a single agreement between the parties
(collectively referred to as this "Agreement"). The parties acknowledge that
all Swap Transactions are entered into in reliance on the fact that this
document and all Confirmations will form a single agreement between the
parties, it being understood that the parties would not otherwise enter into
any Swap Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
any Confirmation and this document, such Confirmation will prevail for the
purpose of the relevant Swap Transaction.
2. PAYMENTS
(a) OBLIGATIONS AND CONDITIONS.
(i) Each party will make each payment specified in each Confirmation as
being payable by it.
(ii) Payments under this Agreement will be made not later than the due
date for value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency.
(iii) Each obligation of each party to pay any amount due under Section
2(a)(i) is subject to (1) the condition precedent that no Event of Default
or Potential Event of Default with respect to the other party has
occurred and is continuing and (2) each other applicable condition
precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account by giving notice to
the other party at least five days prior to the due date for payment for which
such change applies.
<PAGE> 2
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Swap Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.
If the parties specify "Net Payments - Corresponding Payment Dates" in a
Confirmation or otherwise in this Agreement, sub-paragraph (ii) above will
cease to apply to all Swap Transactions with effect from the date so specified
(so that a net amount will be determined in respect of all amounts due on the
same date in the same currency, regardless of whether such amounts are payable
in respect of the same Swap Transaction); provided that, in such case, this
Section 2(c) will apply separately to each Office through which a party makes
and receives payments as set forth in Section 10.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) Gross-Up. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority then
in effect. If a party is so required to deduct or withhold, then
that party ("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required
to be deducted or withheld (including the full amount
required to be deducted or withheld from any additional amount
paid by X to Y under this Section 2(d)) promptly upon the
earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been assessed
against Y;
(3) prompty forward to Y an official receipt (or a
certified copy), or other documentation reasonably acceptable
to Y, evidencing such payment to such authorities; and
(4) if such Tax is an Idemnifiable Tax, pay to Y, in
addition to the payment to which is Y otherwise entitled under
this Agreement, such additional amount as is necessary to
ensure that the net amount actually received by Y (free and
clear of Indemnifiable Taxes whether assessed against X or Y)
will equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that it
would not be required to be paid but for:
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for a Change in Tax Law.
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as
modified by the practice of any relevant governmental revenue
authority, to make any deduction or withholding in respect of
which X would not be required to pay an additional amount to Y
under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X.
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i) or
(d)).
(e) DEFAULT INTEREST. A party that defaults in the payment of any amount
due will, to the extent be permitted by law, be required to pay interest
(before as well as after judgment) on such amount to the other party on demand
in the same currency as the overdue amount, for the period from (and including
2
<PAGE> 3
the original due date for payment to (but excluding) the date of actual
payment, at the Default Rate. Such interest will be calculated on the basis of
daily compounding and the actual number of days elapsed.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Swap Transaction is
entered into and, in the case of the representations in Section 3(f), at all
times until the termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing
under the laws of the jurisdiction of its organisation or incorporation
and, if relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute and deliver this
Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its
obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
(iv) CONSENTS. All governmental and other consents that are
required to have been obtained by it with respect to this Agreement or
any Credit Support Document to which it is a party have been obtained
and are in full force and effect and all conditions of any such
consents have been complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this
Agreement and any Credit Support Document to which it is a party
constitute its legal, valid and binding obligations, enforceable in
accordance with their respective terms (subject to applicable
bankruptcy, reorganisation, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general applicaton
(regardless of whether enforcement is sought in a proceeding in equity
or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a
result of its entering into or performing its obligations under this Agreement
or any Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that purports to draw into question, or is likely to
affect, the legality, validity or enforceability against it of this Agreement
or any Credit Support Document to which it is a party or its ability to perform
its obligations under this Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in paragraph 2 of Part 3 of the Schedule
is, as of the date of the information, true, accurate and complete in every
material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in Part 2 of
the Schedule as being made by it for the purpose of this Section 3(c) is
accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in Part 2 of
the Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as it has or may have any
obligation under this Agreement or under any Credit Support Document to which
it is a party:--
3
<PAGE> 4
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party:--
(i) any forms, documents or certificates relating to taxation
specified in Part 3 of the Schedule or any Confirmation; and
(ii) any other documents specified in Part 3 of the Schedule or any
Confirmation,
by the date specified in Part 3 of the Schedule or such Confirmation or, if
none is specified, as soon as practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. It will pay any Stamp Tax levied or imposed upon it
or in respect of its execution or performance of this Agreement by a
jurisdiction in which it is incorporated, organised, managed and controlled, or
considered to have its seat, or in which a branch or office through which is
acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction")
and will indemnify the other party against any Stamp Tax levied or imposed upon
the other party or in respect of the other party's execution or performance of
this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Specified Entity of such party, of any of the following
events constitutes an event of default (an "Event of Default") with respect to
such party:-
(i) FAILURE TO PAY. Failure by the party to pay, when due, any amount
required to be paid by it under this Agreement if such failure is not
remedied on or before the third Business Day after notice of such failure
to pay is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement obligation (other than an obligation to pay any amount
required to be paid by it under this Agreement or to give notice of a
Termination Event or any agreement or obligation under Section
4(a)(i) or 4(d)) to be complied with or performed by the party in
accordance with this Agreement if such failure is not remedied on or before
the thirtieth day after notice of such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any applicable Specified Entity to
comply with or perform any agreement or obligation to be complied with
or performed by the party or such Specified Entity in accordance with
any Credit Support Document if such failure is continuing after any
applicable grace period has elasped;
(2) the expiration or termination of such Credit Support Document,
or the ceasing of such Credit Support Document to be in full force and
effect, prior to the final Scheduled Payment Date of each Swap
Transaction to which such Credit Support Document relates without the
written consent of the other party; or
(3) the party or such Specified Entity repudiates, or challenges
the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any applicable Specified Entity in this Agreeement
or any Credit Support Document relating to this Agreement proves to have
been incorrect or misleading in any material respect when made or repeated
or deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED SWAPS. The occurrence of an event of
default in respect of the party or any applicable Specified Entity under a
Specified Swap which, following the giving of any
4
<PAGE> 5
applicable notice or the lapse of any applicable grace period, has resulted
in the designation or occurrence of any early termination date in respect
of such Specified Swap;
(vi) CROSS DEFAULT. If "Cross Default" is specified in Part 1 of the
Schedule as applying to the party, (1) the occurrence or existence of an
event or condition in respect of such party or any applicable Specified
Entity under one or more agreements or instruments relating to Specified
Indebtedness of such party or any such Specified Entity in an aggregate
amount of not less than the Threshold Amount (as specified in Part 1 of
the Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable under
such agreements or instruments, before it would otherwise have been due
and payable or (2) the failure by such party or any such Specified Entity
to make one or more payments at maturity in an aggregate amount of not
less than the Threshold Amount under such agreements or instruments
(after giving effect to any applicable grace period);
(vii) BANKRUPTCY. The party or any applicable Specified Entity:--
(1) is dissolved; (2) becomes insolvent or fails or is unable
or admits in writing its inability generally to pay its debts as
they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes
or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or
a petition is presented for the winding-up or liquidiation of the
party or any such Specified Entity, and, in the case of any such
proceeding or petition instituted or presented against it, such
proceeding or petition (A) results in a judgment or insolvency or
bankruptcy or the entry of an order for relief or the making of an
order for the winding-up or liquidation of the party or such
Specified Entity or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation therof; (5) has a resolution passed for its winding-up
or liquidation; (6) seeks or becomes subject to the appointment of
an administrator, receiver, trustee, custodian or other similar
official for it or for all or substantially all its assets
(regardless of how brief such appointment may be, or whether any
obligations are promptly assumed by another entity or whether any
other event described in this clause (6) has occurred and is
continuing); (7) any event occurs with respect to the party or any
such Specified Entity which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (6) (inclusive); or (8) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts;
other than in the case of clause (1) or (5) or, to the extent it relates
to those clauses, clause (8), for the purpose of a consolidation,
amalgamation or merger which would not constitute an event described in
(viii) below; or
(viii) MERGER WITHOUT ASSUMPTION. The party consolidates or amalgamates
with, or merges into, or transfers all or substantially all its assets to,
another entity and, at the time of such consolidation, amalgamation, merger
or transfer.--
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party under this Agreement by
operation of law or pursuant to an agreement reasonably satisfactory
to the other party to this Agreement; or
(2) the benefits of any Credit Support Document relating to
this Agreement fail to extend (without the consent of the other
party) to the performance by such resulting, surviving or transferee
entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party of any event
specified below constitutes an illegality if the event is specified in (i)
below, a Tax Event if the event is specified in (ii) below, a Tax Event Upon
Merger if the event is specified in (iii) below or a Credit Event Upon Merger
if the event is specified in (iv) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which such Swap Transaction is entered
into, or due to the promulgation of, or any change in, the interpretation
by any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of section 4(b)) for such party (which will
be the Affected Party):-
5
<PAGE> 6
(1) to perform any absolute or contingent obligation to make a
payment or to receive a payment in respect of such Swap Transaction
or to comply with any other material provision of this Agreement
relating to such Swap Transaction: or
(2) to perform, or for any applicable Specified Entity to
perform, any contingent or other obligation which the party (or
such Specified Entity) has under any Credit Support Document
relating to such Swap Transaction:
(ii) TAX EVENT.
(1) The party (which will be the Affected Party) will be required
on the next succeeding Scheduled Payment Date to pay to the other
party an additional amount in respect of any Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section
2(e)) as a result of a Change in Tax Law; or
(2) there is a substantial likelihood that the party (which will
be the Affected Party) will be required on the next succeeding
Scheduled Payment Date to pay to the other party an additional
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4)
(except in respect of interest under Section 2(e)) and such
substantial likelihood results from an action taken by a taxing
authority, or brought in a court of competent jurisdiction, on or
after the date on which such Swap Transaction was entered into
(regardless of whether such action was taken or brought with
respect to a party to this Agreement);
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e)) or (2)
receive a payment from which an amount has been deducted or withheld for
or on account of any Indemnifiable Tax in respect of which the other party
is not required to pay an additional amount, in either case as a result of
a party consolidating or amalgamating with, or merging into, or
transferring all or substantially all its assets to, another entity
(which will be the Affected Party) where such action does not constitute
an event described in Section 5(a)(viii); or
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in Part 1 of this Schedule as applying to the party, such party
("X") consolidates or amalgamates with or merges into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity (which
will be the Affected Party) is materially weaker than that of X
immediately prior to such action.
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. EARLY TERMINATION.
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an
Event of Default with respect to a party (the "Defaulting Party") has occurred
and is then continuing, the other party may, by not more than 20 days notice to
the Defaulting Party specifying the relevant Event of Default, designate a day
not earlier than the day such notice is effective as an Early Termination Date
in respect of all outstanding Swap Transactions. However, an Early Termination
Date will be deemed to have occurred in respect of all Swap Transactions
immediately upon the occurrence of any Event of Default specified in Section
5(a)(vii)(1), (2), (3), (5), (6), (7) or (8) and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence of any Event of Default specified in
Section 5(a)(vii)(4).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. Upon the occurrence of a Termination Event, an Affected Party
will, promptly upon becoming aware of the same, notify the other party
thereof, specifying the nature of such Termination Event and the Affected
Transactions relating thereto. The Affected Party will also give such
other information to the other party with regard to such Termination Event
as the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv) use all
reasonable efforts (which
6
<PAGE> 7
will not require such party to incur a loss, excluding immaterial,
incidental expenses) to transfer within 20 days after it gives notice under
Section 6(b)(i) all its rights and obligations under this Agreement in
respect of the Affected Transactions to another of its offices, branches or
Affiliates or that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's policies
in effect at such time would permit it to enter into swap transactions with
the transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action that would cause such
Termination Event to cease to exist.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an Affected
Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2) or a Credit Event
Upon Merger occurs, or a Tax Event Upon Merger occurs and the Burdened
Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger, may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then continuing,
designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is continuing on the relevant Early Termination Date.
(ii) Upon the effectiveness of notice designating an Early Termination
Date (or the deemed occurrence of an Early Termination Date), the
obligations of the parties to make any further payments under Section
2(a)(i) in respect of the Terminated Transactions will terminate, but
without prejudice to the other provisions of this Agreement.
(d) CALCULATIONS.
(i) STATEMENT. Following the occurrence of an Early Termination Date,
each party will make the calculations (including calculation of applicable
interest rates) on its part contemplated by Section 6(e) and will provide
to the other party a statement (1) showing, in reasonable detail, such
calculations (including all relevant quotations) and (2) giving details of
the relevant account to which any payment due to it under Section 6(e) is
to be made. In the absence of written confirmation of a quotation obtained
in determining a Market Quotation from the source providing such quotation,
the records of the party obtaining such quotation will be conclusive
evidence of the existence and accuracy of such quotation.
(ii) DUE DATE. The amount calculated as being payable under Section
6(e) will be due on the day that notice of the amount payable is effective
(in the case of an Early Termination Date which is designated or deemed to
occur as a result of an Event of Default) and not later than the day which
is two Business Days after the day on which notice of the amount payable is
effective (in the case of an Early Termination Date which is designated as
a result of a Termination Event). Such amount will be paid together with
(to the extent permitted under applicable law) interest thereon in the
Termination Currency from (and including) the relevant Early Termination
Date to (but excluding) the relevant due date, calculated as follows:--
(1) if notice is given designating an Early Termination Date or
if an Early Termination Date is deemed to occur, in either case as a
result of an Event of Default, at the Default Rate; or
7
<PAGE> 8
(2) if notice is given designating an Early Termination Date
as a result of a Termination Event, at the Default Rate minus 1% per
annum.
Such interest will be calculated on the basis of daily compounding and
the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION.
(i) DEFAULTING PARTY OR ONE AFFECTED PARTY. If notice is given
designating an Early Termination Date or if an Early Termination Date is
deemed to occur and there is a Defaulting Party or only one Affected Party,
the other party will determine the Settlement Amount in respect of the
Terminated Transactions and:--
(1) if there is a Defaulting Party, the Defaulting Party will
pay to the other party, the excess, if a positive number, of (A) the
sum of such Settlement Amount and the Termination Currency Equivalent
of the Unpaid Amounts owing to the other party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party; and
(2) if there is an Affected Party, the payment to be made will
be equal to (A) the sum of such Settlement Amount and the Termination
Currency Equivalent of the Unpaid Amounts owing to the party
determining the Settlement Amount ("X") less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the party not
determining the Settlement Amount ("Y").
(ii) TWO AFFECTED PARTIES. If notice is given of an Early Termination
Date and there are two Affected Parties, each party will determine a
Settlement Amount in respect of the Terminated Transactions and the payment
to be made will be equal to (1) the sum of (A) one-half of the difference
between the Settlement Amount of the party with the higher Settlement
Amount ("X") and the Settlement Amount of the party with the lower
Settlement Amount ("Y") and (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to X less (2) the Termination Currency Equivalent of
the Unpaid Amounts owing to Y.
(iii) PARTY OWING. If the amount calculated under Section 6(e)(i)(2) or
(ii) is a positive number Y will pay such amount to X; if such amount is a
negative number, X will pay the absolute value of such amount to Y.
(iv) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date is deemed to occur, the amount determined under Section
6(e)(i) will be subject to such adjustments as are appropriate and
permitted by law to reflect any payments made by one party to the other
under this Agreement (and retained by such other party) during the period
from the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(v) PRE-ESTIMATE OF LOSS. The parties agree that the amounts
recoverable under this Section 6(e) are a reasonable pre-estimate of loss
and not a penalty. Such amounts are payable for the loss of bargain and the
loss of protection against future risks and except as otherwise provided in
this Agreement neither party will be entitled to recover any additional
damages as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b) and to any exception provided in the Schedule, neither
this Agreement nor any interest or obligation in or under this Agreement may be
transferred by either party without the prior written consent of the other
party (other than pursuant to a consolidation or amalgamation with or merger
into, or transfer of all or substantially all its assets to, another entity)
and any purported transfer without such consent will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual Currency of
all amounts due in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received
8
<PAGE> 9
falls short of the amount in the Contractual Currency due in respect of this
Agreement, the party required to make the payment will, to the extent
permitted by applicable law, immediately pay such additional amount in the
Contractual Currency as may be necessary to compensate for the shortfall.
If for any reason the amount in the Contractual Currency so received exceeds
the amount in the Contractual Currency due in respect of this Agreement, the
party receiving the payment will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is
rendered (i) for the payment of any amount owing in respect of this Agreement,
(ii) for the payment of any amount relating to any early termination in respect
of this Agreement or (iii) in respect of a judgment or order of another court
for the payment of any amount described in (i) or (ii) above, the party
seeking recovery, after recovery in full of the aggregate amount to which such
party is entitled pursuant to the judgment or order, will be entitled to
receive immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid
in such other currency if such shortfall or such excess arises or results from
any variation between the rate of exchange at which the Contractual Currency
is converted into the currency of the judgment or order for the purposes of
such judgment or order and the rate of exchange at which such party is able,
acting in a reasonable manner and in good faith in converting the currency
received into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation, any
premiums and costs of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim of proof being made for any other sums due in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing and executed by each of the
parties or confirmed by an exchange of telexes.
(c) SURVIVAL OF OBLIGATIONS. Except as provided in Section 6(c)(ii), the
obligations of the parties under this Agreement will survive the termination of
any Swap Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement may be executed in counterparts, each of which will
be deemed an original.
(ii) A Confirmation may be executed in counterparts or be created by
an exchange of telexes, which in either case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. Any such
counterpart or telex will specify that it constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
<PAGE> 10
10. MULTIBRANCH PARTIES
If a party is specified as a Multibranch Party in Part 4 of the Schedule, such
Multibranch Party may make and receive payments under any Swap Transaction
through any of its branches or offices listed in the Schedule (each an
"Office"). The Office through which it so makes and receives payments for the
purpose of any Swap Transaction will be specified in the relevant Confirmation
and any change of Office for such purpose requires the prior written consent of
the other party. Each Multibranch Party represents to the other party that,
notwithstanding the place of payment, the obligations of each Office are for
all purposes under this Agreement the obligations of such Multibranch Party.
This representation will be deemed to be repeated by such Multibranch Party on
each date on which a Swap Transaction is entered into.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or by reason of the early
termination of any Swap Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or communication in respect of this Agreement
wil be sufficiently given to a party if in writing and delivered in person,
sent by certified or registered mail (airmail if overseas) or the equivalent
(with return receipt requested) or by overnight courier or given by telex (with
answerback received) at the address or telex number specified in Part 4 of the
Schedule. A notice or communication will be effective:-
(i) if delivered by hand or sent by overnight courier, on the day it is
delivered (or if that day is not a day on which commercial banks are
open for business in the city specified in the address for notice provided
by the recipient (a "Local Banking Day"), or if delivered after the close
of business on a Local Banking Day, on the first following day that is a
Local Banking Day).
(ii) if sent by telex, on the day the recipient's answerback is received
(or if that day is not a Local Banking Day, or if after the close of
business on a Local Banking Day, on the first following day that is a
Local Banking Day): or
(iii) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), three Local Banking Days
after despatch if the recipient's address for notice is in the same
country as the place of despatch and otherwise seven Local Banking Days
after despatch.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address or telex number at which notices or communications are to be given to
it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in Part 4 of the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York: and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any
claim that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings, that
such court does not have jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in Part 4 of the Schedule to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason any
party's Process Agent is unable to act as such, such party will
10
<PAGE> 11
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to
service of process given in the manner provided for notices in Section 12.
Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similiar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Swap
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Swap Transactions.
"AFFILIATE" means, subject to Part 4 of the Schedule, in relation to any
person, any entity controlled, directly or indirectly, by the person, any
entity that controls, directly or indirectly, the person or any entity under
common control with the person. For this purpose, "control" of any entity or
person means ownership of a majority of the voting power of the entity or
person.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"BUSINESS DAY" means (a) in relation to any payment due under Section 2(a)(i),
a day on which commercial banks and foreign exchange markets are open for
business in the place(s) specified in the relevant Confirmation and (b) in
relation to any other payment, a day on which commercial banks and foreign
exchange markets are open for business in the place where the relevant account
is located and, if different, in the principal financial centre of the currency
of such payment.
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Swap Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument which is specified
as such in this Agreement.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) of
funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date specified as such in a notice given
under Section 6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a).
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be
imposed in respect of a payment under this Agreement but for a present or
former connection between the jurisdiction of the government or taxation
authority imposing such Tax and the recipient of such payment or a person
related to such recipient (including, without limitation, a connection arising
from such recipient or related person being or having been a citizen or
resident of such jurisdiction, or being or having been organised, present or
engaged in a trade or business in such jurisdiction, or having or having had a
permanent establishment or fixed place of business in such jurisdiction, but
excluding a connection arising solely from such recipient or related person
having executed, delivered, performed its obligations or received a payment
11
<PAGE> 12
under, or enforced, this Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "lawful" and "unlawful" will be construed accordingly.
"LOSS" means, with respect to a Terminated Transaction and a party, an amount
equal to the total amount (expressed as a positive amount) required, as
determined as of the relevant Early Termination Date (or, if an Early
Termination Date is deemed to occur, as of a time as soon thereafter as
practicable) by the party in good faith, to compensate it for any losses and
costs (including loss of bargain and costs of funding but excluding legal fees
and other out-of-pocket expenses) that it may incur as a result of the early
termination of the obligations of the parties in respect of such Terminated
Transaction. If a party determines that it would gain or benefit from such
early termination, such party's Loss will be an amount (expressed as a negative
amount) equal to the amount of the gain or benefit as determined by such party.
"MARKET QUOTATION" MEANS, with respect to a Terminated Transaction and a party
to such Terminated Transaction making the determination, an amount (which may
be negative) determined on the basis of quotations from Reference Market-makers
for the amount that would be or would have been payable on the relevant Early
Termination Date, either by the party to the Terminated Transaction making the
determination (to be expressed as a positive amount) or to such party (to be
expressed as a negative amount), in consideration of an agreement between such
party and the quoting Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early Termination Date as the
date of commencement of such agreement (or, if later, the date specified as the
effective date of such Terminated Transaction in the relevant Confirmation),
that would have the effect of preserving for such party the economic equivalent
of the payment obligations of the parties under Section 2(a)(i) in respect of
such Terminated Transaction that would, but for the occurrence of the relevant
Early Termination Date, fall due after such Early Termination Date (excluding
any Unpaid Amounts in respect of such Terminated Transaction but including,
without limitation, any amounts that would, but for the occurrence of the
relevant Early Termination Date, have been payable (assuming each applicable
condition precedent had been satisfied) after such Early Termination Date by
reference to any period in which such Early Termination Date occurs). The party
making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent practicable as of the same
time (without regard to different time zones) on the relevant Early Termination
Date (or, if an Early Termination Date is deemed to occur, as of a time as soon
thereafter as practicable). The time as of which such quotations are to be
obtained will, if only one party is obliged to make a determination under
Section 6(e), be selected in good faith by that party and otherwise will be
agreed by the parties. If more than three such quotations are provided, the
Market Quotation will be the arithmetic mean of the Termination Currency
Equivalent of the quotations, without regard to the quotations having the
highest and lowest values. If exactly three such quotations are provided, the
Market Quotation will be the quotation remaining after disregarding the
quotations having the highest and lowest values. If fewer than three quotations
are provided, it will be deemed that the Market Quotation in respect of such
Terminated Transaction cannot be determined.
"OFFICE" has the meaning specified in Section 10.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant swap
market selected by the party determining a Market Quotation in good faith (a)
from among dealers of the highest credit standing which satisfy all the
criteria that such party applies generally at the time in deciding whether to
offer or to make an extension of credit and (b) to the extent practicable, from
among such dealers having an office in the same city.
"RELEVANT JURISDICTION" MEANS, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where a branch or office through which the
party is acting for purposes of this Agreement is located, (c) in which the
party executes this Agreement and (d) in relation to any payment, from or
through which such payment is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment is due under Section
2(a)(i) with respect to a Swap Transaction.
12
<PAGE> 13
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction for which a Market
Quotation is determined; and
(b) for each Terminated Transaction for which a Market Quotation is not, or
cannot be, determined, the Termination Currency Equivalent of such party's Loss
(whether positive or negative);
provided that if the parties agree that an amount may be payable under
Section 6(e) to a Defaulting Party by the other party, no account shall be
taken of a Settlement Amount expressed as a negative number.
"SPECIFIED ENTITY" has the meaning specified in Part 1 of the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to Part 1 of the Schedule, any
obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"SPECIFIED SWAP" means, subject to Part 1 of the Schedule, any rate swap
or currency exchange transaction now existing or hereafter entered into between
one party to this Agreement (or any applicable Specified Entity) and the other
party to this Agreement (or any applicable Specified Entity).
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Agreement other than a stamp, registration,
documentation or similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means (a) with respect to any Early Termination
Date occurring as a result of a Termination Event, all Affected Transactions and
(b) with respect to any Early Termination Date occurring as a result of an
Event of Default, all Swap Transactions, which in either case are in effect as
of the time immediately preceding the effectiveness of the notice designating
such Early Termination Date (or, in the case of an Event of Default specified in
Section 5(a)(vii), in effect as of the time immediately preceding such Early
Termination Date).
"TERMINATION CURRENCY" has the meaning specified in Part 1 of the
Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated
in the Termination Currency, such Termination Currency amount and, in
respect of any amount denominated in a currency other than the Termination
Currency (the "Other Currency"), the amount in the Termination Currency
determined by the party making the relevant determination as being required to
purchase such amount of such Other Currency as at the relevant Early
Termination Date with the Termination Currency at the rate equal to the spot
exchange rate of the foreign exchange agent (selected as provided below) for
the purchase of such Other Currency with the Termination Currency at or about
11:00 a.m. (in the city in which such foreign exchange agent is located) on
such date as would be customary for the determination of such a rate for the
purchase of such Other Currency for value the relevant Early Termination Date.
The foreign exchange agent will, if only one party is obliged to make a
determination under Section 6(e), be selected in good faith by that party and
otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event, a Tax Event Upon
Merger or a Credit Event Upon Merger.
"UNPAID AMOUNTS" owing to any party means, with respect to any Early
Termination Date, the aggregate of the amounts that became due and payable (or
that would have become due and payable but for Section 2(a)(iii) or the
designation or occurrence of such Early Termination Date) to such party under
Section 2(a)(i) in respect of all Terminated Transactions by reference to all
periods ended on or prior to such Early Termination Date and which remain
unpaid as at such Early Termination Date, together with (to the extent
permitted under applicable law and in lieu of any interest calculated under
Section 2(e)) interest thereon, in the currency of such amounts, from (and
including) the date such amounts became due and payable or would have become
due and payable to (but excluding) such Early Termination Date, calculated as
follows:--
(a) in the case of notice of an Early Termination Date given as a result of
an Event of Default:--
13
<PAGE> 14
(i) interest on such amounts due and payable by a Defaulting Party
will be calculated at the Default Rate; and
(ii) interest on such amounts due and payable by the other
party will be calculated at a rate per annum equal to the cost to such
other party (as certified by it) if it were to fund such amounts
(without proof or evidence of any actual cost): and
(b) in the case of notice of an Early Termination Date given as a result of a
Termination Event, interest on such amounts due and payable by either party
will be calculated at a rate per annum equal to the arithmetic mean of the cost
(without proof or evidence of any actual cost) to each party (as certified by
such party and regardless of whether due and payable by such party) if it were
to fund or of funding such amounts.
Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
IN WITNESS WHEREOF the parties have executed this document as of the date
specified on the first page of this document.
Ford Credit Auto Loan Master Trust,
Ford Motor Credit Company Chemical Bank as Trustee
- -------------------------------- -----------------------------------
(Name of party) (Name of party)
By: By:
----------------------------- --------------------------------
Name: Name:
Title: Title:
14
<PAGE> 15
SCHEDULE
to the
Interest Rate and Currency Exchange Agreement
dated as of July __, 1994, between
Ford Motor Credit Company ("Party A"),
a corporation organized and existing
under the laws of the State of Delaware
and
Ford Credit Auto Loan Master Trust ("Party B"),
a trust organized and existing
under the laws of the State of New York, by
Chemical Bank,
as trustee (the "Trustee").
Part 1
Termination Provisions
In this Agreement:
(1) "Specified Entity" means (i) in relation to Party A, none and (ii)
in relation to Party B, none.
(2) The "Cross Default" provisions of Section 5(a)(vi) of this
Agreement will not apply to Party A or Party B.
(3) "Termination Currency" means Dollars.
(4) The "Credit Event upon Merger" provisions of Section 5(b)(iv) of
this Agreement will not apply to Party A or Party B.
(5) This Agreement and all Swap Transactions hereunder shall terminate
upon the occurrence of an Early Amortization Event (other than the Early
Amortization Event in Section 9.01 (a)) under the Pooling and Servicing
Agreement dated as of December 31, 1991, among Ford Credit Auto Receivables
Corporation, as seller, Ford Motor Credit Company, as servicer, and the
Trustee (as amended and supplemented, the "Pooling and Servicing Agreement"),
as supplemented by the Supplement (as defined in the Pooling and Servicing
Agreement) referred to in the attached confirmation letter (a "Special
Termination Event").
<PAGE> 16
Upon the occurrence of a Special Termination Event, all payment obligations
pursuant to this Agreement and the Swap Transactions hereunder shall terminate
and neither party shall have any further payment obligations pursuant to this
Agreement or any Swap Transaction hereunder.
Part 2
Tax Representations
Not Applicable
Part 3
Documents To Be Delivered
For the purpose of Section 4(a) of this Agreement:
(1) The documents to be delivered are:
Party required to Date by which
deliver document Form/Document/Certificate be delivered
---------------- ------------------------- ------------
(a) Party A An opinion of counsel Closing Date*/
reasonably satisfactory
in form and substance to
Party B.
(b) Party A A certificate of Closing Date
incumbency of Party A with
respect to the authority
of the person executing
this Agreement and related
documentation on its behalf.
(c) Party B An opinion of counsel Closing Date
reasonably satisfactory in
form and substance to
Party A.
(d) Party B A certificate of Closing Date
incumbency of Party B
with respect to the
authority of the person
or persons executing this
Agreement and related
documentation on its behalf.
(2) The information that is required to be delivered
by a party under paragraph 1 of Part 3 of this Schedule
2
<PAGE> 17
will be covered by the representation in Section 3(d)
of this Agreement.
- ------------------------
*/"Closing Date" shall have the meaning assigned to such term in the Pooling
and Servicing Agreement.
Part 4
Miscellaneous
(1) Governinq 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.
(2) Process Agent. Not applicable.
(3) Meaning of "Affiliate". "Affiliate", in relation
to Party A, will mean any person or entity controlled
by Party A and, in relation to Party B, will have the
meaning specified in Section 14 of this Agreement.
(4) Multibranch Party. Not applicable.
(5) Addresses for Notices. For the purpose of Section 12(a) of this
Agreement:
Address for notices or communications to Party A:
Address: The American Road
Dearborn, Michigan 48121
Attention: Funding Strategy
Telex No.: 9102404820 Answerback: FC TREAS II UD
Facsimile No.: 313-594-0735
Address for notices or communications to Party B:
Address: Chemical Bank, as Trustee for
the Ford Credit Auto Loan Master
Trust
450 West 33rd Street
New York, New York 10001
3
<PAGE> 18
Attention: Corporate Trust Department
Telex No.: 960910
Facsimile No.: 212-613-7799 or
212-613-7800
(6) Credit Support Document. Not applicable.
(7) Netting of Payments. "Net Payments-Corresponding Payment Dates" will
apply for the purpose of Section 2(c) of this Agreement with effect from the
date of this Agreement.
(8) Calculation Agent. Party B (acting through the Trustee, who shall be
acting on behalf of the Trust) shall calculate, as promptly as practicable, the
applicable Floating Rate or Floating Rates for each Payment Date, Calculation
Period and Reset Date, as applicable, for all Swap Transactions hereunder and
shall give notice of such Floating Rate or Floating Rates, as promptly as
practicable, to Party A. For all other purposes, the Calculation Agent will be
Party A.
Part 5
Other Provisions
(1) Without affecting the provisions of this Agreement requiring the
calculation of certain net payment amounts, all payments under this Agreement
will be made without setoff or counterclaim.
(2) It is understood that the Trustee is executing this Agreement solely
in its capacity as Trustee to Party B as set forth in the Pooling and Servicing
Agreement and that under this Agreement there shall be no claims against or
liability of the Trustee in any other capacity or claims against the assets of
the Trustee and the Trustee shall have no liabilities, duties or standards of
care hereunder greater than those set forth in the Pooling and Servicing
Agreement. All duties, obligations and liabilities of Party B, including but
not limited to all representations, warranties and covenants of Party B shall
apply to Party B and not to the Trustee in its individual capacity.
4
<PAGE> 19
[ ], 199_
ADDRESS
Attention: Corporate Trust Department
Swap Transaction
Dear Sirs:
The purpose of this letter agreement is to set forth the terms and
conditions of the Swap Transaction entered into between Ford Motor Credit
Company ("Party A") and Ford Credit Auto Loan Master Trust ("Party B"), by
Chemical Bank, as Trustee (the "Trustee"), on the Trade Date specified below
(the "Swap Transaction"). This letter agreement constitutes a "Confirmation"
as referred to in the Interest Rate and Currency Exchange Agreement specified
below.
1. The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers Association, Inc.)
(the "1991 ISDA Definitions"), are incorporated into this Confirmation. In the
event of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern.
The capitalized terms which are not 1991 ISDA Definitions and are used
herein and not otherwise defined have the meanings assigned to them in the
Pooling and Servicing Agreement dated as of December 31, 1991, among
Ford Credit Auto Receivables Corporation, as seller, Ford Motor Credit Company,
as servicer, and the Trustee and as supplemented by the Series 1994-1 Supplement
dated as of June 30, 1994 (as amended and supplemented, the "Pooling and
Servicing Agreement").
This Confirmation supplements, forms part of, and is subject to, the
Interest Rate and Currency Exchange Agreement dated as of July __, 1994, as
amended and supplemented from time to time (the "Swap Agreement") between you
and us. All provisions contained in the Swap Agreement govern this
Confirmation except as expressly modified below.)
5
<PAGE> 20
2. The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Notional Amount: $_________________ on the Effective Date and for any
Payment Date thereafter, $_________________ less
the sum of (i) all payments of principal to the
Certificateholders from the Effective Date through the
immediately preceding Distribution Date and (ii) all
unreimbursed Investor Chargeoffs from the Effective
Date through the immediately preceding Distribution
Date
Trade Date: July __, 1994
Effective Date: July __, 1994
Termination Date: July 15, 2001
Floating Amounts A:
Floating Rate
Payer A: Party A
Floating Rate
Payer A
Payment Dates: The 15th day of each January, April, July and October
commencing on October 15, 1994, until the Termination
Date, subject to the Following Business Day
Convention, or if the Rating Standard is not
maintained, the 15th day of each month, commencing on
the 15th day of any month after the Rating Standard
is not maintained, until the Termination Date,
subject to the Following Business Day Convention
Floating Rate A: Three-Month LIBOR plus __%
Floating Rate A Day
Count Fraction: Actual/360
Rating Standard: Long-term debt of Party A rated at least A-1 by S&P
and Moody's and short-term debt of Party A rated at
least P-1 by Moody's
Floating Amounts B:
Floating Rate
Payer B: Party B
6
<PAGE> 21
Initial Exchange
Amount: $______________
Initial Exchange
Date: July __, 1994
Notwithstanding anything to the contrary in the 1991 ISDA Definitions
or the Swap Agreement, on any Floating Rate Payer B Payment Date the Floating
Rate Payer B shall pay the lesser of the amounts due on such Floating Rate Payer
B Payment Date under the "First Floating Rate Swap" and the "Second Floating
Rate Swap" as set forth below.
The First Floating Rate Swap shall have the following terms:
Floating Rate Payer B
Period End Dates: ________________, 199 , and the last
day of each month thereafter until
______________ ___, 199_
Floating Rate Payer B
Payment Dates: ________________, 199 , and thereafter
Delayed Payment shall apply and such
Payment Dates shall be the 15th day of
the second month following each
Floating Rate Payer B Period End Date
commencing with the ____________, 199
Floating Rate Payer B Payment Date*/,
until the Termination Date, subject to
the Following Business Day Convention
Floating Amount For
the First Floating
Rate Payer B Payment
Date: The product of the Notional Amount and
the Weighted Average of the Prime Rate
(as defined below) on the Reset Dates
in ___________________, 199 (as if
the Calculation Period were the month
of ________), and 10/360
*/ The Floating Amount B payable on the ____________, 199 Floating
Rate Payer B Payment Date shall be calculated as if the Effective Date were
____________, 199 .
7
<PAGE> 22
Floating Rate B Option: The Prime Rate (as defined
below)
Designated Maturity: One month
Floating Rate B Day
Count Fraction: Actual/360
Reset Dates: Each Friday of each calendar
month, subject to the Following
Business Day Convention
Method of Averaging: Weighted Average
The Second Floating Rate Swap shall have the following terms:
Floating Rate Payer B
Payment Dates: The 15th day of each month
commencing on _______ 15,
1994, until the Termination
Date, subject to the Modified
Following Business Day
Convention (New York)
Floating Rate Option: USD-LIBOR-LIBO
Designated Maturity: One month
Floating Rate B Day
Count Fraction: Actual/360
Reset Date: The first day of each
Calculation Period
3. Account Details
Payments to Party A: ____________________________________of New York,
New York branch, in favor of _____________________________ Company's
Treasurer's Account
Account for payments:
Payments to Party B:
Account for payments: To be specified by Party B
4. "Prime Rate" shall mean for a Reset Date the median of the rates of
interest publicly announced effective on the second Thursday next preceding
such Reset Date by each of Chase Manhattan Bank, N. A., Chemical Bank,
Citibank, N.A., Morgan Guaranty Truast Company of New York and Bank of America,
San Francisco as its U.S. Dollar "prime rate" or "base rate" for that Reset
Date, less 1.50 percent. In the event any of the foregoing banks ceases to
exist, then the parties shall make such adjustments to the definition of Prime
Rate as they agree are appropriate.
8
<PAGE> 23
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
Very truly yours,
By: ___________________________
Name:
Title: _________________, Assistant
Secretary
Accepted and confirmed
as of the date first
above written:
____________________________
by _________________________
as Trustee,
By: ________________________
Name:
Title:
9
