<PAGE> 1
PURSUANT TO RULE 424(B)(1)
REGISTRATION NO. 333-00243
$800,000,000
Ford Credit Auto Loan Master Trust Series 1996-1
5.50% Auto Loan Asset Backed Certificates
Ford Credit Auto Receivables Corporation
Seller
Ford Motor Credit Company
Servicer
------------------
The Series 1996-1, 5.50% 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 semi-annually on or about the fifteenth day of February and
August, commencing in August 1996, 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 February 2001
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.
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
CERTIFICATES, SEE "RISK FACTORS" ON PAGE 15.
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>
<S> <C> <C> <C>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions the Seller(1)(2)
------------------------------------------------
Per Certificate........................................ 99.845989% .300000% 99.545989%
Total.................................................. $798,767,912 $2,400,000 $796,367,912
</TABLE>
(1) Plus accrued interest, if any, at the Certificate Rate from February 20,
1996.
(2) Before deduction of expenses payable by the Seller estimated at $450,000.00.
The Certificates are offered by the Underwriters when, as and if issued by
the Seller, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Certificates in book-entry form will be made through the facilities of The
Depository Trust Company ("DTC"), Cedel, societe anonyme ("Cedel") and the
Euroclear System ("Euroclear") on or about February 20, 1996 against payment in
immediately available funds.
CS First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan Securities Inc.
Salomon Brothers Inc
The date of this Prospectus is February 12, 1996
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Trust's (i) Annual Report on Form 10-K for the year ended December 31,
1994, (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995,
June 30, 1995 and September 30, 1995 and (iii) Current Reports on Form 8-K dated
January 10, 1995, February 8, 1995, March 5, 1995, April 4, 1995, May 9, 1995,
June 2, 1995, July 18, 1995, August 9, 1995, August 28, 1995, September 14,
1995, October 16, 1995, November 15, 1995, December 11, 1995 and January 12,
1996 are incorporated by reference into this Prospectus. All documents filed by
the Trust pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this Prospectus and prior to the
termination of the offering of the Certificates shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing such documents.
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.
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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 1996-1, 5.50% Auto Loan Asset Backed
Certificates (the "Certificates" or "Series
1996-1").
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 established
through revolving credit agreements entered
into with Ford Credit by dealers to purchase or
finance
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automobile and light 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
$800,000,000 (the "Initial Principal Amount"),
in minimum denominations of $1,000 and in
integral multiples
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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 semi-annual (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. The Certificates will bear
interest at the rate of 5.50% per annum (the
"Certificate Rate").
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
Cedel Bank Societe anonyme ("CEDEL") or the
Euroclear System ("Euroclear"), in Europe.
Transfers within DTC, CEDEL or Euroclear, as
the case may be, will be in accordance with the
usual rules and operating procedures of the
relevant system. Cross-market transfers between
persons holding directly or indirectly through
DTC, on the one hand, and counterparties
holding directly or indirectly through CEDEL or
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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........ Concurrently with the issuance of the Series
1996-1, the Trust is issuing Series 1996-2,
Floating Rate Auto Loan Asset Backed
Certificates ("Series 1996-2" and with respect
to the Certificates of such series, the "Series
1996-2 Certificates"). As of the date hereof
the Trust has issued four 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"), the Series 1994-1 Floating Rate
Auto Loan Asset Backed Certificates ("Series
1994-1" and with respect to certificates of
such Series, the "Series 1994-1 Certificates")
and the Series 1995-1, 6.50% Auto Loan Asset
Backed Certificates ("Series 1995-1" and with
respect to certificates of such Series, the
"Series 1995-1 Certificates"). See "Annex 1:
Other Issuances of Investor Certificates" for a
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summary of the Series 1992-1 Certificates, the
Series 1992-2 Certificates, the Series 1994-1
Certificates, the Series 1995-1 Certificates
and the Series 1996-2 Certificates.
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
1996-1 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 semi-annually to
Certificateholders on the fifteenth day of
February and August (or, if such day is not a
business day, on the next succeeding business
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day) (each, a "Semi-Annual Payment Date"),
commencing in August 1996; provided, that, if
an Early Amortization Event or an Asset
Composition Event shall have occurred, interest
will be distributed to the Certificateholders
on the first Distribution Date following such
Early Amortization Event or Asset Composition
Event (but, in the case of an Asset Composition
Event, only to the extent needed to cure such
event) and, subject to certain exceptions, on
each subsequent Distribution Date until the
Certificates are retired. "Distribution Date"
shall mean the 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
Semi-Annual Payment Date (or, if applicable,
each Distribution Date). Interest payable on a
Semi-Annual Payment Date or, if applicable, on
a Distribution Date will accrue from and
including the preceding Semi-Annual Payment
Date or Distribution Date (or, in the case of
the first Semi-Annual Payment Date, from and
including the Closing Date) to but excluding
such Semi-Annual Payment Date or Distribution
Date. Interest for any Semi-Annual Payment Date
or Distribution Date will be calculated on the
basis of a 360-day year consisting of twelve 30
day months, and interest due but not paid on
any Semi-Annual Payment Date or Distribution
Date will be due on the next Semi-Annual
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 2 percentage points.
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 February 2001 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
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occurrence of an Asset Composition Event during
the Revolving Period for any Series, an amount
equal to the Series 1996-1 Allocation
Percentage of the Asset Correction Amount shall
be distributed in 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 December 31, 1995 (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 August 15, 2000, 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 August 15, 2000, (after
giving effect to all changes therein on
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such date) and the denominator of which is the
sum of such Invested Amount and the invested
amounts as of August 15, 2000, (after giving
effect to all changes therein on such date) of
all other outstanding Series whose respective
revolving periods are not scheduled to end
before the last day of the January 2001
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 January 2001 Collection Period, the
December 2000 Collection Period, the November
2000 Collection Period, the October 2000
Collection Period or the September 2000
Collection Period, respectively.
Notwithstanding the foregoing, the Accumulation
Period Commencement Date shall be September 1,
2000 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
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(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 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) $8,888,889 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
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<PAGE> 12
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 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 "Risk
Factors -- 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
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<PAGE> 13
herein, be reassigned to the Seller. If Ford
Credit, as Servicer, fails 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
Semi-Annual Payment Date, interest at the
Certificate Rate on the outstanding principal
balance of the Certificates as of the preceding
Semi-Annual 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
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<PAGE> 14
purposes. 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
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 "Risk Factors --
Ratings of the Certificates".
Series Cut-Off Date........... December 31, 1995.
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<PAGE> 15
RISK FACTORS
Limited Liquidity. There is currently no market for the Certificates. CS
First Boston Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, 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.
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<PAGE> 16
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 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
16
<PAGE> 17
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.
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.
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<PAGE> 18
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 (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
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<PAGE> 19
Directors". No assurance can be given, however, that such a consolidation will
not occur. See "Risk Factors -- 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 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.
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<PAGE> 20
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 1995, Ford Credit provided financing for 79.7% of new
factory sales to Ford dealers in the U.S. As of December 31, 1995, Ford Credit
provided financing to approximately 5,900 domestic automotive dealers, including
approximately 1,500 non-Ford dealerships affiliated with Ford-franchised
dealers. In 1995, Ford Credit arranged wholesale financing for approximately 4.6
million cars and light trucks, down approximately 7% from calendar year 1994.
Ford Credit services the wholesale portfolio through its home office in
Dearborn, Michigan and through its 139 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 December 31, 1995, 0.9% of the total dealers in the U.S.
Wholesale Portfolio were suspended, compared with 1.0% as of December 31, 1994.
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.
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<PAGE> 21
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 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 1.8% of the aggregate principal amount of
receivables in the U.S. Wholesale Portfolio as of December 31, 1995. As of the
Series Cut-Off Date, Used Vehicles represented approximately 1.4% of the
aggregate principal amount of Receivables in the Trust.
As of December 31, 1995, average credit lines per dealer in the U.S.
Wholesale Portfolio of Eligible Accounts for new and used vehicles were $1.85
million and $0.22 million, respectively, and the average balance of principal
receivables per credit line was $1.84 million. The aggregate total receivables
balance as a percentage of the aggregate total credit lines was 133.1%. 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
21
<PAGE> 22
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.
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 year ended December 31, 1995, the weighted average
yield on the U.S. Wholesale Portfolio (calculated on the basis of interest
payments actually received thereon during such year over the average aggregate
principal balance thereof at the beginning and end of each such month in 1995)
was 9.64%. 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,
22
<PAGE> 23
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 "Risk Factors -- Trust's
Relationship to Ford and Ford Credit; Financial Condition of Ford".
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 December 31, 1995, the
number of dealers assigned to dealer Status was 37 (0.6% of the total number of
dealers in the U.S. Wholesale Portfolio); as of December 31, 1994, 29 dealers
(0.5% 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).
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
23
<PAGE> 24
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 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 2,459 Accounts containing 4,269 credit lines and the Principal
Receivables balance was approximately $7.9 billion; (b) the average credit line
was $1.34 million (based on the average New Vehicle credit line of $1.79 million
and the average Used Vehicle credit line of $0.18 million); (c) the average
balance of Principal Receivables per credit line was $1.84 million; (d) the
aggregate total Principal Receivables balance as a percentage of the aggregate
total credit line was approximately 137.9%; 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."
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<PAGE> 25
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 represent 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 "Risk Factors -- Trust's
Relationship to Ford and Ford Credit; Financial Condition of Ford."
LOSS EXPERIENCE FOR THE U.S. WHOLESALE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Average Principal Receivables Balance(1)... $16,164 $13,789 $11,602 $9,596 $8,618
Net Losses (Recoveries)(2)................. $ 5.5 $ 1.3 $ (1.4) $ 7.8 $ 28.7
Net Losses/Liquidations.................... 0.007% 0.002% (0.002)% 0.014% 0.062%
Net Losses/Average Principal Receivables
Balance.................................. 0.034% 0.009% (0.012)% 0.081% 0.333%
</TABLE>
- -------------------------
(1) Average Principal Receivables Balance is the average of the monthly average
principal balances (based on beginning and ending balances) for the twelve
months ending on the last day of the period.
(2) Net losses in any period are gross losses less recoveries for such period.
Recoveries include recoveries from 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.
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<PAGE> 26
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 represent
only 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>
DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DAYS
1-120............................................. 76.8% 79.6% 83.0% 81.1% 75.8%
121-180........................................... 10.6 10.0 6.2 9.6 12.7
181-270........................................... 5.3 5.9 5.9 4.9 5.7
Over 270.......................................... 7.3 4.5 4.9 4.4 5.8
</TABLE>
- -------------------------
(1) Measured from the date of shipment with respect to new vehicles.
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 RECEIVABLES AND CREDIT LINES IN THE TRUST
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
RECEIVABLES
OUTSTANDING PERCENTAGE OF PERCENTAGE OF
(THOUSANDS OF RECEIVABLES TOTAL NUMBER NUMBER OF
DOLLARS) OUTSTANDING OF CREDIT LINES CREDIT LINES
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Texas............................. $ 776,286 9.8% 376 8.8%
California........................ 705,274 8.9 244 5.7
Florida........................... 625,823 7.9 160 3.7
Michigan.......................... 411,070 5.2 171 4.0
Other(1).......................... 5,371,875 68.2 3,318 77.8
</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
franchisees 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. In addition, a wholly-owned
subsidiary of Ford Credit provides these financing services to other vehicle
dealers. More than 84% of all new vehicles financed by Ford Credit are
manufactured by Ford or its affiliates. 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 whose
primary activities are consumer and commercial financing operations, insurance
underwriting and equipment leasing.
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<PAGE> 27
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
February 2001 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>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Highest Month..................................... 54.7% 67.9% 64.4% 56.2% 53.8%
Lowest Month...................................... 32.7 36.4 44.5 42.0 35.4
Average of the Months in the Period............... 42.5 48.9 50.1 48.4 44.6
</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.
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<PAGE> 28
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 1/800,000 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 the
Certificate Rate and will be payable to the Certificateholders on each
Semi-Annual Payment Date, commencing August 1996; 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 Semi-Annual Payment Date (or, if
applicable, each Distribution Date). Interest due on a Semi-Annual Payment Date
or, if applicable, on a Distribution Date will accrue from and including the
preceding Semi-Annual Payment Date or Distribution Date (or, in the case of the
first Semi-Annual Payment Date, from and including the Closing Date) to but
excluding such Semi-Annual Payment Date or Distribution Date. Interest due for
any Semi-Annual Payment Date or Distribution Date will be calculated on the
basis of a 360-day year consisting of twelve 30-day months, and interest due but
not paid on any Semi-Annual Payment Date or Distribution Date will be due on the
next Distribution Date together with, to the extent lawfully payable, interest
on such amount at the Certificate Rate plus 2 percentage points. 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).
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,
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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,
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 "Risk Factors -- 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 Semi-Annual 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 Semi-Annual 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 1996-1
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
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brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Certificateholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificateholders will receive all distributions of principal of
and interest on the Certificates from the Trustee through DTC and its
Participants. Under a book-entry format, Certificateholders will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants which thereafter will be required
to forward them to Indirect Participants or Certificateholders. It is
anticipated that the only Certificateholder (as such term is used in the Pooling
and Servicing Agreement) will be Cede, as nominee of DTC, and that Certificate
Owners will not be recognized by the Trustee as Certificateholders under the
Pooling and Servicing Agreement. Certificate Owners will only be permitted to
exercise the rights of Certificateholders under the Pooling and Servicing
Agreement indirectly through DTC and its Participants (who in turn will exercise
their rights through DTC).
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
DTC has advised the 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
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with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to the Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "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
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or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. CEDEL Participants and Euroclear Participants may
not deliver instructions directly to the Depositaries.
Because of time zone differences, credits of securities received in CEDEL
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
CEDEL Participants on such business day. Cash received in CEDEL or Euroclear as
a result of sales of securities by or through a CEDEL Participant or Euroclear
Participant to a Participant will be received with value on the DTC settlement
date but will be available in the relevant CEDEL or Euroclear cash account only
as of the business day following settlement in DTC. For information with respect
to tax documentation procedures relating to the Certificates, see "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.
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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
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
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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 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 "Risk Factors -- 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
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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 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
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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 overdue interest, to the
extent lawfully payable). The payment of the reassignment price for all
outstanding Series, in immediately available funds, will be considered a payment
in full of the Certificateholders' Interest 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
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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.
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.
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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).
"Required Participation Percentage" will mean, with respect to Series
1996-1, 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
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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 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 Semi-Annual Payment Date, interest accrued from and
including the preceding Semi-Annual Payment Date at the Certificate Rate on the
outstanding principal balance of the Certificates as of such preceding
Semi-Annual 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. Net Trust
Swap Receipts (obligations of the Swap Counterparty to the Trust) will be paid
to the Collection Account on each Semi-Annual 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
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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.
"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.
"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.
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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
(iv) Miscellaneous Payments will at all times be allocated to
Certificateholders on the basis of the Series 1996-1 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
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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 1996-1 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.
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
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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 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
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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 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 one-twelfth of the product of (a) the Certificate Rate and (b) the
outstanding principal balance of the Certificates as of the close of
business on the preceding Distribution Date after giving effect to all
repayments of principal made to the Certificateholders on such preceding
Distribution Date, if any; provided, however, that, with respect to the
first Distribution Date, Monthly Interest shall be equal to $3,055,555.55.
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 $88,888,889.
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
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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)
$8,888,889 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.
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 $4,000,000 (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 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.
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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 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 1996-1 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
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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.
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 1996-1 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
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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 1996-1 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 1996-1.
"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 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 August 15, 2000 (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.
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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 Semi-Annual 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 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
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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 1996-1 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.
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
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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;
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,
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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.
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 February 2003
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 1996-1 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.
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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 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.
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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 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;
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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.
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.
REPORTS
On each Distribution Date (including each Distribution Date that
corresponds to a Semi-Annual 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 1996-1 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,
1997, the Trustee will furnish (or cause to be furnished) to each person who at
any time during the preceding calendar year was a
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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 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
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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.
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 "Risk Factors -- Certain Legal Aspects"
and "Certain Legal Aspects of the Receivables -- Transfer of Receivables".
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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 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
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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 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.
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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 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
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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 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") and counsel to the Underwriters, 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.
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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 treated as an entity 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, 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.
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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
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
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(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 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
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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.
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
65
<PAGE> 66
"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 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),
90-1 (Class Exemption for Transactions Involving Insurance Company Pooled
Separate Accounts) and 95-60 (Class Exemption for Transactions Involving
Insurance Company General 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
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<PAGE> 67
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>
CS First Boston Corporation.................................... $160,000,000
Goldman, Sachs & Co. .......................................... 160,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... 160,000,000
J.P. Morgan Securities Inc. ................................... 160,000,000
Salomon Brothers Inc........................................... 160,000,000
----------------
Total............................................. $800,000,000
=============
</TABLE>
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 0.200% the principal amount of the Certificates. The
Underwriters may allow and such dealers may reallow to other dealers a discount
not in excess of 0.125% such principal amount. After the initial public
offering, such public offering price, concession and reallowance may be changed.
The Underwriting Agreement provides that FCAR will indemnify the
Underwriters against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the Underwriters may be required to
make in respect thereof. The Indemnification Agreement provides that Ford Credit
will indemnify the Underwriters against certain liabilities, including
liabilities under applicable securities laws, or contribute to payments the
Underwriters may be required to make in respect thereof.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with Ford Motor Company and its affiliates.
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.
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<PAGE> 68
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......................................................................... 35
Additional Accounts................................................................... 34
Additional Cut-Off Date............................................................... 34
Adjustment Date....................................................................... 40
Adjustment Payment.................................................................... 50
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......................................................................... 66
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.................................................................................. 61
Collateral Security................................................................... 3
Collection Account.................................................................... 38
Collection Period..................................................................... 7
Commission............................................................................ 2
Controlled Amortization Amount........................................................ 48
Controlled Distribution Amount........................................................ 48
Cooperative........................................................................... 31
Dealer Overconcentrations............................................................. 37
Dealers............................................................................... 4
Defaulted Amount...................................................................... 49
Defaulted Receivables................................................................. 49
Deficiency Amount..................................................................... 44
Definitive Certificates............................................................... 32
Depositary............................................................................ 31
Depository............................................................................ 28
Determination Date.................................................................... 12
Distribution Date..................................................................... 8
Distribution Date Statement........................................................... 55
DOL................................................................................... 66
Draw Amount........................................................................... 44
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DTC................................................................................... 2
Early Amortization Event.............................................................. 50
Early Amortization Period............................................................. 10
Eligible Accounts..................................................................... 4
Eligible Deposit Account.............................................................. 38
Eligible Institution.................................................................. 39
Eligible Investments.................................................................. 39
Eligible Portfolio.................................................................... 23
Eligible Receivable................................................................... 4
Enhancement........................................................................... 3
Enhancement Provider.................................................................. 36
ERISA................................................................................. 14
Euroclear............................................................................. 5
Euroclear Operator.................................................................... 30
Euroclear Participant................................................................. 30
Excess Principal Collections.......................................................... 42
Excess Reserve Fund Required Amount................................................... 47
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......................................................................... 26
Holders............................................................................... 32
Incremental Subordinated Amount....................................................... 44
Index Maturity........................................................................ 39
Indirect Participants................................................................. 30
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 Funding Account.............................................................. 8
Interest Funding Account Balance...................................................... 48
Interest Period....................................................................... 40
Interest Rate Swap.................................................................... 13
Invested Amount....................................................................... 41
Investment Proceeds................................................................... 46
Investor Charge-Off................................................................... 50
Investor Default Amount............................................................... 49
IRA................................................................................... 66
IRS................................................................................... 61
London Business Day................................................................... 40
</TABLE>
69
<PAGE> 70
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Michigan Tax Counsel.................................................................. 65
Miscellaneous Payments................................................................ 41
Monthly Interest...................................................................... 44
Monthly Principal..................................................................... 48
Monthly Servicing Fee................................................................. 54
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............................................................ 64
Non U.S. Person....................................................................... 76
Non-Vehicle Collateral Security....................................................... 16
One-Month LIBOR....................................................................... 39
Overconcentration Amount.............................................................. 37
Participants.......................................................................... 29
Plan Assets Regulation................................................................ 66
Pool Balance.......................................................................... 7
Pooling and Servicing Agreement....................................................... 3
Prime Rate............................................................................ 40
Principal Allocation Percentage....................................................... 42
Principal Collections................................................................. 4
Principal Funding Account............................................................. 9
Principal Funding Account Balance..................................................... 49
Principal Receivables................................................................. 6
Principal Shortfalls.................................................................. 42
Principal Terms....................................................................... 33
Publicly Offered Security Exception................................................... 66
Rating Agency......................................................................... 18
Receivables........................................................................... 1
Receivables Purchase Agreement........................................................ 4
Record Date........................................................................... 29
Registration Statement................................................................ 2
Removal Date.......................................................................... 38
Removal Notice........................................................................ 38
Removed Accounts...................................................................... 38
Required Participation Amount......................................................... 38
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.................................................................. 33
Seller's Interest..................................................................... 1
Seller's Participation Amount......................................................... 44
Seller's Percentage................................................................... 44
Semi-Annual Payment Date.............................................................. 8
</TABLE>
70
<PAGE> 71
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Series................................................................................ 1
Series 1992-1......................................................................... 6
Series 1992-1 Certificates............................................................ 6
Series 1992-2......................................................................... 6
Series 1992-2 Certificates............................................................ 6
Series 1994-1......................................................................... 6
Series 1994-1 Certificates............................................................ 6
Series 1995-1......................................................................... 6
Series 1995-1 Certificates............................................................ 6
Series 1996-1......................................................................... 3
Series 1996-1 Allocation Percentage................................................... 42
Series 1996-2......................................................................... 6
Series 1996-2 Certificates............................................................ 6
Series Accounts....................................................................... 8
Series Cut-Off Date................................................................... 9
Series Issuance Date.................................................................. 35
Service Transfer...................................................................... 54
Servicer.............................................................................. 1
Servicing Fee......................................................................... 54
Servicing Fee Rate.................................................................... 54
Special Payment Date.................................................................. 10
Status................................................................................ 23
Subordinated Percentage............................................................... 11
Supplement............................................................................ 6
Supplemental Certificate.............................................................. 33
Swap Counterparty..................................................................... 13
Tax Counsel........................................................................... 61
Tax Opinion........................................................................... 34
Termination Date...................................................................... 52
Terms and Conditions.................................................................. 31
Transfer Date......................................................................... 35
Transfer Deposit Amount............................................................... 35
Trust................................................................................. 1
Trust Available Subordinated Amount................................................... 42
Trust Invested Amount................................................................. 42
Trustee............................................................................... 3
UCC................................................................................... 15
Unallocated Principal Collections..................................................... 42
Underwriters.......................................................................... 15
Underwriting Agreement................................................................ 67
Used Vehicle.......................................................................... 20
Used Vehicle Base Rate................................................................ 22
U.S. Certificateholder................................................................ 62
U.S. Person........................................................................... 76
U.S. Wholesale Portfolio.............................................................. 20
Vehicles.............................................................................. 3
</TABLE>
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<PAGE> 72
ANNEX 1
OTHER ISSUANCES OF INVESTOR CERTIFICATES
This Annex I sets forth the principal characteristics of Series 1992-1,
Series 1992-2, Series 1994-1, Series 1995-1 and Series 1996-2. 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 1994-1
Initial Principal Amount............. $1,000,000,000
Scheduled Interest Payment Date...... The fifteenth day of each January, April, July 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..... $11,500,000
Revolving Period..................... June 30, 1994 to the earlier of Accumulation Period
Commencement Date or an Early Amortization Event
Expected Final Payment Date.......... July 1999 Distribution Date
Termination Date..................... July 2001 Distribution Date
</TABLE>
72
<PAGE> 73
<TABLE>
<S> <C>
Series 1995-1
Initial Principal Amount............. $1,000,000,000
Scheduled Interest Payment Date...... The fifteenth day of each February and August (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..... $14,500,000
Revolving Period..................... June 30, 1995 to the earlier of Accumulation Period
Commencement Date or an Early Amortization Event
Expected Payment Date................ August 2000 Distribution Date
Termination Date..................... August 2002 Distribution Date
Series 1996-2
Initial Principal Amount............. $960,000,000
Scheduled Interest Payment Date...... The fifteenth day of each February, May, August and
November (or, if such day is not a business day, the
next succeeding business day)
Current Principal Amount............. $960,000,000
Required Participation Amount........ 104%
Initial Swap Subordinated Amount..... $2,400,000
Revolving Period..................... December 31, 1995 to the earlier of Accumulation
Period Commencement Date or an Early Amortization
Event
Expected Payment Date................ February 2001 Distribution Date
Termination Date..................... February 2003 Distribution Date
</TABLE>
73
<PAGE> 74
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
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<PAGE> 75
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
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<PAGE> 76
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.
76
<PAGE> 77
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE SELLER OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR 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 HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE SELLER
SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................. 2
Available Information................... 2
Reports to Certificateholders........... 2
Prospectus Summary...................... 3
Risk Factors............................ 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............... 26
Maturity and Principal Payment
Considerations........................ 27
Description of the Certificates......... 27
Description of the Receivables Purchase
Agreement............................. 57
Certain Legal Aspects of the
Receivables........................... 59
Certain Tax Matters..................... 61
ERISA Considerations.................... 65
Underwriting............................ 67
Legal Matters........................... 67
Index of Principal Terms................ 68
Annex 1................................. 72
Global Clearance, Settlement and Tax
Documentation Procedures.............. 74
</TABLE>
Until May 8, 1996 all dealers effecting transactions in the registered
securities, 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.
------------------------------------------------------
------------------------------------------------------
$800,000,000
Ford Credit Auto Loan
Master Trust Series 1996-1
5.50% Auto Loan Asset
Backed Certificates
(FORD LOGO)
Ford Credit Auto Receivables Corporation
Seller
Ford Motor Credit Company
Servicer
PROSPECTUS
CS First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan Securities Inc.
Salomon Brothers Inc
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