As filed with the Securities and Exchange Commission on November 16, 2001
Registration Statement No. 333- [________]
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
DAIMLERCHRYSLER MASTER OWNER TRUST
(Issuer of the Notes)
CARCO AUTO LOAN MASTER TRUST
(Issuer of the Collateral Certificate)
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC
(Depositor into the DaimlerChrysler Master Owner Trust and
the CARCO Auto Loan Master Trust) (Exact name of
registrant as specified in its charter)
DELAWARE 6146 38-3523542
(State of (Primary Standard Industrial (I.R.S. Employer
Incorporation) Classification Code Number) Identification No.)
27777 Franklin Road
Southfield, Michigan 48034
(248) 948-3031
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
CHRISTOPHER A. TARAVELLA, ESQ.
Chrysler Financial Company L.L.C.
27777 Franklin Road
Southfield, Michigan 48034
(248) 948-3060
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
Copies to:
RENWICK D. MARTIN, ESQ.
Sidley Austin Brown & Wood LLP
875 Third Avenue
New York, New York 10022
(212) 906-2000
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement
becomes effective as determined by market conditions.
-------------------
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, check the
following box. /__/
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. /__/
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. /__/
CALCULATION OF REGISTRATION FEE
================================================ ================= ===================== ====================== ===============
Proposed Maximum Proposed Maximum Amount of
Title of each class of Amount to be Offering Price Per Aggregate Offering Registration
Securities to be registered registered (1) Unit(2) Price (3) Fee
- ------------------------------------------------ ----------------- --------------------- ---------------------- ---------------
Auto Loan Asset Backed Notes................. $1,000,000 100% $1,000,000 $250
- ------------------------------------------------ ----------------- --------------------- ---------------------- ---------------
Collateral Certificate (3) -- -- -- --
================================================ ================= ===================== ====================== ===============
(1) With respect to notes denominated in a foreign currency, the amount to be
registered shall be the U.S. dollar equivalent thereof based on the
prevailing exchange rate at the time such notes are originally offered.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) No additional consideration will be paid by the purchasers of the Auto
Loan Asset Backed Notes for the Collateral Certificate, which is pledged
as security for the Auto Loan Asset Backed Notes.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Subject to amendment, dated [o]
DAIMLERCHRYSLER Prospectus Supplement
To Prospectus dated [o]
$[o]
DAIMLERCHRYSLER MASTER OWNER TRUST
Issuer
Floating Rate Auto Loan Asset Backed Notes, Series [o],
due [o].
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC, Seller
CHRYSLER FINANCIAL COMPANY L.L.C., Servicer
Before you decide to invest in the Series [o] notes, please read this
prospectus supplement and the prospectus, especially the risk factors
beginning on page [o] of this prospectus supplement and page [o] of the
prospectus. The Series [o] notes are obligations of the issuer only and do not
represent interests in or obligations of the CARCO receivables trust,
DaimlerChrysler AG, DaimlerChrysler Wholesale Receivables LLC, Chrysler
Financial Company L.L.C. or any of their affiliates.
Principal amount............................ $[[o]
Per annum interest rate..................... one-month LIBOR
plus [o]%
Expected principal payment
date..........................................................[o]
Legal final.........................................................[o]
Proceeds to seller..................................................[o]
The underwriter[s] will purchase the Series [o] notes and will offer them from
time to time to the public at varying prices determined at the time of sale.
The seller must pay expenses estimated to be [o].
The issuer will pay interest on the Series [o] notes on the 15th day of each
month. The first payment date will be [o].
We will deliver the Series [o] notes in book-entry form only on or
about [o].
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the Series [o] notes or
determined that this prospectus supplement or the prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
------------------------------
[underwriter[s]]
------------------------------
The date of this prospectus supplement is [ ].
- -------------------------------------------------------------------------------
Reading the Prospectus and Prospectus Supplement
- -------------------------------------------------------------------------------
We provide information on the offered securities in two documents
that offer varying levels of detail:
o Prospectus -- provides general information, some of which may not
apply to the offered securities.
o Prospectus Supplement -- provides a summary of the specific terms of
the offered securities.
You should rely only on the information contained in this prospectus
supplement and the prospectus. We have not authorized anyone to provide you
with different information.
We suggest you read this prospectus supplement and the prospectus.
The prospectus supplement pages begin with "S". If the terms of the offered
securities described in this prospectus supplement vary with the accompanying
prospectus, you should rely on the information in this prospectus supplement.
We include cross-references to sections in these documents where you
can find further related discussions. Refer to the table of contents on page
S-3 in this document and on page 4 in the prospectus to locate the referenced
sections.
Limitations on Offers or Solicitations
We do not intend this document to be an offer or solicitation:
o if used in a jurisdiction in which the offer or solicitation is
not authorized;
o if the person making the offer or solicitation is not qualified
to do so; or
o if the offer or solicitation is made to anyone to whom it is
unlawful to make the offer or solicitation.
S-2
- -------------------------------------------------------------------------------
Table of Contents
- -------------------------------------------------------------------------------
READING THE PROSPECTUS AND PROSPECTUS SUPPLEMENT..................................................................2
SUMMARY OF SERIES TERMS...........................................................................................5
PARTIES..................................................................................................5
TITLE OF SECURITIES......................................................................................5
STATED PRINCIPAL AMOUNT; NOMINAL LIQUIDATION AMOUNT......................................................5
SERIES ISSUANCE DATE.....................................................................................5
SERIES CUT-OFF DATE......................................................................................5
COLLATERAL CERTIFICATE...................................................................................5
TERMS OF THE SERIES [O] NOTES............................................................................6
LEGAL FINAL..............................................................................................6
REVOLVING PERIOD.........................................................................................6
ACCUMULATION PERIOD......................................................................................7
EARLY REDEMPTION PERIOD..................................................................................7
CREDIT ENHANCEMENT.......................................................................................7
EXCESS PRINCIPAL COLLECTIONS.............................................................................8
OPTIONAL REDEMPTION......................................................................................8
OTHER SERIES OF NOTES AND CERTIFICATES...................................................................8
ERISA CONSIDERATIONS.....................................................................................8
TAX STATUS...............................................................................................8
NOTE RATINGS.............................................................................................8
RISK FACTORS.............................................................................................9
NOTES NOT LISTED ON ANY EXCHANGE.........................................................................9
RISK FACTORS.....................................................................................................10
ONLY SOME OF THE ASSETS OF THE ISSUER WILL BE AVAILABLE TO MAKE PAYMENTS ON THE
SERIES [O] NOTES.........................................................................10
THE TIMING OF PRINCIPAL PAYMENTS MAY NOT BE AS EXPECTED........................................11
CREDIT ENHANCEMENT IS LIMITED AND MAY BE REDUCED...............................................12
THE CARCO RECEIVABLES TRUST AND THE ISSUER ARE DEPENDENT ON CFC AND DAIMLERCHRYSLER............12
YOUR ABILITY TO RESELL YOUR NOTES IS LIMITED...................................................12
GLOSSARY.........................................................................................................12
USE OF PROCEEDS..................................................................................................12
THE DEALER FLOORPLAN FINANCING BUSINESS..........................................................................13
THE ACCOUNTS.....................................................................................................15
S-3
CFC'S PERFORMANCE HISTORY........................................................................................16
LOSS EXPERIENCE.........................................................................................16
AGING EXPERIENCE........................................................................................18
GEOGRAPHIC DISTRIBUTION.................................................................................18
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS....................................................................19
SERIES PROVISIONS................................................................................................20
GENERAL 20
INTEREST 21
PRINCIPAL...............................................................................................22
EXCESS FUNDING ACCOUNT..................................................................................25
OPTIONAL REDEMPTION BY THE ISSUER.......................................................................25
DEPOSIT AND APPLICATION OF FUNDS.................................................................................26
ALLOCATION OF AVAILABLE AMOUNTS ALLOCATED TO SERIES [O].................................................26
REDUCTION AND REINSTATEMENT OF NOMINAL LIQUIDATION AMOUNTS..............................................28
REDUCTIONS.....................................................................................28
REINSTATEMENTS.................................................................................29
SERIES [O] OVERCOLLATERALIZATION AMOUNT.................................................................29
ALLOCATION PERCENTAGES..................................................................................30
REQUIRED PARTICIPATION PERCENTAGE.......................................................................31
SALE OF RECEIVABLES.....................................................................................32
FINAL PAYMENT OF THE SERIES [O] NOTES...................................................................33
SHARED EXCESS AVAILABLE INTEREST AMOUNTS................................................................34
EARLY REDEMPTION EVENTS.................................................................................34
UNDERWRITING.....................................................................................................36
LEGAL MATTERS....................................................................................................37
NOTE RATINGS.....................................................................................................37
GLOSSARY OF PRINCIPAL TERMS FOR PROSPECTUS SUPPLEMENT............................................................37
OTHER SERIES OF NOTES.............................................................................................1
SERIES OF INVESTOR CERTIFICATES ISSUED BY THE CARCO RECEIVABLES TRUST.............................................1
S-4
Summary of Series Terms
This summary highlights selected information from this prospectus
supplement and may not contain all the information that you need to consider
in making an investment decision. It provides general, simplified descriptions
of matters that are highly complex. You should carefully read this document
and the accompanying prospectus. You will find a detailed description of the
terms of the Series [o] notes following this summary and in the prospectus.
Parties
- ---------------------------------------------------------
Party Description
- ---------------------------------------------------------
Issuer o DaimlerChrysler Master Owner
Trust (the "issuer")
- ---------------------------------------------------------
Seller o DaimlerChrysler Wholesale
Receivables LLC ("DCWR"), an
indirectly owned subsidiary of
Chrysler Financial Company L.L.C.
("CFC").
o DCWR's executive offices are located at 27777 Franklin
Road, Southfield, Michigan 48034-8286, and its telephone
number is (248) 948-3031.
- ---------------------------------------------------------
Servicer o CFC, a wholly owned subsidiary of DaimlerChrysler
Corporation ("DaimlerChrysler").
- ---------------------------------------------------------
Indenture o [o]
Trustee
- ---------------------------------------------------------
Owner o [o]
Trustee for
Issuer
- ---------------------------------------------------------
CARCO o CARCO Auto Loan Master Trust (the
trust"). Receivables "CARCO receivables
Trust o owns the receivables and has issued the
collateral certificate to issuer.
- ---------------------------------------------------------
Title of Securities
Floating Rate Auto Loan Asset Backed Notes, Series [o] (the "Series
[o] notes").
Stated Principal Amount; Nominal Liquidation Amount
- ---------------------------------------------------------
Stated Principal Amount of Series [o] notes $[o]
Initial nominal liquidation amount of Series $[o]
[o] notes
Initial Series [o] overcollateralization amount $[o]
Initial Series [o] nominal liquidation amount $[o]
- ---------------------------------------------------------
o The Series [o] nominal liquidation amount will equal the portion of the
invested amount of the collateral certificate allocated to Series [o].
The Series [o] notes are secured only by that portion of the collateral
certificate that corresponds to the Series [o] nominal liquidation
amount. The Series [o] nominal liquidation amount will be equal to the
sum of (i) the nominal liquidation amount of the Series [o] notes and
(ii) the Series [o] overcollateralization amount. The Series [o] nominal
liquidation amount, the nominal liquidation amount of the Series [o]
notes and the Series [o] overcollateralization amount will be subject to
reduction and reinstatement as described in this prospectus supplement
under the caption "Deposit and Application of Funds -- Reduction and
Reinstatement of Nominal Liquidation Amounts."
Series Issuance Date
[o].
Series Cut-Off Date
[o].
Collateral Certificate
The collateral certificate is a certificate issued by the CARCO
receivables trust and represents an allocable interest in the pool of
receivables. The issuer's primary source of funds to make payments
S-5
on its notes is the distributions on the collateral certificate. Only the
portion of those distributions that are allocated to Series [o] as described
in this prospectus supplement will be available to make payments on the Series
[o] notes. The Series [o] noteholders will not have any recourse to any other
assets of the issuer or any other person for payments on the Series [o] notes.
Distributions on the collateral certificate that are allocated to other series
of notes will only be available to make payments on the Series [o] notes under
the limited circumstances described in this prospectus supplement and the
prospectus.
The collateral certificate represents a specified undivided interest
in the CARCO receivables trust. The CARCO receivables trust owns receivables
arising from a portfolio of automobile dealer revolving floorplan financing
agreements. See "DaimlerChrysler Wholesale Receivables LLC and the CARCO
Receivables Trust" and "Description of the Investor Certificates Issued by the
CARCO Receivables Trust" in the prospectus.
Terms of the Series [o] Notes
Interest Payment Dates
o Interest will be payable on the 15th of each month, unless the 15th is
not a business day, in which case the payment will be made on the
following business day. The first payment will be on [o].
Per Annum Interest Rate
o [o]% above one-month LIBOR (calculated as described herein). Interest
will be calculated on the basis of the actual number of days in the
applicable interest period divided by 360.
Interest Periods
o Each period from and including a payment date to but excluding the
following payment date, except that the first interest period will be
[o] days.
Principal Payments
o We expect to pay the principal of the Series [o] notes (but only to the
extent of the nominal liquidation amount of the Series [o] notes) in
full on [o].
o However, under some circumstances we may pay principal earlier or later
or in reduced amounts. See "Maturity and Principal Payment
Considerations" in this prospectus supplement.
Legal Final
We will be obligated to pay the principal amount of the Series [o]
notes (but only to the extent of the nominal liquidation amount of the Series
[o] notes), to the extent not previously paid, by [o].
Revolving Period
During the revolving period, we will not pay principal on the Series
[o] notes or accumulate principal for that purpose. Instead, we will use the
Series [o] share of available principal amounts to make principal payments on
other series and/or pay them to the seller to maintain the interest in the
CARCO receivables trust evidenced by the collateral certificate. The revolving
period will begin at the close of business on the Series Cut-Off Date and will
end when the accumulation period begins. The revolving period will also end if
an early redemption period begins.
S-6
Accumulation Period
We will accumulate principal for the Series [o] notes during an
accumulation period of no more than [o] months long unless an early redemption
period that is not terminated begins before the start of the accumulation
period. The latest date on which the accumulation period will commence is [o].
During the accumulation period we will accumulate the Series [o] share of
principal collections for payment on [o]. See "Series Provisions -- Principal"
in this prospectus supplement.
Early Redemption Period
If an early redemption event occurs and is not cured, you will begin
to receive payments of principal. We refer to this period after the occurrence
of an early redemption event as the early redemption period. Early redemption
events are events that might adversely affect the issuer's ability to make
payments on the Series [o] notes as originally expected. See "Description of
the Investor Certificates Issued by the CARCO Receivables Trust --
Reinvestment Events and Early Redemption Events" in the prospectus and
"Deposit and Allocation of Funds -- Early Amortization Events" in this
prospectus supplement for a description of the events that might cause an
early redemption period to start.
Credit Enhancement
Series [o] Overcollateralization Amount
o On the Series [o] cut-off date, the portion of the collateral
certificate allocable to Series [o] will equal $[o] and will exceed the
outstanding dollar principal amount of the Series [o] notes by $[o]. The
amount of that excess is the initial Series [o] overcollateralization
amount. This overcollateralization amount is intended to protect the
Series [o] noteholders from the effect of charge-offs on defaulted
receivables in the CARCO receivables trust and any use of available
principal amounts to pay interest on the Series [o] notes.
o The Series [o] overcollateralization amount will equal the sum of (i)
[o]% of the nominal liquidation amount of the Series [o] notes, and (ii)
the incremental overcollateralization amount described in this prospectus
supplement, which relates to ineligible receivables and the dealer
overconcentration amounts. The amount in clause (ii) may fluctuate from
time to time.
o We will allocate distributions on the collateral certificate to Series
[o] on the basis of the sum of the nominal liquidation amount of the
Series [o] notes and the Series [o] overcollateralization amount. The
Series [o] overcollateralization amount will be reduced by:
o reallocations of available principal amounts otherwise allocable to the
Series [o] over-collateralization amount to pay interest on the Series
[o] notes and
o charge-offs resulting from uncovered defaults on receivables in the CARCO
receivables trust allocated to Series [o].
Reductions in the Series [o] overcollateralization amount will result
in a reduced amount of distributions on the collateral certificate that are
available to make payments on the Series [o] notes. If
S-7
the Series [o] overcollateralization amount is reduced to zero, then those
reallocations and charge-offs will instead reduce the nominal liquidation
amount of the Series [o] notes and you may incur a loss on your Series [o]
notes.
Excess Principal Collections
Principal collections allocable to other series of notes, to the
extent not needed to make payments in respect of the other series, will be
applied to make principal payments in respect of the Series [o] notes and of
other series of notes then entitled to principal payments.
Optional Redemption
The Series [o] notes are subject to optional redemption by the issuer
on any payment date after the initial nominal liquidation amount for the
Series [o] notes is reduced to $[o] or less.
Other Series of Notes and Certificates
The issuer may issue additional series of notes. The CARCO
receivables trust has previously issued series of certificates and may issue
additional series of certificates. A summary of series of certificates issued
by the CARCO receivables trust currently outstanding is contained in "Series
of Investor Certificates Issued by CARCO Receivables Trust" at the end of this
prospectus supplement.
ERISA Considerations
It is expected that the Series [o] notes will be eligible for
purchase by employee benefit plans. However, plans contemplating the purchase
of Series [o] notes should consult their counsel before making a purchase. See
"ERISA Considerations" in the prospectus.
Tax Status
Sidley Austin Brown & Wood LLP, as special U.S. federal tax counsel
to the issuer, is of the opinion that at the time of initial issuance of the
Series [o] notes for federal income tax purposes:
o the Series [o] notes will be characterized as debt and
o the issuer will not be classified as an association, or a publicly traded
partnership, taxable as a corporation.
By your acceptance of a Series [o] note, you will agree to treat your
Series [o] notes as indebtedness for federal, state and local income and
franchise tax purposes and Michigan single business tax purposes. See "Tax
Matters" in the prospectus for additional information concerning the
application of federal, state and local tax laws.
Note Ratings
The issuer will issue the Series [o] notes only if they are rated at
the time of issuance in the highest long-term rating category by at least one
nationally recognized rating agency.
The rating agencies and their ratings only address the likelihood
that you will timely receive your interest payments and you will ultimately
receive all of your required principal payments by the legal final. The rating
agencies and their ratings do not address the likelihood you will receive
interest or principal payments on a scheduled date or whether you will receive
any principal on the Series [o] notes prior to or after the expected payment
date.
S-8
Risk Factors
An investment in Series [o] notes involves material risks. See "Risk
Factors" in this prospectus supplement and the prospectus.
Notes Not Listed on any Exchange
The Series [o] notes will not be listed on an exchange or quoted in
an automated quotation system of a registered securities association. See
"Risk Factors -- Your ability to resell your notes is limited" in this
prospectus supplement or the prospectus.
S-9
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Risk Factors
- -------------------------------------------------------------------------------
In this section and in the prospectus under the heading "Risk
Factors," we discuss the principal risk factors of an investment in the Series
[o] notes.
Only some of the assets of the issuer will be available to make
payments on the Series [o] notes.
The source of funds for payments on the notes
is limited.
o The sole source of payment of principal of or interest on the
Series [o] notes will be the portion of the available principal
amounts and available interest amounts allocated to Series [o].
As a result, you must rely only on the particular allocated
assets as security for the Series [o] notes for payment of the
principal of and interest on the Series [o] notes. You will not
have recourse to any other assets of the issuer or any other
person for payment of your notes. See "Deposit and Application
of Funds" in this prospectus supplement.
Also, following a sale of receivables due to the insolvency of
CFC or Daimler Chrysler, an acceleration of the notes following
an event of default, or on the legal final, as described in
"Deposit and Application of Funds--Sale of Receivables" in this
prospectus supplement and "Sources of Funds to Pay the
Notes--Sale of Receivables" in the prospectus, only the
proceeds of that sale will be available to make payments on the
Series [o] notes. If the amount of those proceeds is not
enough, you will incur a loss on your notes.
o Available principal amounts allocable to Series [o] may be
reallocated to pay interest on the Series [o] notes to the
extent that available interest amounts allocable to Series [o]
are insufficient to make such interest payments. Also, losses
on defaulted receivables in the CARCO receivables trust
allocated to Series [o] are generally first applied against the
Series [o] overcollateralization amount and, if the Series [o]
overcollateralization amount has been reduced to zero, to the
nominal liquidation amount of the Series [o] notes. If these
reallocations and losses that are allocated to the nominal
liquidation amount of the Series [o] notes are not reimbursed
from excess available funds, the full stated principal amount
of the Series [o] notes will not be repaid. See "The Notes--
Stated Principal Amount,
S-10
Outstanding Dollar Principal Amount and Nominal Liquidation
Amount--Nominal Liquidation Amount" in the prospectus and
"Deposit and Application of Funds-- Reduction and Reinstatement
of Nominal Liquidation Amounts" in this prospectus supplement.
The timing of principal payments may not be as expected. Several
factors will have an effect on the amount and timing of principal payments on
the Series [o] notes. Some of those factors are described below.
You may not receive your principal on the
expected payment date because of the
performance of other series:
o The shorter the accumulation period, the greater the chance
that payment in full of the Series [o] notes by their expected
payment date will depend on available principal amounts from
other series. A series from which principal amounts are
expected to be available to make payments on the Series [o]
notes may enter an early redemption period after the [o]
payment date. Available principal amounts from that series will
not be available to pay principal of the Series [o] notes. As a
result, you may receive some of your principal later than the
Series [o] expected payment date. On written request, the
seller will give you disclosure documents relating to the other
outstanding series of notes of the issuer and the outstanding
series of certificates of the CARCO receivables trust. Those
documents describe the events which could result in the start
of an early redemption period for those series.
If an early redemption event occurs, you may
receive your sooner principal sooner or later
than you expected and you may not receive
receive all of your principal:
o If an early redemption event occurs, you may receive your
principal or later than you expected and you may all of your
principal. In particular, a significant decline in the not
amount of receivables generated could cause an early redemption
of the Series [o] notes. If the balance of the receivables in
the CARCO receivables trust is not maintained at a specified
level, CFC must designate additional accounts, the receivables
of which will be sold to the seller. The seller will be
required to transfer those receivables to the CARCO receivables
trust. If additional accounts are not designated by CFC when
required, an early redemption event will occur.
o If a bankruptcy event relating to CFC or DaimlerChrysler were
to occur, an early redemption event would occur. In that case
additional receivables would not be transferred to
S-11
the CARCO receivables trust and principal payments on the
Series [o] notes would commence.
See "The Dealer Floorplan Financing Business" in the prospectus and
"Maturity and Principal Payment Considerations" and "Deposit and Application
of Funds -- Early Redemption Events" in this prospectus supplement for more
information about the timing of payments on the Series [o] notes.
Credit enhancement is limited and may be reduced. As the credit
enhancement is reduced, you are more likely to incur losses and to receive
your principal earlier or later than you expected. Credit enhancement of the
Series [o] notes will be provided by the Series [o] overcollateralization
amount as described in this prospectus supplement. The amount of such credit
enhancement is limited and may be reduced from time to time. See "Deposit and
Application of Funds -- Series [o] Overcollateralization Amount" for more
information about the credit enhancement for the Series [o] notes.
The CARCO receivables trust and the issuer are dependent on CFC and
DaimlerChrysler. The CARCO receivables trust, and therefore the issuer, are
completely dependent upon CFC for the generation of new receivables. The
ability of CFC to generate receivables is in turn dependent to a large extent
on the sales of automobiles and light duty trucks manufactured or distributed
by DaimlerChrysler. Several factors will have an effect on that dependence. If
CFC does not generate sufficient receivables, an early redemption event may
occur.
Your ability to resell your notes is limited. There may be no
secondary market for your notes. The underwriter[s] may participate in making
a secondary market in the certificates, but are under no obligation to do so.
We cannot assure you that a secondary market will develop. If a secondary
market does develop, we cannot assure you that it will continue or that you
will be able to resell your notes. Also, your notes will not be listed on any
securities exchange or quoted in the automated quotation system of any
registered securities association. As a result, you will not have the
liquidity that might be provided by that kind of listing or quotation.
- -------------------------------------------------------------------------------
Glossary
- -------------------------------------------------------------------------------
You can find a "Glossary of Principal Terms for the Prospectus
Supplement" beginning on page S-[o] in this prospectus supplement.
- -------------------------------------------------------------------------------
Use of Proceeds
- -------------------------------------------------------------------------------
From the net proceeds of the Series [o] notes, we will pay $[o] to
DCWR. DCWR will use the proceeds to purchase receivables from CFC or to repay
amounts previously borrowed to purchase receivables. CFC will use the portion
of the proceeds paid to it for general corporate purposes.
S-12
- -------------------------------------------------------------------------------
The Dealer Floorplan Financing Business
- -------------------------------------------------------------------------------
You can read about the dealer floorplan financing business under "The
Dealer Floorplan Financing Business" in the prospectus. The receivables sold
to the trust were or will be selected from extensions of credit and advances
made by DaimlerChrysler and CFC to approximately 3,210 domestic motor vehicle
dealers.
o CFC financed 57.7% of the total number of all
DaimlerChrysler-franchised dealers as of September 30, 2001.
o CFC has extended credit lines to 1,188
DaimlerChrysler-franchised dealers that also operate
non-DaimlerChrysler franchises (representing approximately 57%
of the aggregate credit lines of dealers in the U.S. Wholesale
Portfolio as of September 30, 2001) and 526 non-DaimlerChrysler
dealers (representing approximately 9% of those aggregate
credit lines).
o As of September 30, 2001, the balance of principal receivables
in the U.S. Wholesale Portfolio was approximately $10.0
billion.
o CFC currently services the U.S. Wholesale Portfolio through its
home office and through a network of 23 zone offices located
throughout the United States.
o As of September 30, 2001, the average credit lines per dealer
in the U.S. Wholesale Portfolio for new and used vehicles
(which includes Auction Vehicles) were $3.90 million and $0.54
million, respectively, and the average balance of principal
receivables per dealer was $3.13 million.
o As of September 30, 2001, the aggregate total receivables
balance as a percentage of the aggregate total credit lines was
approximately 70.4%.
The following table sets forth the percentages of dealer account
balances by year of credit line origination for the U.S. Wholesale Portfolio.
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Percentages by Year
of Credit Line Origination
As of September 30, 2001
- ----------------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 1995 1994 Prior to
1994
- -------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
10.43% 7.27% 8.02% 5.91% 5.04% 2.77% 4.67% 2.75% 52.65%
- -------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
- ----------------------------------------------------------------------------------------------------------------------
As of September 30, 2001, the weighted average spread over the prime
rate charged to dealers in the U.S. Wholesale Portfolio was approximately
1.15%.
S-13
Used vehicles (which excludes Auction Vehicles) represented
approximately 3.31% of the aggregate principal amount of receivables in the
U.S. Wholesale Portfolio as of September 30, 2001. As of September 30, 2001,
used vehicles represented approximately 3.29% of the aggregate principal
amount of receivables in the trust (including Excluded Receivables).
S-14
The following table provides the percentage of dealers in the U.S. Wholesale
Portfolio that were subject to finance hold as of the dates indicated.
- ---------------------------------------------------------------------------------------------------------------------------
Finance Hold Experience
As of
September 30, As of December 31,
---------------- ------- --------- --------- --------- -------- --------- --------- --------- --------
2001 2000 1999 1998 1997 1996 1995 1994 1993 1992
---------------- ------- --------- --------- --------- -------- --------- --------- --------- --------
Percentage of 0.8% 0.8% 0.4% 0.9% 2.1% 1.1% 1.8% 1.6% 3.2% 6.8%
Dealers
- ----------------- ---------------- -- ------- --------- --------- --------- -------- --------- --------- --------- --------
- ---------------------------------------------------------------------------------------------------------------------------
The following table provides the number and percentage of dealers in Dealer
Trouble Status in the U.S. Wholesale Portfolio as of the dates indicated.
- ----------------------------------------------------------------------------------------------------------------
Dealer Trouble Experience
As of
September 30, As of December 31,
--------------- ------ -------- ------- --------- ------- -------- ------- ------- --------
2001 2000 1999 1998 1997 1996 1995 1994 1993 1992
--------------- ------ -------- ------- --------- ------- -------- ------- ------- --------
Number of
Dealers 25 27 27 21 24 20 6 12 21 56
- --------------- --------------- --- ------ -------- ------- --------- ------- -------- ------- ------- --------
Percentage of
Dealers 0.8% 0.8% 0.9% 0.7% 0.7% 0.6% 0.2% 0.3% 0.6% 1.8%
- --------------- --------------- --- ------ -------- ------- --------- ------- -------- ------- ------- --------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
The Accounts
- ----------------------------------------------------------------------------------------------------------------
As of September 30, 2001, with respect to the Accounts in the trust:
o there were approximately 2,950 Accounts and the principal
receivables balance was approximately $8.9 billion;
o the average credit lines per dealer for new and used vehicles
(which include Auction Vehicles) were approximately $3.55
million and $0.53 million, respectively, and the average
balance of principal receivables per dealer was approximately
$2.94 million; and
o the aggregate total receivables balance as a percentage of the
aggregate total credit line was approximately 72.0%.
Unless otherwise indicated, the statistics included in this
paragraph, in the table below and under "CFC's Performance History --
Geographic Distribution" with respect to the Accounts and the receivables in
the CARCO receivables trust give effect to approximately $35.6) million of
principal receivables balances with respect to dealers (the "Excluded
Receivables" and the "Excluded Dealers", respectively) that are in voluntary
or involuntary bankruptcy proceedings or voluntary or involuntary liquidation
or that, subject to limitations, are being voluntarily removed by the seller
from the CARCO receivables trust. A portion of those
S-15
principal receivables was created after those dealers entered into that status
or were designated by the seller for removal from the CARCO receivables trust
and, as a result, are owned by CFC. Principal receivables balances created
prior to those dealers entering into that status or being designated for
removal from the CARCO receivables trust are included in the principal
receivables balance. See "Description of the Certificates -- Removal of
Accounts" in the prospectus for a description of the manner in which an
Account can be removed from the trust.
The following table sets forth the percentages of dealer account
balances by year of credit line origination for the accounts in the trust.
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Percentages by Year
of Credit Line Origination
As of September 30, 2001
- ----------------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 1995 1994 Prior to
1994
- -------------- ----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
* 7.24% 9.14% 6.67% 5.62% 3.11% 4.51% 3.15% 60.54%
- ----------------------------------------------------------------------------------------------------------------------
* Less than 0.05%
- ----------------------------------------------------------------------------------------------------------------------
As of September 30, 2001, the weighted average spread over the Prime
Rate charged to Dealers was approximately 1.20%.
- ----------------------------------------------------------------------------------------------------------------------
CFC's Performance History
- ----------------------------------------------------------------------------------------------------------------------
Loss Experience
The following tables set forth the average principal receivables
balance and loss experience for each of the periods shown on the U.S.
Wholesale Portfolio. Because the Eligible Accounts will be only a portion of
the entire U.S. Wholesale Portfolio, actual loss experience with respect to
the Eligible Accounts may be different. We cannot assure you 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. Also,
the historical experience set forth below reflects financial assistance
provided by Chrysler or DaimlerChrysler to DaimlerChrysler-franchised dealers
as described under "The Dealer Floorplan Financing Business -- Relationship
with DaimlerChrysler" in the prospectus. If DaimlerChrysler is not able to or
elects not to provide that assistance, the loss experience in respect of the
U.S. Wholesale Portfolio may be adversely affected. See "Risk Factors --
Issuer's relationship to DaimlerChrysler and CFC" in the prospectus and "Risk
Factors -- The CARCO receivables trust and the issuer dependent on
DaimlerChrysler and CFC" in this prospectus supplement.
S-16
Loss Experience for the U.S. Wholesale Portfolio
($ Millions)
Nine Months Ended
September 30, Year Ended December 31,
-------------------- -------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996 1995 1994
-------------------- -------------------------------------------------------------------------
Average Principal
Receivables Balance(1) $9,904 $11,489 $11,336 $9,947 $9,236 $8,877 $ 8,825 $ 8,256 $ 6,754
---------------------------------------------------------------------------------------------------------------------------
Net Losses/ (Net
Recoveries)(2) $ 1 $ 0 $ 1 $ (0) $ 11 $ 4 $ (0) $ (1) $ (1)
---------------------------------------------------------------------------------------------------------------------------
Net Losses/ (Net
Recoveries) as a
Percent of
Liquidations 0.002% 0.001% 0.001% (0.001)% 0.020% 0.008% 0.000% (0.002)% (0.003)%
---------------------------------------------------------------------------------------------------------------------------
Net Losses/ (Net
Recoveries) as a
Percent of Average
Principal Receivables
Balance(3) 0.01% 0.00% 0.01% (0.00)% 0.12% 0.04% (0.00)% (0.01)% (0.01)%
---------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-------------- ----------------- --------------- ------------- --------------- ----------------
1993 1992 1991 1990 1989 1988
-------------- ----------------- --------------- ------------- --------------- ----------------
Average Principal
Receivables Balance(1) $6,271 $ 5,344 $ 4,826 $ 4,726 $ 4,933 $ 4,129
-------------------------- -------------- ----------------- --------------- ------------- --------------- ----------------
Net Losses/ (Net
Recoveries)(2) $ 12 $ 26 $ 36 $ 23 $ 13 $ 3
-------------------------- -------------- ----------------- --------------- ------------- --------------- ----------------
Net Losses/ (Net
Recoveries) as a
Percent of
Liquidations 0.035% 0.098% 0.163% 0.117% 0.060% 0.015%
-------------------------- -------------- ----------------- --------------- ------------- --------------- ----------------
Net Losses/ (Net
Recoveries) as a
Percent of Average
Principal Receivables
Balance(3) 0.19% 0.49% 0.75% 0.49% 0.26% 0.07%
-------------------------- -------------- ----------------- --------------- ------------- --------------- ----------------
--------------------------------------------------------------------------------------------------------------------------
(1) Average Principal Receivables Balance is the average of the month-end
principal balances for the thirteen months ending on the last day of the
period, except for the nine months ended September 30, 2001 and 2000,
which are based on a ten-month average.
(2) Net losses in any period are gross losses less recoveries for such
period.
(3) Percentages for the nine months ended September 30, 2001 and 2000 are
expressed on an annualized basis and are not necessarily indicative of
the experience for the entire year.
S-17
Aging Experience
The following table provides the age distribution of vehicle
inventory for all dealers in the U.S. Wholesale Portfolio, as a percentage of
total principal outstanding at the date indicated. Because the Eligible
Accounts will only be a portion of the entire U.S. Wholesale Portfolio, actual
age distribution with respect to the Eligible Accounts may be different.
- ---------------------------------------------------------------------------------------------------------------------
Age Distribution for the U.S. Wholesale Portfolio
As of
September 30, As of December 31,
---------------- --------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 1995 1994
---------------- --------------------------------------------------------------------
1-120....................... 79.3% 77.8% 81.7% 81.7% 80.1% 80.4% 82.2% 82.5%
- ---------------------------------------------------------------------------------------------------------------------
121-180..................... 9.5 13.0 12.1 11.0 10.8 10.0 9.3 10.1
- ---------------------------------------------------------------------------------------------------------------------
181-270..................... 5.3 5.5 3.6 4.1 4.2 5.0 3.8 4.0
- ---------------------------------------------------------------------------------------------------------------------
Over 270.................... 5.9 3.7 2.6 3.2 4.9 4.6 4.7 3.4
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
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 the portfolio. The
percentages may not add to 100.00% because of rounding.
- ---------------------------------------------------------------------------------------------------------------------
Geographic Distribution of Accounts in the Trust
As of September 30, 2001
Percentage of Total Number Percentage of
Receivables Receivables of Number of
Outstanding Outstanding Dealers Dealers
Texas.......................... $890,320,782.17 10.25% 200 6.77%
California..................... 706,040,672.99 8.13% 180 6.10%
Florida........................ 514,450,701.79 5.92% 125 4.23%
Illinois ...................... 489,446,753.09 5.63% 153 5.18%
New York....................... 482,776,109.96 5.56% 178 6.03%
New Jersey..................... 437,927,995.46 5.04% 129 4.37%
Other(1)....................... 5,165,878,846.67 59.47% 1,988 67.32%
Total ......................... $8,686,841,862.13 100.00% 2,953 100.00%
================= ======== ====== =======
(1) No other state includes more than 5% of the outstanding receivables.
- -------------------------------------- ---------------------- ----------------- -------------- ----------------------
S-18
- ------------------------------------------------------------------------------
Maturity and Principal Payment Considerations
- ------------------------------------------------------------------------------
You will begin receiving principal on your notes if an Early
Redemption Period that is not terminated has commenced. Full amortization of
the Series [o] notes by the [o] payment date (the "Series [o] Expected Payment
Date") depends on, among other things, repayment by dealers of the receivables
and may not occur if dealer payments are insufficient. Because the receivables
are paid upon retail sale of the underlying vehicle, the timing of the
payments is uncertain. There is no assurance that CFC will generate additional
receivables under the Accounts or that any particular pattern of dealer
payments will occur. Also, the shorter the Accumulation Period Length the
greater the likelihood that payment of the Series [o] notes in full by the
Series [o] Expected Payment Date will be dependent on the reallocation of
Available Principal Amounts which are initially allocated to other outstanding
series of notes. If one or more other series of notes from which Available
Principal Amounts are expected to be available to be reallocated to the
payment of the Series [o] notes enters into an early redemption period after
the [o] payment date, Available Principal Amounts allocated to those series of
notes will not be available to be reallocated to make payments of principal of
the Series [o] notes and you may receive your final payment of principal later
than the Series [o] Expected Payment Date.
Because an Early Redemption Event with respect to the Series [o]
notes may occur and would initiate an Early Redemption Period, you may receive
the final payment of principal on your Series [o] notes prior to the scheduled
termination of the Revolving Period or prior to the Series [o] Expected
Payment Date.
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. The monthly payment rate is 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 the period. These monthly payment rates
include principal credit adjustments. We cannot assure you that the rate of
principal collections will be similar to the historical experience set forth
below. As the Eligible Accounts will be only a portion of the entire U.S.
Wholesale Portfolio, historical monthly payment rates with respect to the
Eligible Accounts may be different than those shown below.
S-19
- ------------------------------------------------------------------------------------------------------------------------------
Monthly Payment Rates for the U.S. Wholesale Portfolio
Nine Months Ended,
September 30, Year Ended December 31,
------------------------------------------------------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------------------
Highest Month 57.4% 52.8% 52.8% 60.5% 60.8% 57.7% 58.3% 59.1% 59.7% 54.7% 50.6%
- -----------------------------------------------------------------------------------------------------------------------------
Lowest Month 42.5 39.0 36.2 44.7 42.5 41.1 43.2 36.5 34.2 35.9 34.4
- -----------------------------------------------------------------------------------------------------------------------------
Average of the 51.6 46.2 45.6 52.0 50.0 48.2 49.0 45.6 50.3 46.6 41.3
Month in the Period
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Series Provisions
- -------------------------------------------------------------------------------
General
The CARCO receivables trust has issued the collateral certificate
under the Pooling and Servicing Agreement and a Series Supplement relating to
the collateral certificate. The indenture trustee will make available for
inspection a copy of the Pooling and Servicing Agreement, without exhibits or
schedules, on request. You should refer to the prospectus for additional
information concerning the collateral certificate and the Pooling and
Servicing Agreement.
The issuer will issue the Series [o] notes pursuant to the indenture
and an indenture supplement. The discussion under this heading "Series
Provisions" and the heading "Deposit and Allocation of Funds" in this
prospectus supplement and the discussion under the headings "The Notes",
"Sources of Funds to Pay the Notes" and "The Indenture" in the prospectus
summarize the material terms of the Series [o] notes, the indenture and the
indenture supplement. These summaries do not purport to be complete and are
qualified in their entirety by reference to the provisions of the notes, the
indenture and the indenture supplement. Neither the indenture nor the
indenture supplement limits the aggregate principal amount of notes that may
be issued.
The issuer will pay principal of and interest on the Series [o] notes
solely from the portion of Available Interest Amounts and Available Principal
Amounts that are allocated to Series [o] under the indenture and the indenture
supplement after giving effect to all allocations and reallocations. If those
sources are not sufficient to pay the Series [o] notes, Series [o] noteholders
will have no recourse to any other assets of the issuer or any other person or
entity for the payment of principal of or interest on the Series [o] notes.
In general terms, the CARCO receivables trust will allocate
collections on the receivables among each series of certificates, including
the collateral certificate. We describe how these allocations are made under
"Description of the Investor Certificates Issued by the CARCO Receivables
Trust" in the prospectus. The issuer will receive distributions of the
collateral certificate's share of those collections. The issuer will then
allocate those distributions among each series of notes as described in this
prospectus supplement. The Series [o] share of distributions on the collateral
certificate is the only source of funds for payments on the Series [o]
S-20
notes. We will apply the Available Interest Amount allocable to Series [o] to
pay interest on the Series [o] notes and to cover losses from defaults on the
receivables that are allocable to Series [o]. The Available Amounts allocable
to Series [o] will include those funds allocable to the nominal liquidation
amount of the Series [o] notes and the Series [o] overcollateralization
amount. We will first use the portion of the funds allocable to the Series [o]
overcollateralization amount and any excess available interest collections not
required by other series of notes to cover any interest shortfalls and the
Series [o] share of losses on defaulted receivables. When it is time to
distribute principal to investors or accumulate principal collections for that
purpose, we will use the Series [o] share of Available Principal Amounts.
Under some circumstances, we may use Available Principal Amounts allocated to
another series of notes that are not then needed by that series.
The preceding paragraph is a very simplified description of the
primary allocations and uses of distributions on the collateral certificate.
The following descriptions in this prospectus supplement contain a more
precise description of the calculations of those allocations and the manner,
timing and priorities of the application of those distributions. Many of the
calculations are complex and are described in the definitions of the terms
used. The complex defined terms are needed in order to tell you the precise
amount that will be available to make a specified payment. The Glossary of
Principal Terms for the Prospectus Supplement at the end of this prospectus
supplement contains many of these definitions. However, for convenience we
often include the definition where its subject is being discussed.
Interest
Interest on the outstanding dollar principal amount of the Series [o]
notes will accrue at the Series [o] rate and will be payable to the Series [o]
noteholders on each payment date, commencing [o]. Interest payable on any
payment date will accrue from and including the preceding payment date to but
excluding that payment date, or, in the case of the first payment date, from
and including the Series [o] issuance date to but excluding the first payment
date. Each of those periods is an "Interest Period." Interest will be
calculated on a basis of the actual number of days in each Interest Period
divided by 360. Interest due for any payment date but not paid on that payment
date will be due on the next payment date, together with interest on the
amount at the Series [o] rate calculated on the basis of LIBOR, to the extent
permitted by applicable law. We will make interest payments on the Series [o]
notes solely out of distributions on the collateral certificate that are
allocated to Series [o].
The Calculation Agent will determine the Series [o] rate for each
Interest Period on the LIBOR Determination Date preceding that Interest
Period. The "Series [o] rate" will be the per annum rate equal to the
applicable LIBOR plus [o]%.
"Monthly Interest" for any payment date means the amount of interest
accrued in respect of the Series [o] notes in the Interest Period for that
payment date.
"LIBOR" with respect to any Interest Period will equal the offered
rate for United States dollar deposits for one month that appears on Telerate
Page 3750 as of 11:00 A.M., London time, on the second LIBOR Business Day
prior to that Interest Period (a "LIBOR Determination Date"). "Telerate Page
3750" means the display page so designated on the Dow Jones Telerate
S-21
Service, or any other page as may replace that page on that service, or any
other service as may be nominated as the information vendor, for the purpose
of displaying London interbank offered rates of major banks). If that rate
appears on Telerate Page 3750, LIBOR will be that rate. "LIBOR Business Day"
as used in this prospectus supplement means a day that is both a Business Day
and a day on which banking institutions in the City of London, England are not
required or authorized by law to be closed. If on any LIBOR Determination Date
the offered rate does not appear on Telerate Page 3750, the Calculation Agent
will request each of the reference banks, which shall be major banks that are
engaged in transactions in the London interbank market selected by the
Calculation Agent, to provide the Calculation Agent with its offered quotation
for United States dollar deposits for one month to prime banks in the London
interbank market as of 11:00 A.M., London time, on that date. If at least two
reference banks provide the Calculation Agent with the offered quotations,
LIBOR on that date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1 / 100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, of all the quotations. If on that date fewer
than two of the reference banks provide the Calculation Agent with the offered
quotations, LIBOR on that date will be the arithmetic mean, rounded upwards,
if necessary, to the nearest 1 / 100,000 of 1 % (.0000001) , with five
one-millionths of a percentage point rounded upward, of the offered per annum
rates that one or more leading banks in The City of New York selected by the
Calculation Agent are quoting as of 11:00 A.M., New York City time, on that
date to leading European banks for United States dollar deposits for one
month. If, however, those banks are not quoting as described above, LIBOR for
that date will be LIBOR applicable to the Interest Period immediately
preceding that Interest Period. The "Calculation Agent" will initially be the
indenture trustee.
Principal
We will not make principal payments to the Series [o] noteholders
until the Series [o] Expected Payment Date or, upon the commencement of an
Early Redemption Period that is not terminated as described in this prospectus
supplement, until the first payment date in the month following the month in
which the Early Redemption Period begins. On each payment date with respect to
the Revolving Period, Available Principal Amounts otherwise allocable to
Series [o] will either be
o allocated to one or more series of notes which are in
amortization, early redemption or accumulation periods to cover
principal payments due to the noteholders of any of those
series or
o if no series is then amortizing or accumulating principal, paid
to the seller to maintain the interest in the CARCO receivables
trust evidenced by the collateral certificate.
See "Deposit and Allocation of Funds -- Allocation of Available Amounts to
Series [o]" and "-- Allocation Percentages."
The "Revolving Period" will be the period beginning at the close of
business on the Series [o] Cut-Off Date and terminating on the earlier of
S-22
o the close of business on the day immediately preceding the
Accumulation Period Commencement Date and
o the close of business on the day an Early Redemption Period
commences.
The Revolving Period, however, may recommence upon the termination of an Early
Redemption Period. See "Deposit and Allocation of Funds -- Early Redemption
Events". During the Revolving Period, we will not use the Series [o] share of
Available Principal Amounts to make principal payments on the Series [o]
notes. Instead, we will use them to make principal distributions on other
series or we will pay them to the seller to maintain the interest in the CARCO
receivables trust evidenced by the collateral certificate. If the Series [o]
notes have been paid in full, we will pay any remaining Available Principal
Amounts to the seller.
Unless an Early Redemption Period that is not terminated as described
in this prospectus supplement shall have commenced, the Series [o] notes will
have an Accumulation Period of one, two, three, four or five month(s) long as
described in the following paragraph.
The "Accumulation Period Commencement Date" will be [o] or, if the
administrator elects at its option to delay the start of the Accumulation
Period, a later date selected by the administrator. Delaying the start of the
Accumulation Period will extend the Revolving Period. The administrator may
elect to delay the start of the Accumulation Period because it believes that
(i) the issuer will be able to reallocate Available Principal Amounts
allocable to other series of notes to make larger monthly deposits into the
principal funding account over a shorter period of time or (ii) the payment
rate on the receivables will permit larger monthly deposits to that account
over a shorter period of time. In order to delay the start of the Accumulation
Period, the following things must occur:
o the administrator must deliver to the indenture trustee a
certificate to the effect that the administrator believes that
delaying the start of the Accumulation Period will not delay
any payment of principal to Series [o] noteholders;
o Standard & Poor's and Moody's must advise the administrator
that they will not lower or withdraw their ratings on the notes
because of the delay in the start of the Accumulation Period;
o the amount of principal that the indenture trustee will deposit
into the principal funding account each month during the
Accumulation Period must be increased, so that the sum of all
deposits made during the shortened Accumulation Period will
equal the principal amount due to Series [o] noteholders on the
Series [o] Expected Payment Date;
o the Accumulation Period must start no later than [o]; and
o the administrator must make this election no later than the
first day of the last month of the Revolving Period, including
extensions of the Revolving Period.
S-23
If the administrator delays the start of the Accumulation Period and
an Early Redemption Event occurs, you may receive some of your principal later
than you would have received it without a delay in the start of the
Accumulation Period.
Unless and until an Early Redemption Period that is not terminated as
described in this prospectus supplement shall have occurred and until the
outstanding dollar principal amount of the Series [o] notes is paid in full,
on each payment date with respect to the Accumulation Period, Available
Principal Amounts allocable to the Series [o] will no longer be paid for the
benefit of another series of notes or to the issuer. Instead, those amounts up
to the Controlled Deposit Amount for each of those payment dates will be
deposited in the principal funding account. We will use the funds deposited in
the principal funding account to pay the outstanding dollar principal amount
of the Series [o] notes on the Series [o] Expected Payment Date. If on that
date the total amount in the principal funding account and the excess funding
account is less than the outstanding dollar principal amount of the Series [o]
notes, the Early Redemption Period will commence. On each subsequent payment
date the Series [o] noteholders will receive payments of Monthly Principal and
Monthly Interest until the outstanding dollar principal amount of the Series
[o] notes has been paid in full or the legal final has occurred. Even if the
total amount in the Principal Funding Account and the Excess Funding Account
on the Series [o] Expected Payment Date is insufficient to pay the outstanding
dollar principal amount of the Series [o] notes in full, we will distribute
that amount to the Series [o] noteholders at that time.
Monthly Principal is the amount of principal that we will pay to or
accumulate for the Series [o] noteholders. The "Monthly Principal" with
respect to any payment date relating to the Accumulation Period or any Early
Redemption Period will equal the Available Principal Amount for Series [o]
less any portion thereof that is applied to pay interest on the Series [o]
notes on that payment date. However, for each payment date, with respect to
the Accumulation Period, Monthly Principal will not exceed the Controlled
Deposit Amount for that payment date plus any Controlled Deposit Amount for a
prior payment date that has not been previously deposited into the principal
funding account. Also, Monthly Principal will not exceed the nominal
liquidation amount of the Series [o] notes less the amount (other than
investment earnings) on deposit in the principal funding account.
During the Accumulation Period, we intend to accumulate each month a
fixed amount equal to the "Controlled Accumulation Amount", which is equal to
the nominal liquidation amount of the Series [o] notes as of the Accumulation
Period Commencement Date, after giving effect to any changes in that nominal
liquidation amount on that date, divided by the Accumulation Period Length.
The "Accumulation Period Length" will be the number of full Collection Periods
between the Accumulation Period Commencement Date and the Series [o] Expected
Payment Date. Because there may be funds in the Excess Funding Account and the
Available Principal Amounts for Series [o] for any payment date may fluctuate,
we intend to accumulate the Controlled Deposit Amount on each payment date in
the Accumulation Period. The "Controlled Deposit Amount" for a payment date
will be the excess of (i) the Controlled Accumulation Amount over (ii) any
funds in the excess funding account that are allocable to Series [o] and have
not been deposited into the principal funding account as of that payment date.
S-24
Excess Funding Account
Unless and until an Early Redemption Event shall have occurred or the
Accumulation Period shall have commenced, the CARCO receivables trust trustee
will keep the excess funded amount in the excess funding account. The excess
funded amount for a series will initially equal the excess, if any, of the
aggregate outstanding dollar principal amount of the notes of that series over
the initial nominal liquidation amounts of that series. The CARCO receivables
trust trustee will generally invest funds on deposit in the excess funding
account at the direction of the servicer in Eligible Investments. Those
investments must mature on or prior to the next payment date.
We will pay funds on deposit in the excess funding account to the
seller or allocate them to one or more series of notes which are in
amortization, early redemption or accumulation periods, but only to the extent
of any increases in the Invested Amount of the collateral certificate as a
result of the addition of receivables to the trust, a reduction in the
Seller's Interest, or a reduction in the invested amount of any other series
of certificates. We will deposit additional amounts in the excess funding
account on a payment date to the extent described under "Description of the
Investor Certificates Issued by the CARCO Receivables Trust -- Excess Funding
Account."
On each payment date, we will treat the Series [o] share of all net
investment income received on amounts in the excess funding account since the
prior payment date as Available Interest Amounts for Series [o].
On the [o] payment date we will transfer the Series [o] share of any
funds (other than investment income) on deposit in the excess funding account
to the principal funding account. No funds will be deposited in the excess
funding account during any Early Redemption Period. Also, we will not deposit
any amounts into the excess funding account with respect to any Transfer Date
following the [o] Transfer Date.
Optional Redemption by the Issuer
The issuer has the right, but not the obligation, to redeem the
Series [o] notes in whole but not in part on any payment date on or after the
payment date on which the nominal liquidation amount of the Series [o] notes
less the amount on deposit in the principal funding account (other than
investment earnings) is reduced to less than [o]% of the initial nominal
liquidation amount. This redemption option is referred to as a clean-up call.
If the issuer elects to redeem the Series [o] notes, it will notify
the registered holders at least thirty days prior to the redemption date. The
redemption price of a note will equal 100% of the outstanding dollar principal
amount of that note, plus accrued but unpaid interest on the note to but
excluding the date of redemption.
If the issuer is unable to pay the redemption price in full on the
redemption date, monthly payments on these Series [o] notes will thereafter be
made until either the principal of and accrued interest on those notes are
paid in full or the legal final occurs, whichever is earlier. Any funds in the
principal funding account and interest funding account for the Series [o]
notes will
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be applied to make the principal and interest payments on the Series [o] notes
on the redemption date.
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Deposit and Application of Funds
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The indenture specifies how we will allocate Available Interest
Amounts and Available Principal Amounts among the multiple series of notes
issued from time to time by the issuer. "Available Interest Amounts" will
consist of interest collections on the receivables owned by the CARCO
receivables trust that are allocated to the investor portion of the collateral
certificate. "Available Principal Amounts" will consist of principal
collections on the receivables and certain related amounts that are allocated
to the investor portion of the collateral certificate. The Available Interest
Amounts and the Available Principal Amounts are collectively referred to as
"Available Amounts". We describe how interest collections and principal
collections at the CARCO receivables trust are allocated among the various
series of certificates (including the collateral certificate) under
"Description of the Investor Certificates Issued by the CARCO Receivables
Trust" in the prospectus. We describe how interest collections and principal
collections allocated to the collateral certificate are then further allocated
between the seller's portion and the investor portion under "Source of Funds
to Pay the Notes--General" in the prospectus. Only the investor portions of
those collections are available to make payments on the notes.
Each Series [o] account referred to in this prospectus supplement may
be a subaccount of one master account for Series [o].
Allocation of Available Amounts Allocated to Series [o]
Available Interest Amounts for Series [o]. Under "-- Allocation
Percentages" below, we describe how we will allocate Available Interest
Amounts among each series of notes. On each Transfer Date, the indenture
trustee will apply the Available Interest Amounts allocated to Series [o] as
follows:
o first, the indenture trustee will deposit to the interest
funding account (i) accrued and unpaid interest on the Series
[o] notes due on the next payment date and (ii) to the extent
lawful, interest at the Series [o] rate on any unpaid
delinquent interest on the Series [o] notes;
o second, the indenture trustee will apply funds to pay the
servicing fee;
o third, if the Available Interest Amounts for Series [o] for
that Transfer Date exceeds the interest payable in clause
first, then we will treat that excess amount as Available
Principal Funds for Series [o] to the extent of
- the amount of charge-offs on defaulted receivables that
are allocable to Series [o] for the related Collection
Period; and
- the Series [o] nominal liquidation amount deficit, if any;
and
o fourth, any Available Interest Amounts that remain after giving
effect to clauses first and second will be treated as "Shared
Excess Available Interest Amounts"
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and will be applied to shortfalls or deficits of other series
of notes or, to the extent not needed to cover shortfalls or
deficits of other series, paid to the seller.
Available Interest Amounts for Series [o] will also include net
investment earnings, if any, on funds in any Series [o] funding account.
Available Principal Amounts for Series [o]. Under "-- Allocation
Percentages," we describe how we will allocate Available Principal Amounts
among each series of notes. On each Transfer Date the indenture trustee will
apply the Available Principal Amounts allocated to Series [o] as follows:
o first, if the Available Interest Amounts for Series [o] are not
enough to cover the interest on the Series [o] notes specified
in clause first above, the indenture trustee will deposit to
the interest funding account the amount of that shortfall;
o second, if Series [o] is in its Accumulation Period, the
indenture trustee will deposit the Controlled Deposit Amount to
the principal funding account and we will treat any remaining
Available Principal Amounts for Series [o] as "Shared Excess
Principal Amounts" available to be used to satisfy the
principal funding requirements of other series of notes or to
be reinvested in the collateral certificate to maintain the
invested amount of the collateral certificate;
o third, if Series [o] is in an Early Redemption Period, the
indenture trustee will deposit any remaining Available
Principal Amounts for Series [o] in the principal funding
account;
o fourth, if Series [o] is not in its Accumulation Period or an
Early Redemption Period, we will treat any remaining Available
Principal Amounts for Series [o] as Shared Excess Principal
Amounts available to be used to satisfy the principal funding
requirements of other series of notes or to be reinvested in
the collateral certificate to maintain the invested amount of
the collateral certificate; and
o fifth, if Series [o] is in its Accumulation Period or an Early
Redemption Period and the nominal liquidation amount of the
Series [o] notes has been deposited to the principal funding
account, any remaining Available Principal Amounts for Series
[o] will be paid to the seller. The amount in this clause fifth
will represent the Series [o] overcollateralization amount.
The use of Available Principal Amounts for Series [o] under clause
first above to pay interest on the Series [o] notes will result in a reduction
in the Series [o] nominal liquidation amount as described under "--Reduction
and Reinstatement of the Series [o] Nominal Liquidation Amount".
If the Series [o] noteholders direct the CARCO receivables trust to
sell receivables as described under "--Sale of Receivables," we will pay the
proceeds of such sale to the Series [o] noteholders to the extent of the
interest due on the Series [o] notes and the nominal liquidation
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amount of the Series [o] notes, and the Series [o] noteholders will not
receive any further Available Amounts or other assets of the issuer.
Reduction and Reinstatement of Nominal Liquidation Amounts
The calculation of a series nominal liquidation amount is fully
described under "The Notes--Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation Amount of Notes" in the prospectus.
There follows a description of reduction and reinstatements of the series
nominal liquidation amount other than on account of principal payments or
deposits to the principal funding account.
The Series [o] nominal liquidation amount at the Series [o] Cut-off
Date is the sum of (i) the initial $[o] nominal liquidation amount of the
Series [o] notes (which equals the outstanding dollar principal amount of the
Series [o] notes) and (ii) the $[o] Series [o] overcollateralization amount at
the initial issuance of the Series [o] notes. The Invested Amount of the
collateral certificate will be the sum of the series nominal liquidation
amounts for each outstanding series of notes.
Reductions. The Series [o] nominal liquidation amount will be reduced
on any Transfer Date by the following amounts allocated on that Transfer Date:
(A) the amount, if any, of the Available Principal Amounts for
Series [o] used to pay interest on the Series [o] notes as
described above under "--Allocation of Available Amounts
Allocated to Series [o] -- Available Principal Amounts for
Series [o]" and
(B) the amount of charge-offs on defaulted receivables in the
related Collection Period that are allocated to Series [o]
to the extent that they are not covered by Available
Interest Amounts for Series [o] that are treated as
Available Principal Amounts for Series [o] to cover such
losses as described under "--Allocation of Available Amounts
Allocated to Series [o].-- Available Interest Amounts for
Series [o]."
On each Transfer Date, we will allocate the amount of any reduction
in the Series [o] nominal liquidation amount due to clause (A) or (B) above as
follows:
o first, we will reduce the Series [o] overcollateralization
amount by the amount of such reduction until the Series [o]
overcollateralization amount reaches zero; and
o second, we will reduce the nominal liquidation amount of the
Series [o] notes by any remaining amount of such reduction
until the nominal liquidation amount of the Series [o] notes
reaches zero.
When we reduce the Series [o] overcollateralization amount as
described in clause first above, we will apply such reduction to the portion
of the Series [o] overcollateralization amount equal to the Series [o]
percentage of the nominal liquidation amount of the Series [o] notes (the
"Primary Series [o] overcollateralization amount"). If the Primary Series [o]
Overcollateralization Amount is reduced below its original amount on any
Transfer Date after giving effect to all allocation and distributions on that
date, then an Early Redemption Event will occur.
While we will reduce the nominal liquidation amount of the Series [o]
notes as described above, the outstanding dollar principal amount of the
Series [o] notes will not be similarly reduced. However, the aggregate
principal paid on the Series [o] notes will not exceed the
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nominal liquidation amount of the Series [o] notes. Consequently, you will
incur a loss on your notes if the Series [o] overcollateralization amount is
reduced to zero and the nominal liquidation amount of the Series [o] notes in
thereafter reduced and not reinstated as described below.
Reinstatements. The Series [o] nominal liquidation amount will be
reinstated on any Transfer Date by the amount of the Available Interest
Amounts for Series [o] that we apply to cover the Series [o] nominal
liquidation amount deficit pursuant to clause third under "--Allocation of
Available Amounts Allocated to Series [o] - Available Interest Amounts for
Series [o]." We will allocate the amount of that reinstatement on that
Transfer Date as follows:
o first, if the nominal liquidation amount of the Series [o]
notes has been reduced and not fully reinstated, we will
allocate the reinstatement amount to the nominal liquidation
amount of the Series [o] notes until it equals the outstanding
dollar principal amount of the Series [o] less any amounts
(other than investment earnings) in the principal funding
account and any principal payments to the Series [o]
noteholders; and
o second, we will allocate any remaining reinstatement amount to
the Series [o] overcollateralization amount until the Series
[o] overcollateralization amount has been fully reinstated.
The nominal liquidation amounts of other series of notes will be
subject to similar reductions and reinstatements.
Series [o] Overcollateralization Amount
The Series [o] overcollateralization amount will be equal to the sum of
(i) [o]% (the "Series [o] overcollateralization percentage")
of the nominal liquidation amount of the Series [o] notes;
and
(ii) the incremental overcollateralization amount
The "incremental overcollateralization amount" on any Determination
Date will equal the result obtained by multiplying
(x) a fraction, the numerator of which is the Series [o] nominal
liquidation amount (calculated without including the incremental
overcollateralization amount), and the denominator of which is the Pool
Balance on that last day
by (y) the excess, if any, of
(a) the sum of the Overconcentration Amount and the
aggregate amount of Ineligible Receivables on that
Determination Date
over (b) the aggregate amount of Ineligible Receivables and
receivables in accounts containing Dealer
Overconcentrations Balances, in each case
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that became Defaulted Receivables during the
preceding Collection Period and are not subject to
reassignment from the CARCO receivables trust, unless
insolvency events relating to the seller or CFC have
occurred, as further described in the Pooling and
Servicing Agreement.
The terms used in this definition are defined in the Glossary in the
prospectus.
As of the Series [o] Cut-Off Date, the Series [o]
overcollateralization amount was $[o].
The Series [o] overcollateralization amount will vary from time to
time as the amounts in clauses (i) and (ii) vary from time to time. Also, we
will reduce or reinstate the Series [o] overcollateralization amount as
described under "--Reduction and Reinstatement of Nominal Liquidation
Amounts."
Notwithstanding the foregoing, if the long-term unsecured debt of
[Daimler Chrysler AG] is reduced below BBB- by Standard & Poor's, then the
Series [o] overcollateralization percentage will be [o]% rather than [o]%
until that rating is increased to at least BBB-.
Allocation Percentages
We will allocate Available Amounts to Series [o] on the basis of
various percentages. Which percentage we use depends on whether we are
allocating Available Interest Amounts or Available Principal Amounts and
whether or not the Available Amounts are received in the Revolving Period.
The servicer for the CARCO receivables trust will allocate
collections on the receivables among the various series of certificates
(including the collateral certificate) as described under "Description of the
Investor Certificates Issued by the CARCO Receivables Trust -- Allocation
Percentages -- Allocations among Series" in the prospectus. In general, we
will allocate interest collections, principal collections, Defaulted Amounts
and Miscellaneous Payments among series of certificates (including the
collateral certificate) pro rata on the basis of their adjusted invested
amounts. The adjusted invested amount of the collateral certificate will be
the sum of the series nominal liquidation amounts for all series of notes.
We will allocate the Available Amounts distributed on the collateral
certificate among the series of notes (including Series [o]) as follows:
o Available Interest Amounts and the losses on defaulted
receivables will be allocated to Series [o] based on the
Floating Allocation Percentage;
o during any period that is not the Accumulation Period or an
Early Redemption Period (a "Nonprincipal Period"), Available
Principal Amounts will be allocated to Series [o] based on the
Floating Allocation Percentage;
o during the Accumulation Period and any Early Redemption Period,
Available Principal Amounts will be allocated to Series [o]
based on the Principal Allocation Percentage; and
S-30
o Miscellaneous Payments allocated to the collateral certificate
will be treated as part of Available Principal Amounts.
The Floating Allocation Percentage effects, in general, a pro rata
allocation based on the nominal liquidation amount of each series of notes.
The "Floating Allocation Percentage" for any Transfer Date will be the
percentage equivalent, which shall never exceed 100%, of a fraction, the
numerator of which is the Series [o] nominal liquidation amount as of the day
preceding that Transfer Date and the denominator of which is the sum of the
nominal liquidation amounts for all series of notes (including Series [o] ) on
that day.
The Available Interest Amounts allocable to Series [o] for a payment
date will be increased by the negative carry amount on funds
in the principal funding amount. The negative carry amount is the amount by
which interest at the Series [o] rate on funds in the principal funding
account for that collection period exceeds the net investment earnings on
those funds for that period. The negative carry amount will be funded out of
funds otherwise allocable to the seller.
The Principal Allocation Percentage is, in general, based on the
Series [o] nominal liquidation amount at the end of the Revolving Period.
Consequently, even though we are distributing or accumulating Available
Principal Amounts for Series [o] noteholders, the numerator used for the
calculation will not decline. The "Principal Allocation Percentage" for any
Transfer Date will be the percentage equivalent, which shall never exceed
100%, of a fraction
o the numerator of which is the series nominal liquidation amount
of Series [o] as of the last day of the Collection Period prior
to the commencement of such Early Redemption Period or
Accumulation Period, and
o the denominator of which is the sum of the series nominal
liquidation amounts for each series of notes; provided,
however, that for any series that is amortizing or accumulating
principal, the series nominal liquidation amount of that series
will be the series nominal liquidation amount as of the last
day of the Collection Period prior to the commencement of such
amortization or accumulation.
This fraction will adjust to account for any additional issuances of notes
since the prior Transfer Date.
Required Participation Percentage
As described under "Description of the Investor Certificates Issued
by the CARCO Receivables Trust -- Addition of Accounts" in the prospectus, the
seller will be required to add to the CARCO receivables trust the receivables
of Additional Accounts if the Pool Balance at the end of a Collection Period
is less than the Required Participation Amount for the following payment date.
The calculation of the Required Participation Amount is a function of the
Required Participation Percentage. The "Required Participation Percentage" for
the collateral certificate is [103]%. However, if the aggregate amount of
principal receivables due from any dealer or group of affiliated dealers at
the close of business on the last day of any Collection
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Period with respect to which that determination is being made is greater than
[4]% of the Pool Balance on that last day, the Required Participation
Percentage, as of that last day and with respect to that Collection Period and
the immediately following Collection Period only, will be [104]%. Furthermore,
the seller may, upon ten days' prior notice to the CARCO receivables trust
trustee and the Rating Agencies, reduce the Required Participation Percentage
to not less than 100%, so long as the Rating Agencies shall not have notified
the seller or the servicer that any reduction will result in a reduction or
withdrawal of the rating of the Series [o] notes or any other outstanding
series or class of notes.
Sale of Receivables
Receivables may be sold upon the insolvency of CFC or Daimler
Chrysler, an acceleration of the Series [o] notes after an event of default
and on the legal final of the Series [o] notes in the prospectus. If an event
of default occurs and the Series [o] notes are accelerated, the CARCO
receivables trust may sell receivables if the conditions described in
"Indenture -- Events of Defaults" in the prospectus are satisfied. This sale
will take place at the option of the indenture trustee or at the direction of
the holders of a majority of aggregate outstanding dollar principal amount of
the Series [o] notes. However, a sale will only be permitted if at least one
of the following conditions is met:
o the holders of at least 90% of the outstanding dollar principal
amount of the Series [o] notes consent;
o the net proceeds of such sale plus amounts on deposit in the
applicable accounts would be sufficient to pay all amounts due
on the Series [o] notes; or
o holders of at least 66 2/3% of the outstanding dollar principal
amount of the Series [o] notes consent to the sale unless the
indenture trustee determines that the funds to be allocated to
the Series [o] notes, including Available Interest Amounts and
Available Principal Amounts allocable to Series [o] and amounts
on deposit in the applicable accounts are likely to be
sufficient to make payments on the Series [o] notes when due.
If principal of or interest on the Series [o] notes has not been paid
in full on the legal final (after giving effect to any adjustments, deposits
and payments to be made on that date), the sale will automatically take place
on that date. We will apply proceeds from the sale to the payment of the
amounts due on the Series [o] notes. We will pay any excess to the seller.
The amount of receivables sold will be up to the Series [o] nominal
liquidation amount. The nominal liquidation amount of the Series [o] notes
will be automatically reduced to zero upon the sale. After the sale, we will
not allocate any further Available Principal Amounts or Available Interest
Amounts to the Series [o] notes.
The amount of proceeds from the sale of receivables for the Series
[o] notes may be less than the outstanding dollar principal amount of the
Series [o] notes. This deficiency can arise if the Series [o] nominal
liquidation amount was reduced below the outstanding dollar principal amount
of the Series [o] notes before the sale of receivables
S-32
or if the sale price for the receivables was less than the outstanding dollar
principal amount of the Series [o] notes. These types of deficiencies will not
be reimbursed.
Any amount remaining on deposit in the interest funding account when
the Series [o] notes has received final payment as described in "-- Final
Payment of the Series [o] Notes" after a sale of receivables will be treated
as Available Interest Amounts and be allocated as described in "-- Allocation
of Available Amounts."
Final Payment of the Series [o] Notes
Series [o] noteholders will be entitled to payment of principal in an
amount equal to the outstanding dollar principal amount of the Series [o]
notes. However, Available Principal Amounts will be allocated to pay principal
on the Series [o] notes only up to the Series [o] nominal liquidation amount,
which may be reduced for charge-offs due to uncovered defaults on principal
receivables in the CARCO receivables trust and reallocations of Available
Principal Amounts to pay interest on the Series [o] notes. In addition, if a
sale of receivables to pay outstanding amounts on the Series [o] notes occurs
(as described in "-- Sale of Receivables"), the amount of receivables sold
will be limited to the Series [o] nominal liquidation amount. If the Series
[o] nominal liquidation amount has been reduced below the outstanding dollar
principal amount of the Series [o] notes, Series [o] noteholders will not
receive full payment of principal of their notes.
On the date of a sale of receivables following acceleration of the
Series [o] notes or on the legal final of the Series [o] notes, the proceeds
of such sale, but only up to the Series [o] nominal liquidation amount, will
be available to pay the outstanding dollar principal amount of the Series [o]
notes.
The Series [o] notes will be considered to be paid in full, the
holders of the Series [o] notes will have no further right or claim, and the
issuer will have no further obligation or liability for principal or interest,
on the earliest to occur of:
o the date of the payment in full of the stated principal amount
of and all accrued interest on the Series [o] notes;
o the date on which the outstanding dollar principal amount of
the Series [o] notes is reduced to zero, and all accrued
interest on the Series [o] notes if paid in full;
o the legal final of the Series [o] notes, after giving effect to
all deposits, allocations, reallocations, sales of receivables
and payments to be made on that date; or
o the date on which a sale of receivables has taken place, as
described in "--Sale of Receivables."
Shared Excess Available Interest Amounts
Excess Available Interest Amounts for any Transfer Date allocated to
Series[o] that are not needed to make payments or deposits for Series [o] will
be available for allocation to other series of notes. Such excess, called
"Shared Excess Available Interest Amounts," will be
S-33
allocated to cover shortfalls in Available Interest Amounts for other series,
if any, which have not been covered out of the Available Interest Amounts
allocable to those series. If these shortfalls exceed the Shared Excess
Available Interest Amounts for any Transfer Date, Shared Excess Available
Interest Amounts will be allocated pro rata among the applicable series based
on their respective shortfalls in Available Interest Amounts. To the extent
that Shared Excess Available Interest Amounts exceed those shortfalls, the
balance will be paid to the seller.
Early Redemption Events
The Early Redemption Events with respect to the Series [o] notes will
include each of the Early Amortization Events in the prospectus, plus each of
the following:
1. failure on the part of DCWR, the servicer or CFC, as
applicable,
o 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 that payment or deposit is
required to be made; or
o 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; or
o to comply with its covenant not to create any lien on a
Receivable; or
o to observe or perform in any material respect any other
covenants or agreements set forth in the Pooling and
Servicing Agreement or the Receivables Purchase Agreement,
which failure continues unremedied for a period of 45 days
after written notice of that failure;
2. any representation or warranty made by CFC, as seller, in the
Receivables Purchase Agreement or by DCWR in the Pooling and
Servicing Agreement or any information required to be given by
DCWR 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. An
Early Redemption Event, however, shall not be deemed to occur
if DCWR has repurchased the related receivables or all of the
receivables, if applicable, during that period in accordance
with the provisions of the Pooling and Servicing Agreement;
3. the occurrence of events of bankruptcy, insolvency or
receivership relating to CFC or DaimlerChrysler;
4. a failure by DCWR to convey receivables in Additional Accounts
to the trust within five business days after the day on which
it is required to convey those receivables under the Pooling
and Servicing Agreement;
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5. on any Transfer Date, the Primary Series [o]
overcollateralization amount for the next payment date will be
reduced to an amount less than the required amount on that
Determination Date after giving effect to the distributions to
be made on the next payment date;
6. any Service Default occurs;
7. 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 20% of the Pool
Balance on that last day;
8. on any Determination Date, the average of the Monthly Payment
Rates for the three preceding Collection Periods, is less than
20%;
9. the outstanding dollar principal amount of the Series [o] notes
is not repaid by the Series [o] Expected Payment Date;
10. the issuer becomes an investment company within the meaning of
the Investment Company Act of 1940; and
11. the occurrence of an event of default under the indenture.
In the case of any event described in clauses 1, 2 or 6 above, an
Early Redemption Event with respect to Series [o] will be deemed to have
occurred only if, after the applicable grace period described in those
clauses, if any, either the indenture trustee or Series [o] noteholders
holding Series [o] notes evidencing more than 50% of the outstanding dollar
principal amount of the Series [o] notes by written notice to the seller, the
servicer, the CARCO receivables trust trustee and the indenture trustee, if
given by Series [o] noteholders, declare that an Early Redemption Event has
occurred as of the date of that notice. In the case of any Early Redemption
Event described in the prospectus or any event described in 3, 4, 5, 7, 8, 9,
10 or 11 above, an Early Redemption Event with respect to Series [o] will be
deemed to have occurred without any notice or other action on the part of the
trustee or the Series [o] noteholders immediately upon the occurrence of that
event.
Under limited circumstances, an Early Redemption Period which
commences prior to the scheduled end of the Revolving Period may terminate and
the Revolving Period recommence. If an Early Redemption Period results from
the failure by DCWR to convey receivables in Additional Accounts to the CARCO
receivables trust, as described in clause 4 above, during the Revolving Period
and no Early Redemption Event that has not been cured or waived as described
in this prospectus supplement has occurred, the Early Redemption Period
resulting from that failure will terminate and the Revolving Period will
recommence as of the end of the first Collection Period during which the
seller would no longer be required to convey receivables to the trust.
However, it will not recommence if the scheduled termination date of the
Revolving Period has occurred. 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 in respect of the collateral
certificate and the certificates of other outstanding series during the Early
Redemption Period or as a result of the subsequent addition of receivables to
the CARCO receivables trust. However, if any Early Redemption Event, other
than an Early
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Redemption Event described in the clause 3 above or in the prospectus, occurs,
the Revolving Period will recommence following receipt of
o written confirmation by each Rating Agency, other than Moody's,
that its rating of the Series [o] notes will not be withdrawn
or lowered as a result of the recommencement and
o the consent of Series [o] noteholders holding Series [o] notes
evidencing more than 50% of the outstanding dollar principal
amount of the Series [o] notes to the recommencement, provided
that no other Early Redemption Event that has not been cured or
waived as described in this prospectus supplement has occurred
and the scheduled termination of the Revolving Period has not
occurred.
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Underwriting
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Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement"), the seller has agreed to sell to [o]
(the "underwriter[s]"), and the underwriter[s] have agreed to purchase from
the seller, all of the Series [o] notes.
Distribution of the Series [o] notes will be made from time to time
in negotiated transactions or otherwise at varying prices to be determined at
the time of sale. Proceeds to the seller will be [o]% of the aggregate
principal amount of the Series [o] notes plus accrued interest from [o],
before deducting expenses estimated to be $[o]. In connection with the
purchase and sale of the Series [o] notes, the underwriter may be deemed to
have received compensation from the seller in the form of underwriting
discount.
In the ordinary course of its business, the underwriter[s] and [its]
[their] affiliates have engaged and may engage in investment banking
transactions with the seller and its affiliates.
The underwriter[s] intend to make a secondary market in the Series
[o] notes, but have no obligation to do so. We cannot assure you that a
secondary market for the Series [o] notes will develop or, if it does develop,
that it will continue or that it will provide holders of the Series [o] notes
with a sufficient level of liquidity of the Series [o] notes.
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Legal Matters
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Certain legal matters relating to the Series [o] notes will be passed
upon for DCWR by Sidley Austin Brown & Wood LLP, New York, New York, and for
the underwriter by Sidley Austin Brown & Wood LLP. Federal income tax and
ERISA matters will be passed upon for DCWR and the issuer by Sidley Austin
Brown & Wood LLP. In addition to representing the
S-36
underwriter, Sidley Austin Brown & Wood LLP from time to time represents
Chrysler Financial Company L.L.C. and its affiliates on other matters. See
"Legal Matters" in the prospectus.
- -------------------------------------------------------------------------------
Note Ratings
- -------------------------------------------------------------------------------
The issuer will issue the Series [o] notes only if they are rated at
the time of issuance in the highest long-term rating category by at least one
nationally recognized rating agency.
The rating agencies and their ratings only address the likelihood
that you will timely receive interest payments due and you will ultimately
receive all of your required principal payments by the legal final. The rating
agencies and their ratings do not address the likelihood you will receive
principal payments on a scheduled date or whether you will receive any
principal on your Series [o] notes prior to or after the expected payment
date.
The ratings assigned to the Series [o] notes should be evaluated
independently from similar ratings on other types of securities. A rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the rating agency.
- -------------------------------------------------------------------------------
Glossary of Principal Terms for Prospectus Supplement
- -------------------------------------------------------------------------------
"Accumulation Period Commencement Date" means [o] or, if the
administrator elects at its option to delay the start of the Accumulation
Period, a later date selected by the administrator. In selecting an
Accumulation Period Commencement Date, the administrator must satisfy the
conditions described under "Series Provisions--Principal."
"Accumulation Period Length" means the number of full Collection
Periods between the Accumulation Period Commencement Date and the Series [o]
Expected Payment Date.
"Calculation Agent" means the indenture trustee.
"CARCO receivables trust" means the CARCO Auto Loan Master Trust.
"CFC" means Chrysler Financial Company L.L.C.
"Collection Period" means, for any payment date, the calendar month
preceding the month in which that payment date occurs.
"Controlled Accumulation Amount" means an amount equal to the Series
[o] nominal liquidation invested amount as of the [o] payment date, after
giving effect to any changes in the Series [o] nominal liquidation amount on
that date, divided by the Accumulation Period Length.
S-37
"Controlled Deposit Amount" means, for a payment date, the excess (i)
of the Controlled Accumulation Amount over (ii) any funds in the Excess
Funding Account that are allocable to Series [o] and have not been deposited
into the principal funding account as of that payment date.
"DaimlerChrysler" means DaimlerChrysler Corporation.
"DCWR" means DaimlerChrysler Wholesale Receivables LLC.
"Excluded Dealers" means the dealers that are in voluntary or
involuntary bankruptcy proceedings or voluntary or involuntary liquidation or
that, subject to limitations, are being voluntarily removed by the seller from
the trust.
"Excluded Receivables" means principal receivables with respect to
Excluded Dealers.
"final payment date" means the payment date on which, after giving
effect to all payments to be made on that payment date, the outstanding dollar
principal amount of the Series [o] notes will be paid in full.
"Floating Allocation Percentage" means, for any Transfer Date, the
percentage equivalent, which shall never exceed 100%, of a fraction, the
numerator of which is the Series [o] nominal liquidation amount as of the day
preceding that Transfer Date and the denominator of which is the sum of the
series nominal liquidation amounts for all series of notes (including Series
[o]).
"interest funding account" means an Eligible Deposit Account
maintained by the administrator in the name of the indenture trustee for the
benefit of the Series [o] noteholders and in which interest is deposited for
payment to the Series [o] noteholders.
"Interest Period" means, with respect to any payment date, the period
from and including the preceding payment date to but excluding that payment
date, or, in the case of the first payment date, from and including the Series
[o] issuance date to but excluding the first payment date.
"legal final" means the payment date in [o], which is the payment
date on which the Series [o] notes are required to be paid.
"LIBOR" means, with respect to any Interest Period, the rate
established by the Calculation Agent, which will equal the offered rate for
United States dollar deposits for one month that appears on Telerate Page 3750
as of 11:00 A.M., London time, on the LIBOR Determination Date. However, if on
any LIBOR Determination Date the offered rate does not appear on Telerate Page
3750, the Calculation Agent will request each of the reference banks, which
shall be major banks that are engaged in transactions in the London interbank
market selected by the Calculation Agent, to provide the Calculation Agent
with its offered quotation for United States dollar deposits for one month to
prime banks in the London interbank market as of 11:00 A.M., London time, on
that date. If at least two reference banks provide the Calculation Agent with
the offered quotations, LIBOR on that date will be the arithmetic mean,
rounded upwards, if necessary, to the nearest 1/100,000 of 1% (.0000001), with
five one-millionths of a percentage point rounded upward, of all the
quotations. If on that date fewer than two of the
S-38
reference banks provide the Calculation Agent with the offered quotations,
LIBOR on that date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1 / 100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, of the offered per annum rates that one or
more leading banks in The City of New York selected by the Calculation Agent
are quoting as of 11:00 A.M., New York City time, on that date to leading
European banks for United States dollar deposits for one month. If, however,
those banks are not quoting as described above, LIBOR for that date will be
LIBOR applicable to the Interest Period immediately preceding that Interest
Period.
"LIBOR Business Day" means a day that is both a Business Day and a
day on which banking institutions in the City of London, England are not
required or authorized by law to be closed.
"LIBOR Determination Date" means, with respect to any Interest
Period, the second LIBOR Business Day prior to that Interest Period.
"Monthly Interest" means, for any payment date, the amount of
interest accrued in respect of the Series [o] notes in the Interest Period for
that payment date.
"Monthly Principal" means, with respect to any payment date relating
to the Accumulation Period or any Early Redemption Period, the Available
Principal Amounts for Series [o] for that payment date. For each payment date,
however, with respect to the Accumulation Period, Monthly Principal may not
exceed the Controlled Deposit Amount. Also, Monthly Principal will not exceed
the Series [o] nominal liquidation amount less the amount (other than
investment earnings) in the principal funding account.
"nominal liquidation amount of the Series [o] notes" means the
outstanding dollar principal amount of the Series [o] notes (which upon
issuance will be $[o]), minus the reductions in the nominal liquidation amount
of the Series [o] notes described under "Deposit and Application of
Funds--Reduction and Reinstatement of Nominal Liquidation Amounts" plus the
reinstatements to the nominal liquidation amount of the Series [o] notes
described under that heading.
"Nonprincipal Period" means any period that is not the Accumulation
Period or an Early Redemption Period.
"payment date" means the 15th day of each month (or if that 15th day
is not a business day, the next following business day), commencing in [o].
"pool factor" means, for a payment date, an eleven-digit decimal
expressing the Invested Amount as of the Determination Date, determined after
taking into account any reduction in the Invested Amount which will occur on
the payment date, as a proportion of the Initial Invested Amount.
"Principal Allocation Percentage" means, for any Transfer Date, the
percentage equivalent, which shall never exceed 100%, of a fraction,
S-39
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the Revolving Period, if that last
day has occurred or, if that last day has not occurred, as of
the last day of the immediately preceding Collection Period and
o the denominator of which is the sum of the series nominal
liquidation amounts for each series of notes; provided that for
any series that is amortizing or accumulating principal, the
series nominal liquidation amount of that series will be the
series nominal liquidation amount as of the last day of the
Collection Period prior to the commencement of such amortization
or accumulation.
"principal funding account" means an Eligible Deposit Account
maintained by the administrator in the name of the indenture trustee for the
benefit of the Series [o] noteholders and in which principal is accumulated
for payment to the Series [o] noteholders.
"Record Date" means, for any payment date, the day immediately
preceding that date.
"Required Participation Percentage" means, for collateral
certificate, [103]%. If, however, the aggregate amount of Principal Receivables
due from any Dealer or group of affiliated Dealers at the close of business on
the last day of any Collection Period with respect to which the determination
is being made is greater than [4]% of the Pool Balance on that last day, the
Required Participation Percentage shall mean, as of that last day and with
respect to that Collection Period and the immediately following Collection
Period only, [104]%. Furthermore, 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 the Rating
Agencies shall not have notified the seller or the servicer that any reduction
will result in a reduction or withdrawal of the rating of the Series [o] notes
or any other outstanding series or class of notes.
"Revolving Period" means the period beginning at the close of
business on the Series [o] Cut-Off Date and terminating on the earlier of
o the close of business on the day immediately preceding the day
on which the Accumulation Period commences and
o the close of business on the day an Early Redemption Period
commences.
The Revolving Period, however, may recommence upon the termination of an Early
Redemption Period.
"seller" means DCWR.
"Seller's Participation Amount" means, for any date, an amount equal
to the Pool Balance on that date minus the aggregate invested amounts for all
outstanding series of certificates on that date.
"Series [o] Cut-Off Date" means [o].
S-40
"Series [o] Expected Payment Date" means the [o] payment date.
"Series [o] issuance date" means the date on which the Series [o]
notes are initially issued.
"Series [o] nominal liquidation amount" means the sum of (i) the
nominal liquidation amount of the Series [o] notes and (ii) the Series [o]
overcollateralization amount.
"Series [o] notes" means the issuer's Floating Rate Auto Loan Asset
Backed Notes, Series [o].
"Series [o] overcollateralization amount" is described under "Deposit
and Application of Funds--Series [o] Overcollateralization Amount."
"Series [o] rate" means the per annum rate equal to the applicable
LIBOR plus [o]%.
"Shared Excess Available Interest Amounts" means, with respect to any
Transfer Date, the sum of, for each series of notes, the Available Interest
Amounts for that series that are not required to be applied in respect of that
series.
"Shared Excess Available Principal Amounts" means, with respect to
any Transfer Date, the sum of, for each series of notes, the Available
Principal Amounts for that series that are not required to be applied in
respect of that series.
"Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service, or any other page as may replace that page on that
service, or any other service as may be nominated as the information vendor,
for the purpose of displaying London interbank offered rates of major banks.
"Transfer Date" means the Business Day prior to a payment date.
"underwriter" means [o].
"Underwriting Agreement" means the underwriting agreement among the
underwriter[s], DaimlerChrysler Wholesale Receivables LLC and Chrysler
Financial Company L.L.C. dated as of [o]
S-41
Annex I
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Other Series of Notes
- -------------------------------------------------------------------------------
[This Annex I sets forth the principal characteristics of the
following outstanding series of notes issued by the issuer:]
[At the date of this prospectus supplement, there are no outstanding
series of notes.]
A-I-1
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Series of Investor Certificates Issued by the CARCO Receivables Trust
- -------------------------------------------------------------------------------
This Annex II sets forth the principal characteristics of
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 1996-1,
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 1996-2,
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 1998-1,
o the Fixed Rate Auto Loan Asset Backed Certificates, Series
1999-1,
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 1999-2,
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 1999-3,
o the 6.43% Auto Loan Asset Backed Certificates, Series
1999-4,
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 2000-A and
o the Floating Rate Auto Loan Asset Backed Certificates,
Series 2000-B ("Series 1996-1", "Series 1996-2", "Series
1998-1", "Series 1999-1", "Series 1999-2", "Series
1999-3", "Series 1999-4", "Series 2000-A" and "Series
2000-B" respectively).
For more specific information with respect to any series of investor
certificates, any prospective investor should contact DCWR at (248)
[512-3990]. DCWR will provide, without charge, to any prospective purchaser, a
copy of the disclosure document with respect to that series.
1. Series 1996-1
Initial Principal Amount.................... $500,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount $500,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 11.1% of the
Invested Amount
Revolving Period............................ October 31, 1996 to the earlier
of the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date....................... November 2003 Payment date
Termination Date............................ October 2005 Payment date
2. Series 1996-2
Initial Principal Amount.................... $500,000,000
A-II-1
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount.................... $500,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount Approximately 11.1% of the
Invested Amount
Revolving Period............................ November 30, 1996 to the earlier
of the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date....................... December 2001 Payment date
Termination Date............................ November 2003 Payment date
3. Series 1998-1
Initial Principal Amount
Class A-1 Certificates................. $500,000,000
Class A-2 Certificates................. $500,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount
Class A-1 Certificates................. $[0]
Class A-2 Certificates................. $500,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount Approximately 11.1% of the
Invested Amount
Revolving Period............................
Class A-1 Certificates................. July 1, 1998 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Class A-2 Certificates................. July 1, 1998 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date
Class A-1 Certificates................. June 2001 Payment date
Class A-2 Certificates................. June 2003 Payment date
Termination Date
Class A-1 Certificates................. June 2003 Payment date
Class A-2 Certificates................. June 2005 Payment date
4. Series 1999-1
Initial Principal Amount
Class A-1 Certificates................. $0
Class A-2 Certificates................. $600,000,000
A-II-2
Scheduled Interest
Payment Date........................... Monthly, on or about the
fifteenth day of each month
Current Principal Amount
Class A-1 Certificates................. $0
Class A-2 Certificates................. $600,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 11.7% of the
Invested Amount
Revolving Period
Class A-1 Certificates................. March 1, 1999 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Class A-2 Certificates................. March 1, 1999 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date
Class A-1 Certificates................. March 2001 Payment date
Class A-2 Certificates................. March 2002 Payment date
Termination Date
Class A-1 Certificates................. March 2003 Payment date
Class A-2 Certificates................. March 2004 Payment date
5. Series 1999-2
Initial Principal Amount
Class A-1 Certificates................. $750,000,000
Class A-2 Certificates................. $600,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount
Class A-1 Certificates................. $750,000,000
Class A-2 Certificates................. $600,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount Approximately 11.1% of the
Invested Amount
Revolving Period
Class A-1 Certificates................. May 1, 1999 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Class A-2 Certificates................. May 1, 1999 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date
Class A-1 Certificates................. May 2002 Payment date
Class A-2 Certificates................. May 2004 Payment date
Termination Date
Class A-1 Certificates................. May 2004 Payment date
Class A-2 Certificates................. May 2006 Payment date
A-II-3
6. Series 1999-3
Initial Principal Amount.................... $1,000,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount.................... $1,000,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 11.1% of the
Invested Amount
Revolving Period............................ June 30, 1999 to the earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date....................... July 2002 Payment date
Termination Date............................ July 2004 Payment date
7. Series 1999-4
Initial Principal Amount.................... $500,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount.................... $500,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 12% of the
Invested Amount
Revolving Period............................ October 31, 1999 to the earlier
of the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date....................... November 2002 Payment date
Termination Date............................ November 2004 Payment date
8. 2000-A
Initial Principal Amount.................... $750,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount.................... $750,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 11.1% of the
Invested Amount
Revolving Period............................ March 31, 2000 to earlier of the
commencement of an Accumulation
Period or an Early Amortization
Period
Expected Payment Date....................... March 2003 Payment date
Termination Date............................ March 2005 Payment date
9. 2000-B
Initial Principal Amount.................... $501,000,000
Scheduled Interest
A-II-4
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount.................... $501,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 11.1% of the
Invested Amount
Revolving Period ........................... October 24, 2000 to earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date....................... October 2003 Payment date
Termination Date............................ October 2005 Payment date
10. 2000-C
Initial Principal Amount.................... $500,000,000
Scheduled Interest
Payment Date................................ Monthly, on or about the
fifteenth day of each month
Current Principal Amount.................... $500,000,000
Required Participation
Percentage.................................. 103%
Initial Subordinated Amount................. Approximately 11.1% of the
Invested Amount
Revolving Period ........................... December 8, 2000 to earlier of
the commencement of an
Accumulation Period or an Early
Amortization Period
Expected Payment Date....................... November 2003 Payment date
Termination Date............................ November 2005 Payment date
A-II-5
DAIMLERCHRYSLER PROSPECTUS
DAIMLERCHRYSLER MASTER OWNER TRUST
Issuer
Auto Loan Asset Backed Notes
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC,
Seller
CHRYSLER FINANCIAL COMPANY L.L.C.,
Servicer
The issuer --
o may periodically issue asset backed notes in one or more series with
one or more classes; and
o will own
-- a certificate issued by a master receivables trust that owns
receivables arising from a portfolio of automobile dealer
revolving floorplan financing agreements;
-- distributions on that certificate, which consist of payments
due on those receivables; and
-- other property described in this prospectus and in the
prospectus supplement.
The notes --
o will be obligations of the issuer only;
o will be paid only from the assets of the issuer;
o will represent the right to payments in the amounts and at the times
described in the prospectus supplement for those notes;
o will be rated in one of the four highest long-term rating categories
at the time of issuance by at least one nationally recognized rating
agency; and
o may have the benefit of one or more forms of credit enhancement.
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Before you decide to invest in any of the notes, please read this
prospectus and the related prospectus supplement, especially the risk factors
beginning on page [ ] of this prospectus. The notes will be obligations of the
issuer only and neither the notes nor the assets of the issuer will represent
interests in or obligations of DaimlerChrysler Wholesale Receivables LLC,
DaimlerChrysler AG, DaimlerChrysler Corporation, Chrysler Financial Company
L.L.C., any of their affiliates or any other person.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes or determined that this
prospectus or any prospectus supplement is accurate or complete. Any
representation to the contrary is a criminal offense.
- -------------------------------------------------------------------------------
The date of this prospectus is [o], 2001.
Reading This Prospectus and the
Accompanying Prospectus Supplement
We provide information on your notes in two separate documents that
offer varying levels of detail:
o this prospectus provides general information, some of which may not
apply to a particular series of notes, including your notes, and
o the accompanying prospectus supplement provides a summary of the
specific terms of your notes.
If the terms of the notes described in this prospectus vary with the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents in the front
of each document to locate the referenced sections.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement, including any information incorporated
by reference. We have not authorized anyone to provide you with different
information. The information in this prospectus or the accompanying prospectus
supplement is only accurate as of the dates on their respective covers.
Where You Can Find More Information
The seller has filed a Registration Statement (together with all
amendments and exhibits, 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 notes offered by
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 to the Registration Statement.
The Registration Statement may be inspected and copied at:
o the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 (telephone 1-800-732-0330) and
o the SEC's regional office at Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661.
Also, the Commission maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC.
Incorporation of Documents by Reference
The Commission allows information filed with it to be incorporated by
reference into this prospectus. The following documents filed with the
Commission by the servicer, on behalf of the issuer, are incorporated in this
prospectus by reference: the CARCO receivables trust's Annual Report on Form
10-K for the year ended December 31, 2000 and the CARCO receivables trust's
ii
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and June
30, 2001. All reports and other documents filed by the servicer, on behalf of
the CARCO receivables trust and also on behalf of the issuer, in accordance
with Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this prospectus and prior to the termination of the offering of the
notes shall be deemed to be incorporated by reference in this prospectus.
For purposes of this prospectus, any statement in this prospectus or in
a document incorporated or deemed to be incorporated by reference may be
modified or superseded. Those statements may be modified or superseded by any
other statement in this prospectus, an incorporated document or a document
incorporated by reference. The statement may only be modified or superseded to
a limited extent. The original form of the statement will no longer be a part
of this prospectus. Only the modified form of the statement will constitute a
part of this prospectus.
Copies of the Documents
You will receive a free copy of any or all of the documents incorporated
in this prospectus or incorporated by reference into the accompanying
prospectus supplement if:
o you received this prospectus and
o you requested the copies from Assistant Secretary, Chrysler
Financial Company L.L.C., 1000 Chrysler Drive, CIMS 485-14-78,
Auburn Hills, Michigan 48236-2766 (Telephone: 248-512-3990).
This offer only includes the exhibits to the documents, if the exhibits are
specifically incorporated by reference in the documents. You may also read and
copy these materials at the public reference facilities of the Commission in
Washington D.C., referred to previously.
iii
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Table of Contents
- -------------------------------------------------------------------------------
Page
- -------------------------------------------------------------------------------
Summary.......................................................................1
- -------------------------------------------------------------------------------
Risk Factors..................................................................5
o Your ability to resell notes is limited..................................5
o Risk factors relating to the collateral certificate and the CARCO
receivables trust........................................................5
o Credit enhancement for a series of notes is limited. If the credit
enhancement is exhausted, you may incur a loss...........................8
o Credit ratings of the notes reflect the rating agency's
assessment of the likelihood that you will receive your payments
of interest and principal................................................8
o Book-entry registration may limit your ability to resell or
pledge your notes........................................................8
o Only some of the assets of the issuer are available for
payments on any series or class of notes.................................9
o Allocations of charged-off receivables in the CARCO
receivables trust could reduce payments to you...........................9
o You may receive principal payments earlier or later than
the expected payment date................................................9
o Class B notes and Class C notes bear losses before Class A notes........10
o Payment of Class B notes and Class C notes may be delayed
due to the subordination provisions.....................................10
o You may not be able to reinvest any early redemption
proceeds in a comparable security.......................................11
o Issuance of additional notes may affect the timing and
amount of payments to you...............................................11
o You may have limited control of actions under the
indenture and the pooling and servicing agreement.......................11
o Your remedies upon default may be limited...............................11
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DaimlerChrysler Wholesale Receivables LLC and The CARCO Receivables Trust....13
- -------------------------------------------------------------------------------
o DaimlerChrysler Wholesale Receivables LLC...............................13
o The CARCO Receivable Trust..............................................14
- -------------------------------------------------------------------------------
The Issuer...................................................................15
- -------------------------------------------------------------------------------
Use of Proceeds..............................................................16
- -------------------------------------------------------------------------------
The Dealer Floorplan Financing Business......................................16
- -------------------------------------------------------------------------------
o General.................................................................16
o Creation of Receivables.................................................17
o Credit Underwriting Process.............................................17
o Billing, Collection Procedures and Payment Terms........................18
o Revenue Experience......................................................18
o Relationship with DaimlerChrysler.......................................19
o Dealer Monitoring.......................................................19
o "Dealer Trouble" Status and CFC's Write-Off Policy......................20
o Additional Information..................................................21
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The Accounts.................................................................21
- -------------------------------------------------------------------------------
o General.................................................................21
- -------------------------------------------------------------------------------
Chrysler Financial Company L.L.C. Chrysler Financial
Corporation, Chrysler Credit Corporation and DaimlerChrysler
Services North America LLC ..................................................22
- -------------------------------------------------------------------------------
The Notes....................................................................23
o Interest................................................................24
o Principal...............................................................25
o Stated Principal Amount, Outstanding Dollar Principal
Amount and Nominal Liquidation Amount of Notes .........................25
o Subordination of Principal..............................................28
o Redemption and Early Redemption of Notes ...............................29
o Issuances of New Series, Classes and Subclasses of Notes................30
o Payments on Notes; Paying Agent.........................................31
o Book-Entry Notes........................................................32
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Sources of Funds to Pay the Notes............................................38
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o General.................................................................38
o Deposit and Application of Funds........................................40
o Issuer Accounts.........................................................41
o Derivative Agreements...................................................41
o Sale of Receivables.....................................................41
o Limited Recourse to the Issuer; Security for the Notes..................42
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The Indenture................................................................42
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o Indenture Trustee.......................................................43
o Issuer Covenants........................................................43
o Events of Default.......................................................44
o Events of Default Remedies..............................................45
o Early Redemption Events.................................................46
o Meetings................................................................47
o Voting..................................................................47
iv
o Amendments to the Indenture and Indenture Supplements...................48
o Tax Opinions for Amendments.............................................50
o Addresses for Notices...................................................50
o Issuer's Annual Compliance Statement....................................50
o Indenture Trustee's Annual Report.......................................51
o List of Noteholders.....................................................51
o Reports.................................................................51
- -------------------------------------------------------------------------------
Description of the Investor Certificates Issued by the
CARCO Receivables Trust......................................................51
- -------------------------------------------------------------------------------
o General.................................................................51
o Interest................................................................52
o Principal...............................................................52
o The Seller's Certificate................................................55
o New Issuances...........................................................56
o Conveyance of Receivables and Collateral Security.......................58
o Representations and Warranties..........................................59
o Eligible Accounts and Eligible Receivables .............................61
o Ineligible Receivables, the Installment Balance Amount
and the Overconcentration Amount........................................63
o Addition of Accounts....................................................64
o Removal of Accounts.....................................................66
o Excluded Series.........................................................69
o Collection Account......................................................70
o Excess Funding Account..................................................71
o Allocation Percentages..................................................72
o Allocation of Collections; Deposits in Collection Account...............74
o Limited Subordination of Seller's Interest; Enhancements................76
o Distributions...........................................................77
o Defaulted Receivables and Recoveries....................................77
o Optional Repurchase.....................................................79
o Reinvestment Events and Early Amortization Events.......................79
o Termination; Fully Reinvested Date......................................81
o Indemnification.........................................................82
o Collection and Other Servicing Procedures ..............................83
o Servicer Covenants......................................................83
o Servicing Compensation and Payment of Expenses..........................84
o Matters Regarding the Servicer..........................................85
o Service Default.........................................................85
o Reports.................................................................86
o Evidence as to Compliance...............................................87
o Amendments..............................................................87
o List of Certificateholders..............................................88
o The CARCO Receivables Trustee...........................................89
- -------------------------------------------------------------------------------
Description of the Receivables Purchase Agreement ...........................89
- -------------------------------------------------------------------------------
o Sale or Transfer of Receivables.........................................90
o Representations and Warranties..........................................90
o Covenants...............................................................91
o Termination.............................................................91
- -------------------------------------------------------------------------------
Legal Aspects of the Receivables.............................................92
- -------------------------------------------------------------------------------
o Transfer of Receivables.................................................92
o Matters Relating to Bankruptcy..........................................93
- -------------------------------------------------------------------------------
Tax Matters..................................................................94
- -------------------------------------------------------------------------------
o Federal Income Tax Consequences.........................................94
o State and Local Tax Consequences.......................................100
- -------------------------------------------------------------------------------
ERISA Considerations........................................................101
- -------------------------------------------------------------------------------
o General................................................................101
- -------------------------------------------------------------------------------
Experts.....................................................................103
- -------------------------------------------------------------------------------
Plan of Distribution........................................................103
Legal Matters...............................................................106
o Glossary of Terms for Prospectus.......................................106
- -------------------------------------------------------------------------------
Global Clearance, Settlement and Tax Documentation Procedures.................1
- -------------------------------------------------------------------------------
v
- -------------------------------------------------------------------------------
Summary
- -------------------------------------------------------------------------------
The following summary is a short, concise description of the main
structural features that a series or class of notes may have. For this reason,
this summary does not contain all the information that may be important to you
or that describes all of the terms of a note. You will find a detailed
description of the possible terms of a note following this summary. Refer to
the Glossary of Principal Terms for Prospectus for the definitions of each
capitalized term used in this summary and elsewhere in this prospectus.
Parties
---------------- -----------------------------------------
Party Description
---------------- -----------------------------------------
---------------- --- -------------------------------------
Issuer o DaimlerChrysler Master Owner Trust.
Seller o DaimlerChrysler Wholesale
Receivables LLC ("DCWR"), a
special-purpose indirectly owned
subsidiary of Chrysler Financial
Company L.L.C. ("CFC").
Servicer o CFC, a wholly owned subsidiary of DaimlerChrysler
Corporation ("DaimlerChrysler"), the successor to
Chrysler Corporation.
Indenture o [ ].
Trustee
Owner Trustee o [ ].
CARCO o CARCO Auto Loan Master Trust (the
Receivables "CARCO receivables trust")
Trust
o Owns the receivables and has issued
the collateral certificate to the
issuer
Trustee of o The Bank of New York
CARCO
Receivables
Trust
----------------------------------------------------------
Title of Securities
Auto Loan Asset Backed Notes (the "notes").
The Issuer
The issuer will be governed by a trust agreement between DCWR and the
owner trustee. The primary asset of the issuer will be a certificate (the
"collateral certificate") issued by CARCO Auto Loan Master Trust (the "CARCO
receivables trust"). The CARCO receivables trust has or will have outstanding
eleven series of certificates, including the collateral certificate, that
evidence interests in the CARCO receivables trust and receive a share of the
collections on the receivables owned by that trust. The assets of the CARCO
receivables trust include
o receivables existing under the accounts at the close of business on
May 31, 1991, receivables generated under the accounts from time to
time after that date during the term of the CARCO receivables trust
as well as receivables generated under any accounts added to the
CARCO receivables trust from time to time,
o all funds collected or to be collected in respect of the receivables,
o all funds on deposit in the accounts of the CARCO receivables trust,
o any other enhancement issued with respect to any particular series
or class and
o a security interest in motor vehicles and parts inventory, equipment,
fixtures, service accounts and, in some cases, realty and/or a
personal guarantee securing the receivables.
1
The Accounts
The accounts under which the receivables have been or will be generated
are revolving credit agreements entered into with CFC, directly or as
successor to an affiliate, by dealers to finance the purchase of their
automobile and light duty truck and other vehicle inventory. Accounts may be
added to, or removed from, the CARCO receivables trust. See "The Accounts",
"Description of the Certificates -- Eligible Accounts and Eligible
Receivables", " -- Addition of Accounts" and " -- Removal of Accounts."
The Receivables Owned by
the CARCO Receivables Trust
The receivables consist of advances made by CFC to domestic motor
vehicle dealers to purchase the vehicles. The vehicles consist primarily of
new automobiles, light duty trucks and other vehicles. The principal amount of
an advance in respect of a vehicle typically is equal to the wholesale
purchase price of the vehicle plus destination charges and, subject to
exceptions, is due upon the retail sale of the vehicle. See "The Dealer
Floorplan Financing Business -- Creation of Receivables" and " -- Payment
Terms." The receivables bear interest at a floating rate. See "The Dealer
Floorplan Financing Business -- Revenue Experience."
Form and Denomination
of Notes; Record Date
You may purchase notes in book-entry form only and in $1,000 increments.
The record date for payments on the notes will be the day preceding the
related payment date.
Interest
The issuer will pay interest on the notes in a series with the frequency
specified in the prospectus supplement. Each series or class of notes will
have its own interest rate, which may be fixed, variable, contingent, or
adjustable or have any combination of these characteristics and will be
specified in the prospectus supplement. The issuer's sources of funds for the
payment of interest on a series of notes will include:
o interest and principal distributions on the collateral certificate
allocable to that series and
o any available credit enhancement for that series.
Only the amounts allocated to a series are available to make payments on that
series.
Principal
The issuer will make principal payments on a series of notes on one or
more dates specified in the prospectus supplement. We will specify in the
prospectus supplement the sources of funds that the issuer will use to pay
principal. Typically, these sources will include:
o all or a portion of the principal distributions on the collateral
certificate allocable to that series,
o all or a portion of the interest distributions on the collateral
certificate allocable to that series remaining after the issuer has
made interest payments on that series and
o any available credit enhancement for that series.
Only the amounts allocated to a series are available to make payments on that
series.
We will set forth in the prospectus supplement for a series the manner
in which the issuer will accumulate or apply available funds toward principal
payments on that series of notes.
2
Each series of notes will have a revolving period during which we will
make no principal payments on that series of notes. We may structure principal
payments for a class of notes in the following ways, among others:
o a single expected final payment date, on which we will repay all
principal at once or
o an amortization period, during which we will repay principal on each
specified payment date until we have repaid all principal.
If a series has more than one class of notes, we may repay principal
differently for the various classes.
However, it is possible that principal payments on a class or series of
notes will begin earlier than the date we specify in the prospectus
supplement. If an early redemption event or event of default for a series of
notes occurs, the issuer will apply all principal distributions allocated to
that series to the repayment of the outstanding principal of notes in that
series, unless we provide in the prospectus supplement that those funds will
be set aside for payment on a later date. An early redemption event or an
event of default will likely cause us to repay principal on the notes earlier
than the expected date we specified in the prospectus supplement for that
series. Also, an early redemption event or an event of default may result in
delays or reductions in the payments on your notes.
The servicer or other designated person may have the option to purchase
the outstanding notes of a series when its stated principal amount is reduced
to a specified level.
Overcollateralization Amount;
Enhancements
Unless we otherwise specify in the related prospectus supplement, the
overcollateralization amount for a series will be subordinated to the rights
of the noteholders of that series to the extent described in the related
prospectus supplement. Also, we may provide other enhancements. See "Sources
of Funds to Pay the Notes."
Tax Matters
In the opinion of Sidley Austin Brown & Wood LLP, special federal income
tax counsel for the seller and the issuer, the notes of each series will be
o characterized as debt for federal income tax purposes and
o the issuer will not be classified as an association, or a publicly
traded partnership, taxable as a corporation under federal income
tax law.
In the opinion of Michigan counsel for the seller and the issuer, the notes
will be characterized as debt of the seller for Michigan income and single
business tax purposes. By your acceptance of a note, you will agree to treat
your notes as indebtedness of the seller for federal, state and local income
and single business tax purposes. We might issue the notes with original issue
discount. See "Tax Matters" for additional information concerning the
application of federal and Michigan tax laws.
ERISA Considerations
If you are an employee benefit plan, you should review the
considerations discussed under "ERISA Considerations" in this prospectus and
consult counsel before investing in the notes. In general, subject to those
considerations and to the conditions described in that section and unless
otherwise specified in the prospectus supplement, you may purchase notes of
any series.
3
Note Ratings
We will issue the notes of a series only if they are rated in an
investment grade rating category by at least one nationally recognized rating
agency.
The rating agencies and their ratings do not address whether you will
receive any principal on your notes prior to or after the expected payment
date. See "Risk Factors -- Ratings of the Notes."
Risk Factors
An investment in any series of notes involves material risks. See "Risk
Factors" in this prospectus.
4
- -------------------------------------------------------------------------------
Risk Factors
- -------------------------------------------------------------------------------
In this section and in the related prospectus supplement under the
heading "Risk Factors," we discuss the principal risk factors of an investment
in the notes.
Your ability to resell notes is limited.
There may be no secondary market for your notes. Underwriters may
participate in making a secondary market in the notes, but are under no
obligation to do so. We cannot assure you that a secondary market will
develop. If a secondary market does develop, we cannot assure you that it will
continue or that you will be able to resell your notes. Also, your notes will
not be listed on any securities exchange or quoted in the automated quotation
system of any registered securities association. As a result, you will not
have the liquidity that might be provided by that kind of listing or
quotation.
Risk factors relating to the collateral certificate and
the CARCO receivables trust.
The primary assets of the issuer are the collateral certificate and the
distributions made on the collateral certificate. Consequently, the factors
that affect the ability of the CARCO receivables trust to make distributions
on the collateral certificate also affect the issuer's ability to make
payments on your notes.
o Various legal aspects may cause delays in your receiving payments or may
result in reduced payments or losses on your notes.
This risk factor discusses various ways in which a third party may
become entitled to receive collections on the receivables instead of the CARCO
receivables trust. If that happens, you will experience delays in payments on
your notes and may experience reductions in payments on your notes.
Ultimately, you may incur a loss on your notes.
There are limited circumstances under the Uniform Commercial Code and
applicable federal law in which prior or subsequent transferees of receivables
could have an interest in the receivables with priority over the CARCO
receivables trust's interest. See "Legal Aspects of the Receivables --
Transfer of Receivables."
CFC and the seller have and will treat the transfer of receivables to
the CARCO receivables trust described in this prospectus as a sale of the
receivables to the seller and then to the CARCO receivables trust. However,
CFC and/or the seller may become a debtor in a bankruptcy case and a creditor
or trustee-in-bankruptcy of the debtor or the debtor itself may take the
position that the sale of receivables to the seller or to the CARCO
receivables trust should be recharacterized as a pledge of the receivables to
secure a borrowing of the debtor. In that case, the CARCO receivables trust
could experience delays in payments of collections of receivables to it or,
should the court rule in favor of any trustee, debtor or creditor, reductions
in the amount of the payments could result. Also, if the transfer of
receivables to the seller is recharacterized as a pledge, a tax or government
lien on the property of CFC arising before any receivables come into existence
may have priority over the seller's interest in the receivables. See "Legal
Aspects of the Receivables -- Matters Relating to Bankruptcy."
5
At the time a vehicle is sold, CFC's security interest in the vehicle
will terminate. Therefore, if a dealer fails to remit to CFC amounts owed with
respect to vehicles that have been sold, the related receivables will no
longer be secured by vehicles.
o The timing of payments on the receivables will determine whether we will
pay principal on the notes when intended.
Dealers pay receivables upon the retail sale of the underlying vehicle.
The timing of those sales is uncertain. Also, we cannot assure you 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 notes depends on dealer repayments. As a result, you may not receive
your principal when you expected because:
o the notes of your series or class may not be fully amortized by its
expected payment date, if any, or
o the payment of principal to noteholders or the deposit of principal
in a principal funding account during an accumulation period, if
any, with respect to your series or class of notes may not equal the
controlled amortization amount or controlled deposit amount, if any,
with respect to the series or class.
o Social, economic and other factors will affect the level of the
collections on the receivables and may affect the amount of the
distributions of the collateral certificate and therefore payments on
the notes.
Payments of the receivables are 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
o interest rates,
o unemployment levels,
o the rate of inflation and
o consumer perception of economic conditions generally.
The use of incentive programs, e.g., manufacturers' rebate programs, may
affect retail sales. However, we cannot predict whether or to what extent
economic or social factors will affect the level of vehicle sales.
o The ability of the CARCO receivables trust to make payments on the
collateral certificate depends in part on the ability of DaimlerChrysler
and CFC to generate receivables and the ability of CFC to perform its
obligations under the pooling and servicing agreement.
Neither CFC nor DaimlerChrysler is obligated to make any payments in
respect of the receivables, the collateral certificate or any notes. However,
the CARCO receivables trust and the issuer depend completely upon CFC to
generate new receivables. The ability of CFC to generate receivables depends
in turn to a large extent on the sales of automobiles and light duty trucks
and other vehicles manufactured or distributed by DaimlerChrysler. We cannot
assure you that CFC
6
will continue to generate receivables at the same rate as receivables were
generated in prior years. Also, if CFC were to cease acting as servicer,
delays in processing payments on the receivables and information in respect of
the receivables could occur and result in delays in payments to you.
CFC makes representations and warranties with respect to the
characteristics of the receivables. In some cases, CFC would be required to
purchase receivables with respect to which the representations and warranties
have been breached. If CFC fails to make a required repurchase, the issuer may
have less funds. In addition, subject to limitations, CFC has the ability to
change the terms of the Accounts, including the rate and the credit line, as
well as change its underwriting procedures. These changes could reduce the
amount of collections received on the receivables and therefore reduce the
amount of funds received by the issuer.
Under agreements between DaimlerChrysler and DaimlerChrysler-franchised
dealers, DaimlerChrysler is committed to purchase unmiled vehicles from the
dealers upon dealership termination. If DaimlerChrysler is not able to
repurchase the new vehicles under the repurchase provision of new vehicles in
the dealer agreements, losses with respect to the receivables may be adversely
affected. See "The Dealer Floorplan Financing Business -- Relationship with
DaimlerChrysler." Also, because a substantial number of the vehicles to be
sold by the Dealers are manufactured or distributed by DaimlerChrysler, if
DaimlerChrysler were temporarily or permanently no longer manufacturing or
distributing vehicles, the rate of sales of DaimlerChrysler-manufactured
vehicles owned by the Dealers would decrease. In that case, payment rates and
the loss experience with respect to the receivables will be adversely
affected. See "The Dealer Floorplan Financing Business."
o Other certificateholders may control the actions of the CARCO receivables
trust. Their actions may be adverse to your interest.
In some cases, the consent or approval of the holders of a specified
percentage of the aggregate unpaid principal amount of all outstanding
certificates of all outstanding series issued by the CARCO receivables trust
will be required to direct some actions. These actions include amending the
pooling and servicing agreement in some cases and directing a reassignment of
the entire portfolio of receivables. Also, following the occurrence of an
insolvency event with respect to the seller, the holders of certificates
evidencing more than 50% of the aggregate unpaid principal amount of each
series of certificates or each class of each series of certificates, and any
holder of a supplemental certificate, will be required to direct the trustee
for the receivables not to sell or otherwise liquidate the receivables. The
holders of notes may have no control over such actions by holders of
certificates.
o The issuance of additional series of certificates may adversely affect
your interest.
The CARCO receivables trust, as a CARCO receivables trust, has
previously issued series and is expected to issue additional series, which may
be represented by different classes within a series. A series supplement
delivered under the pooling and servicing agreement in connection with the
issuance of other series of certificates will specify principal terms
applicable to the series. No series supplement may change the terms of the
certificates of another series or the terms of the pooling and servicing
agreement as applied to the certificates of another series. See "Description
of the Certificates -- New Issuances." However, we cannot assure you that the
terms of any one
7
series of certificates might not have an impact on the timing or amount of
payments received by a certificateholder of any other series and,
consequently, on the timing or amount of payments received by a noteholder.
Credit enhancement for a series of notes is limited.
If the credit enhancement is exhausted, you may incur a loss.
We will provide credit enhancement of each series of notes by creating
an overcollaterization amount to the extent described in the related
prospectus supplement. The amount of the credit enhancement is limited and
will be reduced from time to time as described in the related prospectus
supplement. If the credit enhancement is exhausted, you are much more likely
to incur a loss. See "Limited Subordination of Seller's Interest;
Enhancements."
Credit ratings of the notes reflect the rating agency's assessment of
the likelihood that you will receive your payments of interest and principal.
Unless we specify otherwise in the related prospectus supplement, it
will be a condition to the issuance of the notes of each series offered by
this prospectus that they be rated in an investment grade rating category by
at least one nationally recognized rating agency. Any rating assigned to the
notes of a series or a class by a rating agency
o will reflect the rating agency's assessment of the likelihood that
noteholders of the series or class will receive the payments of
interest and principal required to be made under the indenture and
o will be based primarily on the value of the receivables in the CARCO
receivables trust, the level of subordination of the seller's
interest in the issuer and the availability of any enhancement with
respect to the series or class.
The rating will not be a recommendation to buy, hold or sell notes of the
series or class, and the rating will not comment as to the market price or
suitability for a particular investor. We cannot assure you that a rating will
remain for any given period of time or that a rating agency will not reduce or
withdraw a rating in the future if in its judgment circumstances in the future
so warrant. A reduction in the rating of your notes may reduce the market
value of your notes.
Book-entry registration may limit your
ability to resell or pledge your notes.
Unless we otherwise specify in the prospectus supplement relating to a
series of notes, the notes of each series will initially be book-entry notes
and will not be registered in your name or your nominee's name. Accordingly,
you will not be recognized by the indenture trustee as the "noteholder." You
will only be able to exercise the rights of a noteholder indirectly through
DTC and its participating organizations, and, if applicable, through Euroclear
or Clearstream Banking and their respective participating organizations. See
"The Notes", " -- Book-Entry Registration" and " -- Definitive Certificates."
8
Only some of the assets of the issuer are available for payments
on any series or class of notes.
The sole source of payment of principal of or interest on a series or
class of notes is provided by:
o the portion of the principal collections and interest collections
received by the issuer under the collateral certificate and
available to that series or class of notes after giving effect to
all allocations and reallocations;
o the applicable trust accounts for that series of class of notes; and
o payments received under any applicable derivative agreement for that
series or class of notes.
As a result, you must rely only on the particular assets allocated to your
series or class as security for your series or class of notes for repayment of
the principal of and interest on your notes. You will not have recourse to any
other assets of the issuer or any other person for payment of your notes. See
"Sources of Funds to Pay the Notes."
A further restriction applies if the holders of a series or class of
notes directs the CARCO receivables trust to sell receivables following an
event of default and acceleration, or on the applicable legal maturity date,
as described in "Sources of Funds to Pay the Notes -- Sale of Receivables." In
that case, that series or class of notes has recourse only to the proceeds of
that sale and investment earnings on those proceeds.
Allocations of charged-off receivables in the CARCO receivables trust
could reduce payments to you.
The servicer will charge off the receivables arising in the accounts in
the CARCO receivables trust portfolio if the receivables become uncollectible.
The collateral certificate will be allocated a portion of these charged-off
receivables. If the amount of charged-off receivables allocated to the
collateral certificate exceeds the amount of funds available for reimbursement
of those charge-offs, the issuer, as the holder of the collateral certificate,
may not receive a sufficient amount under the collateral certificate to pay
the full stated principal amount of your notes.
You will not receive full payment of your notes if the nominal
liquidation amount of your notes has been reduced by charge-offs of
receivables in the CARCO receivables trust or as the result of reallocations
of principal collections to pay interest on senior classes of notes, and those
amounts have not been reimbursed from excess interest collections. See
"Sources of Funds to Pay the Notes -- Final Payment of the Notes." For a
discussion of nominal liquidation amount, see "The Notes -- Stated Principal
Amount, Outstanding Dollar Principal Amount and Nominal Liquidation Amount of
Notes."
You may receive principal payments earlier or later
than the expected payment date.
We cannot assure that you will receive the principal amount of your
notes on its expected payment date. An early redemption event is an event that
indicates that we may not be able to make
9
payments on your notes as we had intended. See "Description of the
Certificates -- Reinvestment Events and Early Amortization Events." If an
early redemption event or an event of default for a series occurs, the issuer
will apply all distributions of principal allocated to that series to the
repayment of the principal of the notes of that series, unless we otherwise
specify in the related prospectus supplement. The occurrence of an early
redemption event or an event of default will likely cause us to begin payment
of principal earlier than the related expected payment date. However, such
events may result in delays or reductions in the payment of principal and
could result in a loss on your notes.
Class B notes and Class C notes bear losses before Class A notes.
A series may include Class B notes and Class C notes. Class B notes of a
series will be subordinated in right of payment of principal to Class A notes
of that series, and Class C notes of a series are subordinated in right of
payment of principal to Class A notes and Class B notes of that series. In
general, unless we specify otherwise in the related prospectus supplement,
interest payments on a class of notes of a series will not be subordinated in
right of payment to interest payments on any other class of notes of that
series.
In all series with subordinated classes of notes, principal collections
that are allocable to the subordinated classes of notes may be reallocated to
pay interest on senior classes of notes of that series. Also, unless we
specify otherwise in the related prospectus supplement, losses on charged-off
receivables in the CARCO receivables trust are allocated first to that series
and then to the subordinated classes of a series. See "The Notes -- Stated
Principal Amount, Outstanding Dollar Principal Amount and Nominal Liquidation
Amount -- Nominal Liquidation Amount" and "Subordination of Principal." If
these reallocations and losses are not reimbursed from excess interest
collections, the full stated principal amount of the subordinated classes of
notes may not be repaid.
If there is a sale of the receivables owned by the CARCO receivables
trust because of a sale or repurchase of the interest represented by the
collateral certificate after a default by the servicer of the CARCO
receivables trust, the net proceeds of the sale allocable to principal
payments with respect to the collateral certificate that are allocable to a
series will generally be used first to pay amounts due to Class A noteholders
of that series, next to pay amounts due to Class B noteholders, if any, of
that series, and lastly, for amounts due to Class C noteholders, if any, of
that series. This could cause a loss to Class C noteholders or the Class B
noteholders.
Payment of Class B notes and Class C notes may be delayed
due to the subordination provisions.
In general, no payment of principal of Class B notes, if any, of a
series will be made until all principal of Class A notes of that series has
been paid, and no payment of principal of Class C notes, if any, of that
series will be made until all principal of Class A notes and Class B notes of
that series has been paid, even if the subordinated notes have reached their
expected principal payment date, or have had an early redemption event, event
of default or other optional or mandatory redemption. See "The Notes --
Subordination of Principal" .
10
You may not be able to reinvest any early redemption proceeds
in a comparable security.
If your notes are redeemed at a time when prevailing interest rates are
relatively low, you may not be able to reinvest the redemption proceeds in a
comparable security with an effective interest rate as high as that of your
notes.
Issuance of additional notes may affect the timing and amount
of payments to you.
The issuer expects to issue notes from time to time. New notes may be
issued without notice to existing noteholders and without their consent, and
may have different terms from outstanding notes. For a description of the
conditions that must be met before the issuer can issue new notes, see "The
Notes -- Issuance of New Series, Classes and Subclasses of Notes."
The issuance of a new series of notes could adversely affect the timing
and amount of payments on outstanding notes. For example, if notes issued
after your notes have a higher interest rate than your notes, the result could
be that there is a smaller amount of shared excess interest collections
available to pay interest on your notes. Also, when new notes are issued, the
voting rights of your notes may be diluted. See "Risk Factors -- You may have
limited control of actions under the indenture and the pooling and servicing
agreement."
You may have limited control of actions under the indenture
and the pooling and servicing agreement.
Under the indenture, some actions require the vote of noteholders
holding a specified percentage of the aggregate outstanding dollar principal
amount of notes of a series, class or subclass or all the notes. These actions
include accelerating the payment of principal of the notes or consenting to
amendments relating to the collateral certificate. In the case of votes by
series or votes by holders of all of the notes of a series that has
subordinated notes, the Class A outstanding dollar principal amount will
generally be substantially greater than the Class B or Class C outstanding
dollar principal amounts. Consequently, the Class A noteholders will generally
have the ability to determine whether and what actions should be taken. The
Class B and Class C noteholders will generally need the concurrence of the
Class A noteholders to cause actions to be taken.
Your remedies upon default may be limited.
Your remedies may be limited if an event of default under your class of
notes occurs. After an event of default affecting your class of notes, any
funds in the principal funding account and the interest funding account with
respect to that series or class of notes will be applied to pay principal of
and interest on those notes or reallocated or retained for the benefit of any
senior classes of notes. Then, in each following month, principal collections
and interest collections allocated to those notes will either be deposited
into the applicable principal or interest funding account, and applied to make
monthly principal and interest payments on those notes or reallocated or
retained for the benefit of any senior classes of notes until the earlier of
the date those notes are no longer necessary to provide subordination
protection for senior classes of notes or until the legal maturity date of
those notes.
11
Any funds in the applicable principal funding account that are not
reallocated to other classes of that series and any funds in the applicable
interest funding account will be available to pay principal of and interest on
that class of notes. However, if your notes are Class B notes or Class C
notes, you generally will receive full payment of principal of those notes
only to the extent provided in the related prospectus supplement.
Following an event of default and acceleration, and on the applicable
legal final maturity date, holders of notes will have the ability to direct a
sale of receivables -- or a sale of interests in receivables -- held by the
CARCO receivables trust only under the limited circumstances as described in
"The Indenture -- Events of Default" and "Sources of Funds to Pay Notes --
Sale of Receivables." Even if a sale of receivables is permitted, we cannot
assure you that the proceeds of the sale will be enough to pay unpaid
principal of and interest on your notes.
You can find a "Glossary of Principal Terms for the Prospectus"
beginning on page [ ] in this prospectus.
12
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DaimlerChrysler Wholesale Receivables LLC and The CARCO Receivables Trust
- -------------------------------------------------------------------------------
DaimlerChrysler Wholesale Receivables LLC
DCWR is a limited liability company formed under the laws of the State
of Delaware on February 4, 2000 as a wholly owned subsidiary of CFC, for the
limited purpose of purchasing wholesale, retail and other receivables from CFC
and transferring the receivables to third parties or issuing indebtedness
secured by receivables to third parties. DCWR acquired the Seller's Interest
from U.S. Auto Receivables Company ("USA") on May 31, 2000. At that time DCWR
assumed the obligations of the seller under the Pooling and Servicing
Agreement and the obligations of the purchaser under the Receivables Purchase
Agreement. On August 8, 1991, USA had acquired the Seller's Interest from
Chrysler Auto Receivables Company ("CARCO") and assumed those obligations. As
of May 31, 2000, USA was merged into a member of DCWR and no longer exists.
CARCO is a wholly-owned subsidiary of CFC.
DCWR is deemed to have made all representations and warranties of the
seller in the Pooling and Servicing Agreement and any Series Supplement with
respect to any series of certificates outstanding as of May 31, 2000. In
addition, DCWR has assumed the obligations of USA under the certificates with
respect to any outstanding series, the Pooling and Servicing Agreement and the
Receivables Purchase Agreement and has agreed to hold USA harmless from any
liability related to those obligations. Obligations transferred to and assumed
by DCWR include USA's obligation with respect to the subordinated notes held
by CFC, the proceeds of which note were used to fund a portion of the purchase
price of receivables from Chrysler Credit Corporation ("CCC") on the Initial
Closing Date and a portion of the purchase prices of the receivables arising
in the Additional Accounts added to the trust on Addition Dates subsequent to
the Initial Closing Date. CFC may make additional subordinated loans to DCWR
in the future.
The seller has taken steps in structuring the transactions contemplated
by this prospectus that are intended to insure that the voluntary or
involuntary application for relief by CFC under the United States Bankruptcy
Code or similar applicable state laws ("Insolvency Laws") will not result in
the consolidation of the assets and liabilities of the seller with those of
CFC. These steps include the creation of the seller as a separate,
limited-purpose subsidiary under a limited liability company agreement
containing limitations on the nature of the seller's business, as described
above, and on the seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the unanimous affirmative vote of all its
officers. However, we cannot assure you that the activities of the seller
would not result in a court concluding that the assets and liabilities of the
seller should be consolidated with those of CFC in a proceeding under any
Insolvency Law. See "Risk Factors -- Risk factors relating to the collateral
certificate and the CARCO receivables trust -- Various legal aspects may cause
delays in your receiving payments or may result in reduced payments or losses
on your notes" and "Legal Aspects of the Receivables -- Matters Relating to
Bankruptcy."
Also, tax and other statutory liabilities, including liabilities to the
Pension Benefit Guaranty Corporation relating to the underfunding of pension
plans, of DaimlerChrysler or CFC can be asserted against the seller. To the
extent that any of those liabilities arise after the transfer of receivables
to the CARCO receivables trust, the CARCO receivables trust's interest in the
receivables would be prior to the interest of the claimant with respect to the
liabilities. However,
13
the existence of a claim against the seller could permit the claimant to
subject the seller to an involuntary proceeding under the Bankruptcy Code or
other Insolvency Law. See "Risk Factors -- Risk factors relating to the
collateral certificate and the CARCO receivables trust -- Various legal
aspects may cause delays in your receiving payments or may result in reduced
payments or losses on your notes" and "-- Risk factors relating to the
collateral certificate and the CARCO Receivables Trust -- The ability of the
CARCO receivables trust to make payments on the collateral certificate depends
in part on the ability of DaimlerChrysler and CFC to generate receivables and
the ability of CFC to perform its obligations under the pooling and servicing
agreement" and "Legal Aspects of the Receivables -- Matters Relating to
Bankruptcy."
DCWR's executive offices are located at 27777 Franklin Road, Southfield,
Michigan 48034-8286, and its telephone number is (248) 948-3031.
The CARCO Receivable Trust
The CARCO receivables trust was formed in accordance with the laws of
the State of New York under the Pooling and Servicing Agreement. The property
of the trust consists of
o the receivables existing in the Accounts on May 31, 1991 (the
"Initial Cut-Off Date").
o all receivables generated in the Accounts from time to time after
the Initial Cut-Off Date during the term of the trust as well as
receivables generated in any Accounts added to the CARCO receivables
trust from time to time, but excluding receivables in any Accounts
that are removed from the CARCO receivables trust from time to time
after the Initial Cut-Off Date,
o an assignment of all the seller's rights and remedies under the
Receivables Purchase Agreement,
o all funds collected or to be collected in respect of the
receivables,
o all funds on deposit in accounts of the CARCO receivables trust,
o any Enhancement issued with respect to any particular series or
class of certificates and
o a security interest in the vehicles and any other collateral
security.
See "Description of the Investor Certificates Issued by the CARCO Receivables
Trust -- Addition of Accounts." See "Description of the Receivables Purchase
Agreement" for a summary of terms of the Receivables Purchase Agreement.
CFC will not convey to the CARCO receivables trust receivables ("Fleet
Receivables") originated in connection with multiple new vehicle orders of at
least five vehicles by specified Dealers. The terms "receivables" and
"principal receivables" as used in this prospectus will not refer to Fleet
Receivables.
The property of the CARCO receivables trust may also include
Enhancements for the benefit of certificateholders of a particular series or
class. The collateral certificate will not have the benefit of any such
Enhancement. The certificateholders of a particular series or class will not
have any interest in any Enhancements provided for the benefit of the
certificateholders of another series
14
or class, unless we so provide in the related Series Supplement or Series
Supplements. Under the Pooling and Servicing Agreement, the seller will be
allowed, subject to limitations and conditions, and in some circumstances will
be obligated,
o to designate from time to time Additional Accounts to be
included as Accounts and to convey to the CARCO receivables
trust the receivables of the Additional Accounts, and
o to designate from time to time Accounts to be removed and to
require the CARCO receivables trustee to convey receivables in
the Removed Accounts to the seller.
The CARCO receivables trust was formed to issue certificates under the
Pooling and Servicing Agreement and prior to formation had no assets or
obligations. The CARCO receivables trust will not engage in any business
activity other than
o acquiring and holding the receivables and the other assets of
the trust and proceeds from the receivables and those assets,
o issuing the investor certificates and the seller's certificate,
and any Supplemental certificates, and making payments on those
certificates
o and related activities.
As a consequence, we do not expect the CARCO receivables trust to have any
need for, or source of, capital resources other than the assets of the CARCO
receivables trust.
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The Issuer
- -------------------------------------------------------------------------------
DaimlerChrysler Master Owner Trust is the issuer of the notes. It is
a Delaware statutory business trust formed by DCWR on , .
The issuer exists for the exclusive purposes of:
o acquiring and holding the collateral certificate and other
assets, including the proceeds of these assets;
o issuing series of notes;
o making payments on the notes; and
o engaging in other activities that are necessary or incidental
to accomplish these limited purposes.
The issuer is operated pursuant to a trust agreement among DCWR and
____________, as owner trustee. The issuer does not have any officers or
directors. Its administrator is CFC. As administrator of the issuer, CFC will
generally direct the actions to be taken by the issuer.
The assets of the issuer consist primarily of:
o the collateral certificate;
15
o derivative agreements that the issuer has entered into or may
enter into to manage interest rate or currency risk relating to
some classes of notes; and
o the issuer accounts.
The issuer does not expect to have any other significant assets.
- -------------------------------------------------------------------------------
Use of Proceeds
- -------------------------------------------------------------------------------
Unless we otherwise provide in the related prospectus supplement:
o we will pay the net proceeds from the sale of a series of notes
to DCWR;
o DCWR will use the portion of the proceeds paid to it, together
with the subordinated loan from CFC described under
"DaimlerChrysler Wholesale Receivables LLC and the CARCO
Receivables Trust -- DaimlerChrysler Wholesale Receivables
LLC", to purchase receivables from CFC or to repay amounts
previously borrowed to purchase receivables; and
o CFC will use the portion of the proceeds paid to it for general
corporate purposes.
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The Dealer Floorplan Financing Business
- -------------------------------------------------------------------------------
General
The receivables transferred to the CARCO receivables trust under to the
Pooling and Servicing Agreement were or will be selected from extensions of
credit and advances, known as "wholesale" or "floorplan" financing, made by
DaimlerChrysler, directly or as successor to Chrysler Corporation, and CFC,
directly or as a successor to affiliates, to domestic motor vehicle dealers.
These funds are used by dealers to purchase new and used vehicles manufactured
or distributed by DaimlerChrysler and other manufacturers pending sale to
retail buyers. As described in this prospectus, receivables transferred to the
CARCO receivables trust are secured by the vehicles and, in many cases parts
inventory, equipment, fixtures and service accounts of the vehicle dealers. In
some cases, the receivables are also secured by realty owned by, and/or a
personal guarantee of, a vehicle dealer.
CFC, as successor to Chrysler Financial Corporation ("CFC Corp.") and
CCC, is the primary wholesale financing source for DaimlerChrysler-franchised
dealers in the United States. DaimlerChrysler vehicles for which CFC provides
wholesale financing include vehicles manufactured under the CHRYSLER, DODGE
and JEEP trademarks.
CFC, directly or as successor to CFC Corp. or CCC, has extended credit
lines to DaimlerChrysler-franchised dealers that also operate
non-DaimlerChrysler franchises and non-DaimlerChrysler dealers. CFC services
the accounts of domestic dealers financed by it (the "U.S. Wholesale
Portfolio") through its Southfield Support office located in Southfield,
Michigan and through a network of zone offices located throughout the United
States.
Vehicles financed by any dealer under the floorplan program are
categorized by CFC, under its policies and procedures, as New Vehicles or Used
Vehicles based on whether the vehicles qualify
16
for the new or used wholesale and retail interest rate chargeable to the
dealer in connection with the vehicles financed. Currently, "New Vehicles"
consist of
o current and prior model year unmiled vehicles,
o current model year miled vehicles purchased at a closed auction
conducted by DaimlerChrysler, and
o prior model year and two year old miled vehicles.
Currently, "Used Vehicles" consist of previously owned vehicles, other than
current model year miled vehicles purchased at a closed auction conducted by
DaimlerChrysler and prior model year and two year old miled vehicles. Vehicles
purchased by a dealer at a closed auction conducted by DaimlerChrysler are
referred to, collectively, as "Auction Vehicles." New Vehicles and Used
Vehicles may be categorized differently in the future based on CFC's practices
and policies.
Creation of Receivables
CFC finances 100% of the wholesale invoice price of new vehicles,
including destination charges. DaimlerChrysler originates receivables in
respect of DaimlerChrysler-manufactured or distributed vehicles concurrently
with the shipment of the vehicles to the financed dealer.
Once a dealer has commenced the floorplanning of a manufacturer's
vehicles through CFC, CFC will finance all purchases of vehicles by the dealer
from the manufacturer. CFC will cancel this arrangement, however, if a
dealer's inventory is considered by CFC to be seriously overstocked, if a
dealer is experiencing financial difficulties or if a dealer requests
controlled vehicle releases. In those circumstances, known as "Finance Hold",
the applicable local zone office of CFC assumes control of vehicle releases to
the dealer. CFC makes special arrangements to finance inter-dealer sales of
vehicles.
Credit Underwriting Process
CFC extends credit to dealers from time to time based upon established
credit lines. Dealers may establish lines of credit to finance purchases of
new, used and auction vehicles. All DaimlerChrysler-franchised dealers that
have a new vehicle line of credit are also eligible for a used vehicle and an
auction vehicle credit line. A new vehicle credit line relates to New
Vehicles, other than current model year miled vehicles purchased at a closed
auction conducted by DaimlerChrysler, and a used vehicle credit line relates
to Used Vehicles. An auction vehicle credit line relates to Auction Vehicles.
A newly franchised dealer requesting the establishment of a new vehicle
credit line must submit an application to a CFC zone office. After receipt of
the application, the local zone office investigates the prospective dealer.
The office reviews the prospective dealer's credit reports and bank references
and evaluates the dealer's marketing capabilities and start-up financial
resources and credit requirements. When an existing dealer requests the
establishment of a wholesale new vehicle credit line, the office reviews the
dealer's credit reports, including the experience of the dealer's current
financing source, and bank references. Further, the office investigates the
dealer's current state of operations and management, including evaluating a
factory reference, and
17
marketing capabilities. For credit lines within an office's approval limits,
the office either approves or disapproves the dealer's request. For credit
lines in excess of an office's approval limits, the office transmits the
requisite documentation to the Southfield Support Dealer Credit Department for
approval or disapproval. CFC applies the same underwriting standards for
dealers franchised by other manufacturers.
Upon approval, dealers execute a series of financing agreements with CFC
and, in the case of DaimlerChrysler-franchised dealers, DaimlerChrysler. These
agreements provide CFC a first priority security interest in the vehicles and
other collateral and a demand master promissory note in favor of CFC. Under
these agreements, CFC requires all dealers to maintain insurance coverage for
each vehicle for which it provided floorplan financing, with CFC designated as
loss payee.
The size of a credit line initially offered to a dealer is based upon
the dealer's sales record, or, in the case of a prospective dealer, expected
annual sales, and the dealer's effective net worth. The amount of a dealer's
credit line for new vehicles is adjusted quarterly by CFC. The adjustment is
based upon the dealer's average new vehicle sales during the prior 180 days
and is, typically, in an amount sufficient to finance a 75-day supply of
vehicles. The amount of a dealer's credit line for used vehicles is also
adjusted periodically. This adjustment is based upon the dealer's average used
vehicle sales for the prior 180 days and is, typically, in an amount
sufficient to finance 50% of a 30 to 45-day supply of vehicles. CFC determines
the size of a dealer's auction vehicle credit line on a case by case basis and
makes adjustments periodically based on CFC's practices and procedures.
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 the vehicle. However, the aggregate amount of
the credit line for the used vehicles may not exceed 50% of the value of the
dealer's total inventory of used vehicles. The amount advanced for New
Vehicles and all Auction Vehicles is equal to the amount invoiced with respect
to the vehicles and the auction purchase price, including auction fees, of the
Auction Vehicles, respectively.
Billing, Collection Procedures and Payment Terms
CFC prepares and distributes each month to each dealer a statement
setting forth billing and related account information. CFC generates and mails
each dealer's bills on the sixth and seventh calendar day of the month.
Interest and other nonprincipal charges must be paid by the end of the month
in which they are billed. CFC bills interest and handling fees in arrears, but
bills insurance costs in advance. Upon the sale of a vehicle for which it has
provided floorplan financing, CFC is entitled to receive payment in full of
the related advance. Dealers remit payments by check directly to CFC's local
zone offices or electronically via an electronic funds transfer system
maintained by the Southfield Support office.
Revenue Experience
CFC charges dealers interest at a floating rate based on the rate (the
"Prime Rate") designated as the "prime rate" from time to time by financial
institutions selected by CFC, plus a designated spread ranging from 0.50% to
1.75% on New Vehicles. The Prime Rate is reset by CFC on the first and
sixteenth days of every month and is applied to all balances outstanding
during the applicable period. The actual spread for each dealer is determined
according to the total amount of
18
the dealer's credit lines. CFC typically increases the spreads charged on Used
Vehicle balances by an additional 0.75%. Previously owned vehicles, however,
purchased at a DaimlerChrysler closed auction are financed at the applicable
New Vehicle rate. In the case of a few larger dealers, CFC charges the dealers
interest at a floating rate based on LIBOR plus 2.75% up to the Prime Rate
plus 0.25%.
Relationship with DaimlerChrysler
DaimlerChrysler provides to some DaimlerChrysler-franchised dealers
financial assistance in the form of working capital loans and other loans. In
addition, DaimlerChrysler provides floorplan assistance to all
DaimlerChrysler-franchised dealers through a number of formal and informal
programs. On all new vehicle financings, DaimlerChrysler reimburses dealers
directly for the finance costs for a specified period from the date of
shipment. DaimlerChrysler also has a supplemental floorplan assistance
program. In this program, DaimlerChrysler reimburses dealers at the time of
retail sale, for a specified amount depending upon the vehicle model.
Under an agreement between DaimlerChrysler and each
DaimlerChrysler-franchised dealer, DaimlerChrysler commits to repurchase
unsold new vehicles in inventory upon dealership termination, at the vehicles'
wholesale prices less a specified margin. DaimlerChrysler only repurchases
current model year vehicles that are new, undamaged and unused.
DaimlerChrysler also agrees to repurchase from dealers, at the time of
franchise termination, parts inventory at specified percentages of the invoice
price. If CFC takes possession of a dealer's parts inventory, DaimlerChrysler
is only obligated to pay CFC 55% of the invoice price of the inventory. All of
the assistance, however, is provided by DaimlerChrysler for the benefit of its
dealers, and does not relieve the dealers of any of their obligations to CFC.
Much of the assistance is provided at the option of DaimlerChrysler,
which may terminate any of the optional programs in whole or in part at any
time. If DaimlerChrysler is unable to or elects not to provide the assistance,
the loss experience of CFC in respect of the U.S. Wholesale Portfolio may be
adversely affected. In addition, because a substantial number of the vehicles
sold by the dealers are manufactured or distributed by DaimlerChrysler, if
DaimlerChrysler were temporarily or permanently no longer in that business,
the rate of sales of DaimlerChrysler-manufactured vehicles would decrease.
This would adversely affect payment rates and the loss experience of the U.S.
Wholesale Portfolio. See "Risk Factors -- Risk factors relating to the
collateral certificate and the CARCO receivables trust -- The ability of the
CARCO receivables trust to make payments on the collateral certificate depends
in part on the ability of Daimler Chrysler and CFC to generate receivables and
the ability of CFC to perform its obligations under the pooling and servicing
agreement."
Dealer Monitoring
CFC's local zone offices monitor the level of each dealer's wholesale
credit line on a periodic basis. Dealers are permitted to exceed those lines
on a temporary basis. For example, a dealer may, immediately prior to a
seasonal sales peak, purchase more vehicles than it is otherwise permitted to
finance under its existing credit lines. As another example, because of slow
inventory turnover, a dealer's credit lines may be reduced prior to its
liquidating a sufficient portion of its vehicle inventory. If at any time CFC
learns that a dealer's balance exceeds its approved credit
19
lines, CFC will evaluate the dealer's financial position and may temporarily
increase the dealer's credit lines or place the dealer in a disciplinary
category known as "finance hold." See "Creation of Receivables."
Zone office personnel conduct audits of dealer vehicle inventories on a
regular basis. The timing of each visit is varied and no advance notice is
given to the audited dealer. Auditors review dealers' financial records and
conduct a physical inventory of the vehicles on the dealers' premises. Through
the audit process, CFC reconciles each dealer's physical inventory with its
records of financed vehicles. Audits are intended to identify instances where
a dealer sold vehicles but did not immediately repay the related advances. The
audit process also aids CFC in determining in those instances whether a dealer
received sale proceeds but diverted the proceeds to uses other than the
repayment of the obligations to CFC.
"Dealer Trouble" Status and CFC's Write-Off Policy
Under some circumstances, CFC will classify a dealer under "Dealer
Trouble" status. The circumstances include
o failure to remit any principal or interest payment when due,
o any notifications of liens, levies or attachments and
o a general deterioration of its financial condition.
Once a dealer is assigned to Dealer Trouble status, CFC determines any more
extension of credit on a case-by-case basis.
CFC attempts to work with dealers to resolve instances of Dealer Trouble
status. If, however, a dealer remains on that status, it can result in one of
the following:
o an orderly liquidation in which the dealer voluntarily
liquidates its inventory through normal sales to retail
customers,
o a forced liquidation in which CFC repossesses the dealer's
inventory and, in the case of DaimlerChrysler-franchised
dealers, closes the franchise,
o a voluntary surrender of the dealer's inventory and, in the
case of DaimlerChrysler-franchised dealers, franchise closure,
or
o a forced sale of the dealership.
CFC typically works with franchised dealers to find third parties to purchase
a troubled dealership.
The proceeds of the sales are used to repay amounts due to CFC. Once
liquidation has begun, CFC performs an analysis of its position, writes off
any amounts identified at that time as uncollectible and attempts to liquidate
all possible collateral remaining. During the course of a liquidation, CFC may
recognize additional losses or recoveries.
20
Additional Information
We will set forth in the prospectus supplement for each series
additional information with respect to the Dealer Floorplan Financing
Business.
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The Accounts
- -------------------------------------------------------------------------------
General
The receivables arise in the revolving financing arrangements (the
"Accounts") with domestic automobile dealers ("dealers") franchised by
DaimlerChrysler and/or other automobile manufacturers. CFC selected the
Accounts from all the wholesale accounts in the U.S. Wholesale Portfolio that
are Eligible Accounts (the "Eligible Portfolio"). Each Account in the Eligible
Portfolio must be an account established by CFC, directly or as successor to
CFC Corp. or CCC, in the ordinary course of business and meet other criteria
provided in the Pooling and Servicing Agreement. See "Description of the
Investor Certificates Issued by the CARCO Receivables Trust -- Representations
and Warranties." CFC and the seller have represented that each believes that
the Accounts will be representative of the accounts in the Eligible Portfolio
and that the inclusion of the Accounts, as a whole, will not represent an
adverse selection from the Eligible Portfolio.
From time to time, dealers deposit funds with CFC in cash management
accounts, limited in amount to the amount of the wholesale accounts. CFC
applies funds deposited by a dealer in its cash management account to reduce
the dealer's outstanding Principal Receivables balance. Under some
circumstances, a dealer may reborrow the funds.
Under the Pooling and Servicing Agreement, the seller, and under the
Receivables Purchase Agreement, CFC has the right, subject to limitations and
conditions, and in some circumstances is obligated, to choose from time to
time additional qualifying wholesale accounts to be included as Accounts and
to convey to the trust some of the receivables of the Additional Accounts,
including receivables created after the conveyance. These accounts must meet
the eligibility criteria set forth above as of the date the accounts are
designated as Additional Accounts. CFC will convey the receivables then
existing, with exceptions, or later created under the Additional Accounts to
the seller. The seller will then convey them to the trust. See "Description of
the Investor Certificates Issued by the CARCO Receivables Trust -- 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, CFC will
represent and warrant to the seller, and the seller will represent and warrant
to the CARCO receivables trust, that the receivables meet the eligibility
requirements set forth in the Pooling and Servicing Agreement. See
"Description of the Investor Certificates Issued by the CARCO Receivables
Trust -- Conveyance of Receivables." Under some circumstances specified in the
Pooling and Servicing Agreement, the seller has the right to remove Accounts,
and the receivables arising from the Accounts, from the CARCO receivables
trust. See "Description of the Certificates -- Removal of Accounts." During
the term of the CARCO receivables 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 CARCO receivables trust.
We will provide additional information about the Accounts in each
prospectus supplement.
21
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Chrysler Financial Company L.L.C.
Chrysler Financial Corporation,
Chrysler Credit Corporation and
DaimlerChrysler Services North America LLC
- -------------------------------------------------------------------------------
CFC, a Michigan limited liability company and a wholly-owned subsidiary
of DaimlerChrysler, is a financial services organization. It is the continuing
company resulting from a merger on October 25, 1998, of CFC Corp. into CFC.
CFC Corp., a Michigan corporation, was the continuing corporation resulting
from a merger on June 1, 1967, of a financial services subsidiary of Chrysler
Corporation, as predecessor of DaimlerChrysler, into a newly acquired,
previously nonaffiliated finance company incorporated in 1926. CFC is engaged
in the following:
o automotive retail, wholesale and fleet financing,
o servicing commercial leases and loans,
o property, casualty and other insurance and
o automotive dealership facility development and management.
CFC's business depends substantially upon DaimlerChrysler's operations.
In particular, lower levels of production and sale of DaimlerChrysler's
automotive products could reduce the level of CFC's finance and insurance
operations. See "Risk Factors -- Risk factors relating to the collateral
certificate and the CARCO receivables trust -- The ability of the CARCO
receivables trust to make payments on the collateral certificate depends in
part on the ability of DaimlerChrysler and CFC to generate receivables and the
ability of CFC to perform its obligations under the pooling and servicing
agreement." CFC's executive offices are located at 27777 Franklin Road,
Southfield, Michigan 48034-8286 and its telephone number is (248) 512-3990.
CCC, a wholly owned subsidiary of CFC Corp., provided retail, wholesale
and lease financing services to automobile dealers and their customers
throughout the United States. On December 31, 1995, CCC merged into CFC Corp.
CFC Corp., in accordance with the terms of the Pooling and Servicing Agreement
and the Receivables Purchase Agreement, assumed all the rights and obligations
of CCC under (a) the Pooling and Servicing Agreement, including rights and
obligations of the servicer, and (b) the Receivables Purchase Agreement,
Agreement including rights and obligations of the seller. After that merger,
CFC Corp. provided retail, wholesale and lease financing services to
automobile dealers and their customers throughout the United States. On
October 25, 1998, CFC Corp. merged into CFC. CFC, under the terms of the
Pooling and Servicing Agreement, assumed all the rights and obligations of CFC
Corp. under (a) the Pooling and Servicing Agreement, including rights and
obligations of the servicer, and (b) the Receivables Purchase Agreement,
including rights and obligations of the seller.
DaimlerChrysler Services North America LLC, a Michigan limited liability
company ("DCS") is a wholly-owned subsidiary of CFC. During 2001, CFC is
expected to merge into DCS with DCS being the surviving legal entity. If such
merger occurs, DCS, under the terms of the Pooling and
22
Servicing Agreement, will then assume the rights and obligations of CFC under
(a) the Pooling and Servicing Agreement, including rights and obligations of
the servicer, and (b) the Receivables Purchase Agreement, including rights and
obligations of the seller. If such merger occurs, DCS is expected to have
substantially the same assets and liabilities that CFC had prior to the
merger. We cannot assure you that such merger will occur. If such merger
occurs, references to CFC in this prospectus and any prospectus supplement
will become references to DCS.
We will provide additional information about CFC in the prospectus
supplement for each series.
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The Notes
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The notes will be issued pursuant to the indenture. The indenture does
not limit the aggregate stated principal amount of notes that may be issued.
The notes will be issued in series. Each series of notes will consist of
Class A notes and may also consist of Class B notes and Class C notes. Each
class of notes may have subclasses. Whenever a "class" of notes is referred to
in this prospectus or any supplement to this prospectus, it also includes all
subclasses of that note, unless the context otherwise requires.
The issuer may offer notes denominated in any foreign currency. We will
describe the specific terms of any note denominated in a foreign currency in
the applicable supplement to this prospectus.
If we so specify in a supplement to this prospectus, the noteholders of
one or more classes will have the benefit of a derivative agreement, including
an interest rate or currency swap, cap, collar, guaranteed investment contract
or other agreement for the exclusive benefit of that class or those classes.
We will describe any derivative agreement for the benefit of a class and the
financial institution that provides it in the applicable supplement to this
prospectus.
The issuer will pay principal of and interest on a class of notes solely
from the portion of interest collections and principal collections distributed
on the collateral certificate that are available to that class of notes after
giving effect to all allocations and reallocations, amounts in any issuer
account relating to that class of notes, and amounts received under any
derivative agreement relating to that class of notes. If those sources are not
sufficient to pay the notes of that class, those noteholders will have no
recourse to any other assets of the issuer or the assets of any other entity
for the payment of principal of or interest on those notes.
We will include the following terms of the notes in a supplement to this
prospectus:
o the series designation;
o the rate per annum at which the notes will bear interest, if
any, or the formula or index on which that rate will be
determined and the date from which interest will accrue;
o the payment dates, if any, for the notes;
23
o the stated principal amount of each Class of notes and, if
there is more than one class of notes, whether they are Class A
notes, Class B notes or Class C notes or a subclass of any of
those classes;
o the overcollateralization amount, if any, for that class of
notes;
o [the currency of payment of principal of and interest on the
notes, if other than U.S. dollars;]
o the expected principal payment date of the notes;
o the legal final maturity date of the notes, which will be no
later than the termination date of the collateral certificate;
o the times at which the notes may, pursuant to any optional or
mandatory redemption provisions, be redeemed, and the other
terms and provisions of those redemptions;
o any additional events of default or early redemption events for
the notes of that series;
o if the notes have the benefit of a derivative agreement, the
terms of that agreement and a description of the counterparty
to that agreement; and
o other terms of the notes.
Holders of notes of any outstanding series or class will not have the
right to review or consent to any subsequent issuance of notes.
The issuer may, without the consent of any noteholders, issue additional
notes of an existing class of notes. Any such issuance of additional notes
must satisfy the applicable conditions under "-- Issuances of New Series,
Classes and Subclasses of Notes" below.
Interest
Each note, except zero-coupon discount notes, will bear interest at
either a fixed rate or a floating rate, which will be specified in the related
prospectus supplement. We will specify the interest accrual period in the
related prospectus supplement. Until the expected principal payment date for a
discount note, accreted principal will be capitalized as part of the principal
of the note and reinvested in the collateral certificate. The applicable
supplement to this prospectus will specify the interest rate to be borne by a
discount note after an event of default or after its expected principal
payment date.
If interest collections allocable to the collateral certificate are less
than expected, principal collections allocable to the overcollateralization
amount for the applicable series or the subordinated classes of notes of that
series under the certificate may be used to pay interest on the notes or the
senior classes of notes of that series. However, this reallocation of
principal would reduce the Invested Amount of the collateral certificate, as
well as the nominal liquidation amount of the overcollateralization amount or
the subordinated classes of notes of that series, and thus reduce later
principal collections and interest collections on the collateral certificate
that are
24
allocable to that series, unless the principal reduction is reimbursed from
excess interest collections. See "Sources of Funds to Pay Notes -- Deposit and
Application of Funds."
If interest on a note is not paid within five business days after it is
due, an event of default will occur with respect to that note. See "The
Indenture -- Events of Default."
Principal
We will specify the timing and the amount of payments of principal of a
note in the related supplement to this prospectus.
The issuer expects to pay the stated principal amount of each note in
one payment on that note's expected principal payment date, and the issuer is
obligated to do so if funds are available for that purpose. It is not an event
of default if the principal of a note is not paid on its expected principal
payment date because no funds are available for that purpose.
Principal of a note may be paid earlier than its expected principal
payment date if an early redemption event or an event of default occurs. See
"The Indenture -- Early Redemption Events" and " -- Events of Default."
Principal of a note may be paid later than its expected principal
payment date if sufficient funds are not allocable from the CARCO receivables
trust to the collateral certificate, or are not allocable under the indenture
to the series and class of the notes to be paid. If the stated principal
amount of a note is not paid in full on its legal final maturity date, an
event of default will occur with respect to that note. See "Covenants, Events
of Default and Early Redemption Events -- Events of Default."
See "Risk Factors -- You may receive principal payments earlier or later
than the expected principal payment date" for a discussion of factors that may
affect the timing of principal payments on the notes.
Stated Principal Amount, Outstanding Dollar Principal Amount and
Nominal Liquidation Amount of Notes
Each class of notes will have:
o a stated principal amount;
o an outstanding dollar principal amount; and
o a nominal liquidation amount of a series.
Stated Principal Amount. The stated principal amount of a class of notes
is the amount that is stated on the face of the notes to be payable to the
holder. It can be denominated in U.S. dollars or in a foreign currency.
Outstanding Dollar Principal Amount. For U.S. dollar notes, the
outstanding dollar principal amount will be the same as the stated principal
amount, less principal payments to the noteholders.
25
For foreign currency notes, the outstanding dollar principal amount will be
the U.S. dollar equivalent of the stated principal amount of the notes, less
dollar payments to derivative counterparties with respect to principal. For
discount notes, the outstanding dollar principal amount will be an amount
stated in, or determined by a formula described in, the applicable supplement
to this prospectus.
Nominal Liquidation Amount. The nominal liquidation amount of a class of
notes is a U.S. dollar amount based on the outstanding dollar principal amount
of that class of notes, but with some reductions -- including reductions from
reallocations of principal collections and allocations of charge-offs of
receivables in the CARCO receivables trust -- and increases described under
this heading. The nominal liquidation amount of a class of notes corresponds
to the portion of the Invested Amount of the collateral certificate that would
be allocated to that class of notes if the CARCO receivables trust were
liquidated.
In most circumstances, the nominal liquidation amount of a class of
notes, together with any funds on deposit in the applicable principal funding
account, will be equal to the outstanding dollar principal amount of that
class. However, if there are reductions in the nominal liquidation amount of a
class of notes as a result of reallocations of principal collections from that
class to pay interest on notes of the same series, or as a result of
charge-offs of principal receivables in the CARCO receivables trust, there
will be a deficit in the nominal liquidation amount of that class. Unless that
deficiency is reimbursed through the reinvestment of Excess Interest
Collections in the collateral certificate, the stated principal amount of some
notes will not be paid in full.
If a series has subordinated notes, the nominal liquidation amount is
used to calculate the maximum amount of funds that may be reallocated from a
subordinated class of notes to pay interest on a senior class of notes of the
same series. The nominal liquidation amount is also used to calculate the
amount of principal collections that can be allocated for payment to a class
of notes, or paid to the counterparty to a derivative agreement, if
applicable. This means that if the nominal liquidation amount of a class of
notes has been reduced by charge-offs of principal receivables in the CARCO
receivables trust or by reallocations of principal collections to pay interest
on notes, the holders of notes with the reduced nominal liquidation amount may
receive less than the full stated principal amount of their notes, either
because the amount of U.S. dollars allocated to pay them is less than the
outstanding dollar principal amount of the notes, or because the amount of
U.S. dollars allocated to pay the counterparty to a derivative agreement is
less than the amount necessary to obtain enough of the applicable foreign
currency for payment of their notes in full.
The nominal liquidation amount of a class of notes may be reduced as
follows:
o If there are charge-offs of principal receivables in the CARCO
receivables trust, the portion of charge-offs allocated to the
collateral certificate will reduce the Invested Amount of the
collateral certificate. The reduction allocated to the
collateral certificate will then be reallocated among the
series of notes pro rata based on the nominal liquidation
amount of all notes in the series. For a series that has an
overcollateralization amount, we will allocate the reductions
first to the overcollateralization amount. Within each series
that has subordinated classes of notes, we will initially
allocate the reductions to the overcollateralization amount if
there is one for that series and then we will allocate any
remaining reductions pro rata to each
26
class of notes based on the nominal liquidation amount of that
class. Then, if the series includes Class B notes or Class C
notes, the reductions initially allocated to the Class A notes
of that series will be reallocated, first, to the Class C notes
of that series, and second, to the Class B notes of that
series. The reductions initially allocated to the Class B notes
of that series will be reallocated to the Class C notes of that
series. However, the related prospectus supplement for any
series of notes may provide for a different allocation of those
reductions.
o If principal collections are reallocated from an
overcollateralization amount of a series to the notes of that
series, the overcollateralization amount will be reduced by the
amount of that reallocation. If principal collections are
reallocated from a subordinated class of notes of a series to
pay interest on the senior classes of notes of that series, the
nominal liquidation amount of that subordinated class will be
reduced by the amount of the reallocations. The amount of the
reallocation of principal collections to pay interest on Class
A notes will be applied first, to reduce the nominal
liquidation amount of Class C notes of the same series to the
extent of the required subordinated amount of Class C notes for
that class of Class A notes, and second, to reduce the nominal
liquidation amount of Class B notes of the same series to the
extent of the required subordinated amount of Class B notes for
that class of Class A notes. The amount of the reallocation of
principal collections to pay interest on Class B notes will be
applied to reduce the nominal liquidation amount of Class C
notes of the same series to the extent of the required
subordination amount of Class C notes for that class of Class B
notes. No principal of Class A notes may be reallocated to pay
interest on any class of notes if the prospectus supplement so
provides. The prospectus supplement for any series of notes may
provide for a different allocation of those reductions.
o The nominal liquidation amount of a class of notes will be
reduced by the amount on deposit in its principal funding
account after giving effect to all allocations, reallocations
and payments. This includes principal collections that are
deposited directly into that class's principal funding account,
or reallocated from the principal funding account for a
subordinated class.
o The nominal liquidation amount of a class of notes will be
reduced by the amount of all payments of principal of that
class.
o If a class of notes directs a sale of receivables after an
event of default and acceleration or on its legal final
maturity date, its nominal liquidation amount is automatically
reduced to zero. See "Sources of Funds to Pay the Notes-- Sale
of Receivables."
The nominal liquidation amount of a note can be increased as follows:
o For a class of discount notes, the nominal liquidation amount
of that class will increase over time as principal accretes, to
the extent that interest collections are allocated to that
class for that purpose.
o If excess interest collections are available, we will apply
them to reimburse earlier reductions in nominal liquidation
amount from charge-offs of principal receivables in
27
the CARCO receivables trust or from reallocations of principal
collections from the overcollateralization amount of a series
to pay interest on the notes of that series or from
subordinated classes of a series to pay interest on senior
classes of that series. These reimbursements will be allocated
to each series pro rata based on the sum of all unreimbursed
reductions of each class in that series. Within each series,
the increases will be allocated in order of seniority of the
notes of that series.
o If principal collections have been reallocated from the
principal funding account for a subordinated class to the
principal funding account for a senior class of notes of the
same series, the nominal liquidation amount of the subordinated
class will be increased by the amount of the reallocation, and
the nominal liquidation amount of the senior class will be
reduced by the same amount.
If the nominal liquidation amount of your notes has been reduced and the
reduction has not been reimbursed from excess interest collections, you will
not receive repayment of all of your principal. See "Sources of Payments on
the Notes -- Final Payment of the Notes."
The nominal liquidation amount of a class of notes may not be reduced
below zero, and may not be increased above the outstanding dollar principal
amount of that class of notes, less any amounts on deposit in the applicable
principal funding account.
If a note held by the DCWR, the issuer or any of their affiliates is
canceled, the nominal liquidation amount of that note is automatically reduced
to zero, with a corresponding automatic reduction in the Invested Amount of
the collateral certificate.
The cumulative net amount of reductions of the nominal liquidation
amount of any class of notes due to reallocation of principal collections to
pay interest on notes and charge-offs of principal receivables in the CARCO
receivables trust cannot exceed the initial outstanding dollar principal
amount of that class.
Allocations of charge-offs of principal receivables in the CARCO
receivables trust and reallocations of principal collections to classes of
notes reduce the nominal liquidation amount of outstanding notes only, and do
not affect notes that are issued after that time.
Subordination of Principal
If a series of notes has only one class, the credit enhancement for that
class will be the overcollateralization amount. If a series of notes has more
than one class, then the subordinate notes of that series will serve as credit
enhancement for the senior notes of that series. Such a series of notes may
also have an overcollateralization amount. The following paragraphs under this
subheading illustrate how this subordination works in the case of a series
that has Class A notes, Class B notes and Class C notes. The related
prospectus supplement of a series may provide for different subordination
arrangements among the senior and subordinate classes of a series.
Principal payments on Class B notes and Class C notes of a series are
subordinated to payments on Class A notes of that series. Subordination of
Class B notes and Class C notes of a series provides credit enhancement for
Class A notes of that series.
28
Principal payments on Class C notes of a series are subordinated to
payments on Class A notes and Class B notes of that series. Subordination of
Class C notes of a series provides credit enhancement for the Class A notes
and Class B notes of that series.
In all series, principal collections that are allocable to subordinated
classes of notes may be reallocated to pay interest on senior classes of notes
of that series and, is so specified, on designated subordinated classes of
notes of that series. In addition, charge-offs of defaulted receivables in the
CARCO receivables trust are allocated first to the subordinated classes of a
series. See "The Notes -- Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation Amount -- Nominal Liquidation Amount"
and "Deposit and
Application of Funds."
No principal payments will be made on a subordinated class of notes of
that series until all principal of the senior classes of notes of that series
has been paid in full. However, there are several exceptions to this rule.
Principal may be paid to the holders of subordinated classes while notes of
senior classes of that series are still outstanding under the following
circumstances:
o If the nominal liquidation amount of a subordinated class has
been reduced as a result of an allocation of charge-offs of
principal receivables to that class or reallocation of
principal collections from that class to pay interest on a
senior or other subordinated class, and that reduction is later
reimbursed from excess interest collections, the amount of that
reimbursement is no longer subordinated to the senior classes
of that series and may be paid to the holders of the
subordinated class while those notes of senior classes are
still outstanding.
o If the principal funding accounts for the senior classes of
notes of a series have been prefunded as described above, then
the subordinated classes of notes of that series may be paid.
Redemption and Early Redemption of Notes
Each class of notes will be subject to mandatory redemption on its
expected principal payment date.
If we so specify in the related prospectus supplement, the issuer may,
at its option, redeem the notes of any class before its expected principal
payment date. The prospectus supplement will indicate at what times the issuer
may exercise that right of redemption and if the redemption may be made in
whole or in part as well as any other terms of the redemption. The issuer will
give notice to holders of the affected notes before any optional redemption
date.
If we so specify in the related prospectus supplement, a noteholder may,
at its option, require the issuer to redeem notes before the expected
principal payment date. The prospectus supplement will indicate at what times
a noteholder may exercise that right of redemption and if the redemption may
be made in whole or in part as well as any other terms of the redemption.
In addition, if an early redemption event occurs, the issuer will be
required to redeem each class of affected notes before the note's expected
principal payment date to the extent funds are available for that purpose. The
issuer will give notice to holders of the affected notes before an
29
early amortization date. See "The Indenture -- Early Redemption Events" for a
description of the early redemption events and their consequences to holders
of notes.
Whenever the issuer is required to redeem a class of notes before its
legal final maturity date, it will do so only if and to the extent funds are
allocated to the collateral certificate and to that class of notes. A
noteholder will have no claim against the issuer if the issuer fails to make a
required redemption of notes because no funds are available for that purpose.
The failure to redeem before the legal final maturity date under these
circumstances will not be an event of default.
Issuances of New Series, Classes and Subclasses of Notes
The issuer may issue new notes of a series, class or subclass, so long
as the conditions of issuance are met. These conditions include:
o on or before the fourth business day before a new issuance of
notes, the issuer gives the indenture trustee and the rating
agencies notice of the issuance;
o the issuer delivers to the indenture trustee a certificate
stating that
-- the issuer reasonably believes that the new issuance will
not at the time of its occurrence or at a future date (1)
cause an early redemption event or event of default, (2)
adversely affect the amount or timing of payments to
holders of notes of any series or (3) adversely affect the
security interest of the indenture trustee in the
collateral securing the outstanding notes;
-- all instruments furnished to the indenture trustee conform
to the requirements of the indenture and constitute
sufficient authority under the indenture for the indenture
trustee to authenticate and deliver the notes;
-- the form and terms of the notes have been established in
conformity with the provisions of the indenture;
-- all laws and requirements with respect to the execution
and delivery by the issuer of the notes have been complied
with in all material respects;
-- the issuer has the power and authority to issue the notes;
and
-- the notes have been duly authorized, are binding
obligations of the issuer, and are entitled to the
benefits of the indenture;
o the issuer delivers to the indenture trustee and the rating
agencies an opinion of counsel that for federal income tax and
Michigan income and single business tax purposes (1) the new
issuance will not adversely affect the characterization as debt
of any outstanding series or class of CARCO receivables trust
investor certificates issued by the CARCO receivables trust,
other than the collateral certificate, (2) the new issuance
will not cause a taxable event to holders of CARCO receivables
trust investor certificates, and (3) following the new
issuance, the CARCO receivables trust will not be an
association, or publicly traded partnership, taxable as a
corporation, except, if
30
certain conditions are satisfied, the issuer at its option will
not be required to deliver the foregoing opinions;
o the issuer delivers to the indenture trustee and the rating
agencies an opinion of counsel that for federal income tax and
Delaware income and franchise tax purposes (1) the new issuance
will not adversely affect the characterization of the notes of
any outstanding series, class or subclass as debt, (2) the new
issuance will not cause a taxable event to holders of any
outstanding notes, (3) following the new issuance, the issuer
will not be an association, or publicly traded partnership,
taxable as a corporation, and (4) following the new issuance,
the newly issued notes will be properly characterized as debt,
except, if certain conditions are satisfied, the issuer at its
option will not be required to deliver the foregoing opinions;
o at the time of the new issuance, either the rating condition
described in "Prospectus Summary -- Note Ratings" are satisfied
or the issuer obtains confirmation from the rating agencies
that the new issuance of notes will not cause a reduction or
withdrawal of the rating of any outstanding notes rated by that
rating agency;
o no early amortization event with respect to the collateral
certificate has occurred and is continuing as of the date of
the new issuance; and
o any other conditions specified in the related prospectus
supplement are satisfied.
Payments on Notes; Paying Agent
The notes will be issued in book-entry form and payments of principal of
and interest on the notes will be made in U.S. dollars as described under " --
Book-Entry Notes" [unless the stated principal amount of the notes is
denominated in a foreign currency].
The issuer and the indenture trustee, and any agent of the issuer or the
indenture trustee, will treat the registered holder of any note as the
absolute owner of that note, whether or not the note is overdue and
notwithstanding any notice to the contrary, for the purpose of making payment
and for all other purposes.
The issuer will make payments on a note to the registered holder of the
note at the close of business on the record date established for the related
payment date.
The issuer has designated the corporate trust office of [o], in New York
City, as its paying agent for the notes of each series. The issuer will
identify any other entities appointed to serve as paying agents on notes of a
series or class in a prospectus supplement. The issuer may at any time
designate additional paying agents or rescind the designation of any paying
agent or approve a change in the office through which any paying agent acts.
However, the issuer will be required to maintain a paying agent in each place
of payment for a series or class of notes.
After notice by publication, all funds paid to a paying agent for the
payment of the principal of or interest on any note of any series which
remains unclaimed at the end of two years after the principal or interest
becomes due and payable will be repaid to the issuer. After funds are repaid
to
31
the issuer, the holder of that note may look only to the issuer for payment
of that principal or interest.
Denominations
The notes offered by this prospectus will be issued in denominations of
$1,000 and multiples of $1,000 in excess of that amount.
Record Date
The record date for payment of the notes will be the last day of the
month before the related payment date.
Governing Law
The laws of the State of New York will govern the notes and the
indenture.
Form, Exchange, and Registration and Transfer of Notes
The notes offered by this prospectus will be issued in registered form.
The notes will be represented by one or more global notes registered in the
name of The Depository Trust Company, as depository, or its nominee. We refer
to each beneficial interest in a global note as a "book-entry note." For a
description of the special provisions that apply to book-entry notes, see " --
Book-Entry Notes."
A holder of notes may exchange those notes for other notes of the same
class of any authorized denominations and of the same aggregate stated
principal amount and tenor.
Any holder of a note may present that note for registration of transfer,
with the form of transfer properly executed, at the office of the note
registrar or at the office of any transfer agent that the issuer designates.
Holders of notes will not be charged any service charge for the exchange or
transfer of their notes. Holders of notes that are to be transferred or
exchanged will be liable for the payment of any taxes and other governmental
charges described in the indenture before the transfer or exchange will be
completed. The note registrar or transfer agent, as the case may be, will
effect a transfer or exchange when it is satisfied with the documents of title
and identity of the person making the request.
The issuer has appointed [o] as the note registrar for the notes. The
issuer also may at any time designate additional transfer agents for any
series or class of notes. The issuer may at any time rescind the designation
of any transfer agent or approve a change in the location through which any
transfer agent acts. However, the issuer will be required to maintain a
transfer agent in each place of payment for a series or class of notes.
Book-Entry Notes
The notes offered by this prospectus will be in book-entry form. This
means that, except under the limited circumstances described in this
subheading under "--Definitive Notes," purchasers of notes will not be
entitled to have the notes registered in their names and will not be entitled
to
32
receive physical delivery of the notes in definitive paper form. Instead,
upon issuance, all the notes of a class will be represented by one or more
fully registered permanent global notes, without interest coupons.
Each global note will be deposited with a securities depository named
The Depository Trust Company and will be registered in the name of its
nominee, Cede & Co. No global note representing book-entry notes may be
transferred except as a whole by DTC to a nominee of DTC, or by a nominee of
DTC to another nominee of DTC. Thus, DTC or its nominee will be the only
registered holder of the notes and will be considered the sole representative
of the beneficial owners of notes for purposes of the indenture.
The registration of the global notes in the name of Cede & Co. will not
affect beneficial ownership and is performed merely to facilitate subsequent
transfers. The book-entry system is used because it eliminates the need for
physical movement of securities.
Purchasers of notes in the United States can hold interests in the
global notes only through DTC, either directly, if they are participants in
that system -- such as a bank, brokerage house or other institution that
maintains securities accounts for customers with DTC or its nominee -- or
otherwise indirectly through a participant in DTC. Purchasers of notes in
Europe can hold interests in the global notes only through Clearstream or
through Euroclear Bank, s.a./n.v., as operator of the Euroclear System.
Because DTC will be the only registered owner of the global notes,
Clearstream, Luxembourg and Euroclear will hold positions through their
respective U.S. depositories, which in turn will hold positions on the books
of DTC.
o As long as the notes are in book-entry form, they will be
evidenced solely by entries on the books of DTC, its
participants and any indirect participants. Thus, each
beneficial owner of a book-entry note will hold its note
indirectly through a hierarchy of intermediaries, with DTC at
the "top" and the beneficial owner's own securities
intermediary at the "bottom."
The issuer, the indenture trustee and their agents will not be liable
for the accuracy of, and are not responsible for maintaining, supervising or
reviewing DTC's records or any participant's or indirect participant's records
relating to book-entry notes. The issuer, the indenture trustee and their
agents also will not be responsible or liable for payments made on account of
the book-entry notes.
Until definitive notes are issued to the beneficial owners as described
in this subheading under "--Definitive Notes," all references to "holders" of
notes means DTC. The issuer, the indenture trustee and any paying agent,
transfer agent or securities registrar may treat DTC as the absolute owner of
the notes for all purposes.
Beneficial owners of book-entry notes should realize that the issuer
will make all distributions of principal and interest on their notes to DTC
and will send all required reports and notices solely to DTC as long as DTC is
the registered holder of the notes. DTC and the participants are
33
generally required to receive and transmit all distributions, notices and
directions from the indenture trustee to the beneficial owners through the
chain of intermediaries.
Similarly, the indenture trustee will accept notices and directions
solely from DTC. Therefore, in order to exercise any rights of a holder of
notes under the indenture, each person owning a beneficial interest in the
notes must rely on the procedures of DTC and, in some cases, Clearstream or
Euroclear. If the beneficial owner is not a participant in that system, then
it must rely on the procedures of the participant and, if applicable, indirect
participant through which that person owns its interest. DTC has advised the
issuer that it will take actions under the indenture only at the direction of
its participants, which in turn will act only at the direction of the
beneficial owners. Some of these actions, however, may conflict with actions
it takes at the direction of other participants and beneficial owners.
Notices and other communications by DTC to participants, by participants
to indirect participants, and by participants and indirect participants to
beneficial owners will be governed by arrangements among them.
Beneficial owners of book-entry notes should also realize that
book-entry notes may be more difficult to pledge because of the lack of a
physical note. Beneficial owners may also experience delays in receiving
payments on their notes since distributions will initially be made to DTC and
must be transferred through the chain of intermediaries to the beneficial
owner's account.
The Depository Trust Company
DTC is a limited-purpose trust company organized under the New York
Banking Law and is a "banking institution" within the meaning of the New York
Banking Law. DTC is also a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under Section 17A of the Securities Exchange Act
of 1934. DTC was created to hold securities deposited by its participants and
to facilitate the clearance and settlement of securities transactions among
its participants through electronic book-entry changes in accounts of the
participants, thus eliminating the need for physical movement of securities.
The rules applicable to DTC are on file with the Securities and Exchange
Commission.
Clearstream Banking, societe anonyme
Clearstream is registered as a bank in Luxembourg and is regulated by
the Banque Centrale du Luxembourg, the Luxembourg Central Bank, which
supervises Luxembourg banks. Clearstream holds securities for its customers
and facilitates the clearance and settlement of securities transactions by
electronic book-entry transfers between their accounts. Clearstream provides
various services, including safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream also deals with domestic securities markets in over 30
countries through established depository and custodial relationships.
Clearstream has established an electronic bridge with Euroclear in Brussels to
facilitate settlement of trades between Clearstream and Euroclear.
Clearstream's customers are worldwide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations. Clearstream's U.S.
34
customers are limited to securities brokers and dealers, and banks. Indirect
access to Clearstream is available to other institutions that clear through or
maintain a custodial relationship with an account holder of Clearstream.
Euroclear System
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment. This
system eliminates the need for physical movement of securities and any risk
from lack of simultaneous transfers of securities and cash. Euroclear includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. The Euroclear Operator
is the Euroclear Bank, s.a./n.v. The Euroclear Operator conducts all
operations. All Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator. Euroclear participants
include banks, including central banks, securities brokers and dealers and
other professional financial intermediaries and may include the underwriters.
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 holds a banking license granted to it, and is
regulated by, the Belgian Banking and Finance 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. These 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
securities 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.
This information about DTC, Clearstream and Euroclear has been provided
by each of them for informational purposes only and is not intended to serve
as a representation, warranty or contract modification of any kind.
Distributions on Book-Entry Notes
The issuer will make distributions of principal of and interest on
book-entry notes to DTC. These payments will be made in immediately available
funds by the issuer's paying agent, [o], at the office of the paying agent in
New York City that the issuer designates for that purpose.
In the case of principal payments, the global notes must be presented to
the paying agent in time for the paying agent to make those payments in
immediately available funds in accordance with its normal payment procedures.
Upon receipt of any payment of principal of or interest on a global
note, DTC will immediately credit the accounts of its participants on its
book-entry registration and transfer system. DTC will
35
credit those accounts with payments in amounts proportionate to the
participants' respective beneficial interests in the stated principal amount
of the global note as shown on the records of DTC. Payments by participants to
beneficial owners of book-entry notes will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of those participants.
Distributions on book-entry notes held beneficially through Clearstream
will be credited to cash accounts of Clearstream participants in accordance
with its rules and procedures, to the extent received by its U.S. depository.
Distributions on book-entry notes held beneficially through Euroclear
will be credited to the cash accounts of Euroclear participants in accordance
with the Terms and Conditions, to the extent received by its U.S. depository.
In the event definitive notes are issued, distributions of principal and
interest on definitive notes will be made directly to the holders of the
definitive notes in whose names the definitive notes were registered at the
close of business on the related record date.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in immediately
available funds using DTC's Same-Day Funds Settlement System. Secondary market
trading between Clearstream participants and/or Euroclear participants will
occur in the ordinary way in accordance with the applicable rules and
operating procedures of Clearstream and Euroclear and will be settled using
the procedures applicable to conventional eurobonds in immediately available
funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
or Euroclear participants, on the other, will be effected in DTC in accordance
with DTC's rules on behalf of the relevant European international clearing
system by the U.S. depositories. However, cross-market transactions of this
type will require delivery of instructions to the relevant European
international clearing system by the counterparty in that 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
U.S. depository to take action to effect final settlement on its behalf by
delivering or receiving notes in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream participants and Euroclear participants may not deliver
instructions directly to DTC.
Because of time-zone differences, credits to notes received in
Clearstream or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and will be
credited the business day following a DTC settlement date. The credits to or
any transactions in the notes settled during processing will be reported to
the relevant Euroclear or Clearstream participants on that business day. Cash
received in Clearstream or Euroclear as a
36
result of sales of notes by or through a Clearstream participant or a
Euroclear participant to a DTC participant will be received with value on the
DTC settlement date, but will be available in the relevant Clearstream or
Euroclear cash account only as of the business day following settlement in
DTC.
Although DTC, Clearstream and Euroclear have agreed to these procedures
in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform these procedures and these procedures may be discontinued at any
time.
Definitive Notes
Beneficial owners of book-entry notes may exchange those notes for
definitive notes registered in their name only if:
o DTC is unwilling or unable to continue as depository for the
global notes or ceases to be a registered "clearing agency" and
the issuer is unable to find a qualified replacement for DTC;
o the issuer, in its sole discretion, elects to terminate the
book-entry system through DTC; or
o any event of default has occurred with respect to those
book-entry notes, and beneficial owners evidencing not less
than 50% of the unpaid outstanding dollar principal amount of
the notes of that class advise the indenture trustee and DTC
that the continuation of a book entry system is no longer in
the best interests of those beneficial owners.
If any of these three events occurs, DTC is required to notify the
beneficial owners through the chain of intermediaries that the definitive
notes are available. The appropriate global note will then be exchangeable in
whole for definitive notes in registered form of like tenor and of an equal
aggregate stated principal amount, in specified denominations. Definitive
notes will be registered in the name or names of the person or persons
specified by DTC in a written instruction to the registrar of the notes. DTC
may base its written instruction upon directions it receives from its
participants. Thereafter, the holders of the definitive notes will be
recognized as the "holders" of the notes under the indenture.
Replacement of Notes
The issuer will replace at the expense of the holder any mutilated note,
upon surrender of that note to the indenture trustee. The issuer will replace
at the expense of the holder any notes that are destroyed, lost or stolen upon
delivery to the indenture trustee of evidence of the destruction, loss or
theft of those notes satisfactory to the issuer and the indenture trustee. In
the case of a destroyed, lost or stolen note, the issuer and the indenture
trustee may require the holder of the note to provide an indemnity
satisfactory to the indenture trustee and the issuer before a replacement note
will be issued.
37
Acquisition and Cancellation of Notes by the Issuer and the Seller
The issuer, the seller and their affiliates may acquire notes in the
open market or otherwise.
The issuer, the seller and their affiliates may cause the notes acquired
by them to be canceled and notes so canceled will no longer be outstanding.
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Sources of Funds to Pay the Notes
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General
The primary source of funds for the payment of principal of and interest
on the notes is the collateral certificate issued by the CARCO receivables
trust to the issuer. For a description of the CARCO receivables trust and its
assets, see "DaimlerChrysler Wholesale Receivables LLC and the CARCO
Receivables Trust." For a description of how we will determine the payments to
be made on the investor certificates issued by the CARCO receivables trust,
which include the collateral certificate, see "Description of the Investor
Certificates Issued by the CARCO Receivables Trust."
Interest collections and principal collections allocated to the
collateral certificate will be deposited every month by the CARCO receivables
trust into the issuer's collection account.
The collateral certificate has no specified interest rate. The issuer,
as holder of the collateral certificate, is entitled to receive its allocable
share of cash collections on the receivables and will be allocated its
allocable share of charge-offs on defaulted receivables.
Allocations of charge-offs and interest collections are made, first,
pro rata among each series of investor certificates issued by the CARCO
receivables trust, including the collateral certificate, based on the ratio
the respective Adjusted Investment Amount bears to the Trust Adjusted Invested
Amount. This allocation is known as the Series Allocation Percentage. Next,
within each series of certificates (including the collateral certificate)
allocations between the seller's portion and the investor portion of series
allocable charge-offs and series allocable interest collections will be
allocated based on the ratio of: (i) Invested Amount (with respect to each
series of certificates (other than the collateral certificate) or (ii) the sum
of the series nominal liquidation amounts for each series of notes (with
respect to the collateral certificate) to the product of (a) the applicable
Series Allocation Percentage and (b) the Pool Balance. This allocation is
known as the CARCO Floating Allocation Percentage. Application of these ratios
results in the investor portion of interest collections and charge-offs
allocable to the series of notes.
The size of the collateral certificate fluctuates according to the
sum of the series nominal liquidation amounts of all the series of notes
issued by DCMOT and represents the investment of the certificate in the Pool
Balance. Unless we specify otherwise in the related prospectus supplement, the
series nominal liquidation amount of a series will be the sum of the nominal
series liquidation amount of the notes of that series plus any
overcollateralization amount for that series. The overcollateralization amount
for a series will be subordinated to the notes of that series to the extent
described in the related prospectus supplement and, in effect, will represent
the interest of the seller in the nominal liquidation amount of that series.
The Seller's Interest, which is owned by DCWR, represents the interest in the
principal receivables in the CARCO receivables trust not represented by any
CARCO receivables trust series of investor certificates (including the
collateral certificate).
38
Principal collections on the receivables are allocated similarly to
the allocation of interest collections on the receivables when no principal
amounts are needed for deposit into a principal funding account or needed to
pay principal to investors. However, principal collections are allocated
differently when principal amounts need to be deposited into CARCO receivables
trust principal funding accounts or paid to CARCO receivables trust investors.
When one or more series of investor certificates begin to accumulate or
amortize, principal collections allocable to other series of certificates that
are not accumulating or amortizing will be used to satisfy the principal
accumulation or payment requirements of those series of certificates that are
accumulating or amortizing.
We will allocate principal collections on the receivables to the
collateral certificate at all times based on a calculation which is an
aggregate of the series nominal liquidation amounts for each series as
described above. For those series of notes that do not require principal
amounts to be deposited into a principal funding account or paid to
noteholders, the series nominal liquidation amount calculation will be
"floating," i.e. calculated as of each Transfer Date. For those series of
notes which require principal amounts to be deposited into a principal funding
account or paid to noteholders, the series nominal liquidation amount will be
"fixed" immediately before the issuer begins to allocate Available Principal
Amounts to the principal funding account for that series or upon the
occurrence of the expected principal payment date, an early redemption event,
an event of default or other optional or mandatory redemption, i.e. calculated
as of the Transfer Date prior to any reductions for deposits or payments of
principal.
If principal collections on the receivables allocated to the
collateral certificate are needed to pay the notes or to make a deposit into
the issuer accounts within a month, they will be deposited into the issuer's
collection account. Otherwise, collections of principal receivables allocated
to the collateral certificate will be reallocated to other series of the
investor certificates which have principal collection shortfalls--which does
not reduce the size of the collateral certificate--or reinvested in the CARCO
receivables trust to maintain the Invested Amount of the collateral
certificate. If the collateral certificate has a shortfall in principal
collections, but other series of investor certificates have excess principal
collections, a portion of the excess principal collections allocated to other
series of investor certificates will be reallocated to the collateral
certificate and any other investor certificates which may have a shortfall in
principal collections. The collateral certificate's share of the excess
principal collections will be paid to the issuer and treated as Available
Principal Amounts.
Upon a sale of receivables, or interests therein, following an
insolvency of CFC or DaimlerChrysler, an acceleration following an event of
default, or on the applicable legal final maturity date for a series of notes,
as described in the related prospectus supplement, the portion of the nominal
liquidation amount, and thereby the Invested Amount, related to that series
will be reduced to zero and that series will no longer receive any allocations
of collections of interest
39
collections or principal collections on the receivables from the CARCO
receivables trust and any allocations of Available Funds or Available
Principal Amounts from the issuer.
Following an Early Amortization Event with respect to the collateral
certificate, which is also an early redemption event for the notes, all
principal collections on the receivables for any Collection Period allocated
to the Invested Amount of the collateral certificate will be used to cover
principal payments to the issuer as holder of the collateral certificate.
For a detailed description of the application of collections and
allocation of defaults by the CARCO receivables trust, see "Description of
Investor Certificates Issued by the CARCO Receivables Trust" in this
prospectus.
Deposit and Application of Funds
Interest collections on the receivables allocated and paid to the
issuer, as holder of the collateral certificate, will first be allocated
between the seller's portion and the investor portion as described under
"--General" above. The investor portion of interest collections are the
"Available Interest Amounts." The Available Interest Amounts will be allocated
pro rata to each series of notes based on a fraction,
o the numerator of which is the series nominal liquidation amount
for that series on the day preceding the Transfer Date, and
o the denominator of which is the aggregate series nominal
liquidation amount for all series on that day.
This fraction will adjust to account for any additional issuances or
final payment of notes of that series since the prior Transfer Date.
Principal collections and Miscellaneous Payments on the receivables
allocated and paid to the issuer, as holder of the collateral certificate,
will first be allocated between the seller's portion and the investor portion
as described under "--General" above. The investor portion of principal
collections and Miscellaneous Payments are the "Available Principal Amounts."
Such Available Principal Amounts, after any reallocations of Available
Principal Amounts, will be allocated to each series of notes pro rata based on
a fraction,
o the numerator of which is the series nominal liquidation amount
of that series; provided, however, that for any series of notes
that are amortizing or accumulating principal, the series
nominal liquidation amount of that series will be the series
nominal liquidation amount as of the last day of the Collection
Period prior to the commencement of such amortization or
accumulation, and
o the denominator of which is the sum of the series nominal
liquidation amounts for each series of notes; provided,
however, that for any series that are amortizing or
accumulating principal, the series nominal liquidation amount
of that series will be the series nominal liquidation amount as
of the last day of the Collection Period prior to the
commencement of such amortization or accumulation.
This fraction will adjust to account for any additional issuances of the
notes of each series since the prior Transfer Date. If Available Principal
Amounts for any Transfer Date are less than the aggregate monthly principal
payments for all series of notes, and any series of notes has excess
40
Available Principal Amounts remaining after its application of its allocation
described above, then any such excess will be applied to each series of notes
to the extent such series still needs to cover a monthly principal payment pro
rata on the basis of their respective shortfalls.
In the case of a series of notes having more than one class,
Available Principal Amounts and Available Interest Amounts allocated to that
series will be allocated and applied to each class in the manner and order of
priority described in the accompanying prospectus supplement.
Issuer Accounts
The issuer has established a collection account for the purpose of
receiving distributions on the collateral certificate.
If we so specify in the related prospectus supplement, the issuer may
direct the indenture trustee to establish and maintain in the name of the
indenture trustee supplemental accounts for any series or class of notes for
the benefit of the related noteholders. Most series will have an interest
funding account and a principal funding account.
Each month, distributions on the collateral certificate will be
deposited into one or more supplemental accounts, to make payments of interest
on and principal of the notes, to make payments under any applicable
derivative agreements, and for other purposes as specified in the related
prospectus supplement.
The supplemental accounts described in this section are referred to
as issuer accounts. Issuer accounts will be Qualified Accounts and amounts
deposited to issuer accounts may only be invested in Eligible Investments.
Derivative Agreements
Some notes may have the benefit of one or more derivative agreements,
which may be a currency, interest rate or other swap, a cap, a collar, a
guaranteed investment contract or other similar arrangements with various
counterparties. In general, the issuer will receive payments from
counterparties to the derivative agreements in exchange for the issuer's
payments to them, to the extent required under the derivative agreements.
Payments received from derivative counterparties with respect to interest
payments on dollar notes in a series will generally be treated as Available
Interest Amounts for such series. We include the specific terms of a
derivative agreement applicable to a series or class of notes and a
description of the related counterparty in the related prospectus supplement.
Sale of Receivables
In addition to a sale of receivables following an insolvency of
DaimlerChrysler or CFC, if a series or class of notes has an event of default
and is accelerated before its legal final maturity date, the CARCO receivables
trust may sell receivables, or interests therein, if the conditions described
in "The Indenture--Events of Default" and "--Events of Default Remedies" are
satisfied. This sale will take place at the option of the indenture trustee or
at the direction of the holders of a majority of aggregate outstanding dollar
principal amount of notes of that series or class.
41
If principal of or interest on a series or class of notes has not
been paid in full on its legal final maturity date, the sale will
automatically take place on that date. Proceeds from such sale will be
immediately paid to the noteholders.
Unless we specify otherwise in the related prospectus supplement, the
amount of receivables sold will be up to the series nominal liquidation amount
of the series. The nominal liquidation amount of a series or class in respect
of which a sale is made will be automatically reduced to zero upon such sale.
No more Available Principal Amounts or Available Funds will be allocated to
those notes. Noteholders will receive the proceeds of such sale in an amount
not to exceed the lesser of (i) the outstanding dollar principal amount of
those notes, plus unpaid interest on those notes and (ii) the nominal
liquidation amount of such series or class, as applicable, plus accrued
interest. Notes whose noteholders have directed sales of receivables are no
longer outstanding under the indenture once the sale occurs.
After giving effect to a sale of receivables for a series or class of
notes, the amount of proceeds on deposit in a principal funding account may be
less than the outstanding dollar principal amount of that series or class.
This deficiency can arise because the series nominal liquidation amount of
that series or class was reduced before the sale of receivables or because the
sale price for the receivables was less than the outstanding dollar principal
amount. Unless we specify otherwise in the prospectus supplement, these types
of deficiencies will not be reimbursed.
Limited Recourse to the Issuer; Security for the Notes
Only the portion of Available Funds and Available Principal Amounts
allocable to a series or class of notes after giving effect to all allocations
and reallocations, funds on deposit in the applicable issuer accounts, any
applicable derivative agreement and proceeds of sales of receivables provide
the source of payment for principal of or interest on any series or class of
notes. Noteholders will have no recourse to any other assets of the issuer or
any other person or entity for the payment of principal of or interest on the
notes.
The notes of all series are secured by a shared security interest in
the collateral certificate and the collection account, but each series or
class of notes is entitled to the benefits of only that portion of those
assets allocated to it under the indenture and the related indenture
supplement. Each series or class of notes is also secured by a security
interest in any applicable supplemental account and any applicable derivative
agreement.
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The Indenture
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The notes of a series will be issued pursuant to the terms of the
indenture and the related indenture supplement. The following discussion under
this heading, the discussions under "The Notes" in this prospectus and certain
sections in the related prospectus supplement summarize the material terms of
the notes, the indenture and the related indenture supplement. These summaries
do not purport to be complete and are qualified in their entirety by reference
to the provisions of the notes, the indenture and the related indenture
supplement.
42
Indenture Trustee
[o] is the trustee under the indenture for the notes. Its principal
corporate trust office is located at [o].
The indenture trustee may resign at any time. The issuer may also
remove the indenture trustee if the indenture trustee is no longer eligible to
act as trustee under the indenture or if the indenture trustee becomes
insolvent. In all circumstances, the issuer must appoint a successor indenture
trustee for the notes. Any resignation or removal of the indenture trustee and
appointment of a successor indenture trustee will not become effective until
the successor indenture trustee accepts the appointment.
The issuer or its affiliates may maintain accounts and other banking
or trustee relationships with the indenture trustee and its affiliates.
Issuer Covenants
The issuer will not, among other things:
o claim any credit on or make any deduction from the principal
and interest payable on the notes, other than amounts withheld
in good faith from such payments under the Internal Revenue
Code or other applicable tax law,
o voluntarily dissolve or liquidate, or
o permit (A) the validity or effectiveness of the indenture to be
impaired, or permit the lien created by the indenture to be
amended, hypothecated, subordinated, terminated or discharged,
or permit any person to be released from any covenants or
obligations with respect to the notes under the indenture
except as may be expressly permitted by the indenture, (B) any
lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien created by the
indenture) to be created on or extend to or otherwise arise
upon or burden the collateral for the notes or proceeds thereof
or (C) the lien of the indenture not to constitute a valid
first priority security interest in the assets of the issuer.
The issuer may not engage in any activity other than the activities
described in "The Issuer" in this prospectus. The issuer will not incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the notes.
The issuer also covenants that if:
o the issuer defaults in the payment of interest on any series or
class of notes when such interest becomes due and payable and
such default continues for a period of five business days
following the date on which such interest became due and
payable, or
o the issuer defaults in the payment of the principal of any
series or class of notes on its legal final maturity date, or
43
o with respect to any series or class of notes that benefits from
a derivative agreement to which the issuer is a party, the
issuer defaults in any of its obligations under the applicable
derivative agreement;
and any such default continues beyond any specified period of grace for such
series or class of notes, the issuer will, upon demand of the indenture
trustee, pay to the indenture trustee, for the benefit of the holders of the
notes of the affected series or class, the whole amount then due and payable
on those notes for principal and interest (after giving effect to any
allocation requirements described in this prospectus and the related
prospectus supplement), with interest, to the extent that payment of such
interest will be legally enforceable, upon the overdue installments of
interest, at such rate or rates described in the related prospectus
supplement. In addition, the issuer will pay an amount sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the indenture trustee, its agents and
counsel and all other compensation due to the indenture trustee. If the issuer
fails to pay such amounts upon such demand, the indenture trustee may
institute a judicial proceeding for the collection of those unpaid amounts.
Events of Default
Each of the following events is an event of default for any related
series or class of notes:
o the issuer's failure, for a period of five business (5) days,
to pay interest on any note of the related series or class when
due;
o the issuer's failure to pay the stated principal amount of any
note of the related series or class on its legal final maturity
date;
o the issuer's default in the performance, or breach, of any
other of its covenants or warranties in the indenture, for a
period of sixty (60) days after either the indenture trustee or
the holders of 25% of the aggregate outstanding dollar
principal amount of the outstanding notes of the affected
series or class has provided written notice requesting remedy
of that default or breach, and, as a result of that default or
breach, the interests of the related noteholders are materially
and adversely affected and continue to be materially and
adversely affected during the sixty (60) day period;
o the occurrence of certain events of bankruptcy, insolvency,
conservatorship or receivership of the issuer; and
o any additional events of default specified in the prospectus
supplement relating to the series or class.
Failure to pay the full stated principal amount of a note on its
expected principal payment date will not constitute an event of default. An
event of default with respect to one series or class of notes will not
necessarily be an event of default with respect to any other series or class
of notes.
44
Events of Default Remedies
The occurrence of some events of default involving the bankruptcy or
insolvency of the issuer results in an automatic acceleration of all of the
notes. If other events of default occur and are continuing with respect to any
series or class, either the indenture trustee or the holders of more than a
majority in aggregate outstanding dollar principal amount of the notes of that
series or class may declare the principal of all those outstanding notes to be
immediately due and payable. This declaration of acceleration may generally be
rescinded by the holders of a majority in aggregate outstanding dollar
principal amount of outstanding notes of that series or class.
If a series or class of notes is accelerated before its legal final
maturity date, the indenture trustee may at any time thereafter, and at the
direction of the holders of a majority of aggregate outstanding dollar
principal amount of notes of that series or class at any time thereafter will,
direct the CARCO receivables trust to sell receivables as described in
"Sources of Funds to Pay the Notes--Sale of Receivables," but only if at least
one of the following conditions is met:
o the noteholders of 90% of the aggregate outstanding dollar
principal amount of the accelerated series or class of notes
consent; or
o the net proceeds of such sale (plus amounts on deposit in the
applicable accounts and payments to be received from any
applicable derivative agreement) would be sufficient to pay all
outstanding amounts due on the accelerated series or class of
notes; or
o the holders of not less than 66 2/3% of the aggregate
outstanding principal dollar amount of notes of the accelerated
series or class, as applicable, consent to the sale, unless the
indenture trustee determines that the funds to be allocated to
the accelerated series or class of notes, taking into account
Available Interest Amounts and Available Principal Amounts
allocable to the accelerated series or class of notes, payments
to be received under any applicable derivative agreement and
amounts on deposit in the applicable principal funding account
and interest funding account.
If an event of default occurs relating to the failure to pay
principal of or interest on a series or class of notes in full on the legal
final maturity date, the issuer will automatically direct the CARCO
receivables trust to sell receivables on the date, as described in "Sources of
Funds to Pay the Notes-- Sale of Receivables."
If a sale of receivables does not take place following an
acceleration of a series or class of notes, then:
o The issuer will continue to hold the collateral certificate,
and distributions on the collateral certificate will continue
to be applied in accordance with the distribution provisions of
the indenture and the related indenture supplement.
o Principal will be paid on the accelerated series or class of
notes to the extent funds are received from the CARCO
receivables trust and available to the accelerated series or
class after giving effect to all allocations and reallocations
and payment is permitted by the subordination provisions of the
senior notes of the same series.
45
o On the legal final maturity date of the accelerated notes, if
the notes have not been paid in full, the indenture trustee
will direct the CARCO receivables trust to sell receivables as
provided in the applicable indenture supplement.
The holders of a majority in aggregate outstanding dollar principal
amount of any accelerated series or class of notes have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the indenture trustee, or exercising any trust or power conferred
on the indenture trustee. However, this right may be exercised only if the
direction provided by the noteholders does not conflict with applicable law or
the indenture or the related indenture supplement or have a substantial
likelihood of involving the indenture trustee in personal liability. The
holder of any note will have the right to institute suit for the enforcement
of payment of principal of and interest on such note on its legal final
maturity date.
Generally, if an event of default occurs and any notes are
accelerated, the indenture trustee is not obligated to exercise any of its
rights or powers under the indenture unless the holders of affected notes
offer the indenture trustee reasonable indemnity. Upon acceleration of the
maturity of a series or class of notes following an event of default, the
indenture trustee will have a lien on the collateral for those notes ranking
senior to the lien of those notes for its unpaid fees and expenses.
The indenture trustee has agreed, and the noteholders will agree,
that they will not at any time institute against the issuer, DaimlerChrysler,
CFC or the CARCO receivables trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
Early Redemption Events
The issuer is required to redeem in whole or in part, to the extent
that funds are available for that purpose, each affected series or class of
notes upon the occurrence of an early redemption event. Early redemption
events include the following:
o the occurrence of a note's expected principal payment date;
o each of the Early Amortization Events applicable to the
collateral certificate, as described under "Description of the
Investor Certificates Issued by the CARCO Receivables
Trust--Early Amortization Events";
o the issuer becoming an "investment company" within the meaning
of the Investment Company Act of 1940, as amended; or
o any additional early redemption event specified in the related
prospectus supplement.
The redemption price of a note so redeemed will be the outstanding
dollar principal amount of that note, plus accrued interest--or, in the case
of discount notes, principal accreted but unpaid on that note--to but
excluding the date of redemption, which will be the next payment date. If the
amount of Available Interest Amounts and Available Principal Amounts allocable
to the series or class of notes to be redeemed, together with funds on deposit
in the applicable principal funding
46
account and interest funding account and any amounts payable to the issuer
under any applicable derivative agreement are insufficient to pay the
redemption price in full on the next payment date after giving effect to the
subordination provisions and allocations to any other notes ranking equally
with that note, monthly payments on the notes to be redeemed will thereafter
be made on each payment date until the stated principal amount of the notes
plus all accrued and unpaid interest are paid in full, or the legal maturity
date of the notes occurs, whichever is earlier.
No Available Principal Amounts will be allocated to a series or class
of notes with a nominal liquidation amount of zero, even if the stated
principal amount of that series or class has not been paid in full. However,
any funds previously deposited in the applicable principal funding subaccount
or interest funding account and any amounts received from an applicable
derivative agreement will still be available to pay principal of and interest
on that series or class of notes. In addition, if Available Interest Amounts
are available, they can be applied to reimburse reductions in the nominal
liquidation amount of that series or class resulting from reallocations of
Available Principal Amounts to pay interest on senior classes of notes, or
from losses on uncovered defaults on principal receivables in the CARCO
receivables trust.
Payments on redeemed notes will be made in the same priority as
described in the related prospectus supplement. The issuer will give notice to
holders of the affected notes before an early redemption date.
Meetings
The indenture trustee may call a meeting of the holders of notes of a
series or class at any time. The indenture trustee will call a meeting upon
request of the issuer or the holders of at least 10% in aggregate outstanding
dollar principal amount of the outstanding notes of the series or class.
The quorum for a meeting is a majority of the holders of the
outstanding dollar principal amount of the related series or class of notes,
as the case may be, unless a higher percentage is specified for approving
action taken at the meeting, in which case the quorum is the higher
percentage.
Voting
Any action or vote to be taken by the holders of a majority, or other
specified percentage, of any series or class of notes may be adopted by the
affirmative vote of the holders of a majority, or the applicable other
specified percentage, of the aggregate outstanding dollar principal amount of
the outstanding notes of that series or class, as the case may be.
Any action or vote taken at any meeting of holders of notes duly held
in accordance with the indenture will be binding on all holders of the
affected notes or the affected series or class of notes, as the case may be.
Notes held by the issuer, DaimlerChrysler, CFC or their affiliates
will not be deemed outstanding for purposes of voting or calculating quorum at
any meeting of noteholders.
47
Amendments to the Indenture and Indenture Supplements
The issuer and the indenture trustee may amend, supplement or
otherwise modify the indenture and any indenture supplement without the
consent of any noteholders to cure any ambiguity, to establish any form of
note under the indenture, and to provide for the issuance of any series or
class of notes (as described under "The Notes--Issuance of New Series or
Classes of Notes") and to set forth the terms thereof, or to add to the rights
of the noteholders of any series or class.
In addition, upon delivery of a CARCO receivables trust tax opinion
and issuer tax opinion, as described under "--Tax Opinions for Amendment"
below, and upon delivery by the issuer to the indenture trustee of an
officer's certificate to the effect that the issuer reasonably believes that
such amendment will not and is not reasonably expected to (i) result in the
occurrence of an early redemption event or event of default, (ii) adversely
affect the amount of funds available to be distributed to the noteholders of
any series of notes or the timing of such distributions, or (iii) adversely
affect the security interest of the indenture trustee in the collateral
securing the notes, the indenture may be amended, supplemented or otherwise
modified without the consent of any noteholders to:
o evidence the succession of another entity to the issuer, and
the assumption by such successor of the covenants of the issuer
in the indenture and the notes;
o add to the covenants of the issuer, or have the issuer
surrender any of its rights or powers under the indenture, for
the benefit of the noteholders of any or all series or classes;
o add to the indenture certain provisions expressly permitted by
the Trust Indenture Act, as amended;
o provide for the acceptance of a successor indenture trustee
under the indenture with respect to one or more series or
classes of notes and add to or change any of the provisions of
this indenture as will be necessary to provide for or
facilitate the administration of the trusts under the indenture
by more than one indenture trustee;
o add any additional early redemption events or events of default
with respect to the notes of any or all series or classes;
o provide for the consolidation of the CARCO receivables trust
and the issuer;
o if one or more additional beneficiaries are added to the trust
agreement, make any necessary changes to the indenture or any
other related document;
o provide for the addition of collateral securing the notes and
the issuance of notes backed by any such additional collateral;
o provide for additional or alternative credit enhancement for
any notes;
48
o to qualify for sale treatment under generally accepted
accounting principles; or
o make any other amendment that could not reasonably be expected
to result in an early redemption event or event of default,
adversely affect the amount of funds available to the
noteholders of any series or class or adversely affect the
security interest of the indenture trustee in the collateral
securing the notes.
The issuer and the indenture trustee may modify and amend the
indenture or any indenture supplement, for reasons other than those stated in
the prior paragraphs, with prior notice to each rating agency and the consent
of the holders of not less than a majority in aggregate dollar principal
amount of the outstanding notes of each series or class affected by that
modification or amendment. However, if the modification or amendment would
result in any of the following events occurring, it may be made only with the
consent of the holders of each outstanding series or class of notes affected
by the modification or amendment:
o a change in any date scheduled for the payment of interest on
any note, the expected principal payment date or legal final
maturity date of any note;
o a reduction of the stated principal amount of, or interest rate
on, any note, or a change in the method of computing the
outstanding dollar principal amount, the adjusted outstanding
dollar principal amount, or the nominal liquidation amount in a
manner that is adverse to any noteholder;
o a reduction of the amount of a discount note payable upon the
occurrence of an early redemption event or other optional or
mandatory redemption or upon the acceleration of its legal
final maturity date;
o an impairment of the right to institute suit for the
enforcement of any payment on any note;
o a reduction of the percentage in outstanding dollar principal
amount of notes of any series or class, the consent of whose
holders is required for modification or amendment of the
indenture or any indenture supplement or for waiver of
compliance with provisions of the indenture or indenture
supplement or for waiver of defaults and their consequences;
o a modification of any of the provisions governing the amendment
of the indenture, any indenture supplement or the issuer's
agreements not to claim rights under any law which would affect
the covenants or the performance of the indenture or any
indenture supplement, except to increase any percentage or to
provide that certain other provisions of the indenture cannot
be modified or waived without the consent of the holder of each
outstanding note affected by such modification;
o permission being given to create any lien or other encumbrance
on the collateral ranking senior to the lien of the indenture;
49
o a change in the city or political subdivision so designated
with respect to any series or class of notes where any
principal of, or interest on, any note is payable; or
o a change in the method of computing the amount of principal of,
or interest on, any note on any date.
The holders of a majority in aggregate outstanding dollar principal
amount of the notes of a series or class may waive, on behalf of the holders
of all the notes of that series or class compliance by the issuer with
specified restrictive provisions of the indenture or the indenture supplement.
The holders of a majority in aggregate outstanding dollar principal
amount of the notes of an affected series or class may, on behalf of all
holders of notes of that series or class, waive any past default under the
indenture or the indenture supplement with respect to notes of that series or
class. However, the consent of the holders of all outstanding notes of a
series or class is required to waive any past default in the payment of
principal of, or interest on, any note of that series or class or in respect
of a covenant or provision of the indenture that cannot be modified or amended
without the consent of the holders of each outstanding note of that series or
class.
Tax Opinions for Amendments
No amendment to the indenture, the Pooling and Servicing Agreement or
the CARCO receivables trust agreement will be effective unless the issuer has
delivered to the indenture trustee, the owner trustee and the rating agencies
an opinion of counsel that:
o for federal income tax purposes (1) the amendment will not
adversely affect the characterization as debt of any
outstanding series or class of investor certificates issued by
the CARCO receivables trust that were characterized as debt at
the time of their issuance, (2) the amendment will not cause a
taxable event to holders of the CARCO receivables trust
investor certificates, and (3) following the amendment, the
CARCO receivables trust will not be an association, or publicly
traded partnership, taxable as a corporation; and
o for federal and Delaware income and franchise tax purposes (1)
the amendment will not adversely affect the characterization of
the notes of any outstanding series or class as debt, (2) the
amendment will not cause a taxable event to holders of any
outstanding notes, and (3) following the amendment, the issuer
will not be an association, or publicly traded partnership,
taxable as a corporation.
Addresses for Notices
Notices to holders of notes will be given by mail sent to the
addresses of the holders as they appear in the note register.
Issuer's Annual Compliance Statement
The issuer is required to furnish annually to the indenture trustee a
statement concerning its performance or fulfillment of covenants, agreements
or conditions in the indenture as well as the presence or absence of defaults
under the indenture.
50
Indenture Trustee's Annual Report
The indenture trustee is required to mail each year to all registered
noteholders a report concerning:
o its eligibility and qualifications to continue as trustee under
the indenture,
o any amounts advanced by it under the indenture,
o the amount, interest rate and maturity date or indebtedness
owing by the issuer to it in the indenture trustee's individual
capacity,
o the property and funds physically held by it as indenture
trustee,
o any release or release and substitution of collateral subject
to the lien of the indenture that has not previously been
reported, and
o any action taken by it that materially affects the notes and
that has not previously been reported.
List of Noteholders
Three or more holders of notes of any series, each of whom has owned
a note for at least six months, may, upon written request to the indenture
trustee, obtain access to the current list of noteholders of the issuer for
purposes of communicating with other noteholders concerning their rights under
the indenture or the notes. The indenture trustee may elect not to give the
requesting noteholders access to the list if it agrees to mail the desired
communication or proxy to all applicable noteholders.
Reports
Monthly reports containing information on the notes and the collateral
securing the notes will be filed with the Securities and Exchange Commission
if such reports are required to be filed by applicable law. These reports will
not be sent to noteholders. See "Where You Can Find More Information" in this
prospectus for information as to how these reports may be accessed.
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Description of the Investor Certificates Issued by the CARCO Receivables Trust
- -------------------------------------------------------------------------------
General
The CARCO receivables trust will issue the certificates of a series
under a Pooling and Servicing Agreement (as amended and supplemented from time
to time, the "Pooling And Servicing Agreement"), among DCWR, as seller of the
receivables, CFC, as servicer of the receivables, and the CARCO receivables
trust trustee. The Pooling and Servicing Agreement will be substantially in
the form filed as an exhibit to the Registration Statement of which this
prospectus is a part. The CARCO receivables trust trustee will make available
for inspection a copy of the Pooling and Servicing Agreement, without exhibits
or schedules, to a noteholder on written request. The following summary
describes terms that may be applicable to the certificates
51
of each series, is not complete and is qualified in its entirety by reference
to the Pooling and Servicing Agreement and the applicable Series Supplement.
The certificates of each series will evidence undivided beneficial
interests in assets of the CARCO receivables trust allocated to the
certificateholders of the series (the "Certificateholders' Interest"). These
interests will represent the right to receive from the CARCO receivables trust
assets funds up to, but not in excess of, the amounts required to make
payments of interest on and principal of the certificates of the series under
the Pooling and Servicing Agreement as described in the related Series
Supplement.
Dissolution of CARCO receivables trust. When the Adjusted Invested
Amounts of all series of certificates other than the collateral certificate
have been reduced to zero, the seller, in its sole discretion, may dissolve
the CARCO receivables trust. If that occurs, the receivables will be
transferred to the issuer. The issuer would enter into a purchase agreement
with DCWR to purchase receivables from it on terms comparable to the analogous
purchase provisions of the Pooling and Servicing Agreement. The issuer would
also enter into a servicing agreement with CFC or its then successor to
service the receivables on terms comparable to the analogous servicing
provisions of the Pooling and Servicing Agreement. The allocations of various
collections and Defaulted Receivables between the collateral certificate and
the Seller's Interest would be made as described below as if there were not
investor certificates outstanding other than the collateral certificate.
Interest
The certificates of a series or class will accrue interest on their
principal balance at the per annum rate set forth in the related Series
Supplement. Interest will be payable to the certificateholders of a series or
class on the interest payment dates specified in its Series Supplement.
Except as otherwise stated in this prospectus or in the related
prospectus supplement, interest collections and other amounts allocable to the
Certificateholders' Interest of a Series will be used to make interest
payments to certificateholders of the Series on each interest payment date
with respect to those certificateholders. Unless we specify otherwise in the
related prospectus supplement, we will make interest payments on the
collateral certificate to the issuer monthly. During any Early Amortization
Period, however, with respect to a series, we will distribute interest to the
certificateholders monthly on each Special Payment Date.
Principal
The certificates of each series and class will have a revolving period
(the "Revolving Period"). During the Revolving Period, principal collections
and other amounts otherwise allocable to the Certificateholders' Interest of
the series or class will not be paid to those noteholders. Instead, they will
be
o paid to the seller,
o deposited to the Excess Funding Account, if any, for the
series, or
52
o distributed to, or for the benefit of, the certificateholders
of other classes or series.
A Revolving Period for a series will begin on the date stated in the related
Series Supplement (the "Series Cut-off Date") and end on the earlier of:
o the day immediately before the Accumulation Period commencement
date or the Controlled Amortization Period commencement date
for the series and
o the day immediately before the day on which an Early
Amortization Event or a Reinvestment Event occurs with respect
to the series.
If a series has more than one class of certificates, each class may have a
different Revolving Period.
The receivables may use any of the following structures for paying
principal on a series or class of certificates.
A series may have an accumulation period (the "Accumulation Period").
The Accumulation Period will begin at the close of business on the date
specified in or determined in the manner specified in the prospectus
supplement and end on the earliest of:
o the beginning of a Reinvestment Period with respect to the
series,
o the beginning of an Early Amortization Period with respect to
the series and
o payment in full of the outstanding principal amount of the
series certificates.
During the Accumulation Period for a series, we will deposit principal
collections and other amounts allocable to the Certificateholders' Interest of
the series, which may include some Excess Principal Collections, on each
payment date in a trust account established for the benefit of the
certificateholders of the series (a "Principal Funding Account"). The CARCO
receivables trust trustee will apply the amounts in the Principal Funding
Account, together with any amounts in the Excess Funding Account allocable to
the series, to make principal distributions to the certificateholders of the
series when due. The amount to be deposited in a Principal Funding Account for
any series on any payment date may, but will not necessarily, be limited to
the Controlled Deposit Amount. The "Controlled Deposit Amount" is an amount
stated in the related prospectus supplement plus, in the case of some payment
dates, any amounts in the Excess Funding Account allocable to the series. If a
series has more than one class of certificates, each class may have a
different Accumulation Period and a separate Principal Funding Account and
Controlled Deposit Amount. Also, there may be priorities among the classes
with respect to deposits of principal into the Principal Funding Accounts.
A series may have a controlled amortization period (the "Controlled
Amortization Period"). The Controlled Amortization Period will begin at the
close of business on the date stated in or determined in the manner stated in
the related prospectus supplement and will end on the earliest of:
o the beginning of a Reinvestment Period with respect to the
series,
o the beginning of an Early Amortization Period with respect to
the series and
53
o payment in full of the outstanding principal amount of the
series certificates.
During the Controlled Amortization Period for a series, the CARCO
receivables trust trustee will apply principal collections and other amounts
allocable to the Certificateholders' Interest of the series, which may include
Excess Principal Collections and amounts in the Excess Funding Account, on
each payment date to make principal distributions to any class of noteholders
of the series then scheduled to receive distributions. The amount to be
distributed to those certificateholders may be limited to the Controlled
Amortization Amount for the series. If a series has more than one class of
certificates, each class may have a different Controlled Amortization Period
and a separate Controlled Amortization Amount. In addition, the related
prospectus supplement may describe priorities among the classes with respect
to the distributions.
A series may have a reinvestment period (the "Reinvestment Period"). The
Reinvestment Period will begin on the day on which a Reinvestment Event has
occurred and end on the earliest of:
o the beginning of an Early Amortization Period with respect to
the series,
o the recommencement of the Revolving Period in accordance with
the related Series Supplement and
o payment in full of the outstanding principal amount of the
certificates of that series.
During the Reinvestment Period for a series, we will deposit principal
collections and other amounts allocable to the Certificateholders' Interest of
the series, which may include some Excess Principal Collections, on each
payment date in a Principal Funding Account. The trustee will apply the funds
in the Principal Funding Account, together with any amounts in the Excess
Funding Account allocable to the series, to make principal distributions to
the certificateholders of the series when due. The amount to be deposited in a
Principal Funding Account for any series on any payment date will not be
limited to any Controlled Deposit Amount or Controlled Amortization Amount. If
a series has more than one class of certificates, each class may have a
separate Principal Funding Account and there may be priorities among the
classes with respect to deposits of principal into the Principal Funding
Accounts.
The "Early Amortization Period" for a series is the period beginning on
the day on which an Early Amortization Event has occurred with respect to the
series and ending on the earliest of:
o payment in full of the outstanding principal amount of the
certificates of that series,
o the recommencement of the Revolving Period in accordance with
the related Series Supplement and
o the Termination Date for the series.
The start of an Early Amortization Period for a series will terminate
its Revolving Period, Reinvestment Period, Controlled Amortization Period or
Accumulation Period, as applicable. Further, we will no longer pay principal
collections and some other amounts allocable to the Certificateholders'
Interest of that series to the seller or the holders of any other outstanding
series or deposited in a Principal Funding Account. Instead, the CARCO
receivables trust trustee will distribute them as principal payments to the
applicable certificateholders of that series monthly on
54
each payment date beginning with the payment date following the Collection
Period in which that Early Amortization Period begins (each of those payment
dates, a "Special Payment Date"). During an Early Amortization Period for a
series, distributions of principal to certificateholders of the series will
not be limited to any Controlled Deposit Amount or Controlled Amortization
Amount. In addition, on the first Special Payment Date for any series, to the
extent stated in the related Series Supplement, the CARCO receivables trust
trustee will distribute any funds on deposit in its Excess Funding Account, if
any, and any funds on deposit in its Principal Funding Account with respect to
that series to the certificateholders of the relevant class or series up to
the outstanding principal balance of their certificates. See "Reinvestment
Events and Early Amortization Events" for a discussion of the events which
might lead to the beginning of an Early Amortization Period with respect to a
Series.
The CARCO receivables trust may use any combination of the above
described structures for a series or class and may use any other principal
payment structure set forth in a prospectus supplement.
We will invest funds on deposit in any Principal Funding Account in
Eligible Investments. The Eligible Investments in the related prospectus
supplement intended to assure a minimum rate of return on the investment of
the funds. To make it more likely that the principal amount of a series or
class of certificates will be paid in full at the end of its Accumulation
Period, the series or class may be subject to a maturity liquidity facility or
other similar mechanism stated in the relevant prospectus supplement. A
maturity liquidity facility is a financial contract that typically provides
that enough principal will be available to retire the notes at a specified
date.
Certificates of a series or class may also be purchased from time to
time, typically at their respective principal amounts, in connection with a
remarketing of the certificates if we so provide in the related prospectus
supplement. A purchase of certificates of a series or class may cause the
outstanding principal amount of the series or class to decrease prior to the
start of any Controlled Amortization Period or Early Amortization Period. The
Series Supplement for any series subject to purchase will describe the
conditions to and procedures for any purchase. The proceeds of any purchase
would be paid to the holders of the certificates so purchased.
The Seller's Certificate
The Pooling and Servicing Agreement provides that the seller may, from
time to time, 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 or entity chosen by the
seller upon the execution and delivery of a supplement to the Pooling and
Servicing Agreement, if
o the seller shall at the time of that exchange and after giving
effect to the exchange have an interest in the Pool Balance of
not less than 2% of the aggregate amount of the principal
balances of the receivables (the "Pool Balance"),
o the seller shall have delivered to the trustee, the Rating
Agencies and any Enhancement provider a Tax Opinion with
respect to the exchange and
55
o the seller shall have delivered to the trustee written
confirmation from the applicable Rating Agencies that the
exchange will not result in a reduction or withdrawal of the
rating of any outstanding series or class of certificates.
Any later transfer or assignment of a Supplemental Certificate is also subject
to the second and third conditions described in the preceding sentence. The
seller may transfer a Supplemental Certificate to a securitization vehicle
that in turn issues asset-backed securities based on that Supplemental
Certificate.
New Issuances
The Pooling and Servicing Agreement states that under one or more Series
Supplements, the CARCO receivables trust trustee may issue two types of
certificates:
o one or more series of certificates which are transferable and
have the characteristics described below and
o the Seller's Certificate, and any Supplemental Certificate,
which will evidence the Seller's Interest and will be
transferable only upon the satisfaction of conditions described
under "The Seller's Certificate."
The Pooling and Servicing Agreement also provides that, under one or
more Series Supplements, the seller may cause the CARCO receivables trust
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:
o its name or designation,
o its initial principal amount, or method for calculating that
amount,
o its certificate rate, or the method for determining its
certificate rate,
o a date on which it will begin its Accumulation Period or
Controlled Amortization Period, if any,
o the method for allocating principal and interest to
certificateholders of the series,
o the percentage used to calculate monthly servicing fees,
o the issuer and terms of any Enhancement or the level of
subordination, if any, provided by the Seller's Interest,
o the terms on which the certificates of the 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,
o the Series Termination Date and
o any other terms permitted by the Pooling and Servicing
Agreement (all of those terms, the "Principal Terms" of the
series).
56
The seller may offer any series to the public under a prospectus or
other disclosure document in transactions either registered under the
Securities Act or exempt from registration under the Securities Act, directly
or through one or more 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 so that each series has a Controlled
Amortization Period or Accumulation Period which may have a different length
and begin on a different date than the Controlled Amortization Period or
Accumulation Period for any other series. Further, one or more series may be
in their Reinvestment Periods, Early Amortization Periods, Controlled
Amortization Periods or Accumulation Periods while other series are not. Thus,
some series may be amortizing or accumulating principal, while other series
are not. Moreover, different series may have the benefits of different forms
of Enhancement issued by different entities. Under the Pooling and Servicing
Agreement, the CARCO receivables trust trustee will hold each form of
Enhancement only on behalf of a specified series or a particular class within
that series. The seller may specify different certificate rates and Monthly
Servicing Fees with respect to each series, or a particular class. In
addition, the seller has the option to vary among series, or classes within a
series, the terms upon which the seller may repurchase a series, or classes
within a series.
Under the Pooling and Servicing Agreement and a Series Supplement, a new
series may be issued only if specified conditions are satisfied. The seller
may cause the issuance of a new series by notifying the CARCO receivables
trust 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. The Pooling and Servicing Agreement states
that the CARCO receivables trust trustee will issue a new series only when it
is delivered the following:
o a Series Supplement in form satisfactory to the CARCO
receivables trust trustee signed by the seller and the servicer
and specifying the Principal Terms of the series,
o the form of any Enhancement and any related agreement,
o an opinion of counsel to the effect that, for federal income
tax and Michigan income and single business tax purposes,
o the issuance will not adversely affect the
characterization of the certificates of any outstanding
series or class as debt of the seller,
o such issuance will not cause a taxable event to any
certificateholders (an opinion of counsel to the effect
referred to in the first subclause above and this
subclause with respect to any action is referred to in
this prospectus as a "Tax Opinion"), and
o the new series will be characterized as debt of the
seller, and
o written confirmation from each applicable Rating Agency that
the issuance will not cause it to reduce or withdraw the rating
of any outstanding series or class of certificates.
The issuance is also subject to the conditions that
57
o the seller shall have represented and warranted that the
issuance shall not, in the reasonable belief of the seller,
cause an Early Amortization Event or Reinvestment Event to
occur with respect to any outstanding series, and
o after giving effect to the issuance, the seller's interest in
the Pool Balance shall not be less than 2% of the Pool Balance.
When all of these conditions are satisfied, the CARCO receivables trust
trustee will issue the series.
Conveyance of Receivables and Collateral Security
CARCO, USA and/or DCWR, as applicable, has sold and assigned or will
sell and assign to the CARCO receivables trust
o all of its right, title and interest in and to the receivables
and the related Collateral Security as of the Initial Cut-Off
Date,
o all receivables created in the Accounts after the Initial
Cut-Off Date,
o its interests in the related Collateral Security and the
Receivables Purchase Agreement and
o the proceeds of all of the foregoing.
The "Collateral Security" in respect of the receivables is a security
interest in vehicles and parts inventory, equipment, fixtures, service
accounts and, in some cases, realty and a personal guarantee.
DCWR and CFC must indicate in their computer records that the
receivables in the Accounts and the related Collateral Security have been
conveyed to the trust. In addition, the seller must provide to the CARCO
receivables trust 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 and the applicable Additional Cut-Off Date,
o its account number,
o the outstanding balance of the receivables in the Account and
o the outstanding balance of principal receivables in the
Account.
CFC will retain and will not deliver to the CARCO receivables trust
trustee any other records or agreements relating to the receivables. Except as
set forth above, CFC has not and will not segregate the records and agreements
relating to the trust's receivables from those relating to other accounts of
CFC. CFC has not and will not stamp or mark the physical documentation
relating to the receivables to reflect the transfer of the receivables to the
trust. The seller will file one or more financing statements in accordance
with applicable state law to perfect the CARCO receivables trust's interest in
the receivables, the Collateral Security, the Receivables Purchase Agreement
and the proceeds of those items. See "Risk Factors" and "Legal Aspects of the
Receivables."
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As contemplated above and as described below under "Addition of
Accounts", the seller has the right, subject to 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
CFC the receivables then existing or created after that time in the Additional
Accounts and to convey the receivables to the CARCO receivables trust. Each
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 the Additional Accounts as of the date the Additional Accounts are
identified and selected (the "Additional Cut-Off Date").
Representations and Warranties
The seller will represent and warrant to the CARCO receivables trust,
among other things, that
o as of each Series Cut-Off Date, and the date of issuance of any
series (a "Series Issuance Date"), or, in the case of the Additional
Accounts, as of the Additional Cut-Off Date and the date the related
receivables are transferred to the CARCO receivables trust (an
"Addition Date"), each Account or Additional Account was an Eligible
Account,
o as of the Series 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 "Receivables Transfer Date"), each
receivable is an Eligible Receivable or, if the receivable is not an
Eligible Receivable, the receivable is conveyed to the CARCO
receivables trust as described below under "Ineligible Receivables,
the Installment Balance Amount and the Overconcentration Amount",
o each receivable and all Collateral Security conveyed to the CARCO
receivables trust on the Receivables 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 CARCO receivables trust free
and clear of any liens and
o all appropriate consents and governmental authorizations required to
be obtained by the seller in connection with the conveyance of each
receivable or Collateral Security have been duly obtained.
If the seller breaches any representation and warranty described in the
preceding paragraph the CARCO receivables trust will reassign the related
receivables to the seller in the manner described in the following paragraph.
However, the CARCO receivables trust will be entitled to make that
reassignment only if
o the breach remains uncured for 30 days or a longer period as may be
agreed to by the CARCO receivables trust trustee, after the earlier
to occur of the discovery of the breach by the seller or the
servicer or receipt of written notice of the breach by the seller or
the servicer, and
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o the breach has a materially adverse effect on the
Certificateholders' Interest in the receivable or, in the case of a
breach relating to an Account, all receivables in the related
Account ("Ineligible Receivables").
The CARCO receivables trust will reassign each Ineligible Receivable to
the seller on or before the end of the Collection Period in which the
reassignment obligation arises by deducting the principal balance of the
receivable from the Pool Balance. A deduction may cause the Pool Balance minus
the aggregate Invested Amounts for all outstanding series (the "Seller's
Participation Amount") to be less than the aggregate Available Subordinated
Amounts for all outstanding series (the "Trust Available Subordinated Amount")
on the second business day preceding the payment date (each second business
day preceding a Distribution Day, a "Determination Date"), after giving effect
to the allocations, distributions, withdrawals and deposits to be made on the
payment date. If this happens, the seller must 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 (that amount, a "Transfer Deposit Amount"). If
the Transfer Deposit Amount is not so deposited, the principal balance of the
related Ineligible 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. Any principal balance not so deducted will not
be reassigned and will remain part of the CARCO receivables trust. The
reassignment of any receivable to the seller and the payment of any related
Transfer Deposit Amount will be the sole remedy available against the seller
for any breach of the representations and warranties described above in this
section with respect to the receivables.
The seller will also represent and warrant to the CARCO receivables
trust that, among other things, as of each Series Issuance Date
o it is duly formed as a limited liability company 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
o 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 created after that time, the
Receivables Purchase Agreement, and the proceeds of those items,
including proceeds in any of the accounts established for the
benefit of the certificateholders of any series, subject to the
rights of the Purchasers with respect to some of the Collateral
Security, under the UCC as then in effect in the State of Michigan,
which is effective as to each receivable existing on the Initial
Closing Date, or as of the Addition Date, if applicable, or, as to
each receivable arising after those dates, upon the creation of that
receivable and until termination of the CARCO receivables trust.
If a breach of any of the representations and warranties described in
the preceding paragraph has a materially adverse effect on the
Certificateholders' Interest in the receivables, either the CARCO receivables
trust trustee or the holders of certificates of all outstanding series
evidencing not less than a majority of the aggregate unpaid principal amount
of all outstanding series, by written notice to the seller and the servicer,
and to the trustee and the provider of any Enhancement
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if given by certificateholders, may direct the seller to accept the
reassignment of the Certificateholders' Interest of all series within 60 days
of the notice, or within a longer period specified in the notice. The seller
must accept the reassignment of the Certificateholders' Interest on a payment
date occurring within the 60-day period. However, the reassignment need not be
made if at the end of the applicable period, the representations and
warranties shall then be true and correct in all material respects and any
materially adverse effect caused by the breach shall have been cured. The
price for the reassignment will typically be equal to the sum of:
o the aggregate "Invested Amounts", as specified in the related Series
Supplements, of all series on the Determination Date preceding the
payment date on which the purchase is scheduled to be made,
o accrued and unpaid interest on the unpaid principal amount of the
certificates at the applicable certificate rate, together with
interest on overdue interest, and
o with respect to any particular series, any other amounts stated in
its Series Supplement.
The payment of the reassignment price for all outstanding series will be
considered a payment in full of the Certificateholders' Interest. The CARCO
receivables trust trustee will distribute those funds to the applicable
certificateholders upon presentation and surrender of the certificates. If the
CARCO receivables trust trustee or the certificateholders give a notice as
provided in the preceding paragraph, the obligation of the seller to make any
deposit will be the sole remedy respecting a breach of the representations and
warranties available to certificateholders or the CARCO receivables trust
trustee on behalf of the certificateholders.
DCWR will be deemed to have made all the representations and warranties
of the seller in the Pooling and Servicing Agreement and in any Series
Supplement with respect to any series or class of certificates.
Eligible Accounts and Eligible Receivables
As discussed under "Representations and Warranties" above, the seller
represents that, as of specified times, the Accounts are Eligible Accounts and
the receivables are Eligible Receivables.
An "Eligible Account" is a wholesale financing line of credit extended
by CFC, directly or as successor to CFC Corp. or CCC, to a dealer, which, as
of its date of determination:
o is established by CFC, directly or as successor to CFC Corp. or CCC,
in the ordinary course of business under a floorplan financing
agreement,
o is in favor of an Eligible Dealer,
o is in existence and maintained and serviced by CFC, directly or as
successor to CFC Corp. or CCC, and
o in respect of which no amounts have been charged off as
uncollectible or are classified as past due or delinquent.
An "Eligible Dealer" is a dealer:
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o which is located in the United States of America, including its
territories and possessions,
o which has not been identified by the servicer as being the subject
of any voluntary or involuntary bankruptcy proceeding or in
voluntary or involuntary liquidation,
o in which DaimlerChrysler or any affiliate of DaimlerChrysler does
not have an equity investment and
o which has not been classified by the servicer as being under Dealer
Trouble status.
An "Eligible Receivable" is a receivable:
o which was originated or acquired by CFC, directly or as successor to
CFC Corp. or CCC, in the ordinary course of business,
o which has arisen under an Eligible Account and is payable in United
States dollars,
o which is owned by CFC, CFC Corp. or CCC at the time of sale to the
seller,
o which represents the obligation of a dealer to repay an advance made
to the dealer to finance the acquisition of vehicles,
o which at the time of creation and at the time of transfer to the
trust is secured by a perfected first priority security interest in
the related vehicle,
o which was created in compliance in all respects with all
requirements of law applicable to the receivable and under a
floorplan financing agreement which complies in all respects with
all requirements of law applicable to any party to the agreement,
o with respect to which all consents and governmental authorizations
required to be obtained by DaimlerChrysler, CCC, CFC Corp., CFC or
the seller in connection with the creation of the receivable or the
transfer of the receivable to the CARCO receivables trust or the
performance by CCC, CFC Corp. or CFC of the floorplan financing
agreement under which the receivable was created, have been duly
obtained,
o as to which at all times following the transfer of the receivable to
the CARCO receivables trust, the CARCO receivables trust will have
good and marketable title to the receivable free and clear of all
liens arising prior to the transfer or arising at any time, other
than liens permitted under the Pooling and Servicing Agreement,
o which has been the subject of a valid transfer and assignment from
the seller to the CARCO receivables trust of all the seller's
interest in the receivable, including any proceeds of the
receivable,
o which will at all times be the legal and assignable payment
obligation of the related dealer, enforceable against the dealer in
accordance with its terms, except as enforceability may be limited
by applicable bankruptcy or other similar laws,
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o which at the time of transfer to the CARCO receivables 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,
o as to which, at the time of transfer of the receivable to the CARCO
receivables trust, DaimlerChrysler, CCC, CFC Corp., CFC and the
seller have satisfied all their respective obligations with respect
to the receivable required to be satisfied at that time,
o as to which, at the time of transfer of the receivable to the CARCO
receivables trust, neither DaimlerChrysler, CCC, CFC Corp. or CFC
nor the seller has taken or failed to take any action which would
impair the rights of the trust or the certificateholders,
o 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 CARCO receivables trust with all
applicable governmental authorization.
The CARCO receivables trust trustee did not and will not 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. Also, the CARCO receivables trust trustee
will not 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 CARCO receivables trust trustee on or before
March 31 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 other
components of the CARCO receivables 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, the
seller will transfer all Ineligible Receivables arising in an Eligible Account
to the CARCO receivables trust. If, however, the Series Supplement for a
series so states, the Incremental Subordinated Amount for the series will be
adjusted by the portion of the aggregate principal amount of Ineligible
Receivables included in the series allocable to the Certificateholders'
Interest of the series. Also, if the Series Supplement for a series so states,
the Incremental Subordinated Amount for the series shall be adjusted to
reflect, on each payment date,
o the aggregate principal amount of receivables in the trust on the
payment date which are Dealer Overconcentrations (the "Dealer
Overconcentration Amount") allocable to the Certificateholders'
Interest of the series and
o the portion of the aggregate amount of Installment Balances in
respect of which CFC has not received an offsetting payment from the
related dealer on the payment date (the "Installment Balance
Amount") allocable to the Certificateholders' Interest of the
series.
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"Dealer Overconcentrations" on any payment date means, with respect to
any dealer or group of affiliated dealers, the excess of
o the aggregate principal amount of receivables due from the dealer or
group of affiliated dealers on the last day of the Collection Period
immediately preceding such payment date over
o 2% of the Pool Balance on the last day of the immediately preceding
Collection Period; provided that when the certificates that were
outstanding at the time the collateral certificate was issued are no
longer outstanding, the percentage applicable to certain dealers or
groups of dealers will be 4% rather than 2%.
At its option, the servicer may purchase one or more Ineligible
Receivables or one or more receivables that are part of a Dealer
Concentration, in each case at a price equal to the principal amount plus
accrued and unpaid interest.
Addition of Accounts
Subject to the conditions described in this paragraph, the seller has
the right to designate from time to time additional accounts to be included as
Accounts (the "Additional Accounts"). Also, the seller must add the
receivables of Additional Accounts if the Pool Balance on the last day of any
Collection Period is less than the Required Participation Amount as of the
following payment date, after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the payment date. In that case, unless
insolvency events have occurred with respect to the seller, CFC or
DaimlerChrysler, then CFC under the Receivables Purchase Agreement must sell
to the seller, and the seller under the Pooling and Servicing Agreement must
transfer and assign to the CARCO receivables trust, within 10 business days
after the end of the Collection Period, interests in all receivables arising
in the Additional Accounts, whether the receivables are then existing or
created after that time. Any designation of Additional Accounts is subject to
the following conditions, among others:
o each Additional Account must be an Eligible Account;
o the seller shall represent and warrant that the addition of the
Additional Accounts shall not, in the reasonable belief of the
seller, cause an Early Amortization Event or Reinvestment Event to
occur with respect to any series;
o the seller shall not select the Additional Accounts in a manner that
it believes is adverse to the interests of the certificateholders or
any Enhancement provider;
o if the addition is not required, the seller shall deliver a Tax
Opinion and other opinions of counsel with respect to the addition
of the Additional Accounts to the CARCO receivables trust trustee,
the Rating Agencies and any Enhancement provider; and
o the applicable Rating Agencies shall have provided written
confirmation that the addition will not cause the rating of any
outstanding series or class of certificates to be reduced or
withdrawn.
The seller may, however, from time to time, at its discretion, and
subject only to the limitations specified in this paragraph, designate
Additional Accounts. Additional Accounts designated in
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accordance with the provisions described in this paragraph are referred to in
this prospectus as "Automatic Additional Accounts." Unless each Rating Agency
otherwise consents,
o the number of Automatic Additional Accounts designated with respect
to any of the three consecutive Collection Periods beginning in
January, April, July and October of each calendar year shall not
exceed 8% of the number of Accounts as of the first day of the
calendar year during which the Collection Periods begin; provided
that such percentage will be 10% rather than 8% when we have retired
all those certificates that were outstanding when the collateral
certificate was issued and
o the number of Automatic Additional Accounts designated during any
calendar year shall not exceed 20% of the number of Accounts as of
the first day of the calendar year.
On or before the first business day of each Collection Period beginning in
January, April, July and October of each calendar year, the seller shall have
requested and obtained notification from each Rating Agency of any limitations
to the right of the seller to designate Eligible Accounts as Automatic
Additional Accounts during any period which includes the Collection Period. On
or before January 31, April 30, July 31 and October 31 of each calendar year,
the CARCO receivables trust trustee shall have received confirmation from each
Rating Agency that the addition of all Automatic Additional Accounts included
as Accounts during the three consecutive Collection Periods ending in the
calendar month prior to that date shall not have resulted in any applicable
Rating Agency reducing or withdrawing its rating of any outstanding series or
class of certificates or notes, as applicable. On or before January 31 and
July 31 of each calendar year, or on or before the last day of each month in
some circumstances, the seller shall have delivered to the CARCO receivables
trust trustee, each Rating Agency and any Enhancement provider an opinion of
counsel with respect to the Automatic Additional Accounts included as Accounts
during the preceding calendar year confirming the validity and perfection of
each transfer of that Automatic Additional Accounts. If the CARCO receivables
trust trustee has not received the Rating Agency confirmation or opinion of
counsel with respect to any Automatic Additional Accounts, the seller must
remove the Automatic Additional Accounts from the CARCO receivables trust.
Each Additional Account, including each Automatic 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 CCC,
CFC Corp. or CFC, they may not be of the same credit quality as the initial
Accounts. Additional Accounts may have been originated by CCC, CFC Corp. or
CFC at a later date using credit criteria different from those which were
applied to the initial Accounts or may have been acquired by CCC, CFC Corp. or
CFC from another wholesale lender that had different credit criteria. In
addition, the seller will be permitted to designate Additional Accounts that
contain receivables that have been sold or pledged to third parties. However,
following the applicable Additional Cut-Off Date, no receivables arising after
the Additional Cut-Off Date in any of those accounts shall be sold or pledged
to any third parties.
The "Required Participation Amount" for any date is an amount equal to
the sum of:
o the sum of the amounts for each series obtained by multiplying the
Required Participation Percentage for the series by the Initial
Invested Amount for the series at that time. However, each Excluded
Series will be excluded from this calculation until the Invested
Amount of the related Paired Series is reduced to zero; and
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o 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 payment
date following the Determination Date.
The "Required Participation Percentage" for a series will be specified
in the related Series Supplement.
Removal of Accounts
The seller shall have the right at any time to require the removal from
the CARCO receivables trust of Eligible Accounts. To remove any Eligible
Account, the seller, or the servicer on its behalf, shall, among other things,
o furnish to the CARCO receivables trust trustee, any Enhancement
provider and the Rating Agencies a written notice (the "Removal
Notice") stating the Determination Date on which removal of one or
more Accounts will commence (the "Removal Commencement Date") and
the Accounts to be removed from the CARCO receivables trust (the
"Designated Accounts"),
o determine on the Removal Commencement Date the aggregate principal
balance of receivables in respect of each Designated Account (the
"Designated Balance"),
o from and after the Removal Commencement Date, cease to transfer to
the CARCO receivables trust all receivables arising in the
Designated Accounts,
o from and after the Removal Commencement Date, allocate all principal
collections in respect of each Designated Account, first to the
oldest outstanding principal balance of the Designated Account,
until the Determination Date on which the Designated Balance in the
Designated Account is reduced to zero (the "Removal Date"),
o on each business day from and after the Removal Commencement Date to
and until the related Removal Date, allocate
o to the CARCO receivables trust, to be further allocated under
the Pooling and Servicing Agreement, interest collections in
respect of each Designated Account with respect to receivables
in all Designated Accounts sold to the CARCO receivables trust,
and
o to the seller the remainder of the interest collections in all
of those Designated Accounts,
o represent and warrant that the removal of any Eligible Account on
any Removal Date shall not, in the reasonable belief of the seller,
cause an Early Amortization Event or Reinvestment Event to occur
with respect to any series or cause the Pool Balance to be less than
the Required Participation Amount,
o represent and warrant that no selection procedures believed by the
seller to be adverse to the interests of the certificateholders were
utilized in selecting the Designated Accounts,
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o represent and warrant that the removal will not cause the rating of
any outstanding series or class of certificates to be reduced or
withdrawn, and
o on or before the related Removal Date, deliver to the CARCO
receivables trust trustee and any Enhancement provider an officers'
note confirming the items set forth in the sixth, seventh and eighth
clauses above and a Tax Opinion with respect to the removal.
No Designated Accounts shall be removed if the removal will cause the
rating of any outstanding series or class of certificates to be reduced or
withdrawn.
On any date on which an Account becomes an Ineligible Account, which
date will be deemed the Removal Commencement Date for the Account, the seller
will start the removal of the Account from the CARCO receivables trust by
taking each of the actions specified in the first five clauses of the
preceding paragraph with respect to the Ineligible Account.
Upon satisfaction of the above conditions, on the Removal Date with
respect to any the Designated Account, the seller will stop allocating
collections of receivables to the Designated Account, which shall be deemed
removed from the CARCO receivables trust for all purposes (a "Removed
Account").
In addition to the removal rights described in the four paragraphs
above, the seller shall have the right at any time to remove Accounts from the
CARCO receivables trust and, in connection with the removal, repurchase the
then existing receivables in the Accounts. To remove Accounts and repurchase
the then existing receivables in those Accounts, the seller, or the servicer
on its behalf, shall, among other things:
o furnish to the CARCO receivables trust, each Enhancement provider
and the Rating Agencies a Removal Notice stating the Designated
Accounts which are to be removed, and the then existing receivables
in the Designated Accounts (the "Designated Receivables") which are
to be repurchased from the CARCO receivables trust and the
Determination Date on which the removal of the Designated Accounts
and the purchase of the Designated Receivables will occur (the
"Removal And Repurchase Date"),
o deliver to the CARCO receivables trust trustee on the Removal and
Repurchase Date a computer file or microfiche or written list
containing a true and complete list of the Removed Accounts stating
for each Account its account number and the aggregate amount of
receivables outstanding in the Account,
o represent and warrant that the removal of any Eligible Account and
the repurchase of the receivables then existing in the Account on
any Removal and Repurchase Date shall not, in the reasonable belief
of the seller, cause an Early Amortization Event or Reinvestment
Event to occur with respect to any Series or cause the Pool Balance
to be less than the Required Participation Amount,
o represent and warrant that no selection procedures believed by the
seller to be adverse to the interests of the noteholders were used
in selecting the Designated Accounts,
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o represent and warrant as of the Removal and Repurchase Date that the
list of Removed Accounts delivered to the CARCO receivables trust
trustee as of the Removal and Repurchase Date, is true and complete
in all material respects,
o represent and warrant that the removal and repurchase will not cause
the rating of any outstanding series or class of certificates to be
reduced or withdrawn by the applicable Rating Agency,
o deliver to the CARCO receivables trust trustee, each Rating Agency
and any Enhancement providers a Tax Opinion, dated the Removal and
Repurchase Date, with respect to the removal and repurchase, and
o deliver to the CARCO receivables trust trustee and any Enhancement
providers an officers' note confirming the items set forth in the
third through sixth clauses above.
The seller may not remove Designated Accounts or repurchase Designated
Receivables unless each Rating Agency shall have notified the seller, the
servicer and the CARCO receivables trust trustee in writing that the removal
and repurchase will not cause the Rating Agency's rating of any outstanding
series or class of certificates to be reduced or withdrawn.
Upon satisfaction of the above conditions, on the Removal and Repurchase
Date with respect to any Designated Account and Designated Receivables, the
Designated Account shall be deemed removed, and the Designated Receivables
("Repurchased Receivables") shall be deemed repurchased, from the CARCO
receivables trust for all purposes.
The seller, however, shall have the right to require the reassignment to
it of all the CARCO receivables trust's right, title and interest in the
receivables then existing and created after that time in Accounts ("Automatic
Removed Accounts") designated by the seller, together with existing and future
collections and proceeds from those receivables, upon satisfaction of the
following conditions:
o on or before the fifth business day immediately preceding the date
upon which the Accounts are to be removed, the seller shall have
given the CARCO receivables trust trustee, each Enhancement provider
and the Rating Agencies a Removal Notice specifying the date for
removal of the Automatic Removed Accounts (the "Automatic Removal
Date");
o on or prior to the date that is five business days after the
Automatic Removal Date, the seller shall have delivered to the CARCO
receivables trust trustee a computer file or microfiche or written
list containing a true and complete list of the Automatic Removed
Accounts stating for each Account, as of the removal notice date,
its account number and the aggregate amount of receivables
outstanding in the Account;
o the seller shall have represented and warranted as of each Automatic
Removal Date that the list of Automatic Removed Accounts delivered
to the CARCO receivables trust trustee, as of the Automatic Removal
Date, is true and complete in all material respects;
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o the CARCO receivables trust trustee shall have received confirmation
from each Rating Agency that the removal will not cause the Ratings
Agency's rating of any outstanding series or class of certificates
to be reduced or withdrawn;
o the seller shall have delivered to the CARCO receivables trust
trustee, each Rating Agency and any Enhancement providers an
officers' certificate, dated the Automatic Removal Date, to the
effect that the seller reasonably believes the removal will not
cause an Early Amortization Event or Reinvestment Event to occur
with respect to any series; and
o the seller shall have delivered to the CARCO receivables trust
trustee, each Rating Agency and any Enhancement providers a Tax
Opinion, dated the Automatic Removal Date, with respect to the
removal.
However, from and after the date on which no series issued prior to
March 10, 1999, is outstanding, the conditions specified in the first clause
above that relate to Enhancement providers and Rating Agencies and the
conditions specified in the fourth, fifth and sixth clauses above will not be
required if all of the Accounts to be removed have liquidated and have zero
balances.
Upon satisfaction of the above conditions, on the Automatic Removal Date
the CARCO receivables trust's interest in the receivables arising in the
Automatic Removed Accounts, all monies due and to become due and all amounts
received with respect to the receivables and all proceeds of the receivables
shall be deemed removed from the trust for all purposes.
Excluded Series
A series of notes may be designated as an excluded series (an "Excluded
Series") with respect to a series of notes previously issued by the CARCO
receivables trust as to which the Accumulation Period or Controlled
Amortization Period has commenced (a "Paired Series"). This allows a seller,
in effect, to replace an amortizing series with a new series without waiting
for the amortizing series to be paid in full.
Each Excluded Series will be prefunded with an initial deposit to a
prefunding account in an amount equal to the initial principal balance of the
Excluded Series. The source of funds will primarily be the proceeds of the
offering of the Excluded Series. Any prefunding account will be held for the
benefit of the Excluded Series and not for the benefit of the Paired Series.
As funds are accumulated in the Principal Funding Account for the Paired
Series or distributed to holders of notes of the Paired Series, the CARCO
receivables trust trustee will distribute to the seller an equal amount of
funds from any prefunding account for the Excluded Series. Until payment in
full of the Paired Series, no interest collections, principal collections,
Defaulted Amounts or Miscellaneous Payments will be allocated to the related
Excluded Series. Also, it is expected that any Excluded Series will be
excluded from the calculation of the Required Participation Amount as
described under " -- Addition of Accounts."
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Collection Account
In general, either the servicer, subject to limitations, will hold the
CARCO receivables trust's funds or the CARCO receivables trust trustee will
keep those funds in accounts that must be Eligible Deposit Accounts.
The servicer has established and will maintain an Eligible Deposit
Account for the benefit of the certificateholders in the name of the CARCO
receivables trust trustee, on behalf of the trust (the "Collection Account").
"Eligible Deposit Account" means either
o a segregated account with an Eligible Institution or
o a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States
or any one of the states of the United States, or any domestic
branch of a foreign bank, having corporate trust powers and acting
as trustee for funds deposited in the account, so long as any of the
securities of the depository institution has a credit rating from
each Rating Agency in one of its generic rating categories which
signifies investment grade.
"Eligible Institution" means
o the corporate trust department of the trustee or
o a depository institution organized under the laws of the United
States or any one of the states of the United States, or the
District of Columbia, or a domestic branch of a foreign bank, which
at all times
o has either
o a long-term unsecured debt rating of A2 or better by Moody's
Investors Service, Inc. ("Moody's") and of AAA or better by
Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies ("Standard & Poor's") or
o a certificate of deposit rating of P-1 by Moody's or A-1+ by
Standard & Poor's, and
o is a member of the FDIC.
Funds in the Collection Account generally will be invested in Eligible
Investments. "Eligible Investments" are book-entry securities, negotiable
instruments or physical securities having original or remaining maturities of
30 days or less, but in no event occurring later than the payment date next
succeeding the trustee's acquisition of the book-entry securitized, negotiable
instruments or physical securities, except as otherwise provided in the
related Series Supplement. Eligible Investments are limited to:
o direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
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o demand deposits, time deposits or certificates of deposit of any
depositary institution or trust company incorporated under the laws
of the United States of America or any state of the United States,
or any domestic branch of a foreign bank, and subject to supervision
and examination by Federal or state banking or depository
institution authorities. However, at the time of the CARCO
receivables trust's investment or contractual commitment to invest
in the demand deposits, the deposits or certificates of deposit, the
commercial paper or other short-term unsecured debt obligations,
other than obligations the rating of which is based on the credit of
a person or entity other than the depository institution or trust
company of the depositary institution or trust company, must have a
credit rating from each of the Rating Agencies in its highest
investment category;
o commercial paper having, at the time of the CARCO receivables
trust's investment or contractual commitment to invest in the
commercial paper, a rating from each of the Rating Agencies in its
highest investment category;
o except during a Reinvestment Period with respect to any series,
investments in money market funds having a rating from each of the
Rating Agencies in its highest investment category or otherwise
approved in writing thereby;
o bankers' acceptances issued by any depository institution or trust
company referred to in the second clause of this sentence;
o repurchase obligations, including those of appropriately rated
broker-dealers and financial institutions; and
o any other investment consisting of a financial asset that by its
terms converts to cash within a finite period of time. However, each
Rating Agency shall have notified the seller, the servicer and the
CARCO receivables trust trustee that the CARCO receivables trust's
investment in the financial asset will not cause the Rating Agency
to reduce or withdraw its then rating of any outstanding class or
series.
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 CARCO receivables trust trustee
to make withdrawals and payments from the Collection Account for the purpose
of making payments under the Pooling and Servicing Agreement. The servicer may
select an appropriate agent as representative of the servicer for the purpose
of choosing the investments.
Excess Funding Account
Except, to the extent provided in the related Series Supplement, during
an Early Amortization Period or Reinvestment Period for a series, we will keep
the Excess Funded Amount, if any, for that series in an Eligible Account (the
"Excess Funding Account") established with the CARCO receivables trust trustee
for the series. The "Excess Funded Amount" for a series will initially equal
the excess, if any, of the initial principal balance of the notes of the
series over the Initial Invested Amount of the series. The CARCO receivables
trust trustee will invest funds on deposit in the Excess Funding Account for a
series at the direction of the servicer in Eligible Investments.
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The investments must mature on or prior to the next payment date. The servicer
may select an agent for the purpose of designating the investments.
The CARCO receivables trust trustee will distribute funds on deposit in
the Excess Funding Account for a series to the seller or allocate them to one
or more other series which are in Controlled Amortization, Early Amortization,
Reinvestment or Accumulation Periods to the extent of any increases in the
Invested Amount of that series as a result of the addition of receivables to
the CARCO receivables trust, a reduction in the Seller's Interest, or a
reduction in the Initial Invested Amount of any other series. The trustee will
deposit additional amounts in the Excess Funding Account for a series on a
payment date to the extent that the sum of the Certificateholders' Interest of
the series in principal receivables and the amount on deposit in the Excess
Funding Account, if any, for the series prior to that date is less than the
outstanding principal balance of the notes of the series, but only to the
extent that funds are available as provided in the related Series Supplement.
The allocation of additional receivables to increase the Invested Amount of
each series that provides for an Excess Funding Account or similar arrangement
involving fluctuating levels of investment in the receivables will generally
be made pro rata on the basis of the amounts in the excess Funding Accounts or
similar basis. The deposit of amounts in the Excess Funding Accounts for each
of those series will generally be made pro rata on the basis of their
respective Adjusted Invested Amounts.
On each payment date, we will apply all investment income earned on
amounts in the Excess Funding Account for any series since the preceding
payment date as described in this prospectus and in the related prospectus
supplement.
The trustee will distribute funds on deposit in the Excess Funding
Account for a series on the earliest of
o the commencement of a Reinvestment Period with respect to the
series,
o the commencement of an Early Amortization Period with respect to the
series and
o the payment date or payment dates specified in or determined in the
manner provided in the Series Supplement for the series
to the certificateholders of the series or a class of the series or deposit
those amounts in the Principal Funding Account for the series or a class of
the series, in each case if and to the extent the related Series Supplement so
states. Also, except as otherwise provided in the related Series Supplement,
we will not deposit funds in the Excess Funding Account for a series during
any Early Amortization Period or Reinvestment Period with respect to the
series or with respect to any Collection Period following the Collection
Period stated in or determined in the manner provided in the Series Supplement
for the series.
Allocation Percentages
We will allocate collections to each series and then between the seller
and the certificateholders of that series on the basis of various percentages.
Which percentage we use depends on whether the collections being allocated are
interest collections or principal collections
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or other amounts and whether or not the collections are received in the
Revolving Period for a series.
Allocations Among Series. Under the Pooling and Servicing Agreement,
during each Collection Period the servicer will allocate to each outstanding
Series its share of interest collections, principal collections, Defaulted
Receivables and Miscellaneous Payments based on the applicable Series
Allocable Interest Collections, Series Allocable Principal Collections, Series
Allocable Defaulted Amount and Series Allocable Miscellaneous Payments.
"Series Allocable Interest Collections", "Series Allocable Principal
Collections", "Series Allocable Defaulted Amount" and "Series Allocable
Miscellaneous Payments" are, with respect to any series of certificates for
any Collection Period, the product of the Series Allocation Percentage for the
series and the amount of interest collections, principal collections, the
Defaulted Amounts and Miscellaneous Payments, respectively, with respect to
the Collection Period.
"Miscellaneous Payments" for any Collection Period are the sum of
o Adjustment Payments and Transfer Deposit Amounts received with
respect to the Collection Period and
o Unallocated Principal Collections on the payment date available to
be treated as Miscellaneous Payments as described below under
"Principal Collections for all Series."
"Series Allocation Percentage" is, with respect to a series for any
Collection Period, the percentage equivalent of a fraction, the numerator of
which is the Adjusted Invested Amount of the series as of the last day of the
immediately preceding Collection Period and the denominator of which is the
Trust Adjusted Invested Amount as of that last day.
"Adjusted Invested Amount" is, with respect to a series for any date,
an amount equal to the sum of
o the Initial Invested Amount of the series, minus unreimbursed
Investor Charge-Offs for the series and
o the Available Subordinated Amount with respect to the series, after
giving effect to the allocations, distributions, withdrawals and
deposits to be made on the payment date during the Collection Period
in which the date occurs.
Notwithstanding the foregoing, the Adjusted Invested Amount for the collateral
certificate will be the sum of the series nominal liquidation amounts for all
series of notes.
"Trust Adjusted Invested Amount" is, with respect to any Collection
Period, the sum of the Adjusted Invested Amounts for all outstanding series.
"Initial Invested Amount" is, with respect to any series and for any
date, the amount stated in the related Series Supplement. The Initial Invested
Amount for any series may be increased or decreased from time to time as
stated in the related Series Supplement, including as a result of deposits to
or withdrawals from the Excess Funding Account, if any, for the series.
73
Allocation between the Certificateholders and the Seller. The servicer
will allocate amounts initially allocated to each series between the
Certificateholders' Interest and the Seller's Interest for each Collection
Period as stated in the related Series Supplement and described in the related
prospectus supplement. If a series consists of more than one class, the
amounts allocated to the Certificateholders' Interest of the series will be
further allocated between those classes as stated in the related Series
Supplement and described in the related prospectus supplement.
Principal Collections For All Series. We will allocate principal
collections allocated to the Certificateholders' Interest of any series, for
any Collection Period with respect to any Accumulation Period, Controlled
Amortization Period, Reinvestment Period or Early Amortization Period with
respect to the series or a class of the series, first to make required
payments of principal to the Principal Funding Account or to the
Certificateholders of the series or class, in each case if and to the extent
stated in the Series Supplement for the series. The servicer will determine
the amount of available certificateholder principal collections for each
series and any Collection Period remaining after the required payments, if any
("Excess Principal Collections"). The servicer will allocate Excess Principal
Collections to cover any principal distributions to certificateholders of any
series which are either scheduled or permitted and which have not been covered
out of principal collections and other amounts allocated to the series
("Principal Shortfalls"). Excess Principal Collections will not be used to
cover Investor Charge-Offs for any series. If Principal Shortfalls exceed
Excess Principal Collections for any Collection Period, Excess Principal
Collections will be allocated pro rata among the applicable series based on
the relative amounts of Principal Shortfalls, unless otherwise provided in the
applicable Series Supplements. To the extent that Excess Principal Collections
exceed Principal Shortfalls, the CARCO receivables trust trustee will pay the
balance to the seller if the Seller's Participation Amount, determined after
giving effect to any principal receivables transferred to the CARCO
receivables trust on that 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
payment date immediately following the 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 we will
allocate the amount to the seller. However, if an Early Amortization Period,
Accumulation Period, Controlled Amortization Period or Reinvestment Period
commences for any series, the amount will be treated as a Series Allocable
Miscellaneous Payment.
Allocation of Collections; Deposits in Collection Account
On each Determination Date, the servicer will calculate the amounts to
be allocated in respect of collections on receivables received with respect to
the related Collection Period to the certificateholders of each outstanding
series or class or the seller in accordance with the Series Supplements.
The servicer, no later than two business days after the processing date,
will deposit all collections received with respect to the receivables,
excluding, with exceptions, portions allocable to the seller, in each
Collection Period into the Collection Account. However, the servicer need not
make daily deposits if
74
o CFC remains the servicer under the Pooling and Servicing Agreement,
o no Service Default has occurred and is continuing, and
o CFC has and maintains a short-term debt rating of at least A-1
by Standard & Poor's and P-1 by Moody's,
o CFC arranges for and maintains a letter of credit or other form
of Enhancement in respect of the servicer's obligation to make
deposits of collections on the receivables in the Collection
Account that is acceptable in form and substance to each Rating
Agency, or
o CFC otherwise obtains the Rating Agency confirmations described
below in this paragraph.
In that case, subject to any limitations referred to below, CFC may use for
its own benefit all collections until the related payment date. At that time
CFC will make the deposits in an amount equal to the net amount of the
deposits and withdrawals which would have been made if deposits were made on a
daily basis. However, before ceasing daily deposits as described above, the
seller must deliver to the trustee written confirmation from the applicable
Rating Agencies that the failure by CFC to make daily deposits will not cause
the Rating Agencies to reduce or withdraw rating of any outstanding series or
class of certificates.
In addition, during any Collection Period the servicer will be required
to deposit interest collections and principal collections into the Collection
Account only to the extent of
o the distributions the CARCO receivables trust must make to
certificateholders,
o the amounts the CARCO receivables trust must deposit into any
account maintained for the benefit of certificateholders of any
series and other parties, and
o the amounts the CARCO receivables trust must pay to any Enhancement
provider on the payment date relating to the Collection Period.
Also, if, at any time prior to that payment date, the amount of collections
deposited in the Collection Account exceeds the amount the servicer is
required to deposit, the servicer will be permitted to withdraw the excess
from the Collection Account.
On any date on which the servicer deposits collections in the Collection
Account, the servicer will distribute directly to the seller the amount of the
interest collections allocable to each series specified in the related Series
Supplement and described in the related prospectus supplement. However, the
CARCO receivables trust trustee will make that distribution only if the
Seller's Participation Amount, determined after giving effect
75
to any Principal Receivables transferred to the CARCO receivables trust on the
date, exceeds the Trust Available Subordinated Amount for the immediately
preceding Determination Date, after giving effect to the allocations,
distributions, withdrawals and deposits required to be made on the payment
date immediately following the Determination Date. Also, during the Revolving
Period for any series, subject to limitations, the servicer will distribute
directly to the seller on each date of deposit the amount of principal
collections allocable to each series stated in the related Series Supplement
and described in the related prospectus supplement if the Seller's
Participation Amount, determined after giving effect to any principal
receivables transferred to the trust on that date, exceeds the Trust Available
Subordinated Amount for the immediately preceding Determination Date, after
giving effect to the allocations, distributions, withdrawals and deposits the
servicer is to make on the payment date immediately following the
Determination Date.
Limited Subordination of Seller's Interest; Enhancements
Subordination Of Seller's Interest. With respect to any series of
certificates, we will subordinate the Seller's Interest to the rights of
certificateholders of the series to the extent described in the related
prospectus supplement. This will provide credit enhancement to the series. The
amount of the subordination with respect to any series is the "Available
Subordinated Amount" for the series. We will decrease and increase the
Available Subordinated Amount for any series from time to time if and to the
extent described in the related prospectus supplement. We will describe in the
prospectus supplement for each series the manner in which the servicer may
draw upon collections attributable to the Available Subordinated Amount for
the series to make payments to or for the benefit of the holders of
certificates of the series. If we so state in the related Series Supplements,
the Available Subordinated Amount for a series may be available to more than
one series of certificates.
Enhancements. In addition to the subordination described above, for any
series, we may provide enhancements ("Enhancements") with respect to one or
more classes of the series, including one or more of the following:
o letter of credit,
o surety bond,
o cash collateral account,
o spread account,
o guaranteed rate agreement,
o swap, including without limitation currency swaps, or other interest
protection agreement,
o repurchase obligation,
o cash deposit, or
o another form of credit enhancement described in the related
prospectus supplement.
We may also provide enhancements to a series or class or classes of a series
by subordination provisions which require that distributions of principal
and/or interest be made with respect to the certificates of the series or the
class or classes before distributions are made to one or more series or one or
more classes of the series. If we so provide in the related prospectus
supplement, any form of Enhancement may be available to more than one class or
series. The trust may use a currency swap to issue certificates payable in a
currency other than United States dollars.
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If we provide Enhancement with respect to a series, we will include in
the related prospectus supplement a description of
o the amount payable under the Enhancement,
o any conditions to payment we do not otherwise describe in this
prospectus,
o the conditions, if any, under which we may reduce the amount payable
under the Enhancement and under which we may terminate or replace
the Enhancement, and
o any material provisions of any agreement relating to the
Enhancement.
Additionally, we may set forth in the related prospectus supplement the
information with respect to the applicable Enhancement provider, including
o a brief description of its principal business activities,
o its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business,
o if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business and
o its total assets, and its stockholders' equity or policyholders'
surplus, if applicable, as of a date we state in the prospectus
supplement.
Limitations on Subordination and Enhancements. We intend the presence of
an Available Subordinated Amount or Enhancement with respect to a series or
class to enhance the likelihood of receipt by certificateholders of the series
or class of the full amount of principal and interest and to decrease the
likelihood that the certificateholders will experience losses. However, unless
we otherwise state in the prospectus supplement for a series, neither
subordination of the Seller's Interest nor the Enhancement, if any, will
provide protection against all risks of loss or will guarantee repayment of
the entire principal balance of the certificates and interest on the
certificates. If losses exceed the amount covered by the subordination or
Enhancement or are not covered by the subordination or Enhancement,
certificateholders (including the issuer) will bear their allocable share of
deficiencies. In addition, if we provide specific Enhancement for the benefit
of more than one class or series, certificateholders of that class or series
will be subject to the risk that the Enhancement will be exhausted by the
claims of certificateholders of other classes or series.
Distributions
The servicer will make payments to certificateholders of a series or a
class from the Collection Account and any accounts established for the benefit
of the certificateholders as we describe in the related prospectus supplement.
Defaulted Receivables and Recoveries
"Defaulted Receivables" on any Determination Date are
77
o all receivables which the servicer charged off as uncollectible in
respect of the immediately preceding Collection Period and
o 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 the receivables to the trust
and which were not Eligible Receivables for any six consecutive
Determination Dates after the date of transfer of the receivables to
the trust.
The "Defaulted Amount" for any Collection Period will be an amount,
which shall not be less than zero, equal to
o the principal amount of receivables that became Defaulted
Receivables during the preceding Collection Period minus
o the sum of
o the full amount of any Defaulted Receivables subject to
reassignment to the seller or purchase by the servicer for the
Collection Period unless 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, and
o the excess, if any, for the immediately preceding Determination
Date of the amount determined under this second clause for the
Determination Date over the amount determined under the first
clause for the Determination Date.
The servicer will charge off receivables as uncollectible in accordance with
the servicer's customary and usual policies and procedures for servicing its
own comparable revolving dealer wholesale loan accounts. The servicer will
allocate a portion of the Series Allocable Defaulted Amount for each series
and Collection Period between the certificateholders of the series and the
seller as we state in the related Series Supplement. The portion of the
Defaulted Amount allocated to the certificateholders of a series will be the
"Investor Default Amount" for the series. The servicer will further allocate
the Investor Default Amount for any series that consists of more than one
class between those classes as we state in the related Series Supplement.
If the servicer adjusts the amount of any receivable because of a
rebate, billing error or other non-cash items to a dealer, or because the
receivable was created in respect of inventory which was refused or returned
by a dealer, we will reduce the principal amount of each of the Seller's
Interest and the Pool Balance by the amount of the adjustment or charge-off.
Further, to the extent that the reduction in the Seller's Interest would
reduce the Seller's Participation Amount below the Trust Available
Subordinated Amount for the immediately preceding Determination Date, after
giving effect to the allocations, distributions, withdrawals and deposits to
be made on the payment date immediately following that Determination Date, the
seller will deposit a cash amount equal to the deficiency into the Collection
Account in immediately available funds (an "Adjustment Payment") on the day on
which the servicer makes the adjustment.
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Optional Repurchase
If we so state in the prospectus supplement relating to a series of
certificates, on any payment date occurring after the Invested Amount of the
certificates of the series is reduced to the percentage of the initial
outstanding principal amount of the notes of the series we state in the
prospectus supplement, the servicer will have the option, subject to
conditions, to repurchase the Certificateholders' Interest of the series. The
purchase price will be equal to the Invested Amount of the series on the
Determination Date preceding the payment date on which the servicer will make
the repurchase plus accrued and unpaid interest on the unpaid principal amount
of the certificates of the series at the applicable certificate rate, together
with interest on overdue interest, to the extent lawful, plus any other
amounts we state in the related Series Supplement. The servicer will deposit
the purchase price in the Collection Account in immediately available funds on
the payment date on which CFC exercises that option. Following any purchase,
the certificateholders of the series will have no further rights with respect
to the Certificateholders' Interest of the series, other than the right to
receive the final distribution on the certificates of that series. If CFC
fails for any reason to deposit the purchase price, the servicer will continue
to make payments to the certificateholders of the series as we describe in the
related prospectus supplement.
Reinvestment Events and Early Amortization Events
Beginning on the first payment date following the Collection Period in
which a Reinvestment Event has occurred with respect to any series,
o the servicer will no longer pay to DCWR principal collections
allocable to the Certificateholders' Interest of the series or
allocate those collections to any other series but instead will
deposit those collections to the Principal Funding Account for the
series monthly on each payment date, and
o the Controlled Deposit Amount or Controlled Amortization Amount, if
any, will no longer apply to distributions of principal in respect
of the notes of the series,
in each case except as we describe below under "Reinvestment Events and Early
Amortization Events" or as we state in the related Series Supplement. A
"Reinvestment Event" is, for any series, any of the events we so describe in
the related Series Supplement and describe in the related prospectus
supplement.
If any event we so define occurs, we will deem a Reinvestment Event to
have occurred with respect to the series without any notice or other action on
the part of any other party immediately upon the occurrence of the event. The
Reinvestment Period with respect to the series will begin as of the close of
business on the business day immediately preceding the day on which we deem
the Reinvestment Event to have occurred. Monthly deposits of principal to the
Principal Funding Account for the series will, except as we describe below
under "Reinvestment Events and Early Amortization Events" or state in the
related Series Supplement, begin on the first payment date following the
Collection Period in which a Reinvestment Period has begun with respect to the
series.
Beginning on the first payment date following the Collection Period in
which an Early Amortization Event has occurred with respect to any series,
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o the servicer will no longer pay to DCWR Principal Collections
allocable to the Certificateholders' Interest of the series,
allocate those collections to any other series or retain those
collections in the Principal Funding Account for the series but
instead will distribute those collections to noteholders of the
series monthly on each payment date and
o the Controlled Deposit Amount or Controlled Amortization Amount, if
any, will no longer apply to distributions of principal on the
certificates of the series,
in each case except as we describe below under "Reinvestment Events and Early
Amortization Events" or state in the related Series Supplement. An "Early
Amortization Event" is, for any series, any of the events we so define in the
related Series Supplement and describe in the related prospectus supplement,
as well as each of the following events:
o the occurrence of events of bankruptcy, insolvency or receivership
relating to the CARCO receivables trust or the seller; and
o the trust or DCWR becomes an investment company within the meaning
of the Investment Company Act of 1940.
If any event we describe above or in the prospectus supplement for a
series occurs, we will deem an Early Amortization Event to have occurred with
respect to the series without any notice or other action on the part of any
other party immediately upon the occurrence of the event. The Early
Amortization Period with respect to the series will begin as of the close of
business on the business day immediately preceding the day on which we deem
the Early Amortization Event to have occurred. Monthly distributions of
principal to the certificateholders of the series will begin on the first
payment date following the Collection Period in which an Early Amortization
Period has begun with respect to the series, except as we describe below under
"Reinvestment Events and Early Amortization Events." The failure of the CARCO
receivables trust to pay the outstanding principal amount of the certificates
of any series or class by their Expected Payment Date will have the same
consequences as the occurrence of an Early Amortization Event with respect to
the series or class. We shall deem all references in this prospectus to Early
Amortization Events to include that type of failure.
Even if a Reinvestment Period or an Early Amortization Period begins
with respect to a series, that period may terminate and the Revolving Period
with respect to the series and any class may recommence when the event giving
rise to the beginning of the Reinvestment Period or Early Amortization Period
no longer exists, whether as a result of the distribution of principal to
certificateholders of the series or otherwise, in each case if and to the
extent we state in the Series Supplement for the series.
In addition, if an insolvency event occurs with respect to DCWR, or DCWR
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 the
insolvency event or violation, as applicable, DCWR will, subject to the
actions of the certificateholders, immediately cease to transfer receivables
to the CARCO receivables trust and promptly give notice to the trustee of the
insolvency event or violation, as applicable. Under the terms of the Pooling
and Servicing Agreement, within 15 days the CARCO receivables trust trustee
will publish a notice of the insolvency event or violation
80
stating that the CARCO receivables trust trustee intends to sell, liquidate or
otherwise dispose of the receivables in a commercially reasonable manner and
on commercially reasonable terms, unless within a stated period of time
holders of notes of each outstanding series representing more than 50% of the
aggregate unpaid principal amount of the certificates of each outstanding
series, or, with respect to any series with two or more classes, the
certificates of each class, and each person holding a Supplemental
Certificate, instruct the CARCO receivables trust trustee not to sell, dispose
of or otherwise liquidate the receivables and to continue transferring
receivables as before the insolvency event or violation, as applicable. If the
portion of the 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 enough to pay the
aggregate unpaid principal balance of the certificates in full plus accrued
and unpaid interest on the certificates, certificateholders will incur a loss.
Termination; Fully Reinvested Date
Termination. The CARCO receivables trust will terminate on the
earliest to occur of
o the day following the payment date on which the aggregate Invested
Amounts for all series is zero,
o May 31, 2012 and
o the date on which the Servicer distributes to the certificateholders
proceeds from the sale, disposal or other liquidation of the
receivables following an insolvency event with respect to DCWR or
any violation by DCWR of its covenant not to create any lien on any
receivable, in each case as stated in the Pooling and Servicing
Agreement and as we describe above under "Reinvestment Events and
Early Amortization Events."
When the CARCO receivables trust is terminated, the trust will transfer to
DCWR all right, title and interest in the receivables and other funds of the
CARCO receivables trust, other than amounts in the CARCO receivables trust's
accounts for the final distribution of principal and interest to
certificateholders.
In any event, the last payment of principal and interest on any series
of certificates will be due and payable no later than the date we state in the
related prospectus supplement (the "Series Termination Date").
Fully Reinvested Date. The "Fully Reinvested Date" is the date on which
the amount on deposit in the Principal Funding Account with respect to a
series equals the outstanding principal amount of the notes of the series.
After the Fully Reinvested Date occurs with respect to any series,
certificateholders of that series will no longer have any interest in the
receivables. Further, all the representations and covenants of the seller and
the servicer relating to the receivables, as well as other provisions of the
Pooling and Servicing Agreement and all remedies for breaches of those
representations, covenants and other provisions, will no longer accrue to the
benefit of the certificateholders of that series, in each case unless the
Revolving Period with respect to the series recommences as we state in the
related Series Supplement. Those representations, covenants and other
provisions include
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o the conditions to the exchange of the Seller's Certificate we
describe under "The Seller's Certificate",
o the conditions to the issuance of a new series we describe under
"New Issuances",
o the representations we describe under "Representations and
Warranties" to the extent they relate to the receivables and the
Collateral Security,
o the limitations on additions and removals of Accounts we describe
under "Addition of Accounts" and "Removal of Accounts",
respectively, and
o the obligations of the servicer with respect to servicing the
receivables we describe under "Collection and Other Servicing
Procedures" and "Servicer Covenants."
Also, if the Fully Reinvested Date occurs with respect to any series,
the servicer will allocate to that series no interest collections, principal
collections, Defaulted Receivables or Miscellaneous Payments, unless the
series' Revolving Period begins again as we describe above. However, when the
servicer has made the final distribution with respect to each series of notes
or the series' Fully Reinvested Date has occurred, the CARCO receivables trust
trustee will convey and transfer to DCWR, all right, title and interest in the
receivables.
Indemnification
The Pooling and Servicing Agreement states that the servicer will
indemnify the CARCO receivables trust and the CARCO receivables trust trustee
from and against any loss, liability, expense, damage or injury suffered or
sustained arising out of any acts, omissions or alleged acts or omissions
arising out of activities of the CARCO receivables trust, the CARCO
receivables trust trustee or the servicer under the Pooling and Servicing
Agreement. The servicer will not so indemnify the CARCO receivables trust or
the CARCO receivables trust trustee, however, if the acts, omissions or
alleged acts or omissions constitute fraud, gross negligence, breach of
fiduciary duty or willful misconduct by the CARCO receivables trust trustee.
Also, the servicer will not indemnify the CARCO receivables trust, the CARCO
receivables trust trustee or the certificateholders for any act taken by the
CARCO receivables trust trustee at the request of the noteholders or for any
tax which the trust or the certificateholders is required to pay.
The Pooling and Servicing Agreement states that, except as we describe
above and with other exceptions, neither the seller, the servicer nor any of
their directors, officers, employees or agents will be under any liability to
the CARCO receivables trust, the CARCO receivables trust trustee, the
certificateholders or any other person for taking any action, or for
refraining from taking any action, under 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 of those persons in the performance of their duties or
by reason of reckless disregard of their obligations and duties under the
Pooling and Servicing Agreement.
Also, the Pooling and Servicing Agreement states 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 legal action which it may deem necessary or desirable for the benefit of
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the certificateholders with respect to the Pooling and Servicing Agreement and
the rights and duties of the parties to that agreement and the interest of the
certificateholders under that agreement.
Collection and Other Servicing Procedures
Under the Pooling and Servicing Agreement, the servicer is responsible
for servicing, collecting, enforcing and administering the receivables. The
servicer must do so 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 CARCO receivables trust.
CFC covenants that it may only change the terms relating to the
Accounts if
o in the servicer's reasonable judgment, the change will not cause any
Early Amortization Event or Reinvestment Event to occur with respect
to any series, and
o the servicer applies the change to the comparable segment of the
portfolio of revolving credit line dealer wholesale loan accounts
with similar characteristics owned or serviced by CFC and not only
to the Accounts.
When acting as a servicer, the servicer will, among other things
o collect and record payments,
o communicate with dealers,
o investigate payment delinquencies,
o evaluate the increase of credit limits, and
o maintain internal records with respect to each Account.
Managerial and custodial services performed by the servicer on behalf
of the trust include
o providing assistance in any inspections of the documents and records
relating to the Accounts and receivables by the CARCO receivables
trust trustee under the Pooling and Servicing Agreement,
o maintaining the agreements, documents and files relating to the
Accounts and receivables as custodian for the CARCO receivables
trust, and
o providing related data processing and reporting services for
certificateholders and on behalf of the CARCO receivables trust
trustee.
Servicer Covenants
In the Pooling and Servicing Agreement the servicer covenants that:
o it will duly satisfy all obligations on its part to be fulfilled
under or in connection with the receivables and the Accounts, will
maintain in effect all qualifications required in
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order to service the receivables and the 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;
o it will not permit any rescission or cancellation of a receivable
except as ordered by a court of competent jurisdiction or other
government authority;
o it will do nothing to impair the rights of the certificateholders in
the receivables or the Accounts; and
o 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 the noncompliance has not been cured within 30 days, or a 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, CFC, as servicer, will
purchase the receivable or all receivables in the Account, as applicable. If
CFC is the servicer, CFC will purchase the receivable or receivables 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 the receivable or receivables plus accrued and unpaid
interest on that amount. We shall deem the amount of the deposit a Transfer
Deposit Amount. The purchase by the servicer constitutes the sole remedy
available to the certificateholders if the covenant or warranty of the
servicer is not satisfied and the trust's interest in any purchased
receivables shall be automatically assigned to the servicer.
Servicing Compensation and Payment of Expenses
Unless we state otherwise in the related Series Supplement or prospectus
supplement, the servicer's compensation with respect to the certificates of a
series for its servicing activities and reimbursement for its expenses will be
a monthly servicing fee (the "Servicing Fee"). The Servicing Fee is an amount
payable in arrears on each payment date on or before the Series Termination
Date of the series and the Fully Reinvested Date, if any, of the series, and
after that date during the Revolving Period with respect to the series, if the
Revolving Period begins again, equal to one-twelfth of the product of
o the "Servicing Fee Rate" set forth in the series Supplement,
o the Pool Balance as of the last day of the second preceding
Collection Period, and
o the Series Allocation Percentage for the series for the immediately
preceding Collection Period.
Unless we state otherwise in a related Series Supplement or prospectus
supplement, the share of the Servicing Fee allocable to certificateholders of
any series with respect to any payment date (the "Monthly Servicing Fee")
shall be equal to one-twelfth of the product of
o the Servicing Fee Rate, and
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o the Invested Amount of the series as of the last day of the second
preceding Collection Period.
The seller shall pay the remainder of the Servicing Fee with respect to any
series. The servicer shall be paid the Monthly Servicing Fee with respect to
any series solely to the extent amounts are available for distribution of the
Monthly Servicing Fee under the terms of the Pooling and Servicing Agreement.
The servicer may waive its right to receive the Servicing Fee with
respect to any series on any payment date, so long as it believes that enough
interest collections will be available on a future payment date to pay the
Monthly Servicing Fee relating to the waived Servicing Fee. If that happens,
we shall deem the Servicing Fee and the Monthly Servicing Fee for the series
and the payment date to be zero.
The servicer will pay from its servicing compensation expenses it incurs
when servicing the Accounts and the receivables including, without limitation,
payment of fees and disbursements of the CARCO receivables trust 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
CARCO receivables trust or the certificateholders other than federal, state
and local income and franchise taxes, if any, of the trust or the
certificateholders.
Matters Regarding the Servicer
The servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon determination that those duties
are no longer permissible under applicable law. No resignation will become
effective until the CARCO receivables trust trustee or a successor to the
servicer has assumed the servicer's responsibilities and obligations under the
Pooling and Servicing Agreement (CFC or any successor servicer, the
"servicer"). The servicer may delegate any of its duties as servicer to any of
its affiliates, but any delegation will not relieve the servicer of its
obligation 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.
Service Default
In the event of any Service Default, the CARCO receivables 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 of the receivables
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 CARCO receivables trust
trustee shall as promptly as possible appoint a successor servicer and if no
successor servicer has been appointed by the CARCO receivables trust trustee
and has accepted the 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 CARCO
receivables trust trustee. Before any Service Transfer, the
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CARCO receivables trust trustee will review any bids obtained from potential
servicers meeting 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 excess amounts payable to the seller.
A "Service Default" refers to any of the following events:
o 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 Pooling and Servicing Agreement requires
the servicer to do so, which is not cured within a five business day
grace period;
o failure by the servicer duly to observe or perform any other
covenants or agreements of the servicer in the Pooling and Servicing
Agreement which failure has a materially adverse effect on the
noteholders of any outstanding series and which continues unremedied
for a period of 30 days after the date the trustee shall have given
written notice of the failure to the servicer;
o the servicer delegates its duties under the Pooling and Servicing
Agreement, except as specifically permitted under that agreement;
o any representation, warranty or certification made by the servicer
in the Pooling and Servicing Agreement or in any certificate
delivered under the Pooling and Servicing Agreement proves to have
been incorrect in any material respect when made, 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 the trustee shall have given written
notice of that fact to the servicer; or
o events of bankruptcy, insolvency or receivership occur with respect
to the servicer.
However, a delay in or failure of performance referred to under the
first clause for a period of ten business days or referred to under the
second, third or fourth clauses for a period of 60 business days, shall not
constitute a Service Default if the delay or failure was caused by an act of
God or other similar occurrence. If any of those events occurs, 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 CARCO receivables trust trustee,
any Enhancement provider, the seller and the certificateholders prompt notice
of the failure or delay by it, together with a description of its efforts to
so perform its obligations. The servicer shall immediately notify the CARCO
receivables trust trustee in writing of any Service Default.
Reports
On each payment date, including each payment date that corresponds to an
interest payment date or any Special Payment Date, the trustee will forward to
each certificateholder of record of any series a statement (the "Distribution
Date Statement") prepared by the servicer. The Distribution Date Statement
will set forth information with respect to the trust and the certificates of
the series, as we state in the related Series Supplement and describe in the
related prospectus supplement.
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With respect to each interest payment date or Special Payment Date, the
Distribution Date Statement with respect to any Series will include the
following information with respect to the certificates of the series:
o the total amount distributed on the certificates of the series;
o the amount of the distribution allocable to principal on the
certificates of the series; and
o the amount of the distribution allocable to interest on the
certificates of the series.
On or before January 31 of each calendar year, the trustee will furnish,
or cause to be furnished, to each person who at any time during the preceding
calendar year was a certificateholder of record a statement containing the
information required to be provided by an issuer of indebtedness under the
Code for the preceding calendar year or the applicable portion of that year
during which the person was a certificateholder, together with other customary
information which the Code requires issuers of indebtedness to provide and
other customary information which certificateholders need to prepare their tax
returns. See "Tax Matters."
Evidence as to Compliance
The Pooling and Servicing Agreement states that on or before March 31 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 regarding matters in connection
with the servicing of CFC's portfolio of wholesale receivables.
The Pooling and Servicing Agreement states that on or before March 31 of
each calendar year, the servicer will deliver to the trustee a statement,
signed by an officer of the servicer. The statement will state 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
obligation, will state the nature and status of the default.
You may obtain copies of all statements, certificates and reports
furnished to the CARCO receivables trust trustee by delivering a written
request to the CARCO receivables trust trustee.
Amendments
The seller, the servicer and the CARCO receivables trust trustee may
amend the Pooling and Servicing Agreement and any Series Supplement, without
certificateholder consent, so long as any amendment shall not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests
of the certificateholders.
The seller, the servicer and the CARCO receivables trust trustee may
amend the Pooling and Servicing Agreement and any Series Supplement 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
amendment, however, may
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o reduce in any manner the amount of or delay the timing of
distributions the servicer is required to make to certificateholders
or deposits of amounts to be so distributed without the consent of
each affected certificateholder,
o change the definition or the manner of calculating any
Certificateholders' Interest without the consent of each affected
certificateholder,
o reduce the amount available under any Enhancement without the
consent of each affected certificateholder,
o adversely affect the rating of any series or class by each Rating
Agency without the consent of the holders of certificates of the
series or class evidencing not less than 66 2/3% of the aggregate
unpaid principal amount of the certificates of the series or class
or
o reduce that percentage of the unpaid principal amount of
certificates the holders of which are required to consent to any
amendment without the consent of each certificateholder.
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 notify each certificateholder in writing of the substance of the
amendment.
However, we will deem each holder of a certificate offered by this
prospectus, by its acceptance of the certificate, to have consented to an
amendment to the Pooling and Servicing Agreement that
o provides that funds in the Collection Account may be invested in any
Eligible Investments,
o provides that the seller need not make any deposit to the Collection
Account in respect of the Repurchased Receivables Price of any
Designated Receivables repurchased from the CARCO receivables trust,
o otherwise changes the procedures for removing receivables from the
CARCO receivables trust as described under "Removal of Accounts",
o provides that, subject to the limitations we describe in this
prospectus, CFC need not deposit collections with respect to any
Collection Period in the Collection Account until the related
payment date or
o permits the designation of Automatic Additional Accounts as we
describe in this prospectus.
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 CARCO receivables trust trustee will give those certificateholders access
during business hours to the current list of
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certificateholders of a series or all outstanding series, as applicable, for
purposes of communicating with other certificateholders of the series or all
outstanding series, as applicable, 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 CARCO Receivables Trustee
The Bank of New York, a New York banking corporation, will act as
trustee under the Pooling and Servicing Agreement. On August 23, 1996, The
Bank of New York, a New York banking corporation, succeeded Manufacturers and
Traders Trust Company, as trustee, under the Pooling and Servicing Agreement
and under an Agreement of Resignation, Appointment and Acceptance dated as of
August 23, 1996 between DCWR, CFC, as successor to CFC Corp., Manufacturers
and Traders Trust Company, as resigning trustee, and The Bank of New York, as
successor trustee. The Corporate Trust Office of the Bank of New York is
located at 101 Barclay Street, New York, New York 10286. 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 CARCO receivables trust trustee may hold certificates in its own name with
the same rights it would have if it were not the CARCO receivables trust
trustee. In addition, for purposes of meeting the legal requirements of local
jurisdictions, the CARCO receivables trust trustee shall have the power to
appoint a co-trustee or separate trustees of all or a part of the CARCO
receivables trust. In the event of those appointments, all rights, powers,
duties and obligations shall be conferred or imposed upon the CARCO
receivables trust trustee and the separate trustee or co-trustee jointly, or,
in any jurisdiction in which the CARCO receivables trust trustee shall be
incompetent or unqualified to perform some acts, singly upon the separate
trustee or co-trustee, who shall exercise and perform those rights, powers,
duties and obligations solely at the direction of the CARCO receivables trust
trustee.
The CARCO receivables trust trustee may resign at any time, in which
event the seller must appoint a successor CARCO receivables trust trustee. The
servicer may also remove the CARCO receivables trust trustee if the CARCO
receivables trust trustee ceases to be eligible to continue as the CARCO
receivables trust trustee under the Pooling and Servicing Agreement or if the
CARCO receivables trust trustee becomes insolvent. If that happens, the
servicer may appoint a successor CARCO receivables trust trustee. Any
resignation or removal of the CARCO receivables trust trustee and appointment
of a successor CARCO receivables trust trustee does not become effective until
the acceptance of the appointment by the successor CARCO receivables trust
trustee.
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Description of the Receivables Purchase Agreement
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The parties to the Receivables Purchase Agreement are CFC, as seller
(together with its predecessors as appropriate, the "RPA seller"), and DCWR,
as purchaser. CFC became the RPA seller as successor by merger. DCWR became
the purchaser as assignee of USA, which was in turn an assignee of CARCO. In
the following summary we describe terms of the Receivables Purchase Agreement.
The summary, however, is qualified in its entirety by reference to the
Receivables Purchase Agreement.
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Sale or Transfer of Receivables
Under the Receivables Purchase Agreement, the RPA seller sold or
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 created after that date. In addition, the RPA
seller has previously designated Additional Accounts, and has previously
conveyed to the seller the Principal Receivables in the Additional Accounts,
together with the related Collateral Security, as of the applicable Additional
Cut-Off Date and all receivables, and related Collateral Security, created
after that date. As we describe in this prospectus, under the Pooling and
Servicing Agreement, the seller has transferred to the CARCO receivables 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, the RPA seller must indicate in its computer files that the
receivables have been sold or transferred to the seller, and that the
receivables have been transferred by the seller to the CARCO receivables
trust. In addition, the RPA seller must provide to the seller a computer file
or microfiche or written list containing a true and complete list of all the
receivables. The records and agreements relating to the Accounts and
receivables have not and will not be segregated by the RPA seller from other
documents and agreements relating to other accounts and receivables and are
not and will not be stamped or marked to reflect the sale or transfer of the
receivables to the seller. The computer records, however, of the RPA seller
have been and will be marked to evidence the sale or transfer. The RPA seller
has filed UCC financing statements with respect to the receivables meeting the
requirements of Michigan state law. See "Risk Factors -- Legal Aspects" and
"Legal Aspects of the Receivables -- Transfer of Receivables."
Representations and Warranties
The RPA seller has or will make representations and warranties to the
seller that, among other things, as of the Initial Closing Date and each
Series Issuance Date, it was duly formed and in good standing and that it has
the authority to consummate the transactions contemplated by the Receivables
Purchase Agreement.
The RPA seller has or will also make representations and warranties to
the seller relating to the receivables to the effect, among other things, that
o as of the Initial Closing Date and each Series Issuance Date, each
of the Accounts is an Eligible Account and
o as of the date any new receivable is created, the receivable is an
Eligible Receivable.
If any representation and warranty set forth in this paragraph is
breached and the breach results in an Ineligible Receivable and the
requirement that the seller accept retransfer of the Ineligible Receivable
under the Pooling and Servicing Agreement, the RPA seller shall repurchase the
Ineligible Receivable from the seller on the date of the retransfer. The
purchase price for the Ineligible Receivable shall be the face amount of the
Ineligible Receivable, 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 the Ineligible Receivable shall be paid in cash.
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The RPA seller has or will also make representations and warranties to
the seller to the effect, among other things, that as of the Initial Closing
Date and each Series Issuance Date
o the Receivables Purchase Agreement is a legal, valid and binding
obligation of the RPA seller and
o the Receivables Purchase Agreement is a valid sale or transfer to
the seller of all right, title and interest of the RPA seller in and
to the receivables, whether then existing or created after that time
in the Accounts, the Collateral Security and the proceeds of those
items which is effective as to each receivable upon the creation of
that receivable.
If any of the representations and warranties described in this paragraph are
breached and the breach results in the obligation of the seller under the
Pooling and Servicing Agreement to accept retransfer of the receivables, the
RPA seller will repurchase the receivables retransferred to the seller 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 the retransfer.
The RPA seller has agreed 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.
Covenants
In the Receivables Purchase Agreement, the RPA seller has covenanted
that it will perform its obligations under the agreements relating to the
receivables and the Accounts in conformity with its current policies and
procedures relating to the receivables and the Accounts.
The RPA seller 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, the RPA seller will not sell,
pledge, assign or transfer any interest in the receivables to any other
person. The RPA seller 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 the RPA seller of any of its representations, warranties or
covenants contained in the Receivables Purchase Agreement.
In addition, the RPA seller 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
CARCO receivables trust terminates. Also, if under provisions of federal law
the RPA seller becomes party to any bankruptcy or similar proceeding, other
than as a claimant, and if the proceeding is not voluntary and is not
dismissed within 60 days of its institution, the RPA seller will immediately
cease to sell or transfer receivables to the seller and will promptly give
notice of that event to the seller and to the CARCO receivables trust trustee.
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Legal Aspects of the Receivables
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Transfer of Receivables
On the Initial Closing Date, the RPA seller sold and assigned the
receivables to the seller, and the seller immediately transferred the
receivables to the CARCO receivables trust. The seller has represented and
warranted and will represent and warranty on the Series Issuance Date with
respect to each Series that
o the transfer to the trust constituted a valid transfer to the CARCO
receivables trust of all right, title and interest of the seller in
and to the receivables and
o 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 after that time in favor of the trust on and
after their creation.
However, the transfer of receivables by the seller to the CARCO receivables
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 the RPA seller 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
of the receivables by either the RPA seller 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. In that case, the transferee must either
take possession of the chattel paper or file an appropriate financing
statement or statements in order to perfect its interest in the chattel paper.
Both the seller and the CARCO receivables trust have filed financing
statements covering the receivables under the UCC as in effect in Michigan to
perfect their respective interests in the receivables and continuation
statements will be filed as required to continue the perfection of those
interests. The receivables have not and will not be stamped to indicate the
interest of the seller or the CARCO receivables trustee.
There are circumstances under the UCC and applicable federal law in
which prior or subsequent transferees of receivables could have an interest in
the receivables with priority over the CARCO receivables 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 the purchaser's business may, under some circumstances,
have priority over the interest of the CARCO receivables trust in the
receivables. A tax or other government lien on property of the RPA seller or
the seller arising prior to the time a receivable is conveyed to the CARCO
receivables trust may also have priority over the interest of the CARCO
receivables trust in the receivable. Under the Receivables Purchase Agreement,
the RPA seller will warrant to the seller, and under the Pooling and Servicing
Agreement, the seller has warranted to the CARCO receivables trust, that the
receivables have been transferred free and clear of the lien of any third
party. Each of the RPA seller and the seller has also covenanted that it will
not sell, pledge, assign,
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transfer or grant any lien on any receivable or, except as we describe under
"Description of the Investor Certificates Issued by the CARCO Receivables
Trust -- The Seller's Certificate", the Seller's Certificate, or any interest
in the Seller's Certificate, other than to the CARCO receivables trust. Also,
while CFC is the servicer, cash collections on the receivables may, in some
cases, be commingled with the funds of CFC prior to each payment date and, in
the event of the bankruptcy of CFC, the CARCO receivables trust may not have a
perfected interest in those collections.
Matters Relating to Bankruptcy
The RPA seller 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. Also, the RPA seller and the seller have
agreed to treat the transactions described in this prospectus as a sale of the
receivables to the seller, and the RPA seller has or will take all actions
that are required under Michigan law to perfect the seller's ownership
interest in the receivables. However, the RPA seller could become a debtor in
a bankruptcy case and a creditor or trustee-in-bankruptcy of the debtor or the
debtor itself could take the position that the sale of receivables from the
debtor to the seller should be recharacterized as a pledge of the receivables
to secure a borrowing from the debtor. In that event, payments of collections
of receivables to the seller could be delayed, or, if the court should rule in
favor of any trustee, debtor in possession or creditor, reduced in amount. See
"Risk Factors -- Legal Aspects."
In addition, the RPA seller could become a debtor in a bankruptcy case
and a creditor or trustee-in-bankruptcy of the debtor or the debtor itself
could request a court to order that the RPA seller should be substantively
consolidated with the seller. In that event, payments on the certificates
could be delayed, or, if a bankruptcy court should rule in favor of any
creditor, trustee-in-bankruptcy or the debtor, reduced in amount.
The seller has warranted to the CARCO receivables trust that the
transfer of the receivables to the CARCO receivables trust is a sale of the
receivables to the CARCO receivables trust. The seller has or will take all
actions that are required under Michigan law to perfect the CARCO receivables
trust's ownership interest in the receivables and the seller has warranted to
the CARCO receivables trust that the CARCO receivables trust will at all times
have a first priority perfected ownership interest in the receivables and,
with exceptions, in proceeds of the receivables. Nevertheless, a tax or
government lien on property of CFC or the seller arising prior to the time a
receivable is conveyed to the CARCO receivables trust may have priority over
the interest of the CARCO receivables trust in the receivable. DCWR's limited
liability agreement provides that 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 the two independent directors of its member.
Under the Pooling and Servicing Agreement, the CARCO receivables trust
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, other steps will be taken to avoid the seller's
becoming a debtor in a bankruptcy case. However, the seller could 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 could take the
position that the transfer of the receivables from the seller to the trust
should be recharacterized as a pledge of the receivables. In that event,
payments on the
93
certificates could be delayed or, should the court rule in favor of any
trustee, debtor in possession or creditor, reduced in amount.
The seller does not intend to file, and CFC has agreed 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 the RPA seller or the seller were to become a debtor in a bankruptcy
case, a Reinvestment Event or an Early Amortization Event would occur with
respect to the certificates of each series. In that event, under the
Receivables Purchase Agreement, new receivables would no longer be transferred
to the seller and, under the Pooling and Servicing Agreement, only collections
on receivables already sold to the seller and transferred to the CARCO
receivables trust would be available to be applied to pay interest accruing on
the certificates and to pay the principal amount of the certificates. If that
happens, the servicer must allocate all collections on Principal Receivables
to the oldest principal balance first. If the bankruptcy court were to alter
the allocation method, the rate of payment on the certificates might be
adversely affected. In addition, distributions in respect of principal on each
certificate would not be subject to any applicable Controlled Distribution
Amount.
The occurrence of events of bankruptcy, insolvency or receivership with
respect to the servicer will result in a Service Default. The Service Default,
in turn, may result in a Reinvestment Event or an Early Amortization Event
with respect to a series. If no other Service Default other than the
commencement of the bankruptcy or similar event exists, a
trustee-in-bankruptcy of the servicer may have the power to prevent either the
trustee or the certificateholders from appointing a successor servicer.
Payments made in respect of repurchases of receivables by CFC or the
seller under the Pooling and Servicing Agreement may be recoverable by CFC or
the seller, as debtor in possession, or by a creditor or a
trustee-in-bankruptcy of CFC or the seller as a preferential transfer from CFC
or the seller if the payments are made within one year prior to the filing of
a bankruptcy case in respect of CFC.
DCWR does not intend to file, and CFC has agreed that it will not cause
DCWR to file, a voluntary application for relief under the Bankruptcy Code or
any similar applicable state law with respect to DCWR so long as DCWR is
solvent and does not foresee becoming insolvent.
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Tax Matters
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Federal Income Tax Consequences
General
We discuss below the anticipated material United States federal income
tax consequences of the purchase, ownership and disposition of the notes
offered by this prospectus. This discussion is based upon current provisions
of the Internal Revenue Code, existing and proposed Treasury regulations,
current administrative rulings, judicial decisions and other applicable
authorities. There are no cases or IRS rulings on similar transactions
involving debt issued by a trust with terms
94
similar to those of the notes. As a result, we cannot assure you that the IRS
will not challenge the conclusions reached in this discussion, and no ruling
from the IRS has been or will be sought on any of the issues discussed below.
Furthermore, legislative, judicial or administrative changes may occur,
perhaps with retroactive effect, which could affect the accuracy of the
statements an conclusions set forth in this prospectus as well as the tax
consequences to noteholders.
This discussion does not claim to deal with all aspects of federal
income taxation that may be relevant to the holders of notes in light of their
personal investment circumstances nor, except for specific limited discussions
of particular topics, to noteholders subject to special treatment under the
federal income tax laws, such as financial institutions, broker-dealers, life
insurance companies and tax-exempt organizations. This information is directed
only to prospective purchasers who:
o purchase notes in the initial distribution of the notes;
o are citizens or residents of the United States, including domestic
corporations, limited liability companies and partnerships; and
o hold the notes as "capital assets" within the meaning of Section
1221 of the Internal Revenue Code.
As used in this discussion, the term "U.S. noteholder" means a
beneficial owner eof a note that is for United States federal income tax
purposes.
o a citizen or resident of the United States;
o a corporation or partnership (including a person treated as a
corporation or partnership for United States federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia, (unless, in
the case of a partnership, Treasury regulations are adopted that
provide otherwise);
o an estate whose income is subject to United States federal income
tax regardless of its source; or
o a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, a trust in existence on August 20, 1996., and treated as
a United States person under the Internal Revenue Code and applicable Treasury
regulations thereunder before such date, that elects to continue to be treated
as a United States person under the Internal Revenue Code or applicable
Treasury regulations thereunder also will be a U.S. noteholder. Moreover, in
this discussion, the term "U.S. noteholder" includes any holder of a note
whose income or gain in respect of its investment in a note is effectively
connected with the conduct of a U.S. trade or business. As used in this
discussion, the term "non-U.S. noteholder" means a beneficial owner of a note
that is not a U.S. noteholder.
Prospective investors should consult with their tax advisors as to the
federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of notes.
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Tax Characterization of the Trusts
Sidley Austin Brown & Wood LLP, special U.S. federal tax counsel to the
transferor ("Tax Counsel"), is of the opinion that, assuming that the terms f
the applicable trust agreement and related documents are complied with, a
trust that issues a or more classes of notes to investors and the transferor
interest of which is retained by the /he r and/or one of its affiliates will
not be an association or publicly traded partnership taxable as a co ration
for United States federal income tax purposes.
The transferor will agree, and the noteholders will agree by their
purchase of notes, to treat the notes as debt for federal income tax purposes.
Assuming such characterization of the notes, the United States federal income
tax consequences to noteholders described below under "-Tax Characterization
and Treatment of Notes--Characterization as Debt" would apply to the
noteholders.
If, contrary to the opinion of Tax Counsel, the IRS successfully
asserted that one or more classes of notes did not represent debt for federal
income tax purposes, such class or classes of notes might be treated as equity
interests in the trust. If so treated, the trust might be treated as a
publicly traded partnership taxable as a corporation with potentially adverse
tax consequences (and the publicly traded , partnership taxable as a
corporation would not be able to reduce its taxable income by deductions for
interest expense on notes recharacterized as equity). Alternatively, the trust
would be treated as a publicly traded partnership that would not be taxable as
a corporation because it would meet an applicable safe harbor. Nonetheless,
treatment of notes as equity interests in such a partnership could have
adverse tax consequences to certain holders of such notes. For example, income
to certain tax-exempt entities (including pension funds) would be "unrelated
business taxable income," income to non-U.S. noteholders may be subject to
United States withholding tax and United States tax return filing
requirements, and individual holders might be subject to certain limitations
on their ability to deduct their share of trust expenses.
Tax Characterization and Treatment of the Notes
Characterization as Debt
For each series of notes, except for any series which is specifically
identified as receiving different tax treatment in the related prospectus
supplement, Tax Counsel will deliver its opinion to the effect that the notes
will be treated as debt for federal income tax purposes. The transferor, the
servicer and each noteholder, by acquiring an interest in a note, will agree
to treat the notes as indebtedness for federal, state and local income and
franchise tax purposes. See "--Tax Characterization of the Trusts" above in
this prospectus for a discussion of the potential federal income tax
consequences to noteholders if the IRS were successful in challenging the
characterization of the notes for federal income tax purposes.
Treatment of Stated Interest
Based on Tax Counsel's opinion that the notes will be treated as debt
for federal income tax purposes, and assuming the notes are not issued with
original issue discount or ("OID"), the stated interest on a note will be
taxable to a noteholder as ordinary income when received or accrued in
accordance with each noteholder's method of tax accounting. Interest received
on a note may
96
constitute "investment income" for purposes of some provisions in the Internal
Revenue Code limiting the deductibility of investment interest expense.
Original Issue Discount
Except to the extent indicated in the related prospectus supplement, no
series of Notes will be issued with OID. In general, OID is the excess of the
"stated redemption price at maturity" of a debt instrument over its "issue
price," unless the OID is small enough to fall within a statutorily defined de
minimis exception. A note's "stated redemption price at maturity" is the total
of all payments required to be made under the note through maturity except
"qualified stated interest." Qualified stated interest is generally interest
that is unconditionally payable in cash or property, other than debt
instruments of the issuer, at fixed intervals of one year or less during the
entire term of the instrument at specified rates. The "issue price" will be
the initial price at which a substantial amount of the notes are sold,
excluding sales to bond holders, brokers or similar persons acting as
underwriters, placement agents or wholesalers.
Although it is not anticipated, except to the extent indicated in the
related prospectus supplement, that any series of notes will be issued at a
greater than de minimis discount, a series of notes may nonetheless be deemed
to have been issued with OID. First, under Treasury regulations, interest
payments on a series of notes may not be deemed "qualified stated interest" if
(i) reasonable legal remedies do not exist to compel timely payment or (ii)
the notes do not otherwise provide terms and conditions that make the
likelihood of late payment (other than a late payment that occurs within a
reasonable grace period) or nonpayment a remote contingency. If a series of
notes does not pay qualified stated interest, all of the taxable income
thereon would be includible in income as OID. Second, the IRS could take the
position (under regulations that have not yet been issued pursuant to Section
1272(a)(6) of the Internal Revenue Code) that a series of notes has OID.
If a note were treated as being issued with OID, a noteholder would be
required to include OID in its income as interest over the term of the note
under a constant yield method. In general, OID must be included in income in
advance of the receipt of cash representing that income. Thus, each cash
distribution would be treated as an amount already included in income (to the
extent OID has accrued as of the date of the interest distribution and is not
allocated to prior distributions), or as a repayment of principal. This
treatment would have no significant effect on noteholders using the accrual
method of accounting. However, cash method noteholders may be required to
report income with respect to the notes in advance of the receipt of cash
attributable to such income. In this situation a noteholder would have to rely
on other sources to pay the taxes on its OID income. Even if a note has OID
falling within the de minimis exception, the noteholder must include such OID
in income proportionately as principal payments are made on such note.
A holder of a note that has a fixed maturity date not more than one year
from the issue date of such note (a "Short-Term Note") will generally not be
required to include OID income on the note as it accrues. However; the
foregoing rule may not apply if such holder holds the instrument as part of a
hedging transaction, or as a stripped bond or stripped coupon or if the holder
is:
o an accrual method taxpayer; or
o a bank;
97
o a broker or dealer that holds the note as inventory;
o a regulated investment company or common trust fund; or
o the beneficial owner of specified pass-through entities specified in
the Internal Revenue Code.
A holder of a Short-Term-Note leis not required to include OID income on
the note as it accrues will instead include the OID accrued on the note in
gross income upon a sale or exchange of the note or at maturity, or if the
Short-Term Note is payable in installments, as principal is paid thereon. A
holder would be required to defer deductions for any interest expense on an
obligation incurred to purchase or carry the Short-Term Note to the extent it
exceeds the sum of any interest income and OID accrued on such note. However,
a holder may elect to include OID in income as it accrues on all obligations
having a maturity of one year or less held by the holder in that taxable year
or thereafter, in which case the deferral rule of the preceding sentence will
not apply. For purposes of this paragraph, OID accrues on a Short-Term Note on
a straight-line basis, unless the holder irrevocably elects, under regulations
to be issued by the Treasury Department, to apply a constant interest method,
using the holder's yield to maturity and daily compounding.
A holder who purchases a note after its initial distribution at a
discount that exceeds a statutorily defined de minimis amount will be subject
to the "market discount" rules of the Internal Revenue Code, and a holder who
purchases a note at a premium will be subject to the bond premium amortization
rules of the Internal Revenue Code.
Disposition of Notes
If a noteholder sells a note, the holder will recognize gain or loss in
an amount equal to the difference between the amount realized on the sale and
the holder's adjusted tax basis in the note. The adjusted tax basis of the
note to a particular noteholder will equal the holder's cost for the note,
increased by any OID and market discount previously included by such
noteholder in income with respect to the note and decreased by any bond
premium previously amortized and any payments of principal and OID previously
received by such noteholder with respect to such note. Any gain or loss on
sale will be capital gain or loss if the note was held as a capital asset,
except for gain representing accrued interest or accrued market discount not
previously included in income. Capital gain or loss will be long-term if the
note was held by the holder for more than one year and otherwise will be
short-term. Any capital losses realized generally may be used by a corporate
taxpayer only to offset capital gains, and by an individual taxpayer only to
the extent of capital gains plus $3,000 of other income.
Notes Subject to Contingencies
The United States federal income tax consequences to an owner or seller
of notes that provide for one or more contingent payments will vary depending
on the exact terms of the notes and related factors. Such notes may be subject
to rules that differ from the general rules discussed above. The United States
federal income tax consequences to a holder of notes that provide for
contingent payments will be summarized in the related prospectus supplement.
98
Information Reporting and Backup Withholding
The indenture trustee will be required to report annually to the IRS,
and to each related noteholder of record, the amount of interest paid on the
notes, and any amount of interest withheld for federal income taxes, for each
calendar year, except as to exempt holders (generally, corporations,
tax-exempt organizations, qualified pension and profit-sharing trusts,
individual retirement accounts, or nonresident aliens who provide
certification as to their status). Each holder will be required to provide to
the Trustee, under penalties of perjury, a certificate containing the holder's
name, address, correct federal taxpayer identification number and a statement
that the holder is not subject to backup withholding. Should a noteholder who
is not exempt from backup withholding fail to provide the required
certification, the Trustee will be required to withhold, from interest
otherwise payable to the holder, 30.5% (which rate is scheduled to be reduced
periodically) of the holder's interest income and pay the withheld amount to
the IRS as a credit against the holder's federal income tax liability.
Noteholders should consult their tax advisors with respect to the impact; if
any, of the new regulations.
Because the transferor will, for federal income tax purposes, treat all
notes as indebtedness issued by the trust characterized as either a
partnership or a division of whichever person owns all of its transferor
interest, the transferor will not comply with the tax reporting requirements
that would apply under any alternative characterization of the trust or the
notes.
Tax Consequences to Non-U.S. Noteholders
A non-U.S. noteholder that is an individual or corporate (or an entity
treated as a corporation for federal income tax purposes) holding the notes on
its own behalf generally will be exempt from United States federal income
taxes on payments of principal, premium, interest or original issue discount
on a note, unless such non-U.S. noteholder is a direct or indirect 10% or
greater shareholder of the trust, a controlled foreign corporation related to
the trust. To qualify for the exemption from taxation, the Withholding Agent,
as defined below, must have received a statement from the individual or
corporation that:
o is signed under penalties of perjury by the beneficial owner of the
note,
o certifies that such owner is not a U.S. noteholder, and
o provides the beneficial owner's name and address.
A "Withholding Agent" is the last U.S. payor (or a non-U.S. payor who is
a qualified intermediary, U.S. branch of a foreign person, or withholding
foreign partnership) in the chain of payment prior to payment to a non-U.S.
holder (which itself is not a Withholding Agent). Generally, this statement is
made on an IRS Form W-8BEN, which is effective for the remainder of the year
of signature plus three full calendar years unless a change in circumstances
renders any information on the form incorrect. Notwithstanding the preceding
sentence, a W-8BEN with a U.S. taxpayer identification number will remain
effective until a change in circumstances makes any information on the form
incorrect, provided that the Withholding Agent reports at least annually to
the beneficial owner on IRS Form 1042-S. The beneficial owner must inform the
Withholding Agent within 30 days of such change and furnish a new W-8BEN.
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A non-U.S. noteholder that is not an individual or corporation (or an
entity treated as a corporation for federal income tax purposes) holding the
notes on its own behalf may have substantially increased reporting
requirements and should consult its tax advisor.
A non-U.S. noteholder whose income with respect to its investment in
a note is effectively connected with the conduct of a U.S. trade or business
would generally be taxed as if the holder were a U.S. person provided that the
holder files an IRS Form W-8ECI.
Certain securities clearing organizations and other entities who are not
beneficial owners, may be able to provide a signed statement to the
Withholding Agent instead of the beneficial owner. However, in such case, the
signed statement may require a copy of the beneficial owner's W-8BEN (or a
substitute form).
Any gain realized on the sale, redemption, retirement or, other taxable
disposition of a Note by a non-U. S. noteholder will be exempt from United
States federal income and withholding tax so long as:
o the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. noteholder; and
o in the case of a foreign individual, the non-U.S. noteholder is not
present in the United States for 183 days or more in the taxable
year.
If the interest, gain or income on a note held by a non-U.S. noteholder
is effectively connected with the conduct of a trade or business in the United
States by the non-U.S. noteholder, such holder, although exempt from the
withholding tax previously discussed if an appropriate statement is furnished,
will generally be subject to United States federal income tax on the interest,
gain or income at regular federal income tax rates. In addition, if the
non-U.S. noteholder is a foreign corporation, it may be subject to a branch
profits tax equal to 30 percent of its "dividend equivalent amount" within the
meaning of the Internal Revenue Code for the to able year, subject to
adjustment, unless it qualifies for a lower rate under an applicable tax
treaty.
State and Local Tax Consequences
The servicer will service and collect the receivables 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 under those statutes, 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 of the seller for federal income
tax purposes, in the opinion of Christopher A. Taravella, Esq., Vice President
and General Counsel of the seller, Michigan tax counsel to the seller and the
trust ("Michigan Tax Counsel"), this treatment will also apply for Michigan
tax purposes. Under this treatment, the trust will not be subject to the
Michigan single business tax and certificateholders not otherwise subject to
Michigan tax would not become subject to the tax solely because of their
ownership of the certificates. Certificateholders already
100
subject to taxation in Michigan, however, could be required to pay tax on the
income generated from ownership of these certificates.
In the alternative, if the trust is treated as a partnership, not
taxable as a corporation, for federal income tax purposes, in the opinion of
Michigan Tax Counsel, the same treatment should also apply for Michigan tax
purposes. In that case, the resulting constructive partnership should not be
treated as doing business in Michigan but rather should be treated as a
passive holder of investments and, as a result, should not be subject to the
Michigan single business tax, which, if applicable, could result in reduced
distributions to certificateholders. Certificateholders also should not be
subject to Michigan single business tax on the income received through the
partnership.
Under current law, certificateholders that are nonresidents of Michigan
and that are not otherwise subject to Michigan income tax should not be
subject to Michigan income tax on the income from the constructive
partnership. Under current law corporate certificateholders are not subject to
Michigan income tax. In any event, classification of the arrangement as a
"partnership" would not cause a certificateholder not otherwise subject to
taxation in Michigan to pay Michigan tax on income beyond that derived from
the certificates.
If the notes are instead treated as ownership interests in an
association or "publicly traded partnership", the hypothetical entity should
not be subject to the Michigan single business tax, which, if applicable,
could result in reduced distributions to certificateholders. A
certificateholder not otherwise subject to tax in Michigan would not become
subject to Michigan tax as a result of its mere ownership of that type of
interest.
Because each state's income tax laws vary, it is impossible to predict
the income tax consequences to the certificateholders in all of the state
taxing jurisdictions in which they are already subject to tax.
Certificateholders are urged to consult their own tax advisors with respect to
state income and franchise taxes.
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ERISA Considerations
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General
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit or other plan (such as an individual
retirement account and certain types of Keogh Plans) that is subject to Title
I of ERISA or to Section 4975 of the Code 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. Certain governmental plans, although not subject to ERISA or the
Code, are subject to federal, state or local laws ("Similar Law") that impose
similar requirements. Such plans subject to ERISA, Section 4975, or Similar
Law are referred to herein as "Plans." The acquisition or holding of
securities by or on behalf of or with plan assets of a Plan could give rise to
a prohibited transaction if the issuer, the underwriters, the seller or any of
their respective affiliates is or becomes a party in interest or disqualified
person with respect to the Plan. A violation of these "prohibited transaction"
rules may generate excise tax and other liabilities under ERISA and the Code
or under Similar Law for such persons.
101
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the notes - for
example:
o Prohibited Transaction Class Exemption ("PTE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager";
o PTE 95-60, which exempts certain transactions between insurance company
general accounts and parties in interest;
o PTE 91-38, which exempts certain transactions between bank collective
investment funds and parties in interest;
o PTE 90-1, which exempts certain transactions between insurance company
pooled separate accounts and parties in interest;
o PTE 84-14, which exempts certain transactions effected on behalf of a
Plan by a "qualified professional asset manager."
There can be no assurance that any of these exemptions will apply with respect
to any Plan's investment in the notes, or that such an exemption, if it did
apply, would apply to all prohibited transactions that may occur in connection
with such investment. Furthermore, these exemptions would not apply to
transactions involved in operation of the issuer if, as described below, the
assets of the issuer were considered to include Plan assets.
ERISA also imposes certain duties on persons who are fiduciaries of
Plans subject ERISA, including the requirements of investment prudence and
diversification, and the requirement that such a Plan's investments be made in
accordance with the documents governing the Plan. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a Plan is considered to be a fiduciary of such Plan. Plan
fiduciaries must determine whether the acquisition and holding of notes and
the operations of the issuer would result in prohibited transactions if Plans
that purchase the notes were deemed to own an interest in the underlying
assets of the issuer under the rules discussed below. There may also be an
improper delegation of the responsibility to manage Plan assets if Plans that
purchase the notes are deemed to own an interest in the underlying assets of
the issuer.
Pursuant to Department of Labor Regulation Section 2510.3-101 (the
"Plan Assets Regulation"), in general when a Plan acquires an equity interest
in an entity such as the issuer and such interest does not represent a
"publicly offered security" or a security issued by an investment company
registered under the Investment Company Act of 1940, as amended, the Plan's
assets include both the equity interest and an undivided interest in each of
the underlying assets of the entity, unless it is established either that the
entity is an "operating company" or that equity participation in the entity by
"benefit plan investors" is not "significant." In general, an "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features.
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Unless we specify otherwise in the related prospectus supplement, the
notes may be purchased by a Plan. A fiduciary of a Plan must determine that
the purchase of a note is consistent with its fiduciary duties under ERISA and
does not result in a nonexempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Code. However, the notes may not be
purchased with the assets of a Plan if the seller, an underwriter, the
indenture trustee of the issuer, the owner trustee or any of their affiliates.
o has investment or administrative discretion with respect to such Plan
assets;
o has authority or responsibility to give, or regularly gives, investment
advice with respect to such Plan assets of a fee and pursuant to an
agreement or understanding that such advice
- will serve as a primary basis for investment decisions
with respect to such Plan assets and
- will be based on the particular investment needs for such
Plan; or
o is an employer maintaining or contributing to such Plan.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33)
of ERISA) are not subject to ERISA requirements. However, any such
governmental or church plan which is qualified under Section 401(a) of the
Code and exempt from taxation under Section 501(a) of the Code is subject to
the prohibited transaction rules in Section 503 of the Code.
A fiduciary of a Plan considering the purchase of notes of a series
should consult its tax and/or legal advisors regarding whether the assets of
the issuer would be considered plan assets, the possibility of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
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Experts
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The financial statements of the CARCO receivables trust as of December
31, 1999 and 1998, and for each of the years in the three-year period ended
December 31, 1999, have been incorporated by reference in this prospectus and
in the registration statement in reliance upon the report by KPMG LLP,
independent certified public accountants, incorporated by reference in this
prospectus, and upon the authority of that firm as experts in accounting and
auditing.
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Plan of Distribution
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The seller may sell notes offered by this prospectus in any of three
ways:
o through underwriters or dealers;
o directly to one or more purchasers; or
o through agents.
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We will set forth in the related prospectus supplement the terms of the
offering of any series, including, without limitation
o the names of any underwriters,
o the purchase price of the notes and the proceeds to the seller
from the sale,
o any underwriting discounts and other items constituting
underwriter's compensation,
H any initial public offering price and
o any discounts or concessions allowed or reallowed or paid to
dealers.
If the seller uses underwriters in a sale of any notes of a series, the
notes will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment for the
certificates. The notes may be offered to the public either through
underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Unless we specify otherwise in the related
prospectus supplement, the obligations of the underwriters to purchase the
notes will be subject to conditions precedent, and the underwriters will be
obligated to purchase all of the notes if any of the notes are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Notes of a series may also be offered and sold, if we so state in the
related prospectus supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment under their terms, by
one or more firms ("remarketing firms") acting as principals for their own
accounts or as agents for the seller. We will identify in the related
prospectus supplement any remarketing firm and describe the terms of its
agreement, if any, with the seller and its compensation. Remarketing firms may
be deemed to be underwriters in connection with the notes they remarket.
Notes may also be sold directly by the seller or through agents
designated by the seller from time to time. We will name any agent involved in
the offer or sale of notes, and we will set forth any commissions payable by
the seller to the agent, in the related prospectus supplement. Unless we
indicate otherwise in the related prospectus supplement, any agent will act on
a best efforts basis for the period of its appointment.
Each underwriting agreement and placement agreement will provide that
DCWR and CFC will indemnify the underwriters and agents, respectively, against
civil liabilities, including liabilities under the Securities Act, or
contribute to payments the several underwriters and agents, as applicable, may
be required to make in respect of those civil liabilities.
The issuer may, from time to time, invest the funds in its accounts in
Eligible Investments acquired from the underwriters, agents or the seller.
We will set forth the place and time of delivery for a series of notes
in the prospectus supplement.
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Until the distribution of the notes of a series is completed, rules of
the Commission may limit the ability of the underwriters and selling group
members to bid for and purchase those notes. As an exception to these rules,
the underwriters are permitted to engage in transactions that stabilize the
price of those notes. Those transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the notes. Purchases of
a note for the purpose of stabilization could cause the price of the note to
be higher than it might be in the absence of the purchases.
In connection with the offering of a series, the underwriters may make
short sales of the notes of that series and may purchase those notes on the
open market to cover positions created by short sales. Short sales involve the
sale by the underwriters of a greater number of notes than they are required
to purchase in the offering. The underwriters must close out any short
position by purchasing notes in the open market. The underwriters are more
likely to create a short position if they are concerned that there may be
downward pressure on the price of the notes in the open market after pricing
that could adversely affect investors who purchase in the offering. Similar to
other purchase transactions, the underwriters' purchases to cover the short
sales may have the effect of raising or maintaining the market price of the
notes or preventing or retarding a decline in the market price of notes. As a
result, the price of the notes may be higher than the price that might
otherwise exist in the open market.
Neither CFC, DCWR nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the notes of any
series. In addition, neither CFC, DCWR nor any of the underwriters makes any
representation that the underwriters will engage in the transactions or that
the transactions, once commenced, will not be discontinued without notice.
If any notes of a series are offered in the United Kingdom, each
underwriter and placement agent will represent and agree that
o it has not offered or sold, and will not offer or sell, any of
those notes to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments, as principal or agent,
for the purposes of their businesses or otherwise in
circumstances that do not constitute an offer to the public in
the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995,
o it has complied and will comply with all applicable provisions
of the Financial Services Act of 1986 of Great Britain with
respect to anything done by it in relation to those securities
in, from or otherwise involving the United Kingdom and
o it has only issued or passed on and will only issue or pass on
in the United Kingdom any document in connection with the issue
of those securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom
the document may otherwise lawfully be issued or passed on.
If you initially receive an electronic copy of the prospectus and
prospectus supplement from an underwriter, you will receive a paper copy of
the prospectus and prospectus supplement upon
105
request to the underwriter. Upon receipt of a qualifying request, the
underwriter will promptly deliver a paper copy of the prospectus and
prospectus supplement to you free of charge.
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Legal Matters
- -------------------------------------------------------------------------------
Certain legal matters relating to the notes will be passed upon for DCWR
by Sidley Austin Brown & Wood LLP, New York, New York, and for any
underwriters, agents or dealers by the counsel we name in the applicable
prospectus supplement, which may be Sidley Austin Brown & Wood LLP. Federal
income tax and ERISA matters will be passed upon for DCWR and the issuer by
the counsel we named in the applicable prospectus supplement, which may also
be Sidley Austin Brown & Wood LLP. Sidley Austin Brown & Wood LLP from time to
time represents Chrysler Financial Company L.L.C. and its affiliates on other
matters.
Glossary of Terms for Prospectus
"Accounts" means the revolving financing arrangements with dealers
franchised by DaimlerChrysler and/or other automobile manufacturers in which
the receivables arise.
"Accumulation Period" means, for any applicable series, the period
beginning at the close of business on the date specified in or determined in
the manner specified in the prospectus supplement and ending on the earliest
of:
o the beginning of a Reinvestment Period with respect to the series,
o the beginning of an Early Amortization Period with respect to the
series and
o payment in full of the outstanding principal amount of the series of
certificates.
"Addition Date" means, in the case of an Additional Account, the date on
which the receivables in the Additional Account are first transferred to the
trust.
"Additional Accounts" means the additional accounts which the seller has
the right, subject to conditions, to designate from time to time to be
included as Accounts.
"Additional Cut-Off Date" means, with respect to any Additional
Accounts, the date those Additional Accounts are identified and selected.
"Adjusted Invested Amount" means, with respect to a series for any date,
an amount equal to the sum of
o the Initial Invested Amount of the series, minus unreimbursed
Investor Charge-Offs for the series and
o the Available Subordinated Amount with respect to the series, after
giving effect to the allocations, distributions, withdrawals and
deposits to be made on the payment date during the Collection Period
in which that date occurs.
"Adjustment Payment" means, to the extent that a reduction in the
Seller's Interest would reduce the Seller's Participation Amount below the
Trust Available Subordinated Amount for the
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immediately preceding Determination Date, after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the payment
date, a cash amount equal to the deficiency which will be deposited by the
seller into the Collection Account in immediately available funds on the day
on which the servicer makes the adjustment.
"Auction Vehicles" means, collectively, the vehicles purchased by a
dealer at a closed auction conducted by DaimlerChrysler.
"Automatic Additional Accounts" means the Additional Accounts which the
seller may designate from time to time, at its discretion, subject only to
some limitations.
"Automatic Removal Date" means the date upon which the Automatic Removed
Accounts are to be removed.
"Automatic Removed Accounts" means the Accounts, designated by the
seller, with respect to which the seller shall have the right to require the
reassignment to it of all the trust's right, title and interest in, to and
under the receivables then existing and created after that time, all monies
due or to become due and all amounts received with respect to those
receivables and all proceeds of those receivables in or with respect to the
Accounts, upon satisfaction of the following conditions:
o on or before the fifth business day immediately preceding the date
upon which the Accounts are to be removed, the seller shall have
given the trust, each Enhancement provider and the Rating Agencies a
Removal Notice specifying the Automatic Removal Date of the
Automatic Removed Accounts;
o on or prior to the date that is five business days after the
Automatic Removal Date, the seller shall have delivered to the
trustee a computer file or microfiche or written list containing a
true and complete list of the Automatic Removed Accounts stating for
each Account, as of the removal notice date, its account number and
the aggregate amount of receivables outstanding in the Account; o
the seller shall have represented and warranted as of each Automatic
Removal Date that the list of Automatic Removed Accounts delivered
pursuant to the second clause above, as of the Automatic Removal
Date, is true and complete in all material respects;
o the CARCO receivables trust trustee shall have received confirmation
from each Rating Agency that the removal will not cause the Ratings
Agency's rating of any outstanding series or class of certificates
to be reduced or withdrawn;
o the seller shall have delivered to the trustee, each Rating Agency
and any Enhancement providers an officers' certificate, dated the
Automatic Removal Date, to the effect that the seller reasonably
believes the removal will not cause an Early Amortization Event or
Reinvestment Event to occur with respect to any series; and
o the seller shall have delivered to the trustee, each Rating Agency
and any Enhancement providers a Tax Opinion, dated the Automatic
Removal Date, with respect to the removal.
"Available Subordinated Amount" means the amount of the subordination
for a series.
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"Bankruptcy Code" means Title 11 of the United States Code.
"Benefit Plans" means, collectively, employee benefit plans subject to
ERISA or the Code or individual retirement accounts.
"CARCO" means Chrysler Auto Receivables Company.
"CARCO receivables trust" means CARCO Auto Loan Master Trust.
"CCC" means Chrysler Credit Corporation.
"Certificateholders' Interest" means, for any series, the undivided
beneficial interests in certain assets of the trust allocated to the Interest
of the Certificateholders of the series.
"certificates" means the Auto Loan Asset Backed Certificates.
"CFC" means Chrysler Financial Company L.L.C.
"CFC Corp." means Chrysler Financial Corporation.
"Citibank" means Citibank, N.A.
"Clearstream" means Clearstream Banking, societe anonyme.
"Code" means the Internal Revenue Code of 1986, as amended.
"collateral certificate" means the series of certificates owned by the
issuer, which are collateral for the notes.
"Collateral Security" means, in respect of the receivables, a security
interest in vehicles and parts inventory, equipment, fixtures, service
accounts and, in some cases, realty and a personal guarantee.
"Collection Account" means an Eligible Deposit Account which the
servicer has established and will maintain for the benefit of the
certificateholders in the name of the CARCO receivables trust trustee, on
behalf of the CARCO receivables trust.
"Collection Period" means, for any payment date, the calendar month
preceding the month in which that payment date occurs.
"Commission" means the Securities and Exchange Commission.
"Controlled Amortization Period" means, for any applicable series, a
controlled amortization period which will begin at the close of business on
the date stated in or determined in the manner stated in the related
prospectus supplement and will end on the earliest of:
o the beginning of a Reinvestment Period with respect to the series,
o the beginning of an Early Amortization Period with respect to the
series and
108
o payment in full of the outstanding principal amount of the
certificates of that series.
"Controlled Deposit Amount" means, for any series, an amount stated in
the related prospectus supplement plus, in the case of some payment dates, any
amounts in the Excess Funding Account allocable to the series.
"DaimlerChrysler" means DaimlerChrysler Corporation, the successor to
Chrysler Corporation.
"DCS" means DaimlerChrysler Financial Services (debis) North America
LLC.
"DCWR" means DaimlerChrysler Wholesale Receivables LLC.
"Dealer Overconcentrations" means, on any payment date, with respect to
any Dealer or group of affiliated Dealers, the excess of
o the aggregate principal amount of receivables due from the Dealer or
group of affiliated Dealers on the last day of the Collection Period
immediately preceding that payment date over
o 2% (or with respect to certain dealers, 4%) of the Pool Balance on
the last day of the immediately preceding Collection Period.
"Dealer Trouble" means a status under which a dealer will be classified
by CFC under some circumstances which include
o failure to remit any principal or interest payment when due,
o any notifications of liens, levies or attachments and
o a general deterioration of its financial condition.
"dealers" or "Dealers" means domestic automobile dealers franchised by
DaimlerChrysler and/or other automobile manufacturers.
"Defaulted Amount" means 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 minus (b) the sum of (i) the full amount of any Defaulted Receivables
subject to reassignment to the seller or purchase by the servicer for the
Collection Period unless 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 and
(ii) the excess, if any, for the immediately preceding Determination Date of
the amount determined pursuant to this clause (b) for that Determination Date
over the amount determined pursuant to clause (a) for that Determination Date.
"Defaulted Receivables" means on any Determination Date
o all receivables which were charged off as uncollectible in respect
of the immediately preceding Collection Period and
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o all receivables which were Eligible Receivables when transferred to
the CARCO receivables trust, which arose in an Account which became
an Ineligible Account after the date of transfer of the receivables
to the CARCO receivables trust and which were not Eligible
Receivables for any six consecutive Determination Dates after that
date.
"Definitive Certificates" means the notes of a series or class issued in
fully registered, certificated form to certificateholders or their nominees.
"Depository" means DTC, together with any successor depository selected
by the seller.
"Designated Accounts" means the Accounts to be removed from the CARCO
receivables trust.
"Designated Balance" means the aggregate principal balance of
receivables in respect of each of the Designated Accounts.
"Designated Receivables" means, at any time, the then existing
receivables in the Designated Accounts.
"Determination Date" means each second business day preceding a
Distribution Date.
"Distribution Date Statement" means a statement prepared by the servicer
and forwarded by the CARCO receivables trust trustee to each certificateholder
of record of any series on each payment date, including each payment date that
corresponds to an interest payment date or any Special Payment Date, that sets
forth information with respect to the trust and the certificates of the
series, as stated in the related Series Supplement and described in the
related prospectus supplement.
"DOL" means the Department of Labor.
"Early Amortization Event" means any of the events so defined in the
related Series Supplement and, described in the related prospectus supplement,
as well as each of the following events:
o the occurrence of events of bankruptcy, insolvency or receivership
relating to the trust or the seller; and
o the trust or DCWR becomes an investment company within the meaning
of the Investment Company Act of 1940.
"Early Amortization Period" means the period beginning on the day on
which an Early Amortization Event has occurred with respect to a series and
ending on the earliest of:
o payment in full of the outstanding principal amount of the
certificates of that series,
o the recommencement of the Revolving Period in accordance with the
related Series Supplement and
o the Termination Date for the series.
110
"Eligible Account" means a wholesale financing line of credit extended
by CFC, directly or as successor to CFC Corp. or CCC, to a Dealer, which, as
of its date of determination:
o is established by CFC, directly or as successor to CFC Corp. or CCC,
in the ordinary course of business under a floorplan financing
agreement,
o is in favor of an Eligible Dealer,
o is in existence and maintained and serviced by CFC, directly or as
successor to CFC Corp. or CCC, and
o in respect of which no amounts have been charged off as
uncollectible or are classified as past due or delinquent.
"Eligible Dealer" means a Dealer:
o which is located in the United States of America, including its
territories and possessions,
o which has not been identified by the servicer as being the subject
of any voluntary or involuntary bankruptcy proceeding or in
voluntary or involuntary liquidation,
o in which DaimlerChrysler or any affiliate of DaimlerChrysler does
not have an equity investment and
o which has not been classified by the servicer as being under Dealer
Trouble status.
"Eligible Deposit Account" means either
o a segregated account with an Eligible Institution or
o a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States
or any one of the states of the United States, 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 the depository institution has a credit rating
from each Rating Agency in one of its generic rating categories
which signifies investment grade.
"Eligible Institution" means
o the corporate trust department of the CARCO receivables trustee or
o a depository institution organized under the laws of the United
States or any one of the states of the United States, or the
District of Columbia, or a domestic branch of a foreign bank, which
at all times (i) has either (x) a long-term unsecured debt rating of
A2 or better by Moody's and of AAA or better by Standard & Poor's or
(y) a certificate of deposit rating of P-1 by Moody's or A-1+ by
Standard & Poor's and (ii) is a member of the FDIC.
"Eligible Investments" means book-entry securities, negotiable
instruments or physical securities having original or remaining maturities of
30 days or less, but in no event occurring later
111
than the payment date next succeeding the trustee's acquisition of those
securities or instruments, except as otherwise provided in the related Series
Supplement. Eligible Investments are limited to:
o direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
o demand deposits, time deposits or certificates of deposit of any
depositary institution or trust company incorporated under the laws
of the United States of America or any state of the United States,
or any domestic branch of a foreign bank, and subject to supervision
and examination by Federal or state banking or depository
institution authorities. However, at the time of the trust's
investment or contractual commitment to invest in those investments,
the commercial paper or other short-term unsecured debt obligations,
other than obligations the rating of which is based on the credit of
a person or entity other than the depository institution or trust
company, of that entity shall have a credit rating from each of the
Rating Agencies in its highest investment category;
o commercial paper having, at the time of the CARCO receivables
trust's investment or contractual commitment to invest in the
commercial paper, a rating from each of the Rating Agencies in its
highest investment category;
o except during a Reinvestment Period with respect to any series,
investments in money market funds having a rating from each of the
Rating Agencies in its highest investment category or otherwise
approved in writing by each of the Rating Agencies;
o bankers' acceptances issued by any depository institution or trust
company referred to in the second clause of this sentence;
o certain repurchase obligations, including those of appropriately
rated broker-dealers and financial institutions; and
o any other investment consisting of a financial asset that by its
terms converts to cash within a finite period of time, provided that
each Rating Agency shall have notified the seller, the servicer and
the CARCO receivables trust trustee that the trust's investment in
that investment will not cause its then rating of any outstanding
class or series with respect to which it is a Rating Agency to be
reduced or withdrawn.
"Eligible Portfolio" means all the wholesale accounts in the U.S.
Wholesale Portfolio that are Eligible Accounts.
"Eligible Receivable" means a receivable
o which was originated or acquired by CFC, directly or as successor to
CFC Corp. or CCC, in the ordinary course of business,
o which has arisen under an Eligible Account and is payable in United
States dollars,
o which is owned by CFC, CFC Corp. or CCC at the time of sale to the
seller,
o which represents the obligation of a Dealer to repay an advance made
to the Dealer to finance the acquisition of vehicles,
112
o which at the time of creation and at the time of transfer to the
CARCO receivables trust is secured by a perfected first priority
security interest in the related vehicle,
o which was created in compliance in all respects with all
requirements of law applicable to it and pursuant to a floorplan
financing agreement which complies in all respects with all
requirements of law applicable to any party to the agreement,
o with respect to which all consents and governmental authorizations
required to be obtained by DaimlerChrysler, CCC, CFC Corp., CFC or
the seller in connection with the creation of the receivable or the
transfer of the receivable to the CARCO receivables trust or the
performance by CCC, CFC Corp. or CFC of the floorplan financing
agreement under which the receivable was created, have been duly
obtained,
o as to which at all times following the transfer of the receivable to
the CARCO receivables trust, the CARCO receivables trust will have
good and marketable title to the receivable free and clear of all
liens arising prior to the transfer or arising at any time, other
than liens permitted under the Pooling and Servicing Agreement,
o which has been the subject of a valid transfer and assignment from
the seller to the CARCO receivables trust of all the seller's
interest in the receivable, including any proceeds of the
receivable,
o which will at all times be the legal and assignable payment
obligation of the related Dealer, enforceable against the Dealer in
accordance with its terms, except as enforceability may be limited
by applicable bankruptcy or other similar laws,
o which at the time of transfer to the CARCO receivables 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,
o as to which, at the time of transfer of the Receivable to the CARCO
receivables trust, DaimlerChrysler, CCC, CFC Corp., CFC and the
seller have satisfied all their respective obligations with respect
to the Receivable required to be satisfied at that time,
o as to which, at the time of transfer of the Receivable to the CARCO
receivables trust, neither DaimlerChrysler, CCC, CFC Corp. or CFC
nor the seller has taken or failed to take any action which would
impair the rights of the trust or the certificateholders,
o 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.
"Enhancements" means enhancements which may be provided with respect to
one or more classes of a series, including one or more of the following:
o letter of credit,
o surety bond,
o cash collateral account,
113
o spread account,
o guaranteed rate agreement,
o swap, including without limitation currency swaps, or other interest
protection agreement,
o repurchase obligation,
o cash deposit, or
o another form of credit enhancement described in the related
prospectus supplement.
"Euroclear" means the Euroclear System.
"Euroclear Operator" means Morgan Guaranty Trust Company of New York,
Brussels, Belgium office.
"Euroclear Participants" means participants of Euroclear.
"Excess Funded Amount" means, initially, the initial principal balance
of the certificates of a series over the Initial Invested Amount of the
series.
"Excess Funding Account" means an Eligible Account established with the
trustee for a series in which the Excess Funding Amount will be maintained,
except, to the extent provided in the related Series Supplement, during an
Early Amortization Period or Reinvestment Period for the series.
"Excess Principal Collections" means the amount of available
certificateholder principal collections for each series and any Collection
Period remaining after required payments, if any.
"Excluded Series" means a series of certificates designated as an
excluded series with respect to a Paired Series.
"Fleet Receivables" means receivables originated in connection with
multiple new vehicle orders of at least five vehicles by specified Dealers.
"Foreign Agency Depositaries" means Citibank, when acting in its
capacity as depositary for Clearstream, and Morgan, when acting in its
capacity as depositary for Euroclear.
"Fully Reinvested Date" means the date on which the amount on deposit in
the Principal Funding Account with respect to a series equals the outstanding
principal amount of the certificates of the series.
"Global Securities" means the globally offered notes.
"Holders" means the certificateholders of record under the Pooling and
Servicing Agreement.
114
"Indirect Participants" means entities including banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly.
"Ineligible Receivables" means any receivable as to which the
Certificateholders' Interest with respect to the receivable will be reassigned
to the seller on the terms and conditions set forth in this prospectus as a
result of a breach by the seller of any representation and warranty described
in the first paragraph of "Representations and Warranties" in this prospectus,
which breach remains uncured for 30 days or a longer period as may be agreed
to by the CARCO receivables trust 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 which breach has a
materially adverse effect on the Certificateholders' Interest in any
receivable or Account.
"Initial Cut-Off Date" means May 31, 1991.
"Initial Invested Amount" means with respect to any series and for any
date, the amount stated as the "Initial Invested Amount" in the related Series
Supplement. The Initial Invested Amount for any series may be increased or
decreased from time to time as stated in the related Series Supplement,
including as a result of deposits to or withdrawals from the Excess Funding
Account, if any, for the series.
"Insolvency Laws" means the United States Bankruptcy Code or similar
applicable state laws.
"Installment Balance" means, with respect to any dealer, the balance
outstanding after the initial payment by that dealer on any receivable and not
immediately required to be remitted under the related floorplan financing
agreement and floorplan financing guidelines following the date of sale of the
related vehicle.
"Installment Balance Amount" means the portion of the aggregate amount
of Installment Balances in respect of which CFC has not received an offsetting
payment from the related Dealer on a payment date.
"interest collections" or "Interest Collections" means collections under
the receivables that consist of interest and other non-principal charges,
including insurance fees, amounts recovered with respect to Defaulted
Receivables and insurance proceeds.
"Interest Funding Account" means the one or more trust accounts in which
collections or other amounts, or the portion allocable to a class, will be
deposited if the interest payment dates for a series or class occur less than
monthly.
"Investor Default Amount" means the portion of the Defaulted Amount
allocated to the certificateholders of a series.
"IRA" means an individual retirement account.
"Michigan Tax Counsel" means Christopher A. Taravella, Esq., Vice
President and General Counsel of the seller, Michigan tax counsel to the
seller and the trust.
115
"Miscellaneous Payments" means, for any Collection Period, the sum of
o Adjustment Payments and Transfer Deposit Amounts received with
respect to the Collection Period and
o Unallocated Principal Collections on the payment date available
to be treated as Miscellaneous Payments as described in this
prospectus under "Principal Collections for all Series."
"Monthly Payment Rate" means, for a Collection Period, the percentage
obtained by dividing Principal Collections for the Collection Period by the
daily average Pool Balance for the Collection Period.
"Monthly Servicing Fee" means, unless a related Series Supplement or
prospectus supplement states otherwise, the share of the Servicing Fee
allocable to certificateholders of any series with respect to any payment
date, which shall generally be equal to one-twelfth of the product of
o the Servicing Fee Rate and
o the Invested Amount of the series as of the last day of the
second preceding Collection Period.
"Moody's" means Moody's Investors Service, Inc.
"Morgan" means Morgan Guaranty Trust Company of New York, Brussels,
Belgium office.
"New Vehicles" means
o current and prior model year unmiled vehicles,
o current model year miled vehicles purchased at a closed auction
conducted by DaimlerChrysler and
o prior model year and two year old miled vehicles.
"OID" means original issue discount.
"OID regulations" means the Treasury regulations relating to OID.
"Overconcentration Amount" means the aggregate principal amount of
receivables in the CARCO receivables trust on a payment date which are Dealer
Overconcentrations.
"Paired Series" means a series of notes previously issued by the CARCO
receivables trust as to which the Accumulation Period or Controlled
Amortization Period has commenced with respect to which a series of
certificates may be designated as an Excluded Series.
"Participants" means the participating organizations of DTC which
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations.
116
"Plan Assets Regulation" means the final regulation issued by DOL
concerning the definition of what constitutes the "plan assets" of Benefit
Plans.
"Pool Balance" means the aggregate amount of the principal balances of
the receivables.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, as amended and supplemented from time to time, among DCWR, as
seller of the receivables, CFC, as servicer of the receivables, and the CARCO
receivables trust trustee.
"prime rate" means the rate designated as the "prime rate" from time to
time by certain financial institutions selected by CFC.
"principal collections" or "Principal Collections" means collections of
principal on the receivables.
"Principal Funding Account" means the trust account established for the
benefit of the certificateholders of a series in which, during the
Accumulation Period for the series, Principal Collections and other amounts
allocable to the Certificateholders' Interest of the series, which may include
some Excess Principal Collections, will be deposited.
"principal receivables" means the portion of the receivables that
represents principal.
"Principal Shortfalls" means any principal distributions to
certificateholders of any series which are either scheduled or permitted and
which have not been covered out of principal collections and certain other
amounts allocated to the series.
"Principal Terms" means the terms of a series which, under the Pooling
and Servicing Agreement, the seller may specify, including, among other
things:
o its name or designation,
o its initial principal amount, or method for calculating such
amount,
o its certificate rate, or the method for determining its note
rate,
o a date on which it will begin its Accumulation Period or
Controlled Amortization Period, if any,
o the method for allocating principal and interest to
certificateholders of such series,
o the percentage used to calculate monthly servicing fees,
o the issuer and terms of any Enhancement or the level of
subordination provided by the Seller's Interest,
o 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,
o the Series Termination Date and
117
o any other terms permitted by the Pooling and Servicing
Agreement.
"Qualified Account" means either:
o a segregated account (including a securities account) with a
Qualified Institution or
o a segregated trust account with the corporate trust department
of a depository institution organized under the laws of the
United States of America or any one of the states thereof or
the District of Columbia (or any domestic branch of a foreign
bank), so long as any of the securities of such depository
institution shall have a credit rating from each rating agency
in one of its generic rating categories which signifies
investment grade.
"Qualified Institution" means either:
o a depository institution, which may include the indenture
trustee or the owner trustee (so long as it is a paying agent),
organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia, the
deposits of which are insured by the Federal Deposit Insurance
Corporation and which at all times has a short-term unsecured
debt rating in the applicable investment category of each
rating agency; or
o a depository institution acceptable to each rating agency.
"Rating Agency" means each rating agency designated by the seller in the
related Series Supplement in respect of any outstanding series or class of
certificates.
"Receivables Transfer Date" means the Series Cut-Off Date, or the
Additional Cut-Off Date, in the case of any Additional Accounts, or the date
any future receivable is generated.
"Registration Statement" means the registration statement, together with
all amendments and exhibits, which the seller has filed under the Securities
Act with the Commission with respect to the certificates and the notes.
"Reinvestment Event" means, for any series, any of the events so defined
in the related Series Supplement and described in the related prospectus
supplement.
"Reinvestment Period" means, for any applicable series, the period
beginning on the day on which a Reinvestment Event has occurred and ending on
the earliest of:
o the beginning of an Early Amortization Period with respect to
the series,
o the recommencement of the Revolving Period in accordance with
the related Series Supplement and
o payment in full of the outstanding principal amount of the
certificates of that series.
"remarketing firms" means one or more firms which, acting as principals
for their own accounts or as agents for the seller, may offer and sell the
notes of a series, if the related prospectus supplement so states, in
connection with a remarketing upon their purchase, in accordance with a
redemption or repayment pursuant to their terms.
118
"Removal and Repurchase Date" means the Determination Date on which the
removal of the Designated Accounts and the purchase of the Designated
Receivables will occur.
"Removal Commencement Date" means the Determination Date on which
removal of one or more Accounts will commence.
"Removal Date" means the Determination Date on which the Designated
Balance in a Designated Account is reduced to zero.
"Removal Notice" means a written notice furnished to the CARCO
receivables trust trustee, any Enhancement provider and the Rating Agencies by
the seller, or the servicer on its behalf stating the Removal Commencement
Date and the Designated Accounts.
"Removed Account" means a Designated Account as to which the seller has
stopped allocating collections of receivables and which has been deemed
removed from the trust for all purposes.
"Repurchased Receivables" means Designated Receivables which have been
deemed repurchased from the trust for all purposes.
"Required Participation Amount" means for any date an amount equal to
the sum of:
o the sum of the amounts for each series of certificates obtained
by multiplying the Required Participation Percentage for the
series by the Initial Invested Amount for the series at that
time. However, each Excluded Series will be excluded from this
calculation until the Invested Amount of the related Paired
Series is reduced to zero; and
o 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 payment date following that Determination Date.
"Required Participation Percentage" means, for a series, the required
participation percentage specified in the related Series Supplement.
"Revolving Period" means the revolving period, for the certificates of
each series and class, during which Principal Collections and other amounts
otherwise allocable to the Certificateholders' Interest of that series or
class will be
o paid to the seller,
o deposited to the Excess Funding Account, if any, for that
series or
o distributed to, or for the benefit of, the certificateholders
of other classes or series,
A Revolving Period for a series will begin on the Series Cut-off Date
and end on the earlier of:
o the day immediately before the Accumulation Period commencement
date or the controlled amortization period commencement date
for the series and
119
o the day immediately before the day on which an Early
Amortization Event or a Reinvestment Event occurs with respect
to the series.
"RPA seller" means CFC, as seller, together with its predecessors as
appropriate, under the Receivables Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller's Certificate" means the certificate evidencing the Seller's
Interest.
"Seller's Participation Amount" means the Pool Balance minus the
aggregate Invested Amounts for all outstanding series of certificates.
"Series Allocable Defaulted Amount" means, with respect to any series of
certificates for any Collection Period, the product of the Series Allocation
Percentage for the series and the amount of the Defaulted Amount with respect
to the Collection Period.
"Series Allocable Interest Collections" means, with respect to any
series of certificates for any Collection Period, the product of the Series
Allocation Percentage for the series and the amount of Interest Collections,
with respect to the Collection Period.
"Series Allocable Miscellaneous Payments" means, with respect to any
series of certificates for any Collection Period, the product of the Series
Allocation Percentage for the series and the amount of Miscellaneous Payments,
with respect to the Collection Period.
"Series Allocable Principal Collections" means, with respect to any
series of certificates for any Collection Period, the product of the Series
Allocation Percentage for the series and the amount of Principal Collections,
with respect to the Collection Period.
"Series Allocation Percentage" means, with respect to a series for any
Collection Period, the percentage equivalent of a fraction, the numerator of
which is the Adjusted Invested Amount of the series as of the last day of the
immediately preceding Collection Period and the denominator of which is the
Trust Adjusted Invested Amount as of that last day.
"Series Cut-off Date" means, for a series, the date stated in the
related prospectus supplement on which a revolving period for the series of
certificates will begin.
"Series Issuance Date" means the date of issuance of any series.
"Series Termination Date" means, for any series, the date stated in the
related prospectus supplement, on which the last payment of principal and
interest on any series of certificates will be due and payable, if not
previously paid.
"Service Default" means any of the following events:
o failure by the servicer to make any payment, transfer or
deposit, or to give instructions to the CARCO receivables trust
trustee to make any payment, transfer or deposit, on the
120
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;
o failure by the servicer duly to observe or perform any other
covenants or agreements of the servicer in the Pooling and
Servicing Agreement 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
date written notice of the failure shall have been given to the
servicer by the CARCO receivables trust trustee;
o the servicer delegates its duties under the Pooling and
Servicing Agreement, except as specifically permitted
thereunder;
o 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, 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 of that fact shall have been given to the
servicer by the trustee; or
o events of bankruptcy, insolvency or receivership occur with
respect to the servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under the first clause for a period of ten business days or
referred to under the second, third or fourth clauses for a period of 60
business days, shall not constitute a Service Default if the delay or failure
was caused by an act of God or other similar occurrence.
"Service Transfer" means, in the event of any Service Default, an action
by the CARCO receivables trust trustee, by written notice to the servicer,
terminating 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 appointing a new servicer.
"servicer" means CFC or any successor servicer.
"Servicing Fee" means a monthly servicing fee which constitutes the
servicer's compensation with respect to the certificates of a series for its
servicing activities and reimbursement for its expenses, unless the related
Series Supplement or prospectus supplement states otherwise.
"Servicing Fee Rate" means, for a series, the servicing fee rate set
forth in the related Series Supplement.
"Special Payment Date" means, during an Early Amortization Period for a
series, each payment date beginning with the payment date following the
Collection Period in which the Early Amortization Period begins.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies.
"Supplemental Certificate" means a certificate for which the seller may,
from time to time, exchange a portion of the Seller's Certificate for transfer
or assignment to a person or entity chosen
121
by the seller upon the execution and delivery of a supplement to the Pooling
and Servicing Agreement, if
o the seller shall at the time of that exchange and after giving
effect to the exchange have an interest of not less than 2% in
the Pool Balance,
o the seller shall have delivered to the CARCO receivables trust
trustee, the Rating Agencies and any Enhancement provider a Tax
Opinion with respect to the exchange and
o the seller shall have delivered to the CARCO receivables trust
trustee written confirmation from the applicable Rating
Agencies that the exchange will not result in a reduction or
withdrawal of the rating of any outstanding series or class of
certificates. Any later transfer or assignment of a
Supplemental Certificate is also subject to the second and
third conditions described in the preceding sentence.
"Tax Counsel" means Sidley Austin Brown & Wood LLP, special federal
income tax counsel to the seller and the trust.
"Tax Opinion" means an opinion of counsel to the effect that, for
federal income tax and Michigan income and single business tax purposes,
o such action, other than some specified actions, will not
adversely affect the characterization of the certificates of any
outstanding series or class as debt of the seller and
o the issuance will not cause a taxable event to any certificateholders.
"Terms and Conditions" means, collectively, the Terms and Conditions
Governing Use of Euroclear and the related Operative Procedures of the
Euroclear System, and applicable Belgian law.
"Transfer Deposit Amount" means, for any Determination Date, the amount
by which the Seller's Participation Amount would be less than the Trust
Available Subordinated Amount, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that payment date,
following a deduction by the servicer of the principal balance of a receivable
from the Pool Balance.
"Trust Adjusted Invested Amount" means with respect to any Collection
Period, the sum of the Adjusted Invested Amounts for all outstanding series of
certificates.
"Trust Available Subordinated Amount" means the aggregate Available
Subordinated Amounts for all outstanding series of certificates.
"U.S. Wholesale Portfolio" means the accounts of domestic dealers
financed and serviced by CFC.
"UCC" means the Uniform Commercial Code.
122
"Unallocated Principal Collections" means any amount of Principal
Collections which are held unallocated.
"USA" means U.S. Auto Receivables Company.
"Used Vehicles" means previously owned vehicles, other than current
model year miled vehicles purchased at a closed auction conducted by
DaimlerChrysler and prior model year and two year old miled vehicles.
123
Annex I
- -------------------------------------------------------------------------------
Global Clearance, Settlement
and Tax Documentation Procedures
- -------------------------------------------------------------------------------
Except in limited circumstances, we will make available the globally
offered notes (the "Global Securities") only in book-entry form. Unless we
state otherwise in a prospectus supplement for a series, investors in the
Global Securities may hold the Global Securities through any of DTC,
Clearstream or Euroclear. Investors may trade the Global Securities as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Investors holding Global Securities through Clearstream and Euroclear
will conduct secondary market trades between each other in the ordinary way
under their normal rules and operating procedures and under conventional
eurobond practice, i.e., seven calendar day settlement.
Investors holding Global Securities through DTC will conduct secondary
market trades between each other under the rules and procedures applicable to
U.S. corporate debt obligations.
Clearstream or Euroclear and DTC participants holding Global Securities
will effect secondary cross-market trades between each other on a
delivery-against-payment basis through Citibank, N.A. ("Citibank") and Morgan
Guaranty Trust Company of New York ("Morgan") as the respective depositaries
of Clearstream and Euroclear and as participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S.
withholding taxes if those holders meet requirements and deliver appropriate
U.S. tax documents to the securities clearing organizations or their
participants.
Initial Settlement
DTC, in the name of Cede & Co. as nominee of DTC, will hold all Global
Securities in book-entry form. Financial institutions acting on the behalf of
investors as direct and indirect participants in DTC will represent those
investors' interests in the Global Securities. As a result, Clearstream and
Euroclear will hold positions on behalf of their participants through their
respective depositaries, Citibank and Morgan, which in turn will hold those
positions in accounts as participants of DTC.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to securities previously issued by
the trust. DTC will credit investor securities custody accounts with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Clearstream
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. Clearstream or Euroclear will credit
Global Securities to the securities custody accounts on the settlement date
against payment in same-day funds.
A-1
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 purchasers and sellers can settle on the
desired value date.
Trading between DTC participants. DTC participants will settle secondary
market trades between each other using the procedures applicable to securities
previously issued by the trust in same-day funds.
Trading between Clearstream and/or participants. Clearstream
participants and/or Euroclear participants will settle secondary market trades
between each other using the procedures applicable to conventional eurobonds
in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
a DTC participant desires to transfer Global Securities from its account to
the account of a Clearstream participant or a Euroclear participant the
purchaser will send instructions to Clearstream or Euroclear through a
participant at least one business day prior to settlement. Clearstream or
Euroclear will instruct Citibank or Morgan, respectively, as the case may be,
to receive the Global Securities against payment. Payment will include
interest accrued on the Global Securities from and including the last coupon
payment date to and excluding the settlement date. For transactions settling
on the 31st day of the month, payment will include interest accrued to and
excluding the first day of the following month. Citibank or Morgan will then
make payment to the DTC participant's account against delivery of the Global
Securities. After settlement has been completed, the respective clearing
system will credit the Global Securities to its system and, in accordance with
its usual procedures, to the Clearstream participant's or Euroclear
participant's account. The Global Securities credit will appear the next day,
European time, and the cash debit 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 Clearstream
or Euroclear cash debit will be valued instead as of the actual settlement
date.
Clearstream participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. They may do so the most directly by prepositioning
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the Global Securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, participants can elect not to preposition funds and allow that
credit line to be drawn upon to finance settlement. Under this procedure,
Clearstream 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
the overdraft charges, although this result will depend on each participant's
particular cost of funds.
A-2
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Global Securities
to Citibank or Morgan for the benefit of Clearstream 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 Clearstream or Euroclear seller and DTC purchaser. Due
to time zone differences in their favor, Clearstream and Euroclear
participants may employ their customary procedures for transactions in which
they are to transfer Global Securities by the respective clearing system,
through Citibank or Morgan, to a DTC participant. The seller will send
instructions to Clearstream or Euroclear through a participant at least one
business day prior to settlement. In these cases, Clearstream or Euroclear
will instruct Citibank or Morgan, as appropriate, to deliver the bonds to the
DTC participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. For transactions settling on the
31st day of the month, payment will include interest accrued to and excluding
the first day of the following month. Clearstream or Euroclear will then
reflect the payment in the account of the Clearstream participant or Euroclear
participant the following day, and back-value to the value date, which would
be the preceding day, when settlement occurred in New York, the receipt of the
cash proceeds in the Clearstream or Euroclear participant's account. Should
the Clearstream or Euroclear participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date, i.e., the trade fails, Clearstream or
Euroclear would instead value as of the settlement date the receipt of the
cash proceeds in the Clearstream or Euroclear participant's account.
Finally, day traders that use Clearstream or Euroclear and that purchase
Global Securities from DTC participants for delivery to Clearstream
participants or Euroclear participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
o borrowing through Clearstream or Euroclear for one day, until
the purchase side of the day trade is reflected in their
Clearstream or Euroclear accounts, in accordance with the
clearing system's customary procedures;
o 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 enough time to be reflected in
their Clearstream or Euroclear account in order to settle the
sale side of the trade; or
o 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 Clearstream participant or Euroclear participant.
U.S. Federal Income Tax Documentation Requirements
A holder of Global Securities holding securities through Clearstream 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
A-3
that applies to payments of interest, including original issue discount, on
registered debt issued by U.S. persons, unless the holder takes one of the
following steps to obtain an exemption or reduced tax rate:
o Exemption for non-U.S. persons (Form W-8BEN). Non-U.S. persons
that are beneficial owners can obtain a complete exemption from
the withholding tax by filing a signed Form W-8BEN (Certificate
of Foreign Status).
o Exemption for non-U.S. persons with effectively connected
income (Form W-8ECI). 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 W-8ECI (Exemption from
Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
o Exemption or reduced rate for non-U.S. persons resident in
treaty countries (Form 1001). Non-U.S. persons that are
beneficial 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-8BEN. Form 1001 may be filed by the beneficial owner or
his agent.
o Exemption for U.S. persons (Form W-9). U.S. persons can obtain
a complete exemption from the withholding tax by filing Form
W-9 (Request for Taxpayer Identification Number and
Certification).
o U.S. Federal Income Tax Reporting Procedure. The Global
Security holder, or in the case of a Form 1001 or a Form W-8ECI
filer, his agent, files by submitting the appropriate form to
the person through whom he holds, which is the clearing agency,
in the case of persons holding directly on the books of the
clearing agency. Form W-8BEN and Form 1001 are effective for
three calendar years and Form W-8ECI is effective for one
calendar year.
In this summary, we have not dealt with all aspects of federal income
tax withholding that may be relevant to foreign holders of these Global
Securities. We advise investors to consult their own tax advisors for specific
tax advice concerning their holding and disposing of these Global Securities.
A-4
===============================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in the
prospectus or prospectus supplement. Any information or representations, other
than those contained in the prospectus or prospectus supplement, are not
authorized by the seller or by the underwriters. Do not rely on any
information or representations other than those contained in the prospectus or
prospectus supplement.
We only intend the prospectus supplement to be an offer to sell or a
solicitation of any offer to buy the offered securities if:
o used in jurisdictions in which the offer or solicitation is
authorized,
o the person making the offer or solicitation is qualified to do
so, and
o the offer or solicitation is made to anyone to whom it is
lawful to make the offer or solicitation.
The information in the prospectus or prospectus supplement is only
accurate as of the date of this prospectus supplement.
All dealers effecting transactions in the offered securities within 90
days after the date of this prospectus supplement may be required to deliver
the prospectus and prospectus supplement, regardless of their participation in
this distribution. This is in addition to the obligation of dealers to deliver
the prospectus supplement when acting as underwriters or when selling their
unsold allotments or subscriptions.
===============================================================================
DAIMLERCHRYSLER [LOGO]
DAIMLERCHRYSLER
MASTER OWNER TRUST
$[o]
Auto Loan
Asset Backed Notes,
Series [o],
due [o]
DAIMLERCHRYSLER WHOLESALE
RECEIVABLES LLC
Seller
CHRYSLER FINANCIAL COMPANY L.L.C.
Servicer
PROSPECTUS SUPPLEMENT
[underwriters]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the amount of fees and expenses
(other than underwriting discounts and commissions) to be incurred in
connection with the issuance and distribution of the Certificates.
SEC Filing Fee......................................... $250
Trustee's Fees and Expenses (including counsel fees)... $15,000
Accounting Fees and Expenses........................... $35,000
Legal Fees and Expenses................................ $20,000
Printing and Engraving Expenses........................ $25,000
Rating Agency Fees..................................... $175,000
Miscellaneous.......................................... $7,000
Total............................................. $277,250
Item 15. Indemnification of Directors and Officers.
DaimlerChrysler Corporation (parent of Chrysler Financial Company
L.L.C. and therefore the indirect parent of the Registrant) is incorporated
under Delaware law. Section 145 of the Delaware General Corporation Law
provides that a Delaware corporation may indemnify any persons, including
officers and directors, who are, or are threatened to be made, parties to any
threatened, pending or completed legal action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of such corporation), by reason of the fact that such person was
an officer or director of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such officer or director acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, for criminal proceedings, had no reasonable
cause to believe that his conduct was illegal. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to
be liable to the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
Section B of Article VIII of the Certificate of Incorporation of
DaimlerChrysler Corporation, the indirect parent of the Registrant, provides,
in effect, that, subject to certain limited exceptions, DaimlerChrysler
Corporation will indemnify the officers and directors of DaimlerChrysler
Corporation or its subsidiaries to the extent permitted by Delaware law. In
addition, DaimlerChrysler Corporation maintains insurance providing for
payment, subject to certain exceptions, on behalf of officers and directors of
DaimlerChrysler Corporation and its subsidiaries of money damages incurred as
a result of legal actions instituted against them in their capacities as such
officers or directors.
The Registrant, DaimlerChrysler Wholesale Receivables LLC, is formed
under Delaware law. Section 18-108 of the Delaware Limited Liability Company
Act provides, in effect, that a Delaware limited liability company may
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
Section 8.2 of the Registrant's Amended and Restated Limited
Liability Company Agreement indemnifies each member, employee or agent of the
Registrant against expenses, judgments and amounts paid in settlement actually
and reasonably incurred by such person in connection with actions, suits or
proceedings by reason of such person being a member, employee or agent of the
Registrant.
Item 16. Exhibits:
1.1 -- Form of Underwriting Agreement.*
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3.1 -- Certificate of Formation of the Registrant is incorporated by
reference from Exhibit 3.1 of the Registrant's Registration
Statement on Form S-3 (File No. 333-37882).
3.2 -- Limited Liability Company Agreement of the Registrant is
incorporated by reference from Exhibit 3.2 of the Registrant's
Registration Statement on Form S-3 (File No. 333-37882).
4.1 -- Pooling and Servicing Agreement among the Registrant, the Servicer
and the Trustee is incorporated by reference from Exhibit 4.1 of the
Registrant's Registration Statement on Form S-1 (File No. 33-41177).
4.2 -- First Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.2 of the Registrant's
Registration Statement on Form S-1 (File No. 33-52990).
4.3 -- Second Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.3 of the Registrant's
Registration Statement on Form S-1 (File No. 33-70144).
4.4 -- Third Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.4 of the Registrant's
Registration Statement on Form S-3 (File No. 333-37882).
4.5 Fourth Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.5 of the Registrant's
Registration Statement on Form S-3 (File No. 333-37882).
4.6 -- Form of Series Supplement to the Pooling and Servicing Agreement,
including the Form of the Certificates and the Form of Servicing
Report, is incorporated by reference from Exhibit 4.4 of the
Registrant's Registration Statement on Form S-3 (File No.
333-38873).
4.7 -- Form of Master Indenture between the Trust and the Indenture Trustee
(including Forms of Notes).*
4.8 -- Form of Series Indenture Supplement between the Trust and the
Indenture Trustee (including forms of Notes).*
5.1 -- Opinion of Sidley Austin Brown & Wood LLP with respect to certain
matters involving the Notes.*
8.1 -- Opinion of Sidley Austin Brown & Wood LLP with respect to federal
tax matters.*
8.2 -- Opinion of Christopher A. Taravella, Esq. with respect to tax
matters under Michigan law.*
23.1-- Consent of Christopher A. Taravella, Esq. (included in opinion filed
as Exhibit 8.2).*
23.2-- Consent of Sidley Austin Brown & Wood LLP (included in opinions
filed as Exhibits 5.1 and 8.1).*
23.4-- Consent of KPMG LLP.*
24.1 Power of Attorney of director of Chrysler Financial Receivables
Corporation.*
* To be filed by amendment.
II-2
Item 17. Undertakings.
(a) As to Rule 415: The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to
this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that the undertakings set forth in clauses (i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those clauses is contained in periodic
reports filed by the registrants pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended, that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) As to indemnification: Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrants pursuant to the
provisions described in Item 15 herein, or otherwise, the registrants have
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933, as amended, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
a registrant of expenses incurred or paid by a director, officer or
controlling person of a registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrants
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933, as amended, and will be governed by
the final adjudication of such issue.
(c) As to documents subsequently filed that are incorporated by
reference: Each undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing, if any, of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended, that is
incorporated by reference in this registration statement shall be deemed to be
a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) As to information omitted in reliance on Rule 430A: The undersigned
registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act of 1933, as amended, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
II-3
upon Rule 430A and contained in a form of prospectus filed by the
registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933, as amended, shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Form
S-3 Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Southfield, State of Michigan, on
the 16th day of November, 2001.
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC
By Chrysler Financial Receivables Corporation,
a Member
By /s/ BYRON C. BABBISH
----------------------------------------
B.C. Babbish
Vice President
DAIMLERCHRYSLER MASTER OWNER TRUST,
By DaimlerChrysler Wholesale Receivables LLC, as
depositor, on behalf of the trust,
By Chrysler Financial Receivables Corporation,
a Member
By /s/ BYRON C. BABBISH
----------------------------------------
B.C. Babbish
Vice President
CARCO AUTO LOAN MASTER TRUST,
By DaimlerChrysler Wholesale Receivables LLC, as
depositor, on behalf of the trust,
By Chrysler Financial Receivables Corporation,
a Member
By /s/ BYRON C. BABBISH
--------------------------------------
B.C. Babbish
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Form
S-3 Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Principal executive officer of Chrysler Financial Receivables
Corporation:
/s/ JUERGEN WALKER President November 16, 2001
- ---------------------------------
Juergen Walker
Principal financial officer and sole director of Chrysler Financial
Receivables Corporation:
Vice President, Sole
Director and Chief
/s/ DAVID H. OLSEN Financial Officer November 16, 2001
- ---------------------------------
David H. Olsen
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Principal accounting officer of Chrysler Financial
Receivables Corporation:
/s/ NORBERT MEDER Vice President and November 16, 2001
- ---------------------------------
Norbert Meder Controller
- ------------------------------------------------------------------------------
II-6
BOARD OF DIRECTORS OF CHRYSLER FINANCIAL RECEIVABLES CORPORATION:
/s/ D. H. OLSEN* Director November 16, 2001
- -------------------------------
D. H. Olsen
*By: BYRON C. BABBISH
-----------------------
Byron C. Babbish
Attorney-in-Fact
November 16, 2001
II-7
EXHIBIT INDEX
Exhibit
Number Description
1.1 -- Form of Underwriting Agreement.*
3.1 -- Certificate of Formation of the Registrant is incorporated by
reference from Exhibit 3.1 of the Registrant's Registration
Statement on Form S-3 (File No. 333-37882).
3.2 -- Limited Liability Company Agreement of the Registrant is
incorporated by reference from Exhibit 3.2 of the Registrant's
Registration Statement on Form S-3 (File No. 333-37882).
4.1 -- Pooling and Servicing Agreement among the Registrant, the Servicer
and the Trustee is incorporated by reference from Exhibit 4.1 of the
Registrant's Registration Statement on Form S-1 (File No. 33-41177).
4.2 -- First Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.2 of the Registrant's
Registration Statement on Form S-1 (File No. 33-52990).
4.3 -- Second Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.3 of the Registrant's
Registration Statement on Form S-1 (File No. 33-70144).
4.4 -- Third Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.4 of the Registrant's
Registration Statement on Form S-3 (File No. 333-37882).
4.5 Fourth Amendment to the Pooling and Servicing Agreement is
incorporated by reference from Exhibit 4.5 of the Registrant's
Registration Statement on Form S-3 (File No. 333-37882).
4.6 -- Form of Series Supplement to the Pooling and Servicing Agreement,
including the Form of the Certificates and the Form of Servicing
Report, is incorporated by reference from Exhibit 4.4 of the
Registrant's Registration Statement on Form S-3 (File No.
333-38873).
4.7 -- Form of Master Indenture between the Trust and the Indenture Trustee
(including Forms of Notes).*
4.8 -- Form of Series Indenture Supplement between the Trust and the
Indenture Trustee (including forms of Notes).*
5.1 -- Opinion of Sidley Austin Brown & Wood LLP with respect to certain
matters involving the Notes.*
8.1 -- Opinion of Sidley Austin Brown & Wood LLP with respect to federal
tax matters.*
8.2 -- Opinion of Christopher A. Taravella, Esq. with respect to tax
matters under Michigan law.*
23.1-- Consent of Christopher A. Taravella, Esq. (included in opinion filed
as Exhibit 8.2).*
23.2-- Consent of Sidley Austin Brown & Wood LLP (included in opinions
filed as Exhibits 5.1 and 8.1).*
23.4-- Consent of KPMG LLP.*
24.1 Power of Attorney of director of Chrysler Financial Receivables
Corporation.*
* To be filed by amendment.
E-1