As filed with the Securities and Exchange Commission on October 29, 2004
Registration Statement No. 333-[o]
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM S-3
REGISTRATION STATEMENT
___________________
UNDER
THE SECURITIES ACT OF 1933
___________________
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC
(Beneficiary of DaimlerChrysler Master Owner Trust)
DAIMLERCHRYSLER MASTER OWNER TRUST
(Issuer of the Notes)
(Exact name of registrant as specified in its charter)
DELAWARE 6146 38-3523542
(State of (Primary Standard Industrial (I.R.S. Employer
Organization) Classification Code Number) Identification No.)
27777 Inkster Road
Farmington Hills, Michigan 48334
(248) 427-2625
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
___________________
CHRISTOPHER A. TARAVELLA, ESQ.
DaimlerChrysler Services North America LLC
27777 Inkster Road
Farmington Hills, Michigan 48334
(248) 427-2577
(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
787 Seventh Avenue
New York, New York 10019
(212) 839-5300
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 Fee (3)
- ------------------------------------------------- ---------------------- --------------------- --------------------- ---------------
Auto Dealer Loan Asset Backed Notes.............. $1,000,000 100% $1,000,000 $126.70
====================================================================================================================================
(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.
________________________________________________________________
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 Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
Subject to amendment, dated [o]
DAIMLERCHRYSLER Prospectus Supplement
to Prospectus dated [o]
$[o]
DAIMLERCHRYSLER MASTER OWNER TRUST
Issuer
Floating Rate Auto Dealer Loan Asset Backed Notes, Series [o],
due [o]
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC, Seller
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC, Servicer
Before you decide to invest in the Series [o] notes, please read this
prospectus supplement and the prospectus, especially the risk factors
beginning on page S-[o] of this prospectus supplement and page [o] of the
prospectus.
THE SERIES [O] NOTES ARE OBLIGATIONS OF THE ISSUER ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF DAIMLERCHRYSLER AG,
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC, DAIMLERCHRYSLER SERVICES NORTH
AMERICA LLC OR ANY OF THEIR AFFILIATES.
Principal amount...................................................$[o]
Per annum interest rate...............................[one-month LIBOR]
plus [o]%
Expected principal payment date.....................................[o]
Legal final.........................................................[o]
Price to public per Series [o] note................................[o]%
Underwriting discount per Series [o] note..........................[o]%
Proceeds to seller..................................................[o]
The total price to public is $[o], the total underwriting discount is $[o] and
the total amount of proceeds to the issuer is $[o].
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, unless the [15th] is not a business day, in which case payment will be
made on the next business day. The first payment date will be [o].
We will deliver the Series [o] notes in book-entry form only on or about [o].
These securities have not been approved or disapproved by the Securities
and Exchange Commission or any state securities commission nor has the
Securities and Exchange Commission or any state securities commission passed
upon the accuracy or adequacy of this prospectus supplement or the prospectus.
Any representation to the contrary is a criminal offense.
------------------------------
[underwriter[s]]
------------------------------
The date of this prospectus supplement is [o].
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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. You should not assume that the information in this
prospectus supplement or the prospectus is accurate on any date other than the
dates stated on their cover pages.
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 pages iv and v in the prospectus to locate the
referenced sections. The definitions of the defined terms used in this
prospectus supplement and the prospectus may be found in glossaries beginning
on page S-[o] in this prospectus supplement and page [o] in the prospectus.
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
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Table of Contents
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- --------------------------------------------------------- --------------------------------------------------------
Section Page Section Page
------- ---- ------- ----
- --------------------------------------------------------- --------------------------------------------------------
Reading the Prospectus and Prospectus Supplement S-2 Glossary S-10
- --------------------------------------------------------- --------------------------------------------------------
Summary of Series Terms S-4 Use of Proceeds S-10
- --------------------------------------------------------- --------------------------------------------------------
o Parties S-4 The Dealer Floorplan Financing Business S-11
- --------------------------------------------------------- --------------------------------------------------------
o Title of Securities S-4 The Accounts S-13
- --------------------------------------------------------- --------------------------------------------------------
o Series Issuance Date S-4 DCS's Performance History S-14
- --------------------------------------------------------- --------------------------------------------------------
o Series Cut-Off Date S-4 o Loss Experience S-14
- --------------------------------------------------------- --------------------------------------------------------
o Stated Principal Amount; Series Nominal o Aging Experience S-16
Liquidation Amount S-4
- --------------------------------------------------------- --------------------------------------------------------
o The Receivables S-5 o Geographic Distribution S-17
- --------------------------------------------------------- --------------------------------------------------------
o Terms of the Series [o] Notes S-5 Maturity and Principal Payment Considerations S-17
- --------------------------------------------------------- --------------------------------------------------------
o Legal Final S-5 Series Provisions S-18
- --------------------------------------------------------- --------------------------------------------------------
o Revolving Period S-5 o Interest S-19
- --------------------------------------------------------- --------------------------------------------------------
o Accumulation Period S-5 o Principal S-19
- --------------------------------------------------------- --------------------------------------------------------
o Early Redemption Period S-6 o Early Redemption Events S-22
- --------------------------------------------------------- --------------------------------------------------------
o Credit Enhancement S-6 o Optional Redemption by the Issuer S-24
- --------------------------------------------------------- --------------------------------------------------------
o Excess Principal Collections S-6 Deposit and Application of Funds S-25
- --------------------------------------------------------- --------------------------------------------------------
o Monthly Servicing Fee S-6 o Application of Series [o] Available Amounts S-25
- --------------------------------------------------------- --------------------------------------------------------
o Optional Redemption S-7 o Series Available Interest Amounts S-25
- --------------------------------------------------------- --------------------------------------------------------
o Other Series of Notes S-7 o Series Available Principal Amounts S-27
- --------------------------------------------------------- --------------------------------------------------------
o ERISA Considerations S-7 o Shares Excess Available Interests Amounts S-28
- --------------------------------------------------------- --------------------------------------------------------
o Tax Status S-7 o Shares Excess Available Principal Amounts S-28
- --------------------------------------------------------- ---------------------------------------------------------
o Note Ratings S-7 o Reduction and Reinstatement of Nominal
Liquidation Amounts S-28
- --------------------------------------------------------- --------------------------------------------------------
o Risk Factors S-7 o Series [o] Overcollateralization Amount S-30
- --------------------------------------------------------- --------------------------------------------------------
o Notes Not Listed on any Exchange S-7 o Allocation Percentages S-31
- --------------------------------------------------------- --------------------------------------------------------
Risk Factors S-8 o Required Participation Percentage S-33
- --------------------------------------------------------- --------------------------------------------------------
o Only some of the assets of the issuer will o Excess Funding Account S-33
be available to make payments on the Series
[o] notes S-8
- --------------------------------------------------------- ---------------------------------------------------------
o The timing of principal payments may not be o Sale of Receivables S-33
as expected S-9
- -------------------------------------------------------- ---------------------------------------------------------
o Credit enhancement is limited and may be o Final Payment of the Series [o] Notes S-35
reduced S-10
- --------------------------------------------------------- --------------------------------------------------------
o The issuer is dependent on DCS and Underwriting S-35
DaimlerChrysler S-10
- --------------------------------------------------------- --------------------------------------------------------
o Your ability to resell notes is limited S-10 Legal Matters S-36
- --------------------------------------------------------- --------------------------------------------------------
Note Ratings S-36
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Glossary of Principal Terms for Prospectus
Supplement S-37
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Other Series of Notes A-1
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S-3
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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")
o Owns the receivables
------------------------------------------------------------------------
Seller o DaimlerChrysler Wholesale Receivables LLC ("DCWR"), an
indirectly owned subsidiary of DaimlerChrysler
Services North America LLC ("DCS")
o DCWR's executive offices are located at 27777 Inkster
Road, Farmington Hills, Michigan 48334, and its
telephone number is (248) 427-2625
------------------------------------------------------------------------
Servicer o DCS, a wholly owned subsidiary of DaimlerChrysler
Corporation ("DaimlerChrysler")
------------------------------------------------------------------------
Indenture o The Bank of New York
Trustee
------------------------------------------------------------------------
Owner o Chase Manhattan Bank USA, National Association
Trustee
------------------------------------------------------------------------
Title of Securities
Floating Rate Auto Dealer Loan Asset Backed Notes, Series [o] (the
"Series [o] notes").
Series Issuance Date
[o], 200[o].
Series Cut-Off Date
[o], 200[o].
Stated Principal Amount;
Series Nominal Liquidation Amount
Stated principal amount of Series [o] notes...........$[o]
------------------------------------------------------------------------
Initial nominal liquidation amount of Series [o] notes....$[o]
------------------------------------------------------------------------
Initial Series [o] overcollateralization amount..$[o]
------------------------------------------------------------------------
Initial Series [o] nominal liquidation amount............$[o]
------------------------------------------------------------------------
o The Series [o] nominal liquidation amount constitutes the portion
of the principal amount of the receivables allocated to Series
[o].
o The Series [o] notes will be secured only by a principal amount of
receivables that corresponds to the Series [o] nominal liquidation
amount.
o The Series [o] nominal liquidation amount will equal the sum of:
-- the nominal liquidation amount of the Series [o] notes
(initially, $[o]) plus
-- the Series [o] overcollateralization amount (initially,
$[o]).
o 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
"Deposit and Application of Funds --
S-4
Reduction and Reinstatement of Nominal Liquidation Amounts."
The Receivables
The primary assets of the issuer will consist of a pool of receivables
arising from revolving floorplan financing agreements of selected motor
vehicle dealers. The issuer's primary source of funds to make payments on the
Series [o] notes will be the Series [o] share of collections received on the
receivables. Only the portion of collections on the receivables 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. Collections on the receivables
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. See "The Notes -- Allocation of
Collections" 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 15], [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 Accrual 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 from and including the Series [o] issuance date to but
excluding the first payment date.
Principal Payments
o We expect to pay the principal of the Series [o] notes (but only
to the extent of the outstanding 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 outstanding 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 principal collections to make principal payments on other
series and/or to pay the purchase price for additional receivables. The
revolving period will begin at the close of business on the Series [o] cut-off
date and will end when the accumulation period begins. The revolving period
will also end if an early redemption period begins.
Accumulation Period
We will accumulate principal for the Series [o] notes during an
accumulation period of no more than [o] months 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.
S-5
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 "Deposit and
Application of Funds -- Early Redemption 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 receivables
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 that are allocated to Series
[o] 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:
-- [o]% of the nominal liquidation amount of the Series [o]
notes plus
-- the incremental overcollateralization amount, which is based
on the amount of ineligible receivables and dealer
overconcentration amounts in the pool of receivables.
The incremental overcollateralization amount may fluctuate from time to
time.
o We will allocate collections on the receivables 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.
o The Series [o] overcollateralization amount will be reduced by:
-- reallocations of available principal amounts otherwise
allocable to the Series [o] overcollateralization amount to
pay interest on the Series [o] notes; and
-- charge-offs resulting from uncovered defaults on the
receivables allocated to Series [o].
o Reductions in the Series [o] overcollateralization amount will
result in a reduced amount of collections on the receivables that
are available to make payments on the Series [o] notes. If 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 those other series, will be applied
to make principal payments or accumulations of principal when due in respect
of the Series [o] notes and of other series of notes then entitled to
principal payments.
Monthly Servicing Fee
The monthly servicing fee allocable to Series [o] is the product of 1/12
of 1.0% times the Series [o] nominal liquidation amount, or less if the
servicer waives any portion of the monthly servicing fee on any date. The
annual servicing fee rate is 1.0%.
S-6
Optional Redemption
The servicer may cause the issuer to redeem the Series [o] notes on any
day on or after the day on which the nominal liquidation amount of the Series
[o] notes is reduced to $[o] or less.
Other Series of Notes
The issuer has previously issued [five] series of notes, and may issue
additional series of notes. A summary of these prior series of notes is
contained in "Other Series of Notes" 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 income tax laws.
Note Ratings
This 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 the likelihood that 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 the Series [o] notes prior to or after the expected
principal payment date.
Risk Factors
An investment in the 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 notes is limited" in this prospectus
supplement or the prospectus.
S-7
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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 notes of your series will be the
Series [o] available principal amount and the
Series [o] available interest amount for your
series. The Series [o] available principal amount
will consist primarily of principal collections
allocated to your series; and the Series [o]
available interest amount will consist primarily of
interest collections allocated to your series. As a
result, you must rely only on the particular assets
allocated as security for the Series [o] notes for
payment 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 "Deposit and Application
of Funds" in this prospectus supplement.
o In particular, if the interest rates charged on the
receivables decline, the amount of interest
collections allocated to your series might be
reduced at a time when the interest rate on the
Series [o] notes is not declining. Conversely, the
interest rate on the Series [o] notes could
increase at a time when the interest rates on the
receivables are not increasing. Either situation
could result in the use of principal collections
allocable to your series to pay interest on the
Series [o] notes. If the Series [o]
overcollateralization amount is not sufficient to
mitigate the effect of such a change in rates, this
could result in delayed or reduced principal and
interest payments to you.
o Also, following a sale of receivables due to the
insolvency of the seller, DCS or DaimlerChrysler,
an acceleration of your 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 "The
Notes -- Sale of Receivables" in the prospectus,
only the proceeds of that sale allocable to the
Series [o] notes 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 Principal collections allocable to your series may
be reallocated to pay interest on the notes of your
series to the extent that the available interest
amount for your series is
S-8
insufficient to make such interest payments. Also,
charge-offs of uncovered defaulted receivables
allocated to your series are generally first
applied against the Series [o]
overcollateralization amount and, if the Series [o]
overcollateralization amount has been reduced to
zero, then applied to the nominal liquidation
amount of the Series [o] notes. If these
reallocations and charge-offs 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 and you will
incur a loss on your notes. See "The Notes --
Stated Principal Amount, Outstanding Dollar
Principal Amount and Nominal Liquidation Amount of
Notes -- Nominal Liquidation Amount of Notes" 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
Series [o] expected
principal 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 principal payment date will
depend on principal collections from other series
of notes. A series from which principal collections
are expected to be available to make payments on
the Series [o] notes may enter an early redemption
period before the Series [o] expected principal
payment date. Principal collections allocable to
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 principal payment date. On
written request, the seller will give you
disclosure documents relating to any other
outstanding series of notes issued by the issuer.
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
principal sooner or
later than you
expected and you may
not receive all of
your principal: o If an early redemption event occurs, you may
receive your principal sooner or later than you
expected and you may not receive all of your
principal. In particular, a significant decline in
the amount of receivables generated could cause an
early redemption of the Series [o] notes. If the
balance of the receivables in the issuer is not
maintained at a specified level, the seller must
designate additional accounts, the receivables of
which will be sold to the issuer. If additional
accounts are not designated by the seller when
required, an early redemption event will occur.
S-9
o If a bankruptcy event relating to DCS or
DaimlerChrysler were to occur, an early redemption
event would occur. In that case additional
receivables would not be transferred to the issuer
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 "Series Provisions --
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 for the
notes of your series will be provided by the Series [o] overcollateralization
amount as described in this prospectus supplement. The amount of this credit
enhancement is limited and may be reduced from time to time. See "Deposit and
Application of Funds -- Series [o] Overcollateralization Amount" in this
prospectus supplement for more information about the credit enhancement for
the Series [o] notes.
The issuer is dependent on DCS and DaimlerChrysler. The issuer
completely depends on DCS for the generation of new receivables. The ability
of DCS 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
DCS does not generate sufficient receivables, an early redemption event may
occur.
Your ability to resell notes is limited. There may be no secondary
market for your notes. The underwriters may participate in making a secondary
market in the Series [o] 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.
- ------------------------------------------------------------------------------
Glossary
- ------------------------------------------------------------------------------
You can find a "Glossary of Principal Terms for Prospectus Supplement"
beginning on page S-[o] in this prospectus supplement.
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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 DCS or to repay
amounts previously borrowed to purchase receivables. DCS will use the portion
of the proceeds paid to it for general corporate purposes.
S-10
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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 issuer were or will be selected from extensions of credit and advances
made by DaimlerChrysler and DCS to approximately 2,910 domestic motor vehicle
dealers.
o DCS financed 60.5% of the total number of all
DaimlerChrysler-franchised dealers as of June 30, 2004.
o As of June 30, 2004, approximately 40.9% of the dealers to which
DCS had extended credit lines were DaimlerChrysler-franchised
dealers that operated only DaimlerChrysler franchises,
approximately 42.8% were DaimlerChrysler-franchised dealers that
also operated non-DaimlerChrysler franchises and approximately
16.3% were non-DaimlerChrysler dealers.
o As of June 30, 2004, the balance of principal receivables in the
U.S. Wholesale Portfolio was approximately $14.0 billion.
o DCS currently services the U.S. Wholesale Portfolio through its
home office and through a network of eight Chrysler Financial
business centers and three Mercedes-Benz regional offices located
throughout the United States.
o As of June 30, 2004, the average credit lines per dealer in the
U.S. Wholesale Portfolio for new and used vehicles (which includes
Auction Vehicles as used vehicles) were approximately $4.7 million
and $0.6 million, respectively, and the average balance of
principal receivables per dealer was approximately $4.8 million.
o As of June 30, 2004, the aggregate total receivables balance as a
percentage of the aggregate total credit lines was approximately
91.0%.
The following table sets forth the percentages of dealer account
balances by year of credit line origination for the U.S. Wholesale Portfolio.
- ------------------------------------------------------------------------------
U.S. Wholesale Portfolio Percentages by Year
of Credit Line Origination
As of June 30, 2004
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Prior to
2004 2003 2002 2001 2000 1999 1998 1997 1997
- ------------------------------------------------------------------------------
3.44% 6.31% 6.55% 11.51% 6.22% 5.89% 4.74% 3.57% 51.77%
- ------------------------------------------------------------------------------
As of June 30, 2004, the weighted average spread over the prime rate
charged to dealers in the U.S. Wholesale Portfolio was approximately 0.63%.
Used vehicles (which excludes Auction Vehicles) represented
approximately 2.29% of the aggregate principal amount of receivables in the
U.S. Wholesale Portfolio as of June 30, 2004. As of June 30, 2004, used
vehicles represented approximately 2.25% of the aggregate principal amount of
receivables in the issuer (including Excluded Receivables).
S-11
Finance Hold Experience
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
June 30, As of December 31,
-------- -----------------------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
-------- -----------------------------------------------------------------------------------------
Percentage
of Dealers 1.2% 0.7% 1.8% 1.9% 0.8% 0.4% 0.9% 2.1% 1.1% 1.8% 1.6%
- ------------------------------------------------------------------------------------------------------------------
DCS management's past experience has indicated that Finance Hold trends
tend to follow the cyclical nature of the present business economy. Finance
Hold experience has been reflective of overall macro-economic conditions.
Dealer Trouble Experience
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
June 30, As of December 31,
-------- -----------------------------------------------------------------------------------------
2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
-------- -----------------------------------------------------------------------------------------
Number
of Dealers 11 13 7 24 27 27 21 24 20 6 12
- ------------------------------------------------------------------------------------------------------------------
Percentage
of Dealers 0.4% 0.4% 0.2% 0.7% 0.8% 0.9% 0.7% 0.7% 0.6% 0.2% 0.3%
- ------------------------------------------------------------------------------------------------------------------
Dealer Trouble status indicates those dealers that have probable
principal loss potential. Trends of Dealer Trouble status over the past five
years have held at an average of less than 20 dealers in Dealer Trouble
status. DCS management's past experience has indicated that Dealer Trouble
status experience tends to increase with the threat or occurrence of economic
pressures in the U.S. Although there may be a correlation between dealers on
Finance Hold and dealers in Dealer Trouble status, Finance Hold percentages
typically trend higher as management attempts to limit the actual loss
experience of dealerships to the portfolio.
S-12
- ------------------------------------------------------------------------------
The Accounts
- ------------------------------------------------------------------------------
As of June 30, 2004, with respect to the Accounts in the CARCO
receivables trust (the owner of the receivables at that time):
o there were approximately 2,460 Accounts and the aggregate
principal receivables balance was approximately $11.4 billion;
o the average credit lines per dealer for new and used vehicles
(which include Auction Vehicles) were approximately $4.3 million
and $0.6 million, respectively, and the average balance of
principal receivables per dealer was approximately $4.6 million;
and
o the aggregate total receivables balance as a percentage of the
aggregate total credit line was approximately 94.1%.
Unless otherwise indicated, the statistics included in the preceding
paragraph, in the table below and under "DCS's Performance History --
Geographic Distribution" with respect to the Accounts and the receivables in
the issuer give effect to approximately $5.4 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 issuer. A
portion of those principal receivables was created after those dealers entered
into that status or were designated by the seller for removal from the issuer
and, as a result, are owned by DCS. Principal receivables balances created
prior to those dealers entering into that status or being designated for
removal from the issuer are included in determining the principal receivables
balance of the receivables held by the issuer. See "Description of the Sale
and Servicing Agreement -- Removal of Accounts" in the prospectus for a
description of the manner in which an Account can be removed from the issuer.
The following table sets forth the percentages of dealer account
balances by year of credit line origination for the Accounts allocated to the
issuer.
- ------------------------------------------------------------------------------
Account Portfolio Percentages by Year
of Credit Line Origination
As of June 30, 2004
- ------------------------------------------------------------------------------
Prior to
2004 2003 2002 2001 2000 1999 1998 1997 1997
- ------------------------------------------------------------------------------
0.05% 0.00% 1.38% 13.02% 6.55% 7.19% 5.67% 4.01% 62.13%
- ------------------------------------------------------------------------------
As of June 30, 2004, the weighted average spread over the prime rate
charged to Dealers was approximately 0.65%.
S-13
- ------------------------------------------------------------------------------
DCS'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 issuer 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 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 -- Risk
factors relating to the receivables -- The ability of the issuer to make
payments on the notes depends in part on the ability of DaimlerChrysler and
DCS to generate receivables and the ability of DCS to perform its obligations
under the sale and servicing agreement" and "The Dealer Floorplan Financing
Business--Relationship with DaimlerChrysler" in the prospectus and "Risk
Factors -- The issuer is dependent on DCS and DaimlerChrysler" in this
prospectus supplement.
S-14
Loss Experience for the U.S. Wholesale Portfolio
($ in Millions)
Six Months
Ended June 30, Year Ended December 31,
-------------------- ------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999
-------------------- ------------------------------------------------------------------
Average Principal
Receivables Balance (1) $12,220 $10,906 $10,781 $ 9,813 $ 9,689 $11,336 $ 9,947
- -------------------------------------------- ------------------------------------------------------------------
Net Losses / (Net
Recoveries) (2)........ $ 0 $ 1 $ 3 $ 10 $ 2 $ 1 $ (0)
- -------------------------------------------- ------------------------------------------------------------------
Net Losses / (Net
Recoveries) as a
Percent of Liquidations 0.001% 0.001% 0.005% 0.016% 0.004% 0.001% (0.001)%
- -------------------------------------------- ------------------------------------------------------------------
Net Losses / (Net
Recoveries) as a
Percent of Average
Principal Receivables
Balance (3)............ 0.003% 0.008% 0.04% 0.11% 0.02% 0.01% (0.00)%
- -------------------------------------------- ------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------
Average Principal
Receivables Balance (1) $ 9,236 $ 8,877 $ 8,825 $ 8,256 $ 6,754 $ 6,271 $ 5,344
- ------------------------------------------------------------------------------------------------------------------
Net Losses / (Net
Recoveries) (2)........ $ 11 $ 4 $ (0) $ (1) $ (1) $ 12 $ 26
- ------------------------------------------------------------------------------------------------------------------
Net Losses / (Net
Recoveries) as a
Percent of Liquidations 0.020% 0.008% (0.000)% (0.002)% (0.003)% 0.035% 0.098%
- ------------------------------------------------------------------------------------------------------------------
Net Losses / (Net
Recoveries) as a
Percent of Average
Principal Receivables
Balance (3)............ 0.12% 0.04% (0.00)% (0.01)% (0.01)% 0.19% 0.49%
- ------------------------------------------------------------------------------------------------------------------
(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 six months ended June 30, 2004 and 2003, which
are based on a seven month average.
(2) Net Losses in any period are gross losses less recoveries for such
period.
(3) Percentages for the six months ended June 30, 2004 and 2003 are
expressed on an annualized basis and are not necessarily indicative of
the experience for the whole year.
Except for the net loss experience of the U.S. Wholesale Portfolio for
the year ended December 31, 2002, net losses have shown favorable trends over
the last four years principally because of the availability of large amounts of
deficiencies collected after realization on the vehicles.
S-15
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. The
percentages below may not add to 100.0% because of rounding.
Age Distribution for the U.S. Wholesale Portfolio
As of
June 30, As of December 31,
----------- ----------------------------------------------------------------------------
Aging (Days) 2004 2003 2002 2001 2000 1999 1998 1997
----------- ----------------------------------------------------------------------------
<31...................... 33.2% 29.2% 28.3% 33.5% 23.0% 36.7% 32.2% 32.5%
- ------------------------------------------------------------------------------------------------------------------
31-60.................... 16.4% 19.2% 18.9% 23.0% 19.8% 21.9% 21.5% 21.9%
- ------------------------------------------------------------------------------------------------------------------
61-90.................... 12.7% 14.2% 16.3% 14.3% 18.3% 16.6% 15.3% 14.7%
- ------------------------------------------------------------------------------------------------------------------
91-120................... 12.3% 14.6% 14.4% 10.6% 16.6% 11.6% 12.6% 11.0%
- ------------------------------------------------------------------------------------------------------------------
121-150.................. 7.5% 9.4% 10.6% 7.7% 10.0% 4.4% 8.0% 7.4%
- ------------------------------------------------------------------------------------------------------------------
151-180.................. 3.5% 3.0% 4.3% 3.5% 2.9% 2.5% 2.9% 3.3%
- ------------------------------------------------------------------------------------------------------------------
181-210.................. 3.3% 3.4% 1.9% 1.9% 2.8% 1.5% 1.9% 1.9%
- ------------------------------------------------------------------------------------------------------------------
211-240.................. 2.9% 1.9% 1.3% 1.4% 1.6% 1.3% 1.3% 1.3%
- ------------------------------------------------------------------------------------------------------------------
241-270.................. 2.2% 1.2% 0.8% 0.9% 1.2% 0.9% 0.9% 1.0%
- ------------------------------------------------------------------------------------------------------------------
271-300.................. 2.2% 1.3% 0.7% 0.8% 1.1% 0.7% 0.7% 0.9%
- ------------------------------------------------------------------------------------------------------------------
301-330.................. 1.5% 0.6% 0.6% 0.5% 0.8% 0.4% 0.6% 0.8%
- ------------------------------------------------------------------------------------------------------------------
331-360.................. 0.6% 0.5% 0.3% 0.3% 0.6% 0.3% 0.4% 0.6%
- ------------------------------------------------------------------------------------------------------------------
>360..................... 1.7% 1.5% 1.6% 1.6% 1.3% 1.2% 1.7% 2.7%
- ------------------------------------------------------------------------------------------------------------------
Total................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
- ------------------------------------------------------------------------------------------------------------------
S-16
Geographic Distribution
The following table provides the geographic distribution of the vehicle
inventory for all dealers with accounts allocated to the issuer on the basis
of receivables outstanding and the number of dealers generating the portfolio.
The percentages below may not add to 100.00% because of rounding.
Geographic Distribution of Accounts for the Issuer
As of June 30, 2004
---------------------------------------------------------------------------------
Percentage of Total Percentage of
Receivables Receivables Number of Number of
Outstanding (2) Outstanding (2) Dealers (3) Dealers (3)
---------------------------------------------------------------------------------
Texas.......................... $ 882,127,607.56 7.75% 143 5.81%
- ------------------------------------------------------------------------------------------------------------------
California..................... 879,930,688.34 7.73% 141 5.73%
- ------------------------------------------------------------------------------------------------------------------
Florida........................ 790,609,815.67 6.94% 113 4.59%
- ------------------------------------------------------------------------------------------------------------------
New York....................... 737,218,604.97 6.47% 148 6.01%
- ------------------------------------------------------------------------------------------------------------------
Michigan....................... 671,412,238.91 5.90% 125 5.08%
- ------------------------------------------------------------------------------------------------------------------
New Jersey..................... 601,958,804.16 5.29% 117 4.76%
- ------------------------------------------------------------------------------------------------------------------
Other (1)...................... 6,822,807,948.39 59.92% 1,674 68.02%
- ------------------------------------------------------------------------------------------------------------------
Total.................. $ 11,386,065,708.00 100.00% 2,461 100.00%
- ------------------------------------------------------------------------------------------------------------------
(1) No other state includes more than 5% of the outstanding receivables.
(2) Includes Excluded Receivables.
(3) Includes Excluded Dealers.
- ------------------------------------------------------------------------------
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 payment of the Series [o]
notes by the [o] payment date (the "Series [o] Expected Principal 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 DCS 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 Principal Payment Date will depend on the reallocation to
Series [o] of principal collections which are initially allocated to other
outstanding series of notes. If one or more other series of notes from which
principal collections are expected to be available to be reallocated to the
payment of the Series [o] notes enters into an early redemption period before
the Series [o] Expected Principal Payment Date, principal collections
allocated to those series of notes will not be available to be reallocated to
make principal payments on the Series [o] notes. As a result, you may receive
your final payment of principal later than the Series [o] Expected Principal
Payment Date.
S-17
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
Principal Payment Date.
The amount of new receivables generated in any month and the 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 of receivables in the U.S. Wholesale Portfolio 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. Furthermore, 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.
Monthly Payment Rates for the U.S. Wholesale Portfolio
Six Months
Ended
June 30, Year Ended December 31,
---------------- ---------------------------------------------------------------------------------
2004 2003 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
---------------- ---------------------------------------------------------------------------------
Highest Month 51.3% 52.8% 55.6% 65.4% 64.4% 52.8% 60.5% 60.8% 57.7% 58.3% 59.1% 59.7%
- ----------------------------------------------------------------------------------------------------------------------
Lowest Month 42.4% 42.2% 37.2% 44.9% 42.4% 36.3% 44.7% 42.5% 41.1% 43.2% 36.5% 34.2%
- ----------------------------------------------------------------------------------------------------------------------
Average of the
Months in the
Period 46.1% 46.5% 46.7% 55.7% 52.6% 45.6% 52.0% 50.0% 48.2% 49.0% 45.6% 50.3%
- ----------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Series Provisions
- ------------------------------------------------------------------------------
The issuer will issue the Series [o] notes pursuant to the indenture and
an indenture supplement. The sole source of funds for the payment of principal
of and interest on the Series [o] notes will be collections in respect of the
receivables that are allocated to the Series [o] notes under the indenture,
the indenture supplement and the sale and servicing agreement, after giving
effect to all allocations and reallocations. If the payments received by the
issuer on the receivables are not sufficient to pay the Series [o] notes in
full, 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.
The discussions under this heading "Series Provisions" and the heading
"Deposit and Application of Funds" in this prospectus supplement and the
discussions under the headings "The Notes," "The Indenture" and "Description
of the Sale and Servicing Agreement" in the prospectus summarize the material
terms of the Series [o] notes, the indenture, the indenture supplement and the
sale and servicing agreement. These summaries do not purport to be complete
and are qualified in their entirety by reference to the provisions of the
Series [o] notes, the indenture, the indenture supplement and the sale and
servicing agreement.
Neither the indenture nor the indenture supplement limits the aggregate
principal amount of notes that may be issued.
S-18
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 the 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 that
amount at the Series [o] rate, to the extent permitted by applicable law.
We will make interest payments on the Series [o] notes solely out of the
Series [o] Available Interest Amounts. See "Deposit and Application of Funds
- -- Application of Series [o] Available Amounts -- Series Available Interest
Amount" in this prospectus supplement for additional details.
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 during 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 as reported by Bloomberg Financial
Markets Commodities News, 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
for U.S. dollar deposits. 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 four 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 are not scheduled to make principal payments to the Series [o]
noteholders until the Series [o] Expected Principal Payment Date. However, if
an Early Redemption Period that is not terminated has commenced before
S-19
the Series [o] Expected Principal Payment Date, we will begin making principal
payments on the payment date in the month following the month in which the
Early Redemption Period begins.
Generally, the Series [o] share of principal collections for each
collection period during the Revolving Period will not be used to make
principal payments on the Series [o] notes. Instead, we will either:
o use this share of principal collections to cover a shortfall in
the Series [o] Available Interest Amount needed to pay interest on
the Series [o] notes; or
o use this share of principal collections to cover principal
payments due to the noteholders of any other series of notes that
is in an amortization, early redemption or accumulation period; or
o if no other series is then amortizing, repaying or accumulating
principal, pay this share of principal collections to the issuer
to maintain its interest in the receivables pool and to be applied
in accordance with the sale and servicing agreement.
See "Deposit and Application of Funds -- Application of Series [o] Available
Amounts - Series Available Principal Amount" in this prospectus supplement for
additional details.
The "Revolving Period" for the Series [o] notes will be 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
Accumulation Period Commencement Date; and
o the close of business on the day immediately preceding the day on
which an Early Redemption Period commences.
The Revolving Period, however, may recommence upon the termination of an
Early Redemption Period. See "-- Early Redemption Events" below for additional
details on how we may terminate an Early Redemption Period and recommence the
Revolving Period for the Series [o] notes.
Unless an Early Redemption Period that is not terminated as described in
this prospectus supplement has commenced, the Series [o] notes will have an
Accumulation Period during which the Series [o] share of principal collections
will no longer be used by another series of notes or paid to the issuer for
application under the sale and servicing agreement. Instead, the Series [o]
share of principal collections will be accumulated in specified amounts in the
principal funding account for the Series [o] notes. We will make these
deposits into the principal funding account for the purpose of paying the
outstanding dollar principal amount of the Series [o] notes in full on the
Series [o] Expected Principal Payment Date.
The "Accumulation Period" for the Series [o] notes will be the period
beginning on the Accumulation Period Commencement Date and terminating on the
earlier of:
o the payment date on which the outstanding dollar principal amount
of the Series [o] notes is reduced to zero; and
o the close of business on the day immediately preceding the day on
which an Early Redemption Period commences.
S-20
Initially, the Accumulation Period is scheduled to be [five] months
long. However, depending on the performance of the receivables, the length of
the Accumulation Period may be shortened to [four, three or two] months or a
single month as described in the following paragraph.
The "Accumulation Period Commencement Date" for the Series [o] notes
will be [o] or, if the issuer, acting directly or through the administrator,
elects at its option to delay the start of the Accumulation Period, a later
date selected by the issuer. Delaying the start of the Accumulation Period
will extend the Revolving Period and shorten the Accumulation Period. The
issuer may elect to delay the start of the Accumulation Period because it
believes that (i) the issuer will be able to reallocate the principal
collections allocable to other series of notes to make larger monthly deposits
into the principal funding account for the Series [o] notes over a shorter
period of time or (ii) the payment rate on the receivables will permit larger
monthly deposits to that trust account over a shorter period of time. In order
to delay the start of the Accumulation Period, the following things must
occur:
o the issuer must deliver to the indenture trustee a certificate to
the effect that the issuer 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 issuer that they
will not lower or withdraw their ratings on the notes of any
series 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 Principal Payment Date;
o the Accumulation Period must start no later than [o]; and
o the issuer must make this election no later than the first day of
the last month of the Revolving Period, including extensions of
the Revolving Period.
If the issuer 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.
During the Accumulation Period, we will accumulate each month in the
principal funding account a fixed amount equal to the "Controlled Accumulation
Amount," which will equal the outstanding dollar principal amount of the
Series [o] notes as of the Accumulation Period Commencement 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 Principal Payment Date. Because there may be
funds in the excess funding account allocable to Series [o] and the principal
collections allocable to Series [o] for any payment date may fluctuate, we
will be required to deposit the Controlled Deposit Amount into the principal
funding account on each payment date with respect to the Accumulation Period.
The "Controlled Deposit Amount" for a payment date will be the excess
of:
o the Controlled Accumulation Amount over
o any funds in the excess funding account that are allocable to
Series [o] and will be deposited into the principal funding
account on that payment date.
S-21
Unless and until an Early Redemption Period that is not terminated as
described in this prospectus supplement has occurred, we will use the funds
accumulated in the principal funding account, including available funds from
the excess funding account that are allocable to Series [o], to pay the
outstanding dollar principal amount of the Series [o] notes on the Series [o]
Expected Principal Payment Date.
If the outstanding dollar principal amount of the Series [o] notes is
not paid in full on the Series [o] Expected Principal Payment Date, an Early
Redemption Event will occur, resulting in the start of an Early Redemption
Period. Other Early Redemption Events that will also trigger the start of an
Early Redemption Period are described in "-- Early Redemption Events" below.
An "Early Redemption Period" for the Series [o] notes will be a period
beginning on the day on which an Early Redemption Event occurs and terminating
on the earliest of:
o the payment date on which the outstanding dollar principal amount
of the Series [o] notes is reduced to zero;
o the legal final; and
o if this Early Redemption Period has commenced before the scheduled
termination of the Revolving Period, the day on which the
Revolving Period recommences under the limited circumstances
described in "-- Early Redemption Events" below.
On each payment date with respect to the Early Redemption Period, the
Series [o] noteholders will receive payments of Monthly Principal and Monthly
Interest.
Monthly Principal is the amount of principal that we will pay to or
accumulate for the Series [o] noteholders on a monthly basis. The "Monthly
Principal" for any payment date relating to the Accumulation Period or any
Early Redemption Period will equal the Series [o] share of principal
collections for the related collection period 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 in any event will not exceed the nominal liquidation amount of the
Series [o] notes. Consequently, if the nominal liquidation amount of the
Series [o] notes is reduced by reallocations of the Series [o] share of
principal collections to pay interest on the Series [o] notes or by
charge-offs due to uncovered defaulted receivables and is not reinstated, you
will incur a loss on your Series [o] notes.
Early Redemption Events
The early redemption events (each, an "Early Redemption Event") with
respect to the Series [o] notes will include each of the following events.
1. failure on the part of DCWR, the servicer or DCS (if DCS is no
longer the servicer), as applicable,
o to make any payment or deposit required by the sale 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
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o to deliver a Monthly Noteholders' Statement or payment
instruction on the date required under the indenture, 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 sale 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 DCS in the Receivables
Purchase Agreement or by DCWR in the sale and servicing agreement
or any information required to be given by DCWR to the issuer 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 noteholders 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 sale and servicing
agreement;
3. the occurrence of certain events of bankruptcy, insolvency or
receivership relating to DCWR, DCS or DaimlerChrysler;
4. a failure by DCWR to convey receivables in Additional Accounts to
the issuer within five business days after the day on which it is
required to convey those receivables under the sale and servicing
agreement;
5. on any payment date, the Primary Series [o] overcollateralization
amount is reduced to an amount less than the Required Primary
Series [o] overcollateralization amount on that payment date after
giving effect to the reductions, reinstatements and distributions
to be made on that payment date; provided that, for the purpose of
determining whether an Early Redemption Event has occurred
pursuant to this clause 5, any reduction of the Primary Series [o]
overcollateralization amount resulting from reallocations of the
Series [o] Available Principal Amounts to pay interest on the
Series [o] notes in the event LIBOR is equal to or greater than
the prime rate upon which interest on the receivables is
calculated on the applicable LIBOR Determination Date will be
considered an Early Redemption Event only if LIBOR remains equal
to or greater than such prime rate for the next 30 consecutive
days following such LIBOR Determination 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 Principal Payment Date;
10. DCWR or the issuer becomes an investment company within the
meaning of the Investment Company Act of 1940, as amended; and
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11. the occurrence of an event of default with respect to the Series
[o] notes under the indenture.
In the case of any event described in clause 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 holders of 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 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 event described in clause 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 indenture trustee or the Series [o] noteholders immediately
upon the occurrence of that event.
The Early Redemption Period begins upon the occurrence of an Early
Redemption Event. Under limited circumstances, an Early Redemption Period
which commences before 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
issuer, as described in clause 4 above, during the Revolving Period and no
other 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 issuer. However, the Revolving
Period 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 Aggregate
Series Nominal Liquidation Amount due to principal payments made in respect of
any notes during the Early Redemption Period or as a result of the subsequent
addition of receivables to the issuer. However, if any Early Redemption Event,
other than an Early Redemption Event described in clause 3 or 10 above,
occurs, the Revolving Period will recommence following receipt of:
o written confirmation by the rating agency specified in the
indenture supplement, that its rating of the Series [o] notes will
not be withdrawn or lowered as a result of the recommencement; and
o holders of Series [o] notes evidencing more than 50% of the
outstanding dollar principal amount of the Series [o] notes
consent to the recommencement of the Revolving Period;
so long as 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.
Optional Redemption by the Issuer
Under the indenture, the servicer has the right, but not the obligation,
to cause the issuer to redeem the Series [o] notes in whole but not in part on
any day on or after the day on which the nominal liquidation amount of the
Series [o] notes is reduced to $[o] or less. This redemption option is
referred to as a clean-up call.
If the servicer elects to cause the issuer to redeem the Series [o]
notes, the servicer will cause the issuer to notify the registered holders at
least 30 days prior to the redemption date. The redemption price of the Series
[o] notes will equal 100% of the outstanding dollar principal amount of the
Series [o] notes, plus accrued but unpaid interest on the Series [o] notes 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 the 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
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funding account for the Series [o] notes will be applied to make the principal
and interest payments on the Series [o] notes on the redemption date.
- ------------------------------------------------------------------------------
Deposit and Application of Funds
- ------------------------------------------------------------------------------
The servicer will deposit collections into the Collection Account at the
times and in the manner described in "Description of the Sale and Servicing
Agreement -- Allocation of Collections; Deposits in Collection Account." The
indenture trustee will then allocate those collections among each series of
notes as described in this prospectus supplement. The Series [o] share of
those collections is the only source of funds for payments on the Series [o]
notes.
As more fully described under this heading "Deposit and Application of
Funds," we will apply the interest collections allocable to Series [o] to pay
interest on the Series [o] notes, to pay the servicing fee and to cover
charge-offs from defaults on the receivables that are allocable to Series [o].
The Series [o] share of interest collections will be comprised of those
interest collections allocable to the nominal liquidation amount of the Series
[o] notes and the Series [o] overcollateralization amount. If the Series [o]
share of interest collections for any payment date is insufficient to make
these payments or to cover the Series [o] share of charge-offs, we will use
any excess available interest collections not required by other series of
notes to make up the shortfalls. If there remains any unpaid interest on the
Series [o] notes after the application of excess available interest
collections from other series of notes, we will then use the Series [o] share
of principal collections to do so. When it is time to pay principal to Series
[o] noteholders or to accumulate principal collections for that purpose, we
will use the Series [o] share of principal collections. The Series [o] share
of principal collections will be comprised of those principal collections
allocable to the nominal liquidation amount of the Series [o] notes and the
Series [o] overcollateralization amount. Under some circumstances, we may use
principal collections allocated to one or more other series of notes to the
extent that such amounts are not then needed by those series.
The preceding paragraph is a very simplified description of the primary
allocations and uses of collections in respect of the receivables. 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 collections. 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 more precisely
the amount that will be available to make a specified payment. The section
called "Glossary of Principal Terms for 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.
Application of Series [o] Available Amounts
Series Available Interest Amount
We describe how we will allocate the interest collections for each
collection period among each series of notes under "-- Allocation Percentages"
below. On each payment date, the amount of interest collections that has been
allocated to Series [o] will be supplemented by certain additional funds in
the following manner:
o any net investment earnings on funds in the principal funding
account will be withdrawn from the principal funding account and
added to the Series [o] share of interest collections;
o if the amount of interest at the Series [o] rate on funds in the
principal funding account exceeds the net investment earnings
described in the preceding bullet point, the amount of this excess
will be deducted
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from collections otherwise allocable to the seller and added to
the Series [o] share of interest collections; and
o any shared excess interest collections from other series will be
added to the Series [o] share of interest collections to the
extent described in "-- Shared Excess Available Interest Amounts"
below.
The Series [o] share of interest collections, together with the
additional funds described in the above three bullet points, are collectively
referred to as the "Series [o] Available Interest Amount." On each payment
date, the indenture trustee, at the direction of the administrator, will apply
the Series [o] Available Interest Amount for that payment date in the
following order:
o first, if DCS or any of its affiliates is not the servicer, the
indenture trustee will apply funds to pay the servicing fee;
o second, the indenture trustee will deposit into the interest
funding account (i) accrued and unpaid interest on the Series [o]
notes due on that 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 third, if DCS or any of its affiliates is the servicer, the
indenture trustee will apply funds to pay the servicing fee;
o fourth, if the Series [o] Available Interest Amount exceeds the
amounts payable in clauses first, second and third, then we will
add that excess to the Series [o] share of principal collections
for the related collection period 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 fifth, any Series [o] Available Interest Amount that remains after
giving effect to clauses first, second, third and fourth and
reimbursement of waived servicing fees, if any, will be treated as
part of the "Shared Excess Available Interest Amount" for that
payment date and will be applied to cover 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 issuer for
distribution to the seller.
The "Series [o] nominal liquidation amount deficit" is the sum of (i)
the nominal liquidation amount deficit of the Series [o] notes and (ii) the
Series [o] overcollateralization amount deficit. The "nominal liquidation
amount deficit of the Series [o] notes" is the amount, if any by which (x) the
outstanding dollar principal amount of the Series [o] notes less the amount
(other than investment earnings) in the principal funding account and the
Series [o] share of the amount (other than investment earnings) in the excess
funding account exceeds (y) the nominal liquidation amount of the Series [o]
notes. The "Series [o] overcollateralization amount deficit" is the amount, if
any, by which (a) the aggregate of reallocations and reductions of the Series
[o] overcollateralization amount to cover charge-offs and interest shortfalls
exceeds (b) the aggregate amount of reimbursements of such reallocations and
reductions.
The annual Servicing Fee Rate is 1.0%. The monthly servicing fee for all
series of notes in the aggregate is 1/12 of 1.0% of the aggregate series
nominal liquidation amounts of all of the notes of the outstanding series. A
portion of that monthly servicing fee will be allocated to each series of
notes pro rata on the basis of the series nominal liquidation amount of each
series. If the servicer, in its sole discretion, elects to waive any portion
of
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its servicing fee for a payment date, the servicer will receive such servicing
fee on a future payment date out of the amount, if any, available pursuant to
clause fifth above.
Series Available Principal Amount
We describe how we will allocate the principal collections for each
collection period among each series of notes under "-- Allocation Percentages"
below. On each payment date, the amount of principal collections that has been
allocated to Series [o] will be supplemented by certain additional funds in
the following manner:
o the amount of any Series [o] Available Interest Amount used to
cover the Series [o] share of any charge-offs on defaulted
receivables or to cover any Series [o] nominal liquidation amount
deficit (as described in clause fourth of the second paragraph
under "-- Series Available Interest Amount" above) will be added
to the Series [o] share of principal collections; and
o the amount of any Miscellaneous Payments allocated to Series [o]
will be added to the Series [o] share of principal collections;
The Series [o] share of principal collections, together with the
additional funds described in the above two bullet points, are collectively
referred to as the "Series [o] Available Principal Amount." On each payment
date, the indenture trustee, at the direction of the administrator, will apply
the Series [o] Available Principal Amount for that payment date in the
following order:
o first, if the Series [o] Available Interest Amount is not enough
to cover the full amount of interest owed on the Series [o] notes
on that payment date, the indenture trustee will deposit into the
interest funding account the amount of the shortfall in an amount
not to exceed the Series [o] nominal liquidation amount (after
taking into account any reductions due to charge-offs from
uncovered defaulted receivables);
o second, if Series [o] is in its Accumulation Period, the indenture
trustee will deposit the Controlled Deposit Amount, to the extent
of the amount of the Series [o] Available Principal Amount after
application pursuant to clause first of this paragraph, and will
treat any remaining Series [o] Available Principal Amount as part
of the "Shared Excess Available Principal Amount" for that payment
date to be used to satisfy the principal funding requirements of
other series of notes or to be reinvested in receivables;
o third, if Series [o] is in an Early Redemption Period, the
indenture trustee will deposit any remaining Series [o] Available
Principal Amount, to the extent of the Series [o] nominal
liquidation amount (after taking into account any reductions due
to charge-offs of uncovered defaulted receivables and any
application pursuant to clause first of this paragraph), into the
principal funding account for payment to the Series [o]
noteholders;
o fourth, if Series [o] is not in its Accumulation Period or an
Early Redemption Period, we will treat any remaining Series [o]
Available Principal Amount as part of the Shared Excess Available
Principal Amount for that payment date to be used as described in
clause second of this paragraph; 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 into the principal funding account,
we will treat any remaining Series [o] Available Principal Amount
as part of the Shared Excess Available Principal Amount for that
payment date to be used as described in clause second of this
paragraph. The amount in this clause fifth will represent the
Series [o] overcollateralization amount.
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The use of any Series [o] Available Principal Amount 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 Nominal Liquidation Amounts" below.
If the Series [o] noteholders cause the issuer to sell receivables as
described below 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 amount of the Series [o]
notes, and the Series [o] noteholders will not receive any further collections
on the receivables or other assets of the issuer.
Shared Excess Available Interest Amounts
The amount of any Series [o] Available Interest Amount that is not
needed to make payments or deposits for Series [o] on any payment date will be
available for allocation to other series of notes. Such excess will be treated
as part of the Shared Excess Available Interest Amount and will be used for
the benefit of other outstanding series to cover any required payments or
deposits in respect of those series that, before giving effect to the Shared
Excess Available Interest Amount, have not been covered by the respective
series available interest amounts for those other series. If these interest
shortfalls exceed the Shared Excess Available Interest Amount for any payment
date, the amount of the Shared Excess Available Interest Amount will be
allocated pro rata among the applicable series based on their respective
interest shortfalls. To the extent that the Shared Excess Available Interest
Amount for any payment date exceeds those interest shortfalls, the balance
will be paid to the issuer for application under the sale and servicing
agreement.
Shared Excess Available Principal Amounts
The amount of any Series [o] Available Principal Amount that is not
needed to make payments or deposits for Series [o] on any payment date will be
available for allocation to other series of notes. Such excess will be treated
as part of the Shared Excess Available Principal Amount and will be used for
the benefit of other outstanding series to cover any required payments or
deposits in respect of those series that, before giving effect to the Shared
Excess Available Principal Amount, have not been covered by the respective
series available principal amounts for those other series. If these principal
shortfalls exceed the Shared Excess Available Principal Amount for any payment
date, the amount of the Shared Excess Available Principal Amount will be
allocated pro rata among the applicable series based on their respective
principal shortfalls. Any reallocation of the Series [o] Available Principal
Amount for this purpose will not reduce the nominal liquidation amount of the
Series [o] notes. To the extent that the Shared Excess Available Principal
Amount for any payment date exceeds those principal shortfalls, the balance
will be paid to the issuer for application under the sale and servicing
agreement.
Reduction and Reinstatement of Nominal Liquidation Amounts
The calculation of a series nominal liquidation amount is described
under "The Notes -- Stated Principal Amount, Outstanding Dollar Principal
Amount and Nominal Liquidation Amount of Notes" in the prospectus. That
section contains a description of reductions and reinstatements of the series
nominal liquidation amount other than on account of principal payments or
deposits into the principal funding account.
The Series [o] nominal liquidation amount at the Series [o] Cut-Off Date
is the sum of:
o the $[o] initial nominal liquidation amount of the Series [o]
notes (which equals the initial outstanding dollar principal
amount of the Series [o] notes) plus
o the $[o] Series [o] overcollateralization amount at the initial
issuance of the Series [o] notes.
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The Series [o] nominal liquidation amount will be calculated on each
payment date. Generally, the Series [o] nominal liquidation amount for each
payment date will be an amount equal to the Series [o] nominal liquidation
amount as calculated on the prior determination date, decreased by certain
reductions since that date and increased by certain reinstatements since that
date. We describe these reductions and reinstatements below.
Reductions
The Series [o] nominal liquidation amount will be reduced on any payment
date by the following amounts allocated on that payment date:
o the amount of any Series [o] Available Principal Amount used to
pay interest on the Series [o] notes as described above under "--
Application of Series [o] Available Amounts -- Series Available
Principal Amount"; and
o 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 the portion of the Series [o]
Available Interest Amount that is applied to cover such
charge-offs as described above under "-- Application of Series [o]
Available Amounts -- Series Available Interest Amount."
In addition, the portion of the Series [o] nominal liquidation amount
constituting the nominal liquidation amount of the Series [o] notes will be
(i) reduced by (x) the amount of any funds (other than investment earnings)
deposited into the principal funding account since the prior date on which the
Series [o] nominal liquidation amount was calculated and (y) the amount (other
than investment earnings) deposited into the excess funding account since the
prior calculation date in connection with a reduction in principal receivables
that is allocable to Series [o] and (ii) increased by amounts (other than
investment earnings) that are withdrawn from the excess funding account since
such prior calculation date in connection with the purchase of additional
principal receivables and are allocable to Series [o]. Deposits into the
principal funding account will not reduce the portion of the Series [o]
nominal liquidation amount constituting the Series [o] overcollateralization
amount.
On each payment date, we will allocate the amount of any reduction in
the Series [o] nominal liquidation amount due to the above two bullet points
in the following order:
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 constituting the Primary Series [o]
overcollateralization amount. Initially, the Primary Series [o]
overcollateralization amount equals the Series [o] overcollateralization
percentage of the initial nominal liquidation amount of the Series [o] notes.
In general, if the Primary Series [o] overcollateralization amount on any
payment date (after giving effect to any reductions and reinstatements) is
reduced below the then-required level, an Early Redemption Event will occur.
This required level, referred to as the "Required Primary Series [o]
overcollateralization amount," will be calculated on each payment date to be
an amount equal to the product of the Series [o] overcollateralization
percentage and the nominal liquidation amount of the Series [o] notes on that
payment date, after giving effect to all allocations and distributions on that
date (but without giving effect to any reductions or reinstatements described
under this heading except for reductions due to deposits to the principal
funding account and reductions and increases related to deposits to and
withdrawals from the excess funding account).
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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 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 is thereafter reduced
by charge-offs or reallocations as described above and not reinstated as
described below.
Reinstatements
The Series [o] nominal liquidation amount will be reinstated on any
payment date by the amount of the Series [o] Available Interest Amounts that
we apply to cover the Series [o] nominal liquidation amount deficit pursuant
to clause fourth under "-- Application of Series [o] Available Amounts --
Series Available Interest Amount" above. We will allocate the amount of that
reinstatement on that payment date in the following order:
o first, if the nominal liquidation amount of the Series [o] notes
has been reduced by charge-offs or reallocations as described
above 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, any principal payments made to the
Series [o] noteholders and the Series [o] share of amounts (other
than investment earnings) in the excess funding account; 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.
We will apply any reinstatement allocated to the Series [o]
overcollateralization amount, as described in clause second above, to the
portion of the Series [o] overcollateralization amount constituting the
Primary Series [o] overcollateralization amount.
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 equal the sum of (i)
the Primary Series [o] overcollateralization amount and (ii) the incremental
overcollateralization amount. Each of these component amounts will vary from
time to time as described below.
The "Primary Series [o] overcollateralization amount" initially will
equal the Series [o] overcollateralization percentage of the initial nominal
liquidation amount of the Series [o] notes. Afterwards, the Primary Series [o]
overcollateralization amount will be calculated on each payment date to be the
product of (i) the Series [o] overcollateralization percentage times (ii) the
nominal liquidation amount of the Series [o] notes on that payment date (after
giving effect to all allocations, deposits and payments), which product will
be decreased by all reductions that have been allocated to the Series [o]
overcollateralization amount, as described above under "-- Reduction and
Reinstatement of Nominal Liquidation Amounts," and increased by all
reinstatements that have been allocated to the Series [o]
overcollateralization amount, as described under the same heading. However, if
an Early Redemption Period has commenced and the Revolving Period has not
recommenced, the nominal liquidation amount of the Series [o] notes referred
to in clause (ii) above will be the nominal liquidation amount of the Series
[o] notes at the commencement of that Early Redemption Period. A more detailed
definition of the Primary Series [o] overcollateralization amount is provided
in the "Glossary of Principal Terms for Prospectus Supplement" at the end of
this prospectus supplement.
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The "Series [o] overcollateralization percentage" is [o]%, except that
if the long-term unsecured debt of DaimlerChrysler AG is reduced below BBB- by
Standard & Poor's, then the Series [o] overcollateralization percentage will
be [o]% until that rating is increased to at least BBB-.
In general, if the Primary Series [o] overcollateralization amount on
any payment date (after giving effect to any reductions and reinstatements) is
reduced below the Required Primary Series [o] overcollateralization amount for
that payment date, an Early Redemption Event will occur. See "Series
Provisions -- Early Redemption Events" above.
The "incremental overcollateralization amount" on any determination date
will equal the product of:
o 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 the last day of the preceding collection period
times
o the excess, if any, of:
-- the sum of the Overconcentration Amount and the aggregate
amount of Ineligible Receivables on that determination date
over
-- the aggregate amount of Ineligible Receivables and
receivables in accounts containing Dealer
Overconcentrations, in each case that became Defaulted
Receivables during the preceding collection period and are
not subject to reassignment from the issuer, unless any
insolvency event relating to the seller or DCS has occurred,
as further described in the sale and servicing agreement.
The terms used in this definition are defined in the "Glossary of
Principal Terms for Prospectus" at the end of the prospectus.
As of the Series [o] Cut-Off Date, the Series [o] overcollateralization
amount was $[o].
The issuer may change the Series [o] overcollateralization amount,
including the component amounts comprising the Series [o]
overcollateralization amount, at any time without any notice to or consent of
any noteholder so long as
o the issuer receives confirmation from the rating agencies that the
change will not result in a reduction or withdrawal of the rating
of the Series [o] notes; and
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 franchise tax purposes (1) the change will not
adversely affect in any material respect the characterization of
the notes of any outstanding series, class or subclass as debt,
(2) the change will not cause a taxable event to holders of any
outstanding notes and (3) following the change, the issuer will
not be an association, or a publicly traded partnership, taxable
as a corporation.
Allocation Percentages
We will allocate to Series [o] collections on the receivables and
charge-offs on defaulted receivables for each collection period and the
Miscellaneous Payments for the related payment dates on the basis of various
percentages. Which percentage we use depends on the amount that we are
allocating and, in the case of principal collections, on whether the principal
collections are received in the Revolving Period, the Accumulation Period or
an Early Redemption Period.
S-31
We will make allocations among each series of notes (including Series
[o]) as follows:
o interest collections and charge-offs on defaulted receivables will
be allocated to each series of notes based on its series floating
allocation percentage;
o principal collections will be allocated to each series based on
its series principal allocation percentage; and
o Miscellaneous Payments will be allocated to each series of notes
based on its series miscellaneous allocation percentage.
The series floating allocation percentage effects, in general, a pro
rata allocation based on the series nominal liquidation amount of each series.
The series floating allocation percentage for Series [o], referred to as the
"Series [o] floating allocation percentage," for any collection period will be
the percentage equivalent, which shall never exceed 100%, of a fraction:
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the immediately preceding collection
period (or the Series [o] issuance date in the case of the first
collection period); and
o the denominator of which is the Pool Balance as of the last day of
the immediately preceding collection period (or the Series [o]
Cut-Off Date in the case of the first collection period).
The series principal allocation percentage is, in general, based on the
series nominal liquidation amount of each series, which will be fixed for any
series at the end of its revolving period. Consequently, even though we are
distributing or accumulating principal collections for the noteholders of a
series, the numerator used for the calculation for that series will not
decline. The series principal allocation percentage for Series [o], referred
to as the "Series [o] principal allocation percentage," for any collection
period will be the percentage equivalent, which shall never exceed 100%, of a
fraction:
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the immediately preceding collection
period (or the Series [o] issuance date in the case of the first
collection period) or, if the Accumulation Period or an Early
Redemption Period has commenced, as of the last day of the
collection period ending prior to the commencement of the
Accumulation Period or Early Redemption Period, as applicable; and
o the denominator of which is the Pool Balance as of the last day of
the immediately preceding collection period (or the Series [o]
Cut-Off Date in the case of the first collection period) or, if
the Accumulation Period or an Early Redemption Period has
commenced, as of the last day of the collection period ending
prior to the commencement of the Accumulation Period or Early
Redemption Period, as applicable.
This Series [o] principal allocation percentage will adjust if the
Series [o] notes or any other series of notes has entered into an early
redemption period since the prior collection period.
The series miscellaneous allocation for Series [o], referred to as the
"Series [o] miscellaneous allocation percentage," for any payment date will be
the percentage equivalent, which shall never exceed 100%, of a fraction:
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the immediately preceding collection
period; and
S-32
o the denominator of which is the Aggregate Series Nominal
Liquidation Amount as of that last day.
Required Participation Percentage
As described under "Description of the Sale and Servicing Agreement --
Addition of Accounts" in the prospectus, the seller will be required to add to
the issuer 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 Series [o] is [103]%. However, if either (a) the
aggregate amount of principal receivables due from either AutoNation, Inc. and
its affiliates or United Auto Group, Inc. and its affiliates on the close of
business on the last day of any collection period is greater than 4% of the
Pool Balance on that day or (b) the aggregate amount of principal receivables
due from any other dealer at such time is greater than 1.5% of the Pool
Balance on that day, then 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 indenture trustee and the rating agencies
and without any notice to or consent of any noteholder, 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 such 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.
Excess Funding Account
Unless and until an Early Redemption Event shall have occurred or the
Accumulation Period shall have commenced, the indenture trustee will keep the
Series [o] share of the excess funded amount in the excess funding account.
The indenture trustee will generally invest funds on deposit in the excess
funding account at the direction of the servicer in Permitted Investments.
Those investments must mature on or prior to the next payment date unless the
rating agencies confirm that a longer maturity will not result in the
downgrade or withdrawal of their ratings of the Series [o] notes.
We will pay funds on deposit in the excess funding account to the seller
or allocate them to one or more series of notes that are in amortization or
accumulation periods, but only to the extent of any increases in the Pool
Balance as a result of the addition of receivables to the issuer, certain
reductions in the Seller's Interest, or certain reductions in the nominal
liquidation amount of any other series of notes. We will deposit additional
amounts in the excess funding account on a payment date to the extent
described under "Description of the Sale and Servicing Agreement -- Excess
Funding Account Deposits and Withdrawals" in the prospectus.
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 part of the Series [o] Available Interest Amount.
At the end of the Revolving Period, 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 allocable to Series
[o] will be deposited in the excess funding account during any Early
Redemption Period.
Sale of Receivables
Receivables may be sold upon the insolvency of the seller, DCS or
DaimlerChrysler, an acceleration of the Series [o] notes after an event of
default and on the legal final of the Series [o] notes. If such an insolvency
occurs or the Series [o] notes are accelerated after an event of default, each
holder of Series [o] notes may notify the indenture trustee that it desires to
exercise the put feature that is part of its Series [o] notes. The "put
feature" will be deemed to be exercised only if at least one of the following
conditions is met:
S-33
o the holders of at least 90% of the outstanding dollar principal
amount of the Series [o] notes have notified the indenture trustee
that they desire to exercise the put feature in respect of their
Series [o] notes; or
o the holders of a majority of the outstanding dollar principal
amount of the Series [o] notes have notified the indenture trustee
that they desire to exercise the put feature in respect of their
Series [o] notes and the net proceeds of the sale of Receivables
pursuant to such exercise (as described below) plus amounts on
deposit in the principal funding account would be sufficient to
pay all amounts due on the Series [o] notes; or
o both:
-- the indenture trustee determines that the funds to be
allocated to the Series [o] notes, including (1) the Series
[o] Available Interest Amounts and Series [o] Available
Principal Amounts and (2) amounts on deposit in the
principal funding account, may not be sufficient on an
ongoing basis to make payments on the Series [o] notes as
such payments would have become due if such obligations had
not been declared due and payable and
-- holders of at least 66 2/3% of the outstanding dollar
principal amount of the Series [o] notes have notified the
indenture trustee that they desire to exercise the put
feature in respect of their Series [o] notes.
If the put feature is deemed to be exercised as provided in the
preceding sentence, it will be deemed to be exercised by all holders of the
Series [o] notes, whether or not they have actually given notice of their
desire to exercise the put feature. Upon such deemed exercise of the put
feature, the indenture trustee will cause the issuer to sell principal
receivables and the related non-principal receivables (or interests therein)
in the amount described below. The holders of the Series [o] notes will
maintain their rights in their Series [o] notes until such sale proceeds have
been applied to payment of the amounts due on the Series [o] notes and shall
deliver their Series [o] notes to the issuer as part of their exercise of the
put feature. We will pay any remaining amount to the seller.
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.
In the case of any such sale, the amount of receivables sold will be in
an amount not exceeding 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 interest
collections or principal collections 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 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 have received final payment as described in "-- Final Payment
of the Series [o] Notes" after a sale of receivables will be treated as
interest collections and be allocated and applied as described in "--
Application of Series [o] Available Amounts."
S-34
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, the Series [o] Available Principal Amount will be available 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 and reallocations of any portion of the
Series [o] Available Principal Amount 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 and has not been
reinstated to that amount as described in this prospectus supplement, Series
[o] noteholders will not receive full payment of the outstanding dollar
principal amount 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 is 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; and
o the date on which a sale of receivables in respect of Series [o]
has taken place, as described in "-- Sale of Receivables."
- ------------------------------------------------------------------------------
Underwriting
- ------------------------------------------------------------------------------
Subject to the terms and conditions set forth in the underwriting
agreement, the seller has agreed to sell to each of the underwriters named
below, and each underwriter has severally agreed to purchase, Series [o] notes
in the principal amount indicated opposite its name:
------------------------------------------------------------------------
Underwriters Principal Amount
of Series [o] notes
------------------------------------------------------------------------
[Underwriters]..................................... $ [o]
------------------------------------------------------------------------
Total..................................... $ [o]
------------------------------------------------------------------------
[In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions set forth in that agreement, to purchase all of the
Series [o] notes offered hereby if any of these notes are purchased.
S-35
The underwriters propose initially to offer the Series [o] notes to the
public at the public offering price shown on the cover page of this prospectus
supplement, and to securities dealers at that price less concessions not
greater than [o]% of the principal amount of the Series [o] notes. The
underwriters may allow, and the securities dealers may reallow to other
securities dealers, concessions not greater than [o]% of the principal amount
of the Series [o] notes. After the initial public offering, the public
offering price and other selling terms may be changed by the underwriters.]
[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 underwriters may be deemed to have received
compensation from the seller in the form of underwriting discount.]
In the ordinary course of its business, the underwriters and their
affiliates have engaged and may engage in investment banking transactions with
the seller and its affiliates.
The underwriters 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.
- ------------------------------------------------------------------------------
Legal Matters
- ------------------------------------------------------------------------------
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 underwriters 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 underwriters, Sidley Austin
Brown & Wood LLP from time to time represents DaimlerChrysler Services North
America LLC 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 the likelihood that 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 principal
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.
S-36
- ------------------------------------------------------------------------------
Glossary of Principal Terms for Prospectus Supplement
- ------------------------------------------------------------------------------
"Accumulation Period" means the period beginning on the Accumulation
Period Commencement Date and terminating on the earlier of:
o the payment date on which the outstanding dollar principal amount
of the Series [o] notes is reduced to zero; and
o the close of business on the day immediately preceding the day on
which an Early Redemption Period commences.
If an Early Redemption Period that is not terminated, as described under
"Series Provisions -- Early Redemption Events" in this prospectus supplement,
has commenced before the Accumulation Period Commencement Date, the Series [o]
notes will not have an Accumulation Period.
"Accumulation Period Commencement Date" means [o] or, if the issuer,
acting directly or through the administrator, elects to delay the start of the
Accumulation Period, a later date selected by the issuer. In selecting an
Accumulation Period Commencement Date, the issuer must satisfy the conditions
described under "Series Provisions -- Principal" in this prospectus
supplement.
"Accumulation Period Length" means the number of full collection periods
between the Accumulation Period Commencement Date and the Series [o] Expected
Principal Payment Date.
"administrator" means DCS acting as an administrative agent for the
issuer pursuant to an administration agreement with the issuer and the
indenture trustee.
"Calculation Agent" means, initially, the indenture trustee.
"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
outstanding dollar principal amount of the Series [o] notes as of the
Accumulation Period Commencement Date, divided by the Accumulation Period
Length.
"Controlled Deposit Amount" means, for a payment date, the excess of:
o the Controlled Accumulation Amount over
o any funds in the excess funding account that are allocable to
Series [o] and will be deposited into the principal funding
account on that payment date.
"DaimlerChrysler" means DaimlerChrysler Corporation and its successors.
"DCS" means DaimlerChrysler Services North America LLC and its
successors.
"DCWR" means DaimlerChrysler Wholesale Receivables LLC and its
successors.
S-37
"Early Redemption Events" are described under "Series Provisions --
Early Redemption Events" in this prospectus supplement.
"Early Redemption Period" means a period beginning on the day on which
an Early Redemption Event occurs and terminating on the earliest of:
o the payment date on which the outstanding dollar principal amount
of the Series [o] notes is reduced to zero;
o the legal final; and
o if this Early Redemption Period has commenced before the scheduled
termination of the Revolving Period, the day on which the
Revolving Period recommences under the limited circumstances
described under "Series Provisions -- Early Redemption Events" in
this prospectus supplement.
"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 issuer.
"Excluded Receivables" means principal receivables with respect to
Excluded Dealers.
"incremental overcollateralization amount" is described under "Deposit
and Application of Funds -- Series [o] Overcollateralization Amount" in this
prospectus supplement.
"interest funding account" means a Qualified Trust Account maintained 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.
"issuer" means DaimlerChrysler Master Owner Trust and its successors.
"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
four 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
S-38
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 during the Interest Period for that
payment date.
"Monthly Principal" means, for any payment date relating to the
Accumulation Period or any Early Redemption Period will equal the Series [o]
share of principal collections for the related collection period 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 in any event will not exceed the nominal
liquidation amount of the Series [o] notes.
"nominal liquidation amount of the Series [o] notes" means the
outstanding dollar principal amount of the Series [o] notes (which upon
initial 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" in this prospectus supplement, plus the increases in the nominal
liquidation amount of the Series [o] notes described under that heading.
"nominal liquidation amount deficit of the Series [o] notes" is
described under "Deposit and Application of Funds -- Application of Series [o]
Available Amounts -- Series Available Interest Amount" in this prospectus
supplement.
"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 on [o].
"Primary Series [o] overcollateralization amount" means, initially, the
Series [o] overcollateralization percentage of the initial nominal liquidation
amount of the Series [o] notes. Afterwards, the Primary Series [o]
overcollateralization amount will be calculated on each payment date to be an
amount equal to, without duplication:
o the product of (i) the Series [o] overcollateralization percentage
times (ii) the nominal liquidation amount of the Series [o] notes
on that payment date (after giving effect to all allocations,
deposits and payments); minus
o all reductions that have been allocated to the Series [o]
overcollateralization amount, as described under "Deposit and
Application of Funds -- Reduction and Reinstatement of Nominal
Liquidation Amounts," due to the use of Series [o] Available
Principal Amounts to pay interest on the Series [o] notes; minus
o all reductions resulting from uncovered charge-offs that have been
allocated to the Series [o] overcollateralization amount, as
described under the same heading; plus
S-39
o all reinstatements that have been allocated to the Series [o]
overcollateralization amount, as described under the same heading,
due to the application of Series [o] Available Interest Amounts to
cover the Series [o] nominal liquidation amount deficit.
However, if an Early Redemption Period has commenced and the Revolving
Period has not recommenced, the nominal liquidation amount of the Series [o]
notes referred to in clause (ii) of the first bullet point above will be the
nominal liquidation amount of the Series [o] notes at the commencement of that
Early Redemption Period.
"principal funding account" means a Qualified Trust Account maintained
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.
"put feature" is described under "Deposit and Application of Funds --
Sale of Receivables" in this prospectus supplement.
"Required Participation Percentage" means [103%]. However, if either (a)
the aggregate amount of principal receivables due from either AutoNation, Inc.
and its affiliates or United Auto Group, Inc. and its affiliates on the close
of business on the last day of any collection period is greater than 4% of the
Pool Balance on that day or (b) if the aggregate amount of principal
receivables due from any other dealer at such time is greater than 1.5% of the
Pool Balance on that 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 indenture trustee and the rating
agencies and without any notice to or consent of any noteholder, 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 such
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.
"Required Primary Series [o] overcollateralization amount" means, for
any payment date, the product of the Series [o] overcollateralization
percentage and the nominal liquidation amount of the Series [o] notes on that
payment date, after giving effect to all allocations and distributions on that
date (but without giving effect to any reductions or reinstatements described
under "Deposit and Application of Funds -- Reduction and Reinstatement of
Nominal Liquidation Amounts," except for reductions due to deposits to the
principal funding account and reductions and increases related to deposits to
and withdrawals from the excess funding account).
"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
Accumulation Period Commencement Date; and
o the close of business on the day immediately preceding the day on
which an Early Redemption Period commences.
The Revolving Period, however, may recommence upon the termination of an
Early Redemption Period as described under "Series Provisions -- Early
Redemption Events" in this prospectus supplement.
"seller" means DCWR.
S-40
"Series [o] Available Interest Amount" is described under "Deposit and
Application of Funds -- Application of Series [o] Available Amounts -- Series
Available Interest Amount" in this prospectus supplement.
"Series [o] Available Principal Amount" is described under "Deposit and
Application of Funds -- Application of Series [o] Available Amounts -- Series
Available Principal Amount" in this prospectus supplement.
"Series [o] Cut-Off Date" means [o].
"Series [o] Expected Principal Payment Date" means the [o] payment date.
"Series [o] floating allocation percentage" means, for any collection
period, the percentage equivalent, which shall never exceed 100%, of a
fraction:
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the immediately preceding collection
period (or the Series [o] issuance date in the case of the first
collection period); and
o the denominator of which is the Pool Balance as of the last day of
the immediately preceding collection period (or the Series [o]
Cut-Off Date in the case of the first collection period).
"Series [o] issuance date" means the date on which the Series [o] notes
are initially issued.
"Series [o] miscellaneous allocation percentage" means, for any payment
date, the percentage equivalent, which shall never exceed 100%, of a fraction:
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the immediately preceding collection
period; and
o the denominator of which is the Aggregate Series Nominal
Liquidation Amount as of that last day.
"Series [o] nominal liquidation amount" means the sum of:
o the nominal liquidation amount of the Series [o] notes; plus
o the Series [o] overcollateralization amount.
"Series [o] nominal liquidation amount deficit" is described under
"Deposit and Application of Funds -- Application of Series [o] Available
Amounts -- Series Available Interest Amount" in this prospectus supplement.
"Series [o] notes" means the issuer's Floating Rate Auto Dealer Loan
Asset Backed Notes, Series [o].
"Series [o] overcollateralization amount" is described under "Deposit
and Application of Funds -- Series [o] Overcollateralization Amount" in this
prospectus supplement.
"Series [o] overcollateralization amount deficit" is described under
"Deposit and Application of Funds -- Application of Series [o] Available
Amounts -- Series Available Interest Amount" in this prospectus supplement.
S-41
"Series [o] overcollateralization percentage" means [9.89]%, except
that, if the long-term unsecured debt of DaimlerChrysler AG is reduced below
BBB-- by Standard & Poor's, the Series [o] overcollateralization percentage
will be [11.11]% until that rating is increased to at least BBB--.
"Series [o] principal allocation percentage" means, for any collection
period, the percentage equivalent, which shall never exceed 100%, of a
fraction:
o the numerator of which is the Series [o] nominal liquidation
amount as of the last day of the immediately preceding collection
period (or the Series [o] issuance date in the case of the first
collection period) or, if the Accumulation Period or an Early
Redemption Period has commenced, as of the last day of the
collection period ending prior to the commencement of the
Accumulation Period or Early Redemption Period, as applicable; and
o the denominator of which is the Pool Balance as of the last day of
the immediately preceding collection period (or the Series [o]
Cut-Off Date in the case of the first collection period) or, if
the Accumulation Period or an Early Redemption Period has
commenced, as of the last day of the collection period ending
prior to the commencement of the Accumulation Period or Early
Redemption Period, as applicable.
This Series [o] principal allocation percentage will adjust if the
Series [o] notes or any other series of notes has entered into an early
redemption period since the prior collection period.
"Series [o] rate" means the per annum rate equal to the applicable LIBOR
plus [o]%.
"Shared Excess Available Interest Amount" means, for any payment date,
the sum of, for each series of notes, the series available interest amount for
that series that are not required to be applied in respect of that series
pursuant to the indenture supplement for that series.
"Shared Excess Available Principal Amount" means, for any payment date,
the sum of, for each series of notes, the series available principal amount
for that series that are not required to be applied in respect of that series
pursuant to the indenture supplement for that series.
"Telerate Page 3750" means the display page so designated as reported by
Bloomberg Financial Markets Commodities News 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 for U.S. dollar deposits.
"underwriter" means any of [o].
"underwriting agreement" means the underwriting agreement among the
underwriters, DCWR and DCS dated [o].
S-42
Annex I
- ------------------------------------------------------------------------------
Other Series of Notes
- ------------------------------------------------------------------------------
This Annex I sets forth the principal characteristics of the [five]
series of Floating Rate Auto Dealer Loan Asset Backed Notes previously issued
by the issuer. For more specific information with respect to any of these
series of notes, prospective investors should contact DCWR at (248) 427-2565.
DCWR will provide, without charge, to prospective investors, a copy of the
disclosure document with respect to the series.
1. Series 2002-A notes
o Series issuance date........................ June 11, 2002
o Stated Principal Amount of
Series 2002-A notes......................... $2,000,000,000
o Initial nominal liquidation
amount of Series 2002-A notes............... $2,000,000,000
o Initial Series 2002-A
overcollateralization amount................ $197,802,198
o Initial Series 2002-A nominal
liquidation amount.......................... $2,197,802,198
o Scheduled interest payment dates............ 15th day of each month (or if that 15th day is not a
business day, the next following business day)
o Required participation percentage........... 103%, subject to increase or decrease
o Series 2002-A
overcollateralization percentage............ 9.89% (or, so long as the long-term unsecured debt of
DaimlerChrysler AG is below BBB-- by Standard & Poor's, 11.11%)
o Current outstanding dollar
principal amount............................ $2,000,000,000
o Revolving period............................ May 31, 2002 to the commencement of the earlier of the
related accumulation period or an early redemption period
o Expected principal payment date............. May 2005 payment date
o Legal final................................. May 2007 payment date
2. Series 2002-B notes
o Series issuance date........................ November 26, 2002
o Stated Principal Amount of
Series 2002-B notes......................... $1,000,000,000
o Initial nominal liquidation
amount of Series 2002-B notes............... $1,000,000,000
A-1
o Initial Series 2002-B
overcollateralization amount................ $98,901,099
o Initial Series 2002-B nominal
liquidation amount.......................... $1,098,901,099
o Scheduled interest payment dates............ 15th day of each month (or if that 15th day is not a
business day, the next following business day)
o Required participation percentage........... 103%, subject to increase or decrease
o Series 2002-B
overcollateralization percentage............ 9.89% (or, so long as the long-term unsecured debt of
DaimlerChrysler AG is rated below BBB- by Standard &
Poor's, 11.11%)
o Current outstanding dollar
principal amount............................ $1,000,000,000
o Revolving period............................ October 31, 2002 to the commencement of the earlier of
the related accumulation period or an early redemption
period
o Expected principal payment date............. November 2005 payment date
o Legal final................................. November 2007 payment date
3. Series 2003-A notes
o Series issuance date........................ March 3, 2003
o Stated Principal Amount of
Series 2003-A notes......................... $1,500,000,000
o Initial nominal liquidation
amount of Series 2003-A notes............... $1,500,000,000
o Initial Series 2003-A
overcollateralization amount................ $148,351,648
o Initial Series 2003-A nominal
liquidation amount.......................... $1,648,351,648
o Scheduled interest payment dates............ 15th day of each month (or if that 15th day is not a
business day, the next following business day)
o Required participation percentage........... 103%, subject to increase or decrease
o Series 2003-A
overcollateralization percentage............ 9.89% (or, so long as the long-term unsecured debt of
DaimlerChrysler AG is rated below BBB- by Standard &
Poor's, 11.11%)
o Current outstanding dollar
principal amount............................ $1,500,000,000
o Revolving period............................ February 28, 2003 to the commencement of the earlier of
the related accumulation period or an early redemption
period
A-2
o Expected principal payment date............. February 2006 payment date
o Legal final................................. February 2008 payment date
4. Series 2004-A notes
o Series issuance date........................ January 16, 2004
o Stated Principal Amount of
Series 2004-A notes......................... $1,000,000,000
o Initial nominal liquidation
amount of Series 2004-A notes............... $1,000,000,000
o Initial Series 2004-A
overcollateralization amount................ $98,901,099
o Initial Series 2004-A nominal
liquidation amount.......................... $1,098,901,099
o Scheduled interest payment dates............ 15th day of each month (or if that 15th day is not a
business day, the next following business day)
o Required participation percentage........... 103%, subject to increase or decrease
o Series 2004-A
overcollateralization percentage............ 9.89% (or, so long as the long-term unsecured debt of
DaimlerChrysler AG is rated below BBB- by Standard &
Poor's, 11.11%)
o Current outstanding dollar
principal amount............................ $1,000,000,000
o Revolving period............................ December 31, 2003 to the commencement of the earlier of
the related accumulation period or an early redemption
period
o Expected principal payment date............. January 2007 payment date
o Legal final................................. January 2009 payment date
5. Series 2004-B notes
o Series issuance date........................ August 31, 2004
o Stated Principal Amount of
Series 2004-B notes......................... $1,000,000,000
o Initial nominal liquidation
amount of Series 2004-B notes............... $1,000,000,000
o Initial Series 2004-B
overcollateralization amount................ $98,901,099
o Initial Series 2004-B nominal
liquidation amount.......................... $1,098,901,099
o Scheduled interest payment dates............ 15th day of each month (or if that 15th day is not a
business day, the next following business day)
A-3
o Required participation percentage........... 103%, subject to increase or decrease
o Series 2004-B
overcollateralization percentage............ 9.89% (or, so long as the long-term unsecured debt of
DaimlerChrysler AG is rated below BBB- by Standard &
Poor's, 11.11%)
o Current outstanding dollar
principal amount............................ $1,000,000,000
o Revolving period............................ July 31, 2004 to the commencement of the earlier of the
related accumulation period or an early redemption period
o Expected principal payment date............. August 2007 payment date
o Legal final................................. August 2009 payment date
A-4
PROSPECTUS
DAIMLERCHRYSLER
DAIMLERCHRYSLER MASTER OWNER TRUST
Issuer
Auto Dealer Loan Asset Backed Notes
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC,
Seller
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC,
Servicer
The issuer--
o may periodically issue asset backed notes in one or more series with one
or more classes; and
o will own
-- receivables arising from a portfolio of automobile dealer revolving
floorplan financing agreements;
-- collections on those receivables; and
-- other property, if any, 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 an investment grade rating category 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 or cash flow
enhancement.
BEFORE YOU DECIDE TO INVEST IN ANY OF THE NOTES, PLEASE READ THIS PROSPECTUS
AND THE RELATED PROSPECTUS SUPPLEMENT. THERE ARE MATERIAL RISKS IN THE NOTES.
PLEASE READ THE RISK FACTORS BEGINNING ON PAGE [9] OF THIS PROSPECTUS. The
notes will be obligations of the issuer only and neither the notes nor the
assets of the issuer will represent interest in or obligations of
DaimlerChrysler Wholesale Receivables LLC, DaimlerChrysler AG, DaimlerChrysler
Corporation, DaimlerChrysler Services North America LLC, any of their
affiliates or any other person.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE ATTACHED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is [o].
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 "SEC") 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),
o the SEC's public reference facilities at 233 Broadway, New York, New
York 10279 and
o the SEC's regional office at 175 West Jackson Boulevard, Suite 900,
Chicago, Illinois 60604.
Also, the SEC 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 SEC allows information filed with it to be incorporated by reference
into this prospectus. The following documents filed with the SEC by the
servicer, on behalf of the issuer, are incorporated in this prospectus by
reference: (i) the issuer's Annual Report on Form 10-K for the years ended
December 31, 2002 and December 31, 2003 and (ii) all reports and other
documents filed by, or on behalf of, the issuer, in accordance with Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this prospectus and prior to the termination of the
offering of the notes.
2
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, DaimlerChrysler
Services North America LLC, 27777 Inkster Road, Farmington Hills,
Michigan 48334 (telephone: 248-427-2565)
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 SEC in
Washington D.C., referred to previously.
3
- ---------------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
- ---------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------- -----------------------------------------------------------
Section Page Section Page
------- ---- ------- ----
- ----------------------------------------------------------- -----------------------------------------------------------
Summary 6 o "Dealer Trouble Status" and DCS's Write-Off 22
- ----------------------------------------------------------- Policy
Risk Factors 9 -----------------------------------------------------------
- ----------------------------------------------------------- o Additional Information 22
o Your ability to resell notes is limited 9 -----------------------------------------------------------
- ----------------------------------------------------------- The Accounts 22
o Risk factors relating to the receivables 9 -----------------------------------------------------------
- ----------------------------------------------------------- DaimlerChrysler Services North America LLC 23
o Credit enhancement for a series of notes is -----------------------------------------------------------
limited. If the credit enhancement is The Notes 24
exhausted, you may incur a loss 11 -----------------------------------------------------------
- ----------------------------------------------------------- o Interest 25
o Credit ratings of the notes reflect the rating -----------------------------------------------------------
agency's assessment of the likelihood that you o Principal 26
will receive your payments of interest and -----------------------------------------------------------
principal 12 o Stated Principal Amount, Outstanding Dollar
- ----------------------------------------------------------- Principal Amount and Nominal Liquidation
o Book-entry registration may limit your Amount of Notes 26
ability to resell or pledge your notes 12 -----------------------------------------------------------
- ----------------------------------------------------------- o Subordination of Principal 29
o Only some of the assets of the issuer are -----------------------------------------------------------
available for payments on any series or class o Other Enhancements 30
of notes 12 -----------------------------------------------------------
- ----------------------------------------------------------- o Limitations on Overcollateralization and
o Allocations of charged-off receivables and Other Enhancements 31
reallocations of principal collections could -----------------------------------------------------------
reduce payments to you 12 o Allocation of Interest Collections 31
- ----------------------------------------------------------- -----------------------------------------------------------
o You may receive principal payments earlier o Allocation of Principal Collections 32
or later than the expected principal payment -----------------------------------------------------------
date 13 o Trust Accounts of the Issuer 32
- ----------------------------------------------------------- -----------------------------------------------------------
o Class B notes and Class C notes bear losses o Sale of Receivables 33
before Class A notes bear any losses 13 -----------------------------------------------------------
- ----------------------------------------------------------- o Limited Recourse to the Issuer; Security
o Payment of Class B notes and Class C notes for the Notes 33
may be delayed due to the subordination -----------------------------------------------------------
provisions 13 o Redemption and Early Redemption of Notes 34
- ----------------------------------------------------------- -----------------------------------------------------------
o You may not be able to reinvest any early o Issuances of New Series, Classes and
redemption proceeds in a comparable security 13 Subclasses of Notes 34
- ----------------------------------------------------------- -----------------------------------------------------------
o Issuance of additional notes may affect the o Payments on Notes; Paying Agent 35
timing and amount of payments to you 14 -----------------------------------------------------------
- ----------------------------------------------------------- o Book-Entry Notes 36
o You may have limited control of actions -----------------------------------------------------------
under the indenture and the sale and servicing The Indenture 41
agreement 14 -----------------------------------------------------------
- ----------------------------------------------------------- o Indenture Trustee 41
o Your remedies upon default may be limited 14 -----------------------------------------------------------
- ----------------------------------------------------------- o Issuer Covenants 41
DaimlerChrysler Wholesale Receivables LLC 15 -----------------------------------------------------------
- ----------------------------------------------------------- o Events of Default 42
The Issuer 16 -----------------------------------------------------------
- ----------------------------------------------------------- o Events of Default Remedies 43
Use of Proceeds 17 -----------------------------------------------------------
- ----------------------------------------------------------- o Early Redemption Events 44
The Dealer Floorplan Financing Business 17 -----------------------------------------------------------
- ----------------------------------------------------------- o Meetings 45
o General 17 -----------------------------------------------------------
- ----------------------------------------------------------- o Voting 45
o Creation of Receivables 18 -----------------------------------------------------------
- ----------------------------------------------------------- o Amendments to the Indenture and Indenture
o Credit Underwriting Process 19 Supplements 45
- ----------------------------------------------------------- -----------------------------------------------------------
o Billing, Collection Procedures and Payment o Tax Opinions for Amendments 48
Terms 20 -----------------------------------------------------------
- ----------------------------------------------------------- o Addresses for Notices 48
o Revenue Experience 20 -----------------------------------------------------------
- ----------------------------------------------------------- o Issuer's Annual Compliance Statement 48
o Relationship with DaimlerChrysler 20 -----------------------------------------------------------
- ----------------------------------------------------------- o Indenture Trustee's Annual Report 48
o Dealer Monitoring 21 -----------------------------------------------------------
- ----------------------------------------------------------- o List of Noteholders 48
-----------------------------------------------------------
o Reports 49
-----------------------------------------------------------
4
- ----------------------------------------------------------- -----------------------------------------------------------
Section Page Section Page
------- ---- ------- ----
- ----------------------------------------------------------- -----------------------------------------------------------
Description of the Sale and Servicing Agreement 49 Description of the Receivables Purchase 69
- ----------------------------------------------------------- Agreement
o Conveyance of Receivables and Collateral -----------------------------------------------------------
Security 49 o Sale or Transfer of Receivables 69
- ----------------------------------------------------------- -----------------------------------------------------------
o Representations and Warranties 50 o Representations and Warranties 70
- ----------------------------------------------------------- -----------------------------------------------------------
o Eligible Accounts and Eligible Receivables 52 o Covenants 71
- ----------------------------------------------------------- -----------------------------------------------------------
o Ineligible Receivables and the o Termination 71
Overconcentration Amount 54 -----------------------------------------------------------
- ----------------------------------------------------------- Legal Aspects of the Receivables 71
o Addition of Accounts 54 -----------------------------------------------------------
- ----------------------------------------------------------- o Transfer of Receivables 71
o Removal of Accounts 56 -----------------------------------------------------------
- ----------------------------------------------------------- o Matters Relating to Bankruptcy 72
o Seller's Interest 59 -----------------------------------------------------------
- ----------------------------------------------------------- Tax Matters 74
o Miscellaneous Payments 60 -----------------------------------------------------------
- ----------------------------------------------------------- o Federal Income Tax Consequences 74
o Excess Funding Account Deposits and -----------------------------------------------------------
Withdrawals 61 o State and Local Tax Consequences 80
- ----------------------------------------------------------- -----------------------------------------------------------
o Allocation of Collections; Deposits in ERISA Considerations 80
Collection Account 61 -----------------------------------------------------------
- ----------------------------------------------------------- o General 80
o Defaulted Receivables and Recoveries 63 -----------------------------------------------------------
- ----------------------------------------------------------- Experts 82
o Termination 64 -----------------------------------------------------------
- ----------------------------------------------------------- Plan of Distribution 82
o Indemnification 64 -----------------------------------------------------------
- ----------------------------------------------------------- Legal Matters 84
o Collection and Other Servicing Procedures 64 -----------------------------------------------------------
- ----------------------------------------------------------- Glossary of Principal Terms for Prospectus 85
o Servicer Covenants 65 -----------------------------------------------------------
- ----------------------------------------------------------- Annex A: Global Clearance, Settlement and Tax A-1
o Servicing Compensation and Payment of Documentation Procedures
Expenses 66 -----------------------------------------------------------
- -----------------------------------------------------------
o Matters Regarding the Servicer 66
- -----------------------------------------------------------
o Service Default 67
- -----------------------------------------------------------
o Reports 67
- -----------------------------------------------------------
o Evidence as to Compliance 68
- -----------------------------------------------------------
o Amendments 68
- -----------------------------------------------------------
5
- ------------------------------------------------------------------------------
Summary
- ------------------------------------------------------------------------------
The following summary describes 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
(the "issuer")
---------------- ------------------------------------------
Seller o DaimlerChrysler Wholesale
Receivables LLC ("DCWR"), an
indirectly owned subsidiary of
DaimlerChrysler Services North
America LLC ("DCS")
---------------- ------------------------------------------
Servicer o DCS, a wholly owned subsidiary of
DaimlerChrysler Corporation
("DaimlerChrysler"), the successor
to Chrysler Corporation
---------------- ------------------------------------------
Indenture o The Bank of New York
Trustee
---------------- ------------------------------------------
Owner Trustee o Chase Manhattan Bank USA, National
Association
---------------- ------------------------------------------
---------------- ------------------------------------------
Title of Securities
Auto Dealer Loan Asset Backed Notes (the "notes").
The Issuer
The issuer is governed by a trust agreement between DCWR and the owner
trustee. The primary assets of the issuer include:
o receivables generated under the accounts from time to time as well as
receivables generated under any accounts added to the issuer from time
to time, in each case exclusive of any accounts that become removed
accounts;
o all funds collected or to be collected in respect of the receivables;
o all funds on deposit in the trust accounts of the issuer;
o any other credit or cash flow enhancement provided with respect to any
particular series or class; and
o a security interest in motor vehicles and, in many cases, in
non-vehicle collateral, such as parts inventory, equipment, fixtures,
service accounts, chattel paper, instruments, franchise rights and, in
some cases, realty and/or a personal guarantee securing the
receivables.
The Accounts
The accounts under which the receivables have been or will be generated
are revolving credit agreements entered into with DCS, 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 issuer. See "The Accounts," "Description of the
Sale and Servicing Agreement -- Eligible Accounts and Eligible Receivables,"
"-- Addition of Accounts" and " -- Removal of Accounts."
The Receivables
The receivables consist of advances made by DCS to domestic motor vehicle
dealers to purchase
6
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 "-- Billing, Collection Procedures 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. In the unlikely event that the issuer issues notes in
definitive form, the record date will be a date at least 15 days prior to the
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 collections on the receivables; and
o any available credit or cash flow 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 collections on the receivables
allocable to that series;
o all or a portion of the interest collections on the receivables
allocable to that series remaining after the issuer has made interest
payments on that series; and
o any available credit or cash flow 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.
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 principal 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 collections allocated to
that series to the repayment of the outstanding principal of notes in
7
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;
Other 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 "Other
Enhancements."
Tax Matters
In the opinion of Sidley Austin Brown & Wood LLP, special U.S. federal
income tax counsel for the seller and the issuer,
o the notes of each series will be 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.
By your acceptance of a note, you will agree to treat your note 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.
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 principal
payment date.
Risk Factors
An investment in any series of notes involves material risks. See "Risk
Factors" in this prospectus and in the accompanying prospectus supplement.
8
- ------------------------------------------------------------------------------
Risk Factors
- ------------------------------------------------------------------------------
In this section and in the related prospectus supplement under the
heading "Risk Factors," we discuss the principal risk factors for 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 receivables.
The primary assets of the issuer are the receivables. Consequently, the
factors that affect the collectibility of the receivables 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 issuer. 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 issuer's
interest. See "Legal Aspects of the Receivables -- Transfer of Receivables."
DCS and the seller have and will treat the transfer of receivables to the
issuer described in this prospectus as a sale of the receivables to the seller
and then to the issuer. However, DCS 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 issuer should be recharacterized as a pledge of the receivables to
secure a borrowing of the debtor. In that case, the issuer 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
DCS arising before any receivables come into existence may have priority over
the seller's interest in the receivables. Notwithstanding the treatment by DCS
and the seller of their transfers of receivables as a legal sale, accounting
principles that are expected to apply to DCS and/or the seller at some point
in the future may require these transfers of receivables to be treated as
financings for accounting purposes. See "Legal Aspects of the Receivables --
Matters Relating to Bankruptcy."
At the time a vehicle is sold, DCS's security interest in the vehicle
will terminate. Therefore, if a dealer fails to remit to DCS amounts owed with
respect to vehicles that have been sold, the related receivables will no
longer be secured by vehicles.
9
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 accumulation 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 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 issuer to make payments on the notes depends
in part on the ability of DaimlerChrysler and DCS to generate
receivables and the ability of DCS to perform its obligations
under the sale and servicing agreement.
Neither DCS nor DaimlerChrysler is obligated to make any payments in
respect of the receivables or any notes. However, the issuer depends
completely upon DCS to generate new receivables. The ability of DCS 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 DCS will continue to
generate receivables at the same rate as receivables were generated in prior
years. If the amount of principal receivables held by the issuer falls below
the amount required under the sale and servicing agreement in order to
collateralize the notes, excess principal collections that would have been
released to the seller will instead be accumulated in a trust account called
the excess funding account. Funds in the excess funding account will be
invested in short-term, highly liquid permitted investments that will earn
interest at lower rates than the receivables, resulting in a reduction in the
interest collections available to the issuer. While the credit enhancement for
your series may be used to offset these reductions in interest collections, if
the rates at which new receivables are generated do not subsequently increase,
the credit enhancement for your series may be
10
exhausted. In this case, an early redemption event or an event of default
could occur. See "Description of the Sale and Servicing Agreement -- Excess
Funding Account Deposits and Withdrawals."
DCS services the receivables under the sale and servicing agreement. If
DCS 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. DCS also makes representations and
warranties with respect to the characteristics of the receivables. In some
cases, DCS would be required to repurchase those receivables affected by a
breach of these representations and warranties. If DCS fails to make a
required repurchase, the issuer may have less funds available for payments on
the notes. In addition, subject to limitations, DCS 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 dealer 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."
Credit enhancement for a series of notes is limited.
If the credit enhancement is exhausted, you may incur a loss.
We may provide credit enhancement of each series of notes by creating an
overcollateralization amount to the extent described in the related prospectus
supplement. The amount of credit enhancement, if any, in any form will be
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 "The Notes -- Subordination of Principal,"
"-- Other Enhancements" and "-- Limitations on Overcollateralization and Other
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, the
overcollateralization amount and the availability of any other
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
11
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 and their respective participating organizations. Such
book-entry registration may limit your ability to resell or pledge your
securities. See "The Notes" and "-- Book-Entry Notes."
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 on the receivables 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 or class of notes; and
o payments received under any applicable credit or cash flow enhancement
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 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.
A further restriction applies if the holders of a series or class of
notes direct the issuer to sell receivables following an insolvency of the
seller, DCS or DaimlerChrysler, an event of default and acceleration or on the
applicable legal maturity date, as described in "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 and
reallocations of principal collections could reduce payments to you.
The servicer will charge off the receivables arising in the accounts in
the issuer's portfolio if the receivables become uncollectible. Each series of
notes will be allocated a portion of these charged-off receivables. If the
amount of charged-off receivables allocated to your series of notes exceeds
the amount of funds available for reimbursement of those charge-offs, the
nominal liquidation amount of your notes may be reduced. The nominal
liquidation amount of your notes may also be reduced as the result of
reallocations of principal collections to pay interest on the notes of your
series. If any of these reductions to the nominal liquidation amount of your
notes are not reimbursed from excess interest collections, you will not
receive full repayment of your notes. See "The Notes -- Stated Principal
Amount, Outstanding Dollar Principal Amount and Nominal Liquidation Amount of
Notes."
12
You may receive principal payments
earlier or later than the expected principal payment date.
We cannot assure that you will receive the principal amount of your
notes by their expected principal payment date. An early redemption event is
an event that indicates that we may not be able to make payments on your notes
as we had intended. See "The Indenture -- Early Redemption 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 principal 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 bear any losses.
A series may include Class B notes and/or 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 will be 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 are allocated first to the subordinated classes of a series. See
"The Notes -- Stated Principal Amount, Outstanding Dollar Principal Amount and
Nominal Liquidation Amount of Notes -- Nominal Liquidation Amount of Notes"
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 after a default by the servicer,
the net proceeds of the sale allocable to principal 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."
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.
13
Issuance of additional notes may affect
the timing and amount of payments to you.
The issuer expects to issue additional series of 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 sale and servicing
agreement."
You may have limited control of actions
under the indenture and the sale 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 to the indenture. 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 and may be expected to act
solely in their interest. 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 the related series or that 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 of that series. 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 of that series until the earlier of the date those notes are no longer
necessary to provide subordination protection for those senior classes of
notes or until the legal maturity date of those notes.
Any funds in the applicable principal funding account for a series 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 insolvency of the seller, DCS or DaimlerChrysler, an event
of default and acceleration, and on the applicable legal final maturity date,
holders of notes will have the ability to cause a sale of receivables, or a
sale of interests in receivables, only under the limited circumstances as
described in "The Indenture -- Events of Default Remedies" and "The 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.
14
You can find a "Glossary of Principal Terms for Prospectus" beginning on
page [85] in this prospectus.
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DaimlerChrysler Wholesale Receivables LLC
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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 the
predecessor of DCS, for the limited purpose of purchasing wholesale, retail
and other receivables from DCS and transferring the receivables to third
parties or issuing indebtedness secured by receivables to third parties. Until
around [ ], 2004 DCWR purchased receivables from DCS and sold them pursuant to
a pooling and servicing agreement to a trust governed by that pooling and
servicing agreement. We refer to that trust as the "CARCO receivables trust."
DCWR was the successor by transfer to two other affiliates of DCS that used to
purchase receivables from DCS and sell them to the CARCO receivables trust.
Prior to the issuance of the series [ ] notes, the issuer owned an
investor certificate issued by the CARCO receivables trust. That investor
certificate represented a fractional undivided interest in the receivables
owned by the CARCO receivables trust and the collections thereon. The issuer
used the distributions on that investor certificate to make payment on its
notes. Each series of notes was only entitled to its proportionate share of
available distributions on the investor certificate. DCWR owned the remaining
interest in the CARCO receivables trust. On or prior to the issuance of the
series [ ] notes, the issuer will transfer the investor certificate to the
CARCO receivables trust in exchange for all of the receivables owned by the
CARCO receivables trust. The CARCO receivables trust will be dissolved at that
time. The issuer will then use the amounts collected in respect of the
receivables to make payments on the notes as described in this prospectus and
the related prospectus supplements. DCWR will own the Seller's Interest in the
issuer and will sell receivables to the issuer pursuant to the sale and
servicing agreement. DCS will service the receivables pursuant to the sale and
servicing agreement.
Obligations transferred to and assumed by DCWR include each of its
predecessors' obligations with respect to the subordinated notes held by DCS,
the proceeds of which were used to fund a portion of the purchase price of
receivables arising in the Accounts. DCS 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 DCS 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
DCS. These steps include the creation of the seller as a separate,
limited-purpose, indirect 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 consent of the two independent
directors of one of its members. 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 DCS
in a proceeding under any Insolvency Law. See "Risk Factors -- Risk factors
relating to the receivables -- 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, DCS or their affiliates can be asserted against the
seller. To the extent that any of those liabilities arise after the transfer
of receivables to the issuer, the issuer's interest in the receivables would
be prior to the interest of the claimant with respect to the liabilities.
However, 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
15
relating to the receivables -- 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 receivables -- The ability of the issuer
to make payments on the notes depends in part on the ability of
DaimlerChrysler and DCS to generate receivables and the ability of DCS to
perform its obligations under the sale and servicing agreement" and "Legal
Aspects of the Receivables -- Matters Relating to Bankruptcy."
DCWR's executive offices are located at 27777 Inkster Road, Farmington
Hills, Michigan 48334, and its telephone number is (248) 427-2625.
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The Issuer
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DaimlerChrysler Master Owner Trust will be the issuer of the notes. It
is a Delaware statutory trust.
The issuer exists for the exclusive purposes of:
o acquiring and holding the receivables 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 between DCWR and
Chase Manhattan Bank USA, National Association, as owner trustee. The issuer
does not have any officers or directors. Its administrator is DCS. As
administrator of the issuer under an administration agreement, DCS will
generally direct the administrative actions to be taken by the issuer.
The assets of the issuer will consist primarily of:
o the receivables existing in the Accounts on [ ], 2004 (the
"Initial Cut-Off Date");
o all receivables generated in the Accounts from time to time after the
Initial Cut-Off Date as well as receivables generated in any
Additional Accounts added to the issuer from time to time, but
excluding receivables in any Accounts that are removed from the issuer
from time to time after the Initial Cut-Off Date;
o the issuer's rights and remedies under the sale and servicing
agreement;
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 the trust accounts of the issuer;
o any other credit or cash flow enhancement provided with respect to any
particular series or class of notes; and
16
o a security interest in the vehicles and any other collateral security.
The issuer does not expect to have any other significant assets.
Under the sale 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 the receivables of the Additional Accounts to
the issuer; and
o to designate from time to time Accounts to be removed and to require
the indenture trustee to convey receivables in the Removed Accounts to
the seller.
See "Description of the Sale and Servicing Agreement -- Addition of
Accounts." See "Description of the Receivables Purchase Agreement" for a
summary of terms of the Receivables Purchase Agreement.
DCWR and the owner trustee may amend the trust agreement without the
consent of the noteholders or the indenture trustee so long as the issuer
delivers to the indenture trustee an officer's certificate to the effect that
the issuer reasonably believes that the amendment will not adversely affect in
any material respect the interests of the noteholders. Accordingly, neither
the indenture trustee nor any holder of any note will be entitled to vote on
any such amendment.
In addition, the trust agreement may also be amended with the consent of
the indenture trustee and holders of at least 66 2/3% of the outstanding
dollar principal amount of the notes affected by the amendment in any material
respect. However, an amendment to the trust agreement that increases or
reduces the amount of, or accelerates or delays the timing of, collections of
payments in respect of the receivables or distributions to the noteholders
requires the consent of all noteholders affected by the amendment.
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Use of Proceeds
- ------------------------------------------------------------------------------
Unless we otherwise provide in the related prospectus supplement:
o we will pay the net proceeds from the sale of the notes of a series
offered by this prospectus to DCWR;
o DCWR will use the portion of the proceeds paid to it, together with
the subordinated loan from DCS described under "DaimlerChrysler
Wholesale Receivables LLC," to purchase receivables from DCS or to
repay amounts previously borrowed to purchase receivables; and
o DCS will use the portion of the proceeds paid to it for general
corporate purposes.
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The Dealer Floorplan Financing Business
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General
The receivables transferred to the issuer under the sale and servicing
agreement were or will be selected from extensions of credit and advances,
known as "wholesale" or "floorplan" financing, made by DCS to
17
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 issuer are secured by the vehicles and, in many
cases, parts inventory, equipment, fixtures, service accounts, chattel paper,
instruments and franchise rights 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.
DCS, as successor to Chrysler Financial Company L.L.C. ("CFC LLC"),
Chrysler Financial Corporation ("CFC Corp.") and Chrysler Credit Corporation
("CCC"), is the primary wholesale financing source for
DaimlerChrysler-franchised dealers in the United States. DaimlerChrysler
vehicles for which DCS provides wholesale financing include vehicles
manufactured under the CHRYSLER, DODGE and JEEP trademarks.
DCS, directly or as successor to CFC LLC, CFC Corp. or CCC, has extended
credit lines to DaimlerChrysler-franchised dealers that may also operate
non-DaimlerChrysler franchises and to non-DaimlerChrysler dealers. DCS
services the accounts of domestic dealers financed by it (the "U.S. Wholesale
Portfolio") through its Farmington Hills Support office located in Farmington
Hills, Michigan and through a network of Chrysler Financial business centers
and Mercedes-Benz regional offices located throughout the United States.
Vehicles financed by any dealer under the floorplan program are
categorized by DCS, under its policies and procedures, as New Vehicles or Used
Vehicles based on whether the vehicles qualify 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 DCS's practices
and policies.
The receivables transferred to the issuer will not include any "Fleet
Receivables," which are receivables originated in connection with multiple new
vehicle orders of at least five vehicles by specified dealers. Accordingly,
the terms "receivables" and "principal receivables" as used in this prospectus
will not refer to Fleet Receivables.
Creation of Receivables
DCS finances 100% of the wholesale invoice price of New Vehicles,
including destination charges. DaimlerChrysler originates receivables in
respect of DaimlerChrysler-manufactured vehicles and other vehicles
distributed by DaimlerChrysler franchised dealers concurrently with the
shipment of the vehicles to the financed dealer.
Once a dealer has commenced the floorplanning of a manufacturer's
vehicles through DCS, DCS will finance all purchases of vehicles by the dealer
from the manufacturer. DCS will cancel this arrangement, however, if a
dealer's inventory is considered by DCS to be seriously overstocked, if a
dealer is experiencing
18
financial difficulties or if a dealer requests controlled vehicle releases. In
those circumstances, known as "Finance Hold," the applicable local business
center or regional office of DCS assumes control of vehicle releases to the
dealer. DCS makes special arrangements to finance inter-dealer sales of
vehicles.
The floorplan financing arrangements grant DCS a security interest in the
related vehicles. Generally, the security interest granted in a vehicle
terminates as a matter of law upon the retail sale of the vehicle by the
dealer. In connection with their vehicle credit lines, some dealers also grant
to DCS a security interest in non-vehicle collateral, such as parts inventory,
equipment, fixtures, service accounts, chattel paper, instruments, franchise
rights and, in some cases, realty and/or a personal guarantee. Pursuant to the
Receivables Purchase Agreement, DCS assigns its security interests in the
vehicles and in any non-vehicle collateral to DCWR and represents that DCWR
will have a first-priority perfected ownership interest in such property.
These security interests are then assigned by DCWR to the issuer pursuant to
the sale and servicing agreement. In its other lending activities, DCS may
make capital loans, equipment loans or other advances to a dealer, or its
parent holding company or other affiliates. These other loans and advances may
also be secured by a security interest in the dealer's vehicles and
non-vehicle collateral. In the Receivables Purchase Agreement, DCS has agreed
not to assert its security interest in any vehicle or non-vehicle collateral
until the issuer (as transferee of DCWR) has been paid in full on the
receivables secured by the issuer's security interest in the vehicle and
non-vehicle collateral. Although the issuer will have a first-priority
perfected security interest in such collateral, a default under any capital
loans, equipment loans or other advances made by or to a dealer, or its parent
holding company or other affiliates, may nonetheless result in a default in
respect of the dealer's receivables that have been transferred to the issuer.
Credit Underwriting Process
DCS 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 the applicable DCS business center
or regional office. After receipt of the application, the business center or
regional office investigates the prospective dealer. The business center or
regional 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 business center
or regional office reviews the dealer's credit reports, including the
experience of the dealer's current financing source, and bank references.
Further, the business center or regional office investigates the dealer's
current state of operations and management, including evaluating a factory
reference, and marketing capabilities. For credit lines within a business
center's or regional office's approval limits, the business center or regional
office either approves or disapproves the dealer's request. For credit lines
in excess of a business center's or regional office's approval limits, the
business center or regional office transmits the requisite documentation to
the Farmington Hills Support Dealer Credit Department for approval or
disapproval. DCS applies the same underwriting standards for dealers
franchised by other manufacturers.
Upon approval, dealers execute a series of financing agreements with DCS
and, in the case of DaimlerChrysler-franchised dealers, DaimlerChrysler. These
agreements provide DCS a first priority security interest in the vehicles and
other collateral Under these agreements, DCS requires all dealers to maintain
insurance coverage for each vehicle for which it provided floorplan financing,
with DCS designated as loss payee to the extent required by DCS.
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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 DCS. 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. DCS determines
the size of a dealer's auction vehicle credit line on a case by case basis and
makes adjustments periodically based on DCS'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
DCS prepares and distributes each month to each dealer a statement
setting forth billing and related account information. DCS 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. DCS 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, DCS is entitled to receive payment in full of
the related advance. Dealers remit payments by check directly to DCS's local
business centers and regional offices or electronically via an electronic
funds transfer system maintained by the Farmington Hills Support office.
Revenue Experience
DCS 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 DCS, plus a designated spread ranging from 0.00% to
1.00% on New Vehicles. The prime rate is reset by DCS 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 the dealer's credit lines. DCS 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, DCS 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
20
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 DCS takes possession of a
dealer's parts inventory, DaimlerChrysler is only obligated to pay DCS 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 DCS.
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 DCS 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
receivables -- The ability of the issuer to make payments on the notes depends
in part on the ability of DaimlerChrysler and DCS to generate receivables and
the ability of DCS to perform its obligations under the sale and servicing
agreement."
Under the terms of agreements entered into by DCS with manufacturers and
distributors other than DaimlerChrysler, DCS provides private-label automotive
financing to some dealers that are similar to those offered to
DaimlerChrysler-franchised dealers. In connection with these and other
agreements with non-DaimlerChrysler manufacturers or distributors, some of the
manufacturers or distributors agree to repurchase unsold vehicles in the
dealer's inventory upon termination of the dealer's franchise, whether
voluntary or otherwise. The agreements vary, but typically provide for
repurchase of unused, current models that are new, undamaged and untitled.
This assistance is provided for the benefit of the dealer in the event of a
voluntary termination and for the benefit of DCS in the event of an
involuntary termination. Many of these types of assistance are provided at the
option of non-DaimlerChrysler manufacturers and distributors and may be
terminated by the manufacturers and distributors in whole or in part at any
time. If these manufacturers and distributors are unable or elect not to
provide assistance to the applicable dealers, the loss experience of DCS in
respect of its U.S. Wholesale Portfolio may be adversely affected. In
addition, if a manufacturer or distributor that supplies vehicles to these
dealers exited the vehicle business temporarily or permanently, the sales rate
of its vehicles would decrease and the payment rates and loss experience of
the U.S. Wholesale Portfolio may be adversely affected.
Dealer Monitoring
DCS's local business centers and regional 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 DCS learns that a dealer's balance exceeds its
approved credit lines, DCS will evaluate the dealer's financial position and
may temporarily increase the dealer's credit lines or place the dealer in
Finance Hold. See "-- Creation of Receivables."
Personnel from the business centers and regional offices 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, DCS 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 DCS 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 DCS.
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"Dealer Trouble Status" and DCS's Write-Off Policy
Under some circumstances, DCS 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, DCS determines any more
extension of credit on a case-by-case basis.
DCS 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 DCS 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.
DCS 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 DCS. Once liquidation has begun, DCS 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, DCS may recognize additional losses or recoveries.
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
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The receivables arise in the revolving financing arrangements (the
"Accounts") with domestic motor vehicle dealers ("dealers") franchised by
DaimlerChrysler and/or other automobile manufacturers. DCS 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 DCS, directly or as successor to
CFC LLC, CFC Corp. or CCC, in the ordinary course of business and meet other
criteria provided in the sale and servicing agreement. See "Description of the
Sale and Servicing Agreement -- Representations and Warranties." DCS and the
seller have represented that each believes that the Accounts
22
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.
The Accounts may contain special subaccounts relating to financing
provided by DCS other than for dealers' vehicle inventories. For example,
these special subaccounts may relate to capital loans, equipment loans or
other advances or relate to financing for fleet purchases. These special
subaccounts are not included when the Account is designated for the issuer.
Accordingly, any right to receive payments in respect of these special
subaccounts are not transferred to the issuer.
From time to time, dealers deposit funds with DCS in cash management
accounts, limited in amount to the amount of the wholesale accounts. DCS
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. Any such reborrowing will be
treated as a new advance to the dealer, resulting in a corresponding increase
in the dealer's outstanding Principal Receivables balance.
Under the sale and servicing agreement, the seller, and under the
Receivables Purchase Agreement, DCS 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 issuer 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. DCS 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 issuer. See "Description
of the Sale and Servicing Agreement -- 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, DCS will represent and warrant to the
seller, and the seller will represent and warrant to the issuer, that the
receivables meet the eligibility requirements set forth in the sale and
servicing agreement. See "Description of the Sale and Servicing Agreement --
Conveyance of Receivables and Collateral Security." Under some circumstances
specified in the sale and servicing agreement, the seller has the right to
remove Accounts, and the receivables arising from the Accounts, from the
issuer. See "Description of the Sale and Servicing Agreement -- Removal of
Accounts." 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 issuer.
We will provide additional information about the Accounts in each
prospectus supplement.
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DaimlerChrysler Services North America LLC
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DCS, 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 November 30, 2001, of CFC LLC into DCS. DCS
has substantially the same assets and liabilities that CFC LLC had. CFC LLC, a
Michigan limited liability company, was the continuing limited liability
company resulting from a merger on October 28, 1998, of CFC Corp. into CFC
LLC. 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. DCS
is engaged in the following:
o automotive retail, wholesale and fleet financing;
o servicing commercial leases and loans;
23
o property, casualty and other insurance; and
o automotive dealership facility development and management.
DCS'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 DCS's finance and insurance
operations. See "Risk Factors -- Risk Factors relating to the receivables --
The ability of the issuer to make payments on the notes depends in part on the
ability of DaimlerChrysler and DCS to generate receivables and the ability of
DCS to perform its obligations under the sale and servicing agreement." DCS's
executive offices are located at 27777 Inkster Road, Farmington Hills,
Michigan 48334 and its telephone number is (248) 427-2625.
DCS will sell the receivables to the seller under the Receivables
Purchase Agreement and will service the receivables on behalf of the issuer
under the sale and servicing agreement.
We will provide additional information about DCS 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 (or a single class of notes) and may also consist of Class B
notes and Class C notes or other classes of 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 class, 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 additional enhancements in the
form of one or more derivative or other agreements, such as 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 or other 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 on the
receivables 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 enhancement 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;
24
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;
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, Class C notes or other class of 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 (the "legal final") of the notes;
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 any other credit or cash flow
enhancement, the terms of that enhancement and the provider of the
enhancement; 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. A series or
class of notes may be issued privately, which series or class would therefore
not be offered pursuant to this prospectus and a prospectus supplement.
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 receivables. 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 a series of notes are less than
expected, principal collections allocable to (i) the overcollateralization
amount for the applicable series or (ii) the notes of that series may be used
to pay interest on the notes of that series. However, this reallocation of
principal would reduce the overcollateralization amount or the nominal
liquidation amount of the specified classes of notes of that series.
Reductions of these amounts would have the effect of reducing principal
collections and interest collections on
25
the receivables that are allocable to that series, unless these reductions are
reimbursed from excess interest collections.
If interest on a note is not paid within five business days after it is
due, or such longer period of time specified in the prospectus supplement, 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.
For some notes, 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 under the indenture to the series
or class of 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 "The Indenture -- Events of Default."
A series of notes may provide for the variable funding and amortization
of those notes from time to time.
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 note will have:
o a stated principal amount;
o an outstanding dollar principal amount; and
o a nominal liquidation amount.
Stated Principal Amount
The stated principal amount of a note is the amount that is stated on the
face of the note to be payable to its holders. It may be denominated in U.S.
dollars or in a foreign currency.
Outstanding Dollar Principal Amount
For U.S. dollar notes (other than discount notes), the outstanding dollar
principal amount is the same as the stated principal amount, less principal
payments to the noteholders. For foreign currency notes, the outstanding
dollar principal amount is the U.S. dollar equivalent of the stated principal
amount of the notes, less dollar
26
payments to derivative counterparties with respect to principal. For discount
notes, the outstanding dollar principal amount is an amount stated in, or
determined by a formula described in, the applicable supplement to this
prospectus.
Nominal Liquidation Amount of Notes
The nominal liquidation amount of a note is a U.S. dollar amount based on
the outstanding dollar principal amount of that note, but with some reductions
- -- including reductions from reallocations of principal collections and
allocations of charge-offs of defaulted principal receivables -- and increases
described under this heading. The nominal liquidation amount of a note
corresponds to the portion of the principal receivables that would be
allocated to that note if the receivables were liquidated.
In most circumstances, the nominal liquidation amount of a note, together
with its share of any funds on deposit in the applicable principal funding
account and its share of any funds in the excess funding account, will be
equal to the outstanding dollar principal amount of that note. However, if
there are reductions in the nominal liquidation amount of a note as a result
of reallocations of principal collections from that note to pay interest on
notes of the same series, or as a result of charge-offs of defaulted principal
receivables, there will be a deficit in the nominal liquidation amount of that
note. Unless that deficiency is reimbursed through the reinvestment of excess
interest collections on the receivables, the stated principal amount of some
notes will not be paid in full.
A subordinated note's nominal liquidation amount is used to calculate the
maximum amount of funds that may be reallocated from that subordinated note to
pay interest on senior notes of the same series. The nominal liquidation
amount of a note is also used to calculate the amount of principal collections
that can be allocated for payment of principal to a note, or paid to the
counterparty to a derivative agreement, if applicable. This means that if the
nominal liquidation amount of a note has been reduced by charge-offs of
defaulted principal receivables 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 or series of notes may be
reduced as follows:
o If there are charge-offs of defaulted principal receivables, the
portion of charge-offs allocated to a series of notes will reduce the
series nominal liquidation amount for that series to the extent these
charge-offs are greater than that series' available excess interest
collections. For a series that has an overcollateralization amount, we
will allocate these reductions first to the overcollateralization
amount. Any remaining reductions will be allocated to the nominal
liquidation amounts of the notes of that series. If the series has
subordinated classes of notes, the reductions allocated to the notes
of that series will be initially allocated pro rata to each class of
notes based on the nominal liquidation amount of that class. Then we
will reallocate these reductions to the subordinated classes of notes
of that series in succession, beginning with the most subordinated
class. The prospectus supplement for any series of notes may provide
for a different allocation of these 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 class of
notes of a series to pay interest on a class or classes of notes of
that series, the nominal liquidation amount of that class from which
the reallocation is made will be reduced by the amount of the
reallocations. For example, the amount of the reallocation of
principal collections to pay interest on Class A notes will be applied
first, to reduce the nominal
27
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 these reductions.
o The nominal liquidation amount of a series or class of notes will be
reduced by the amount on deposit in its principal funding account
(other than investment earnings) after giving effect to all
allocations, reallocations and payments. This includes principal
collections that are deposited directly into that series' or class's
principal funding account, or reallocated from the principal funding
account for a subordinated class. The nominal liquidation amount of a
series or class of notes will also be reduced by its allocable share
of deposits to the excess funding account in connection with a
reduction in principal receivables.
o The nominal liquidation amount of a note will be reduced by the amount
of all payments of principal of that note without duplicating the
reductions due to any related deposits to the principal funding
account.
o If the holders of a class or series of notes direct a sale of
receivables after an insolvency of the seller, DCS or DaimlerChrysler,
an event of default and acceleration or on its legal final maturity
date, the nominal liquidation amount of that class or series is
automatically reduced to zero. See "The Notes -- Sale of Receivables."
The nominal liquidation amount of a class or series of notes can be
increased as follows:
o The nominal liquidation amount of a series or class of notes will be
increased by its allocable share of withdrawals from the excess
funding account in connection with the purchase of an interest in
additional principal receivables.
o For a class of discount notes, the nominal liquidation amount 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 the nominal liquidation amount from
charge-offs of defaulted principal receivables 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 or from the senior class of a series to pay interest on
that senior class. 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.
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If the nominal liquidation amount of your notes has been reduced because
of charge-offs or reallocations to pay interest and the reduction has not been
reimbursed from excess interest collections, you will not receive repayment of
all of your principal.
The nominal liquidation amount of a note may not be reduced below zero
and may not be increased above the outstanding dollar principal amount of that
note, less any amounts on deposit in the applicable principal funding account.
If a note held by 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 Aggregate Series
Nominal Liquidation Amount.
The cumulative net amount of reductions of the nominal liquidation amount
of any series or class of notes due to reallocation of principal collections
to pay interest on notes and charge-offs of principal receivables cannot
exceed the initial outstanding dollar principal amount of that series or class
of notes.
Subordination of Principal
Credit enhancement for your series or class of notes may be provided
through the subordination of principal. If a series of notes has only one
class, this form of credit enhancement will be the overcollateralization
amount for that series unless otherwise specified in the prospectus
supplement. 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 multi-class series of notes may also have an
overcollateralization amount.
Overcollateralization Amount
The overcollateralization amount for a series of notes constitutes an
additional amount of principal receivables that is allocated to that series in
excess of the nominal liquidation amount of the related notes. Accordingly, if
a series of notes has an overcollateralization amount, its series nominal
liquidation amount will equal the sum of the nominal liquidation amount of its
notes and the overcollateralization amount, unless we otherwise specify in a
prospectus supplement. We will describe the calculation of the
overcollateralization amount, if any, for a series of notes in the prospectus
supplement.
Subordination Between Classes
The following paragraphs under this subheading illustrate how the credit
enhancement provided by subordinate notes works in the case of a series that
has Class A notes, Class B notes and Class C notes. The prospectus supplement
for 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.
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, if so specified, on designated subordinated classes of
notes of that series. In addition, charge-offs of defaulted principal
receivables are allocated first to the
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subordinated classes of a series. See "-- Stated Principal Amount, Outstanding
Dollar Principal Amount and Nominal Liquidation Amount of Notes" and "--
Allocation of Collections."
No principal payments will be made on a subordinated class of notes 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 defaulted
principal receivables to that class or reallocation of principal
collections from that class to pay interest on senior classes, 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 the notes of senior classes are still
outstanding.
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, then the
subordinated classes of notes of that series may be paid.
Other Enhancements
In addition or in lieu of the subordination of principal described
immediately above, we may provide other credit or cash flow enhancements with
respect to one or more classes of the series. These other enhancements may
include 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 a currency swap, or other interest
protection agreement;
o repurchase or liquidity arrangements;
o yield supplement arrangements;
o cash deposit; or
o another form of credit or cash flow enhancement described in the
related prospectus supplement.
If we so provide in the related prospectus supplement, any of these other
enhancements may be available to more than one class or series of notes. In
particular, 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. The issuer will generally receive payments
30
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-denominated notes of a series will generally be treated as
part of the interest collections allocated to that series. We will include the
specific terms of any derivative agreement applicable to a series or class of
notes and a description of the related counterparty in the related prospectus
supplement.
The issuer may use a currency swap to issue notes payable in a currency
other than United States dollars.
Limitations on Overcollateralization and Other Enhancements
We intend that the overcollateralization amount or other enhancement, if
any, with respect to a series or class of notes will enhance the likelihood of
receipt by noteholders of the series or class of the full amount of principal
and interest and will decrease the likelihood that the noteholders will
experience losses. However, neither overcollateralization nor the other
enhancement, if any, will provide protection against all risks of loss or will
guarantee repayment of the entire stated principal amount of the notes and
interest on the notes. If losses exceed the amount covered by the
overcollateralization or any other enhancement, noteholders will bear their
allocable share of deficiencies. In addition, if we provide specific
enhancement for the benefit of more than one class or series, noteholders of
that class or series will be subject to the risk that the enhancement will be
exhausted by the claims of noteholders of other classes or series.
Allocation of Collections
The primary source of funds for the payment of principal of and interest
on a series of notes will be collections on the receivables that are allocated
to that series. The servicer will deposit collections into the Collection
Account at the times and in the manner described in "Description of the Sale
and Servicing Agreement -- Allocation of Collections; Deposits in Collection
Account."
In this section, we describe how we allocate collections to each series
of notes. The balance of collections not allocated to any series will be
allocated to the Seller's Interest and generally will not be available to make
payments on any series of notes.
Allocation of Interest Collections
The amount of interest collections on the receivables for any monthly
collection period, together with any net investment earnings on funds in the
Collection Account, 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 as of the last day of the immediately preceding collection
period (or the issuance date of that series in the case of the first
collection period); and
o the denominator of which is the Pool Balance as of the last day of the
immediately preceding collection period (or the cut-off date of that
series in the case of the first collection period).
The amount of defaulted receivables for any collection period will be
allocated pro rata to each series of notes based on the same fraction. This
fraction for a series when expressed as a percentage will be the "Series
Floating Allocation Percentage" for that series unless we specify otherwise in
the related prospectus supplement.
The indenture trustee will apply the amount of interest collections
allocated to a series of notes in accordance with the indenture supplement for
that series to cover the monthly interest payments or deposits
31
required for that series. We will describe the application of these funds for
a series in the related prospectus supplement. In the case of a series of
notes having more than one class, we will also describe how interest
collections allocated to that series will be allocated and applied to each
class.
If any series of notes has interest collections remaining after the
application of these funds in accordance with its indenture supplement, then
these excess interest collections will be shared with each other series of
notes whose own allocated interest collections are insufficient to cover its
monthly interest payments or its other applications of interest collections as
specified in the applicable indenture supplement. Any such excess interest
collections shared with other series will be applied to these other series pro
rata on the basis of their respective shortfalls.
Allocation of Principal Collections
The amount of principal collections on the receivables for any monthly
collection period 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 for
that series as of the last day of the immediately preceding collection
period (or the issuance date of that series in the case of the first
collection period) or, if the accumulation period or an Early
Redemption Period for that series has commenced, as of the last day of
the collection period ending prior to the commencement of the
accumulation period or Early Redemption Period, as applicable; and
o the denominator of which is the Pool Balance as of the last day of the
immediately preceding collection period (or the cut-off date of that
series in the case of the first collection period) or, if the
accumulation period or an Early Redemption Period for that series has
commenced, as of the last day of the collection period ending prior to
the commencement of the accumulation period or Early Redemption
Period, as applicable.
This fraction for each series will adjust if that series or any other
series of notes has entered into an Early Redemption Period since the prior
collection period. This fraction for a series when expressed as a percentage
will be the "Series Principal Allocation Percentage" for that series unless we
specify otherwise in the related prospectus supplement.
The indenture trustee will apply the amount of principal collections
allocated to a series of notes in accordance with the indenture supplement for
that series to cover the monthly principal payments or deposits required for
that series. We will describe the application of these funds for a series in
the related prospectus supplement. In the case of a series of notes having
more than one class, we will also describe how principal collections allocated
to that series will be allocated and applied to each class.
If any series of notes has principal collections remaining after the
application of these funds in accordance with its indenture supplement, then
these excess principal collections will be shared with each other series of
notes whose own allocated principal collections are insufficient to cover its
monthly principal payments or deposits as specified in the applicable
indenture supplement. Any such excess principal collections shared with other
series will be applied to these other series pro rata on the basis of their
respective shortfalls.
Trust Accounts of the Issuer
The issuer has established a Collection Account for the purpose of
receiving collections on the receivables. The Collection Account is maintained
in the name of the indenture trustee, for the benefit of all the noteholders.
Any earnings,
32
net of losses and investment expenses, on funds in the Collection Account
will be credited to the Collection Account and treated as part of interest
collections.
The issuer has also established an Excess Funding Account in the name of
the indenture trustee, for the benefit of all the noteholders. As described in
"Description of the Sale and Servicing Agreement--Excess Funding Account
Deposits and Withdrawals," if the Aggregate Series Nominal Liquidation Amount
and other available amounts securing the notes were to fall below a minimum
threshold, some of the principal collections to be released to the seller
will, instead, be deposited into the Excess Funding Account. All funds, if
any, in the Excess Funding Account, together with any related net investment
earnings on funds in this trust account, will be allocated to each series of
notes pro rata on the basis of the respective series nominal liquidation
amounts.
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. Typically, funds will be
transferred from the Collection Account to these supplemental accounts in
order to make payments of interest on and principal of the notes, to make
payments under any applicable enhancement agreements, and for any other
purposes as specified in the related prospectus supplement. Each supplemental
account for a series may be a subaccount of one master trust account or other
trust account for that series.
The Collection Account, the Excess Funding Account and the supplemental
accounts described in this section are referred to as trust accounts. The
trust accounts will be Qualified Trust Accounts and amounts deposited into the
trust accounts may only be invested in Permitted Investments selected by the
issuer (or by its administrator on its behalf).
Sale of Receivables
In addition to a sale of receivables following an insolvency of the
seller, DaimlerChrysler or DCS, if a series or class of notes has an event of
default and is accelerated before its legal final maturity date, the issuer
may sell receivables, or interests therein, if the conditions described in
"The Indenture -- Events of Default" and "-- Events of Default Remedies" are
satisfied.
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
toward payment on those notes.
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 collections 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 caused
sales of receivables are no longer outstanding under the indenture once the
sale has occurred and the net sale proceeds have been applied.
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 for
that series 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
The portion of collections allocable to a series or class of notes after
giving effect to all allocations and reallocations, funds for that series or
class on deposit in the applicable issuer accounts, any applicable enhancement
for that series or class and proceeds of sales of receivables for that series
or class provide the only sources of payment for principal of or interest on
that series or class of notes. Noteholders will have no recourse
33
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 security interest in the
receivables, but each series or class of notes is entitled to the benefits of
only that portion of the receivables, collections on the receivables and
proceeds of the receivables that is 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 enhancement.
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 servicer may,
at its option, cause the issuer to redeem any note before its expected
principal payment date. The prospectus supplement will indicate at what times
the servicer 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 the holder's 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 in respect of a series,
the issuer will be required to redeem each affected note of that series to the
extent funds are available for that purpose. The issuer will give notice to
holders of the affected notes before an early redemption 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 note before its legal final
maturity date, it will do so only if and to the extent funds are allocated to
that note. 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 third 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;
34
-- 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 franchise tax purposes (1) the new issuance will not adversely
affect in any material respect 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 a publicly traded partnership, taxable as a
corporation and (4) following the new issuance, the newly issued notes
will be properly characterized as debt;
o the issuer obtains confirmation from each rating agency 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; and
o any other conditions specified in the related prospectus supplement
are satisfied.
However, so long as each rating agency has confirmed 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, the conditions specified in the
first and second bullet points above may be waived by the issuer at its
option.
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 expects to designate the corporate trust office of The Bank of
New York, 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.
35
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 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
If the notes are in book-entry form, the record date for payment of the
notes will be the day before the related payment date. If the notes are in
definitive form, the record date for a payment date will be the last day of
the calendar month ending prior to that 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 expects to appoint The Bank of New York 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 the 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 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.
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Each global note will be deposited with a securities depository named The
Depository Trust Company and will be registered in its name or the name of its
nominee. 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. or another
nominee of DTC 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 and Euroclear will hold positions through their respective U.S.
depositories, which in turn will hold positions on the books of DTC.
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 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.
37
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 SEC.
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. 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
38
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, The Bank of New York, at the office of the
paying agent in New York City that the issuer designates for that purpose.
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 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
39
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 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.
40
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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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 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.
Indenture Trustee
The Bank of New York, a New York banking corporation, will act as trustee
under the indenture for the notes. Its principal corporate trust office is
located at 101 Barclay Street, New York, New York 10286.
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.
DCS, DCWR, the issuer or their respective 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.
41
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; and
any such default continues beyond any specified period of grace for such
series or class of notes, then 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 days (or such
longer period as may be specified in the prospectus supplement), 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 other covenants or warranties in the indenture, for a period of 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 have 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 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.
42
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 a majority in
aggregate outstanding dollar principal amount of the notes of that series or
class (or of all notes (treated as one class) in the case of certain events of
defaults with respect to all notes) 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, each holder of the accelerated notes may notify the indenture
trustee that it desires to exercise the put feature that is part of its notes.
The "put feature" will be deemed to be exercised only 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 notes of that series or class have notified the indenture
trustee that they desire to exercise the put feature in respect of
their notes;
o the holders of a majority of the outstanding dollar principal amount
of the notes of that series or class have notified the indenture
trustee that they desire to exercise the put feature in respect of
their notes and the net proceeds of the sale of receivables pursuant
to such exercise (as described below) plus amounts on deposit in the
principal funding account would be sufficient to pay all amounts due
on the notes of that series or class; or
o both:
-- the indenture trustee determines that the funds to be allocated to
the notes of that series or class, including (1) the Series
Available Interest Amount and Series Available Principal Amount
for that series or class and (2) amounts on deposit in the
principal funding account, may not be sufficient on an ongoing
basis to make payments on the notes of that series or class as
such payments would have become due if such obligations had not
been declared due and payable; and
-- holders of at least 66 2/3% of the outstanding dollar principal
amount of the notes of that series or class have notified the
indenture trustee that they desire to exercise the put feature in
respect of their notes.
If the put feature is deemed to be exercised as provided in the preceding
sentence, it will be deemed to be exercised by all holders of the notes of
that series or class, whether or not they have actually given notice of their
desire to exercise the put feature. Upon such deemed exercise of the put
feature, the indenture trustee will cause the issuer to sell principal
receivables and related non-principal receivables (or interest therein) in the
amount described below. The holders of the accelerated notes will maintain
their rights in their notes until such sale proceeds have been applied to
payment of the amounts due on their notes and shall deliver their notes to the
issuer as part of their exercise of the put feature.
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 indenture trustee will automatically sell receivables on the date,
as described in "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:
43
o The issuer will continue to hold the receivables, and distributions on
the receivables will continue to be applied in accordance with the
allocation and application 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 on the receivables and allocated 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, if any, of the same series.
o On the legal final maturity date of the accelerated notes, if the
notes have not been paid in full, the indenture trustee will 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 or DCWR, 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 each of the following:
o the occurrence of a note's expected principal payment date;
o the issuer becoming an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
o the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the seller, DCS or DaimlerChrysler;
o a failure by the seller to convey receivables in Additional Accounts
to the issuer within five business days after the day on which it is
required to convey those receivables under the sale and servicing
agreement; and
o any additional early redemption events specified in the related
prospectus supplement.
44
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 Series
Available Interest Amount and Series Available Principal Amount for the series
or class of notes to be redeemed, together with funds on deposit in the
applicable principal funding account and interest funding account and any
amounts payable to the issuer under any applicable enhancement 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 those notes, 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 principal collections on the receivables 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
account or interest funding account and any amounts received from any
applicable enhancements will still be available to pay principal of and
interest on that series or class of notes. In addition, if any Series
Available Interest Amount remains after required interest payments and
deposits, the remaining Series Available Interest Amount can be applied to
reimburse reductions in the nominal liquidation amount of that series or class
resulting from reallocations of any Series Available Principal Amounts to pay
interest on classes of notes or from charge-offs of defaulted principal
receivables in the issuer.
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, DCS or their affiliates will
not be deemed outstanding for purposes of voting or calculating quorum at any
meeting of noteholders.
Amendments to the Indenture and Indenture Supplements
Upon delivery of an issuer tax opinion, as described under "-- Tax
Opinions for Amendments" below, and upon delivery by the issuer to the
indenture trustee of an officer's certificate to the effect that the issuer
45
reasonably believes that the 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 or the timing of such distributions, or (iii)
adversely affect the security interest of the indenture trustee in the
receivables, 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 of 1939, as amended;
o cure any ambiguity, to correct or supplement any provision that may be
inconsistent with any other provision, or with the descriptions of
these provisions or of the notes contained in this prospectus and the
prospectus supplements, or to make any other provisions with respect
to matters or questions arising under the indenture;
o 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 -- Issuances of New Series, Classes and Subclasses of Notes")
and to set forth the terms thereof, or to add to the rights of the
noteholders of any series or class;
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
to 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 if one or more additional sellers are added to, or replaced under, the
sale and servicing agreement, or if one or more additional
beneficiaries are added to, or replaced under, 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; or
o amend all relevant documents to reflect or facilitate the direct
ownership of the receivables by the issuer.
The indenture or any indenture supplement may also be amended without the
consent of the indenture trustee or any noteholders upon delivery of an issuer
tax opinion, as described under "-- Tax Opinions for Amendments" below, for
the purpose of adding provisions to, or changing in any manner or eliminating
any of the provisions of, the indenture or any indenture supplement or of
modifying in any manner the rights of the holders of the notes under the
indenture or any indenture supplement, provided, however, that the issuer
shall (i) deliver to the indenture trustee an officer's certificate to the
effect that the issuer reasonably believes that such amendment will not and is
not reasonably expected to (a) result in the occurrence of an early redemption
event or event of default, (b) adversely affect the amount of funds available
to be distributed to the noteholders or any
46
series or class of notes or the timing of such distributions, or (c) adversely
affect the security interest of the indenture trustee in the collateral
securing the notes and (ii) receive written confirmation from each rating
agency that such amendment will not result in the reduction or withdrawal of
the ratings of any outstanding notes which it has rated.
Upon delivery of an issuer tax opinion as described under "-- Tax
Opinions for Amendments" below, the issuer and the indenture trustee may
modify and amend the indenture or any indenture supplement, with prior notice
to each rating agency and the consent of the holders of not less than 66 2/3%
in aggregate outstanding 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 holder of each note
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 of any note 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;
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
47
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.
No amendment may be made to the indenture or any indenture supplement
that would adversely affect in any material respect the interests of the
servicer without its consent.
Tax Opinions for Amendments
No amendment to the indenture or the 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 for federal income 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 a 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.
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
48
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 SEC 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 Sale and Servicing Agreement
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DCWR, as seller, DCS, as servicer, and the issuer, as purchaser, will
have entered into a sale and servicing agreement (the "sale and servicing
agreement") under which DCWR will sell receivables to the issuer and DCS will
service those receivables on behalf of the issuer. In the following summary we
describe terms of the sale and servicing agreement. This summary is qualified
in its entirety by reference to the sale and servicing agreement. We have
filed a form of the sale and servicing agreement as an exhibit to the
registration statement of which this prospectus is a part.
Conveyance of Receivables and Collateral Security
DCWR has sold and assigned or will sell and assign to the issuer:
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, including any Additional Accounts;
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, in many cases, parts inventory, equipment, fixtures,
service accounts, chattel paper, instruments, franchise rights and, in some
cases, realty and a personal guarantee.
DCWR and DCS must indicate in their computer records that the receivables
in the Accounts and the related Collateral Security have been conveyed to the
issuer. In addition, the seller must provide to the issuer and the indenture
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.
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DCS will retain and will not deliver to the issuer or the indenture
trustee any other records or agreements relating to the receivables. Except as
set forth above, DCS has not and will not segregate the records and agreements
relating to the receivables from those relating to other accounts of DCS. DCS
has not and will not stamp or mark the physical documentation relating to the
receivables to reflect the transfer of the receivables to the issuer or the
indenture trustee. The seller will file one or more financing statements in
accordance with applicable state law to perfect the issuer'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."
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
DCS the receivables then existing or created after that time in the Additional
Accounts and to convey the receivables to the issuer. 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
two preceding paragraphs, except the list of Accounts 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 issuer, 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 issuer (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 issuer as
described below under "-- Ineligible Receivables and the
Overconcentration Amount";
o each receivable and all Collateral Security conveyed to the issuer 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 issuer free and clear of any liens, except for liens permitted
under the Receivables Purchase Agreement; 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 issuer will reassign the related receivables to the
seller in the manner described in the following paragraph. However, the issuer
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 indenture 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 noteholder's interest
in the receivable or, in the case of a breach relating to an Account,
all receivables in the related Account ("Ineligible Receivables").
The issuer 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 to be less than the sum of the
series nominal liquidation amounts for all outstanding series of notes (the
"Aggregate Series Nominal Liquidation Amount") for all outstanding series on
the second business day preceding the payment date (each second business day
preceding a payment date, a "Determination Date"), after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the payment
date. If the Pool Balance is less than the Aggregate Series Nominal
Liquidation Amount as a result of this deduction, the seller must make a
deposit into the Collection Account in immediately available funds in an
amount (a "Transfer Deposit Amount") equal to the amount by which the Pool
Balance would be less than the Aggregate Series Nominal Liquidation 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 Pool Balance is not reduced below the Aggregate Series Nominal
Liquidation Amount. Any principal balance not so deducted will not be
reassigned and will remain part of the issuer's assets. 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 issuer 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 sale and servicing agreement, and the sale and servicing agreement
constitutes a valid, binding and enforceable agreement of the seller;
and
o the sale and servicing agreement constitutes a valid sale, transfer
and assignment to the issuer 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, subject to the rights of
certain purchasers with respect to some of the Collateral Security.
If a breach of any of the representations and warranties described in the
preceding paragraph has a materially adverse effect on the noteholders'
interest in the receivables, either the indenture trustee or the holders of a
majority in aggregate outstanding principal dollar amount of all outstanding
notes, by written notice to the seller and the servicer, and to the indenture
trustee and the provider of any enhancement if given by noteholders, may
direct the seller to accept the reassignment of the noteholders' interest in
the receivables within 60 days of the notice, or within a longer period
specified in the notice. The seller must accept the reassignment of the
noteholders' 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 Series Nominal Liquidation Amount on the Determination
Date preceding the payment date on which the purchase is scheduled to
be made; and
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o accrued and unpaid interest on the unpaid principal amount of all
notes at the applicable note rate, together with interest on overdue
interest, to the extent permitted by law.
The payment of the reassignment price for all outstanding series will be
considered a payment in full of the notes. The indenture trustee will
distribute those funds to the applicable noteholders upon presentation and
surrender of the notes. If the indenture trustee or the noteholders 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 noteholders or the indenture
trustee on behalf of the noteholders.
DCWR will be deemed to have made all the representations and warranties
of the seller in the sale and servicing agreement and in any indenture
supplement with respect to any series or class of notes.
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
DCS to a dealer, which, as of its date of determination:
o is established by DCS 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 DCS; 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:
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 DCS 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 DCS at the time of sale to the seller;
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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
issuer(or if it was initially transferred to the CARCO receivables
trust, at the time of transfer to that 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, DCS or the seller in
connection with the creation of the receivable or the transfer of the
receivable to the issuer (or to the CARCO receivables trust if it was
initially transferred to that trust) or the performance by DCS of the
floorplan financing agreement under which the receivable was created,
have been duly obtained and are in full force and effect;
o as to which at all times following the transfer of the receivable to
the issuer (or to the CARCO receivables trust if it was initially
transferred to that trust), the issuer or the CARCO receivables trust,
as applicable, 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 sale and servicing
agreement;
o which (1) if originally transferred to the CARCO receivables trust,
has been the subject of a valid transfer and assignment from the
seller to the CARCO receivables trust and from that trust to the
issuer of all the seller's interest in the receivable, including any
proceeds of the receivable and (2) if directly sold by the seller to
the issuer, has been the subject of a valid transfer and assignment
from the seller to the issuer of 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 issuer (or to the CARCO
receivables trust if it was initially transferred to that 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 issuer
(or to the CARCO receivables trust if it was initially transferred to
that trust), DaimlerChrysler, DCS 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 issuer
(or to the CARCO receivables trust if it was initially transferred to
that trust), neither DaimlerChrysler, DCS nor the seller has taken or
failed to take any action which would impair the rights of the issuer
or the noteholders;
o which constitutes "tangible chattel paper" or an "account" or "payment
intangible," each as defined in Article 9 of the UCC as then in effect
in the State of Michigan; and
o which was transferred to the issuer (or to the CARCO receivables trust
if it was initially transferred to that trust) with all applicable
governmental authorization.
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The CARCO receivables trust trustee did not make, and the indenture
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 indenture 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 sale and servicing agreement or for any other purpose.
The servicer, however, will deliver to the indenture trustee on or before
March 31 of each calendar year, an opinion of counsel with respect to the
validity of the interest of the indenture trustee in and to the receivables.
Ineligible Receivables and the Overconcentration Amount
For the purpose of facilitating the administration and reporting
requirements of the servicer under the sale and servicing agreement, the
seller will transfer all Ineligible Receivables arising in an Eligible Account
to the issuer. However, unless we otherwise specify in the related prospectus
supplement, the series nominal liquidation amount for a series of notes will
include the overcollateralization amount for that series, which may in turn be
sized on the basis of the amount of Ineligible Receivables and an
overconcentration amount.
Addition of Accounts
Subject to the conditions described in the following 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:
o 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; or
o the Seller's Interest in the Pool Balance is less than 2% of the Pool
Balance on the last day of any collection period.
In either case, unless insolvency events have occurred with respect to the
seller, DCS or DaimlerChrysler, then DCS under the Receivables Purchase
Agreement must sell to the seller, and the seller under the sale and servicing
agreement must transfer and assign to the issuer, 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. The failure to transfer receivables arising in the
Additional Accounts to the issuer solely as a result of the unavailability of
a sufficient amount of Eligible Receivables will not be a breach of the sale
and servicing agreement. However, any such failure will result in an early
redemption of the notes.
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 Redemption Event to occur with respect to any series of
notes;
o the seller shall not select the Additional Accounts in a manner that
it believes is adverse to the interests of the noteholders or any
enhancement provider;
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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 indenture 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 notes 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 accordance with the
provisions described in this paragraph are referred to in this prospectus as
"Automatic Additional Accounts." Unless each applicable 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 10% of
the number of Accounts as of the first day of the calendar year during
which the collection periods begin; 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 applicable 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 indenture trustee shall have received confirmation from
each applicable 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 notes. 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 indenture 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 indenture 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 issuer.
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 LLC, CFC Corp. or DCS, they may not be of the same credit quality as the
initial Accounts. Additional Accounts may have been originated by CCC, CFC
LLC, CFC Corp. or DCS 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 LLC, CFC Corp. or DCS 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 of notes obtained by
multiplying the Required Participation Percentage for that series of
notes by the nominal liquidation amount of the notes of that series at
that time; plus
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o the sum of the overcollateralization amounts for each series of notes
on the preceding payment date, after giving effect to the allocations,
deposits and payments made on that payment date.
The "Required Participation Percentage" for a series of notes will be
specified in the related prospectus supplement.
Removal of Accounts
The seller shall have the right at any time, but no more frequently than
once a month, to require the removal from the issuer of Eligible Accounts. To
remove any Eligible Account, the seller, or the servicer on its behalf, shall,
among other things:
o furnish to the issuer, the indenture 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 issuer (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
issuer 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:
-- to the issuer, to be further allocated under the sale and
servicing agreement, interest collections in respect of each
Designated Account with respect to receivables in all Designated
Accounts sold to the issuer and
-- 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 Redemption Event to occur with respect to any series of notes
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 utilized
in selecting the Designated Accounts and that the selection procedures
were applied so as to randomly select the Designated Accounts;
o represent and warrant that the removal will not cause the rating of
any outstanding series or class of notes to be reduced or withdrawn;
and
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o on or before the related Removal Date, deliver to the issuer, the
indenture trustee and any enhancement provider an officers'
certificate confirming the items set forth in the sixth, seventh and
eighth clauses of this paragraph 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 notes to be reduced or withdrawn.
The seller shall also have the right, but shall not be obligated, to
remove from the issuer any Account with respect to which the related dealer
has gone into Dealer Trouble status as described under "The Dealer Floorplan
Business -- `Dealer Trouble Status' and DCS's Write-off Policy." To do so, the
seller will take the actions specified in clauses two through five of the
second preceding paragraph and will deliver a Tax Opinion with respect to the
removal and will represent and warrant that the seller reasonably believes
that the removal will not result in an Early Redemption Event.
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 issuer by taking each of the actions
specified in the first five clauses of the third 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 issuer for all purposes (a "Removed Account").
In addition to the removal rights described in the five paragraphs above,
the seller shall have the right at any time to remove Accounts from the issuer
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,
must, among other things:
o furnish to the issuer, the indenture trustee, 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 issuer 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 issuer and the indenture 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 Redemption Event to occur with respect to any
series or class of notes 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 of any series
or class of notes were used in selecting the Designated Accounts and
that the selection procedures were applied so as to randomly select
the Designated Accounts from the entire population of Accounts;
o represent and warrant as of the Removal and Repurchase Date that the
list of Removed Accounts delivered to the indenture trustee as of the
Removal and Repurchase Date is true and complete in all material
respects;
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o represent and warrant that the removal and repurchase will not cause
the rating of any outstanding series or class of notes to be reduced
or withdrawn by the applicable rating agency;
o deliver to the indenture 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 indenture trustee and any enhancement providers an
officers' certificate confirming the items set forth in the third
through sixth clauses above.
Except for the removal of Accounts in Dealer Trouble status, the seller
may not remove Designated Accounts or repurchase Designated Receivables unless
each applicable rating agency shall have notified the seller, the servicer, the
issuer and the indenture trustee in writing that the removal and repurchase
will not cause that rating agency's rating of any outstanding series or class
of notes 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
(the "Repurchased Receivables") shall be deemed repurchased, from the issuer
for all purposes. The seller need not make any deposit in the Collection
Account in respect of the repurchase price of any Designated Receivables
repurchased from the issuer.
The seller, however, shall have the right to require the reassignment to
it of all the issuer'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 issuer, the indenture 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 issuer, the
indenture 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 issuer, the indenture trustee, as of the Automatic Removal Date,
is true and complete in all material respects and that the selection
procedures for selecting Automatic Removed Accounts were applied so as
to randomly select the Automatic Removed Accounts from the entire
population of Accounts;
o the issuer shall have received confirmation from each applicable
rating agency that the removal will not cause that rating agency's
rating of any outstanding series or class of notes to be reduced or
withdrawn;
o the seller shall have delivered to the issuer, the indenture trustee,
each applicable 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 Redemption Event to occur with respect to any series of notes;
and
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o the seller shall have delivered to the issuer, the indenture trustee,
each applicable rating agency and any enhancement providers a Tax
Opinion, dated the Automatic Removal Date, with respect to the removal.
However, 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 issuer'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 issuer for all purposes.
Seller's Interest
The "Seller's Interest" is the seller's interest in the assets of the
issuer to extent the assets are not allocated for the payment or security of
the notes as described in this prospectus and the prospectus supplements. The
Seller's Interest will be evidenced by a certificate (the "Seller's
Certificate") issued under the trust agreement by the issuer.
Without any notice to or consent of any noteholder, the seller may from
time to time exchange a portion of the Seller's Certificate for another
certificate (a "Supplemental Certificate") that the seller may then transfer
or assign to a person or entity chosen by the seller. The terms of any
Supplemental Certificate will be set forth in a supplement to the trust
agreement. A Supplemental Certificate may be issued only 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 indenture 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 indenture 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 notes.
Any later transfer or assignment of a Supplemental Certificate is also
subject to the second and third conditions described in the immediately
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.
In addition, DCWR may without any notice to or consent of any noteholder
transfer and assign all, but not less than all, of its rights and obligations
in respect of the issuer, the Seller's Interest, the Seller's Certificate, the
sale and servicing agreement, the Receivables Purchase Agreement and all other
related agreements and instruments to a limited purpose, direct or indirect
wholly-owned subsidiary of DCS (a "Designated Affiliate") so long as the
Designated Affiliate assumes DCWR's obligations under these assigned
agreements and instruments and certain conditions are satisfied. Among these
conditions are:
o DCWR, the Designated Affiliate and the issuer shall have executed and
delivered an assignment and assumption agreement, which shall be
acknowledged and agreed to by the indenture trustee, and the
Designated Affiliate shall have delivered to the issuer and the
indenture trustee the opinion of counsel required under the assignment
and assumption agreement;
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o DCWR shall have delivered to the issuer and the indenture trustee a
certificate and an opinion of counsel that each condition precedent
set forth in the sale and servicing agreement for a transfer to a
Designated Affiliate have been complied with;
o DCWR shall have delivered to the indenture trustee written
confirmation from the applicable rating agencies that the transfer to
the Designated Affiliate will not result in a reduction or withdrawal
of the rating of any outstanding series or class of notes;
o DCWR shall have delivered to the issuer and the indenture trustee a
Tax Opinion with respect to the transfer to the Designated Affiliate;
and
o all filings required to continue the perfected interests of the issuer
and the indenture trustee in the receivables and the Collateral
Security shall have been made.
Miscellaneous Payments
"Miscellaneous Payments" means, for any monthly collection period, the
sum of:
o Adjustment Payments and Transfer Deposit Amounts received with respect
to the collection period; and
o Unallocated Principal Collections consisting of any Excess Available
Principal Amounts and any principal collections allocated to the
seller based on the Seller's Percentage that are not released to the
seller because the Pool Balance (after giving effect to any
receivables transferred to the issuer) does not equal or exceed the
Aggregate Series Nominal Liquidation Amount for all series (after
giving effect to the allocations, distributions, withdrawals and
deposits).
The amount of any Miscellaneous Payments for any collection period 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 for
that series as of the last day of the immediately preceding collection
period; and
o the denominator of which is the Aggregate Series Nominal Liquidation
Amount as of that last day.
This fraction for a series when expressed as a percentage will be the
"Series Miscellaneous Allocation Percentage" for that series unless we specify
otherwise in the related prospectus supplement.
The Miscellaneous Payments allocated to a series will be added to the
principal collections allocated to that series. Unless we specify otherwise in
a prospectus supplement, the sum of the principal collections and
Miscellaneous Payments allocated to a series will make up the "Series
Available Principal Amount" for that series. The amount of any Series
Available Principal Amount for a series that is not needed to make payments or
deposits for that series on a payment date will be available for allocation to
other series of notes whose own Series Available Principal Amount for that
payment date is insufficient to fully cover its required payments or deposits.
After giving effect to this sharing of excess Series Available Principal
Amounts amongst series, the excess Series Available Principal Amounts that
remain are collectively referred to as the "Excess Available Principal
Amounts."
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Excess Funding Account Deposits and Withdrawals
On each payment date, unless otherwise specified in the prospectus
supplement, Excess Available Principal Amounts will be deposited by the
indenture trustee into the Excess Funding Account in an amount equal to the
excess, if any, of:
o the sum of (1) the aggregate outstanding dollar principal amount of
all series of notes and (2) the sum of the overcollateralization
amounts for all series of notes over
o the sum of (1) the Aggregate Series Nominal Liquidation Amount, as
adjusted for the purpose of this calculation in the manner set forth
in the sale and servicing agreement, (2) the aggregate amount (other
than investment earnings) on deposit in the principal funding accounts
for all series and (3) the amount (other than investment earnings)
already on deposit in the Excess Funding Account.
Any remaining Excess Available Principal Amounts not required to be
deposited into the Excess Funding Account will be paid to the issuer for
distribution to the seller so long as the Pool Balance (after giving effect to
any receivables transferred to the issuer on that payment date) equals or
exceeds the Aggregate Series Nominal Liquidation Amount for all series (after
giving effect to the allocations, distributions, withdrawals and deposits on
that payment date). Any Excess Available Principal Amounts that are not
released to the seller as a result of the condition specified in this
paragraph will be transferred to the Collection Account and included as part
of the Unallocated Principal Collections.
If, on any Determination Date, the amount specified in the second bullet
point of the first paragraph in this section exceeds the amount specified in
the first bullet point of the same paragraph because of an increase in the
amount of principal receivables in the issuer, the indenture trustee will
withdraw the amount of such excess from the Excess Funding Account and pay
such amount to the seller in payment of the purchase price for such principal
receivables. Upon any such release of funds from the Excess Funding Account to
the seller, the Aggregate Series Nominal Liquidation Amount will be increased
by the amount released, with the increase being allocated pro rata to each
series of notes (other than any series that is not in its revolving period) on
the basis of their respective series nominal liquidation amounts. If the
Aggregate Series Nominal Liquidation Amount is increased in this manner, the
Seller's Interest will be correspondingly reduced by the amount of the funds
released from the Excess Funding Account to the seller. Additionally, any
release of funds from the Excess Funding Account to the seller is subject to
the condition that, after giving effect to the release, the Pool Balance
equals or exceeds the Required Participation Amount.
Amounts (other than investment earnings) that have been deposited into
the Excess Funding Account will be allocated to each series of notes pro rata
on the basis of the respective series nominal liquidation amounts. On the
payment date following the end of a revolving period for a series of notes,
the indenture trustee will apply any funds (other than investment earnings) in
the Excess Funding Account that are allocable to that series as we describe in
the related prospectus supplement.
On each payment date, we will allocate all net investment income earned on
amounts in the Excess Funding Account since the preceding payment date to each
series of notes pro rata on the basis of the respective series nominal
liquidation amounts. We will apply the amount of net investment income so
allocated to a series in the manner described in the related prospectus
supplement.
Allocation of Collections; Deposits in Collection Account
On each Determination Date, the servicer will calculate the amounts to
be allocated in respect of collections received on recei +vables with respect
to the related collection period to the noteholders of each outstanding series
or class or the seller in accordance with the indenture supplements.
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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:
o DCS remains the servicer under the sale and servicing agreement;
o no Service Default has occurred and is continuing; and
o either:
-- DCS or DaimlerChrysler North America Holding Corporation has and
maintains a short-term debt rating of at least A-1 by Standard &
Poor's and P-1 by Moody's,
-- DCS 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
-- DCS otherwise obtains the rating agency confirmations described
below in this paragraph.
In that case, subject to any limitations referred to below, DCS may use for
its own benefit all collections until the related payment date. At that time
DCS 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 indenture trustee written confirmation from the
applicable rating agencies that the failure by DCS to make daily deposits will
not cause the rating agencies to reduce or withdraw the rating of any
outstanding series or class of notes.
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 payments and distributions that the issuer must make;
o the amounts the issuer must deposit into any account maintained for
the benefit of noteholders of any series and other parties; and
o the amounts the issuer 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 into the
Collection Account, the servicer will distribute directly to the seller its
share of the interest collections described in this prospectus in an amount
equal to the Seller's Percentage for the related collection period of interest
collections deposited into the Collection Account for such date. On any date
on which the servicer deposits collections into the Collection Account, the
servicer will also distribute directly to the seller its share of the
principal collections described in this prospectus in an amount equal to the
Seller's Percentage for the related collection period of principal collections
deposited into the Collection Account for such date so long as the Pool
Balance (determined after giving effect to any Principal Receivables
transferred to the issuer on the date) equals or exceeds the Aggregate Series
Nominal Liquidation Amount for the immediately preceding Determination Date
(after giving effect to the allocations,
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distributions, withdrawals and deposits to be made on the payment date
immediately following the Determination Date. Any principal collections
allocated to the seller based on the Seller's Percentage that are not released
to the seller as a result of the condition specified in the immediately
preceding sentence will be kept in the Collection Account and included as part
of the Unallocated Principal Collections.
Defaulted Receivables and Recoveries
The "Defaulted Receivables" on any Determination Date are:
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 issuer (or to the CARCO receivables trust if the receivables were
initially transferred to the CARCO receivables trust), which arose in
an Account which became an Ineligible Account after the date of such
transfer of the receivables and which were not Eligible Receivables
for any six consecutive Determination Dates after the Account became
an Ineligible Account.
The "Defaulted Amount" for any Determination Date 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:
-- 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
-- the excess, if any, for the immediately preceding Determination
Date of the amount determined pursuant to this second bullet point
for that Determination Date over the amount determined pursuant to
the first bullet point above for that 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 (i) to the seller to the Seller's Percentage of the Defaulted Amount
for each collection period and (ii) to each series, the applicable Series
Floating Allocation Percentage of the Defaulted Amount.
If the servicer adjusts the amount of any receivable because of a rebate,
refund, credit adjustment or 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, and, following such adjustment downward,
the Pool Balance would be less than the Aggregate Series Nominal Liquidation
Amount on 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
be required to deposit a cash amount equal to the deficiency (up to the amount
of the adjustment) 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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Termination
The issuer and the sale and servicing agreement will terminate upon the
final distribution by the indenture trustee and the owner trustee of all
property of the issuer in accordance with the indenture and the Delaware
Statutory Trust Act.
When the issuer is terminated, it will transfer to DCWR all right, title
and interest in the remaining receivables and other funds of the issuer, other
than amounts in the issuer's trust accounts for the final payment of principal
and interest to noteholders.
In any event, the last payment of principal and interest on any series of
notes will be due and payable no later than the date we specify to be the
legal final maturity date for that series in the related prospectus
supplement.
Indemnification
The sale and servicing agreement states that the servicer will indemnify
the issuer and the indenture 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
issuer, the indenture trustee or the servicer under the sale and servicing
agreement. The servicer will not so indemnify the issuer or the indenture
trustee, however, if the acts, omissions or alleged acts or omissions
constitute fraud, gross negligence, breach of fiduciary duty or willful
misconduct by the indenture trustee. Also, the servicer will not indemnify the
issuer, the indenture trustee or the noteholders for any act taken by the
indenture trustee at the request of the noteholders or for any tax which the
issuer or the noteholders is required to pay.
The sale 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
issuer, the indenture trustee, the noteholders or any other person for taking
any action, or for refraining from taking any action, under the sale 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 sale and servicing agreement.
Also, the sale 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 sale 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 the
noteholders with respect to the sale and servicing agreement and the rights
and duties of the parties to that agreement and the interest of the
noteholders under that agreement.
Collection and Other Servicing Procedures
Under the sale 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 issuer.
DCS 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 Redemption Event to occur with respect to any series; and
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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 DCS 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 issuer include:
o providing assistance in any inspections of the documents and records
relating to the Accounts and receivables by the indenture trustee
under the sale and servicing agreement;
o maintaining the agreements, documents and files relating to the
Accounts and receivables as custodian for the issuer; and
o providing related data processing and reporting services for
noteholders and on behalf of the issuer.
Servicer Covenants
In the sale 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 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 noteholders 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 issuer or the indenture
trustee 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 sale 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 indenture trustee may agree to, and has a materially adverse effect on the
interests of all noteholders in any receivable or Account,
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DCS, as servicer, will purchase the receivable or all receivables in the
Account, as applicable. If DCS is the servicer, DCS 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 will deem the
amount of the deposit a Transfer Deposit Amount. The purchase by the servicer
constitutes the sole remedy available to the noteholders if the covenant or
warranty of the servicer is not satisfied and the issuer'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 indenture supplement or
prospectus supplement, the servicer's compensation for its servicing
activities and reimbursement for its expenses in respect of a series will be a
monthly servicing fee (the "Monthly Servicing Fee"). The Monthly Servicing Fee
in respect of a series is an amount payable in arrears on each payment date on
or before the legal final maturity date for that series equal to one-twelfth
of the product of:
o the annual "Servicing Fee Rate" specified in the prospectus
supplement; and
o the series nominal liquidation amount for that series.
The servicer will 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 sale and servicing agreement, the
indenture and the applicable indenture supplement.
The servicer may waive its right to receive the Monthly 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 waived Monthly Servicing Fee. If the servicer waives its right to receive
the Monthly Servicing Fee on any payment date, we will deem the Monthly
Servicing Fee for that payment date to be zero.
The seller will pay the portion of the aggregate Servicing Fee allocable
solely to the Seller's Interest in the receivables held by the issuer.
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 indenture trustee and independent
accountants and all other fees and expenses which are not expressly stated in
the sale and servicing agreement to be payable by the issuer or the
noteholders other than federal, state and local income and franchise taxes, if
any, of the issuer or the noteholders.
Matters Regarding the Servicer
The servicer may not resign from its obligations and duties under the
sale and servicing agreement, except upon determination that those duties are
no longer permissible under applicable law. No resignation will become
effective until the indenture trustee or a successor to the servicer has
assumed the servicer's responsibilities and obligations under the sale and
servicing agreement (DCS 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 obligations under the
sale and servicing agreement.
Any person into which, in accordance with the sale 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 sale and servicing agreement.
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Service Default
In the event of any Service Default, the indenture trustee, by written
notice to the servicer, may terminate all of the rights and obligations of the
servicer, as servicer, under the sale 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 in the Seller's
Interest under the sale and servicing agreement will not be affected by any
Service Transfer. The indenture trustee shall as promptly as possible appoint
a successor servicer and if no successor servicer has been appointed by the
indenture 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 sale and servicing agreement shall pass to and be vested in
the indenture trustee. Before any Service Transfer, the indenture trustee will
review any bids obtained from potential servicers meeting eligibility
requirements set forth in the sale 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 indenture trustee to make any payment,
transfer or deposit, on the date the sale and servicing agreement
requires the servicer to do so, which is not cured within a five-day
grace period;
o failure by the servicer duly to observe or perform any other covenants
or agreements of the servicer in the sale 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 indenture trustee shall have given written
notice of the failure to the servicer;
o the servicer delegates its duties under the sale and servicing
agreement, except as specifically permitted under that agreement;
o any representation, warranty or certification made by the servicer in
the sale and servicing agreement or in any certificate delivered under
the sale and servicing agreement proves to have been incorrect in any
material respect when made, has a materially adverse effect on the
rights of the noteholders of any outstanding series, and which
materially adverse effect continues for a period of 60 days after the
indenture trustee shall have given written notice of that fact to the
servicer; or
o certain 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
bullet point for a period of ten business days or referred to under the
second, third or fourth bullet points for a period of 60 business days, will
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 will not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the sale and
servicing agreement and the servicer will provide the indenture trustee, any
enhancement providers, the seller and the noteholders prompt notice of the
failure or delay by it, together with a description of its efforts to so
perform its obligations. The servicer will immediately notify the indenture
trustee in writing of any Service Default.
Reports
On each payment date, the indenture trustee will forward to each
noteholder of record of any series a statement (the "Monthly Noteholders'
Statement") prepared by the servicer. The Monthly Noteholders' Statement
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will set forth information with respect to the issuer and the notes of the
series, as we state in the related indenture supplement and describe in the
related prospectus supplement.
With respect to each payment date, the Monthly Noteholders' Statement
with respect to any series will include the following information with respect
to the notes of that series:
o the total amount paid on the notes of the series;
o the amount of the payment allocable to principal; and
o the amount of the payment allocable to interest.
On or before January 31 of each calendar year, the indenture trustee will
furnish, or cause to be furnished, to each person who at any time during the
preceding calendar year was a noteholder of record a statement containing the
information required to be provided by an issuer of indebtedness under the
Internal Revenue Code for the preceding calendar year or the applicable
portion of that year during which the person was a noteholder, together with
other customary information which the Internal Revenue Code requires issuers
of indebtedness to provide and other customary information which noteholders
need to prepare their tax returns. See "Tax Matters."
Evidence as to Compliance
The sale 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 DCS's portfolio of wholesale receivables or an
attestation in respect of the servicer's assessment as to its compliance with
certain servicing criteria.
The sale and servicing agreement states that on or before March 31 of
each calendar year, the servicer will deliver to the indenture 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 sale 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. In lieu of (or in addition to) such statement, the servicer, in its
sole discretion, may deliver an assessment as to its compliance with certain
servicing criteria.
You may obtain copies of all statements, certificates and reports
furnished to the indenture trustee by delivering a written request to the
indenture trustee.
Amendments
The seller, the servicer, the issuer and the indenture trustee may amend
the sale and servicing agreement, without noteholder 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 noteholders and the indenture
trustee shall have received written confirmation from each rating agency that
the amendment will not result in the reduction or withdrawal of the ratings of
any outstanding notes which it has rated.
The seller, the servicer and indenture trustee may amend the sale and
servicing agreement and any indenture supplement with the consent of the
holders of notes evidencing not less than 66 2/3% of the aggregate outstanding
dollar principal amount of the notes 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 sale and servicing agreement or of modifying in
any manner the rights of noteholders. No amendment, however, may:
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o reduce in any manner the amount of or delay the timing of payments
required to make to noteholders or deposits of amounts to be so paid
without the consent of each affected noteholder;
o change the definition or the manner of calculating any noteholders'
interest in the receivables without the consent of each affected
noteholder;
o reduce the amount available under any enhancement without the consent
of each affected noteholder, except as we may otherwise describe in
the related prospectus supplement;
o adversely affect the rating of any series or class by any rating
agency without the consent of the holders of notes evidencing not less
than 66 2/3% of the aggregate outstanding dollar principal amount of
the notes of that series or class; or
o reduce that percentage of the outstanding dollar principal amount of
notes the holders of which are required to consent to any amendment
without the consent of each noteholder.
Promptly following the execution of any amendment to the sale and servicing
agreement, other than an amendment described in the preceding paragraph, the
indenture trustee will notify each noteholder in writing of the substance of
the amendment.
However, we will deem each holder of a note, by its acceptance of the
note, to have consented to an amendment to the sale and servicing agreement
and any other related document or agreement for the purpose of providing for
the transfer of receivables from DCWR (or an additional seller under the sale
and servicing agreement) to a bankruptcy remote special purpose entity, and
from that entity to the issuer and the substitution of a bankruptcy remote
special purpose entity as the beneficiary of the issuer.
The sale and servicing agreement may not be amended in any manner which
materially adversely affects the interests of any enhancement provider without
its prior consent.
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Description of the Receivables Purchase Agreement
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The parties to the Receivables Purchase Agreement are DCS, as seller
(together with its predecessors as appropriate, the "RPA seller"), and DCWR,
as purchaser. DCS became the RPA seller as successor by merger. DCWR became
the purchaser as assignee of U.S. Auto Receivables Company ("USA"), which was
in turn an assignee of Chrysler Auto Receivables Company ("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.
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 then existing and the related Collateral Security as of the
Initial Cut-Off Date and will sell or transfer all of the receivables created
after that date and the related Collateral Security. In addition, the RPA
seller has previously designated and may designate in the future Additional
Accounts, and has previously conveyed and will convey 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. Prior
to the Initial Cut-Off Date, the seller sold or transferred the related
Collateral Security to the CARCO receivables trust. On that date the CARCO
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receivables trust will transfer to the issuer all of the receivables and
Collateral Security then held by it. Also on that date the seller will begin
selling or transferring to the issuer the receivables and Collateral Security
purchased by the seller from the RPA Seller on or after that date.
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 issuer. 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 -- Risk factors relating to the receivables -- 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 --
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 made 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 sale 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 sale and servicing agreement in
respect of the retransfer of the Ineligible Receivable shall be paid in cash.
The RPA seller has made or will 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 sale
and servicing agreement to accept retransfer of the receivables, the RPA
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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 sale 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 agreed 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 agreed further that, except for the sale and
conveyances under the Receivables Purchase Agreement and the interests created
under the sale 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 agreed 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.
The RPA seller has agreed that, to the extent it has a security interest
in any Collateral Security resulting from any capital loans, equipment loans
or other non-vehicle advances made in connection with the Accounts, such
security interest is junior and subordinate to the issuer's security interest
in the Collateral Security and that the RPA seller will not realize upon the
Collateral Security until all required payments on the receivables held by the
issuer have been paid in full.
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 issuer.
Termination
The Receivables Purchase Agreement will terminate immediately after the
issuer 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 issuer.
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Legal Aspects of the Receivables
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Transfer of Receivables
The RPA seller sells or transfers the receivables to the seller. The
Seller immediately sells or transfers the receivables to the issuer. Also, on
the Initial Cut-Off Date the CARCO receivables trust transferred the
receivables then held by it to the issuer. The seller has represented and
warranted and will represent and warrant on the Series Issuance Date with
respect to each Series that:
o the transfer to the issuer constituted a valid transfer to the issuer
of all right, title and interest of the seller in and to the
receivables; and
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o under the UCC, as in effect in Delaware, there exists a valid,
subsisting and enforceable first-priority perfected ownership interest
in the receivables, in existence on the Initial Cut-Off Date or at the
date of addition of any Additional Accounts, in favor of the issuer
and a valid, subsisting and enforceable first-priority perfected
ownership interest in the receivables created after that time in favor
of the issuer on and after their creation.
However, the transfer of receivables by the seller to the issuer could be
deemed to create a security interest under the UCC. For a discussion of the
issuer's rights arising from these representations and warranties not being
satisfied, see "Description of the Sale and Servicing Agreement --
Representations and Warranties."
Each of the RPA seller and the seller has represented that the
receivables are "tangible chattel paper", accounts" or "payment intangibles"
for purposes of the UCC as in effect in Michigan. If the receivables are
deemed to be tangible chattel paper, accounts or payment intangibles, and the
transfer of the receivables by either the RPA seller to the seller or by the
seller to the issuer is deemed either to be a sale or to create a security
interest, the UCC as in effect in Michigan or Delaware, respectively, applies.
In that case, except for the sale of payment intangibles, the transferee must
file an appropriate financing statement or statements in order to perfect its
interest in the receivables. If the receivables are tangible chattel paper,
the transferee may alternatively perfect its interest in the receivables by
taking possession of the chattel paper. Both the seller and the issuer have
filed financing statements covering the receivables under the UCC as in effect
in Michigan and Delaware, respectively, to perfect their respective interests
in the receivables and continuation statements are required to be filed as
required to continue the perfection of those interests. Similarly, the issuer
has filed a financing statement covering the receivables in order to perfect
under the UCC as in effect in Delaware to perfect the indenture trustee's in
the receivables and continuation statements are required to be filed to the
extent necessary to continue the perfection of the indenture trustee's
security interest. The receivables have not and will not be stamped to
indicate the interest of the seller, the issuer or the indenture.
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 issuer's interest. A purchaser of the
receivables who gives new value and takes possession of the instruments which
evidence the receivables, i.e., the tangible chattel paper, in the ordinary
course of the purchaser's business may, under some circumstances, have
priority over the interest of the issuer 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 issuer may also have priority over
the interest of the issuer in the receivable. Under the Receivables Purchase
Agreement, the RPA seller will warrant to the seller, and under the sale and
servicing agreement the seller has warranted to the issuer, that the
receivables transferred under the sale and servicing agreement 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, transfer or grant any lien on any receivable other than to the issuer.
Also, while DCS is the servicer, cash collections on the receivables may, in
some cases, be commingled with the funds of DCS prior to each payment date
and, in the event of the bankruptcy of DCS, the indenture trustee may not have
a perfected security 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 by the debtor. In that event, payments of collections in
respect of the receivables to the seller, the issuer and the
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indenture trustee could be delayed, or, if the court should rule in favor of
any trustee-in-bankruptcy, debtor in possession or creditor, reduced in
amount. See "Risk Factors -- Risk factors relating to the receivables --
Various legal aspects may cause delays in your receiving payments or may
result in reduced payments or losses on your notes."
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 receivables 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 issuer that the transfer of the
receivables to the issuer is a sale of the receivables to the issuer. The
seller has or will take all actions that are required under Michigan and
Delaware law to perfect the issuer's ownership interest in the receivables and
the seller has warranted to the issuer that the issuer 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 DCS or the seller arising prior to the time a receivable
is conveyed to the issuer may have priority over the interest of the issuer in
the receivable and the security interest of the indenture trustee 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 one of its members. The issuer, under the sale and servicing
agreement, and the noteholders, under the respective indenture supplement,
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
issuer should be recharacterized as a pledge of the receivables. In that
event, payments on the receivables could be delayed or, should the court rule
in favor of any bankruptcy trustee, debtor in possession or creditor, reduced
in amount.
The seller does not intend to file, and DCS 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.
Notwithstanding the treatment by the RPA seller and the seller of their
transfers of receivables as a legal sale, accounting principles that are
expected to apply to the RPA seller and/or the seller at some point in the
future may require that these transfers of receivables, including the sale of
the collateral certificate to the issuer, be treated as a financing for
accounting purposes.
If the RPA seller or the seller were to become a debtor in a bankruptcy
case, an Early Redemption Event would occur with respect to the notes of each
series. In that event, under the Receivables Purchase Agreement, new
receivables would no longer be transferred to the seller and, under the sale
and servicing agreement, only collections on receivables already sold to the
seller and transferred to the issuer would be available to be applied to pay
interest and principal owed on the notes. 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 notes might be adversely affected. In addition,
distributions in respect of principal on each note would not be subject to any
applicable controlled accumulation amount specified in the related indenture
supplement.
The occurrence of events of bankruptcy, insolvency or receivership with
respect to the servicer will result in a Service Default. A Service Default,
in turn, may result in an Early Redemption 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-
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bankruptcy of the servicer may have the power to prevent the indenture trustee
and the noteholders from appointing a successor servicer.
Payments made in respect of repurchases of receivables by DCS or the
seller under the sale and servicing agreement may be recoverable by DCS or the
seller, as debtor in possession, or by a creditor or a trustee-in-bankruptcy
of DCS or the seller, as a preferential transfer from DCS or the seller if the
payments are made within one year prior to the filing of a bankruptcy case in
respect of DCS or the seller, as the case may be.
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Tax Matters
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Federal Income Tax Consequences
General
The following summary describes the anticipated material United States
federal income tax consequences of the purchase, ownership and disposition of
the notes issued by the issuer. This discussion is based upon current
provisions of the Internal Revenue Code, existing and proposed Treasury
regulations, and current administrative rulings, judicial decisions and other
applicable authorities. There are no cases or Internal Revenue Service ("IRS")
rulings on similar transactions involving debt issued by a trust with terms
similar to those of the notes and no ruling from the IRS has been or will be
sought on any of the issues discussed below. As a result, we cannot assure you
that the IRS will not challenge the conclusions reached in this discussion.
Furthermore, legislative, judicial or administrative changes may occur,
possibly with retroactive effect, which could affect the accuracy of the
statements and conclusions set forth in this prospectus as well as the tax
consequences to noteholders.
This discussion does not address all aspects of federal income taxation
that may be relevant to the holders of notes in light of their personal
investment circumstances or, except for specific limited discussions of
particular topics, that are relevant to noteholders subject to special
treatment under the federal income tax laws, such as financial institutions,
broker-dealers, life insurance companies, tax-exempt organizations, real
estate investment trusts, regulated investment companies, dealers in
securities or currencies, holders that hold the notes as part of a hedge,
straddle, "synthetic security" or other integrated transaction for United
States federal income tax purposes and holders whose functional currency is
not the U.S. dollar. Further, this summary does not include any description of
any alternative minimum tax consequences, United States federal estate or gift
tax laws or the tax laws of any state, local or foreign government that may be
applicable to the notes. Additionally, this summary does not address the tax
consequences of the purchase, ownership or disposition of the notes issued by
the issuer by any holder treated as a partnership for federal income tax
purposes. If a partnership (including for this purpose any entity treated as a
partnership for United States federal income tax purposes) is a beneficial
owner of the notes, the treatment of a partner in the partnership will
generally depend upon the status of the partner and upon the activities of the
partnership. A holder of the notes that is a partnership and partners in such
partnership should consult their tax advisors about the United States federal
income tax consequences of holding and disposing of the notes. Unless
otherwise specified, this information is directed only to prospective
purchasers who:
o purchase notes in the initial distribution of the notes;
o are U.S. noteholders (as defined below); and
o hold the notes as "capital assets" within the meaning of Section 1221
of the Internal Revenue Code.
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As used in this discussion, the term "U.S. noteholder" means a beneficial
owner of a note that is for United States federal income tax purposes:
o a citizen or resident of the United States;
o a corporation (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;
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 the 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. 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. If a partnership (including for
this purpose any entity treated as a partnership for United States federal
income tax purposes) is a beneficial owner of the notes, the treatment of a
partner in the partnership will generally depend upon the status of the
partner and upon the activities of the partnership. A holder of the notes that
is a partnership and partners in such partnership should consult their tax
advisors about the United States federal income tax consequences of holding
and disposing of the notes.
Prospective investors should consult with their tax advisors as to the
United States federal, state, local, foreign and any other tax consequences to
them relating to their purchase, ownership and disposition of notes.
Tax Characterization of the Issuer
Sidley Austin Brown & Wood LLP, special U.S. federal tax counsel to the
seller and the issuer ("Tax Counsel"), is of the opinion that, assuming that
the terms of the trust agreement, the indenture, the sale and servicing
agreement and related documents are complied with, the issuer will not be
characterized as an association or a publicly traded partnership taxable as a
corporation for United States federal income tax purposes.
The seller will agree, and the noteholders will agree by their purchase
of notes, to treat the notes as debt for United States federal, state and
local income, franchise and single business tax purposes. Assuming such
characterization of the notes is correct, the United States federal income tax
consequences to noteholders described below under "-- Tax Characterization and
Treatment of Notes -- Characterization as Debt" will apply to the noteholders.
If, contrary to the opinion of Tax Counsel, the IRS were to successfully
assert that one or more classes of notes did not represent debt for federal
income tax purposes, such class or classes of notes may be treated as equity
interests in the issuer. If so treated, the issuer may be treated as a
publicly traded partnership taxable as a corporation with potentially adverse
tax consequences (for instance, the issuer may not be able to reduce its
taxable income by deductions for interest expense on notes recharacterized as
equity). Alternatively, and in the opinion of Tax Counsel, the more likely
view is that the issuer may be treated as a publicly traded partnership that
is not be taxable as a corporation because it falls within an applicable safe
harbor. Nonetheless, treatment
75
of notes as equity interests in such a partnership may 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.
Because the seller will, for federal income tax purposes, treat all notes
as indebtedness issued by the issuer characterized as either a partnership or
a division of the person that holds the Seller's Certificate, the beneficial
owner of the Seller's Certificate will not comply with the tax reporting
requirements that would apply under any alternative characterization of the
issuer or the notes.
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 United States federal income
tax purposes. The seller, 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, single business and franchise tax purposes. See "--
Tax Characterization of the Issuer" above in this prospectus for a discussion
of certain potential federal income tax consequences to noteholders if the IRS
were to successfully challenge 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 ("OID"), unless
otherwise provided in the applicable prospectus supplement, 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 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 excess of
the statutorily defined de minimis amount. In general, OID is the excess of
the "stated redemption price at maturity" of a debt instrument over its "issue
price." A note's "stated redemption price at maturity" is the total of all
payments required to be made under the note through maturity except for
payments of "qualified stated interest." Generally, interest is qualified
stated interest if it 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"
of a note is the initial price at which a substantial amount of the notes are
sold, excluding sales to bond houses, 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 greater than de minimis OID. First, interest payments
on a series of notes may not be deemed "qualified stated interest" under
applicable Treasury regulations 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.
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If a note were treated as being issued with greater than de minimis OID,
a noteholder would be required to include such 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 cash method noteholder would have to rely on other income 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 de minimis OID in income
proportionately as principal payments are made on such note.
U.S. noteholders may generally, upon election, include in income all
interest (including stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis
market discount, and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium) that accrues on a debt instrument by using the
constant yield method applicable to original issue discount, subject to
certain limitations and exceptions.
Short Term Notes. 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;
o a bank;
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 that is 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.
Market Discount and Premium. 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. These rules provide, in part, that gain on the sale or other
disposition of a note and partial principal payments on a note are treated as
ordinary income to the extent of accrued market discount which has not been
previously included in income. The market discount rules also provide for
deferral of interest deductions with respect to debt incurred to purchase or
carry a note that has market discount. Market
77
discount will be considered to accrue ratably during the period from the date
of acquisition to the maturity date of the note, unless the U.S. noteholder
elects to accrue market discount on the basis of semiannual compounding. A
U.S. noteholder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case
the rules described above regarding the treatment as ordinary income or gain
upon the disposition of the note and upon the receipt of certain cash payments
and regarding the deferral of interest deductions will not apply. Generally,
such currently included market discount is treated as ordinary interest for
United States federal income tax purposes. Such an election will apply to all
debt instruments acquired by the U.S. noteholder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the IRS.
If a U.S. noteholder purchases a note for an amount that is greater than
the sum of all amounts payable on the notes after the purchase date other than
payments of qualified stated interest, such U.S. noteholder will be considered
to have purchased the note with "amortizable bond premium" equal in amount to
such excess. A U.S. noteholder may elect to amortize such premium using a
constant yield method over the remaining term of the note and may offset
interest otherwise required to be included in respect of the note during any
taxable year by the amortized amount of such excess for the taxable year. Any
election to amortize bond premium applies to all taxable debt instruments
acquired by the U.S. noteholder on or after the first day of the first taxable
year to which such election applies and may be revoked only with the consent
of the IRS.
Disposition of Notes. If a noteholder sells a note, the holder generally
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 other than
qualified stated interest 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.
Foreign Currency Notes. Special tax considerations relating to notes
denominated in one or more foreign currencies will be set forth in the
applicable prospectus supplement relating thereto.
Information Reporting and Backup Withholding. The indenture trustee will
be required to report annually to the IRS and to withhold on payments of
interest made to the noteholder at the applicable rate, except as to payments
made 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). In addition,
upon the sale of a note to (or through) a broker, the broker must report the
sale and withhold on the entire purchase price at the applicable rate, unless
either (i) the broker determines that the seller is a corporation or other
exempt recipient or (ii) the seller certifies that such seller is a Non-U.S.
noteholder (and certain other conditions are met). Each holder will be
required to provide to the indenture trustee, a certificate, signed under
penalties of perjury, containing the beneficial owner's name, address, correct
federal taxpayer identification number and a statement that the beneficial
owner is not subject to backup withholding. Certification of the noteholder's
non-U.S. status would be made normally on an IRS Form W-8BEN under
78
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence. Non-U.S. noteholders characterized as partnerships
or trusts for U.S. federal income tax purposes may be subject to additional
reporting requirements and should consult their tax advisers. Should a
noteholder who is not otherwise exempt from backup withholding fail to provide
the required certification, the indenture trustee will be required to withhold
on payments of interest made to the noteholder at the applicable rate and pay
the withheld amount to the IRS. Backup withholding does not constitute a tax
and may be credited against the noteholder's federal income tax liability.
Tax Consequences to Non-U.S. Noteholders. Under United States federal
income tax law now in effect, subject to exceptions applicable to certain
types of interest, payments of interest by the issuer to a holder of a note
will be considered "portfolio interest." If such interest is not portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30%, unless such rate is reduced or eliminated
pursuant to an applicable tax treaty or such interest is effectively connected
with the conduct of a trade or business within the United States and, in
either case, the appropriate statement has been provided. A non-U.S.
noteholder that is an individual or corporation (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 and
withholding 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 issuer, a controlled foreign corporation
related to the issuer or seller or a bank extending credit pursuant to a loan
agreement entered into in the ordinary course of its trade or business. To
qualify for the exemption from taxation, the Withholding Agent, as defined
below, must have received a statement (generally made on IRS Form W-8BEN) 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, an IRS Form
W-8BEN 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. The
beneficial owner must inform the Withholding Agent within 30 days of such
change and furnish a new IRS Form W-8BEN.
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
will 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 IRS Form W-8BEN
(or a substitute form).
79
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 year, subject to adjustment,
unless it qualifies for a lower rate under an applicable tax treaty.
State and Local Tax Consequences
In addition to the federal income tax considerations described above,
potential investors should consider the state and local income tax
consequences of acquiring, owning and disposing of the notes. The activities
of servicing and collecting the receivables will be undertaken by the
servicer, which is a Michigan limited liability company. Because of the
variation in each state's tax laws based in whole or in part upon income,
state and local income tax law may differ substantially from the corresponding
federal law, and it is thus impossible to predict tax consequences to the
noteholders in all of the state taxing jurisdictions in which they are already
subject to tax. Accordingly, this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
investors should consult their own tax advisors with respect to the various
state and local tax consequences of an investment in the notes.
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ERISA Considerations
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General
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue 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 Internal Revenue Code from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Internal Revenue
Code with respect to the plan. Certain governmental plans, although not
subject to ERISA or the Internal Revenue Code, are subject to federal, state
or local laws ("Similar Law") that impose similar requirements. Such plans
subject to ERISA, Section 4975 Internal Revenue Code, or Similar Law are
referred to 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
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 Internal Revenue
Code or under Similar Law for such persons.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the notes --
for example:
80
o Prohibited Transaction Class Exemption 96-23, which exempts certain
transactions effected on behalf of a Plan by an "in-house asset
manager";
o Prohibited Transaction Class Exemption 95-60, which exempts certain
transactions between insurance company general accounts and parties in
interest;
o Prohibited Transaction Class Exemption 91-38, which exempts certain
transactions between bank collective investment funds and parties in
interest;
o Prohibited Transaction Class Exemption 90-1, which exempts certain
transactions between insurance company pooled separate accounts and
parties in interest; and
o Prohibited Transaction Class Exemption 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 to 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.
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 non-exempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Internal Revenue 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 for a fee and
pursuant to an agreement or understanding that such advice
81
-- 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 Internal Revenue
Code and exempt from taxation under Section 501(a) of the Internal Revenue
Code is subject to the prohibited transaction rules in Section 503 of the
Internal Revenue 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 availability of exemptive
relief from the prohibited transaction rules and other issues and their
potential consequences.
The sale of notes to a Plan is in no respect a representation by the
issuer or any underwriter of the notes that this investment meets all relevant
legal requirements with respect to investments by Plans generally or any
particular Plan, or that this investment is appropriate for Plans generally or
any particular Plan.
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Experts
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The statements of assets, liabilities and equity arising from cash
transactions of the issuer as of December 31, 2003 and 2002 and the related
statements of cash receipts and disbursements for the year ended December 31,
2003 and the period from June 1, 2002 (inception) through December 31, 2002,
have been incorporated by reference herein and in the registration statement
in reliance upon the report by KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The reports contain explanatory
language stating that the financial statements were prepared on the basis of
cash receipts and disbursements, which is a comprehensive basis of accounting
other than accounting principles generally accepted in the United States of
America.
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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.
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;
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o the purchase price of the notes and the proceeds to the seller from
the sale;
o any underwriting discounts and other items constituting underwriters'
compensation;
o 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 notes. The
notes may be offered to the public either through underwriting syndicates
represented by managing underwriters or by one or more 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 or the issuer. 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 or the issuer 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 DCS 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
Permitted 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.
Until the distribution of the notes of a series is completed, rules of
the SEC 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
83
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 DCS, 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 DCS, 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 (the "U.K. Regulations");
o it has complied and will comply with all applicable provisions of the
U.K. Regulations and of the Financial Services and Markets Act 2000
(the "FSMA") 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 communicated or caused to be communicated and it will only
communicate or cause to be communicated any invitation or inducement
to engage in investment activity (within the meaning of section 21 of
the FSMA) received by it in connection with the issue or sale of any
series of notes in circumstances in which section 21(1) of the FSMA
does not apply to the issuer.
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 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
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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 name in the applicable prospectus supplement, which may also be
Sidley Austin Brown & Wood LLP. Sidley Austin Brown & Wood LLP from time to
time represents DCS and its affiliates on other matters.
84
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Glossary of Principal Terms for Prospectus
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"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 a series, the period specified in the
related prospectus supplement during which principal will be accumulated for
payment to the noteholders of that series.
"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
issuer.
"Additional Accounts" means the additional accounts which the seller has,
subject to conditions, designated from time to time to be included as
Accounts.
"Additional Cut-Off Date" means, for any Additional Accounts, the date
those Additional Accounts are identified and selected.
"Adjustment Payment" means, if the servicer adjusts downward the amount
of a receivable because of a rebate, refund, credit adjustment or 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, and
following such downward adjustment, the Pool Balance would be less than the
Aggregate Series Nominal Liquidation 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 such
Determination Date), the cash payment required to be made by the seller to the
Collection Account equal to the deficiency (up to the amount of the
adjustment).
"Aggregate Series Nominal Liquidation Amount" means, for any collection
period, an amount equal to the sum of the series nominal liquidation amounts
for all Series of Notes determined on the Determination Date occurring in such
collection period (in each case, after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the payment date
following the Determination Date during the collection period in which such
Determination Date occurs).
"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 issuer'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 applicable conditions specified in the sale
and servicing agreement, as described under "Description of the Sale and
Servicing Agreement -- Removal of Accounts."
"Bankruptcy Code" means Title 11 of the United States Code.
85
"Benefit Plans" means, collectively, employee benefit plans subject to
ERISA or the Internal Revenue 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.
"CFC Corp." means Chrysler Financial Corporation.
"CFC LLC" means Chrysler Financial Company L.L.C.
"Clearstream" means Clearstream Banking, societe anonyme.
"Collateral Security" means, in respect of the receivables, a security
interest in vehicles and parts inventory, equipment, fixtures, service
accounts, chattel paper, instruments, franchise rights and, in some cases,
realty and a personal guarantee.
"Collection Account" means a Qualified Trust Account that the issuer has
established and will maintain in the name of the indenture trustee for the
benefit of the noteholders of all series.
"collection period" means, for any payment date, the calendar month
preceding the month in which that payment date occurs.
"DaimlerChrysler" means DaimlerChrysler Corporation, the successor to
Chrysler Corporation.
"DCS" means DaimlerChrysler Services 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 status" is described in this prospectus under "The Dealer
Floorplan Financing Business -- `Dealer Trouble Status' and DCS's Write-off
Policy."
"dealers" means domestic automobile dealers franchised by DaimlerChrysler
and/or other automobile manufacturers.
"Defaulted Amount" means, for any Determination Date, 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
86
o the sum of:
-- 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
-- the excess, if any, for the immediately preceding Determination
Date of the amount determined pursuant to this second bullet point
for that Determination Date over the amount determined pursuant to
the first bullet point above 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
o all receivables which were Eligible Receivables when transferred to
the issuer (or to the CARCO receivables trust if the receivables were
initially transferred to the CARCO receivables trust) which arose in an
Account which became an Ineligible Account after the date of such
transfer of the receivables and which were not Eligible Receivables
for any six consecutive Determination Dates after the Account became
an Ineligible Account.
"Definitive Notes" means the notes of a series or class issued in fully
registered, certificated form to noteholders 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 issuer.
"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 payment
date.
"DTC" means The Depository Trust Company.
"Early Redemption Events" are described under "The Indenture -- Early
Redemption Events." The prospectus supplement will describe additional Early
Redemption Events for the related series.
"Eligible Account" means a wholesale financing line of credit extended by
DCS to a dealer, which, as of its date of determination:
o is established by DCS 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 DCS; and
87
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 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 DCS 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 DCS 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
issuer(or if it was initially transferred to the CARCO receivables
trust, at the time of transfer to that 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, DCS or the seller in
connection with the creation of the receivable or the transfer of the
receivable to the issuer (or to the CARCO receivables trust if it was
initially transferred to that trust) or the performance by DCS of the
floorplan financing agreement under which the receivable was created,
have been duly obtained and are in full force and effect;
o as to which at all times following the transfer of the receivable to
the issuer (or to the CARCO receivables trust if it was initially
transferred to that trust), the issuer or the CARCO receivables trust,
as applicable, 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 sale and servicing
agreement;
88
o which (1) if originally transferred to the CARCO receivables trust,
has been the subject of a valid transfer and assignment from the
seller to the CARCO receivables trust and from that trust to the
issuer of all the seller's interest in the receivable, including any
proceeds of the receivable and (2) if directly sold by the seller to
the issuer, has been the subject of a valid transfer and assignment
from the seller to the issuer of 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 issuer (or to the CARCO
receivables trust if it was initially transferred to that 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 issuer
(or to the CARCO receivables trust if it was initially transferred to
that trust), DaimlerChrysler, DCS 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 issuer
(or to the CARCO receivables trust if it was initially transferred to
that trust), neither DaimlerChrysler, DCS nor the seller has taken or
failed to take any action which would impair the rights of the issuer
or the noteholders;
o which constitutes "tangible chattel paper" or an "account" or "payment
intangible," each as defined in Article 9 of the UCC as then in effect
in the State of Michigan; and
o which was transferred to the issuer (or to the CARCO receivables trust
if it was initially transferred to that trust) with all applicable
governmental authorization.
"enhancements" means enhancements which may be provided for one or more
classes of notes, 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 or cash flow enhancement described in the
related prospectus supplement.
89
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means the Euroclear System.
"Euroclear Operator" means Euroclear Bank, S.A./N.V.
"Euroclear Participants" means participants of Euroclear.
"Excess Available Principal Amounts" means, for any payment date, the sum
of the excess Series Available Principal Amounts that remain after giving
effect to the sharing of excess Series Available Principal Amounts on that
payment date, as described under "Description of the Sale and Servicing
Agreement -- Miscellaneous Payments."
"Excess Funding Account" means a Qualified Trust Account that the issuer
has established and will maintain in the name of the indenture trustee for the
benefit of the noteholders, in which excess funding amounts will be maintained
to the extent provided in the sale and servicing agreement, the indenture and
the applicable indenture supplements.
"Finance Hold" is described under "The Dealer Floorplan Financing
Business -- Creation of Receivables."
"Fleet Receivables" means receivables originated in connection with
multiple new vehicle orders of at least five vehicles by specified dealers.
"Global Securities" means the globally offered notes.
"indenture" means the amended and restated indenture dated as of [ ],
2004 between the issuer and the indenture trustee, as amended and supplemented
from time to time, which provides for the issuance of series of notes from
time to time.
"indenture supplement" means, for a series of notes, the supplement to
the indenture that provides for the issuance of that series of notes.
"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
noteholders' 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 "Description of the Sale and Servicing Agreement --
Representations and Warranties" in this prospectus, which breach remains
uncured for 30 days or a longer period as may be agreed to by the indenture
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 noteholders' interest in any receivable or Account.
"Initial Cut-Off Date" means [ ], 2004.
"Insolvency Laws" means the United States Bankruptcy Code or similar
applicable state laws.
90
"interest collections" means (i) collections on the receivables that
consist of interest and other non-principal charges, including insurance fees,
amounts recovered with respect to Defaulted Receivables and insurance
proceeds and (ii) any net investment earings on funds in the Collection Account.
"interest funding account" means, for a series, the account maintained
for that series in which interest is deposited for payment to the noteholders
of that series.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"IRS" means the Internal Revenue Service.
"issuer" means DaimlerChrysler Master Owner Trust.
"legal final" means, for a series of notes, the payment date on which
those notes are required to be paid in full. The legal final for a series of
notes is the legal final maturity date of those notes. We will specify the
legal final for each series of notes in the related prospectus supplement.
"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 consisting of any Excess Available
Principal Amounts and any principal collections allocated to the
seller based on the Seller's Percentage that are not released to the
seller because the Pool Balance (after giving effect to any
receivables transferred to the issuer) does not equal or exceed the
Aggregate Series Nominal Liquidation Amount for all series (after
giving effect to the allocations, distributions, withdrawals and
deposits).
"Monthly Noteholders' Statement" means a statement prepared by the
servicer and forwarded by the indenture trustee to each noteholder of record
of any series on each payment date, that sets forth information with respect
to the issuer and the notes of the series, as stated in the related indenture
supplement.
"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 indenture supplement or
prospectus supplement states otherwise, the share of the Servicing Fee
allocable to noteholders 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 series nominal liquidation amount of that series as of the last
day of the second preceding collection period.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"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
91
o prior model year and two year old miled vehicles.
"nominal liquidation amount" of the notes of a series is described in
general in this prospectus under "The Notes -- Stated Principal Amount,
Outstanding Dollar Principal Amount and Nominal Liquidation Amount of Notes --
Nominal Liquidation Amount of Notes." The nominal liquidation amount of the
notes of a specific series will be described in the related prospectus
supplement.
"OID" means original issue discount.
"OID regulations" means the United States Treasury regulations relating
to OID.
"outstanding dollar principal amount" of the notes of a series is
described in this prospectus under "The Notes -- Stated Principal Amount,
Outstanding Dollar Principal Amount and Nominal Liquidation Amount of Notes --
Outstanding Dollar Principal Amount."
"overcollateralization amount," if any, for a series will be calculated
as described in the related prospectus supplement.
"Overconcentration Amount" means, on any Determination Date, the sum of
the Dealer Overconcentrations on that date.
"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.
"Permitted Investments" means, except as otherwise provided in the
related indenture supplement for any series of notes:
o instruments, investment property or other property consisting of:
-- obligations of or fully guaranteed by the United States of
America,
-- time deposits or certificates of deposit of any depository
institution or trust company incorporated under the laws of the
United States of America or any state thereof (or domestic
branches of foreign depository institutions or trust companies)
and subject to supervision and examination by federal or state
banking or depository institution authorities; provided, however,
that at the time of the indenture trustee's investment or
contractual commitment to invest therein, the certificates of
deposit or short-term deposits of such depository institution or
trust company shall have a credit rating from Moody's and Standard
& Poor's of P-1 and A-1+, respectively, and, if rated by Fitch,
F1+ from Fitch;
-- commercial paper (including but not limited to asset backed
commercial paper) having, at the time of the Indenture Trustee's
investment or contractual commitment to invest therein, a rating
from Moody's and Standard & Poor's of P-1 and A-1+, respectively,
and, if rated by Fitch, F1+ from Fitch;
-- bankers' acceptances issued by any depository institution or trust
company incorporated under the laws of the United States of
America or any state thereof (or domestic branches of foreign
depository institutions or trust companies) and subject to
supervision and examination by federal or state banking or
depository institution authorities; and
92
-- investments in money market funds rated AAA-m or AAA-mg by
Standard & Poor's and Aaa by Moody's or otherwise approved in
writing by each rating agency;
o demand deposits in the name of the indenture trustee in any depository
institution or trust company incorporated under the laws of the United
States of America or any state thereof (or domestic branches of
foreign depository institutions or trust companies) and subject to
supervision and examination by federal or state banking or depository
institution authorities;
o uncertificated securities that are registered in the name of the
indenture trustee upon books maintained for that purpose by the issuer
of these uncertificated securities and identified on books maintained
for that purpose by the indenture trustee as held for the benefit of
the noteholders, and consisting of shares of an open end diversified
investment company which is registered under the Investment Company
Act of 1940, as amended, and which (i) invests its assets exclusively
in obligations of or guaranteed by the United States of America or any
instrumentality or agency thereof having in each instance a final
maturity date of less than one year from their date of purchase or
other Permitted Investments, (ii) seeks to maintain a constant net
asset value per share, (iii) has aggregate net assets of not less than
$100,000,000 on the date of purchase of such shares and (iv) as to
which each rating agency confirms in writing that the investment will
not cause a reduction, qualification or withdrawal of the rating of
any outstanding notes which it has rated; and
o any other investment if each rating agency confirms in writing that
the investment will not cause a reduction, qualification or withdrawal
of the rating of any outstanding notes which it has rated.
"Plan Assets Regulation" means the final regulation issued by the
Department of Labor 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 Amended and Restated Pooling
and Servicing Agreement, as amended and supplemented from time to time, among
DCWR, as seller of the receivables, DCS, as servicer of the receivables, and
the CARCO receivables trust trustee. Prior to the Initial Cut-Off Date the
CARCO receivables trust used to acquire the receivables pursuant to the
pooling and servicing agreement. On the Initial Cut-Off Date, the receivables
were transferred from the CARCO receivables trust to the issuer and the
pooling and servicing agreement was terminated.
"prime rate" means the rate designated as the "prime rate" from time to
time by certain financial institutions selected by DCS.
"principal collections" means collections of principal on the
receivables.
"principal funding account" means, for a series, the account maintained
for that series in which principal is accumulated for payment to the
noteholders of that series.
"principal receivables" means the portion of the receivables that
represents principal.
"Qualified Institution" means either:
o a depository institution, which may include the indenture trustee (so
long as it is a paying agent under the indenture), or the owner
trustee 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
93
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 as to which each rating agency confirms in
writing that the depository institution as a Qualified Institution
will not cause a reduction, qualification or withdrawal of the rating
of any outstanding notes which it has rated.
"Qualified Trust 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; or
o any other account in respect of which each rating agency confirms in
writing that the use of the account will not cause a reduction,
qualification or withdrawal of the rating of any outstanding notes
which it has rated.
"rating agency" means each rating agency designated by the seller in
respect of any outstanding series or class of notes.
"Receivables Purchase Agreement" means the Second Amended and Restated
Receivables Purchase Agreement, as amended and supplemented from time to time,
between DCS, as RPA seller, and DCWR, as buyer.
"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 SEC with respect to the notes.
"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.
"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 indenture
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.
94
"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 issuer for all purposes.
"Repurchased Receivables" means Designated Receivables which have been
deemed repurchased from the issuer 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 notes obtained by
multiplying the Required Participation Percentage for that series of
notes by the nominal liquidation amount of the notes of that series at
that time; plus
o the sum of the overcollateralization amounts for each series of notes
on the preceding payment date, after giving effect to the allocations,
deposits and payments made on that payment date.
"Required Participation Percentage" means, for a series, the required
participation percentage specified in the related indenture supplement.
"RPA seller" means DCS, as seller, together with its predecessors as
appropriate, under the Receivables Purchase Agreement.
"sale and servicing agreement" means the Sale and Servicing Agreement
dated as of [ ], 2004, as amended and supplemented from time to time, among
DCWR, as seller of the receivables, DCS, as servicer of the receivables, and
the issuer.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"seller" means DCWR and its successors.
"Seller's Certificate" means the certificate issued by the issuer that
evidences the Seller's Interest.
"Seller's Interest" means the seller's interest in the assets of the
issuer to extent the assets are not allocated for the payment or security of
the notes as described in this prospectus and the prospectus supplements.
"Seller's Participation Amount" means, at any time of determination, an
amount equal to (i) the Pool Balance at that time minus (ii) the Aggregate
Series Nominal Liquidation Amount at that time.
"Seller's Percentage" means, for any collection period, the percentage
(not less than 0%) equal to 100% minus either:
o the sum of the "Series Floating Allocation Percentages" for all series
of notes (as defined in the related indenture supplements) for such
collection period, when used with respect to allocations of interest
collections and Defaulted Amounts; or
o the sum of the "Series Principal Allocation Percentages" for all
series of notes (as defined in the related indenture supplements) for
such collection period, when used with respect to allocations of
principal collections.
The Seller's Percentage for allocations of Miscellaneous Payments will be
zero.
95
"Series Available Interest Amount" means, for any series of notes, the
interest collections allocated to that series, together with any other
available funds described in the related prospectus supplement that are to be
treated as part of the Series Available Interest Amount for that series.
"Series Available Principal Amount" means, for any series of notes, the
sum of the principal collections and Miscellaneous Payments allocated to that
series, together with any other available funds described in the related
prospectus supplement that are to be treated as part of the Series Available
Principal Amount for that series.
"Series Cut-Off Date" means, for a series, the date stated in the related
indenture supplement on which a revolving period for the series of notes will
begin.
"Series Issuance Date" means the date of issuance of any series.
"series nominal liquidation amount" means, for a series, the sum of (i)
the nominal liquidation amount of the notes of that series plus (ii) the
overcollateralization amount for that series. A prospectus supplement may
provide a different definition.
"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 indenture trustee to make any payment,
transfer or deposit, on the date the servicer is required to do so
under the sale and servicing agreement, the indenture or any indenture
supplement, which is not cured within a five day grace period;
o failure by the servicer duly to observe or perform any other covenants
or agreements of the servicer in the sale and servicing agreement, the
indenture or any indenture supplement, 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 written
notice of the failure shall have been given to the servicer by the
indenture trustee;
o the servicer delegates its duties under the sale and servicing
agreement, except as specifically permitted thereunder;
o any representation, warranty or certification made by the servicer in
the sale and servicing agreement or in any certificate delivered
pursuant to the sale and servicing agreement proves to have been
incorrect when made, has a materially adverse effect on the rights of
the noteholders 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 indenture
trustee; or
o certain 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 indenture trustee, by written notice to the servicer, terminating all
of the rights and obligations of the servicer, as servicer, under the
96
sale and servicing agreement and in and to the receivables and the proceeds
thereof and appointing a new servicer.
"servicer" means DCS or any successor servicer.
"Servicing Fee" means a monthly servicing fee which constitutes the
servicer's compensation for its servicing activities and reimbursement for its
expenses with respect to all of the receivables in the issuer.
"Servicing Fee Rate" means, for a series, the servicing fee rate set
forth in the related indenture supplement.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. or its successors.
"Supplemental Certificate" means a certificate received by the seller in
exchange for a portion of the Seller's Interest that the seller then transfers
or assigns to a person or entity chosen by the seller. The terms of any
Supplemental Certificate will be set forth in a supplement to the trust
agreement. A Supplemental Certificate may be issued only 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 indenture 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 indenture 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 notes.
Any later transfer or assignment of a Supplemental Certificate is also subject
to certain conditions.
"Tax Counsel" means Sidley Austin Brown & Wood LLP, special U.S. federal
income tax counsel to the seller and the issuer.
"Tax Opinion" means an opinion of counsel to the effect that, for
federal income tax and Michigan income and single business tax purposes in
respect of a specified action:
o such action, other than some specified actions, will not adversely
affect the characterization of the notes of any outstanding series or
class as debt; and
o such action will not cause a taxable event to any noteholders or the
issuer.
"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 Pool Balance would be less than the Aggregate Series Nominal
Liquidation 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.
97
"UCC" means the Uniform Commercial Code.
"Unallocated Principal Collections" means any amount of any principal
collections which are held unallocated in the Collection Account.
"USA" means U.S. Auto Receivables Company.
"U.S. Wholesale Portfolio" means the accounts of domestic dealers
financed and serviced by DCS.
"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.
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Annex A
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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 their respective depositaries, who are
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, 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 issuer. 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.
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.
A-1
Trading between DTC participants. DTC participants will settle secondary
market trades between each other using the procedures applicable to securities
previously issued by the issuer 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 their respective depositary 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
the depositary 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.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Global Securities
to the related depositary 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 the
related depositary, 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 the
related depositary 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
A-2
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 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 of a note and are individuals or entities
treated as corporations for federal income tax purposes can obtain a
complete exemption from the withholding tax by filing a signed Form
W-8BEN (Certificate of Foreign Status). A non-U.S. person not
described in the foregoing sentence that beneficially owns a note may
be subject to more complex rules.
o Exemption for non-U.S. persons with effectively connected income (Form
W-8ECI). A non-U.S. person that for federal income tax purposes is an
individual or entity treated as a corporation, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income
from a note 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). A non-U.S. person not described in the
foregoing sentence that beneficially owns a note may be subject to
more complex rules.
A-3
o Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form W-8BEN). Non-U.S. persons that are beneficial owners
of a note and that for federal income tax purposes are individuals or
entities treated as corporations 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 W-8BEN. A non-U.S.
person not described in the foregoing sentence that beneficially owns
a note may be subject to more complex rules.
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).
The Global Security holder, or in the case of 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 are generally 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 DAIMLERCHRYSLER
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 DAIMLERCHRYSLER
those contained in the prospectus or prospectus supplement,
are not authorized by the seller or by the underwriters. Do MASTER OWNER TRUST
not rely on any information or representations other than
those contained in the prospectus or prospectus supplement. $[o]
Auto Dealer Loan
We only intend the prospectus supplement to be an offer Asset Backed Notes,
to sell or a solicitation of any offer to buy the offered Series [o],
securities if: due [o]
o used in jurisdictions in which the offer or
solicitation is authorized,
DAIMLERCHRYSLER WHOLESALE
o the person making the offer or solicitation is RECEIVABLES LLC
qualified to do so, and Seller
o the offer or solicitation is made to anyone to whom DAIMLERCHRYSLER SERVICES
it is lawful to make the offer or solicitation. NORTH AMERICA LLC
Servicer
The information in the prospectus or prospectus
supplement is PROSPECTUS SUPPLEMENT only accurate as of the PROSPECTUS SUPPLEMENT
date of this prospectus supplement.
[underwriter[s]]
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.
============================================================== ==============================================================
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 Securities.
SEC Filing Fee................................................ $126.70
Trustee's Fees and Expenses (including counsel fees).......... To be completed by amendment.
Accounting Fees and Expenses.................................. To be completed by amendment.
Legal Fees and Expenses....................................... To be completed by amendment.
Printing and Engraving Expenses............................... To be completed by amendment.
Rating Agency Fees............................................ To be completed by amendment.
Miscellaneous................................................. To be completed by amendment.
Total.................................................... To be completed by amendment.
Item 15. Indemnification of Directors and Officers.
DaimlerChrysler Corporation (parent of DaimlerChrysler Services North
America LLC 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.
II-1
Item 16. Exhibits:
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).
3.3 -- Form of Certificate of Trust for DaimlerChrysler Master Owner Trust
(the "Issuer") (included in Exhibit 4.3).*
4.1 -- Form of Amended and Restated Indenture between the Issuer and The
Bank of New York, as indenture trustee (the "Indenture Trustee").*
4.2 -- Form of Series Indenture Supplement between the Issuer and the
Indenture Trustee (including form of notes).*
4.3 -- Form of Amended and Restated Trust Agreement between the Registrant
and Chase Manhattan Bank USA, National Association (the "Owner
Trustee") (including form of the Issuer's certificate of trust).*
4.4 -- Form of notes (included in Exhibit 4.2).*
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 certain
federal tax matters.*
23.1 -- Consent of Sidley Austin Brown & Wood LLP (included in opinions
filed as Exhibits 5.1 and 8.1).*
23.2 -- Consent of KPMG LLP.*
25.1 -- Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of The Bank of New York.*
99.1 -- Form of Sale and Servicing Agreement among the Issuer, the Registrant
and DaimlerChrysler Services North America LLC (the "Servicer").*
99.2 -- Form of Amended and Restated Administration Agreement among the
Issuer, DaimlerChrysler Services North America LLC (the
"Administrator") and the Indenture Trustee.*
99.3 -- Form of Second Amended and Restated Receivables Purchase Agreement
between the Registrant and DaimlerChrysler Services North America
LLC.*
- --------------------------------
* To be filed by amendment.
Item 17. Undertakings.
(a) As to Rule 415: The undersigned registrant hereby undertakes:
(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 registrant 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, may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
described in Item 15 herein, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) As to documents subsequently filed that are incorporated by
reference: The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, 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 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 registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
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 Farmington Hills, State of Michigan,
on the 29th day of October, 2004.
DAIMLERCHRYSLER WHOLESALE RECEIVABLES LLC,
as beneficiary of DaimlerChrysler Master Owner Trust
By Chrysler Financial Receivables Corporation, a Member
By /s/ Juergen Walker
-----------------------------------------------------
Juergen Walker
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Christopher A. Taravella, Byron C.
Babbish and Steven C. Poling, or any one or more of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and his name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of his substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 October 29, 2004
Juergen Walker
Principal financial officer and sole director of Chrysler
Financial Receivables Corporation:
Vice President, Sole
/s/ Paul Knauss Director and Chief
- -------------------------------------------------------------- Financial Officer October 29, 2004
Paul Knauss
Principal accounting officer of Chrysler Financial
Receivables Corporation:
/s/ Norbert Meder Vice President and
- -------------------------------------------------------------- Controller October 29, 2004
Norbert Meder
BOARD OF DIRECTORS OF CHRYSLER FINANCIAL RECEIVABLES CORPORATION:
Director of Chrysler Financial Receivables Corporation:
/s/ Paul Knauss
- -------------------------------------------------------------- Director October 29, 2004
Paul Knauss
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).
3.3 -- Form of Certificate of Trust for DaimlerChrysler Master Owner Trust
(the "Issuer") (included in Exhibit 4.3).*
4.1 -- Form of Amended and Restated Indenture between the Issuer and The
Bank of New York, as indenture trustee (the "Indenture Trustee").*
4.2 -- Form of Series Indenture Supplement between the Issuer and the
Indenture Trustee (including form of notes).*
4.3 -- Form of Amended and Restated Trust Agreement between the Registrant
and Chase Manhattan Bank USA, National Association (the "Owner
Trustee") (including form of the Issuer's certificate of trust).*
4.4 -- Form of notes (included in Exhibit 4.2).*
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 certain
federal tax matters.*
23.1 -- Consent of Sidley Austin Brown & Wood LLP (included in opinions
filed as Exhibits 5.1 and 8.1).*
23.2 -- Consent of KPMG LLP.*
25.1 -- Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of The Bank of New York.*
99.1 -- Form of Sale and Servicing Agreement among the Issuer, the Registrant
and DaimlerChrysler Services North America LLC (the "Servicer").*
99.2 -- Form of Amended and Restated Administration Agreement among the
Issuer, DaimlerChrysler Services North America LLC (the
"Administrator") and the Indenture Trustee.*
99.3 -- Form of Second Amended and Restated Receivables Purchase Agreement
between the Registrant and DaimlerChrysler Services North America LLC.*
- --------------------------------
* To be filed by amendment.
E-1