As filed with the Securities and Exchange Commission on January 25, 2002
REGISTRATION NO. 333-75942
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-3536414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27777 FRANKLIN ROAD
SOUTHFIELD, MICHIGAN 48034-8286
(248) 948-3124
(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 FRANKLIN ROAD
SOUTHFIELD, MICHIGAN 48034-8286
(248) 948-3062
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------------
With a Copy to:
RENWICK D. MARTIN, ESQ.
SIDLEY AUSTIN BROWN & WOOD LLP
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 906-2575
------------------------------------
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, please 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, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, 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 Proposed Maximum
Maximum Aggregate Offering Amount of
Title of Each Class of Amount to be Offering Price Price Registration Fee
Securities to be Registered Registered Per Unit (1) (2)(3)
- ---------------------------------------------------------------------------------------------------------------------
Asset Backed Securities... $15,000,000,000 100% $15,000,000,000(1) $3,414,228
- ---------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The Registrant is the successor by merger to the registrant under Registration Statement No. 333-60454, Chrysler
Financial Company L.L.C. Pursuant to Rule 457(p), the Registrant is applying as an offset to the registration fee
for this Registration Statement the registration fee of $1,837,500 (this dollar amount is the corrected amount and
replaces the $2,115,150 dollar amount specified in the initial filing of this Registration Statement) associated
with the $7,350,000,000 (this dollar amount is the corrected amount and replaces the $8,850,000,000 dollar amount
specified in the intitial filing of this Registration Statement) of unsold securities registered under Registration
Statement No. 333-60454.
(3) An amount of $1,469,850 was paid prior to the initial filing of this Registration Statement. An additional amount
of $106,878 was paid prior to the filing of this pre-effective amendment No. 1 to this Registration Statement. The
additional amount of $106,878 represents the amount of registration fees which were owed but not paid prior to the
initial filing of this Registration Statement due to the incorrect specification in the initial filing of this
Registration Statement of the dollar amount of the unsold securities registered under Registration Statement
333-60454 and of the registration fee associated with such dollar amount, as described in footnote 2. The EDGAR
submission of this Registration Statement contains "header tags" specifying an additional registration of
$1,161,715,481 of securities. This action was taken to enable the
2
filing system of the Securities and Exchange Commission to accept the payment of the $106,878 of registration fees owed
by the Registrant. The entire amount of securities registered under this Registration Statement remains $15,000,000,000.
------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this
Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
2
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to
the offering of a series of Asset Backed Notes and/or Asset Backed
Certificates by various DaimlerChrysler Auto Trusts created from time to time
by DaimlerChrysler Services North America LLC and (ii) a form of Prospectus
Supplement relating to the offering by DaimlerChrysler Auto Trust ___-_ of the
particular series of Asset Backed Notes described therein. The form of
Prospectus Supplement relates only to the securities described therein and is
a form which may be used, among others, by DaimlerChrysler Services North
America LLC to offer Asset Backed Notes and/or Asset Backed Certificates under
this Registration Statement. The features applicable to any actual series of
Asset Backed Securities may include any features specified in the Prospectus.
3
Information contained in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus supplement is not an offer to sell these securities, and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
Subject to completion dated [o]
prospectus supplement
to prospectus dated ______ __, _____
$ -------------
DAIMLERCHRYSLER AUTO TRUST ______
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC, Seller and Servicer
The trust will issue the following securities that will be backed by
automobile and light duty truck receivables purchased directly from
DaimlerChrysler Services North America LLC.
- ---------------------------------------------------------------------------------------------------------------
Total Securities Issued
Original Fixed Price Proceeds
Principal Interest to the Underwriting to the
Security Amount Rate Public(2) Fees Seller(2)
- ---------------------------------------------------------------------------------------------------------------
A-1 Notes(1) $ % n/a n/a n/a
A-2 Notes $ % % % %
A-3 Notes $ % % % %
A-4 Notes $ % % % %
Certificates(1) $ n/a n/a n/a n/a
Total Securities $ n/a $ $ $
(1) Not being offered publicly or in this document. The certificates are subordinated.
(2) Plus accrued interest from _________.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Initial Credit Enhancement for the Notes(1)
Certificates (2)
Overcollateralization (Subordinated) Reserve Fund Total
--------------------- --------------- ------------ -----
Amount $ $ $ $
Percentage of Total % % % %
Securities
(1) The expected excess cash flows generated from the difference between the
interest collections on all the receivables and the sum of the servicing
fee, the interest payments on the outstanding securities and required
reserve fund deposits could also provide credit enhancement.
(2) The certificates do not bear interest.
- ---------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Before you decide to invest in any of the offered securities, please read
this prospectus supplement and the prospectus, especially the risk factors
beginning on page S-12 of the prospectus. The securities will be obligations
of the trust only and neither the securities nor the assets of the trust will
represent interest in or obligations of DaimlerChrysler AG, DaimlerChrysler
Services North America LLC or any of their affiliates. Neither the SEC nor any
state securities commission has approved or disapproved the securities or
determined that this prospectus supplement or the prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
[Underwriters]
The date of this prospectus supplement is ____________, ____.
Reading the Prospectus and prospectus supplement
------------------------------------------------
We provide information on the offered securities in two documents that
offer varying levels of detail:
1. Prospectus - provides general information, some of which may not apply
to the offered securities.
2. Prospectus Supplement - provides a summary of the specific terms of
the offered securities.
We suggest you read this prospectus supplement and the prospectus. The
prospectus supplement pages begin with "S". If the terms of the offered
securities described in this prospectus supplement vary with the accompanying
prospectus, you should rely on the information in this prospectus supplement.
We include cross-references to sections in these documents where you can
find further related discussions. Refer to the table of contents on page S-3
in this document and on page 4 in the prospectus to locate the referenced
sections.
The Index of Principal Terms on page 69 in the prospectus lists the pages
where capitalized terms used in the prospectus or prospectus supplement are
defined.
S-3
TABLE OF CONTENTS
- ---------------------------------------------------- --------------------------------------------------
Section Page Section Page
- ---------------------------------------------------- --------------------------------------------------
- Optional Redemption S-15
TRANSACTION ILLUSTRATION S-4 --------------------------------------------------
- ---------------------------------------------------- o FLOW OF FUNDS S-15
TRANSACTION OVERVIEW S-5 --------------------------------------------------
- ---------------------------------------------------- - Sources of Funds Available
o PARTIES TO THE TRANSACTION S-5 for Distribution S-15
- ---------------------------------------------------- --------------------------------------------------
o SECURITIES OFFERED S-6 - Application of Available Funds S-16
- ---------------------------------------------------- --------------------------------------------------
o RECEIVABLES POOL S-6 o CREDIT ENHANCEMENT S-17
- ---------------------------------------------------- --------------------------------------------------
- Composition of the - Overcollateralization S-17
Receivables Pool S-7 --------------------------------------------------
- ---------------------------------------------------- - Excess Interest Collections S-18
- New/Used Distribution S-7 --------------------------------------------------
- ---------------------------------------------------- - Reserve Fund S-19
- Distribution by APR S-8 --------------------------------------------------
- ---------------------------------------------------- - Subordinated Certificates S-19
- Geographic Distribution S-9 --------------------------------------------------
- ---------------------------------------------------- o SERVICING S-19
- Selection Criteria S-10 --------------------------------------------------
- ---------------------------------------------------- - Compensation S-19
o NET CREDIT LOSS AND --------------------------------------------------
DELINQUENCY EXPERIENCE S-10 o THE TRUST S-19
- ---------------------------------------------------- --------------------------------------------------
- DCS Net Credit Loss and - Activities S-19
Repossession Experience S-11 --------------------------------------------------
- ---------------------------------------------------- - Capitalization S-20
- DCS Delinquency Experience S-12 --------------------------------------------------
- ---------------------------------------------------- UNDERWRITING S-20
o PAYMENTS ON THE SECURITIES S-13 --------------------------------------------------
- ---------------------------------------------------- FEDERAL INCOME TAX CONSEQUENCES S-21
- Payment Dates S-13 --------------------------------------------------
- ---------------------------------------------------- LEGAL OPINIONS S-21
- Interest Payments S-13 --------------------------------------------------
- ----------------------------------------------------
- Principal Payments S-14
- ----------------------------------------------------
S-4
- ------------------------------------------------------------------------------
TRANSACTION ILLUSTRATION
- ------------------------------------------------------------------------------
on or before [closing date]
(approximate $ thousands)
(GRAPHIC OMITTED)
(1) Not being offered publicly or in this document. The certificates are
subordinated.
S-5
- ------------------------------------------------------------------------------
TRANSACTION OVERVIEW
- ------------------------------------------------------------------------------
PARTIES TO THE TRANSACTION
- ------------------------------------------------------------------------------
Entity Description
- ------------------------------------------------------------------------------
DaimlerChrysler Auto o Issuer of the Securities
Trust________
o A Delaware business trust
o Principal office is in [city, state]
- ------------------------------------------------------------------------------
DaimlerChrysler Services o Seller of the receivables
North America LLC
o Servicer of the receivalbles
o An indirect wholly-owned subsidiary of
DaimlerChrysler AG LLC
o A Michigan limited liability company
o Originator of DCS receivables
- ------------------------------------------------------------------------------
___________________(1) o Indenture trustee
o Performs duties for the benefit of the
noteholders
- ------------------------------------------------------------------------------
____________________(1) o Owner trustee
o Performs duties on behalf of the trust and
certificateholders
- ------------------------------------------------------------------------------
DaimlerChrysler Retail o A special-purpose financing entity
Receivables LLC
o A Michigan limited liability company,
Receivablformerly named Premier
Receivables L.L.C.
o An indirect wholly-owned subsidiary of DCS
o Initial holder of the subordinated
certificates
o Initial owner of rights to
overcollateralization distributions and
residual cash flows
- ------------------------------------------------------------------------------
(1) The seller and its affiliates may maintain normal commercial banking
relations with the indenture trustee, the owner trustee and their
affiliates.
- ------------------------------------------------------------------------------
SECURITIES OFFERED
The trust will issue $ ___________ of securities, comprised of both notes
and certificates. This prospectus supplement provides information on the
following securities:
- ----------------------------------------------------------------------------------------------
Offered Securities
---------------------- ---------------------- --------------------- --------------------
Note Class Principal Amount Fixed Per Annum
Note Class Principal Amout Interest Rate Legal Final
---------------------- ---------------------- --------------------- --------------------
A-2 Notes $___________ % _____________
---------------------- ---------------------- --------------------- --------------------
A-3 Notes $___________ % _____________
---------------------- ---------------------- --------------------- --------------------
A-4 Notes $___________ % _____________
---------------------- ---------------------- --------------------- --------------------
- ----------------------------------------------------------------------------------------------
The trust will also issue $_________ of Class A-1, ___% asset-backed
notes, due on ________ and $________ of subordinated certificates. Other
points to consider include:
o the outstanding principal of each class of notes is due by its
maturity date (each a "Legal Final"),
o by [closing date] at least two nationally recognized rating agencies
will rate the offered securities in the highest investment rating
category,
o the offered securities will be issued on or about [closing date] in
book-entry form through the facilities of DTC, Clearstream and the
Euroclear System, and
o the offered securities are generally eligible for purchase by
employee benefit plans, subject to important considerations; refer
to the "ERISA Considerations" section of the prospectus.
RECEIVABLES POOL
On [closing date] the trust will use the proceeds from the issuance of
the securities to purchase a pool of automobile and light duty truck
receivables from the seller. Collections on this pool of receivables will be
the trust's principal source of funds for making payments on the securities.
The following information about the receivables is as of ___________ (the
"Cut-off Date").
S-7
The receivables pool had the following characteristics:
------------------------------------------------------------------
Composition of the Receivables Pool
As of [Cut-off Date
Aggregate Principal Balance $
--------------------------------------------- --------------------
Number of Receivables
--------------------------------------------- --------------------
Average Principal Balance $
--------------------------------------------- --------------------
Weighted Average APR %
--------------------------------------------- --------------------
Weighted Average Original Term months
--------------------------------------------- --------------------
Weighted Average Remaining Term months
--------------------------------------------- --------------------
As a Percentage of the Aggregate
Principal Balance:
--------------------------------------------- --------------------
Receivables with Recourse to Dealers %
------------------------------------------------------------------
The receivables pool had the following new vehicle/used vehicle
distribution:
------------------------------------------------------------------------
New/Used Distribution of the Receivables Pool
As of [Cut-off Date]
------ --------
New Used
------ --------
Aggregate Principal Balance $ $
Percentage of Aggregate Principal Balance % %
Number of Receivables
Percentage of Receivables % %
------------------------------------------------------------------------
S-8
The receivables pool had the following distribution by APR:
Distribution by APR of the Receivables Pool
As of [Cut-off Date]
------------------------- --------------- ---------------------- -----------------------
APR Range Number of Aggregate Principal Percent of Aggregate
Receivables Balance Principal Balance(1)
------------------------- --------------- ---------------------- -----------------------
0.00% to 5.00% $___,___,___.__ %
------------------------- --------------- ---------------------- -----------------------
5.01% to 6.00%
------------------------- --------------- ---------------------- -----------------------
6.01% to 7.00%
------------------------- --------------- ---------------------- -----------------------
7.01% to 8.00%
------------------------- --------------- ---------------------- -----------------------
8.01% to 9.00%
------------------------- --------------- ---------------------- -----------------------
9.01% to 10.00%
------------------------- --------------- ---------------------- -----------------------
10.01% to 11.00%
------------------------- --------------- ---------------------- -----------------------
11.01% to 12.00%
------------------------- --------------- ---------------------- -----------------------
12.01% to 13.00%
------------------------- --------------- ---------------------- -----------------------
13.01% to 14.00%
------------------------- --------------- ---------------------- -----------------------
14.01% to 15.00%
------------------------- --------------- ---------------------- -----------------------
15.01% to 16.00%
------------------------- --------------- ---------------------- -----------------------
16.01% to 17.00%
------------------------- --------------- ---------------------- -----------------------
17.01% to 18.00%
------------------------- --------------- ---------------------- -----------------------
18.01% to 19.00%
------------------------- --------------- ---------------------- -----------------------
19.01% to 20.00%
------------------------- --------------- ---------------------- -----------------------
Greater than 20.00%
------------------------- --------------- ---------------------- -----------------------
Totals $_,___,___,___.__ %
------------------------- --------------- ---------------------- -----------------------
(1) Percentages may not add to 100.0% because of rounding.
-----------------------------------------------------------------------------------------
The following table lists the ten states with the largest percentage
concentration of the aggregate principal balance of the receivables pool based
on the physical address of the dealer originating the receivable. No other
state accounts for more than [ ]% of the aggregate principal balance of the
receivables pool as of [Cut-off Date].
-----------------------------------------------------------------------
Geographic Distribution of the Receivables Pool
As of [Cut-off Date]
-----------------------------------------------------------------------
State Percentage of Aggregate
Principal Balance(1)
-----------------------------------------------------------------------
Texas %
-----------------------------------------------------------------------
New York
-----------------------------------------------------------------------
Illinois
-----------------------------------------------------------------------
California
-----------------------------------------------------------------------
Michigan
-----------------------------------------------------------------------
New Jersey
-----------------------------------------------------------------------
Massachusetts
-----------------------------------------------------------------------
Florida
-----------------------------------------------------------------------
Pennsylvania
-----------------------------------------------------------------------
Maryland
-----------------------------------------------------------------------
Total %
(1) Percentages may not add to 100.0%
because of rounding.
-----------------------------------------------------------------------
S-10
Selection Criteria
We used the following criteria to select the receivables pool:
o Each receivable was originally purchased by the seller from
dealers in the ordinary course of its business.
o Interest on each receivable is computed using the simple
interest method.
o As of [Cut-off Date]:
- no receivable was more than 30 days past due (an account
is not considered past due if the amount past due is less
than 10% of the scheduled monthly payment);
- no receivable was the subject of a bankruptcy proceeding;
- each receivable had a principal balance of at least
$300.00; and
- each receivable had a scheduled maturity after ________,
20__ and on or before ______, 20__.
The seller believes its selection procedures are not adverse to
securityholders.
Refer to the "Receivable Pools" section in the prospectus for additional
selection criteria.
NET CREDIT LOSS AND DELINQUENCY EXPERIENCE
Net credit loss experience is dependent upon general economic conditions,
the number of repossessions, the amount of principal and accrued interest
outstanding on the receivable at the time of repossession, and the resale
values of the repossessed vehicles. [The net credit loss and delinquency
experience information in this section is presented separately for contracts
originated by DCS and contracts originated by Mercedes-Benz Credit Corporation
("MBCC")]
The following tables detail the net credit loss, repossession and
delinquency experience of DCS's United States portfolio of new and used
automobile and light duty truck retail receivables. The information includes:
o an immaterial amount of retail receivables secured by vehicles
other than automobiles and light duty trucks, and
o previously sold contracts which DCS continues to service.
Unless otherwise indicated, all amounts and percentages are based on estimated
gross collections, including principal and interest.
We cannot assure you that the delinquency, repossession and net credit
loss experience on the receivables sold to the trust will be comparable to the
following historical experience.
S-11
DCS Net Credit Loss and Repossession
Experience
----------------------------------------------------------------------------
Nine months
ended September Year Ended
30, December 31,
----------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
----------------------------------------------------------------------------
Average Portfolio $36,012 $30,590 $26,191 $23,581 $21,485 $21,062
Outstanding During the
Period ($ Millions)
---------------------------------------------------------------------------------------------------------
Average Number of 2,230,455 2,004,982 1,835,534 1,747,846 1,688,525 1,671,405
Contracts Outstanding
During the Period
---------------------------------------------------------------------------------------------------------
Repossessions as a 1.77% 1.82% 2.16% 2.77% 3.40% 3.82%
Percentage of Average
Number of Contracts
Outstanding
---------------------------------------------------------------------------------------------------------
Net Credit Losses as 1.71% 1.77% 1.91% 2.77% 3.36% 3.17%
Percentage of
Liquidations (1) (2)
---------------------------------------------------------------------------------------------------------
Net Credit Losses as a 0.76% 0.78% 0.98% 1.39% 1.80% 1.68%
Percentage of Average
Portfolio Outstanding (1)
- --------------------------------------------------------------------------------------------------------------
(1) Net credit losses are equal to the aggregate of the balances of all receivables which are
determined to be uncollectible in the period, less any amounts realized from the sale of
repossessed vehicles and any recoveries on receivables charged off in the current or prior
period, net of any disposition expenses and any dealer commissions which DCS failed to recover
on receivables that were prepaid or charged off.
(2) Liquidations represent monthly cash payments and charge-offs which reduce the outstanding
balance of a receivable.
(3) Percentages have been annualized for the nine months ended September 30, 2001 and are not
necessarily indicative of the experience for the entire year.
- --------------------------------------------------------------------------------------------------------------
S-12
DCS Delinquency Experience
At September 30, At December 31,
---------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------
Portfolio ($ Millions) $37,382 $33,776 $27,255 $24,854 $21,879 $21,197
----------------------------------------------------------------------------------------------------------------
Delinquencies as a
Percentage of the Portfolio
----------------------------------------------------------------------------------------------------------------
31 - 60 Days 1.58% 1.53% 1.78% 2.27% 3.24% 3.98%
----------------------------------------------------------------------------------------------------------------
61 Days or More 0.21% 0.17% 0.17% 0.20% 0.46% 0.55%
----------------------------------------------------------------------------------------------------------------
Total 1.79% 1.70% 1.95% 2.47% 3.70% 4.53%
----------------------------------------------------------------------------------------------------------------
[The following may be used if a substantial amount of the receivables in
the pool were originated by Mercedes-Benz Credit Corporation, which was merged
into DCS.] The following tables detail the net credit loss, repossession and
delinquency experience of new and used retail automobile receivables
originated by MBCC, including those previously sold which DCS continues to
service. We cannot assure you that the delinquency, repossession and net
credit loss experience on the receivables sold to the trust will be comparable
to the following historical experience.
MBCC Net Credit Loss and Repossession Experience
At September At December 31,
30,
----------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
Average Portfolio
Outstanding During the Period
($ Millions) $2,824 $ 2,436 $ 2,095 $ 1,683 $ 1,291 $ 1,005
--------------------------------------------------------------------------------------------------------------------
Average Number of
Contracts Outstanding During the
Period $110,290 $ 98,925 $ 87,810 73,674 59,215 48,275
--------------------------------------------------------------------------------------------------------------------
Repossessions as a Percentage 1.52% 1.52% 1.53% 2.04% 2.01% 1.43%
of Average Number of
Contracts Outstanding(2)
--------------------------------------------------------------------------------------------------------------------
Net Credit Losses as a 0.77% 0.64% 0.79% 0.98% 0.71% 0.68%
Percentage of Average Portfolio
Outstanding
--------------------------------------------------------------------------------------------------------------------
S-13
MBCC Delinquency Experience
At
September At December 31,
30,
-----------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------
Portfolio ($ Millions) $3,642 $3,186 $2,741 $2,352 $1,792 $1,403
- ---------------------------------------------------------------------------------------------------------------------
Delinquencies as a
Percentage of the Portfolio
- ---------------------------------------------------------------------------------------------------------------------
31 - 60 Days 2.06% 1.81% 1.90% 1.95% 2.28% 2.20%
- ---------------------------------------------------------------------------------------------------------------------
61 Days or More 0.74% 0.76% 0.77% 0.75% 1.52% 0.55%
- ---------------------------------------------------------------------------------------------------------------------
Total 2.80% 2.57% 2.67% 2.70% 3.80% 2.75%
- ---------------------------------------------------------------------------------------------------------------------
Refer to the "Net Credit Loss and Delinquency Experience" section in the
prospectus for additional information.
SONIA
PAYMENTS ON THE SECURITIES
Payment Dates
o Interest and principal will be payable on the ___th of each month. If
the __th is not a business day, then interest and principal will be
payable on the next business day.
o The first payment will be on ________, ____.
o Payments will be payable to securityholders of record on the
business day before the payment date.
Interest Payments
o The first interest payment will be calculated on the original
principal amount of each class of notes at the applicable per annum
interest rate.
o Subsequent interest payments will be calculated on the outstanding
principal balance of each note class as of the prior payment date
(after giving effect to any payment of principal on that date) at
the applicable per annum interest rate.
o To calculate interest due on the A-1 notes on a payment date, the
per annum interest rates will be converted from an annual rate as
follows:
S-14
-------------------------------------------------------------------------
Days in Initial Interest Days in Subsequent Day Count
Accrual Period Interest Accrual Periods Convention
-------------------------------------------------------------------------
From To
(including) (excluding)
-------------------------------------------------------------------------
Prior Current
___ days payment payment actual/360
date date
-------------------------------------------------------------------------
o To calculate the interest due on the A-2, A-3 and A-4 notes on a payment
date, the per annum interest rates will be converted from an annual rate
as follows:
-------------------------------------------------------------------------
Days in Initial Interest Days in Subsequent Day Count
Accrual Period Interest Accrual Periods Convention
-------------------------------------------------------------------------
__ days 1/12th of per annum 30/360
interest rate
-------------------------------------------------------------------------
o Interest payments on all classes of notes will have the same priority. If
the available amount for interest payments, including the balance in the
reserve fund, is less than the amount due, each class of notes will
receive their pro rata share.
Refer to the "Flow of Funds" section for information on how the amount
available for interest payments is determined. Also refer to the "Credit
Enhancement - Reserve Fund" section for information on how the reserve fund
may be used to make interest payments.
Principal Payments
o The amount of principal payments on the securities on each payment
date will generally equal the amount of principal that was collected
on the receivables during the prior calendar month plus Excess
Interest Collections minus the overcollateralization distribution
amount.
o Principal of each class of notes will generally be repaid over a
span of several consecutive months.
o The trust will pay principal sequentially to the earliest maturing
class of notes then outstanding until such class is paid in full.
o The certificates will not receive any principal payments until all
notes are paid in full.
o The trust is required to pay the outstanding principal of each class
of notes by the applicable Legal Final.
o The final principal payment on any class of notes could occur
significantly earlier than its Legal Final.
S-15
o The rate of principal payment on the notes will increase to the
extent Excess Interest Collections are applied to pay note
principal.
Refer to the "Flow of Funds" section for information on how the amount
available for principal payments is determined. Refer to the "Credit
Enhancement" section for information on Excess Interest Collections. Refer to
the "Payments on the Securities-Principal Payments-Weighted Average Life of
the Securities" section in the prospectus for information regarding certain
maturity and prepayment considerations for the securities.
Optional Redemption
The servicer will have the option to purchase all of the remaining
receivables from the trust when their aggregate principal balance declines to
an amount that is less than or equal to 10% of the initial aggregate principal
balance of the receivables, or $__________ or less. If the servicer decides to
exercise this option, then the outstanding principal amounts of the A-4 notes
and the certificates, together with any accrued and unpaid interest, will be
repaid in a lump sum payment. The lump sum payment under this optional
redemption will shorten the maturity of the A-4 notes and certificates.
FLOW OF FUNDS
Sources of Funds Available for Distribution
Funds from the following sources may be available to make payments on the
securities on each payment date:
o collections received on the receivables during the prior
calendar month,
o net recoveries received during the prior calendar month on
receivables that were charged off as losses in prior months,
o investment earnings on the reserve fund received during the
prior calendar month,
o administrative and/or warranty repurchases, and
o the reserve fund.
S-16
Application of Available Funds
On each monthly payment date the total funds available (except for the
reserve fund) will be distributed in the following order of priority:
- -------------------------------------------------------------------------------
Monthly Flow of Funds
----------------------------------------------------
pay servicing fee
----------------------------------------------------
|
----------------------------------------------------
pay accrued and unpaid interest on the notes
----------------------------------------------------
|
----------------------------------------------------
replenish reserve fund,
if necessary, up to the initial amount
----------------------------------------------------
|
----------------------------------------------------
pay up to the outstanding principal
amount of the A-1 notes
----------------------------------------------------
|
----------------------------------------------------
pay the overcollateralization
distribution amount , if any,
to DaimlerChrysler Retail Receivables LLC
----------------------------------------------------
|
----------------------------------------------------
pay up to the outstanding principal
amount of the A-2 notes
----------------------------------------------------
|
----------------------------------------------------
pay up to the outstanding principal
amount of the A-3 notes
----------------------------------------------------
|
----------------------------------------------------
pay up to the outstanding principal
amount of the A-4 notes
----------------------------------------------------
|
----------------------------------------------------
pay up to the outstanding principal
amount of the certificates
----------------------------------------------------
|
----------------------------------------------------
distribute remaining balance, if any,
to DaimlerChrysler Retail Receivables LLC
----------------------------------------------------
- ------------------------------------------------------------------------------
S-17
CREDIT ENHANCEMENT
The following forms of credit enhancement are intended to enhance the
likelihood of full payment of principal and interest due to the noteholders
and to decrease the likelihood that the noteholders will experience losses of
principal or interest on their notes.
Overcollateralization
Overcollateralization is represented by the amount by which the principal
balance of receivables exceeds the principal balance of the securities. The
initial overcollateralization amount of $_______________ is equal to the
initial receivables balance of $_______________ minus the initial principal
amount of the securities of $_______________. This excess collateral is
intended to protect noteholders from losses on the receivables.
The trust will attempt to maintain an overcollateralization amount
(i.e., the amount by which the principal balance of the receivables exceeds
the principal balance of the securities) at least equal to [___]% of the
principal balance of the receivables the receivables as of the prior calendar
month end. Once the A-1 notes are paid in full, total funds available (except
funds in the reserve fund) after paying the servicing fee, accrued and unpaid
interest on the notes and any reserve fund deposit will be applied (i) to the
payment of principal of the securities and (ii) to pay the
overcollateralization distribution amount to DaimlerChrysler Retail
Receivables LLC. As illustrated in the "Application of Available Funds"
section, the trust may begin making payments of the overcollateralization
distribution amount to DaimlerChrysler Retail Receivables LLC on the same
payment date on which the A-1 notes are paid in full. No overcollateralization
distribution will be made in any month in which the balance of the reserve
fund is below $ [initial amount]. The overcollateralization distribution
amount to be distributed on each payment date will be the greater of:
(i) $0.00
or
(ii) the lesser of (a) D - [S - (P x [ ]%)] or (b) D minus the A-1
notes balance immediately prior to the current payment date
where:
total funds available ( accrued and unpaid )
D = for distribution (except ( minus servicing + interest on the + reserve fund )
for the reserve fund) ( fee notes deposit )
S = the outstanding principal amount of the securities as of the
prior payment date, after giving effect to payments made on
that date
P = the outstanding principal balance of the receivables as of the prior calendar month end.
S-18
Excess Interest Collections
"Excess Interest Collections" are generally equal to (A) the sum of (i)
interest collections received on the receivables during the prior calendar
month and (ii) investment earnings on the reserve fund received during the
prior calendar month minus (B) the sum of (i) the servicing fee for the prior
calendar month, (ii) accrued and unpaid interest on the notes and (iii) the
amount, if any, required to replenish the reserve fund to $ [initial amount].
Excess Interest Collections provide an additional form of credit
enhancement since they will be applied to the payment of principal of the
securities to the extent described above under "Flow of Funds - Application of
Available Funds" section.
If credit losses on receivables and delinquent receivables decrease the
amount of interest collections received on the receivables in a month, Excess
Interest Collections will be reduced or eliminated for such month. Prepayments
on the higher APR receivables will have a greater effect in reducing Excess
Interest Collections than will prepayments on the low APR receivables.
Reserve Fund
o On [closing date] the seller will provide funds from the proceeds of
its sale of receivables to establish a $____________ reserve fund.
o The indenture trustee will hold the reserve fund for the benefit of
the noteholders.
o The reserve fund will be invested in high quality, short term
investments which mature on or prior to each monthly payment date.
o If the total funds available for distribution minus the servicing
fee is less than accrued interest on the notes, the reserve fund
will be available to make interest payments.
o If a class of notes has not been paid in full on its Legal Final,
the reserve fund will be applied to the payment of principal for
that class of notes.
o If the aggregate outstanding principal amount of the notes exceeds
the outstanding principal balance of the receivables as of the prior
calendar month end, the reserve fund will be applied to the payment
of principal of the notes.
o As illustrated in the "Flow of Funds" section above, on each payment
date the reserve fund will be reinstated up to the initial balance
to the extent funds are available.
o After full payment of all accrued interest on the notes and the
outstanding principal balance of the securities, the reserve fund
will be distributed to DaimlerChrysler Retail Receivables LLC.
Subordinated Certificates
As additional credit enhancement, the certificates do not bear interest
and will not receive any principal payments until the notes are paid in full.
The payments on the certificates are
S-19
subordinated to payments on the notes to decrease the likelihood that the
trust will default in making payments due on the notes.
SERVICING
Compensation
o The servicer will be compensated on a monthly basis.
o The first servicing fee will be calculated on the original principal
amount of the receivables at 1/12th of 1% per month.
o For the first servicing fee calculation, the per annum servicing fee
rate will be converted from an annual rate using the number of days
from and including [Cut-off Date] to and including [last day of
month in which closing date occurs] on a 30/360 basis, or __ days
over 360.
o Subsequent servicing fees will be calculated on the principal
balance of the receivables as of the first day of the prior calendar
month at 1/12th of 1%.
o As illustrated in the "Flow of Funds" section above, the servicing
fee will be paid out of the total funds available for distribution
each month.
Refer to the "Servicing -- Servicing Compensation" section in the
prospectus for additional information on servicer compensation. Refer to the
"Servicing -- Servicer" section in the prospectus for additional information
regarding the servicer.
THE TRUST
Activities
The trust will only engage in the following activities:
o acquiring, holding and managing the receivables, their proceeds, the
reserve fund and other assets of the trust;
o issuing the securities;
o making payments on the securities; and
o other activities that are necessary, suitable or incidental to the
above activities.
The trust's office is at the owner trustee's principal office, located at
______, Delaware _______.
S-20
Capitalization
The following balance sheet illustrates the capitalization of the trust
as of [closing date]. It is assumed that the notes have been issued and sold
on [closing date]. DaimlerChrysler Retail Receivables LLC holds the equity
interests and may transfer or sell such interests. DCS will initially purchase
and may later sell the A-1 notes.
- ----------------------------------------------------------------------------------------------------------------
Balance Sheet
As of [closing date]
------------------------------------------------- -------------------------------------------------
Assets Liabilities
------------------------------------------------- -------------------------------------------------
Receivables $ A-1 Notes $
------------------------------------------------- -------------------------------------------------
Reserve Fund A-2 Notes
------------------------------------------------- -------------------------------------------------
A-3 Notes
-------------------------------------------------
A-4 Notes
-------------------------------------------------
Total $
-------------------------------------------------- -------------------------------------------------
-------------------------------------------------
Equity
-------------------------------------------------
Certificates $
-------------------------------------------------
-------------------------------------------------
Overcollateralization
-------------------------------------------------
-------------------------------------------------
Reserve Fund
-------------------------------------------------
-------------------------------------------------
Total $
-------------------------------------------------
Total Liabilities and
Total Assets $ Equity $
------------------------------------------------- -------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
UNDERWRITING
- ----------------------------------------------------------------------------------------------------------------
The trust will sell the following amounts of the offered securities to
the underwriters named below. The underwriters have agreed to purchase these
amounts:
---------------------- -------------------- -------------------- -------------------- --------------------
Underwriter A-2 A-3 A-4 Total
---------------------- -------------------- -------------------- -------------------- --------------------
$ $ $ $
---------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- --------------------
---------------------- -------------------- -------------------- -------------------- --------------------
Total $ $ $ $
---------------------- -------------------- -------------------- -------------------- --------------------
----- ---------------------- -------------------- -------------------- -------------------- -------------------- ---
S-21
The underwriters propose to sell the offered securities to the public at
the initial offering prices listed on the cover page and to certain dealers at
the same prices less an initial selling concession. These selling concessions
will not be greater than the selling concessions listed in the table below.
The underwriters may allow and those certain dealers may reallow another
concession. These reallowances will not be greater than the reallowances
listed in the table below. After the initial public offering, the price to the
public, the concessions and the reallowances may change.
- -----------------------------------------------------------------------------------------------
Class Selling
Concession Reallowance
A-2 Notes ______% ______%
------------------------------------- -------------------------- --------------------------
A-3 Notes ______% ______%
------------------------------------- -------------------------- --------------------------
A-4 Notes ______% ______%
------------------------------------- -------------------------- --------------------------
The Seller estimates that it will have additional offering expenses of
$[__________].
Refer to the "Plan of Distribution" section in the prospectus for
additional information about the distribution of the offered securities.
- ------------------------------------------------------------------------------
FEDERAL INCOME TAX CONSEQUENCES
- ------------------------------------------------------------------------------
In the opinion of Sidley Austin Brown & Wood LLP, counsel for the
underwriters and special tax counsel for the trust, for federal income tax
purposes the offered securities will be characterized as debt and the trust
will not be characterized as an association (or a publicly traded partnership)
taxable as a corporation.
For additional information refer to the "Certain Federal Income Tax
Consequences" section in the prospectus.
- -----------------------------------------------------------------------------
LEGAL OPINIONS
- -----------------------------------------------------------------------------
In addition to the legal opinions described in the prospectus, Sidley
Austin Brown & Wood LLP, New York, New York will review or opine on certain
legal matters relating to the offered securities for the underwriters and
certain federal income tax and other matters for the trust. Also, Sidley
Austin Brown & Wood LLP from time to time renders legal services to DCS and
its affiliates.
S-22
================================================== =======================================================
No dealer, salesperson or other person has $ -------------
been authorized to give any information or to make
any representations, other than those contained in DAIMLERCHRYSLER
the prospectus or prospectus supplement. Any such AUTO TRUST ______
information or any such representations are not
authorized by the seller or by the underwriters.
Do not rely on any such information or any such $-------------
representations. A-2, ____% Asset-Backed Notes
We only intend the prospectus supplement to $-------------
be an offer to sell or a solicitation of an offer A-3, ____% Asset-Backed Notes
to buy the offered securities if:
$-------------
o used in a jurisdiction in which such A-4, ____% Asset-Backed Notes
offer or solicitation is authorized,
o the person making such offer or DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC
solicitation is qualified to do so, and Seller and Servicer
o such offer or solicitation is made to
anyone to whom it is lawful to make such
offer or solicitation.
PROSPECTUS SUPPLEMENT
The information in the prospectus or Dated_____________
prospectus supplement is only accurate as of the
date of this prospectus supplement.
All dealers effecting transactions in the [underwriters]
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
and prospectus supplement when acting as
underwriters or when selling their unsold
allotments or subscriptions.
================================================= =======================================================
Information contained in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus supplement is not an offer to sell these securities, and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
Subject to completion dated January 25, 2002
prospectus
DAIMLERCHRYSLER AUTO TRUSTS
Asset Backed Notes
Asset Backed Certificates
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC
SELLER AND SERVICER
DaimlerChrysler Services North America LLC may form trusts at various
times. A trust may purchase automobile and light duty truck retail installment
sales contracts directly from DaimlerChrysler Services North America LLC. A
trust will issue securities to fund its purchase. Securities issued by a trust
o may consist of one or more classes of notes and/or certificates;
o will be payable only from the assets of that trust;
o will be entitled to receive payments that will vary by class as to
timing, amount and priority, as described in the related prospectus
supplement; and
o may have the benefit of some form of credit or other enhancement.
The main source of funds for making payments on the trust's securities
will be collections on the purchased receivables.
Before you decide to invest in any of the securities, please read this
prospectus and the related prospectus supplement, especially the risk factors
beginning on page 9 of the prospectus. The securities will be interests in or
obligations of a trust only and neither the securities nor the assets of the
trust will represent interest in or obligations of DaimlerChrysler AG,
DaimlerChrysler Services North America LLC, or any of their affiliates.
Neither the SEC nor any state securities commission has approved or
disapproved the securities or determined that this prospectus or any
prospectus supplement is accurate or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus is [__________].
READING THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information on your securities 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 securities, including your
securities, and
o the accompanying prospectus supplement is a summary of the specific
terms of your securities.
If the terms of the securities 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.
The Index of Principal Terms on page 69 in this prospectus lists the
pages where capitalized terms used in this prospectus are defined.
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.
AVAILABLE INFORMATION
DaimlerChrysler Services North America LLC, as the originator of each
trust, has filed a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the "Registration Statement") with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933,
as amended. The Registration Statement relates to any notes and certificates
offered in this prospectus.
The Registration Statement may be inspected and copied at:
o the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 (telephone 1-800-732-0330), and
o at the SEC's regional office at Citicorp Center, 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661.
Also, the SEC maintains a website at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, including DaimlerChrysler Services North America LLC, that file
electronically with the SEC.
2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by DaimlerChrysler Services North America LLC, as
originator of the trust referred to in the accompanying prospectus supplement,
pursuant to 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 securities offered by such trust shall
be deemed to be incorporated by reference in this prospectus.
For purposes of this prospectus, any statement in this prospectus, an
incorporated document or a document incorporated by reference may be modified
or superseded. Such 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 any such statement will no longer be a
part of this prospectus. Only the modified form of any such 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 request such copies from Assistant Secretary, DaimlerChrysler
Services North America LLC, 1000 Chrysler Drive, CIMS 485-14-78,
Auburn Hills, Michigan 48236-2766 (Telephone: 248-512-3990).
This offer only includes the exhibits to such documents, if such exhibits
are specifically incorporated by reference in such 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
- -----------
SUMMARY
7
PARTIES 7
SECURITIES ISSUED 8
TRUST PROPERTY 9
ENHANCEMENT 10
TAX STATUS 11
ERISA CONSIDERATIONS 11
FORM, DENOMINATION AND RECORD DATE 11
RISK FACTORS 12
A TRUST'S ONLY SOURCES OF FUNDS FOR MAKING PAYMENTS ON ITS SECURITIES ARE COLLECTIONS ON
ITS RECEIVABLES AND ANY ENHANCEMENT THE SECURITIES MAY HAVE 12
PREPAYMENTS MAY ADVERSELY AFFECT AVERAGE LIFE AND YIELDS OF THE SECURITIES 12
RATINGS OF THE OFFERED SECURITIES 13
LIMITED ABILITY TO RESELL SECURITIES 13
BOOK-ENTRY REGISTRATION MAY LIMIT YOUR ABILITY TO RESELL YOUR SECURITIES 13
CHANGE IN SERVICER MAY RESULT IN LATE PAYMENTS ON SECURITIES 13
COMMINGLING OF MONIES BY THE SERVICER MAY RESULT IN A LOSS FOR SECURITYHOLDERS 13
CERTIFICATEHOLDERS DO NOT HAVE RIGHTS TO ACT UPON SERVICER DEFAULT 14
INSOLVENCY OF THE SELLER MAY RESULT IN DELAYS, REDUCTIONS OR LOSS OF PAYMENTS TO SECURITYHOLDERS 14
TRUSTS MAY NOT HAVE A PERFECTED SECURITY INTEREST IN CERTAIN FINANCED VEHICLES 15
RELIANCE ON REPRESENTATIONS AND WARRANTIES BY THE SELLER OR THE SERVICER
WHICH PROVES TO BE INADEQUATE MAY RESULT IN LOSSES TO SECURITYHOLDERS 15
FAILURE TO COMPLY WITH CONSUMER PROTECTION LAW REQUIREMENTS MAY MAKE A TRUST LIABLE 15
SUBORDINATION OF CERTAIN SECURITIES MAY RESULT IN REDUCED PAYMENTS TO THOSE SECURITIES 16
ISSUANCE OF A SUBSEQUENT SERIES OF SECURITIES MAY ADVERSELY AFFECT ANY PRIOR SERIES OF SECURITIES 16
PRINCIPAL DOCUMENTS 17
THE TRUSTS 17
SECURITIES ISSUANCE 18
TRUST PROPERTY 18
USE OF PROCEEDS 19
RECEIVABLE POOLS 19
UNDERWRITING 20
SIMPLE INTEREST RECEIVABLES 20
PRECOMPUTED RECEIVABLES 21
DCS GOLD KEY PLUS RECEIVABLES 21
SELECTION CRITERIA 22
RECOURSE TO DEALERS 22
NET CREDIT LOSS AND DELINQUENCY EXPERIENCE 23
FLOW OF FUNDS 23
SOURCES OF FUNDS 23
APPLICATION OF AVAILABLE FUNDS 24
NET DEPOSITS 24
CREDIT ENHANCEMENT 24
RESERVE FUND 25
4
PAYMENTS ON THE SECURITIES 25
PRINCIPAL PAYMENTS 25
Weighted Average Life of the Securities 25
Indexed Securities 26
Optional Redemption 26
INTEREST PAYMENTS 27
Fixed Rate Securities 27
Floating Rate Securities 27
FORM OF SECURITIES AND TRANSFERS 29
BOOK-ENTRY REGISTRATION 29
DEFINITIVE SECURITIES 32
List of Securityholders 33
SALE PROVISIONS 34
SERVICING 35
THE SERVICER 35
ACCOUNTS 36
SERVICING PROCEDURES 36
COLLECTIONS 36
[MBCC SERVICING AND COLLECTIONS 37
SERVICING COMPENSATION AND PAYMENT OF EXPENSES 38
REPORTS TO SECURITYHOLDERS 38
STATEMENTS TO TRUSTEES AND TRUST 39
EVIDENCE AS TO COMPLIANCE 40
CERTAIN MATTERS REGARDING THE SERVICER 40
SERVICER DEFAULT 41
RIGHTS UPON SERVICER DEFAULT 41
WAIVER OF PAST DEFAULTS 41
THE INDENTURE 42
INDENTURE; MASTER INDENTURE 42
ANNUAL COMPLIANCE STATEMENT 45
INDENTURE TRUSTEE'S ANNUAL REPORT 46
SATISFACTION AND DISCHARGE OF INDENTURE 46
THE INDENTURE TRUSTEE 46
MISCELLANEOUS PROVISIONS OF PRINCIPAL DOCUMENTS 47
AMENDMENT 47
THE OWNER TRUSTEE 47
INSOLVENCY EVENT 48
PAYMENT OF NOTES 48
TERMINATION 48
ADMINISTRATION AGREEMENT 48
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES 49
SECURITY INTEREST IN VEHICLES 49
REPOSSESSION 50
NOTICE OF SALE; REDEMPTION RIGHTS 50
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS 50
CONSUMER PROTECTION LAWS 51
OTHER LIMITATIONS 52
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 52
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE 53
TRUSTS IN WHICH ALL CERTIFICATES ARE RETAINED BY THE SELLER OR AN AFFILIATE OF THE SELLER 60
FASITS 62
CERTAIN STATE TAX CONSEQUENCES 62
ERISA CONSIDERATIONS 63
PLAN OF DISTRIBUTION 67
LEGAL OPINIONS 68
5
INDEX OF PRINCIPAL TERMS 69
ANNEX I-GLOBAL CLEARANCE A-1
OVERVIEW A-1
INITIAL SETTLEMENT A-1
SECONDARY MARKET TRADING\ A-2
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A-3
6
SUMMARY
The following summary is a short, concise description of the main
structural features that a class of securities 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 security. You will find a detailed
description of the possible terms of a security following this summary.
PARTIES
Party Description
Issuer and Trust o Generally, each series of securities will be issued by a separate trust
o Some trusts may issue more than one series of securities
DaimlerChrysler Services o Seller of receivables to a trust
North America LLC ("DCS") o Servicer of receivables
o DCS's address is 27777 Franklin Road, Southfield,
Michigan 48034-8286 (telephone 248-512-3990)
o DCS is the successor by merger to Chrysler Financial
Company L.L.C. and Mercedes Benz Credit Corporation
o Indirect wholly-owned subsidiary of DaimlerChrysler AG
o Originator of DCS receivables
Indenture Trustee o Specified in the related prospectus supplement
o Performs duties for the benefit of
noteholders
Owner Trustee o Specified in the related prospectus supplement
o Performs duties on behalf of a trust and certificateholders
DaimlerChrysler o A special-purpose financing entity, formerly named Premier
Retail Receivables L.L.C.
Receivables o An indirect wholly-owned subsidiary of DCS
LLC o Generally, owner of the equity in a trust
7
SECURITIES ISSUED
A series of securities may include one or more classes of notes and/or
certificates. You will find the following information about each class of
securities in the prospectus supplement:
o its principal amount;
o its interest rate, which may be fixed or floating or a combination;
o the timing, amount and priority or subordination of payments of
principal and interest;
o the method for calculating the amount of principal payments;
o its final payment date;
o whether it may be redeemed prior to its final payment date; and
o other relevant factors.
Some classes of securities may be entitled to:
o principal payments with disproportionate, nominal or no interest
payments or
o interest payments with disproportionate, nominal or no principal
payments.
8
TRUST PROPERTY
The property of each trust will include a pool of motor vehicle retail
installment sale contracts secured by new or used automobiles or light duty
trucks. These receivables include:
o rights to receive certain payments made on the receivables;
o security interests in the underlying financed vehicles;
o certain accounts and the related proceeds, and
o any proceeds from claims on certain related insurance policies.
In addition, the property of a trust may include:
o notes and/or certificates that were issued by a prior trust but were
not then offered and/or
o distributions from one or more prior trusts that would otherwise be
made to DaimlerChrysler Retail Receivables LLC.
In a trust that issues more than one series of securities, the trust will
allocate a group of its assets to a single series. This allocated series trust
property will support only the single series of securities to which it has
been allocated. This series trust property will not benefit or result in any
payments on any other series of securities issued by that trust or any other
trust.
You will find a description of the receivables in the prospectus
supplement.
DCS will have purchased the receivables from the originating automobile
and light duty truck dealers or may have acquired them from its affiliate,
Mercedes-Benz Credit Corporation ("MBCC"), when that company was merged into
CFC on November 30, 2001. MBCC had purchased its receivables from the
originating dealers. DCS may sell these MBCC receivables to the trust.
If a trust has not purchased all of its receivables at the time you
purchase your securities, it will purchase the remainder of its receivables
from DCS over a period specified in the prospectus supplement. Some trusts
may, during a specified period, use principal collections on its receivables
to purchase additional receivables.
9
ENHANCEMENT
Some classes of securities may have the benefit of any of the following
enhancements which are intended to increase the likelihood of payments on
those securities:
o subordination of one or more classes of securities;
o overcollateralization (i.e., the amount by which the principal
amount of the receivables exceeds the principal amount of all of the
trust's securities);
o excess interest collections (i.e., the excess of interest
collections on the receivables over servicing fees, interest on the
trust's securities and any amounts required to be deposited in a
reserve fund, if any);
o reserve funds that will be applied to cover payments on the
securities not covered by collections on the receivables;
o letter of credit or other credit facility;
o surety bond;
o liquidity arrangements;
o swaps (including currency swaps) and other derivative instruments
and interest rate protection agreements;
o repurchase or put obligations;
o yield supplement agreements; and
o other arrangements similar to those described above.
The prospectus supplement will describe the limitation of any enhancement
that applies to the securities. Enhancements cannot guarantee that losses will
not be incurred on the securities.
10
TAX STATUS
If the trust issues notes, federal tax counsel to the trust will deliver
an opinion at the time of initial issuance that for federal income tax
purposes:
o the notes will be characterized as debt unless otherwise stated
in the prospectus supplement and
o the trust will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation.
If the trust issues certificates, you will find a discussion of the
federal income tax characterization of the certificates and the related trust
in this prospectus and the related prospectus supplement.
See "Certain Federal Income Tax Consequences" for additional information
concerning the application of federal and state tax laws to the securities.
ERISA CONSIDERATIONS
If you are an employee benefit plan, you should review the considerations
discussed under "ERISA Considerations" in this prospectus before investing in
the securities. In general, subject to those considerations and to conditions
described in that section, and unless otherwise specified in the prospectus
supplement, you may purchase the notes of any series.
FORM, DENOMINATION AND RECORD DATE
You may purchase securities only in book-entry form. You may purchase
securities in $1,000 increments. The "Record Date" will be the business day
immediately preceding the payment date or, if Definitive Securities are
issued, the 15th day of the preceding calendar month.
11
RISK FACTORS
A TRUST'S ONLY SOURCES OF FUNDS FOR MAKING PAYMENTS ON ITS
SECURITIES ARE COLLECTIONS ON ITS RECEIVABLES AND ANY
ENHANCEMENT THE SECURITIES MAY HAVE
Receivables and enhancement, if any, will be the only significant assets
of a trust. Collections on the receivables and the enhancement are the only
possible sources of funds to make payments on the securities. You must rely
upon these sources for repayment of your securities.
The securities of any series will represent obligations of or interests
in the related trust only. The securities of any series will not be insured or
guaranteed by DaimlerChrysler AG, DCS or any of their affiliates, the
applicable owner trustee, any indenture trustee or any other person or entity.
The following applies in the case of a trust that issues more than one
series of securities. The securities of a multi-series trust will be supported
solely by the trust property allocated to its series and will not have any
rights in or claims on, or receive any payments from, the trust property
allocated to any other series of securities issued by that trust.
Consequently, investors must rely solely upon collections on the receivables
allocated to their series and, to the extent available, any enhancement for
such series.
PREPAYMENTS MAY ADVERSELY AFFECT
AVERAGE LIFE AND YIELDS OF THE SECURITIES
Prepayments include all of the following:
o an obligor on a receivable makes payments, in whole or in part,
earlier than scheduled
o the servicer liquidates a defaulted receivable
o the servicer or seller is required to purchase or repurchase,
respectively, a receivable from the trust
As a result of any of the above instances, the principal amount of a
receivable is repaid (or charged off) in advance of its payment schedule.
Most investors use an assumed prepayment rate on the receivables to price
their securities. The actual prepayment rate may be faster or slower than the
prepayment rate used to price the securities. The prepayment rate on the
receivables may be influenced by a variety of economic, social and other
factors.
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of receivables will be borne entirely by the securityholders of the
related series.
Refer to the "Payments on the Securities--Principal Payments--Optional
Redemption" section for information on the servicer's option to purchase the
receivables of a trust.
12
RATINGS OF THE OFFERED SECURITIES
At the initial issuance of a series, at least two nationally recognized
rating agencies will rate the offered securities in the highest investment
rating category or in the categories otherwise specified in the prospectus
supplement. A rating is not a recommendation to purchase, hold or sell
securities, and it does not comment as to market price or suitability for a
particular investor. The ratings of the offered securities address the
likelihood of the payment of principal and interest on the offered securities
according to their terms. We cannot assure you that a rating will remain for
any given period of time or that a rating agency will not lower or withdraw
its rating if, in its judgment, circumstances in the future so warrant.
LIMITED ABILITY TO RESELL SECURITIES
There may be no secondary market for the securities. Underwriters may
participate in making a secondary market in the securities, 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 securities.
BOOK-ENTRY REGISTRATION MAY LIMIT
YOUR ABILITY TO RESELL YOUR SECURITIES
The securities will be delivered to you in book-entry form through the
facilities of The Depository Trust Company ("DTC") or Clearstream or
Euroclear. Consequently, your securities will not be registered in your name.
As a result, you will not be recognized as a securityholder by the owner
trustee or any applicable indenture trustee. Consequently, you will only be
able to exercise the rights of a securityholder indirectly through DTC and its
participating organizations. Specifically, you may be limited by your ability
to resell the securities to a person or entity that does not participate in
the DTC system or Clearstream or Euroclear.
The above does not apply if Definitive Securities are issued. Refer to
the "Form of Securities and Transfers--Definitive Securities" section for
additional information.
CHANGE IN SERVICER MAY RESULT IN LATE PAYMENTS ON SECURITIES
If DCS were to cease acting as servicer, there may be delays in
processing
o payments on the receivables and
o information on the receivables.
These processing delays may result in late payments on the securities.
COMMINGLING OF MONIES BY THE SERVICER
MAY RESULT IN A LOSS FOR SECURITYHOLDERS
The servicer will be required to remit all collections on and proceeds
from the receivables to each trust on a monthly or daily basis. For a monthly
basis, the servicer will remit on or before the monthly payment date. For a
daily basis, the servicer will remit within two business days of receipt of
collections and proceeds. Prior to remittance, the funds
o may be invested by the servicer at its own risk and for its own
benefit and
o will not be segregated from funds of the servicer.
If the servicer were unable to remit those funds, the applicable
securityholders might incur a loss.
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The prospectus supplement may require the servicer to obtain a letter of
credit or other security for the benefit of the trust to secure timely
remittances of collections on and proceeds from the receivables. Refer to the
"Servicing--Collections" section for additional information.
CERTIFICATEHOLDERS DO NOT HAVE RIGHTS
TO ACT UPON SERVICER DEFAULT
The following generally applies to a series that includes notes and
certificates. If the notes are still outstanding and a Servicer Default occurs
o removal of the servicer may occur without the consent of the
certificateholders or the owner trustee and
o the certificateholders or owner trustee will not have the
ability to remove the servicer.
In addition, the noteholders may have the ability to waive defaults by the
servicer, including defaults that could materially adversely affect the
certificateholders. Refer to the "Servicing--Rights Upon Servicer Default" and
"--Waiver of Past Defaults" sections for additional information.
INSOLVENCY OF THE SELLER MAY RESULT IN DELAYS,
REDUCTIONS OR LOSS OF PAYMENTS TO SECURITYHOLDERS
The seller will warrant to each trust that the sale of the receivables to
the trust is a valid sale. However, if the seller were to become a debtor in a
bankruptcy case, delays in payments of collections of receivables to the
related securityholders could result if it is argued that the transfer of the
receivables to the trust is a pledge of the receivables to secure a borrowing
rather than a sale. If the court rules that the transfer is a pledge rather
than a sale, reductions in the amount of payments to the securityholders could
result.
Also, if the transfer of receivables to a trust is treated as a pledge,
then a tax or government lien on the property of the seller arising before the
transfer may have priority over the trust's interest in the receivables.
A case decided by the United States Court of Appeals for the Tenth
Circuit contains language to the effect that accounts sold by an entity that
subsequently became bankrupt remained property of the debtor's bankruptcy
estate because the sale of accounts is treated as a "security interest" that
must be perfected under the Uniform Commercial Code ("UCC"). Although the
contracts representing the receivables constitute chattel paper rather than
accounts under the UCC, sale of chattel paper, like sales of accounts, must be
perfected under Article 9 of the UCC. If DCS were to become a debtor under any
insolvency law and a court were to follow the reasoning of the Tenth Circuit
Court of Appeals and apply such reasoning to chattel paper, then the trust
could experience a delay in or reduction of collections on the receivables,
and you could incur a loss on your investment as a result.
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TRUSTS MAY NOT HAVE A PERFECTED SECURITY
INTEREST IN CERTAIN FINANCED VEHICLES
In connection with the sale of receivables to a trust, the seller will
assign the security interests in the financed automobiles or light duty trucks
securing those receivables to the trust at the time of sale. Due to
administrative burden and expense, the certificates of title to the financed
automobiles or light duty trucks will not be amended to reflect the assignment
to the trust. In the absence of such an amendment, the trust may not have a
perfected security interest in the financed vehicles securing its receivables
in some states. If a trust does not have a perfected security interest in a
financed automobile or light duty truck, its ability to repossess the financed
automobile or light duty truck securing a defaulted receivable may be
adversely affected.
Generally, the seller will be obligated to repurchase any receivable that
does not have a perfected security interest in the name of the seller (or
MBCC, as applicable) as of the date the receivable is transferred to the
trust. The seller will only be obligated to repurchase the receivable if
o the lack of perfection will materially adversely affect the
trust and
o the lack of perfection will not be cured within a specified
period.
To the extent the security interest is perfected, a trust will have a
prior claim over subsequent purchasers of the financed automobile or light
duty truck and holders of subsequently perfected security interests. However,
a trust may not have a prior security interest against liens for repairs of
financed automobiles or light duty trucks or for taxes unpaid by an obligor.
Also, a trust could lose its security interest (or its priority) through fraud
or negligence. If a trust loses its security interest or the priority of its
security interest due to any of these occurrences, neither the seller nor the
servicer will be obligated to repurchase the related receivable if the
occurrence transpired after the trust purchased the receivable.
RELIANCE ON REPRESENTATIONS AND WARRANTIES BY THE SELLER
OR THE SERVICER WHICH PROVES TO BE INADEQUATE
MAY RESULT IN LOSSES TO SECURITYHOLDERS
In connection with the sale of receivables by the seller to a trust, the
seller will make representations and warranties on the characteristics of the
receivables. In some circumstances, the seller may be required to repurchase
receivables that do not conform to the representations and warranties. In
addition, under some circumstances the servicer may be required to purchase
receivables from a trust.
Refer to the "Sale Provisions" and "Servicing--Servicing Procedures"
sections for additional information.
FAILURE TO COMPLY WITH CONSUMER PROTECTION
LAW REQUIREMENTS MAY MAKE A TRUST LIABLE
Federal and state consumer protection laws impose requirements upon
creditors in connection with extensions of credit and collections of retail
installment loans. Some of these laws make an assignee of a loan (such as a
trust) liable to the obligor for any violation by the lender. Generally, the
seller will be obligated to repurchase any receivable which fails to comply
with such laws.
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SUBORDINATION OF CERTAIN SECURITIES MAY RESULT
IN REDUCED PAYMENTS TO THOSE SECURITIES
Payments of interest and principal on one or more classes of securities
of a series may be subordinated in priority of payment to payments of interest
and principal due on one or more other classes of securities of the same
series. Subordination of a class of securities has the effect of increasing
the likelihood of payment on the senior classes of securities in that series
and decreasing the likelihood of payment on that subordinated class of
securities.
ISSUANCE OF A SUBSEQUENT SERIES OF SECURITIES MAY
ADVERSELY AFFECT ANY PRIOR SERIES OF SECURITIES
A single trust may issue more than one series of securities. The
provisions of the governing documents for a subsequent series of securities
issued by a trust will not be subject to the consent of or prior review by the
holders of a prior series of securities. If a trust issues a subsequent series
of securities, each rating agency that rated a prior series of securities must
indicate that the subsequent series will not cause them to reduce or withdraw
its rating of a prior series. We cannot assure you that the issuance of a
subsequent series will not have some effect on a prior series of securities.
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PRINCIPAL DOCUMENTS
In general, the operations of a trust will be governed by the following
documents:
Document Parties Primary Purposes
-------- ------- ----------------
Trust Agreement Owner trustee and DCS, o creates the trust
as depositor o provides for issuance of
certificates and payments to
certificateholders
o establishes rights and duties of owner trustee
o establishes rights of certificateholders
Indenture Trust, as issuer of the o provides for issuance of the notes and
the notes, and indenture trustee terms of the notes
o establishes rights and duties of indenture trustee
o establishes rights of noteholders
Sale and Servicing DCS, as seller and servicer, o effects sale of receivables to the trust
Agreement and a trust as purchaser o contains representations and warranties
concerning the receivables
o contains servicing obligations of
servicer
o provides for compensation to servicer
o directs how cash flow will be applied to expenses
of the trust and payments on its securities
Various provisions of these documents are described throughout this
prospectus and in the related prospectus supplement. The prospectus supplement
for a series will describe any material provisions of these documents that
differ in a material way for that series from the provisions described in this
prospectus.
A form of each of these principal documents has been filed as an exhibit
to the Registration Statement of which this prospectus forms a part. The
summaries of the principal documents in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of those principal documents.
THE TRUSTS
DCS may form trusts at various times pursuant to a separate "Trust
Agreement" for each trust. The principal offices of each trust and the related
owner trustee will be specified in the applicable prospectus supplement.
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SECURITIES ISSUANCE
A trust will issue securities and use the net proceeds from the sale of
the securities to purchase receivables and all payments received on such
receivables on and after the applicable cut-off date (as specified in the
prospectus supplement, a "Cut-off Date"). If the purchased receivable is a DCS
Gold Key Plus Receivable, generally, only the right to receive certain
payments will be purchased by a trust. The primary sources for repayment of
the securities issued by a trust are collections on its receivables,
liquidation proceeds on its defaulted receivables and its reserve funds, if
any.
TRUST PROPERTY
If a trust issues more than one series of securities, the securities of a
series will be supported solely by the property allocated to such series
("Series Trust Property") and will not have any rights in or receive any
payments from the Series Trust Property allocated to any other series of
securities issued by that trust. The Series Trust Property of a trust will
include:
o the receivables pool allocated to such series and payments on such
receivables;
o such amounts as from time to time may be held in separate trust
accounts established for the trust and the proceeds of such
accounts, as described in this prospectus and in the accompanying
prospectus supplement;
o security interests in the financed vehicles and any other interest
of the seller in such financed vehicles;
o the rights to proceeds from claims on certain physical damage,
credit life and disability insurance policies covering the financed
vehicles or the obligors;
o the seller's interest in proceeds from recourse to dealers on
defaulted receivables or the underlying financed vehicles of
defaulted receivables;
o any property that secured a receivable and has been acquired by the
trust; and
o any and all proceeds of the above as allocated to such series of
securities.
In accordance with a "Sale and Servicing Agreement", the seller will sell
a pool of receivables to the trust on the day the trust issues a series of
securities. After an initial sale, the seller may sell subsequent receivables
("Subsequent Receivables") to the trust as frequently as daily during a
specified funding period (a "Funding Period"). The trust will purchase its
Subsequent Receivables from the proceeds of the sale of its securities that
were not used to purchase its initial pool of receivables. Prior to the
purchase of Subsequent Receivables, the trust will maintain those proceeds in
its pre-funding account (the "Pre-Funding Account").
Also, a trust may use its principal collections on receivables to
purchase additional receivables ("Additional Receivables") from the seller
over a specified period (a "Revolving Period"). Any Subsequent Receivables or
Additional Receivables so conveyed will also be assets of the applicable trust
allocated solely to such series of securities.
A trust will purchase Subsequent Receivables or Additional Receivables
only if the prospectus supplement so specifies.
The servicer will continue to service the receivables held by each trust
and will receive fees for such services. To facilitate the servicing of the
receivables, the servicer will retain physical possession of the retail
installment sale contracts owned by each trust and other related documents as
custodian for the trust. To avoid undue administrative burden and expense, the
certificates of title to the financed vehicles will not be amended to reflect
the
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sale and assignment of the security interest in the financed vehicles to
each trust. In the absence of such an amendment, a trust may not have a
perfected security interest in the financed vehicles in all states.
A trust may have reserve funds or other forms of credit enhancement.
Also, a trust may own securities that were issued by another trust but were
not then sold to investors ("Previously Issued Securities"). In addition, a
trust may own the right to receive the overcollateralization distributions
from another trust.
Refer to the "Receivable Pools" section for additional information on the
receivables. Refer to the "Servicing" section in this prospectus and in the
"Transaction Overview-Servicing" section in the accompanying prospectus
supplement for additional information on servicing the receivables. Refer to
the "Certain Legal Aspects of the Receivables" and "Sale Provisions" sections
for additional information on security interests in the financed vehicles.
USE OF PROCEEDS
Generally, a trust will use the net proceeds from the sale of a series of
securities to (i) purchase receivables and, if applicable, any Previously
Issued Securities from the seller, (ii) make the initial deposit into the
reserve funds, if any, and (iii) deposit the Pre-Funded Amount, if any, into
the Pre-Funding Account. Generally, the seller will use the proceeds it
receives for general corporate purposes.
RECEIVABLE POOLS
Each receivable in a pool is a motor vehicle retail installment sale
contract between a dealer and an obligor. The dealers are retail sellers of
new and used automobiles and light duty trucks. Most of the dealers sell
products manufactured and/or distributed by subsidiaries of DaimlerChrysler
AG. Those products include vehicles manufactured under the Chrysler, Plymouth,
Dodge, Jeep, and Mercedes-Benz trademarks.
Each receivable in a pool was or will be originated by dealers who
regularly sell such contracts to DCS (or regularly sold contracts to MBCC).
DCS and MBCC have purchased, and DCS will purchase, the receivables directly
or indirectly according to agreements with dealers throughout the United
States in the ordinary course of business.
Receivable pools will continue to be serviced by DCS, in such capacity as
the servicer and will evidence indirect financing made available by the seller
to the obligors.
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UNDERWRITING
DCS purchases contracts in accordance with its credit standards which are
based upon the vehicle buyer's ability and willingness to repay the obligation
and the value of the vehicle being financed, as well as other factors.
SIMPLE INTEREST RECEIVABLES
"Simple Interest Receivables" are receivables that amortize the amount
financed over a series of fixed level monthly payments. Under the "simple
interest" method, each monthly payment is generally allocated first to
interest and the remainder to principal. The interest allocation is calculated
as follows:
period between current
outstanding principal X stated X and prior payments
balance of the receivable APR (as a fraction of a calendar year)
Accordingly, the portion of the obligor's monthly payment allocated to
principal and interest depends on when an obligor pays the fixed monthly
installment relative to its scheduled due date. The following table
illustrates this relationship:
Portion of Payment
Allocated to If Paid .....
------------ -------------
Before Scheduled After Scheduled
Due Date Due Date
Principal Greater Less
Interest Less Greater
In either case, the obligor generally pays a fixed monthly installment
until the final scheduled payment date. The amount of the final installment is
increased or decreased as necessary to repay the outstanding principal balance
and any finance charges up to the date of final payment. If a Simple Interest
Receivable is prepaid in full, the obligor is required to pay interest only to
the date of prepayment.
If any receivables amortize according to a different method, the
prospectus supplement will describe it. All of DCS's contracts and some of
MBCC's contracts are Simple Interest Receivables.
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PRECOMPUTED RECEIVABLES
Payments received on a "Precomputed Receivable" are allocated according
to the "actuarial" method. The actuarial method provides for amortization of
the loan over a series of fixed level monthly installments. Each monthly
installment is deemed to consist of an amount of interest equal to a
percentage of the stated APR of the loan multiplied by the scheduled principal
balance. The remainder of the scheduled payment is applied to principal.
Generally, no adjustment is made in the event of early or late payments,
although in the latter case the obligor is subject to a late payment penalty.
Even though scheduled payments received on a Precomputed Receivable are
allocated in accordance with the actuarial method, for a receivable which is
prepaid in full or accelerated under certain circumstances or the financed
vehicle is repossessed and sold or becomes a total loss, the amount owing by
the obligor will be determined by considering that previous payments on the
receivable were allocated according to the "simple interest" or "Rule of 78's"
method.
Refer to the "Simple Interest Receivables" section above for a
description of the simple interest method.
Many of the Precomputed Receivables generally also provide that, in the
event of a prepaid receivable, if the amount owing by the obligor determined
by the "Rule of 78s" would be more favorable to the obligor, the amount owing
may be determined in accordance with such rule. A portion of MBCC's contracts
and none of DCS's contracts are Precomputed Receivables.
An "MBCC Balloon Receivable" provides for monthly payments that amortize
the amount financed over its original term to maturity, except that a final
balloon payment, which is materially greater than the scheduled monthly
payments, becomes due on the final maturity date. MBCC Balloon Receivables are
a type of Precomputed Receivable, whose payments are allocated in the same
manner as described above.
DCS GOLD KEY PLUS RECEIVABLES
A "DCS Gold Key Plus Receivable" has the following characteristics:
o requires a fixed, level monthly payment from the obligor,
o is originated under DCS's Gold Key Plus program,
o is secured by a new automobile or light duty truck, and
o has a final "Fixed Value Payment" which is materially greater than
the scheduled monthly payments.
A DCS Gold Key Plus Receivable provides for amortization of the loan over
a series of fixed level payment monthly installments, but also requires a
final Fixed Value Payment due after payment of the monthly installments. The
final Fixed Value Payment may be satisfied by:
o payment in full in cash of such amount,
o transfer of the vehicle to DCS provided certain conditions are
satisfied, or
o refinancing the Fixed Value Payment in accordance with certain
conditions.
Generally, a trust will only purchase the principal and interest payments
due prior to the final Fixed Value Payment and DaimlerChrysler Retail
Receivables LLC will purchase the final Fixed Value Payment. DaimlerChrysler
Retail Receivables LLC will have the option to transfer these final Fixed
Value Payments to the related trust in exchange for certificates representing
interests in these final Fixed Value Payments or indebtedness
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secured by these final Fixed Value Payments. DaimlerChrysler Retail
Receivables LLC may then sell those certificates or the indebtedness.
SELECTION CRITERIA
Each pool of receivables to be held by a trust and allocated to a series
of securities will be selected from the seller's portfolio, including
receivables acquired from MBCC. Each pool of receivables may include only DCS
contracts, or only MBCC contracts or a combination of both DCS and MBCC
contracts.
Generally, only receivables meeting the following criteria will be
selected:
o has been purchased by the seller (or MBCC, as applicable), directly
or indirectly, from dealers in the ordinary course of business
o is secured by a new or used vehicle
o has been originated in the United States and
o satisfies the other criteria, if any, in the related prospectus
supplement
If a pool of receivables does not follow any of these selection criteria, the
related prospectus supplement will so specify.
The prospectus supplement will include information on each receivables
pool, including, to the extent appropriate:
o the composition
o the distribution of the receivables pool selected from the DCS
portfolio and from MBCC's former portfolio
o the distribution of such receivables pool secured by new vehicles
and by used vehicles
o the distribution by outstanding principal balance
o the distribution by annual percentage rate ("APR")
o the distribution by U.S. state of origination
RECOURSE TO DEALERS
DCS has recourse to its dealers on a portion of its retail installment
sale contracts (other than MBCC contracts). Under its recourse obligation, the
dealer is responsible to DCS for payment of the unpaid balance of the
contract, provided that DCS repossesses the vehicle from the retail buyer and
returns it to the dealer within a specified time. DCS applies the same
underwriting standards to the purchase of contracts regardless of whether
there is recourse to dealers.
The net credit loss experience of contracts without recourse against
dealers is higher than that of contracts with recourse against dealers. Based
on its experience, DCS believes that there is no material difference between
the rates of delinquency and repossession on contracts with recourse against
dealers as compared to contracts without recourse against dealers.
In the event of a dealer's bankruptcy, a bankruptcy trustee might attempt
to characterize recourse sales of contracts as loans to the dealer secured by
the contracts. Such an attempt could result in payment delays and, if
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successful, losses on the affected receivables. The prospectus supplement will
include information on the percentage of receivables in the pool with recourse
to dealers.
In addition, some dealers may be obligated to repurchase receivables
originated by them if the dealers have made certain misrepresentations about
the receivables.
DCS's agreements with those dealers that it acquired as a result of its
merger with MBCC obligates the dealer to repurchase any retail installment
sale contract for the outstanding principal balance if the dealer breaches
certain representations and warranties. Upon breach of any representation or
warranty made by a dealer with respect to a contract, pursuant to the dealer
agreement, DCS has a right of recourse against such dealer to require it to
repurchase such contract. Generally, in determining whether to exercise such
right, DCS considers the prior performance of the dealer and other business
and commercial considerations.
NET CREDIT LOSS AND
DELINQUENCY EXPERIENCE
Each prospectus supplement will include specified net credit loss,
repossession and delinquency experience of the seller and, if applicable,
receivables originated by MBCC. We cannot assure you that the delinquency,
repossession and net credit loss experience on any receivables pool will be
comparable to historical experience or to such information.
FLOW OF FUNDS
SOURCES OF FUNDS
A trust may use funds from the following sources to pay its expenses and
make payments on its securities:
o collections on its receivables
o net recoveries from the liquidation of defaulted receivables
o amounts paid by the seller to repurchase a receivable as a result of
the seller's material breach of a representation and warranty--refer
to "Sale Provisions"
o amounts paid by the servicer to purchase a receivable to which it
has made certain modifications--refer to "Servicing -- Servicing
Procedures"
o investment earnings during the related collection period, if any, on
its reserve fund, if any, and on deposits, if any, in its deposit
account
o any reserve fund described in the related prospectus supplement
o any other sources described in the related prospectus supplement.
The funds available to pay expenses and make payments on securities for
any given period are referred to as "Available Funds".
In the case of a trust that issues more than one series of securities,
the distributions on the securities of any one series will be made solely from
funds allocated to that series and not from the funds allocated to any other
series issued by that trust.
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APPLICATION OF AVAILABLE FUNDS
On each payment date the available funds of a trust will be applied to
its expenses and payments on its securities in the amounts and the order of
priority set forth in the prospectus supplement.
NET DEPOSITS
As an administrative convenience, the servicer will deposit a trust's
available funds into any account of the trust net of a payments to be made to
the servicer. However, the servicer will account for available funds as if all
deposits and transfers of available funds were made individually rather than
net.
CREDIT ENHANCEMENT
Credit enhancements are intended to enhance the likelihood of full
payment of principal and interest due and to decrease the likelihood that
securityholders will experience losses. Unless otherwise specified in the
related prospectus supplement, the credit enhancement for a class or series of
securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and accrued interest. If
losses occur which exceed the amount covered by any credit enhancement or
which are not covered by any credit enhancement, securityholders of any class
or series will bear their allocable share of losses, as described in the
related prospectus supplement. In addition, if a form of credit enhancement
covers more than one series of securities, securityholders of any such series
will be subject to the risk that the credit enhancement will be exhausted by
the claims of securityholders of the other series.
A prospectus supplement for a series will specify whether there is any
credit or cash flow enhancement and how it works. Examples are:
o subordination of one or more classes of securities of a series,
o reserve funds,
o overcollateralization,
o letters of credit,
o credit or liquidity facilities,
o surety bonds,
o guaranteed investment contracts,
o swaps (including without limitation currency swaps),
o other interest rate protection agreements,
o repurchase obligations (including without limitation put options),
o yield supplement agreements,
o other agreements with respect to third party payments,
o any other arrangements as may be described in the related prospectus
supplement or
o any combination of two or more of the above.
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RESERVE FUND
A trust may maintain a reserve fund in its Deposit Account. Generally, a
reserve fund will be established by an initial deposit by the seller on the
Closing Date. If a trust has a Funding Period, the reserve fund will also be
increased on each Subsequent Transfer Date to the extent described in the
related prospectus supplement. The amount of the reserve fund may be increased
on each payment date up to a required amount through an allocation of the
trust's Available Funds. The related prospectus supplement will describe the
manner in which the reserve fund will be applied.
PAYMENTS ON THE SECURITIES
The prospectus supplement will describe
o the timing and priority of payments of principal and interest on
each class of the securities,
o their interest rates,
o the method of determining the amount of their principal payments,
o the priority of the application of the trust's available funds to
its expenses, and payments on its securities.
The rights of any class of securities may be senior or subordinate to
other classes of securities. A security may be entitled to
o principal payments with disproportionate, nominal or no interest
payments or
o interest payments with disproportionate, nominal or no principal
payments.
Interest rates may be fixed, variable or adjustable. A class of securities may
be redeemable. The aggregate initial principal amount of the securities of a
series may be greater than, equal to or less than the aggregate initial
principal amount of the receivables in that series.
Payments of principal and interest on any class of securities will be
made on a pro rata basis among all the securityholders of such class. A series
may provide for a liquidity facility or other arrangement (including without
limitation the issuance of additional securities by the trust) that permits
one or more classes of securities to be paid in planned amounts on scheduled
payment dates.
PRINCIPAL PAYMENTS
Weighted Average Life of the Securities
The weighted average life of the securities will generally be influenced
by the rate at which the principal balances of the related receivables are
paid, which payment may be in the form of scheduled amortization or
prepayments. For this purpose, the term "prepayments" includes prepayments in
full, partial prepayments including those related to rebates of extended
warranty contract costs and insurance premiums, liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and
disability insurance policies and certain other receivables repurchased by the
seller or the servicer for administrative reasons. All of the receivables may
be prepaid at any time without penalty to the obligor. The rate of prepayment
of automotive receivables is influenced by a variety of economic, social and
other factors, including the fact that an obligor generally may not sell or
transfer the financed vehicle securing a receivable without the consent of the
seller. The rate of prepayment on the receivables may also be influenced by
the structure of the loan. In addition, under certain circumstances, the
seller will be obligated to repurchase receivables from a trust pursuant to
the related Sale and Servicing Agreement as a result of breaches of its
representations and warranties and the servicer will be obligated to purchase
receivables from a trust pursuant to the Sale and Servicing Agreement as a
result of its breaches of certain covenants. The
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servicer will also have an option to purchase all of a trust's receivables
when their outstanding amount declines to a specified level. Such a purchase
would result in the early redemption of the trust's securities.
Refer to the "Sale Provisions" and "Servicing" sections.
A prospectus supplement may provide for a Revolving Period during which
principal collections in respect of the receivables allocated to the related
series will be applied to purchase Additional Receivables for inclusion in the
related series trust property rather than applied to make distributions on the
related securities. Any such application would increase the weighted average
life of those securities. Also, a prospectus supplement may provide for a
liquidity facility or similar arrangement under which collections of principal
may be invested in Eligible Investments and distributed on the related
securities in planned amounts on scheduled payment dates.
In light of the above considerations, we cannot tell you the amount of
principal that will be paid on any class of securities on any payment date,
since that amount will depend, in part, on the amount of principal collected
on the related receivables pool during the applicable collection period. You
will bear any reinvestment risks resulting from a faster or slower incidence
of prepayment of the receivables that support your securities. The related
prospectus supplement may set forth certain additional information with
respect to the maturity and prepayment considerations applicable to the
particular receivables pool and the related series of securities.
Indexed Securities
A trust may issue a class of "Indexed Securities" in which the principal
amount payable at its final scheduled payment date (the "Indexed Principal
Amount") is determined by reference to a measure (the "Index") which will
relate to the difference in the rate of exchange between United States dollars
and a currency or composite currency (the "Indexed Currency") specified in the
applicable prospectus supplement (such Indexed Securities, "Currency Indexed
Securities");
o the difference in the price of a specified commodity (the "Indexed
Commodity") on specified dates (such Indexed Securities, "Commodity
Indexed Securities");
o the difference in the level of a specified stock index (the "Stock
Index"), which may be based on U.S. or foreign stocks, on specified
dates (such Indexed Securities, "Stock Indexed Securities"); or
o such other objective price or economic measures as are described in
the applicable prospectus supplement.
The applicable prospectus supplement will describe the manner of
determining the Indexed Principal Amount of an Indexed Security and historical
and other information concerning the Indexed Currency, the Indexed Commodity,
the Stock Index or other price or economic measures used in such
determination. The prospectus supplement will also include information
concerning tax consequences to the holders of such Indexed Securities.
Typically, interest on an Indexed Security will be payable based on the
amount designated in the applicable prospectus supplement. The prospectus
supplement will determine the terms of redemption or repayment of Indexed
Securities prior to the final schedule payment date.
Optional Redemption
The prospectus supplement will state whether the servicer has an option
to repurchase the receivables in the related series and when it may exercise
that option. Normally, the option is exercisable when the total principal
balance of the receivables has declined to 10% of their total principal
balance as of the cut-off date. If the servicer exercises this option, the
outstanding securities of that series will be repaid at that time.
26
INTEREST PAYMENTS
A class of securities may bear interest at a fixed, variable, adjustable,
or zero rate per annum. The applicable prospectus supplement will provide the
detailed interest rate terms of your securities. The following sections
provide a general overview of the mechanics of the various types of interest
rates.
Fixed Rate Securities
Each class of fixed rate securities will bear interest at the applicable
per annum interest rate or pass through rate, as the case may be, specified in
the applicable prospectus supplement. Generally, interest on each class of
fixed rate securities will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
Floating Rate Securities
A trust may issue various types of floating rate securities. Each class
of floating rate securities will bear interest at the applicable per annum
floating interest rate. The following defined terms are used in the sections
below to illustrate how various floating rates are determined. All floating
rate interest calculations resulting in percentages will be rounded, if
necessary, to the nearest 1/100,000 of 1% (0.0000001), with five
one-millionths of a percentage point rounded upward.
"Base Rate"-basis for floating interest rate on securities.
"Spread"-added to or subtracted from the Base Rate and generally a stated
number of basis points (one basis point equals one one-hundredth of a
percentage point).
"Spread Multiplier"-generally a number expressed as a percentage.
"Floating Rate Interest Accrual Period"-the period over which interest
accrues at the floating interest rate.
"Index Maturity"-the period of maturity of the instrument or obligation
from which the Base Rate is calculated (i.e., one month LIBOR).
"H.15(519)"-the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", published by the Board of Governors of the Federal
Reserve System.
"Composite Quotations"-the daily statistical release entitled "Composite
3:30 p.m. Quotations for U.S. Government Securities" published by the Federal
Reserve Bank of New York.
"Interest Reset Date"-the first day of the Floating Rate Interest Accrual
Period.
"Calculation Agent"-representative appointed by the trust to calculate
the interest rate on a class of floating rate securities, typically the
indenture trustee. The Calculation Agent's determinations of interest, in the
absence of obvious error, are conclusive and binding for all purposes.
Floating rate securities may have either or both of the following:
o a maximum limitation, or ceiling, on the rate at which interest may
accrue during any Floating Rate Interest Accrual Period and
o a minimum limitation, or floor, on the rate at which interest may
accrue during any Floating Rate Interest Accrual Period.
In no event will the per annum floating interest rate be higher than the
maximum rate permitted by applicable law.
27
LIBOR Securities
- ----------------
LIBOR based floating rate securities will bear interest for each Floating
Rate Interest Accrual Period at LIBOR plus or minus the Spread or multiplied
by a Spread Multiplier, if any. The Calculation Agent determines LIBOR for
each Floating Rate Interest Accrual Period on the LIBOR Determination Date.
The "LIBOR Determination Date" is the second LIBOR Business Day prior to the
Interest Reset Date. A "LIBOR Business Day" is 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" equals the arithmetic mean of the offered rates for deposits in
U.S. dollars for the period of the Index Maturity commencing on the Interest
Reset Date, as displayed on Telerate Page 3750 at approximately 11:00 a.m.
London time on the LIBOR Determination Date. "Telerate Page 3750" means the
display page so designated on the Dow Jones Telerate Service.
CD Rate Securities
CD Rate based floating rate securities will bear interest for each
Floating Rate Interest Accrual Period at the CD Rate plus or minus the Spread
or multiplied by a Spread Multiplier, if any. The Calculation Agent determines
the CD Rate for each Floating Rate Interest Accrual Period on the CD Rate
Determination Date. The "CD Rate Determination Date" is the second business
day prior to the Interest Reset Date.
The "CD Rate" equals the rate on the CD Determination Date for negotiable
certificates of deposit for the period of the Index Maturity. This rate is
published in H.15(519) under the heading "CDs (Secondary Market)".
Commercial Paper Rate Securities
- --------------------------------
Commercial Paper Rate based floating rate securities will bear interest
for each Floating Rate Interest Accrual Period at the Commercial Paper Rate
plus or minus the Spread or multiplied by a Spread Multiplier, if any. The
Calculation Agent determines the Commercial Paper Rate for each Floating Rate
Interest Accrual Period as of the Commercial Paper Rate Determination Date.
The "Commercial Paper Rate Determination Date" is the second business day
prior to the Interest Reset Date.
The "Commercial Paper Rate" for a Floating Rate Interest Accrual Period
equals the Money Market Yield on the Commercial Paper Rate Determination Date
for commercial paper having the period of the Index Maturity. The rate is
published in H.15(519) under the heading "Commercial Paper". "Money Market
Yield" is calculated as follows:
Money Market Yield = D x 360 x 100
-------------
360 - (D x M)
where:
D = the applicable per annum rate for commercial paper quoted on a
bank discount basis and expressed as a decimal
M = the actual number of days in the Index Maturity
Federal Funds Rate Securities
- -----------------------------
Federal Funds Rate based floating rate securities will bear interest for
each Floating Rate Interest Accrual Period at the Federal Funds Rate plus or
minus the Spread or multiplied by a Spread Multiplier, if any. The Calculation
Agent determines the Federal Funds Rate for each Floating Rate Interest
Accrual Period as of the Interest Reset Date.
28
The "Federal Funds Rate" equals the effective rate on the Interest Reset
Date for Federal Funds having the period of the Index Maturity. This rate is
published in H.15(519) under the heading "Federal Funds (Effective)".
Treasury Rate Securities
- ------------------------
Treasury Rate based floating rate securities will bear interest for each
Floating Rate Interest Accrual Period at the Treasury Rate plus or minus the
Spread or multiplied by a Spread Multiplier, if any. The Calculation Agent
determines the Treasury Rate for each Floating Rate Interest Accrual Period as
of its Treasury Rate Determination Date.
The "Treasury Rate Determination Date" is the Monday of the week in which
the Interest Reset Date falls as Treasury bills are normally sold at auction
on Monday of each week. If the applicable Monday is a legal holiday and the
auction is held on Tuesday, then Tuesday would be the Treasury Rate
Determination Date. If the applicable Monday is a legal holiday and the
auction is held on the preceding Friday, then Friday would be the Treasury
Rate Determination Date. If the Interest Reset Date falls on an auction date,
then such Interest Reset Date will instead be the business day immediately
following such auction date.
The "Treasury Rate" equals the rate on the Treasury Determination Date
for the auction of direct obligations of the United States having the period
of the Index Maturity. This rate is published in H.15(519) under the heading
"U.S. Government Securities-Treasury Bills-auction average (investment)".
FORM OF SECURITIES AND TRANSFERS
Unless otherwise specified in the related prospectus supplement, each
class of securities will initially be represented by one or more securities
registered in the name of the nominee of DTC except as set forth below. Unless
otherwise specified in the related prospectus supplement, the securities will
be available for purchase in denominations of $1,000 in book-entry form only.
The seller has been informed by DTC that DTC's nominee will be Cede & Co.
("Cede"), unless another nominee is specified in the related prospectus
supplement. Accordingly, such nominee is expected to be the holder of record
of the securities of each class. Unless and until Definitive Securities are
issued under the limited circumstances described in this prospectus or in the
related prospectus supplement, no securityholder will be entitled to receive a
physical certificate representing a security. All references in this
prospectus and in the related prospectus supplement to actions by
securityholders refer to actions taken by DTC upon instructions from its
participating organizations (the "Participants") and all references in this
prospectus or and in the related prospectus supplement to distributions,
notices, reports and statements to securityholders refer to distributions,
notices, reports and statements to DTC or its nominee, as the registered
holder of the securities, for distribution to securityholders in accordance
with DTC's procedures with respect thereto.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to
hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Unless otherwise specified in the related prospectus supplement,
securityholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
securities may do so only through Participants and Indirect Participants. In
addition, securityholders will receive all distributions of principal and
interest from the related indenture trustee or the related owner trustee, as
applicable, through Participants. Under a book-entry format, securityholders
may experience some delay in their receipt of payments, since such payments
will be forwarded by the applicable trustee to DTC's nominee. DTC will forward
such payments to its Participants, which thereafter will forward them to
Indirect Participants or securityholders.
29
Except to the extent the applicable DaimlerChrysler Retail Receivables LLC
holds certificates with respect to any series of securities, it is anticipated
that the only "securityholder", "noteholder" and "certificateholder" will be
DTC's Nominee. Noteholders will not be recognized by each indenture trustee as
noteholders, as such term is used in each Indenture, and noteholders will be
permitted to exercise the rights of noteholders only indirectly through DTC
and its Participants. Similarly, certificateholders will not be recognized by
each owner trustee as certificateholders as such term is used in each trust
agreement, and certificateholders will be permitted to exercise the rights of
certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of securities among Participants on whose behalf it acts with respect to the
securities and to receive and transmit distributions of principal of, and
interest on, the securities. Participants and Indirect Participants with which
securityholders have accounts with respect to the securities similarly are
required to make book- entry transfers and receive and transmit such payments
on behalf of their respective securityholders. Accordingly, although
securityholders will not possess securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
securities, may be limited due to the lack of a physical certificate for such
securities.
DTC has advised the seller that it will take any action permitted to be
taken by a noteholder under the related Indenture or a certificateholder under
the related Trust Agreement only at the direction of one or more Participants
to whose accounts with DTC the applicable notes or certificates are credited.
DTC may take conflicting actions with respect to other undivided interests to
the extent that such actions are taken on behalf of Participants whose
holdings include such undivided interests.
Except as required by law, neither any administrator, the applicable
owner trustee nor the applicable indenture trustee, will have any liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of the securities of any series held by DTC's
nominee, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Clearstream, Luxembourg ("Clearstream") is incorporated under the laws of
Luxembourg as a professional depository. Clearstream holds securities for its
participating organizations ("Clearstream Participants") and facilitates the
clearance and settlement of securities transactions between Clearstream
Participants through electronic book-entry changes in accounts of Clearstream
Participants, thereby eliminating the need for physical movement of
certificated securities. Transactions may be settled in Clearstream in any of
28 currencies, including United States dollars. Clearstream provides to its
Clearstream Participants services for safekeeping, administration, clearance
and settlement of internationally traded securities and securities lending and
borrowing. Clearstream interfaces with domestic markets in several countries.
As a professional depository, Clearstream is subject to regulation by the
Luxembourg Monetary Institute. Clearstream Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the underwriters. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
Participants of the Euroclear System ("Euroclear Participants") and to clear
and settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need
for physical movement of certificated securities and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in Euroclear in any of 32 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing, and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC. The
Euroclear System is operated by Euroclear Bank S.A./N.V. (the "Euroclear
Operator" or "Euroclear"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator. The Euroclear Operator
holds a banking license granted to it, and is regulated, by the
30
Belgian Banking and Finance Commission. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
System, withdrawal of securities and cash from the Euroclear System, and
receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held as a single bulk holding without
attribution of specific certificated 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.
Distributions with respect to securities held through Clearstream or
Euroclear will be credited to the cash accounts of Clearstream Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "Certain Federal Income Tax Consequences" in this
prospectus and "Global Clearance, Settlement and Tax Documentation Procedures"
to this prospectus. Clearstream or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a securityholder under the
Indenture or Trust Agreement, as applicable, on behalf of a Clearstream
Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depositary's ability to effect such
actions on its behalf through DTC.
Cede, as nominee for DTC, will hold the securities. Clearstream and
Euroclear will hold omnibus positions in the securities on behalf of the
Clearstream Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries (collectively, the "Depositaries"),
which in turn will hold such positions in customers' securities accounts in
the Depositaries' names on the books of DTC.
Transfers between DTC's Participants will occur in accordance with DTC
rules. Transfers between Clearstream Participants and Euroclear Participants
will occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary. However, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream
Participants and Euroclear Participants may not deliver instructions directly
to the Depositaries.
Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date. Those credits or any transactions in those
securities settled during such processing will be reported to the relevant
Clearstream Participant or Euroclear Participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream Participant or a Euroclear Participant to a 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.
31
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of securities among Participants
of DTC, Clearstream and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
In the event that any of DTC, Clearstream or Euroclear should discontinue
its services, the administrator would seek an alternative depository (if
available) or cause the issuance of Definitive Securities to the owners
thereof or their nominees in the manner described in the prospectus below
under "--Definitive Securities".
DEFINITIVE SECURITIES
Unless otherwise specified in the related prospectus supplement, the
securities of a series will be issued in fully registered, certificated form
("Definitive Securities") to securityholders or their respective nominees,
rather than to DTC or its nominee, only if
o o the related administrator or indenture trustee, as applicable,
determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such
securities and such administrator or indenture trustee is unable to
locate a qualified successor (and if it is an administrator that has
made such determination, such administrator so notifies the
applicable trustee in writing), or
o o the administrator or indenture trustee, as applicable, at its
option, elects to terminate the book-entry system through DTC or
o o after the occurrence of an Event of Default or a Servicer Default
with respect to such securities, holders representing at least a
majority of the outstanding principal amount of the notes or the
certificates, as the case may be, of such series advise the
applicable trustee through DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) with respect
to such notes or certificates is no longer in the best interest of
the holders of such securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable trustee will be required to notify all applicable
securityholders of a given series through Participants of the availability of
Definitive Securities. When DTC surrenders the definitive certificates
representing the corresponding securities and gives instructions for
re-registration, the applicable trustee will reissue such securities as
Definitive Securities to such securityholders.
Distributions of principal of, and interest on, such Definitive
Securities will thereafter be made by the applicable trustee in accordance
with the procedures set forth in the related Indenture or the related Trust
Agreement, as applicable, directly to holders of Definitive Securities in
whose names the Definitive Securities were registered at the close of business
on the Record Date. Those distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the
applicable trustee. The final payment on any such Definitive Security,
however, will be made only upon presentation and surrender of such Definitive
Security at the office or agency specified in the notice of final distribution
to the applicable securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the applicable trustee or of a registrar named in a notice
delivered to holders of Definitive Securities. No service charge will be
imposed for any registration of transfer or exchange, but the applicable
trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
List of Securityholders
Unless otherwise specified in the related prospectus supplement with
respect to the notes of any series, three or more holders of the notes of such
series or one or more holders of such notes evidencing not less than 25% of
the aggregate outstanding principal balance of such notes may, by written
request to the related indenture trustee, obtain access to the list of all
noteholders maintained by such indenture trustee for the purpose of
communicating
32
with other noteholders with respect to their rights under the related
Indenture or under such notes. The indenture trustee may elect not to afford
the requesting noteholders access to the list of noteholders if it agrees to
mail the desired communication or proxy, on behalf of and at the expense of
the requesting noteholders, to all noteholders of such series.
Unless otherwise specified in the related prospectus supplement with
respect to the certificates of any series, three or more holders of the
certificates of such series or one or more holders of such certificates
evidencing not less than 25% of the certificate balance of such certificates
may, by written request to the related owner trustee, obtain access to the
list of all certificateholders maintained by such owner trustee for the
purpose of communicating with other certificateholders with respect to their
rights under the related trust agreement or under such certificates.
33
SALE PROVISIONS
On the closing date specified in a prospectus supplement (the "Closing
Date"), the seller will transfer and assign to the applicable trust, without
recourse, pursuant to a Sale and Servicing Agreement, its entire interest in a
pool of receivables, including its security interests in the related financed
vehicles. Each such receivable will be identified in a schedule to the Sale
and Servicing Agreement. The applicable owner trustee will execute and deliver
the trust's notes and/or certificates, as applicable. Unless otherwise
provided in the related prospectus supplement, the net proceeds received from
the sale of the offered securities of a series will be applied to the purchase
of the related receivables from the seller and, to the extent specified in the
related prospectus supplement, to the deposit of the Pre-Funded Amount for
such series into the related Pre-Funding Account. The prospectus supplement
will specify whether Subsequent Receivables for such series will be sold by
the seller to the trust from time to time during any Funding Period for the
trust on each date specified as a transfer date in the prospectus supplement
(each, a "Subsequent Transfer Date").
In each Sale and Servicing Agreement the seller will represent and
warrant to the applicable trust, among other things, that:
o the information provided in the schedule of receivables attached to
the Sale and Servicing Agreement is correct in all material
respects;
o the obligor on each receivable is required to maintain physical
damage insurance covering the financed vehicle in accordance with
the seller's or MBCC's, as applicable, normal requirements;
o as of the applicable Closing Date or the applicable Subsequent
Transfer Date, if any, to the best of its knowledge, the related
receivables are free and clear of all security interests, liens,
charges and encumbrances and no offsets, defenses or counterclaims
have been asserted or threatened;
o as of the Closing Date or the applicable Subsequent Transfer Date,
if any, each related receivable is or will be secured by a first
perfected security interest in favor of the seller or MBCC, as
applicable, in the financed vehicle;
o each receivable, at the time it was originated, complied and, as of
the Closing Date or the applicable Subsequent Transfer Date, if any,
complies in all material respects with applicable federal and state
laws, including, without limitation, consumer credit, truth in
lending, equal credit opportunity and disclosure laws; and
o any other representations and warranties that may be set forth in
the related prospectus supplement.
Unless otherwise provided in the related prospectus supplement, as of the
last day of the second month following the discovery by or notice to the
seller of a breach of any representation or warranty of the seller that
materially and adversely affects the interests of the related trust in any
receivable, the seller will repurchase that receivable if the breach has not
been cured. The purchase price payable to the trust will be the unpaid
principal balance owed by the obligor on the receivable plus interest thereon
at its APR to the last day of the month of repurchase (the "Repurchase
Amount"). The repurchase obligation constitutes the sole remedy available to
the securityholders, the owner trustee and the indenture trustee for any such
uncured breach.
Pursuant to each Sale and Servicing Agreement, to assure uniform quality
in servicing the receivables and to reduce administrative costs, each trust
will designate the servicer as custodian to maintain possession, as such
trust's agent, of the related motor vehicle retail installment sale contracts
and any other documents relating to the receivables. The seller's accounting
records and computer systems will reflect the sale and assignment of the
related receivables to the applicable trust, and UCC financing statements
reflecting such sale and assignment will be filed. However, if another person
acquired possession of the motor vehicle retail installment contracts, under
some circumstances collections on those receivables would not be available to
make payments on the securities.
34
SERVICING
THE SERVICER
Unless otherwise specified in the prospectus supplement, DCS will service
the receivables. DCS is a wholly-owned subsidiary of DaimlerChrysler
Corporation ("DaimlerChrysler") and engages in providing consumer and dealer
automotive financing for the products of DaimlerChrysler, including retail and
lease financing for vehicles, dealer inventory and other financing needs.
DaimlerChrysler is a wholly-owned subsidiary of DaimlerChrysler AG.
DaimlerChrysler AG provides a wide range of transportation products and
financial and other services. It is one of the largest automobile
manufacturers in the world in terms of revenues. DaimlerChrysler AG operates
in several business segments including passenger cars, commercial vehicles,
services, and aerospace. The following chart illustrates the organization
effective before and after November 30, 2001:
Before mergers referred to below After mergers referred to below
|---------------------------------| |---------------------------------|
| DaimlerChrysler AG | | DaimlerChrysler AG |
|---------------------------------| |---------------------------------|
| |
| |
|---------------------------------| |---------------------------------|
| DaimlerChrysler | | DaimlerChrysler |
|North America Holding Corporation| |North America Holding Corporation|
|---------------------------------| |---------------------------------|
| |
| |
|---------------------------------| |---------------------------------|
| DaimlerChrysler | | DaimlerChrysler |
| Corporation | | Corporation |
|---------------------------------| |---------------------------------|
| |
| |
|---------------------------------| |---------------------------------|
| CFC | | DCS |
|---------------------------------| |---------------------------------|
|
|
|---------------------------------|
| MBCC |
|---------------------------------|
DCS's business is substantially dependent upon the operations of
DaimlerChrysler. In particular, lower levels of production and sale of
DaimlerChrysler's automotive products could result in a reduction in the level
of finance and insurance operations of DCS. DCS's executive offices are
located at 27777 Franklin Road, Southfield, Michigan 48034-9296, and its
telephone number is (248) 948-3124.
Prior to November 30, 2001, DCS was a wholly-owned subsidiary of Chrysler
Financial Company L.L.C., a Michigan limited liability company ("CFC"). On
November 30, 2001, MBCC merged into CFC with CFC being the surviving legal
entity, and immediately thereafter CFC merged into DCS with DCS being the
surviving legal entity. Immediately following the merger DCS became the seller
and servicer under each Sale and Servicing Agreement and Administration
Agreement to which CFC was a party, and had substantially the same assets and
liabilities and substantially the same personnel that CFC had prior to the
merger. All references in this prospectus or any prospectus supplement to DCS
that relate to the time prior to that merger are, in effect, to CFC as
predecessor to DCS. All references in this prospectus and any prospectus
supplement to DCS in the context of receivables relating to Mercedes Benz
automobiles at a time prior to the merger are, in effect, to MBCC.
35
ACCOUNTS
With respect to each trust, the servicer will establish and maintain with
the related indenture trustee one or more accounts, in the name of the
indenture trustee on behalf of the securityholders of that series (the
"Deposit Account"). The servicer will deposit the collections on a trust's
receivables into the trust's Deposit Account as described under
"--Collections" below. The applicable trustee will apply available funds in a
Deposit Account to pay the trust's expenses and to make payments on its
securities. If a trust has reserve funds, they will be held in its Deposit
Account. As described under "Sale Provisions" a trust that has a Funding
Period will have a Pre-Funding Account. The prospectus supplement will
describe any other accounts that a trust may have.
Funds in any account of a trust will be invested in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
rating agencies rating the trust's offered securities as being consistent with
the ratings of those securities. Eligible Investments may include motor
vehicle retail sale contracts. Except as described below or in the related
prospectus supplement, Eligible Investments are generally limited to
obligations or securities that mature on or before the next payment date for
such series. However, to the extent permitted by the rating agencies for a
series, funds in any reserve funds for such series may be invested in
securities that will not mature prior to the next payment date and will not be
sold to meet any shortfalls. Thus, the amount of available cash in any reserve
funds at any time may be less than the balance of the reserve funds. If the
amount required to be withdrawn from any reserve funds to cover shortfalls in
collections on the receivables for the related series (as provided in the
related prospectus supplement) exceeds the amount of cash available in the
reserve funds, a temporary shortfall in the amounts distributed to the
securityholders of that series could result. Those shortfalls could, in turn,
increase the average life of those securities. Except as otherwise specified
in the related prospectus supplement, investment earnings on funds in the
Deposit Account during the related Collection Period, if any, net of losses
and investment expenses shall be deposited in the Deposit Account on each
payment date and shall be treated as collections of interest on the related
receivables.
Any account for a trust will be maintained as an Eligible Deposit
Account. An "Eligible Deposit Account" is any segregated account with an
Eligible Institution or an institution otherwise acceptable to the rating
agencies. An "Eligible Institution" means (a) 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) (i) which has either (A) a long-term unsecured debt rating
acceptable to the rating agencies or (B) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the rating agencies and (ii) whose
deposits are insured by the FDIC or (b) the corporate trust department of the
related indenture trustee or owner trustee.
SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all payments due
with respect to the receivables held by any trust and will, consistent with
the related Sale and Servicing Agreement, follow such collection procedures as
it follows with respect to comparable motor vehicle retail installment sale
contracts it services for itself or others. Consistent with its normal
procedures, the servicer may, in its discretion, arrange with the obligor on a
receivable to extend or modify the payment schedule. Some of such arrangements
may result in the servicer purchasing the receivable for the Repurchase
Amount. The servicer may sell the financed vehicle securing the respective
receivable at public or private sale, or take any other action permitted by
applicable law. See "Certain Legal Aspects of the Receivables".
DCS's collectors are assigned to specific delinquent obligors and attempt
to contact the delinquent obligor by telephone or by letter based on the terms
of delinquency and the history of the account. Repossession procedures
typically begin when a contract becomes between 60 to 90 days delinquent.
Repossession is carried out according to specific procedures adopted by DCS.
Any deficiencies remaining, after repossession and sale of the vehicle
after the full charge-off of the contract, are pursued by DCS to the extent
practicable and legally permitted. Obligors are contacted, and when warranted
by individual circumstances, repayment schedules are established and monitored
until the deficiencies are either paid in full or become impractical to
pursue.
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COLLECTIONS
The servicer will deposit collections on the receivables received by it
during the Collection Period on the payment date following that Collection
Period. A "Collection Period" is a calendar month unless otherwise specified
in the prospectus supplement. If at any time any of the following conditions
are true, the servicer must deposit collections on the receivables for that
series into its Deposit Account within two business days of receipt. The
conditions are: (i) DCS is no longer the servicer, or (ii) a Servicer Default
exists, or (iii) any other condition to making deposits monthly as may be
specified by the rating agencies or set forth in the related prospectus
supplement. Pending deposit into the Deposit Account, collections may be
invested by the servicer at its own risk and for its own benefit and will not
be segregated from its own funds. If the servicer were unable to remit such
funds, securityholders might incur a loss. To the extent set forth in the
related prospectus supplement, the servicer may, in order to satisfy the
requirements described above, obtain a letter of credit or other security for
the benefit of the related trust to secure timely remittances of collections
on the related receivables and payment of the aggregate Repurchase Amount with
respect to receivables purchased by the servicer.
Unless otherwise provided in the related prospectus supplement, the
servicer will not make advances of delinquent payments on the receivables.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the prospectus supplement for any series,
the servicer will be entitled to receive the Servicing Fee for each Collection
Period in an amount equal to a specified percentage per month of the total
receivables principal balance for such series as of the first day of that
Collection Period (the "Servicing Fee"). The priority of payment of the
Servicing Fee will be set forth in the prospectus supplement.
Unless otherwise provided in the related prospectus supplement, the
servicer will also collect and retain any late fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to the related receivables. The servicer will be entitled to
reimbursement from such trust for certain liabilities. Payments by or on
behalf of obligors will be allocated to scheduled payments and late fees and
other charges in accordance with the servicer's normal practices and
procedures.
The Servicing Fee will compensate the servicer for performing the
functions of a third party servicer of motor vehicle receivables as an agent
for their beneficial owner, including collecting and posting all payments,
responding to inquiries of obligors on the receivables, investigating
delinquencies, sending payment coupons to obligors, reporting tax information
to obligors, paying costs of collections and disposition of defaults and
policing the collateral. The Servicing Fee also will compensate the servicer
for administering the particular receivables pool, including accounting for
collections and furnishing monthly and annual statements to the related owner
trustee and indenture trustee with respect to distributions and generating
federal income tax information for such trust and for the related
securityholders. The Servicing Fee also will reimburse the servicer for
certain taxes, the fees of the related owner trustee and indenture trustee, if
any, accounting fees, outside auditor fees, data processing costs and other
costs incurred in connection with administering a receivables pool.
REPORTS TO SECURITYHOLDERS
On or prior to each payment date, the servicer will prepare and provide
to the indenture trustee and owner trustee for each series a statement to be
made available to the securityholders of that series on such payment date. The
statement for a series will contain the following information for the current
payment date or the period since the prior payment date:
(i) the amount of principal paid on each class of securities;
(ii) the amount of the interest paid on each class of securities;
(iii) the total principal balance of the receivables as of the close
of business at the beginning and at the end of the related
Collection Period;
(iv) the outstanding principal balance of each class of securities,
both before and after giving effect to all principal payments
on that payment date;
(v) the amount of the servicing fee paid to the servicer with
respect to the related Collection Period;
(vi) the interest rate or pass through rate for the current Interest
Reset Period for any class of notes or certificates of such
series with variable or adjustable rates;
(vii) the amount of the aggregate realized losses, if any, for the
related Collection Period;
(viii) any shortfalls in the payments due on that payment date;
(ix) the total Repurchase Amounts, if any, for receivables that were
repurchased by the seller or the servicer during such
Collection Period;
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(x) the balance of the reserve funds, if any, on that payment date
and the required amount, if any, of those reserve funds;
(xi) during the related Funding Period, if any, the remaining
Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following
the end of the Funding Period, if any, the amount of any
related remaining Pre-Funded Amount that has not been used to
fund the purchase of Subsequent Receivables and is being passed
through as payments of principal on the securities of such
series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii)
with respect to each security of any series will be expressed both in total
and as a dollar amount per $1,000 of the initial principal balance of that
security.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each trust, the applicable
trustee will mail to each person who at any time during such calendar year has
been a securityholder with respect to that trust and received any payment
thereon a statement containing certain information needed in the preparation
of federal income tax returns of that securityholder. Refer to "Certain
Federal Income Tax Consequences".
STATEMENTS TO TRUSTEES AND TRUST
Prior to each payment date or payment date with respect to each series of
securities, the servicer will provide to the applicable trustees a statement
setting forth substantially the same information as is required to be provided
in the periodic reports provided to securityholders of such series described
under "--Reports to Securityholders".
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EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement will provide that a firm of independent
public accountants will furnish annually to the indenture trustee and owner
trustee a statement as to compliance by the servicer during the preceding
twelve months (or, in the case of the first such certificate, from the
applicable Closing Date) with certain standards relating to the servicing of
the applicable receivables, the servicer's accounting records and computer
files with respect thereto and certain other matters.
Under each Sale and Servicing Agreement the servicer will be obligated to
deliver annually to the indenture trustee and owner trustee a certificate
signed by an officer of the servicer stating that the servicer has fulfilled
its obligations under the Sale and Servicing Agreement throughout the
preceding twelve months (or, in the case of the first such certificate, from
the Closing Date). However, if there has been a default in the fulfillment of
any such obligation, the certificate describing each such default. The
servicer has agreed to give each indenture trustee and each owner trustee
notice of certain servicer Defaults under the related Sale and Servicing
Agreement.
Copies of such statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement will provide that DCS may not resign
from its obligations and duties as servicer thereunder, except upon
determination that DCS's performance of such duties is no longer permissible
under applicable law. No such resignation will become effective until the
related indenture trustee or owner trustee, as applicable, or a successor
servicer has assumed DCS's servicing obligations under the Sale and Servicing
Agreement.
Each Sale and Servicing Agreement will further provide that neither the
servicer nor any of its directors, officers, employees and agents will be
under any liability to the related trust or the related noteholders or
certificateholders for taking any action or for refraining from taking any
action pursuant to such Sale and Servicing Agreement or for errors in
judgment. However, neither the servicer nor any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of the servicer's
duties thereunder or by reason of reckless disregard of its obligations and
duties thereunder. In addition, each Sale and Servicing Agreement will provide
that the servicer is under no obligation to appear in, prosecute or defend any
legal action that is not incidental to the servicer's servicing
responsibilities under such Sale and Servicing Agreement and that, in its
opinion, may cause it to incur any expense or liability.
The following entities will automatically become the successor servicer
under a Sale and Servicing Agreement:
o any entity into which the servicer may be merged or consolidated, or
o any entity resulting from any merger or consolidation to which the
servicer is a party, or
o any entity succeeding to the business of the servicer or,
o any entity 50% or more of the ownership interest which is owned,
directly or indirectly, by DaimlerChrysler and which assumes the
servicer's obligations.
Such successor must assume the obligations of the servicer under the Sale and
Servicing Agreement.
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SERVICER DEFAULT
Except as otherwise provided in the related prospectus supplement,
"Servicer Default" under each Sale and Servicing Agreement will consist of
o o any failure by the servicer to deliver to the applicable trustee
for deposit in any of the related trust accounts any required
payment or to direct the applicable trustee to make any required
distributions therefrom, which failure continues unremedied for five
business days after written notice from the applicable trustee is
received by the servicer or after discovery of such failure by the
servicer;
o o any failure by the servicer or the seller, as the case may be,
duly to observe or perform in any material respect any other
covenant or agreement in such Sale and Servicing Agreement, which
failure materially and adversely affects the rights of the
noteholders or the certificateholders of the related series and
which continues unremedied for 60 days after the giving of written
notice of such failure (A) to the servicer or the seller, as the
case may be, by the applicable trustee or (B) to the servicer or the
seller, as the case may be, and to the applicable trustee by holders
of notes or certificates of such series, as applicable, evidencing
not less than 25% in principal amount of such outstanding notes or
certificates; and
o o the occurrence of an Insolvency Event with respect to the
servicer, the seller or DaimlerChrysler Retail Receivables LLC.
"Insolvency Event" means, with respect to any person, any of the
following events or actions: certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings with respect to such person and certain actions
by such person indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any trust that has issued notes, unless otherwise provided
in the related prospectus supplement, as long as a Servicer Default under a
Sale and Servicing Agreement remains unremedied, the related indenture trustee
or holders of the notes evidencing not less than 51% of principal amount of
such notes then outstanding may terminate all the rights and obligations of
the servicer under such Sale and Servicing Agreement. Such indenture trustee
or a successor servicer appointed by such indenture trustee will succeed to
all the responsibilities, duties and liabilities of the servicer under such
Sale and Servicing Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the servicer, and no Servicer Default other than such
appointment has occurred, such trustee or official may have the power to
prevent the indenture trustee, the noteholders, the owner trustee or the
certificateholders from effecting a transfer of servicing. If the indenture
trustee is unwilling or unable to so act, it may appoint, or petition a court
of competent jurisdiction for the appointment of, a successor with a net worth
of at least $100,000,000 and whose regular business includes the servicing of
motor vehicle receivables. The indenture trustee or owner trustee may make
arrangements for compensation to be paid to the successor that is not greater
than the servicing compensation to the servicer under such Sale and Servicing
Agreement.
WAIVER OF PAST DEFAULTS
Unless otherwise provided in the related prospectus supplement, the
holders of notes of a series evidencing at least a majority in principal
amount of the then outstanding notes of the series may, on behalf of all
noteholders and certificateholders of that series, waive any default by the
servicer in the performance of its obligations under the related Sale and
Servicing Agreement and its consequences. However, they cannot waive a
Servicer Default in making any required deposits to or payments from any of
the trust accounts in accordance with such Sale and Servicing Agreement.
Holders of a majority of the principal balance of the certificates of a series
have similar rights with respect to a default by the Servicer that does not
adversely affect the noteholders of the series.
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THE INDENTURE
INDENTURE; MASTER INDENTURE
A trust will issue its notes pursuant to an indenture with the applicable
indenture trustee. If a trust issues more than one series of notes, each such
series may be issued pursuant to a separate indenture or pursuant to a base
indenture and a supplement for the series. In that case, the notes of a series
will be secured solely by the series trust property allocated to the series
and will not have any rights in, or receive any payments from, that series
trust property allocated to any other series of securities issued by the same
trust. Such an indenture or master indenture is referred to as an "Indenture".
Modification of Indenture
With respect to each trust that has issued notes pursuant to an
Indenture, the trust and the indenture trustee may, with the consent of the
holders of a majority of the outstanding notes of the related series, execute
a supplemental indenture to add provisions to, change in any manner or
eliminate any provisions of, the related Indenture, or modify (except as
provided below) in any manner the rights of the related noteholders.
Unless otherwise specified in the related prospectus supplement with
respect to a series of notes, without the consent of the holder of each such
outstanding note affected thereby, no supplemental indenture will:
o change the due date of any installment of principal of or interest
on any such note or reduce the principal amount thereof, the
interest rate specified thereon or the redemption price with respect
thereto or change any place of payment where or the coin or currency
in which any such note or any interest thereon is payable;
o impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment;
o reduce the percentage of the aggregate amount of the outstanding
notes of such series, the consent of the holders of which is
required for any such supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with
certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture;
o modify or alter the provisions of the related Indenture regarding
the voting of notes held by the applicable trust, any other obligor
on such notes, the seller or an affiliate of any of them;
o reduce the percentage of the aggregate outstanding amount of such
notes, the consent of the holders of which is required to direct the
related indenture trustee to sell or liquidate the receivables
allocated to such series if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding notes of such series;
o decrease the percentage of the aggregate principal amount of such
notes required to amend the sections of the related Indenture which
specify the applicable percentage of aggregate principal amount of
the notes of such series necessary to amend such Indenture or
certain other related agreements; or
o permit the creation of any lien ranking prior to or on a parity with
the lien of the related Indenture with respect to any of the series
trust property securing such notes or, except as otherwise permitted
or contemplated in such Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such
note of the security afforded by the lien of such Indenture.
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Unless otherwise provided in the applicable prospectus supplement, the
trust and the applicable indenture trustee may also enter into supplemental
indentures, without obtaining the consent of the noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such noteholders;
provided that such action will not materially and adversely affect the
interest of any such noteholder.
Events of Default; Rights upon Event of Default.
With respect to the notes of a series, unless otherwise specified in the
related prospectus supplement, "Events of Default" under the related Indenture
will consist of:
o a default for five days (or for such other longer period specified
in the related prospectus supplement) or more in the payment of any
interest on any such note;
o a default in the payment of the principal of or any installment of
the principal of any such note when the same becomes due and
payable;
o a default in the observance or performance of any covenant or
agreement of the applicable trust made in the related Indenture and
the continuation of any such default for a period of 30 days after
notice thereof is given to such trust by the applicable indenture
trustee or to such trust and such indenture trustee by the holders
of at least 25% in principal amount of such notes then outstanding;
o any representation or warranty made by such trust in the related
Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in any material respect
as of the time made, and such breach not having been cured within 30
days after notice thereof is given to such trust by the applicable
indenture trustee or to such trust and such indenture trustee by the
holders of at least 25% in principal amount of such notes then
outstanding; or
o certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable trust.
The amount of principal required to be paid to noteholders of a series under
the related Indenture will generally be limited to amounts available in the
applicable Deposit Account and allocated for distribution to such noteholders.
Therefore, unless otherwise specified in the related prospectus supplement,
the failure to pay principal on a class of notes generally will not result in
the occurrence of an Event of Default until the final scheduled payment date
for such class of notes.
In the case of a trust that issues more than one series of notes, an
Event of Default with respect to one such series of notes will not of itself
constitute an Event of Default with respect to any such other series of notes.
If an Event of Default with respect to the notes of any series should
occur and continue, the related indenture trustee or holders of a majority in
principal amount of such notes then outstanding may declare the principal of
such notes to be immediately due and payable. Unless otherwise specified in
the related prospectus supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount
of such notes then outstanding.
If the notes of any series are due and payable following an Event of
Default with respect thereto, the related indenture trustee may institute
proceedings to collect amounts due or foreclose on series trust property
allocated to such series, exercise remedies as a secured party, sell the
receivables included in such series trust property or elect to have the
applicable trust maintain possession of such receivables and continue to apply
collections on such receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related prospectus supplement,
however, such indenture trustee is prohibited from selling the related
receivables following an Event of Default, other than a default in the payment
of any principal of or a default for five days (or such longer period
specified in the related Indenture) or more in the payment of any interest on
any note of such series, unless
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o the holders of all the outstanding notes of such series consent to
such sale,
o the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding notes at
the date of such sale or
o such indenture trustee determines that the proceeds of such
receivables would not be sufficient on an ongoing basis to make all
payments on such notes as such payments would have become due if
such obligations had not been declared due and payable, and such
indenture trustee obtains the consent of the holders of 66 2/3% of
the aggregate outstanding amount of such notes.
If a trust issues more than one series of notes, each such series of
notes will be secured solely by the series trust property allocated to such
series and will not have any rights in or claims on, or receive any payments
from, the series trust property allocated to any other series of securities
issued by such trust.
Subject to the provisions of the applicable Indenture relating to the
duties of the related indenture trustee, if an Event of Default occurs and is
continuing with respect to a series of notes, such indenture trustee will be
under no obligation to exercise any of the rights or powers under such
Indenture at the request or direction of any of the holders of such notes, if
such indenture trustee reasonably believes it will not be adequately
indemnified against the costs, expenses and liabilities which it might incur
in complying with such request. Subject to the provisions for indemnification
and certain limitations contained in the related Indenture, the holders of a
majority in principal amount of the outstanding notes of a series will have
the right to direct the time, method and place of conducting any proceeding or
any remedy available to the applicable indenture trustee in respect of such
series, and the holders of a majority in principal amount of such notes then
outstanding may, in certain cases, waive any default with respect to such
notes, except a default in the payment of principal or interest or a default
in respect of a covenant or provision of such Indenture that cannot
be\modified without the waiver or consent of all the holders of such
outstanding notes.
Unless otherwise specified in the related prospectus supplement, no
holder of a note of any series will have the right to institute any proceeding
with respect to the related Indenture, unless
o such holder has given to the applicable indenture trustee prior
written notice of a continuing Event of Default,
o the holders of not less than 25% in principal amount of the
outstanding notes of such series have made written request to such
indenture trustee to institute such proceeding in its own name as
indenture trustee,
o such holder or holders have offered such indenture trustee
reasonable indemnity,
o such indenture trustee has for 60 days failed to institute such
proceeding, and no direction inconsistent with such written request
has been given to such indenture trustee during such 60-day period
by the holders of a majority in principal amount of such outstanding
notes.
In addition, each indenture trustee and the holders of a series of notes,
by accepting such notes, will covenant, to the extent legally enforceable,
that they will not at any time institute against the applicable trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law and that they do not have and will not assert any
claims against any series trust property allocated to any other series of
notes issued by such trust.
For any series, neither the related indenture trustee nor the related
owner trustee in its individual capacity, nor any holder of a certificate
representing an ownership interest in the trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on such notes or for the agreements of such trust contained in the applicable
Indenture.
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Certain Covenants
Each Indenture will provide that the related trust may not consolidate
with or merge into any other entity, unless
o the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States, any state or the
District of Columbia,
o such entity expressly assumes such trust's obligation to make due
and punctual payments upon the notes of the related series and the
performance or observance of every agreement and covenant of such
trust under the Indenture,
o no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation,
o such trust has been advised that the rating of the notes or the
certificates of such series then in effect would not be reduced or
withdrawn by the rating agencies as a result of such merger or
consolidation and
o such trust has received an opinion of counsel to the effect that
such consolidation or merger would have no material adverse federal
income tax consequence to the trust or to any related noteholder or
certificateholder.
No trust will, among other things,
o except as expressly permitted by its documents, sell, transfer,
exchange or otherwise dispose of any of its property,
o claim any credit on or make any deduction from the principal and
interest payable in respect of its notes (other than amounts
withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such notes because of the
payment of taxes levied or assessed upon the trust,
o dissolve or liquidate in whole or in part,
o permit the validity or effectiveness of the related Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to such notes under such Indenture except
as may be expressly permitted thereby or
o permit any lien, charge, excise, claim, security interest, mortgage
or other encumbrance to be created on or extend to or otherwise
arise upon or burden such series trust property or any part thereof,
or any interest therein or the proceeds thereof.
No trust may engage in any activity other than as specified under the
section of the related prospectus supplement entitled "Transaction
Overview--The Trust". No trust will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to one or more series
of notes issued by it and the related Indentures, pursuant to any advances
made to it by the servicer or otherwise in accordance with its documents.
ANNUAL COMPLIANCE STATEMENT
Each trust will be required to file annually with the related indenture
trustee a written statement as to the fulfillment of its obligations under the
Indenture.
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INDENTURE TRUSTEE'S ANNUAL REPORT
The indenture trustee for each series of notes will be required to mail
each year to all related noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee under the
related Indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the related
trust to the applicable indenture trustee in its individual capacity, the
property and funds physically held by such indenture trustee as such and any
action taken by it that materially affects the related notes and that has not
been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
An Indenture will be discharged with respect to the series trust property
securing a series of notes upon the delivery to the related indenture trustee
for cancellation of all such notes or, with certain limitations, upon deposit
with such indenture trustee of funds sufficient for the payment in full of all
such notes.
THE INDENTURE TRUSTEE
The indenture trustee for a series of notes will be specified in the
related prospectus supplement. The indenture trustee for any series may resign
at any time, in which event the trust will be obligated to appoint a successor
trustee for such series. A trust may also remove any such indenture trustee if
such indenture trustee ceases to be eligible to continue as such under the
related Indenture or if such indenture trustee becomes insolvent. In such
circumstances, the trust will be obligated to appoint a successor indenture
trustee for the applicable series of notes. Any resignation or removal of the
indenture trustee for any series of notes does not become effective until
acceptance of the appointment by the successor trustee for such series.
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MISCELLANEOUS PROVISIONS
OF PRINCIPAL DOCUMENTS
AMENDMENT
Unless otherwise provided in the related prospectus supplement, each of a
trust's principal documents may be amended by the parties thereto, without the
consent of the related noteholders or certificateholders, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of any of those agreement or of modifying in any manner the rights
of such noteholders or certificateholders so long as such action will not, in
the opinion of counsel satisfactory to the related owner trustee or indenture
trustee, as applicable, materially and adversely affect the interest of any
such noteholder or certificateholder. Unless otherwise specified in the
related prospectus supplement, those agreements may also be amended by the
seller, the servicer, the related owner trustee and any related indenture
trustee with the consent of the holders of notes evidencing at least a
majority in principal amount of then outstanding notes, if any, of the related
series and the holders of the certificates of such series evidencing at least
a majority of the principal amount of such certificates then outstanding, for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of those agreements or of modifying in any
manner the rights of such noteholders or certificateholders. However, no such
amendment may (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the related
receivables or distributions that are required to be made for the benefit of
such noteholders or certificateholders or (ii) reduce the aforesaid percentage
of the notes or certificates of such series that are required to consent to
any such amendment, without the consent of the holders of all the outstanding
notes or certificates, as the case may be, of such series.
THE OWNER TRUSTEE
The owner trustee for each trust will be specified in the related
prospectus supplement. The owner trustee's liability in connection with the
issuance and sale of the related securities is limited solely to the express
obligations of such owner trustee set forth in the related Trust Agreement and
the Sale and Servicing Agreement, as applicable. An owner trustee may resign
at any time, in which event the servicer will be obligated to appoint a
successor owner trustee. The administrator of a trust may also remove the
owner trustee if the owner trustee ceases to be eligible to continue as owner
trustee under the related trust agreement or if the owner trustee becomes
insolvent. In such circumstances, the administrator will be obligated to
appoint a successor owner trustee. Any resignation or removal of an owner
trustee will not become effective until acceptance of the appointment by the
successor owner trustee.
47
INSOLVENCY EVENT
Each Trust Agreement will provide that the applicable owner trustee does
not have the power to commence a voluntary proceeding in bankruptcy with
respect to the related trust without the unanimous prior approval of all
certificateholders (including DaimlerChrysler Retail Receivables LLC) of such
trust and the delivery to the owner trustee by each such certificateholder
(including DaimlerChrysler Retail Receivables LLC) of a certificate certifying
that such certificateholder reasonably believes that such trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding notes of a series and the
satisfaction and discharge of the related Indenture, the related owner trustee
will succeed to all the rights of the indenture trustee, and the
certificateholders of such series will succeed to all the rights of the
noteholders of such series, under the related Sale and Servicing Agreement,
except as otherwise provided therein.
TERMINATION
With respect to each series, the obligations of the servicer, the seller,
the related owner trustee and the related indenture trustee, if any, pursuant
to the principal agreements of the trust will terminate upon the earliest of
o the maturity or other liquidation of the last related receivable
included in the series trust property allocated to such series and
the disposition of any amounts received upon liquidation of any such
remaining receivables,
o the payment to noteholders, if any, and certificateholders of such
series of all amounts required to be paid to them pursuant to the
Sale and Servicing Agreement and the Indenture, and
o the occurrence of either event described below.
Unless otherwise provided in the related prospectus supplement, in order
to avoid excessive administrative expense, the servicer will be permitted at
its option to purchase from each trust, as of the end of any applicable
Collection Period, if the total outstanding principal amount of the
receivables in a series is 10% or less of the total principal amount of the
receivables as of the cut-off date for the series. The purchase price will
equal the aggregate of the Repurchase Amounts for the receivables as of the
end of such Collection Period.
If and to the extent provided in the related prospectus supplement with
respect to a trust, the applicable trustee will, within ten days following a
payment date as of which the total principal amount of the receivables in a
series is equal to or less than the percentage of the total principal amount
of the receivables as of the cut-off date for the series specified in the
related prospectus supplement, solicit bids for the purchase of such
receivables, in the manner and subject to the terms and conditions set forth
in such prospectus supplement. If the applicable trustee receives satisfactory
bids as described in such prospectus supplement, then such remaining
receivables will be sold to the highest bidder.
As more fully described in the related prospectus supplement, any
outstanding notes of the related series will be redeemed concurrently with
either of the events specified above. The subsequent distribution to the
related certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement will effect early retirement of
those certificates.
ADMINISTRATION AGREEMENT
DCS, in its capacity as administrator, will enter into an agreement (as
amended and supplemented from time to time, an "Administration Agreement")
with each trust that issues notes and the related indenture trustee. The
administrator will agree, to the extent provided in such Administration
Agreement, to provide the notices and to perform other administrative
obligations required by the related Indenture. Unless otherwise specified in
the related prospectus supplement, as compensation for the performance of the
administrator's obligations under the applicable
48
Administration Agreement and as reimbursement for its expenses related
thereto, the administrator will be entitled to a monthly administration fee in
an amount equal to $200 per month with respect to each series of notes (the
"Administration Fee"), which fee will be paid by the servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTEREST IN VEHICLES
The retail installment sales contracts evidencing the receivables also
grant security interests in the financed vehicles under the applicable UCC.
Perfection of security interests in the automobiles and light duty trucks
financed by the seller is generally governed by the motor vehicle registration
laws of the state in which the vehicle is located. In all states in which the
receivables have been originated, a security interest in automobiles and light
duty trucks is perfected by obtaining the certificate of title to the financed
vehicle or a notation of the secured party's lien on the vehicles' certificate
of title. (In Louisiana, a copy of the installment sale contract must also be
filed with the appropriate governmental recording office).
All contracts originated or acquired by the seller name the seller as
obligee or assignee and as the secured party. The seller also takes all
actions necessary under the laws of the state in which the financed vehicle is
located to perfect the seller's security interest in the financed vehicle,
including, where applicable, having a notation of its lien recorded on such
vehicle's certificate of title. Because the seller continues to service the
contracts, the obligors on the contracts will not be notified of the sale to a
trust. No action will be taken to record the transfer of the security interest
from the seller to a trust by amendment of the certificates of title for the
financed vehicles or otherwise.
The seller will assign its security interests in the financed vehicles
securing the related receivables to each trust pursuant to the related Sale
and Servicing Agreement. However, because of the administrative burden and
expense, neither the seller nor the related owner trustee will amend any
certificate of title to identify a trust as the new secured party on the
certificate of title relating to a financed vehicle. Also, the seller will
continue to hold any certificates of title relating to the vehicles in its
possession as custodian for the trust pursuant to the related Sale and
Servicing Agreement. Refer to "Sale Provisions".
In most states, an assignment such as that under each Sale and Servicing
Agreement is an effective conveyance of a security interest without amendment
of any lien noted on a vehicle's certificate of title, and the assignee
succeeds thereby to the assignor's rights as secured party. However, by not
identifying a trust as the secured party on the certificate of title, the
security interest of a trust in the vehicle could be defeated through fraud or
negligence. In such states, in the absence of fraud or forgery by the vehicle
owner or the seller or administrative error by state or local agencies, the
notation of the seller's lien on the certificates of title will be sufficient
to protect a trust against the rights of subsequent purchasers of a financed
vehicle or subsequent lenders who take a security interest in a financed
vehicle. If there are any financed vehicles as to which the seller failed to
obtain or assign to a trust a perfected security interest, the security
interest of that trust would be subordinate to, among others, the interests of
subsequent purchasers of the financed vehicles and holders of perfected
security interests therein. Such a failure, however, would constitute a breach
of the warranties of the seller under the related Sale and Servicing Agreement
and would create an obligation of the seller to repurchase the related
receivable unless the breach were cured. Refer to "Sale Provisions" and "Risk
Factors--Trusts May Not have a Perfected Security Interest in Certain Financed
Vehicles".
Under the laws of most states, the perfected security interest in a
vehicle would continue for four months after the vehicle is moved to a state
other than the state in which it is initially registered and thereafter until
the owner thereof reregisters the vehicle in the new state. A majority of
states generally require surrender of a certificate of title to reregister a
vehicle. Accordingly, a secured party must surrender possession if it holds
the certificate of title to the vehicle. If a vehicle is registered in a state
providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party would receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party would have the opportunity to re-perfect its security
interest in the vehicle in the state of relocation. In states that do not
require a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing
motor vehicle receivables, the servicer takes steps to effect re-perfection
upon receipt of notice of re-registration or information from the obligor as
to relocation. Similarly, when an obligor sells a vehicle, the servicer must
surrender possession of the certificate of
49
title or will receive notice as a result of its lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
receivable before release of the lien. Under each Sale and Servicing Agreement
the servicer is obligated to take appropriate steps to maintain perfection of
security interests in the financed vehicles and is obligated to purchase the
related receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected
security interest in a financed vehicle. The Code also grants priority to
certain federal tax liens over the lien of a secured party. The laws of
certain states and federal law permit the confiscation of vehicles by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated vehicle. Under each Sale and Servicing
Agreement the seller will represent to the related trust that, as of the date
the related receivable is sold to the trust, each security interest in a
financed vehicle is or will be prior to all other present liens (other than
tax liens and other liens that arise by operation of law) upon and security
interests in such financed vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a financed vehicle could occur, at any time
during the term of a receivable. No notice will be given to the owner trustee,
any indenture trustee or any securityholders in respect of a trust if such a
lien arises or confiscation occurs.
REPOSSESSION
In the event of default by a vehicle purchaser, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured
party under the UCC, except where specifically limited by other state laws.
Among the UCC remedies, the secured party has the right to perform self-help
repossession unless such act would constitute a breach of the peace. Self-help
is the method employed by the servicer in most cases and is accomplished
simply by retaking possession of the financed vehicle. In the event of default
by the obligor, some jurisdictions require that the obligor be notified of the
default and be given a time period within which he may cure the default prior
to repossession. Generally, the right of reinstatement may be exercised on a
limited number of occasions in any one-year period. In cases where the obligor
objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate
state court. The vehicle must then be repossessed in accordance with that
order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held.
The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions,
reasonable attorneys' fees. In some states, payment of delinquent installments
is sufficient.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. Some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness; others do not. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the creditor to remit the surplus to any holder of a lien with respect to the
vehicle. If no such lienholder exists and there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
50
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers
involved in consumer finance. These laws include the Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair
Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Procedures Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, the
Texas Consumer Credit Code, state adoptions of the National Consumer Act and
of the Uniform Consumer Credit Code and state motor vehicle retail installment
sales acts, retail installment sales acts and other similar laws. Also, state
laws impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities
upon creditors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts such as the receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the receivables will be subject to the requirements of the FTC
Rule. Accordingly, each trust, as holder of its receivables, will be subject
to any claims or defenses that the purchaser of the applicable financed
vehicle may assert against the seller of the financed vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the obligor on the
receivable.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the
United States. Courts have generally upheld the notice provisions of the UCC
and related laws as reasonable or have found that the repossession and resale
by the creditor do not involve sufficient state action to afford
constitutional protection to borrowers.
Under each Sale and Servicing Agreement the seller will warrant to the
related trust that each receivable complies with all requirements of law in
all material respects. Accordingly, if an obligor has a claim against the
trust for violation of any law and such claim materially and adversely affects
the trust's interest in a receivable, such violation would constitute a breach
of the warranties of the seller under such Sale and Servicing Agreement and
would create an obligation of the seller to repurchase the receivable unless
the breach is cured. Refer to "Sale Provisions".
51
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured
party to realize upon collateral or to enforce a deficiency judgment. For
example, in a Chapter 13 proceeding under the federal bankruptcy law, a court
may prevent a creditor from repossessing a vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the vehicle at the time of bankruptcy (as determined by the
court), leaving the creditor as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments
due under a contract or change the rate of interest and time of repayment of
the indebtedness.
CERTAIN FEDERAL INCOME
TAX CONSEQUENCES
The following is a general summary of certain federal income tax
consequences of the purchase, ownership and disposition of the notes and the
certificates. The summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment
of noteholders or certificateholders that are insurance companies, regulated
investment companies or dealers in securities. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving
both debt and equity interests issued by a trust with terms similar to those
of the notes and the certificates. As a result, the IRS may disagree with all
or a part of the discussion below. Prospective investors are urged to consult
their own tax advisors in determining the federal, state, local, foreign and
any other tax consequences to them of the purchase, ownership and disposition
of the notes and the certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each trust will be
provided with an opinion of special federal tax counsel to each trust
specified in the related prospectus supplement ("Federal Tax Counsel"),
regarding certain federal income tax matters discussed below. An opinion of
Federal Tax Counsel, however, is not binding on the IRS or the courts. No
ruling on any of the issues discussed below will be sought from the IRS. For
purposes of the following summary, references to the trust, the notes, the
certificates and related terms, parties and documents shall be deemed to
refer, unless otherwise specified herein, to each trust and the notes,
certificates and related terms, parties and documents applicable to such
trust.
The federal income tax consequences to certificateholders will vary
depending on whether (i) an election is made to treat the trust as a
partnership under the Code or (ii) all the certificates are retained by the
seller or an affiliate thereof. The prospectus supplement for each series of
certificates will specify whether a partnership election will be made.
52
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
Tax Characterization of the Trust as a Partnership
Federal Tax Counsel will deliver its opinion that a trust for which a
partnership election is made will not be an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the trust agreement
and related documents will be complied with, and on counsel's conclusions that
the nature of the income of the trust will exempt it from the rule that
certain publicly traded partnerships are taxable as corporations.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness
- --------------------------------------
The seller will agree, and the noteholders will agree by their purchase
of notes, to treat the notes as debt for federal income tax purposes. Federal
Tax Counsel will, except as otherwise provided in the related prospectus
supplement, advise the trust that the notes will be characterized as debt for
federal income tax purposes. The discussion below assumes this
characterization of the notes is correct.
OID, Indexed Securities, Etc.
- -----------------------------
The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the notes are not Indexed securities or
Strip notes. Moreover, the discussion assumes that the interest formula for
the notes meets the requirements for "qualified stated interest" under
Treasury regulations (the "OID regulations") relating to original issue
discount ("OID"), and that any OID on the notes (i.e., any excess of the
principal amount of the notes over their issue price) does not exceed a de
minimis amount (i.e., 1/4% of their principal amount multiplied by the number
of full years included in their term), all within the meaning of the OID
regulations. If these conditions are not satisfied with respect to any given
series of notes, additional tax considerations with respect to such notes will
be disclosed in the applicable prospectus supplement.
Interest Income on the Notes
- ----------------------------
Based on the above assumptions, except as discussed in the following
paragraph, the notes will not be considered issued with OID. The stated
interest thereon will be taxable to a noteholder as ordinary interest income
when received or accrued in accordance with such noteholder's method of tax
accounting. Under the OID regulations, a holder of a note issued with a de
minimis amount of OID must include such OID in income, on a pro rata basis, as
principal payments are made on the note. It is believed that any prepayment
premium paid as a result of a mandatory redemption will be taxable as
contingent interest when it becomes fixed and unconditionally payable. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one
year from the issue date of such note (a "Short-Term note") may be subject to
special rules. An accrual basis holder of a Short-Term note (and certain cash
method holders, including regulated investment companies, as set forth in
Section 1281 of the Code) generally would be required to report interest
income as interest accrues on a straight-line basis over the term of each
interest period. Other cash basis holders of a Short-Term note would, in
general, be required to report interest income as interest is paid (or, if
earlier, upon the taxable disposition of the Short-Term note). However, a cash
basis holder of a Short-Term note reporting interest income as it is paid may
be required to defer a portion of any interest expense otherwise deductible on
indebtedness incurred to purchase or carry the Short-Term note until the
taxable disposition of the Short-Term note. A cash basis taxpayer may elect
under Section 1281 of the Code to accrue interest income on all non-government
debt obligations with a term of one year or less, in which case the taxpayer
would include interest on the Short-Term note in income as it accrues, but
would not be subject to the interest expense deferral rule referred to in the
preceding sentence. Certain special rules apply if a Short-Term note is
purchased for more or less than its principal amount.
53
Sale or Other Disposition
- -------------------------
If a noteholder sells a note, the holder will recognize gain or loss in
an amount equal to the difference between the amount realized on the sale and
the holder's adjusted tax basis in the note. The adjusted tax basis of a note
to a particular noteholder will equal the holder's cost for the note,
increased by any market discount, acquisition discount, OID (including de
minimis OID) and gain previously included by such noteholder in income with
respect to the note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously
received by such noteholder with respect to such note. Any such gain or loss
will be capital gain or loss if the note was held as a capital asset, except
for gain representing accrued interest and accrued market discount not
previously included in income. Any capital gain recognized upon a sale,
exchange or other disposition of a note will be long-term capital gain if the
seller's holding period is more than one year and will be short-term capital
gain if the seller's holding period is one year or less. The deductibility of
capital losses is subject to certain limitations. Prospective investors should
consult with their own tax advisors concerning the U.S. federal tax
consequences of the sale, exchange or other disposition of a note.
Foreign Holders
- ---------------
Interest payments made or accrued on the notes will generally be
considered "portfolio interest," and a non-U.S. person that is an individual
or corporation (or an entity treated as a corporation for U.S. federal income
tax purposes) holding the notes on its own behalf will not be subject to U.S.
federal income tax on interest paid or accrued on a note unless such non-U.S.
person is an actual or constructive "10 percent shareholder" of the trust or
the seller (including a holder of 10% of the outstanding certificates), a
"controlled foreign corporation" related to the trust or the seller, or a bank
receiving interest described in section 881(c)(3)(A) of the Code.
To qualify for the exemption from taxation, the withholding agent must
have received a statement from the individual or corporation that:
o is signed under penalties of perjury by the beneficial owner of
the note,
o certifies that such owner is not a U.S. person, and
o provides the beneficial owner's name and address.
The "withholding agent" is the last U.S. payor (or non-U.S. payor that 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.
person (which itself is not a withholding agent). Generally, this statement is
made on an IRS Form W-8BEN, which will be effective for the remainder of the
year of signature plus three full calendar years, unless a change in
circumstances makes any information on the form incorrect. Notwithstanding the
preceding sentence, an IRS Form W-8BEN with a U.S. taxpayer identification
number will remain effective until a change in circumstances makes any
information on the form incorrect, provided that the withholding agent reports
at least annually to the beneficial owner on IRS Form 1042-S. The beneficial
owner must inform the withholding agent within 30 days of such change and
furnish a new IRS Form W-8BEN.
A non-U.S. person other than 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. In
particular, in the case of notes held by a foreign partnership or foreign
trust, the partners or beneficiaries, as the case may be, rather than the
partnership or trust will be required to provide the certification discussed
above, and the partnership (or trust) will be required to provide certain
additional information. Certain securities clearing organizations, and other
entities who are not beneficial owners, may provide a signed statement to the
withholding agent in lieu of the beneficial owner's signed statement. However,
in such case, the signed statement may require a copy of the beneficial
owner's IRS Form W-8BEN (or the substitute form) to be attached.
A non-U.S. person holding the notes on its own behalf, 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 if the holder provides the withholding agent with an IRS Form
W-8ECI.
54
If the interest paid or accrued on the notes is not portfolio interest,
then it will be subject to U.S. federal income tax at graduated rates (if
received by a non-U.S. person with effectively connected income that has
provided a Form W-8ECI) or withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable tax treaty.
Generally, a non-U.S. person will not be subject to U.S. federal income
tax on any amount which constitutes capital gain upon the sale, redemption,
retirement or other taxable disposition of a note, unless such gain is derived
from sources within the United States and such non-U.S. person is an
individual who is present in the United States for 183 days or more in the
taxable year of the disposition or otherwise establishes a "tax home" in the
United States. Certain other exceptions may be applicable, and a non-U.S.
person holding a note should consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. person that
holds a note unless the individual is an actual or constructive "10 percent
shareholder" of the seller or the trust (including a holder of 10% of the
outstanding certificates) or, at the time of such individual's death, payments
in respect of the note would have been effectively connected with the conduct
by such individual of a trade or business in the United States.
Backup Withholding
- ------------------
Backup withholding of U.S. federal income tax may apply to payments made
in respect of a note to a registered owner that is not an exempt recipient and
that fails to provide certain identifying information (such as the registered
owner's taxpayer identification number) in the required manner. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities, such as tax exempt organizations, qualified pension and
profit-sharing trusts, or individual retirement accounts generally are exempt
recipients. Payments made in respect of the notes to a U.S. person must be
reported to the IRS, unless the U.S. person is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in the preceding section would establish an exemption from backup
withholding for those non-U.S. persons holding notes who are not exempt
recipients.
In addition, upon the sale of a note to (or through) a broker, the broker
must report the sale and withhold a portion of the entire purchase price,
unless either (i) the broker determines that the seller is a corporation or
other exempt recipient or (ii) the seller certifies that it is a non-U.S.
person (and certain other conditions are met). Certification of the registered
owner's status as a non-U.S. person normally would be made on an IRS Form
W-8BEN under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's U.S. federal income tax provided the required information
is furnished to the IRS.
Prospective investors are strongly urged to consult their own tax
advisors with respect to the application of backup withholding to their
individual circumstances.
\Possible Alternative Treatments of the Notes
- --------------------------------------------
If, contrary to the opinion of Federal Tax Counsel, the IRS successfully
asserted that one or more of the notes did not represent debt for federal
income tax purposes, the notes might be treated as equity interests in the
trust. If so treated, the trust might be treated as a publicly traded
partnership taxable as a corporation with potentially adverse tax consequences
(and the publicly traded partnership taxable as a corporation would not be
able to reduce its taxable income by deductions for interest expense on notes
recharacterized as equity). Alternatively, and most likely in the view of
Federal Tax Counsel, the trust would be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
certain qualifying income tests. Nonetheless, treatment of the notes as equity
interests in such a partnership could have adverse tax consequences to certain
holders. For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income", income to foreign holders
generally would be subject to U.S. tax and U.S. tax return filing and
withholding requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of trust expenses.
55
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership
- ---------------------------------------
The seller and the servicer will agree, and the certificateholders will
agree by their purchase of certificates, to treat the trust and each separate
series trust property as a partnership for purposes of federal and state
income tax, franchise tax and any other tax measured in whole or in part by
income, with the assets of the partnership being the assets held by the trust,
the partners of the partnership being the certificateholders (including
DaimlerChrysler Retail Receivables LLC in its capacity as recipient of
distributions from the reserve funds), and the notes being debt of the related
partnership. However, the proper characterization of the arrangement involving
the trust, the certificates, the notes, the seller, DaimlerChrysler Retail
Receivables LLC and the servicer is not clear because there is no authority on
transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of DaimlerChrysler Retail Receivables
LLC or the trust. Any such characterization would not result in materially
adverse tax consequences to certificateholders as compared to the consequences
from treatment of the certificates as equity in a partnership, described
below. The following discussion assumes that the certificates represent equity
interests in a partnership.
Indexed Securities, Etc.
- ------------------------
The following discussion assumes that all payments on the certificates
are denominated in U.S. dollars, none of the certificates are Indexed
securities or Strip certificates, and that a series of securities includes a
single class of certificates. If these conditions are not satisfied with
respect to any given series of certificates, additional tax considerations
with respect to such certificates will be disclosed in the applicable
prospectus supplement.
Partnership Taxation
- --------------------
As a partnership, the trust will not be subject to federal income tax.
Rather, each certificateholder will be required to separately take into
account such holder's allocated share of income, gains, losses, deductions and
credits of the trust. The trust's income will consist primarily of interest
and finance charges earned on the receivables (including appropriate
adjustments for market discount, OID and bond premium) and any gain upon
collection or disposition of receivables. The trust's deductions will consist
primarily of interest accruing with respect to the notes, servicing and other
fees, and losses or deductions upon collection or disposition of receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the trust agreement and related documents). The trust agreement will
provide, in general, that the certificateholders will be allocated taxable
income of the trust for each month equal to the sum of (i) the interest that
accrues on the certificates in accordance with their terms for such month,
including interest accruing at the pass through rate for such month and
interest on amounts previously due on the certificates but not yet
distributed; (ii) any trust income attributable to discount on the receivables
that corresponds to any excess of the principal amount of the certificates
over their initial issue price; (iii) prepayment premium payable to the
certificateholders for such month; and (iv) any other amounts of income
payable to the certificateholders for such month. Such allocation will be
reduced by any amortization by the trust of premium on receivables that
corresponds to any excess of the issue price of certificates over their
principal amount. All remaining taxable income of the trust will be allocated
to DaimlerChrysler Retail Receivables LLC. Based on the economic arrangement
of the parties, this approach for allocating trust income should be
permissible under applicable Treasury regulations, although no assurance can
be given that the IRS would not require a greater amount of income to be
allocated to certificateholders. Moreover, even under the foregoing method of
allocation, certificateholders may be allocated income equal to the entire
pass through rate plus the other items described above even though the trust
might not have sufficient cash to make current cash distributions of such
amount. Thus, cash basis holders will in effect be required to report income
from the certificates on the accrual basis and certificateholders may become
liable for taxes on trust income even if they have not received cash from the
trust to pay such taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all certificateholders but
certificateholders may be purchasing certificates at different times and at
different prices, certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to
them by the trust.
56
All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the trust (including fees
to the servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or
in part and might result in such holder being taxed on an amount of income
that exceeds the amount of cash actually distributed to such holder over the
life of the trust.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each receivable, the
trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on certificateholders.
Discount and Premium
- --------------------
It is believed that the receivables were not issued with OID, and,
therefore, the trust should not have OID income. However, the purchase price
paid by the trust for the receivables may be greater or less than the
remaining principal balance of the receivables at the time of purchase. If so,
the receivables will have been acquired at a premium or discount, as the case
may be. (As indicated above, the trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
receivable-by-receivable basis.)
If the trust acquires the receivables at a market discount or premium,
the trust will elect to include any such discount in income currently as it
accrues over the life of the receivables or to offset any such premium against
interest income on the receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to
certificateholders.
Section 708 Termination
- -----------------------
Under Section 708 of the Code, the trust will be deemed to terminate for
federal income tax purposes if 50% or more of the capital and profits
interests in the trust are sold or exchanged within a 12-month period.
Pursuant to final Treasury regulations issued on May 9, 1997, if such a
termination occurs, the trust will be considered to have contributed the
assets of the trust (the "old partnership") to a new partnership (the "new
partnership") in exchange for interests in the partnership. Such interests
would be deemed distributed to the partners of the old partnership in
liquidation thereof, which would not constitute a sale or exchange.
57
Disposition of Certificates
- ---------------------------
Generally, capital gain or loss will be recognized on a sale of
certificates in an amount equal to the difference between the amount realized
and the seller's tax basis in the certificates sold. A certificateholder's tax
basis in a certificate will generally equal the holder's cost increased by the
holder's share of trust income (includible in income) and decreased by any
distributions received with respect to such certificate. In addition, both the
tax basis in the certificates and the amount realized on a sale of a
certificate would include the holder's share of the notes and other
liabilities of the trust. A holder acquiring certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
certificates, and, upon sale or other disposition of some of the certificates,
allocate a portion of such aggregate tax basis to the certificates sold
(rather than maintaining a separate tax basis in each certificate for purposes
of computing gain or loss on a sale of that certificate).
Any gain on the sale of a certificate attributable to the holder's share
of unrecognized accrued market discount on the receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets
that would give rise to such special reporting requirements. Thus, to avoid
those special reporting requirements, the trust will elect to include market
discount in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees
- -----------------------------------------------
In general, the trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month will be apportioned
among the certificateholders in proportion to the principal amount of
certificates owned by them as of the close of the last day of such month. As a
result, a holder purchasing certificates may be allocated tax items (which
will affect its tax liability and tax basis) attributable to periods before
the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the trust might be reallocated among the certificateholders.
DaimlerChrysler Retail Receivables LLC is authorized to revise the trust's
method of allocation between transferors and transferees to conform to a
method permitted by future regulations.
Section 754 Election
- --------------------
In the event that a certificateholder sells its certificates at a profit
(or loss), the purchasing certificateholder will have a higher (or lower)
basis in the certificates than the selling certificateholder had. The tax
basis of the trust's assets will not be adjusted to reflect that higher (or
lower) basis unless the trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the trust will not make such an
election. As a result, certificateholders might be allocated a greater or
lesser amount of trust income than would be appropriate based on their own
purchase price for the certificates.
58
Administrative Matters
- ----------------------
Taxation of U.S. Tax-Exempt Shareholders. In general, U.S. Shareholders
that generally are exempt from taxation in the United States ("U.S. Tax-Exempt
Shareholders") are subject to tax in respect of any unrelated business taxable
income ("UBTI") they recognize. UBTI is defined generally as income from a
trade or business regularly carried on by a tax-exempt entity that is
unrelated to its exempt purpose. UBTI generally does not include dividends,
interest and, with certain exceptions, gains or losses from the sale, exchange
or other disposition of property.
Section 514 of the Code provides that a tax-exempt entity's
"debt-financed income" will be included in computing UBTI, regardless of
whether such income would otherwise be excluded as dividends, interest or
other similar income. Consequently, if a U.S. Tax-Exempt Shareholder's
acquisition of a certificate is debt-financed, all or a portion of such
investor's income attributable to the trust will be included in UBTI. In
addition, the trust may borrow funds or otherwise incur debt (for example, by
issuing notes) that may result in income of the trust being treated as
debt-financed income under the UBTI rules.
There is some uncertainty with respect to this matter, certain proposed
regulations with respect to this subject have not been finalized and may be
modified or amended prior to their finalization, and additional regulations
could be promulgated, possibly with retroactive effect, U.S. Tax-Exempt
Shareholders should therefore consult their tax advisors regarding all
possible aspects of UBTI.
The owner trustee is required to keep or have kept complete and accurate
books of the trust. Such books will be maintained for financial reporting and
tax purposes on an accrual basis and the fiscal year of the trust will be the
calendar year. The owner trustee will file a partnership information return
(IRS Form 1065) with the IRS for each taxable year of the trust and will
report each certificateholder's allocable share of items of trust income and
expense to holders and the IRS on Schedule K1. The trust will provide the
Schedule K1 information to nominees that fail to provide the trust with the
information statement described below and such nominees will be required to
forward such information to the beneficial owners of the certificates.
Generally, holders must file tax returns that are consistent with the
information return filed by the trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust
with a statement containing certain information on the nominee, the beneficial
owners and the certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such
person, (y) whether such person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any wholly owned
agency or instrumentality of either of the foregoing, and (z) certain
information on certificates that were held, bought or sold on behalf of such
person throughout the year. In addition, brokers and financial institutions
that hold certificates through a nominee are required to furnish directly to
the trust information as to themselves and their ownership of certificates. A
clearing agency registered under Section 17A of the Exchange Act is not
required to furnish any such information statement to the trust. The
information referred to above for any calendar year must be furnished to the
trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the trust with the information described
above may be subject to penalties.
DaimlerChrysler Retail Receivables LLC will be designated as the tax
matters partner in the related trust agreement and, as such, will be
responsible for representing the certificateholders in any dispute with the
IRS. The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute
of limitations for partnership items does not expire before three years after
the date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
certificateholders, and, under certain circumstances, a certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the trust. An adjustment could also result in an audit of a
certificateholder's returns and adjustments of items not related to the income
and losses of the trust.
Tax Consequences to Foreign Certificateholders
- ----------------------------------------------
59
It is not clear whether the trust would be considered to be engaged in a
trade or business in the United States for purposes of federal withholding
taxes with respect to non-U.S. persons because there is no clear authority
dealing with that issue under facts substantially similar to those described
herein. Although it is not expected that the trust would be engaged in a trade
or business in the United States for such purposes, the trust will withhold as
if it were so engaged in order to protect the trust from possible adverse
consequences of a failure to withhold. The trust expects to withhold on the
portion of its taxable income that is allocable to foreign certificateholders
pursuant to Section 1446 of the Code, as if such income were effectively
connected to a U.S. trade or business, at the highest rate applicable to
corporations for foreign holders that are taxable as corporations and the
highest rate applicable to individuals for all other foreign holders.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the trust to change its withholding
procedures. In determining a holder's withholding status, the trust may rely
on IRS Form W-8BEN, IRS Form W9 or the holder's certification of non-foreign
status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the trust's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that
number to the trust on Form W-8BEN or other applicable form (or substantially
identical form) in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the trust, taking the
position that no taxes were due because the trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard
to the income of the trust. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
"portfolio interest". As a result, certificateholders that are not non-U.S.
persons will be subject to United States federal income tax and withholding
tax at a rate of 30%, unless reduced or eliminated pursuant to an applicable
treaty. In such case, a foreign holder would only be entitled to claim a
refund for that portion of the taxes in excess of the taxes that should be
withheld with respect to the guaranteed payments.
Backup Withholdings
- -------------------
Distributions made on the certificates and proceeds from the sale of the
certificates will be subject to a "backup" withholding tax if, in general, the
certificateholder fails to comply with certain identification procedures,
unless the holder is an exempt recipient under applicable provisions of the
Code.
Tax Exempt Investors
- --------------------
Investors that are exempt from federal income taxation under Section 501
of the Code are nevertheless subject to federal income taxation on their
"unrelated business taxable income," including "unrelated debt-financed
income," as defined in Sections 512 and 514 of the Code. Income in respect of
certificates of a trust that has also issued notes would be "unrelated
debt-financed income" for these purposes.
TRUSTS IN WHICH ALL CERTIFICATES ARE RETAINED
BY THE SELLER OR AN AFFILIATE OF THE SELLER
Tax Characterization of the Trust
Federal Tax Counsel will deliver its opinion that a trust which issues
one or more classes of notes to investors and all the certificates of which
are retained by seller or an affiliate thereof will not be an association (or
publicly traded partnership) taxable as a corporation for federal income tax
purposes. This opinion will be based on the assumption that the terms of the
trust agreement and related documents will be complied with, and on counsel's
conclusions that the trust will constitute a mere security arrangement for the
issuance of debt by the single certificateholder.
Treatment of the Notes as Indebtedness
- --------------------------------------
60
The seller will agree, and the noteholders will agree by their purchase
of notes, to treat the notes as debt for federal income tax purposes. Federal
Tax Counsel will, except as otherwise provided in the related prospectus
supplement, advise the trust that the notes will be classified as debt for
federal income tax purposes. Assuming such characterization of the notes is
correct, the federal income tax consequences to noteholders described above
under the heading "Trusts for Which a Partnership Election is Made--Tax
Consequences to Holders of the notes" would apply to the noteholders.
If, contrary to the opinion of Federal Tax Counsel, the IRS successfully
asserted that one or more classes of notes did not represent debt for federal
income tax purposes, such class or classes of notes might be treated as equity
interests in the trust. If so treated, the trust might be treated as a
publicly traded partnership taxable as a corporation with potentially adverse
tax consequences (and the publicly traded partnership taxable as a corporation
would not be able to reduce its taxable income by deductions for interest
expense on notes recharacterized as equity). Alternatively, and more likely in
the view of Federal Tax Counsel, the trust would most likely be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of notes
as equity interests in such a partnership could have adverse tax consequences
to certain holders of such notes. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable
income", income to foreign holders may be subject to U.S. withholding tax and
U.S. tax return filing requirements, and individual holders might be subject
to certain limitations on their ability to deduct their share of trust
expenses. In the event one or more classes of notes were treated as interests
in a partnership, the consequences governing the certificates as equity
interests in a partnership described above under "Trusts for which a
Partnership Election is Made--Tax Consequences to Holders of the certificates"
would apply to the holders of such notes.
61
FASITS
FASIT Provisions
The Small Business and Job Protection Act of 1996 added sections 860H
through 860L to the Code (the "FASIT provisions"), which provide for a new
type of entity for United States federal income tax purposes known as a
"financial asset securitization investment trust" (a "FASIT"). Federal Tax
Counsel will deliver its opinion that a trust for which a FASIT election is
made will be treated as a FASIT for federal income tax purposes assuming
compliance with the terms of the trust agreement (including the making of a
timely FASIT election) and related documents. The FASIT provisions of the Code
became effective on September 1, 1997. On February 4, 2000, the IRS and
Treasury issued proposed Treasury regulations on FASITs. The regulations
generally would not be effective until final regulations are filed with the
federal register. However, it appears that certain anti-abuse rules would
apply as of February 4, 2000. Accordingly, definitive guidance cannot be
provided with respect to many aspects of the tax treatment of the trust or the
holders of FASIT regular interests (such holders, "FASIT regular
noteholders"). Moreover, the qualification as a FASIT of any trust for which a
FASIT election is made (a "FASIT trust") depends on the trust's ability to
satisfy the requirements of the FASIT provisions on an ongoing basis,
including, without limitation, the requirements of any final Treasury
regulations that may be promulgated in the future under the FASIT provisions
or as a result of any change in applicable law. Thus, no assurances can be
made regarding the continuing qualification as a FASIT of any trust for which
a FASIT election is made at any particular time after the issuance of
securities by the FASIT trust. In general, the FASIT legislation will enable a
trust to be treated as a pass-through entity not subject to United States
federal entity-level income tax (except with respect to certain prohibited
transactions) and to issue securities that would be treated as debt for United
States federal income tax purposes. The prospectus supplement for a trust that
elects FASIT treatment will provide additional information on the FASIT
provisions. Also, FASIT election may be made with respect to a trust in
connection with the issuance of future series of its securities, upon
satisfaction of certain conditions, delivery by the trust of appropriate legal
opinions and a determination by the trust that such election will have no
adverse impact on holders of any then-existing classes of securities of the
trust.
CERTAIN STATE TAX CONSEQUENCES
The activities of servicing and collecting the receivables will be
undertaken by the servicer, a Michigan limited liability company. Because of
the variation in each state's tax laws based in whole or in part upon income,
it is impossible to predict tax consequences to holders of notes and
certificates in all of the state taxing jurisdictions in which they are
already subject to tax. Noteholders and certificateholders are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of notes and certificates.
* * *
The federal and state tax discussions set forth above are included for
general information only and may not be applicable depending upon a
noteholder's or certificateholder's particular tax situation. Prospective
purchasers should consult their tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of notes and
certificates, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in federal or other tax
laws.
62
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit or other plan (such as an individual
retirement account and certain types of Keogh Plans) that is subject to Title
I of ERISA or to Section 4975 of the Code from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the plan. Certain governmental plans, although not subject to ERISA or the
Code, are subject to federal, state or local laws ("Similar Law") that impose
similar requirements. Such plans subject to ERISA, Section 4975, or Similar
Law are referred to herein as "Plans". A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA
and the Code or under Similar Law for such persons.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the
securities--for example:
o Prohibited Transaction Class Exemption ("PTE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house
asset manager";
o PTE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest;
o PTE 91-38, which exempts certain transactions between bank
collective investment funds and parties in interest;
o PTE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest;
o PTE 84-14, which exempts certain transactions effected on behalf of
a Plan by a "qualified professional asset manager".
There can be no assurance that any of these exemptions will apply with
respect to any Plan's investment in the securities, 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 trust if, as described below, the
assets of the trust 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 securities
and the operations of the trust would result in prohibited transactions if
Plans that purchase the securities were deemed to own an interest in the
underlying assets of the trust under the rules discussed below. There may also
be an improper delegation of the responsibility to manage Plan assets if Plans
that purchase the securities are deemed to own an interest in the underlying
assets of the trust.
Pursuant to Department of Labor Regulation ss.2510.3-101 (the "Plan
Assets Regulation"), in general when a Plan acquires an equity interest in an
entity such as a trust 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. It is
anticipated that the certificates will be considered equity interests in the
trust for purposes of the Plan Assets Regulation. Therefore, the assets of the
trust could constitute plan assets if certificates were acquired by Plans. In
such event, the fiduciary and prohibited transaction restrictions of ERISA and
Section 4975 of the Code would apply to transactions involving the
63
assets of the trust. As a result, except in the case of Certificates with
respect to which the Exemption is available (as described below), certificates
generally shall not be transferred unless the owner trustee receives
o a representation substantially to the effect that the proposed
transferee is not a Plan and is not acquiring the certificates on
behalf of or with the assets of a Plan (including assets that may be
held in an insurance company's separate or general accounts where
assets in such accounts may be deemed "plan assets" for purposes of
ERISA), or
o an opinion of counsel in form and substance satisfactory to the
owner trustee and the seller that the purchase or holding of the
certificates by or on behalf of a Plan will not constitute a
prohibited transaction and will not result in the assets of the
trust being deemed to be "plan assets" and subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction
provisions of ERISA and the Code or any Similar Law or subject the
owner trustee, the indenture trustee, the certificate administrator
or the seller to any obligation in addition to those undertaken in
the trust agreement.
Unless otherwise specified in the related prospectus supplement, the
offered notes may be purchased by a Plan. A fiduciary of a Plan must determine
that the purchase of a note is consistent with its fiduciary duties under
ERISA and does not result in a nonexempt prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Code. However, the notes may not
be purchased with the assets of a Plan if the seller, an underwriter, the
indenture trustee, 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
- will serve as a primary basis for investment decisions with respect
to such Plan assets and
- will be based on the particular investment needs for such Plan; or
o is an employer maintaining or contributing to such Plan.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. However, any such governmental
or church plan which is qualified under Section 401(a) of the Code and exempt
from taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules in Section 503 of the Code.
A fiduciary of a Plan considering the purchase of securities of a given
series should consult its tax and/or legal advisors regarding whether the
investment will cause the assets of the trust to be considered plan assets,
the possibility of exemptive relief from the prohibited transaction rules and
other issues and their potential consequences.
Certificates
The following applies only to certain certificates (referred to herein as
"Certificates") issued by a trust.
The U.S. Department of Labor (the "DOL") has granted to the lead
underwriter named in the prospectus supplement an exemption (the "Exemption")
from certain of the prohibited transaction rules of ERISA with respect to the
initial purchase, the holding and the subsequent resale by Plans of
certificates representing interests in asset-backed pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Exemption. The receivables covered by the
Exemption include fully-serviced motor vehicle installment sales contracts.
The Exemption will apply to the acquisition, holding and resale of the
Certificates by a Plan, provided that certain conditions (certain of which are
described below) are met.
64
Among the conditions which must be satisfied for the Exemption to apply
to the Certificates are the following:
1. The acquisition of the Certificates by a Plan is on terms (including
the price for the Certificates) that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party;
2. The rights and interests evidenced by the Certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the trust unless the issuer holds only certain types of assets
such as fully-secured motor vehicle installment sales ("Designated
Transactions");
3. The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories (four, in a Designated Transaction) from either Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc. or Fitch, Inc.;
4. The owner trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
5. The sum of all payments made to the underwriters in connection with
the distribution of the Certificates represents not more than reasonable
compensation for underwriting the Certificates; the sum of all payments made
to and retained by the seller pursuant to the sale of the receivables to the
trust represents not more than the fair market value of such receivables; and
the sum of all payments made to and retained by the servicer represents not
more than reasonable compensation for the servicer's services under the Sale
and Servicing Agreement and reimbursement of the servicer's reasonable
expenses in connection therewith; and
6. The Plan investing in the Certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the SEC under the Securities Act
of 1933.
The Exemption extends exemptive relief to certain mortgage-backed and
asset-backed securities transactions using pre-funding accounts for trusts
issuing pass-through certificates. Mortgage loans or other secured receivables
(the "Obligations") supporting payments to certificateholders, and having a
value equal to no more than twenty-five percent (25%) of the total principal
amount of the certificates being offered by the trust, may be transferred to
the trust within a 90-day or three-month period following the closing date
(the "Pre-Funding Period"), instead of being required to be either identified
or transferred on or before the Closing Date. The relief is available when the
following conditions are met:
1. The ratio of the amount allocated to the pre-funding account to the
total principal amount of the certificates being offered (the "Pre-Funding
Limit") must not exceed twenty-five percent (25%).
2. All Obligations transferred after the Closing Date (the "Additional
Obligations") must meet the same terms and conditions for eligibility as the
original Obligations used to create the trust, which terms and conditions have
been approved by a rating agency.
3. The transfer of such Additional Obligations to the trust during the
Pre-Funding Period must not result in the certificates to be covered by the
Exemption receiving a lower credit rating from a rating agency upon
termination of the Pre-Funding Period than the rating that was obtained at the
time of the initial issuance of the certificates by the trust.
4. Solely as a result of the use of pre-funding, the weighted average
annual percentage interest rate for all of the Obligations in the trust at the
end of the Pre-Funding Period must not be more than 100 basis points lower
than the average interest rate for the Obligations transferred to the trust on
the Closing Date.
5. In order to insure that the characteristics of the Additional
Obligations are substantially similar to the original Obligations which were
transferred to the trust Fund:
65
(i) the characteristics of the Additional Obligations must be monitored
by an insurer or other credit support provider that is independent of the
depositor; or
(ii) an independent accountant retained by the depositor must provide the
depositor with a letter (with copies provided to each rating agency rating the
certificates, the related underwriter and the related trustee) stating whether
or not the characteristics of the Additional Obligations conform to the
characteristics described in the related prospectus or prospectus supplement.
In preparing such letter, the independent accountant must use the same type of
procedures as were applicable to the Obligations transferred to the trust as
of the Closing Date.
6. The Pre-Funding Period must end no later than three months or 90 days
after the Closing Date or earlier in certain circumstances if an Event of
Default occurs.
7. Amounts transferred to any pre-funding account and/or capitalized
interest account used in connection with the pre-funding may be invested only
in certain permitted investments ("Permitted Investments").
8. The related prospectus or prospectus supplement must describe:
(i) any pre-funding account and/or capitalized interest account used in
connection with a pre-funding account;
(ii) the duration of the Pre-Funding Period;
(iii) the percentage and/or dollar amount of the Pre-Funding Limit for
the trust; and
(iv) that the amounts remaining in the pre-funding account at the end of
the Pre-Funding Period will be remitted to certificateholders as repayments of
principal.
9. The related sale and servicing agreement must describe the Permitted
Investments for the pre-funding account and/or capitalized interest account
and, if not disclosed in the related prospectus or prospectus supplement, the
terms and conditions for eligibility of Additional Obligations.
The Exemption would also provide relief from certain
self-dealing/conflict of interest or prohibited transactions that may occur
when the Plan fiduciary causes a Plan to acquire certificates in a trust when
the fiduciary (or its affiliate) is an obligor on obligations held in the
trust only if, among other requirements,
(i) in the case of the acquisition of Certificates in connection with the
initial issuance, at least fifty (50) percent of the Certificates and of the
aggregate interest in the trust are acquired by persons independent of the
Restricted Group (as defined below),
(ii) such fiduciary (or its affiliate) is an obligor with respect to five
percent (5%) or less of the fair market value of the obligations contained in
the trust,
(iii) Plan's investment in Certificates does not exceed twenty-five (25)
percent of all of the Certificates outstanding at the time of the acquisition,
and
(iv) immediately after the acquisition, no more than twenty-five (25)
percent of the assets of any Plan with respect to which the fiduciary has
discretionary authority or renders investment advice are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity.
The Exemption does not apply to Plans sponsored by the seller, any
underwriter, the owner trustee, the indenture trustee, the servicer, any
obligor with respect to receivables included in the trust constituting more
than five percent of the aggregate unamortized principal balance of the assets
in the trust, or any affiliate of such parties (the "Restricted Group").
66
The prospectus supplement for each series of securities will indicate the
classes of securities, if any, offered thereby to which it is expected that
the Exemption will apply.
Any Plan fiduciary which proposes to cause a Plan to purchase securities
should consult with counsel concerning the impact of ERISA and the Code, the
applicability of the Exemption (as amended) and the potential consequences in
their specific circumstances, prior to making such investment. Also, each Plan
fiduciary should determine whether, under the general fiduciary standards of
investment prudence and diversification, an investment in the securities is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in one or more underwriting
agreements for a series (collectively, the "Underwriting Agreement"), the
seller will agree to cause the related trust to sell to the underwriters named
in the related prospectus supplement, and each of such underwriters will
severally agree to purchase, the offered securities set forth in that
prospectus supplement.
In an Underwriting Agreement for a series, the several underwriters will
agree, subject to the terms and conditions set forth therein, to purchase all
the offered securities if any of the offered securities are purchased.
Each prospectus supplement will either (i) set forth the price at which
each class of offered securities will be offered to the public and any
concessions that may be offered to certain dealers participating in the
offering of such notes and certificates or (ii) specify that the offered
securities are to be resold by the underwriters in negotiated transactions at
varying prices to be determined at the time of such sale. After the initial
public offering of any offered securities, the public offering prices and
concessions may be changed.
Each Underwriting Agreement will provide that the seller will indemnify
the underwriters against certain civil liabilities, including liabilities
under the Securities Act, or contribute to payments the several underwriters
may be required to make in respect thereof.
Each trust may, from time to time, invest the funds in its accounts in
Eligible Investments acquired from the underwriters or the seller.
Pursuant to the Underwriting Agreement for a series of securities, the
closing of the sale of any class of offered securities will be conditioned on
the closing of the sale of all other offered securities of that series.
The place and time of delivery for a series of securities will be set
forth in the related prospectus supplement.
Until the distribution of the offered securities of a series is
completed, rules of the Commission may limit the ability of the underwriters
and certain selling group members to bid for and purchase those securities. As
an exception to these rules, the underwriters are permitted to engage in
certain transactions that stabilize the price of those securities. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the securities.
The underwriters may create a short position in the securities being
offered by selling more offered securities than are set forth on the cover
page of the related prospectus supplement. The underwriters may reduce that
short position by purchasing those offered securities in the open market.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the seller 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 securities of any
trust. In
67
addition, neither the seller nor any of the underwriters makes any
representation that the underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
If any securities of a series are offered in the United Kingdom, each
underwriter will represent and agree that
o it has not offered or sold, and will not offer or sell, any of those
securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the
purposes of the Public Offers of Securities Regulations 1995,
o it has complied and will comply with all applicable provisions of
the Financial Services Act of 1986 of Great Britain with respect to
anything done by it in relation to those securities in, from or
otherwise involving the United Kingdom and
o it has only issued or passed on and will only issue or pass on in
the United Kingdom any document in connection with the issue of
those securities to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.
If you initially receive an electronic copy of the prospectus and
prospectus supplement from an underwriter, you will receive a paper copy of
the prospectus and prospectus supplement upon 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.
LEGAL OPINIONS
Certain legal matters relating to the securities of any series will be
passed upon for the related trust and the seller by Sidley Austin Brown & Wood
LLP as to matters of New York law and Richards, Layton & Finger as to matters
of Delaware law.
68
INDEX OF PRINCIPAL TERMS
A
Additional Obligations...........................................................................................65
Additional Receivables...........................................................................................18
Administration Agreement.........................................................................................48
Administration Fee...............................................................................................49
APR..............................................................................................................22
Available Funds..................................................................................................23
B
Base Rate........................................................................................................27
C
Calculation Agent................................................................................................27
CD Rate..........................................................................................................28
CD Rate Determination Date.......................................................................................28
Cede.............................................................................................................29
Certificates.....................................................................................................64
Clearstream......................................................................................................30
Clearstream Participants.........................................................................................30
Closing Date.....................................................................................................34
Code.............................................................................................................52
Collection Period................................................................................................37
Commercial Paper Rate............................................................................................28
Commercial Paper Rate Determination Date.........................................................................28
Commodity Indexed Securities.....................................................................................26
Composite Quotations.............................................................................................27
Currency Indexed Securities......................................................................................26
Cut-off Date.....................................................................................................18
D
DaimlerChrysler..................................................................................................35
DaimlerChrysler AG...............................................................................................35
DCS Gold Key Plus Receivable.....................................................................................21
Definitive Securities............................................................................................32
Deposit Account..................................................................................................36
Depositaries.....................................................................................................31
DOL..............................................................................................................64
DTC..............................................................................................................13
E
Eligible Deposit Account.........................................................................................36
Eligible Institution.............................................................................................36
Eligible Investments.............................................................................................36
Events of Default................................................................................................43
excess interest collections......................................................................................10
Exemption........................................................................................................64
F
FASIT............................................................................................................62
FASIT provisions.................................................................................................62
Federal Funds Rate...............................................................................................29
69
Federal Tax Counsel..............................................................................................52
Fixed Value Payment..............................................................................................21
Floating Rate Interest Accrual Period............................................................................27
FTC Rule.........................................................................................................51
Funding Period...................................................................................................18
H
H.15(519)........................................................................................................27
I
Indenture........................................................................................................42
Index............................................................................................................26
Index Maturity...................................................................................................27
Indexed Commodity................................................................................................26
Indexed Currency.................................................................................................26
Indexed Principal Amount.........................................................................................26
Indexed Securities...............................................................................................26
Indirect Participants............................................................................................29
Insolvency Event.................................................................................................41
Interest Reset Date..............................................................................................27
IRS..............................................................................................................52
L
LIBOR............................................................................................................28
LIBOR Business Day...............................................................................................28
LIBOR Determination Date.........................................................................................28
M
MBCC Balloon Receivable..........................................................................................21
Money Market Yield...............................................................................................28
N
new partnership..................................................................................................57
O
Obligations......................................................................................................65
OID..............................................................................................................53
OID regulations..................................................................................................53
old partnership..................................................................................................57
P
Participants.....................................................................................................29
Permitted Investments............................................................................................66
Plan Assets Regulation...........................................................................................63
Plans............................................................................................................63
Precomputed Receivable...........................................................................................21
Pre-Funding Account..............................................................................................18
Pre-Funding Limit................................................................................................65
Pre-Funding Period...............................................................................................65
Previously Issued Securities.....................................................................................19
PTE..............................................................................................................63
R
Record Date......................................................................................................11
Registration Statement............................................................................................2
Repurchase Amount................................................................................................34
70
Restricted Group.................................................................................................67
Revolving Period.................................................................................................18
Rules............................................................................................................30
S
Sale and Servicing Agreement.....................................................................................18
SEC...............................................................................................................2
Series Trust Property............................................................................................18
Servicer Default.................................................................................................41
Servicing Fee....................................................................................................38
Short-Term note..................................................................................................53
Similar Law......................................................................................................63
Simple Interest Receivables......................................................................................20
Spread...........................................................................................................27
Spread Multiplier................................................................................................27
Stock Index......................................................................................................26
Stock Indexed Securities.........................................................................................26
Subsequent Receivables...........................................................................................18
Subsequent Transfer Date.........................................................................................34
T
Telerate Page 3750...............................................................................................28
Terms and Conditions.............................................................................................31
Treasury Rate....................................................................................................29
Treasury Rate Determination Date.................................................................................29
Trust Agreement..................................................................................................17
U
U.S. person.......................................................................................................4
UCC..............................................................................................................14
Underwriting Agreement...........................................................................................67
71
Annex I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
OVERVIEW
Except in certain limited circumstances, the globally offered securities
will be available only in book-entry form. Investors may hold the globally
offered securities through any of DTC, Clearstream or Euroclear. In both the
European and U.S. domestic markets, the globally offered securities will trade
as home market instruments. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding globally offered
securities through Clearstream and Euroclear will be conducted in the ordinary
way in accordance with their normal rules and operating procedures and in
accordance with conventional eurobond practice (i.e., seven calendar day
settlement).
Secondary market trading between investors holding globally offered
securities through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
Participants holding offered securities will be effected on a
delivery-against-payment basis through the respective depositaries of
Clearstream and Euroclear (in such capacity) and DTC Participants.
Non-U.S. holders (as described below) of globally offered securities will
be subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their Participants.
INITIAL SETTLEMENT
All globally offered securities will be held in book-entry form by DTC in
the name of Cede & Co. as nominee of DTC. Investors' interests in the globally
offered securities will be represented through financial institutions acting
on their behalf as direct and Indirect Participants in DTC. As a result,
Clearstream and Euroclear will hold positions on behalf of their Participants
through their respective depositaries, which in turn will hold such positions
in accounts as DTC Participants.
Investors electing to hold their globally offered securities through DTC
will follow the settlement practices applicable to prior debt issues.
Investors' securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their globally offered 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. Globally offered
securities will be credited to the securities custody accounts on the
settlement date against payments in same-day funds.
A-1
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade the location of both the purchaser's and
seller's accounts to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants
Secondary market trading between DTC Participants will be settled using
the procedures applicable to book-entry securities in same-day funds.
Trading between Clearstream and/or Euroclear Participants
Secondary market trading between Clearstream Participants or Euroclear
Participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser
When globally offered securities are to be transferred from the account
of a DTC Participant to the account of a Clearstream Participant or a
Euroclear Participant, the purchaser will send instructions to Clearstream or
Euroclear through a Clearstream Participant or Euroclear Participant at least
one business day prior to settlement. Clearstream or Euroclear, as applicable,
will instruct its depositary to receive the globally offered securities
against payment. Payment will include interest accrued on the globally offered
securities from and including the last coupon payment date to and excluding
the settlement date. Payment will then be made by such depositary to the DTC
Participant's account against delivery of the globally offered securities.
After settlement has been completed, the globally offered securities will be
credited to the applicable clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream Participant's or
Euroclear Participant's account. The globally offered securities' credit will
appear the next day (European time) and the cash debit will be back-valued to,
and the interest on the globally offered 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. The most direct means of doing so is to
pre-position 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 globally offered securities are credited to
their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream Participants or Euroclear Participants can elect
not to pre-position funds and allow that credit line to be drawn upon to
finance settlement. Under this procedure, Clearstream Participants or
Euroclear Participants purchasing globally offered securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the
globally offered securities were credited to their accounts. However, interest
on the globally offered securities would accrue from the value date.
Therefore, in many cases the investment income on the globally offered
securities earned during that one-day period may substantially reduce or
offset the amount of such overdraft charges, although this result will depend
on each Clearstream Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending globally offered
securities to the respective 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.
A-2
Trading between Clearstream or Euroclear seller and DTC purchaser
Due to time zone differences in their favor, Clearstream Participants and
Euroclear Participants may employ their customary procedures for transactions
in which globally offered securities are to be transferred by the respective
clearing systems, through their respective depositaries, to a DTC Participant.
The seller will send instructions to Clearstream or Euroclear through a
Clearstream Participant or Euroclear Participant at least one business day
prior to settlement.
In these cases, Clearstream or Euroclear will instruct their respective
depositaries, as appropriate, to deliver the securities to the DTC
Participant's account against payment. Payment will include interest accrued
on the globally offered securities from and including the last coupon payment
date to and excluding the settlement date. The payment will then be reflected
in the account of the Clearstream Participant or Euroclear Participant the
following day, and receipt of the cash proceeds in the Clearstream
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York).
Should the Clearstream Participant or Euroclear Participant have a line
of credit with its clearing system and elect to be in debt in anticipation of
receipt of the sale proceeds in its account, the back-valuation will
extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade
fails), receipt of the cash proceeds in the Clearstream Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use Clearstream or Euroclear and that purchase
globally offered 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 globally offered securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would
give the globally offered securities sufficient 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.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of globally offered securities holding securities
through Clearstream or Euroclear (or through DTC if the holder has an address
outside the U.S.) generally will be subject to the 30% U.S. withholding tax
that generally applies to payments of interest (including original issue
discount) on registered debt issued by U.S. persons, generally unless each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption of non-U.S. persons (Form W-8BEN)
Beneficial owners of offered securities that are non-U.S. persons
generally can obtain a complete exemption from the withholding tax by filing a
signed Form W-8BEN (Certificate of Foreign Status). If the information shown
on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of such
change.
A-3
Exemption for non-U.S. person with effectively connected income (Form W-8ECI)
A non-U.S. person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form W-8ECI (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
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 offered securities and are
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 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8BEN. Form W-8BEN may be filed by
the beneficial owner of offered securities or such owner's agent.
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 (Payer's Request for Taxpayer Identification Number and
Certification).
U.S. Federal Income Tax Reporting Procedure
The beneficial owner of a Global Security or, in the case of a Form
W-8BEN or a Form W-8ECI filer, such owner's agent, files by submitting the
appropriate form to the person through whom it holds the security (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8BEN is effective for three calendar years and Form
W-8ECI is effective for one calendar year.
The term "U.S. person" means
o a citizen or resident of the United States or
o a corporation or partnership (including an entity treated as a
corporation or partnership for United States federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia, (unless, in
the case of partnership, Treasury regulations are adopted that
provide otherwise),
o an estate the income of which is includible in gross income for
United States tax purposes, regardless of its source or
o a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust or
o to the extent provided in Treasury regulations, certain trusts in
existence on August 20, 1996 and treated as United States persons
before such date that elect to be so treated.
The term "non-U.S. person" means a beneficial owner of a Note that is not
a U.S. person. The discussion under the heading of "Certain Federal Income Tax
Consequences" applies to U.S. persons, except as provided otherwise. The terms
U.S. person and non-U.S. person have the same meaning as defined herein.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the globally offered
securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the globally
offered securities.
A-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee.............................................$ 3,682,350
Printing Expenses............................................$ 420,000
Trustee Fees and Expenses....................................$ 322,500
Legal Fees and Expenses......................................$ 281,250
Accountants' Fees and Expenses...............................$ 281,250
Rating Agencies' Fees...................................... .$ 2,812,500
Miscellaneous................................................$ 172,500
-----------
Total...............................................$ 7,972,350
- ---------------
*All amounts except the SEC Registration Fee are estimates of expenses in
connection with the issuance and distribution of ten Series of Securities in
an aggregate principal amount assumed for these purposes to be equal to
$10,000,000,000.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 3.5 of the Operating Agreement of the Registrant provides that to
the fullest extent permitted by the Michigan Limited Liability Company Act,
the Registrant, to the extent of its assets legally available for such
purpose, will indemnify and hold harmless each person who is or was a manager,
officer, committee member, employee, member, or who serves or may have served
at the Registrant's request as a member, director, manager, officer, or
employee of any company or corporation that the Registrant owns directly or
indirectly, and any member's respective shareholders, directors, officers,
agents, affiliates and professional or other advisors (collectively, the
"Indemnified Persons") from and against any and all loss, cost, damage,
expense (including, without limitation, fees and expenses of attorneys and
other advisors and any court costs incurred by any Indemnified Person) or
liability by reason of anything any Indemnified Person does or refrains from
doing for, or in connection with the business or affairs of, the Registrant
and its subsidiaries and affiliates, except to the extent that it is finally
judicially determined by a court of competent jurisdiction that the loss,
cost, damage, expense or liability resulted primarily from the Indemnified
Person's negligence, misconduct in the performance of her or her duty, or
willful breach of a material provision of the Operating Agreement which in any
event causes actual material damage to the Registrant. The Registrant may pay
in advance or reimburse reasonable expenses (including advancing the
reasonable cost of defense) incurred by an Indemnified Person who is, or is
threatened to be, named or made a defendant or a respondent in a proceeding
concerning the business affairs of the Registrant. Reference is made to
Exhibit 3.2 to this Registration Statement for the complete texts of Section
3.5 of the Operating Agreement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 by the Registrant may be permitted to directors, officers and
controlling persons of the Registrant under the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in said Act and therefore may be unenforceable. If a claim
for indemnification against such liabilities (except insofar as it provides
for the payment by the Registrant of expenses incurred or paid by a director
or officer in the successful defense of any action, suit or proceeding) is
asserted against the Registrant by a director, officer or controlling person
in connection with the securities offered hereby and the Securities and
Exchange Commission is still of the same opinion, 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
or not such indemnification by it is against public policy as expressed in the
Act, and will be governed by the final adjudication of such issue.
II-1
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
1.1 Form of Underwriting Agreement for the Notes.
1.2 Form of Underwriting Agreement for the Certificates.
3.1 Copy of Articles of Organization of DaimlerChrysler Services North
America LLC.
3.2 Copy of Operating Agreement of DaimlerChrysler Services North
America LLC.
3.3 Form of Certificate of Trust for DaimlerChrysler Auto Trusts
(included in Exhibit 4.4).
4.1 Form of Indenture between the Trust and the Indenture Trustee
(including Forms of Notes).
4.2 Form of Master Indenture (for issuance of more than one series of
Notes) between the Trust and the Indenture Trustee.
4.3 Form of Series Indenture Supplement between the Trust and the
Indenture Trustee (including forms of Notes).
4.4 Form of Amended and Restated Trust Agreement among the Registrant,
the Company and the Trustee (including forms of Certificates).
4.5 Form of Amended and Restated Trust Agreement (for issuance of more
than one Series of Certificates) among the Registrant, the Company
and the Trustee (including forms of Certificates).
5.1 Opinion of Sidley Austin Brown & Wood LLP with respect to legality.
5.2 Opinion of Richards, Layton & Finger with respect to legality.
8.1 Opinion of Sidley Austin Brown & Wood LLP with respect to federal
tax matters.
23.1 Consent of Sidley Austin Brown & Wood LLP (included in its opinions
filed as Exhibits 5.1 and 8.1).
23.2 Consent of Richards, Layton & Finger (included in its opinion filed
as Exhibit 5.2).
24.1 Powers of Attorney.
25.1 Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of Bank One, National Association.
25.2 Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of The Bank of New York.
25.3 Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of Citibank, N.A.
99.1 Form of Sale and Servicing Agreement between the Registrant and the
Trust.
99.2 Form of Administration Agreement among the Trust, the Administrator
and the Indenture Trustee.
99.3 Form of Purchase Agreement between the Company and the Registrant.
- ------------------------------------------------------------------------------
II-2
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, as amended, 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) The registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of that Act.
(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, as amended, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(d) As to indemnification:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, 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, as amended,
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 such
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
II-3
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 the requirements for filing on Form S-3 and has duly caused this amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Southfield and State of Michigan, on
the 25th day of January, 2002.
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC,
By: /s/ J. H. Walker
------------------------
J.H. Walker
President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Principal Executive Officer of DaimlerChrysler Services North America LLC
/s/ J.H. Walker
- ------------------ President January 25, 2002
J.H. Walker
Principal Financial Officer of DaimlerChrysler Services North America LLC:
/s/ D.H. Olsen Vice President and January 25, 2002
- ----------------- Chief Financial Officer
D.H. Olsen
Principal Accounting Officer of DaimlerChrysler Services North America LLC:
/s/ N. Meder Vice President and January 25, 2002
- ----------------- Controller
N. Meder
II-4
Board of Managers of DaimlerChrysler Services North America LLC:
/s/ D.H. Olsen Manager January 25, 2002
- -----------------
D.H. Olsen
By: /s/ Byron C. Babbish
---------------------
Byron C. Babbish
Attorney-in-Fact
January 25, 2002
II-5
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
1.1 Form of Underwriting Agreement for the Notes.
1.2 Form of Underwriting Agreement for the Certificates.
3.1 Copy of Articles of Organization of DaimlerChrysler Services North
America LLC.
3.2 Copy of Operating Agreement of DaimlerChrysler Services North
America LLC.
3.3 Form of Certificate of Trust for DaimlerChrysler Auto Trusts
(included in Exhibit 4.4).
4.1 Form of Indenture between the Trust and the Indenture Trustee
(including Forms of Notes).
4.2 Form of Master Indenture (for issuance of more than one series of
Notes) between the Trust and the Indenture Trustee.
4.3 Form of Series Indenture Supplement between the Trust and the
Indenture Trustee (including forms of Notes).
4.4 Form of Amended and Restated Trust Agreement among the Registrant,
the Company and the Trustee (including forms of Certificates).
4.5 Form of Amended and Restated Trust Agreement (for issuance of more
than one Series of Certificates) among the Registrant, the Company
and the Trustee (including forms of Certificates).
5.1 Opinion of Sidley Austin Brown & Wood LLP with respect to legality.
5.2 Opinion of Richards, Layton & Finger with respect to legality.
8.1 Opinion of Sidley Austin Brown & Wood LLP with respect to federal
tax matters.
23.1 Consent of Sidley Austin Brown & Wood LLP (included in its opinions
filed as Exhibits 5.1 and 8.1).
23.2 Consent of Richards, Layton & Finger (included in its opinion filed
as Exhibit 5.2).
24.1 Powers of Attorney.
25.1 Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of Bank One, National Association.
25.2 Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of The Bank of New York.
25.3 Form of T-1 Statement of Eligibility under the Trust Indenture Act
of 1939 of Citibank, N.A.
99.1 Form of Sale and Servicing Agreement between the Registrant and the
Trust.
99.2 Form of Administration Agreement among the Trust, the Administrator
and the Indenture Trustee.
99.3 Form of Purchase Agreement between the Company and the Registrant.
- ------------------------------------------------------------------------------
II-6