Filed Pursuant to Rule 424(b)(3)
Registration No. 333-75942
[DAIMLERCHRYSLER LOGO] PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED OCTOBER 15, 2002
$1,622,000,000
DAIMLERCHRYSLER AUTO TRUST 2002-C
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
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------
SECURITY ORIGINAL FIXED PRICE PROCEEDS
PRINCIPAL INTEREST TO THE UNDERWRITING TO THE
AMOUNT RATE PUBLIC(2) FEES SELLER(2)
- ---------------------------------------------------------------------------------------------------------------------------
A-1 Notes(1) $ 380,000,000 1.79% n/a n/a n/a
- ---------------------------------------------------------------------------------------------------------------------------
A-2 Notes $ 700,000,000 2.07% 99.9960% 0.1650% 99.8310%
- ---------------------------------------------------------------------------------------------------------------------------
A-3 Notes $ 550,000,000 2.56% 99.9833% 0.1875% 99.7958%
- ---------------------------------------------------------------------------------------------------------------------------
A-4 Notes $ 372,000,000 3.09% 99.9997% 0.2500% 99.7497%
- ---------------------------------------------------------------------------------------------------------------------------
Certificates(1) $ 67,366,000 0% n/a n/a n/a
- ---------------------------------------------------------------------------------------------------------------------------
Total Securities $ 2,069,366,000 n/a $1,621,879,034 $3,116,250 $1,618,762,784
- ---------------------------------------------------------------------------------------------------------------------------
(1) Not being offered publicly or in this document. The certificates are subordinated.
(2) Plus accrued interest from October 25, 2002.
</Table>
INITIAL CREDIT ENHANCEMENT FOR THE NOTES(1)
<Table>
<Caption>
----------------------------------------------------------------------------------------
OVERCOLLATERALIZATION(2) CERTIFICATES(3) RESERVE FUND
(SUBORDINATED) TOTAL
----------------------------------------------------------------------------------------
Amount $62,081,325.39 $67,366,000.00 $5,173,415.00 $134,620,740.39
- ---------------------------------------------------------------------------------------------------------------------
Percentage of Total
Securities 3.00% 3.25% 0.25% 6.50%
- ---------------------------------------------------------------------------------------------------------------------
(1) The expected excess cash flows generated from the difference between the interest collections on all the
receivables (including principal collections allocable to the yield supplement overcollateralization amount) 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 overcollateralization amount does not include the yield supplement overcollateralization amount which is
initially $51,952,365.08.
(3) The certificates do not bear interest.
</Table>
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 9 OF THE PROSPECTUS. The securities will be obligations of the
trust only and neither the securities nor the assets of the trust will represent
interests 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.
CREDIT SUISSE FIRST BOSTON JPMORGAN
BEAR, STEARNS & CO. INC.
DEUTSCHE BANK SECURITIES
MORGAN STANLEY
SALOMON SMITH BARNEY
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 15, 2002
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 73 IN THE PROSPECTUS LISTS THE PAGES
WHERE CAPITALIZED TERMS USED IN THE PROSPECTUS OR PROSPECTUS SUPPLEMENT ARE
DEFINED.
S-2
TABLE OF CONTENTS
<Table>
---------------------------------------------------- ------------------------------------------------------
SECTION PAGE SECTION PAGE
---------------------------------------------------- ------------------------------------------------------
</Table>
<Table>
TRANSACTION ILLUSTRATION S-4
- ----------------------------------------
TRANSACTION OVERVIEW S-5
- ----------------------------------------
-- PARTIES TO THE TRANSACTION S-5
- ----------------------------------------
-- SECURITIES OFFERED S-6
- ----------------------------------------
-- RECEIVABLES POOL S-6
- ----------------------------------------
- Composition of the
Receivables Pool S-7
- ----------------------------------------
- New/Used Distribution S-7
- ----------------------------------------
- Distribution by APR S-8
- ----------------------------------------
- Geographic Distribution S-9
- ----------------------------------------
- Selection Criteria S-10
- ----------------------------------------
-- NET CREDIT LOSS AND
DELINQUENCY EXPERIENCE S-10
- ----------------------------------------
- DCS Net Credit Loss and
Repossession Experience S-11
- ----------------------------------------
- DCS Delinquency Experience S-11
- ----------------------------------------
-- PAYMENTS ON THE SECURITIES S-12
- ----------------------------------------
- Payment Dates S-12
- ----------------------------------------
- Interest Payments S-12
- ----------------------------------------
- Principal Payments S-13
- ----------------------------------------
- Optional Redemption S-13
- ----------------------------------------
-- FLOW OF FUNDS S-14
- ----------------------------------------
- Sources of Funds Available
for Distribution S-14
- ----------------------------------------
- Application of Available
Funds S-15
- ----------------------------------------
-- CREDIT ENHANCEMENT S-16
- ----------------------------------------
- Overcollateralization S-16
- ----------------------------------------
- Excess Interest Collections S-17
- ----------------------------------------
- Reserve Fund S-17
- ----------------------------------------
- Subordinated Certificates S-17
- ----------------------------------------
-- YIELD SUPPLEMENT
OVERCOLLATERALIZATION
AMOUNT S-18
- ----------------------------------------
-- SERVICING S-19
- ----------------------------------------
- Compensation S-19
- ----------------------------------------
-- THE TRUST S-19
- ----------------------------------------
- Activities S-19
- ----------------------------------------
- Capitalization S-20
- ----------------------------------------
UNDERWRITING S-21
- ----------------------------------------
FEDERAL INCOME TAX CONSEQUENCES S-22
- ----------------------------------------
LEGAL OPINIONS S-22
- ----------------------------------------
</Table>
S-3
TRANSACTION ILLUSTRATION
[TRANSACTION ILLUSTRATION FLOW CHART]
S-4
TRANSACTION OVERVIEW
PARTIES TO THE TRANSACTION
<Table>
<Caption>
- -----------------------------------------------------------------------------------------
ENTITY DESCRIPTION
- -----------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust 2002-C -- Issuer of the securities
-- A Delaware business trust
-- Principal office is in Newark, Delaware
- -----------------------------------------------------------------------------------------
DaimlerChrysler Services North -- Seller of the receivables to the trust
America LLC ("DCS")
-- Servicer of the receivables
-- An indirect wholly-owned subsidiary of
DaimlerChrysler AG
-- A Michigan limited liability company
-- Originator of DCS receivables
- -----------------------------------------------------------------------------------------
Citibank, N.A.(1) -- Indenture trustee
-- Performs duties for the benefit of the
noteholders
- -----------------------------------------------------------------------------------------
Chase Manhattan Bank USA, -- Owner trustee
National Association(1) -- Performs duties on behalf of the trust and
certificateholders
- -----------------------------------------------------------------------------------------
DaimlerChrysler Retail -- A special-purpose financing entity
Receivables LLC
-- A Michigan limited liability company,
formerly named Premier Receivables L.L.C.
-- An indirect wholly-owned subsidiary of DCS
-- Initial holder of the subordinated
certificates
-- Initial owner of rights to
overcollateralization distributions and residual
cash flows
- -----------------------------------------------------------------------------------------
</Table>
(1) The seller and its affiliates may maintain normal commercial
banking relations with the indenture trustee, the owner
trustee and their affiliates.
S-5
SECURITIES OFFERED
The trust will issue $2,069,366,000 of securities, comprised of both notes
and certificates. This prospectus supplement provides information on the
following securities:
OFFERED SECURITIES
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------
FIXED PER ANNUM
NOTE CLASS PRINCIPAL AMOUNT INTEREST RATE LEGAL FINAL
- -------------------------------------------------------------------------------------------------
A-2 Notes $700,000,000 2.07% June 2005
- -------------------------------------------------------------------------------------------------
A-3 Notes $550,000,000 2.56% November 2006
- -------------------------------------------------------------------------------------------------
A-4 Notes $372,000,000 3.09% January 2008
- -------------------------------------------------------------------------------------------------
</Table>
The trust will also issue $380,000,000 of Class A-1, 1.79% asset-backed
notes, due in November 2003 and $67,366,000 of subordinated certificates. DCS
will purchase the Class A-1 Notes and may thereafter sell them. Other points to
consider include:
-- the outstanding principal of each class of notes is due by its
maturity date (each a "LEGAL FINAL"),
-- by October 25, 2002 three nationally recognized rating agencies
will rate the offered securities in the highest investment rating
category,
-- the offered securities will be issued on or about October 25, 2002
in book-entry form through the facilities of DTC, Clearstream and
the Euroclear System, and
-- 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 October 25, 2002 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 October 9, 2002 (the "CUT-OFF DATE").
S-6
The receivables pool had the following characteristics:
COMPOSITION OF THE RECEIVABLES POOL
AS OF OCTOBER 9, 2002
<Table>
Aggregate Principal Balance $2,183,399,690.47
- ---------------------------------------------------------
Number of Receivables 125,308
- ---------------------------------------------------------
Average Principal Balance $17,424.26
- ---------------------------------------------------------
Weighted Average APR 5.93%
- ---------------------------------------------------------
Weighted Average Original Term 60.27 months
- ---------------------------------------------------------
Weighted Average Remaining Term 54.28 months
- ---------------------------------------------------------
</Table>
The receivables pool had the following new vehicle/used vehicle
distribution:
NEW/USED DISTRIBUTION OF THE RECEIVABLES POOL
AS OF OCTOBER 9, 2002
<Table>
<Caption>
-----------------------------------------
NEW USED
-----------------------------------------
Aggregate Principal Balance $1,879,161,601.05 $304,238,089.42
- ---------------------------------------------------------------------------------
Percentage of Aggregate Principal
Balance 86.07% 13.93%
- ---------------------------------------------------------------------------------
Number of Receivables 100,772 24,536
- ---------------------------------------------------------------------------------
Percentage of Receivables 80.42% 19.58%
- ---------------------------------------------------------------------------------
</Table>
S-7
The receivables pool had the following distribution by APR:
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
AS OF OCTOBER 9, 2002
<Table>
<Caption>
---------------------------------------------------------------------------------
NUMBER OF AGGREGATE PERCENT OF AGGREGATE
APR RANGE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
---------------------------------------------------------------------------------
0.00% to 5.00% 41,875 $ 876,301,114.99 40.2%
---------------------------------------------------------------------------------
5.01% to 6.00% 10,168 151,615,034.16 6.9%
---------------------------------------------------------------------------------
6.01% to 7.00% 13,768 240,838,518.82 11.0%
---------------------------------------------------------------------------------
7.01% to 8.00% 12,542 202,183,100.02 9.3%
---------------------------------------------------------------------------------
8.01% to 9.00% 11,379 179,802,638.22 8.2%
---------------------------------------------------------------------------------
9.01% to 10.00% 10,244 158,148,343.51 7.2%
---------------------------------------------------------------------------------
10.01% to 11.00% 7,024 110,309,417.98 5.1%
---------------------------------------------------------------------------------
11.01% to 12.00% 5,570 87,699,893.85 4.0%
---------------------------------------------------------------------------------
12.01% to 13.00% 4,097 59,925,919.45 2.7%
---------------------------------------------------------------------------------
13.01% to 14.00% 2,249 30,822,736.88 1.4%
---------------------------------------------------------------------------------
14.01% to 15.00% 1,672 22,328,280.50 1.0%
---------------------------------------------------------------------------------
15.01% to 16.00% 1,086 15,159,017.47 0.7%
---------------------------------------------------------------------------------
16.01% to 17.00% 999 14,481,316.52 0.7%
---------------------------------------------------------------------------------
17.01% to 18.00% 1,203 16,275,614.50 0.8%
---------------------------------------------------------------------------------
18.01% to 19.00% 333 4,503,182.20 0.2%
---------------------------------------------------------------------------------
19.01% to 20.00% 1,083 12,826,271.10 0.6%
---------------------------------------------------------------------------------
Greater than 20.00% 16 179,290.30 0.0%
---------------------------------------------------------------------------------
Totals 125,308 $2,183,399,690.47 100.0%
---------------------------------------------------------------------------------
</Table>
(1) Percentages may not add to 100.0% because of rounding.
S-8
The following table lists the eleven 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 3.0% of the aggregate principal balance of the
receivables pool as of October 9, 2002.
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
AS OF OCTOBER 9, 2002
<Table>
<Caption>
- -------------------------------------------------------
PERCENTAGE OF AGGREGATE
STATE PRINCIPAL BALANCE(1)
- -------------------------------------------------------
Texas 9.1%
- -------------------------------------------------------
California 7.2%
- -------------------------------------------------------
Pennsylvania 6.0%
- -------------------------------------------------------
Illinois 5.8%
- -------------------------------------------------------
Florida 5.5%
- -------------------------------------------------------
New York 5.2%
- -------------------------------------------------------
Michigan 4.5%
- -------------------------------------------------------
New Jersey 3.8%
- -------------------------------------------------------
Maryland 3.6%
- -------------------------------------------------------
North Carolina 3.1%
- -------------------------------------------------------
Ohio 3.0%
- -------------------------------------------------------
All Other 43.2%
- -------------------------------------------------------
Total 100.0%
- -------------------------------------------------------
(1) Percentages may not add to 100.0% because of
rounding.
</Table>
S-9
SELECTION CRITERIA
We used the following criteria to select the receivables pool:
-- Each receivable was originally purchased by the seller from
dealers in the ordinary course of its business.
-- Interest on each receivable is computed using the simple interest
method.
-- As of October 9, 2002:
- no receivable was more than 30 days past due (an account is not
considered past due if the amount past due is less than 10.0% of
the scheduled monthly payment);
- no receivable was the subject of a bankruptcy proceeding;
- each receivable had a principal balance of at least $1,000.00; and
- each receivable had a scheduled maturity before October 1, 2008.
The seller believes its selection procedures are not adverse to securityholders.
Refer to the "Receivable Pools" section in the prospectus for additional
selection criteria.
NET CREDIT LOSS AND DELINQUENCY EXPERIENCE
Net credit loss experience is dependent upon general economic conditions,
the number of repossessions, the amount of principal and accrued interest
outstanding on the receivable at the time of repossession, and the resale values
of the repossessed vehicles.
The following tables detail the net credit loss, repossession and
delinquency experience of DCS's United States portfolio of new and used
automobile and light duty truck retail receivables. The information includes:
-- an immaterial amount of retail receivables secured by vehicles
other than automobiles and light duty trucks, and
-- previously sold contracts which DCS continues to service.
Unless otherwise indicated, all amounts and percentages are based on estimated
gross collections, including principal and interest.
We cannot assure you that the delinquency, repossession and net credit loss
experience on the receivables sold to the trust will be comparable to the
following historical experience.
S-10
DCS NET CREDIT LOSS AND REPOSSESSION EXPERIENCE
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------
Average Portfolio
Outstanding
During the Period ($
Millions) $37,924 $35,337 $36,609 $30,590 $26,191 $23,581 $21,485
- ----------------------------------------------------------------------------------------------------------------
Average Number of Contracts
Outstanding During the
Period 2,374,477 2,201,560 2,254,297 2,004,982 1,835,534 1,747,846 1,688,525
- ----------------------------------------------------------------------------------------------------------------
Repossessions as a
Percentage
of Average Number of
Contracts Outstanding(3) 1.81% 1.71% 1.84% 1.82% 2.16% 2.77% 3.40%
- ----------------------------------------------------------------------------------------------------------------
Net Credit Losses as
Percentage of
Liquidations(1)(2) 1.54% 1.70% 1.83% 1.77% 1.91% 2.77% 3.36%
- ----------------------------------------------------------------------------------------------------------------
Net Credit Losses as a
Percentage of Average
Portfolio
Outstanding(1)(3) 0.84% 0.74% 0.81% 0.78% 0.98% 1.39% 1.80%
- ----------------------------------------------------------------------------------------------------------------
(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 six months ended June 30, 2001 and 2002, and are not necessarily
indicative of the experience for the entire year.
</Table>
DCS DELINQUENCY EXPERIENCE
<Table>
<Caption>
AT JUNE 30, AT DECEMBER 31,
-----------------------------------------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------
Portfolio ($ Millions) $37,777 $37,235 $39,068 $33,776 $27,255 $24,854 $21,879
- ----------------------------------------------------------------------------------------------------------------------------
Delinquencies as a
Percentage of the
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
31 - 60 Days 1.59% 1.29% 2.04% 1.53% 1.78% 2.27% 3.24%
- ----------------------------------------------------------------------------------------------------------------------------
61 Days or More 0.30% 0.16% 0.31% 0.17% 0.17% 0.20% 0.46%
- ----------------------------------------------------------------------------------------------------------------------------
Total 1.89% 1.45% 2.35% 1.70% 1.95% 2.47% 3.70%
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Refer to the "Net Credit Loss and Delinquency Experience" section in the
prospectus for additional information.
S-11
PAYMENTS ON THE SECURITIES
PAYMENT DATES
-- Interest and principal will be payable on the 8th of each month.
If the 8th is not a business day, then interest and principal will
be payable on the next business day.
-- The first payment will be on December 9, 2002.
-- Payments will be payable to securityholders of record on the
business day before the payment date.
INTEREST PAYMENTS
-- The first interest payment will be calculated on the original
principal amount of each class of notes at the applicable per
annum interest rate.
-- 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.
-- 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:
<Table>
<Caption>
- -----------------------------------------------------------------------------
DAYS IN SUBSEQUENT
DAYS IN INITIAL INTEREST INTEREST ACCRUAL PERIODS DAY COUNT
ACCRUAL PERIOD CONVENTION
- -----------------------------------------------------------------------------
FROM TO
(INCLUDING) (EXCLUDING)
- -----------------------------------------------------------------------------
Prior Current
45 days payment payment actual/360
date date
- -----------------------------------------------------------------------------
</Table>
-- 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:
<Table>
<Caption>
- --------------------------------------------------------------------------------
DAYS IN INITIAL FOR SUBSEQUENT INTEREST DAY COUNT
INTEREST ACCRUAL PERIOD ACCRUAL PERIODS CONVENTION
- --------------------------------------------------------------------------------
44 days 1/12(th) of per annum 30/360
interest rate
- --------------------------------------------------------------------------------
</Table>
-- 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.
S-12
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
-- 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.
-- Principal of each class of notes will generally be repaid over a
span of several consecutive months.
-- The trust will pay principal sequentially to the earliest maturing
class of notes then outstanding until such class is paid in full.
-- The certificates will not receive any principal payments until all
notes are paid in full.
-- The trust is required to pay the outstanding principal of each
class of notes by the applicable Legal Final.
-- The final principal payment on any class of notes could occur
significantly earlier than its Legal Final.
-- 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 10.0% of the initial aggregate principal
balance of the receivables, or $218,339,969.05 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.
S-13
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:
-- collections received on the receivables during the prior calendar
month,
-- net recoveries received during the prior calendar month on
receivables that were charged off as losses in prior months,
-- investment earnings on the reserve fund received during the prior
calendar month,
-- administrative and/or warranty repurchases, and
-- the reserve fund.
S-14
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 Chart]
S-15
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 (i) the
principal balance of receivables minus the yield supplement
overcollateralization amount exceeds (ii) the principal balance of the
securities. The initial overcollateralization amount of $62,081,325.39 is equal
to the initial receivables balance of $2,183,399,690.47 minus the initial yield
supplement overcollateralization amount of $51,952,365.08 minus the initial
principal amount of the securities of $2,069,366,000.00. 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 (i) the principal balance of the receivables minus the yield
supplement overcollateralization amount exceeds (ii) the principal balance of
the securities) at least equal to 3.75% of the amount equal to (x) the principal
balance of the receivables as of the prior calendar month end minus (y) the
yield supplement overcollateralization amount for that payment date. 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 $5,173,415.00. 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 96.25%)] or (b) D minus the A-1 notes
balance immediately prior to the current payment date
where:
<Table>
total funds
available accrued and unpaid
D = for distribution minus [ servicing + interest on the + reserve fund ]
(except fee notes deposit
for the reserve
fund)
</Table>
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 minus the YSOA for that payment date.
YSOA = for each payment date, the amount set forth in the table under
"Yield Supplement Overcollateralization Amount".
S-16
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, (ii) principal collections attributable to the reduction in the yield
supplement overcollateralization amount from the prior payment date and (iii)
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 $5,173,415.00.
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
-- On October 25, 2002 the seller will provide funds from the
proceeds of its sale of receivables to establish a $5,173,415.00
reserve fund.
-- The indenture trustee will hold the reserve fund for the benefit
of the noteholders.
-- The reserve fund will be invested in high quality, short term
investments which mature on or prior to each monthly payment date.
-- 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.
-- 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.
-- 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.
-- 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.
-- 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 subordinated to payments on the notes to
decrease the likelihood that the trust will default in making payments due on
the notes.
S-17
YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT
For a portion of the receivables, the weighted average APR less the
servicing fee rate
will be less than the weighted average interest rate of the notes. The yield
supplement overcollateralization amount is intended to mitigate such negative
differential.
"YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT" means, with respect to any
payment date, the amount specified below with respect to such payment date:
Closing Date......................................................$51,952,365.08
December 2002..................................................... 50,030,256.19
January 2003...................................................... 48,147,054.75
February 2003..................................................... 46,302,896.13
March 2003........................................................ 44,497,916.15
April 2003........................................................ 42,732,229.88
May 2003.......................................................... 41,005,973.08
June 2003......................................................... 39,319,258.46
July 2003......................................................... 37,672,075.84
August 2003....................................................... 36,064,393.46
September 2003.................................................... 34,496,160.17
October 2003...................................................... 32,967,369.91
November 2003..................................................... 31,478,102.16
December 2003..................................................... 30,028,450.68
January 2004...................................................... 28,618,464.66
February 2004..................................................... 27,248,247.53
March 2004........................................................ 25,917,917.09
April 2004........................................................ 24,627,572.38
May 2004.......................................................... 23,377,341.22
June 2004......................................................... 22,167,277.96
July 2004......................................................... 20,997,377.10
August 2004....................................................... 19,867,697.23
September 2004.................................................... 18,778,261.75
October 2004...................................................... 17,729,063.47
November 2004..................................................... 16,720,083.33
December 2004..................................................... 15,751,362.74
January 2005...................................................... 14,822,713.58
February 2005..................................................... 13,931,512.03
March 2005........................................................ 13,074,403.37
April 2005........................................................ 12,247,978.04
May 2005.......................................................... 11,450,944.56
June 2005......................................................... 10,682,981.68
July 2005......................................................... 9,943,867.30
August 2005.......................................................$ 9,233,296.54
September 2005.....................................................$8,550,939.52
October 2005....................................................... 7,896,467.60
November 2005...................................................... 7,268,921.25
December 2005...................................................... 6,667,652.84
January 2006....................................................... 6,092,189.26
February 2006...................................................... 5,542,582.35
March 2006......................................................... 5,018,860.80
April 2006......................................................... 4,520,996.38
May 2006........................................................... 4,049,045.06
June 2006.......................................................... 3,603,082.92
July 2006.......................................................... 3,183,180.98
August 2006........................................................ 2,789,366.09
September 2006..................................................... 2,421,669.22
October 2006....................................................... 2,080,113.86
November 2006...................................................... 1,764,662.95
December 2006...................................................... 1,475,274.45
January 2007....................................................... 1,211,924.09
February 2007...................................................... 974,478.59
March 2007......................................................... 762,851.76
April 2007......................................................... 577,099.03
May 2007........................................................... 417,293.58
June 2007.......................................................... 283,515.38
July 2007.......................................................... 175,833.89
August 2007........................................................ 94,301.31
September 2007..................................................... 38,946.81
October 2007....................................................... 9,410.27
November 2007..................................................... 8.51
December 2007..................................................... 5.93
January 2008...................................................... 3.84
February 2008..................................................... 2.23
March 2008........................................................ 1.11
April 2008........................................................ 0.48
May 2008.......................................................... 0.21
June 2008......................................................... 0.05
July 2008..........................................................$ 0.00
The yield supplement overcollateralization amount has been calculated for
each payment date as the sum of the amount for each receivable equal to the
excess, if any, of
-- the scheduled payment due on such receivable for each future
collection period discounted to present value as of the end of the
preceding collection period at the APR of such receivable, over
-- the scheduled payments due on the receivable for each future
collection period discounted to present value as of the end of the
preceding collection period at 4.0%.
For purposes of such calculation, future scheduled payments on the
receivables are assumed to be made on their scheduled due dates without any
delays, defaults or prepayments.
S-18
SERVICING
COMPENSATION
-- The servicer will be compensated on a monthly basis.
-- The first servicing fee will be calculated on the original
principal amount of the receivables at 1/12th of 1% per month.
-- 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 October 9, 2002 to and including November 30, 2002 on a
30/360 basis, or 51 days.
-- 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%.
-- 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:
-- acquiring, holding and managing the receivables, their proceeds,
the reserve fund and other assets of the trust;
-- issuing the securities;
-- making payments on the securities; and
-- 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
500 Stanton Christiana Road, Newark, Delaware 19713.
S-19
CAPITALIZATION
The following balance sheet illustrates the capitalization of the trust as
of October 25, 2002. It is assumed that the notes have been issued and sold on
October 25, 2002. DaimlerChrysler Retail Receivables LLC holds the equity
interests and may transfer or sell such interests.
BALANCE SHEET
AS OF OCTOBER 25, 2002
<Table>
<Caption>
- ----------------------------------------------- -----------------------------------------------
ASSETS LIABILITIES
- ----------------------------------------------- -----------------------------------------------
Receivables $2,183,399,690.47 A-1 Notes $ 380,000,000.00
- ----------------------------------------------- -----------------------------------------------
Reserve Fund 5,173,415.00 A-2 Notes 700,000,000.00
- ----------------------------------------------- -----------------------------------------------
A-3 Notes 550,000,000.00
-----------------------------------------------
A-4 Notes 372,000,000.00
-----------------------------------------------
Total $2,002,000,000.00
-----------------------------------------------
<Caption>
-----------------------------------------------
EQUITY
-----------------------------------------------
Certificates $ 67,366,000.00
-----------------------------------------------
Overcollateralization 62,081,325.39
-----------------------------------------------
Yield Supplement Over- 51,952,365.08
collateralization Amount
-----------------------------------------------
Reserve Fund 5,173,415.00
-----------------------------------------------
Total $ 186,573,105.47
-----------------------------------------------
TOTAL LIABILITIES
TOTAL ASSETS $2,188,573,105.47 AND EQUITY $2,188,573,105.47
- -------------------------------------------------------------------------------------------------
</Table>
S-20
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:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------
UNDERWRITER A-2 A-3 A-4 TOTAL
- ------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Corporation $116,900,000 $ 91,850,000 $ 62,124,000 $ 270,874,000
- ------------------------------------------------------------------------------------------------------
J.P. Morgan Securities Inc. $116,900,000 $ 91,850,000 $ 62,124,000 $ 270,874,000
- ------------------------------------------------------------------------------------------------------
Bear, Stearns & Co. Inc. $116,550,000 $ 91,575,000 $ 61,938,000 $ 270,063,000
- ------------------------------------------------------------------------------------------------------
Deutsche Bank Securities Inc. $116,550,000 $ 91,575,000 $ 61,938,000 $ 270,063,000
- ------------------------------------------------------------------------------------------------------
Morgan Stanley & Co. Incorporated $116,550,000 $ 91,575,000 $ 61,938,000 $ 270,063,000
- ------------------------------------------------------------------------------------------------------
Salomon Smith Barney Inc. $116,550,000 $ 91,575,000 $ 61,938,000 $ 270,063,000
- ------------------------------------------------------------------------------------------------------
Total $700,000,000 $550,000,000 $372,000,000 $1,622,000,000
- ------------------------------------------------------------------------------------------------------
</Table>
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.
<Table>
<Caption>
- ---------------------------------------------------------
CLASS SELLING CONCESSION REALLOWANCE
- ---------------------------------------------------------
A-2 Notes 0.1150% 0.0850%
- ---------------------------------------------------------
A-3 Notes 0.1275% 0.1000%
- ---------------------------------------------------------
A-4 Notes 0.1500% 0.1125%
- ---------------------------------------------------------
</Table>
The Seller estimates that it will have additional offering expenses of
$750,000.
Refer to the "Plan of Distribution" section in the prospectus for
additional information about the distribution of the offered securities.
S-21
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.
Investors will agree, by their purchase of the offered securities, to treat
the offered securities as debt for federal income tax purposes.
For additional information refer to the "Certain Federal Income Tax
Consequences--Trusts in Which All Certificates Are Retained By the Seller or an
Affiliate of the Seller" 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 on other matters.
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 the
prospectus or prospectus supplement. Any such 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.
We only intend the prospectus supplement to be an offer to sell or a
solicitation of an offer to buy the offered securities if:
-- used in a jurisdiction in which such offer or solicitation is
authorized,
-- the person making such offer or solicitation is qualified to do
so, and
-- such offer or solicitation is made to anyone to whom it is lawful
to make such offer or solicitation.
The information in the prospectus or prospectus supplement is only accurate
as of the date of this prospectus supplement.
All dealers effecting transactions in the offered securities within 90 days
after the date of this prospectus supplement may be required to deliver the
prospectus and prospectus supplement, regardless of their participation in this
distribution. This is in addition to the obligation of dealers to deliver the
prospectus and prospectus supplement when acting as underwriters or when selling
their unsold allotments or subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[DAIMLERCHRYSLER LOGO]
$1,622,000,000
DAIMLERCHRYSLER
AUTO TRUST 2002-C
$700,000,000
A-2, 2.07% ASSET-BACKED NOTES
$550,000,000
A-3, 2.56% ASSET-BACKED NOTES
$372,000,000
A-4, 3.09% ASSET-BACKED NOTES
DAIMLERCHRYSLER SERVICES NORTH AMERICA LLC
Seller and Servicer
PROSPECTUS SUPPLEMENT
Dated October 15, 2002
CREDIT SUISSE FIRST BOSTON
PROSPECTUS
[DAIMLERCHRYSLER LOGO]
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
-- may consist of one or more classes of notes and/or certificates;
-- will be payable only from the assets of that trust;
-- 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
-- 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 OCTOBER 15, 2002.
READING THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information on your securities in two separate documents that
offer varying levels of detail:
-- this prospectus provides general information, some of which may
not apply to a particular series of securities, including your
securities, and
-- 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 72 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:
-- the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 (telephone
1-800-732-0330),
-- the public reference facilities at 233 Broadway, New York, New
York 10279, and
-- 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:
-- you received this prospectus and
-- 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
<Table>
<Caption>
- -------------------------------------------
SECTION PAGE
- -------------------------------------------
SUMMARY 6
- -------------------------------------------
-- PARTIES 6
- -------------------------------------------
-- SECURITIES ISSUED 6
- -------------------------------------------
-- TRUST PROPERTY 7
- -------------------------------------------
-- ENHANCEMENT 7
- -------------------------------------------
-- TAX STATUS 8
- -------------------------------------------
-- ERISA CONSIDERATIONS 8
- -------------------------------------------
-- FORM, DENOMINATION AND RECORD
DATE 8
- -------------------------------------------
RISK FACTORS 9
- -------------------------------------------
-- 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 9
- -------------------------------------------
-- PREPAYMENTS MAY ADVERSELY
AFFECT AVERAGE LIFE AND
YIELDS OF THE SECURITIES 9
- -------------------------------------------
-- RATINGS OF THE OFFERED
SECURITIES 10
- -------------------------------------------
-- LIMITED ABILITY TO RESELL
SECURITIES 10
- -------------------------------------------
-- BOOK-ENTRY REGISTRATION MAY
LIMIT YOUR ABILITY TO RESELL
YOUR SECURITIES 10
- -------------------------------------------
-- CHANGE IN SERVICER MAY RESULT
IN LATE PAYMENTS ON
SECURITIES 10
- -------------------------------------------
-- COMMINGLING OF MONIES BY THE
SERVICER MAY RESULT IN A LOSS
FOR SECURITYHOLDERS 10
- -------------------------------------------
-- CERTIFICATEHOLDERS DO NOT
HAVE RIGHTS TO ACT UPON
SERVICER DEFAULT 11
- -------------------------------------------
-- INSOLVENCY OF THE SELLER MAY
RESULT IN DELAYS, REDUCTIONS
OR LOSS OF PAYMENTS TO
SECURITYHOLDERS 11
- -------------------------------------------
-- TRUSTS MAY NOT HAVE A
PERFECTED SECURITY INTEREST
IN CERTAIN FINANCED VEHICLES 12
- -------------------------------------------
-- RELIANCE ON REPRESENTATIONS
AND WARRANTIES BY THE SELLER
OR THE SERVICER WHICH PROVES
TO BE INADEQUATE MAY RESULT
IN LOSSES TO SECURITYHOLDERS 12
- -------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------
SECTION PAGE
- -------------------------------------------
-- FAILURE TO COMPLY WITH
CONSUMER PROTECTION LAW
REQUIREMENTS MAY MAKE A TRUST
LIABLE 12
- -------------------------------------------
-- SUBORDINATION OF CERTAIN
SECURITIES MAY RESULT IN
REDUCED PAYMENTS TO THOSE
SECURITIES 13
- -------------------------------------------
-- ISSUANCE OF A SUBSEQUENT
SERIES OF SECURITIES MAY
ADVERSELY AFFECT ANY PRIOR
SERIES OF SECURITIES 13
- -------------------------------------------
PRINCIPAL DOCUMENTS 14
- -------------------------------------------
THE TRUSTS 14
- -------------------------------------------
-- SECURITIES ISSUANCE 15
- -------------------------------------------
-- TRUST PROPERTY 15
- -------------------------------------------
USE OF PROCEEDS 16
- -------------------------------------------
RECEIVABLE POOLS 16
- -------------------------------------------
-- UNDERWRITING 17
- -------------------------------------------
-- SIMPLE INTEREST RECEIVABLES 17
- -------------------------------------------
-- PRECOMPUTED RECEIVABLES 17
- -------------------------------------------
-- DCS GOLD KEY PLUS RECEIVABLES 18
- -------------------------------------------
-- SELECTION CRITERIA 19
- -------------------------------------------
-- RECOURSE TO DEALERS 19
- -------------------------------------------
NET CREDIT LOSS AND DELINQUENCY
EXPERIENCE 20
- -------------------------------------------
FLOW OF FUNDS 20
- -------------------------------------------
-- SOURCES OF FUNDS 20
- -------------------------------------------
-- APPLICATION OF AVAILABLE
FUNDS 21
- -------------------------------------------
-- NET DEPOSITS 21
- -------------------------------------------
CREDIT ENHANCEMENT 21
- -------------------------------------------
-- RESERVE FUND 22
- -------------------------------------------
PAYMENTS ON THE
SECURITIES 22
- -------------------------------------------
-- PRINCIPAL PAYMENTS 22
- -------------------------------------------
- Weighted Average Life of the
Securities 22
- -------------------------------------------
- Indexed Securities 23
- -------------------------------------------
- Optional Redemption 24
- -------------------------------------------
-- INTEREST PAYMENTS 24
- -------------------------------------------
- Fixed Rate Securities 24
- -------------------------------------------
- Floating Rate Securities 24
- -------------------------------------------
</Table>
4
TABLE OF CONTENTS (CONTINUED)
<Table>
<Caption>
- -------------------------------------------
SECTION PAGE
- -------------------------------------------
FORM OF SECURITIES AND TRANSFERS 27
- -------------------------------------------
-- BOOK-ENTRY REGISTRATION 27
- -------------------------------------------
-- DEFINITIVE SECURITIES 30
- -------------------------------------------
- List of Securityholders 31
- -------------------------------------------
SALE PROVISIONS 32
- -------------------------------------------
SERVICING 33
- -------------------------------------------
-- THE SERVICER 33
- -------------------------------------------
-- ACCOUNTS 34
- -------------------------------------------
-- SERVICING PROCEDURES 34
- -------------------------------------------
-- COLLECTIONS 35
- -------------------------------------------
-- SERVICING COMPENSATION AND
PAYMENT OF EXPENSES 36
- -------------------------------------------
-- REPORTS TO SECURITYHOLDERS 36
- -------------------------------------------
-- STATEMENTS TO TRUSTEES AND
TRUST 37
- -------------------------------------------
-- EVIDENCE AS TO COMPLIANCE 37
- -------------------------------------------
-- CERTAIN MATTERS REGARDING THE
SERVICER 38
- -------------------------------------------
-- SERVICER DEFAULT 38
- -------------------------------------------
-- RIGHTS UPON SERVICER DEFAULT 39
- -------------------------------------------
-- WAIVER OF PAST DEFAULTS 39
- -------------------------------------------
THE INDENTURE 40
- -------------------------------------------
-- INDENTURE; MASTER INDENTURE 40
- -------------------------------------------
-- ANNUAL COMPLIANCE STATEMENT 44
- -------------------------------------------
-- INDENTURE TRUSTEE'S ANNUAL
REPORT 44
- -------------------------------------------
-- SATISFACTION AND DISCHARGE OF
INDENTURE 44
- -------------------------------------------
-- THE INDENTURE TRUSTEE 45
- -------------------------------------------
MISCELLANEOUS PROVISIONS OF
PRINCIPAL DOCUMENTS 46
- -------------------------------------------
-- AMENDMENT 46
- -------------------------------------------
-- THE OWNER TRUSTEE 46
- -------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------
SECTION PAGE
- -------------------------------------------
-- INSOLVENCY EVENT 47
- -------------------------------------------
-- PAYMENT OF NOTES 47
- -------------------------------------------
-- TERMINATION 47
- -------------------------------------------
-- ADMINISTRATION AGREEMENT 48
- -------------------------------------------
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES 48
- -------------------------------------------
-- SECURITY INTEREST IN VEHICLES 48
- -------------------------------------------
-- 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 62
- -------------------------------------------
-- FASITS 63
- -------------------------------------------
-- CERTAIN STATE TAX
CONSEQUENCES 64
- -------------------------------------------
ERISA CONSIDERATIONS 65
- -------------------------------------------
-- CERTIFICATES 67
- -------------------------------------------
PLAN OF DISTRIBUTION 68
- -------------------------------------------
LEGAL OPINIONS 71
- -------------------------------------------
INDEX OF PRINCIPAL TERMS 72
- -------------------------------------------
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-4
- -------------------------------------------
</Table>
5
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
<Table>
<Caption>
- -------------------------------------------------------------
PARTY DESCRIPTION
- -------------------------------------------------------------
Issuer and Trust - Generally, each series of securities
will be issued by a separate trust
- Some trusts may issue more than one
series of securities
- -------------------------------------------------------------
DaimlerChrysler - Seller of receivables to a trust
Services
North America - Servicer of receivables
LLC ("DCS")
- DCS's address is 27777 Inkster Road,
Farmington Hills, Michigan 48334
(telephone 248-427-2565)
- DCS is the successor by merger to
Chrysler Financial Company L.L.C. and
Mercedes Benz Credit Corporation
- Indirect wholly-owned subsidiary of
DaimlerChrysler AG
- Originator of DCS receivables
- -------------------------------------------------------------
Indenture - Specified in the related prospectus
Trustee supplement
- Performs duties for the benefit of
noteholders
- -------------------------------------------------------------
Owner Trustee - Specified in the related prospectus
supplement
- Performs duties on behalf of a trust
and certificateholders
- -------------------------------------------------------------
DaimlerChrysler - A special-purpose financing entity,
Retail formerly named Premier
Receivables LLC Receivables L.L.C.
- An indirect wholly-owned
subsidiary of DCS
- Generally, owner of the equity in a
trust
- -------------------------------------------------------------
</Table>
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:
-- its principal
amount;
-- its interest rate,
which may be fixed
or floating or a
combination;
-- the timing, amount
and priority or
subordination of
payments of
principal and
interest;
-- the method for
calculating the
amount of principal
payments;
-- its final payment
date;
-- whether it may be
redeemed prior to
its final payment
date; and
-- other relevant
factors.
Some classes of securities may be
entitled to:
-- principal payments
with
disproportionate,
nominal or no
interest payments or
-- interest payments
with
disproportionate,
nominal or no
principal payments.
6
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:
-- rights to receive certain payments made on the receivables;
-- security interests in the underlying financed vehicles;
-- certain accounts and the related proceeds, and
-- any proceeds from claims on certain related insurance policies.
In addition, the property of a trust may include:
-- notes and/or certificates that were issued by a prior trust but were
not then offered and/or
-- 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.
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:
-- subordination of one or more classes of securities;
-- overcollateralization (i.e., the amount by which the principal amount
of the receivables exceeds the principal amount of all of the trust's
securities);
-- 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);
-- reserve funds that will be applied to cover payments on the
securities not covered by collections on the receivables;
-- letter of credit or other credit facility;
-- surety bond;
-- liquidity arrangements;
-- swaps (including currency swaps) and other derivative instruments and
interest rate protection agreements;
-- repurchase or put obligations;
-- yield supplement agreements; and
7
-- 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.
TAX STATUS
If the securities offered in the related prospectus supplement are notes
issued by the trust, federal tax counsel to the trust will deliver an opinion at
the time of initial issuance that for federal income tax purposes:
-- the notes will be characterized as debt unless otherwise stated in
the prospectus supplement and
-- the trust will not be characterized as an association (or a publicly
traded partnership) taxable as a corporation.
If the securities offered in the related prospectus supplement are
certificates issued by the trust, 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.
8
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:
-- an obligor on a receivable makes payments, in whole or in part,
earlier than scheduled
-- the servicer liquidates a defaulted receivable
-- 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.
9
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
-- payments on the receivables and
-- 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
10
-- may be invested by the servicer at its own risk and for its own
benefit and
-- 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.
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
-- removal of the servicer may occur without the consent of the
certificateholders or the owner trustee and
-- 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.
11
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
-- the lack of perfection will materially adversely affect the trust
and
-- 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.
12
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.
13
PRINCIPAL DOCUMENTS
In general, the operations of a trust will be governed by the following
documents:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
DOCUMENT PARTIES PRIMARY PURPOSES
- ---------------------------------------------------------------------------------------------------
Trust Agreement Owner trustee and DCS, as - creates the trust
depositor - provides for issuance of certificates and
payments to certificateholders
- establishes rights and duties of owner
trustee
- establishes rights of certificateholders
- ---------------------------------------------------------------------------------------------------
Indenture Trust, as issuer of the - provides for issuance of the notes and
notes, and indenture trustee terms of the notes
- establishes rights and duties of
indenture trustee
- establishes rights of noteholders
- ---------------------------------------------------------------------------------------------------
Sale and Servicing DCS, as seller and servicer, - effects sale of receivables to the trust
Agreement and a trust as purchaser - contains representations and warranties
concerning the receivables
- contains servicing obligations of
servicer
- provides for compensation to servicer
- directs how cash flow will be applied to
expenses of the trust and payments on its
securities
- ---------------------------------------------------------------------------------------------------
</Table>
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.
14
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:
-- the receivables pool allocated to such series and payments on
such receivables;
-- 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;
-- security interests in the financed vehicles and any other
interest of the seller in such financed vehicles;
-- the rights to proceeds from claims on certain physical damage,
credit life and disability insurance policies covering the
financed vehicles or the obligors;
-- the seller's interest in proceeds from recourse to dealers on
defaulted receivables or the underlying financed vehicles of
defaulted receivables;
-- any property that secured a receivable and has been acquired by
the trust; and
-- 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.
15
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 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.
16
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:
<Table>
outstanding principal X stated X period between current
balance of the receivable APR and prior payments
(as a fraction of a calendar year)
</Table>
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:
<Table>
<Caption>
- ---------------------------------------------------------------------
PORTION OF PAYMENT
ALLOCATED TO IF PAID .....
- ---------------------------------------------------------------------
BEFORE SCHEDULED AFTER SCHEDULED
DUE DATE DUE DATE
- ---------------------------------------------------------------------
Principal Greater Less
- ---------------------------------------------------------------------
Interest Less Greater
- ---------------------------------------------------------------------
</Table>
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.
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.
17
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:
-- requires a fixed, level monthly payment from the obligor,
-- is originated under DCS's Gold Key Plus program,
-- is secured by a new automobile or light duty truck, and
-- 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:
-- payment in full in cash of such amount,
-- transfer of the vehicle to DCS provided certain conditions are
satisfied, or
-- 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 secured by these
final Fixed Value Payments. DaimlerChrysler Retail Receivables LLC may then sell
those certificates or the indebtedness.
18
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:
-- has been purchased by the seller (or MBCC, as applicable),
directly or indirectly, from dealers in the ordinary course of
business
-- is secured by a new or used vehicle
-- has been originated in the United States and
-- 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:
-- the composition
-- the distribution of the receivables pool selected from the DCS
portfolio and from MBCC's former portfolio
-- the distribution of such receivables pool secured by new vehicles
and by used vehicles
-- the distribution by outstanding principal balance
-- the distribution by annual percentage rate ("APR")
-- 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
successful, losses on the affected receivables. The prospectus supplement will
include information on the percentage of receivables in the pool with recourse
to dealers.
19
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:
-- collections on its receivables
-- net recoveries from the liquidation of defaulted receivables
-- 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"
-- amounts paid by the servicer to purchase a receivable to which it
has made certain modifications -- refer to "Servicing -- Servicing
Procedures"
-- investment earnings during the related collection period, if any,
on its reserve fund, if any, and on deposits, if any, in its
deposit account
-- any reserve fund described in the related prospectus supplement
-- 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.
20
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:
-- subordination of one or more classes of securities of a series,
-- reserve funds,
-- overcollateralization,
-- letters of credit,
-- credit or liquidity facilities,
-- surety bonds,
-- guaranteed investment contracts,
-- swaps (including without limitation currency swaps),
-- other interest rate protection agreements,
-- repurchase obligations (including without limitation put options),
-- yield supplement agreements,
-- other agreements with respect to third party payments,
-- any other arrangements as may be described in the related
prospectus supplement or
-- any combination of two or more of the above.
21
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
-- the timing and priority of payments of principal and interest on
each class of the securities,
-- their interest rates,
-- the method of determining the amount of their principal payments,
-- 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
-- principal payments with disproportionate, nominal or no interest
payments or
-- 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
22
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 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");
-- the difference in the price of a specified commodity (the "INDEXED
COMMODITY") on specified dates (such Indexed Securities,
"COMMODITY INDEXED SECURITIES");
-- 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
-- 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
23
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.
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).
24
"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:
-- a maximum limitation, or ceiling, on the rate at which interest
may accrue during any Floating Rate Interest Accrual Period and
-- 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.
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)".
25
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:
<Table>
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
</Table>
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.
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)".
26
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.
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
27
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
28
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 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.
29
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.
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
-- 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
-- the administrator or indenture trustee, as applicable, at its
option, elects to terminate the book-entry system through DTC or
-- 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
30
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 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.
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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:
-- the information provided in the schedule of receivables attached
to the Sale and Servicing Agreement is correct in all material
respects;
-- 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;
-- 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;
-- 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;
-- 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
-- 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.
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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.
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 an indirectly owned subsidiary of DaimlerChrysler AG
("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.
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 Inkster Road, Farmington Hills, Michigan 48334, and its telephone
number is (248) 427-2565.
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.
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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
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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.
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;
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(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;
(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".
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).
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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:
-- any entity into which the servicer may be merged or
consolidated, or
-- any entity resulting from any merger or consolidation to which
the servicer is a party, or
-- any entity succeeding to the business of the servicer or,
-- 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.
SERVICER DEFAULT
Except as otherwise provided in the related prospectus supplement,
"SERVICER DEFAULT" under each Sale and Servicing Agreement will consist of
-- 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;
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-- 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
-- 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
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have similar rights with respect to a default by the Servicer that does not
adversely affect the noteholders of the series.
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:
-- 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;
-- impair the right to institute suit for the enforcement of
certain provisions of the related Indenture regarding payment;
-- 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;
-- 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;
-- 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;
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-- 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
-- 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.
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:
-- 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;
-- 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;
-- 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;
-- 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
-- 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.
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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
-- the holders of all the outstanding notes of such series consent to
such sale,
-- 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
-- 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
42
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
-- such holder has given to the applicable indenture trustee prior
written notice of a continuing Event of Default,
-- 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,
-- such holder or holders have offered such indenture trustee
reasonable indemnity,
-- 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.
CERTAIN COVENANTS
Each Indenture will provide that the related trust may not consolidate with
or merge into any other entity, unless
-- 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,
-- 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,
-- no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation,
-- 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
-- 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.
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No trust will, among other things,
-- except as expressly permitted by its documents, sell, transfer,
exchange or otherwise dispose of any of its property,
-- 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,
-- dissolve or liquidate in whole or in part,
-- 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
-- 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.
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.
44
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.
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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
-- 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,
-- 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
-- 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.
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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 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
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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 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
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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.
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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".
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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. Unless otherwise specified, this
summary does not deal with U.S. federal income tax consequences to non-U.S.
persons. As used in this summary, the term "U.S. person" means a beneficial
owner of a note or certificate that is: (1) an individual who is a citizen or
resident of the United States, (2) a corporation or partnership (or entity
treated as a corporation or partnership for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia (unless, in the case of a partnership, U.S.
Treasury Regulations are adopted that provide otherwise), (3) an estate the
income of which is subject to United States federal income taxation regardless
of its source, or (4) a trust with respect to which a court within the United
States is able to exercise primary supervision over its administration and one
or more United States persons have the authority to control all of its
substantial decisions (and certain other trusts as provided by U.S. Treasury
Regulations). The term "non-U.S. person" means a beneficial owner of a note or
certificate that is not a U.S. person. If a partnership (including for this
purpose any entity treated as a partnership for United States federal income tax
purposes) is a beneficial owner of a note or certificate, the treatment of a
partner in the partnership will generally depend upon the status of the partner
and upon the activities of the partnership. A holder of a note or certificate
that is a partnership and partners in such partnership should consult their tax
advisors about the United States federal income tax consequences of holding and
disposing of the note or certificate, as the case may be.
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
52
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. 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. 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.
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
the offered notes (hereinafter, the "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. 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
53
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.
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.
Non-U.S. Persons
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 and whose income in respect of the notes is
not effectively connected with the conduct of a U.S. trade or
54
business 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:
- is signed under penalties of perjury by the beneficial owner of the note,
- certifies that such owner is not a U.S. person, and
- 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 that is an individual or a corporation 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.
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 IRS Form W-8ECI (or the substitute form) to be attached.
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.
55
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
56
requirements, and individual holders might be subject to certain limitations on
their ability to deduct their share of trust expenses.
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,
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
57
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 and interest paid on the notes. 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.
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.
58
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.
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.
59
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.
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,
60
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
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 certificateholders that are non-U.S. persons ("FOREIGN
CERTIFICATEHOLDERS") 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 certificateholder's withholding
status, the trust may rely on IRS Form W-8BEN, IRS Form W-8ECI, IRS Form W9 or
the holder's certification of non-foreign status signed under penalties of
perjury.
Each foreign certificateholder 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
certificateholder 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 certificateholder 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
61
foreign certificateholder 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, a foreign certificateholder 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 certificateholder
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 Withholding
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
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
62
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.
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.
63
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.
64
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:
-- Prohibited Transaction Class Exemption ("PTE") 96-23, which
exempts certain transactions effected on behalf of a Plan by an
"in-house asset manager";
-- PTE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest;
-- PTE 91-38, which exempts certain transactions between bank
collective investment funds and parties in interest;
-- PTE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest;
-- 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 sec.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
65
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 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
-- 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
-- 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 or
result in a non-exempt prohibited transaction under ERISA or
Section 4975 of 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
-- has investment or administrative discretion with respect to such
Plan assets;
-- 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
-- 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.
66
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 and the Code 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-secured 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.
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 Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the four highest generic
rating categories from either Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., Moody's Investors
Service, Inc. or Fitch, Inc.;
3. The owner trustee is not an affiliate of any other member of the
Restricted Group (as defined below) other than an underwriter;
4. The sum of all payments made to and retained by 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
5. 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
67
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 pre-funding arrangements satisfy certain conditions.
The Exemption also provides 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 holding obligations on which
the fiduciary (or its affiliate) is an obligor 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 equity 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) no Plan's investment in Certificates exceeds 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.
This relief is not available 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, a provider
of credit support to the trust, or any affiliate of such parties (the
"RESTRICTED GROUP").
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.
68
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 otherwise, 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
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
-- it has not offered or sold, and will not offer or sell, any of
those securities to persons in the United Kingdom before the
expiry of six months from the Closing Date except to persons whose
ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the
purposes of
69
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, as
amended (the "UK REGULATIONS"),
-- it has complied and will comply with all applicable provisions of
the UK Regulations and of the Financial Services and Markets Act
2000 ("FSMA") of Great Britain with respect to anything done by it
in relation to those securities in, from or otherwise involving
the United Kingdom,
-- 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 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) or is a person to whom the
document may otherwise lawfully be issued or passed on, and
-- it has only communicated or caused to be communicated and it will
only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning of
Section 21 of the FSMA) received by it in connection with the
issue or sale of any of the offered securities in circumstances in
which Section 21(1) of the FSMA does not apply to the trust and
will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the offered
securities in, from or otherwise involving the United Kingdom.
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.
70
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.
71
INDEX OF PRINCIPAL TERMS
<Table>
A
Additional Receivables.................... 15
Administration Agreement.................. 48
Administration Fee........................ 48
APR....................................... 19
Available Funds........................... 20
B
Base Rate................................. 24
C
Calculation Agent......................... 25
CD Rate................................... 25
CD Rate Determination Date................ 25
Cede...................................... 27
Certificates.............................. 67
CFC....................................... 33
Clearstream............................... 28
Clearstream Participants.................. 28
Closing Date.............................. 32
Code...................................... 52
Collection Period......................... 35
Commercial Paper Rate..................... 26
Commercial Paper Rate Determination
Date.................................... 26
Commodity Indexed Securities.............. 23
Composite Quotations...................... 25
Currency Indexed Securities............... 23
Cut-off Date.............................. 15
D
DaimlerChrysler........................... 33
DaimlerChrysler AG........................ 33
DCS Gold Key Plus Receivable.............. 18
Definitive Securities..................... 30
Deposit Account........................... 34
Depositaries.............................. 29
DOL....................................... 67
DTC....................................... 10
E
Eligible Deposit Account.................. 34
Eligible Institution...................... 34
Eligible Investments...................... 34
Euroclear................................. 29
Euroclear Operator........................ 29
Euroclear Participants.................... 28
Events of Default......................... 41
excess interest collections............... 7
Exemption................................. 67
F
FASIT..................................... 63
FASIT provisions.......................... 63
FASIT regular noteholders................. 63
FASIT trust............................... 63
Federal Funds Rate........................ 26
Federal Tax Counsel....................... 52
Fixed Value Payment....................... 18
Floating Rate Interest Accrual Period..... 24
FSMA...................................... 70
FTC Rule.................................. 51
Funding Period............................ 15
H
H.15(519)................................. 25
I
Indenture................................. 40
Index..................................... 23
Index Maturity............................ 24
Indexed Commodity......................... 23
Indexed Currency.......................... 23
Indexed Principal Amount.................. 23
Indexed Securities........................ 23
Indirect Participants..................... 27
Insolvency Event.......................... 39
Interest Reset Date....................... 25
IRS....................................... 53
L
LIBOR..................................... 25
LIBOR Business Day........................ 25
LIBOR Determination Date.................. 25
M
MBCC...................................... 7
MBCC Balloon Receivable................... 18
Money Market Yield........................ 26
N
new partnership........................... 59
O
Obligations............................... 67
OID....................................... 53
OID regulations........................... 53
old partnership........................... 59
</Table>
72
<Table>
P
Participants.............................. 27
Plan Assets Regulation.................... 65
Plans..................................... 65
Precomputed Receivable.................... 17
Pre-Funding Account....................... 15
Pre-Funding Period........................ 68
Previously Issued Securities.............. 16
PTE....................................... 65
R
Record Date............................... 8
Registration Statement.................... 2
Repurchase Amount......................... 32
Restricted Group.......................... 68
Revolving Period.......................... 15
Rules..................................... 28
S
Sale and Servicing Agreement.............. 15
SEC....................................... 2
Series Trust Property..................... 15
Servicer Default.......................... 38
Servicing Fee............................. 36
Short-Term note........................... 54
Similar Law............................... 65
Simple Interest Receivables............... 17
Spread.................................... 24
Spread Multiplier......................... 24
Stock Index............................... 23
Stock Indexed Securities.................. 23
Subsequent Receivables.................... 15
Subsequent Transfer Date.................. 32
T
Telerate Page 3750........................ 25
Terms and Conditions...................... 29
Treasury Rate............................. 26
Treasury Rate Determination Date.......... 26
Trust Agreement........................... 14
U
UBTI...................................... 60
UCC....................................... 11
UK Regulations............................ 70
Underwriting Agreement.................... 68
U.S. Tax-Exempt Shareholders.............. 60
</Table>
73
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
A-2
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.
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:
-- 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;
-- 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
A-3
-- 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 (or, in the case of a non-U.S. person
holding the securities through a partnership, such other rate as is applicable),
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 and
that are individuals or entities treated as corporations for federal income
tax purposes 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 non-U.S. person other than an individual
or an entity treated as a corporation for federal income tax purposes that
beneficially owns a certificate may be subject to more complex rules.
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 (Certificate of
Foreign Person's Claim for 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
that are individuals or entities treated as corporations for federal income
tax purposes 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. A non-U.S. person other than an
individual or an entity treated as a corporation for
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federal income tax purposes that beneficially owns a certificate may be
subject to more complex rules.
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).
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.
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JPMORGAN
BEAR, STEARNS & CO. INC.
DEUTSCHE BANK SECURITIES
MORGAN STANLEY
SALOMON SMITH BARNEY
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