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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-41568
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 26, 2000
$1,045,038,000
TOYOTA AUTO RECEIVABLES 2000-B OWNER TRUST
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
$429,000,000 6.75% ASSET BACKED NOTES, CLASS A-2
$407,000,000 6.76% ASSET BACKED NOTES, CLASS A-3
$209,038,000 6.80% ASSET BACKED NOTES, CLASS A-4
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK fACTORS"
BEGINNING ON PAGE S-13 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 9 IN THE
ACCOMPANYING PROSPECTUS.
This prospectus supplement does not contain complete information about the
offering of the notes. No one may use this prospectus supplement to offer and
sell the notes unless it is accompanied by the prospectus. If any statements in
this prospectus supplement conflict with statements in the prospectus, the
statements in this prospectus supplement will control.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NOTES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes are asset backed securities issued by the trust. The notes are
not obligations of Toyota Motor Credit Corporation, Toyota Motor Credit
Receivables Corporation, Toyota Financial Services Corporation, Toyota Motor
Sales, U.S.A., Inc. or any of their respective affiliates. Neither the notes nor
the receivables are insured or guaranteed by any governmental agency.
The trust will issue the following notes:
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Final
Initial First Scheduled
Principal Interest Accrual Interest Payment
Amount Rate(2) Method(2) Payment Date Date
------------ -------- ---------- ------------- ---------
Class A-1 Notes(1)... $366,759,000 6.66% Actual/360 10/16/2000 10/15/2001
Class A-2 Notes(3)... $429,000,000 6.75% 30/360 10/16/2000 5/15/2003
Class A-3 Notes(3)... $407,000,000 6.76% 30/360 10/16/2000 8/15/2004
Class A-4 Notes...... $209,038,000 6.80% 30/360 10/16/2000 4/15/2007
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(1) The Class A-1 Notes will not be offered to third party investors by this
prospectus supplement.
(2) Interest generally will accrue on the Class A-1 Notes from payment
date to payment date, and on the Class A-2, Class A-3 and Class A-4
Notes from the 15th day of each month to the 15th day of the succeeding
month.
(3) $70,000,000 of Class A-2 Notes and $65,000,000 of Class A-3 Notes
are being sold by the seller directly to affiliates of Merrill Lynch,
Pierce, Fenner & Smith Incorporated and are not being offered by the
underwriters.
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The terms of the offering are as follows:
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Initial Public Underwriting
Offering Discount and Proceeds To
Price(1) Placement Fee Seller(2)
---------------- ------------- -------------
Per Class A-2 Note.............. 99.99517% 0.125% 99.87017%
Per Class A-3 Note.............. 99.99099% 0.175% 99.81599%
Per Class A-4 Note.............. 99.99512% 0.255% 99.74012%
Total........................... $1,044,970,408 $1,781,547 $1,043,188,861
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(1) Plus accrued interest, if any, from October 11, 2000.
(2) Before deducting expenses payable by Toyota Motor Credit Receivables
Corporation, as the seller, estimated to be $600,000. The notes will be
delivered in book-entry form only on or about October 11, 2000.
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Joint Global Coordinators
DEUTSCHE BANC ALEX. BROWN MORGAN STANLEY DEAN WITTER
Co-Managers
CHASE SECURITIES INC.
MERRILL LYNCH & Co.
SALOMON SMITH BARNEY
The date of this prospectus supplement is September 26, 2000
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the notes is provided in two separate documents that
progressively provide more detail:
o the accompanying prospectus, which provides general information, some
of which may not apply to a particular class of notes, including your
notes; and
o this prospectus supplement, which describes the specific terms of
your class of notes.
IF THE TERMS OF YOUR NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT.
Cross-references are included in this prospectus supplement and in the
prospectus which direct you to more detailed descriptions of a particular topic.
You can also find references to key topics in the table of contents on the back
cover of the prospectus.
You can find a listing of the pages where capitalized terms used in
this prospectus supplement are defined under the caption "Index of Terms"
beginning on page S-43 in this prospectus supplement and under the caption
"Index of Terms" beginning on page 85 in the accompanying prospectus.
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SUMMARY OF TERMS
THE FOLLOWING INFORMATION HIGHLIGHTS SELECTED INFORMATION FROM THIS
DOCUMENT AND PROVIDES A GENERAL OVERVIEW OF THE TERMS OF THE NOTES. TO
UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THESE NOTES, YOU SHOULD READ
CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS. BOTH DOCUMENTS
CONTAIN INFORMATION YOU SHOULD CONSIDER WHEN MAKING YOUR INVESTMENT DECISION.
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RELEVANT PARTIES
ISSUER.......................................... Toyota Auto Receivables 2000-B Owner Trust, a Delaware business trust.
SELLER.......................................... Toyota Motor Credit Receivables Corporation.
SERVICER........................................ Toyota Motor Credit Corporation.
INDENTURE TRUSTEE............................... U.S. Bank National Association.
OWNER TRUSTEE................................... U.S. Bank Trust National Association.
RELEVANT AGREEMENTS
INDENTURE....................................... The indenture between the issuer and the indenture trustee. The indenture
provides for the terms relating to the notes.
TRUST AGREEMENT................................. The trust agreement between the seller, the owner trustee and the Delaware
trustee. The trust agreement governs the creation of the trust and provides
for the terms relating to the certificates.
SALE AND SERVICING AGREEMENT.................... The sale and servicing agreement between the servicer and the seller. The
sale and servicing agreement governs the transfer of the receivables by the
seller to the trust and the servicing of the receivables by the servicer.
ADMINISTRATION AGREEMENT........................ The administration agreement between Toyota Motor Credit Corporation as the
administrator, the owner trustee and the indenture trustee. The
administration agreement governs the provision of reports by the administrator
and the performance by the administrator of other administrative duties for
the trust.
RECEIVABLES PURCHASE AGREEMENT.................. The receivables purchase agreement between Toyota Motor Credit Corporation and
the seller. The receivables purchase agreement governs the sale of the
receivables from Toyota Motor Credit Corporation to the seller.
RELEVANT DATES
CLOSING DATE.................................... Expected to be October 11, 2000.
CUTOFF DATE..................................... September 1, 2000
PAYMENT DATES................................... The trust will pay interest and principal on the notes on the fifteenth day of
each month. If the fifteenth day of the month is not a business day, payments
on the notes will be made on the next business day. The date that any payment
is made is called a payment date. The first payment date is October 16, 2000.
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A "business day" is any day except:
o a Saturday or Sunday; or
o a day on which banks in New York, Chicago or San Francisco are closed.
Interest will accrue on the Class A-1 Notes from payment date to payment
date, and on the Class A-2, Class A-3 and Class A-4 Notes from the fifteenth
day of each calendar month to the fifteenth day of the next calendar month,
except that for all classes of notes the first interest accrual period will
begin on the closing date. The Seller's fractional undivided interest
(described below) will not bear interest.
FINAL SCHEDULED PAYMENT DATES................... The final principal payment for each class of notes is scheduled to be made on
the related final scheduled payment date specified on the front cover of this
prospectus supplement.
RECORD DATE..................................... So long as the notes are in book-entry form, the trust will make payments on
the notes to the holders of record on the day immediately preceding the
related payment date. If the notes are issued in definitive form, the record
date will be the last day of the month preceding the related payment date.
COLLECTION PERIOD............................... The calendar month preceding the related payment date.
DESCRIPTION OF THE NOTES........................... The trust is offering the classes of notes listed below by way of this
prospectus supplement (provided that $70,000,000 of the Class A-2
Notes and $65,000,000 of the Class A-3 Notes are being sold directly by the
seller to affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated).
All of the notes will be secured by the assets of the trust pursuant to the
indenture.
Class A-2 6.75% Asset Backed Notes in the aggregate initial principal amount of
$429,000,000 CUSIP No. 89232QAB1.
Class A-3 6.76% Asset Backed Notes in the aggregate initial principal amount of
$407,000,000 CUSIP No. 89232QAC9.
Class A-4 6.80%Asset Backed Notes in the aggregate initial principal amount of
$209,038,000 CUSIP No. 89232QAD7.
The trust will also issue Class A-1 6.66% Asset Backed Notes in the aggregate
initial principal amount of $366,759,000. The Class A-1 Notes are not offered
by this prospectus supplement. Instead, the Class A-1 Notes will be sold in a
separate transaction to Toyota Motor Credit Corporation. Any information
relating to the Class A-1 Notes contained in this prospectus supplement is
included only for informational purposes to facilitate a better
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understanding of the Class A-2, Class A-3 and Class A-4 Notes.
A description of how payments of interest on and principal of the Class A Notes
will be made on each payment date is provided under "Description of the Notes"
and "Payments to Noteholders" in this prospectus supplement.
SUBORDINATED SELLER'S INTEREST..................... The trust will issue to Toyota Motor Credit Receivables Corporation, as the
Seller, in certificated form, a fractional undivided interest in the trust
that includes the right to payment of certain available amounts in excess of
those necessary to make payments on the notes on each payment date to the
extent specified in this prospectus supplement. This fractional undivided
interest will not bear interest and is not offered by this prospectus
supplement.
MINIMUM DENOMINATIONS.............................. The notes will be issued only in denominations of $1,000 or more.
REGISTRATION OF THE NOTES.......................... You will generally hold your interests in the notes through The Depository
Trust Company in the United States, or Clearstream Banking societe anonyme or
the Euroclear System in Europe or Asia. This is referred to as book-entry form.
You will not receive a definitive note except under limited circumstances.
We expect the notes to be delivered through The Depository Trust Company,
Clearstream Banking societe anonyme and the Euroclear System against payment in
immediately available funds on or about October 11, 2000.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "ANNEX A: GLOBAL CLEARANCE,
SETTLEMENT AND TAX DOCUMENTATION PROCEDURES" IN THIS PROSPECTUS SUPPLEMENT AND
"CERTAIN INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" IN THE
ACCOMPANYING PROSPECTUS.
TAX STATUS......................................... Subject to important considerations described in this prospectus supplement
and the prospectus, O'Melveny & Myers LLP, special tax counsel to the trust,
will deliver its opinion that:
o the Class A-2, Class A-3 and Class A-4 Notes will be characterized as
debt; and
o the trust will not be characterized as an association or a publicly traded
partnership taxable as a corporation for federal income and California
income and franchise tax purposes.
If you purchase the notes, you will agree to treat the notes as debt.
YOU SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL
INFORMATION
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CONCERNING THE APPLICATION OF FEDERAL INCOME AND CALIFORNIA TAX LAWS TO THE
TRUST AND THE NOTES.
ERISA CONSIDERATIONS............................... The notes are generally eligible for purchase by employee benefit plans,
subject to the considerations discussed under "ERISA Considerations" in this
prospectus supplement and in the accompanying prospectus.
YOU SHOULD REFER TO "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND
IN THE ACCOMPANYING PROSPECTUS. IF YOU ARE A BENEFIT PLAN FIDUCIARY
CONSIDERING PURCHASE OF THE NOTES, YOU SHOULD, AMONG OTHER THINGS, CONSULT
WITH YOUR COUNSEL IN DETERMINING WHETHER ALL REQUIRED CONDITIONS HAVE BEEN
SATISFIED.
RATINGS............................................ It is a condition to the issuance of the notes that the Class A-2, Class A-3
and Class A-4 Notes be rated "AAA" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., and "Aaa" by Moody's Investors
Service, Inc.
A SECURITY RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD NOTES. THE
RATINGS OF THE NOTES ADDRESS THE LIKELIHOOD OF THE PAYMENT OF PRINCIPAL AND
INTEREST ON THE NOTES IN ACCORDANCE WITH THEIR TERMS. A RATING AGENCY MAY
SUBSEQUENTLY LOWER OR WITHDRAW ITS RATING OF ANY CLASS OF THE NOTES. IF THIS
HAPPENS, NO PERSON OR ENTITY WILL BE OBLIGATED TO PROVIDE ANY ADDITIONAL CREDIT
ENHANCEMENT FOR THE NOTES.
THE TRUST WILL OBTAIN THE RATINGS MENTIONED ABOVE FROM MOODY'S INVESTORS
SERVICE, INC. AND STANDARD & POOR'S RATINGS SERVICES, A DIVISION OF THE
MCGRAW-HILL COMPANIES, INC. HOWEVER, ANOTHER RATING AGENCY MAY RATE THE NOTES
AND, IF SO, THE RATING MAY BE LOWER THAN THE RATINGS OBTAINED BY THE TRUST.
STRUCTURAL SUMMARY
OVERVIEW.......................................... TOYOTA AUTO RECEIVABLES 2000-B OWNER TRUST
STRUCTURAL DIAGRAM
[TOYOTA GRAPHIC]
*Except that certain Class A-2 Notes and Class A-3 Notes will be sold directly
by the seller to certain investors.
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ASSETS OF THE TRUST................................ Purchasers of Toyota and Lexus cars and light duty trucks often finance their
purchases by entering into retail installment sales contracts with Toyota and
Lexus dealers who then resell the contracts to Toyota Motor Credit
Corporation. The purchasers of the vehicles are referred to as the "obligors"
under the contracts. Toyota Motor Credit Receivables Corporation will
purchase a specified amount of these contracts from Toyota Motor Credit
Corporation and on the closing date will sell them to the trust in exchange
for the notes. These contracts are referred to as the "receivables." The
receivables will have a total outstanding principal balance of approximately
$1,455,461,330 as of the cutoff date.
Toyota Motor Credit Receivables Corporation will sell the Class A-2, Class A-3
and Class A-4 Notes to investors for cash and will use this cash to pay part of
the purchase price for its purchase of the receivables from Toyota Motor Credit
Corporation. Toyota Motor Credit Receivables Corporation will pay the remainder
of the purchase price from the net proceeds from the sale of the Class A-1
Notes to Toyota Motor Credit Corporation and by issuing to Toyota Motor Credit
Corporation a subordinated non-recourse promissory note. The chart above
represents the flow of funds provided by investors for the notes and the
receivables sold by Toyota Motor Credit Corporation.
On the closing date, the trust will purchase receivables having the following
characteristics as of the cutoff date:
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Total Cutoff Date Principal Balance..... $ 1,455,461,330
Number of Receivables................... 105,023
Average Cutoff Date Principal Balance... $ 13,859
Range of Cutoff Date Principal
Balance............................ $ 259 to 49,725
Average Original Amount Financed........ $ 17,225
Range of Original Amount Financed.... $1,239 to 70,158
Weighted Average APR(1) ................ 10.34%
Range of APRs........................ 8% to 15%
Weighted Average Original Number of
Scheduled Payments(1) ............... 60.8
Range of Original Number of
Scheduled Payments................. 12 to 72
Weighted Average Remaining Number of
Scheduled Payments(1) ............... 49.9
Range of Remaining Number of
Scheduled Payments................. 5 to 72
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(1) Weighted by principal balance as of the cutoff date.
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The assets of the trust will also include:
o certain monies due or received under the receivables on and after the
cutoff date;
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o security interests in the vehicles financed under the receivables;
o certain bank accounts and the proceeds of those accounts; and
o proceeds from claims under certain insurance policies relating to the
financed vehicles or the obligors under the receivables and certain rights
of the seller under the receivables purchase agreement.
FOR A MORE DETAILED DESCRIPTION OF THE ASSETS OF THE TRUST, SEE "THE
TRUST--GENERAL" IN THIS PROSPECTUS SUPPLEMENT.
SERVICING.......................................... Toyota Motor Credit Corporation will be appointed to act as servicer for the
receivables owned by the trust. The servicer will handle all collections,
administer defaults and delinquencies and otherwise service the contracts. On
each payment date, the trust will pay the servicer a monthly fee equal to
one-twelfth of 1.00% of the total principal balance of the receivables as of
the first day of the related collection period. The servicer will also
receive additional servicing compensation in the form of certain investment
earnings, late fees and other administrative fees and expenses or similar
charges received by the servicer during such month.
The servicer will be obligated to advance to the trust interest on any
receivable that is due but unpaid by the obligor. In addition, the servicer
will be obligated to advance to the trust principal that is due but unpaid by
the obligor on any precomputed receivable (but not on any simple interest
receivable). However, the servicer will not be required to make an advance if
it determines that the advance will not ultimately be recoverable. The trust
will reimburse the servicer from later collections on the related delinquent
receivable. If the servicer determines that the advance will not ultimately be
recoverable from proceeds of the related receivable, the servicer may be
reimbursed from collections on other receivables.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "TRANSFER AND SERVICING
AGREEMENT--ADVANCES" IN THIS PROSPECTUS SUPPLEMENT AND TO "TRANSFER AND
SERVICING AGREEMENTS--SERVICING COMPENSATION AND PAYMENT OF EXPENSES" IN THE
ACCOMPANYING PROSPECTUS.
INTEREST AND PRINCIPAL PAYMENTS.................... In general, noteholders are entitled to receive payments of interest and
principal from the trust only to the extent that collections on the
receivables, advances and amounts on deposit in the reserve account (and
available for those purposes) are sufficient to make the payments described
below in the order of priority described below.
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A. INTEREST RATES
The Class A Notes will bear interest for each interest accrual period at the
fixed annual interest rates specified on the cover of this prospectus
supplement.
B. INTEREST ACCRUAL
The Class A-1 Notes will accrue interest on an actual/360 basis from (and
including) a payment date to (but excluding) the next payment date, except that
the first interest accrual period will be from (and including) the closing date
to (but excluding) October 16, 2000. This means that the interest due on each
payment date will be the product of: (i) the outstanding principal balance, (ii)
the interest rate, and (iii) the actual number of days since the previous
payment date (or, in the case of the first payment date, since the closing date)
divided by 360.
The Class A-2, Class A-3 and Class A-4 Notes will accrue interest on a 30/360
basis from (and including) the 15th day of each calendar month to (but
excluding) the 15th day of the succeeding calendar month except that the first
interest accrual period will be from (and including) the closing date to (but
excluding) October 15, 2000. This means that the interest due on each payment
date will be the product of: (i) the outstanding principal balance, (ii) the
interest rate, and (iii) 30 (or, in the case of the first payment date, 4)
divided by 360.
If noteholders of any class do not receive all interest owed on their notes on
any payment date, the trust will make payments of interest on later payment
dates to make up the shortfall (together with interest on such amounts at the
applicable interest rate for such class, to the extent permitted by law) to the
extent funds are available to do so pursuant to the payment priorities described
in this prospectus supplement.
FOR A MORE DETAILED DESCRIPTION OF THE PAYMENT OF INTEREST ON THE NOTES YOU
SHOULD REFER TO THE SECTIONS OF THIS PROSPECTUS SUPPLEMENT ENTITLED "DESCRIPTION
OF THE NOTES--PAYMENTS OF INTEREST" AND "PAYMENTS TO NOTEHOLDERS".
C. PAYMENT PRIORITIES
On each payment date, the trust will make payments from collections on the
receivables during the related collection period and, if necessary, from amounts
withdrawn from the reserve account, to the extent available for these purposes.
Advances made by the servicer will be included in collections, and
reimbursements of servicer advances will be deducted from collections before any
payments are
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made. The trust generally will make payments in the following order of priority:
1. SERVICING FEE--the servicing fee payable to the servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and unpaid
interest on the Class A-1, Class A-2, Class A-3 and Class A-4 Notes,
together with any amounts that were to be paid pursuant to this
clause (2) on any prior payment date but were not paid because
sufficient funds were not available to make the payment (with
interest accrued on any unpaid amounts as described under "Payments
to Noteholders" in this prospectus supplement);
3. ALLOCATION OF PRINCIPAL--to the principal distribution account, an
amount equal to the excess, if any, of (x) the principal balance of
the receivables as of the end of the collection period preceding the
related collection period (or, in the case of the first collection
period, as of the cut-off date) over (y) the principal balance of
the receivables as of the end of the related collection period,
together with any amounts that were to be paid pursuant to this
clause (3) on any prior payment date but were not paid because
sufficient funds were not available to make the payment;
4. RESERVE ACCOUNT DEPOSIT--to the reserve account, the amount, if any,
necessary to cause the balance of funds in the account to equal the
required balance described under "Reserve Account" below; and
5. EXCESS AMOUNTS--any remaining amounts will be distributed to Toyota
Motor Credit Receivables Corporation as payment on its fractional
undivided interestin the trust.
PAYMENTS OF PRINCIPAL--On each payment date, from the amounts deposited into the
principal distribution account from the allocations of principal described in
clause (3) above, the trust generally will pay principal of the securities in
the following priority:
1. to the Class A-1 Notes until they are paid in full;
2. to the Class A-2 Notes until they are paid in full;
3. to the Class A-3 Notes until they are paid in full; and
4. to the Class A-4 Notes until they are paid in full.
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After the Class A Notes are paid in full, any remaining funds will be paid to
Toyota Motor Credit Receivables Corporation as payment on its fractional
undivided interest in the trust.
However, if an event of default under the indenture results in acceleration of
the notes, the payment priorities described above will change from pro rata
payments of interest followed by sequential payments of principal, to pro rata
payments of interest followed by pro rata payments of principal to all four
classes of Class A Notes.
Under those circumstances, the amounts available to make payments to any class
of Class A Notes may be reduced based on the sufficiency of proceeds from the
liquidation of the assets of the trust.
FOR INFORMATION CONCERNING SUCH CHANGES IN PRIORITIES OF PAYMENTS AND AMOUNTS
AVAILABLE, SEE "PAYMENTS TO NOTEHOLDERS" IN THIS PROSPECTUS SUPPLEMENT.
D. SUBORDINATION
As long as any Class A Notes remain outstanding, all payments on each payment
date in respect of Toyota Motor Credit Receivables Corporation's undivided
beneficial interest in the trust will be subordinated to payments of interest
and principal on the Class A Notes.
E. RESERVE ACCOUNT
On the closing date, the seller will deposit $3,638,653 (0.25% of the
outstanding principal balance of the receivables as of the cutoff date) into the
reserve account for the trust.
On each payment date, if collections on the receivables and advances by the
servicer are insufficient to pay the first three items listed under "Interest
and Principal Payments--Payment Priorities" above, the indenture trustee will
withdraw funds (if available) from the reserve account to pay those amounts.
If the principal balance of a class of notes is not paid in full on the related
final scheduled payment date, the indenture trustee will withdraw amounts from
the reserve account (if available) to pay that class in full.
The amount required to be on deposit in the reserve account at the close of
business on any payment date will be the greater of (a) 0.75% of the outstanding
principal balance of the receivables as of the end of the related collection
period or (b) $7,277,307 (0.50% of the outstanding principal balance of the
receivables as of the cutoff date), except that if charge-offs or delinquencies
exceed specified levels, the
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required amount will be the greatest of (i) 0.75% of the outstanding principal
balance of the receivables as of the end of the related collection period, (ii)
$7,277,307 (0.50% of the outstanding principal balance of the receivables as of
the cutoff date), and (iii) 5.50% of the outstanding principal balance of the
notes as of that payment date (after giving effect to payments of principal made
on that date). On each payment date, the trust will deposit, to the extent
available, the amount, if any, necessary to cause the balance of funds on
deposit in the reserve account to equal the required balance set forth above.
F. FINAL SCHEDULED PAYMENT DATES
The trust is required to pay the outstanding principal amount of each class of
notes in full on or before the related final scheduled payment date specified on
the cover of this prospectus supplement.
G. OPTIONAL REDEMPTION; CLEAN-UP CALL
The servicer may redeem the Class A Notes in whole, but not in part, at a price
equal to the unpaid principal amount of those notes plus any accrued and unpaid
interest on the notes, on any payment date when the outstanding principal
balance of the receivables has declined to 10% or less of the principal balance
of the receivables as of the cutoff date.
FOR MORE DETAILED INFORMATION REGARDING THIS OPTION, YOU SHOULD REFER TO
"TRANSFER AND SERVICING AGREEMENTS--OPTIONAL PURCHASE" IN THIS PROSPECTUS
SUPPLEMENT.
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS (AND THOSE SET FORTH
UNDER "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS) IN DECIDING WHETHER TO
PURCHASE ANY CLASS A NOTES.
PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES,
RESULTING IN REINVESTMENT RISK TO YOU.
You may receive payment of principal on your notes earlier than you
expected. If that happens, you may not be able to reinvest the principal you
receive at a rate as high as the rate on your notes. Prepayments on the
receivables will shorten the life of the notes to an extent that cannot be
predicted. Prepayments may occur for a number of reasons. Some prepayments may
be caused by the obligors under the receivables. For example, obligors may:
make early payments, since receivables will generally be prepayable at
any time without penalty;
default, resulting in the repossession and sale of the financed
vehicle; or
damage the vehicle or become unable to pay due to death or disability,
resulting in payments to the trust under any existing physical damage,
credit life or other insurance.
Some prepayments may be caused by the seller or the servicer. For
example, the seller will make representations and warranties regarding the
receivables, and the servicer will agree to take or refrain from taking certain
actions with respect to the receivables. If the seller or the servicer breaches
its representation or agreement and the breach is material and cannot be
remedied, it will be required to purchase the affected receivables from the
trust. This will result, in effect, in the prepayment of the purchased
receivables. In addition, the servicer will have the option to purchase the
receivables from the trust when the total outstanding principal balance of the
receivables is 10% or less of the total outstanding principal balance of the
receivables as of the cutoff date. In addition, an event of default under the
indenture could cause your notes to be prepaid. See "BECAUSE THE TRUST HAS
LIMITED ASSETS, THERE IS ONLY LIMITED PROTECTION AGAINST POTENTIAL LOSSES"
BELOW.
The rate of prepayments on the receivables may be influenced by a
variety of economic, social and other factors. The seller has limited historical
experience with respect to prepayments and cannot predict the actual prepayment
rates for the receivables. The seller, however, believes that the actual rate of
payments, including prepayments, will result in the weighted average life of
each class of notes being shorter than the period from the closing date to the
related final scheduled maturity date.
PAYMENT PRIORITIES INCREASE RISK OF LOSS OR DELAY IN PAYMENT TO
CERTAIN NOTES.
Based on the priorities described under "Payments to Noteholders",
classes of notes that receive payments, particularly principal payments, before
other classes will be repaid more rapidly than the other classes. In addition,
because principal of each class of notes will be paid sequentially, classes of
notes that have higher sequential numerical class designations will be
outstanding longer and therefore will be exposed to the risk of losses on the
receivables during periods after other classes have been receiving most or all
amounts payable on their notes, and after which a disproportionate amount of
credit enhancement may have been applied and not replenished.
As a result, the yields of the Class A-3 and A-4 Notes will be
relatively more sensitive to losses on the receivables and the timing of such
losses than the Class A-2 Notes. If the actual rate and amount of losses exceed
your expectations, and if amounts in the reserve account are insufficient to
cover the resulting shortfalls, the yield to maturity on your notes may be lower
than anticipated, and you could suffer a loss.
Classes of notes that receive payments earlier than expected are
exposed to greater reinvestment risk, and classes of notes that receive
principal later than expected are exposed to greater risk of loss. In either
case, the yields on your notes could be materially and adversely affected.
S-13
<PAGE>
BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS ONLY LIMITED PROTECTION
AGAINST POTENTIAL LOSSES.
The only sources of funds for payments on the notes are collections on
the receivables (which include proceeds of the liquidation of repossessed
vehicles and of relevant insurance policies), advances by the servicer and the
reserve account. The notes are not obligations of, and will not be insured or
guaranteed by, any governmental agency or the seller, the servicer, Toyota Motor
Sales, U.S.A., Inc., any trustee or any of their affiliates. You must rely
solely on payments on the receivables, advances by the servicer and amounts
available in the reserve account for payments on the notes. Although funds in
the reserve account will be available to cover shortfalls in payments of
interest and principal on each payment date, the amounts deposited in the
reserve account will be limited. If the entire reserve account has been used,
the trust will depend solely on current collections on the receivables and
advances by the servicer to make payments on the notes. Any excess amounts
released from the reserve account to the seller will no longer be available to
noteholders on any later payment date. See "Subordination; Reserve Account" in
this prospectus supplement. If the assets of the trust are not sufficient to pay
interest and principal on the notes you hold, you will suffer a loss.
Certain events that are not entirely within the control of the trust
or Toyota Motor Credit Corporation may result in events of default under the
indenture and cause acceleration of all outstanding Class A Notes. Upon the
occurrence of an event of default under the indenture and the acceleration of
the notes, the trust may be required promptly to sell the receivables, liquidate
the other assets of the trust and apply the proceeds to the payment of the
notes. Liquidation would be likely to accelerate payment of all notes that are
then outstanding. If a liquidation occurs close to the date when any class
otherwise would have been paid in full, repayment of that class might be delayed
while liquidation of the assets is occurring. The trust cannot predict the
length of time that will be required for liquidation of the assets of the trust
to be completed. In addition, the amounts received from a sale in these
circumstances may not be sufficient to pay all amounts owed to the holders of
all classes of notes or any class of notes, and you may suffer a loss. Even if
liquidation proceeds are sufficient to repay the notes in full, any liquidation
that causes principal of a class of notes to be paid before the related final
scheduled payment date will involve the prepayment risks described under
"PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN
REINVESTMENT RISK TO YOU" above. Also, an event of default that results in the
acceleration of the notes will cause priority of payments of all Class A Notes
to change, from pro rata payments of interest followed by sequential payments of
principal, to pro rata payments of interest followed by pro rata payments of
principal. Therefore, all outstanding Class A Notes will be affected by any
shortfall in liquidation proceeds.
PERFORMANCE OF THE RECEIVABLES COULD BE AFFECTED BY ECONOMIC
CONDITIONS IN THE STATES WHERE THE RECEIVABLES WERE ORIGINATED.
If a large number of obligors are located in a particular state,
economic conditions or other factors that negatively affect that state could
also negatively affect the delinquency, credit loss or repossession experience
of the trust. The table entitled "Geographic Distribution of the Receivables by
State" on page S-21 of this prospectus supplement provides important information
about the number and principal amount of receivables located in each state
(based on the address of the related dealer). By cutoff date principal balance,
based on the address of the related dealer, 17.28%, 11.65%, 7.90%, 7.16%, 6.24%
and 6.13% of the receivables were located in California, Maryland, Illinois, New
Jersey, New York and Virginia respectively. By cutoff date principal balance,
based on the address of the related dealer, not more than 5% of the receivables
were located in any other state.
CERTAIN NOTEHOLDERS MAY HAVE LITTLE OR NO CONTROL WITH RESPECT TO
IMPORTANT ACTIONS.
The trust will pledge the property of the trust to the indenture
trustee as collateral for the payment of the notes. As a result, the indenture
trustee, acting at the direction of the holders of a majority in outstanding
principal amount of the notes (excluding for such purposes the outstanding
principal amount of any notes held of record or beneficially owned by Toyota
Motor Credit Corporation or any of its affiliates), has the power to direct the
trust to take certain actions in connection with the property of the trust. The
holders of at least 51% of the principal balance of the outstanding notes
(excluding for such purposes the outstanding principal amount
S-14
<PAGE>
of any notes held of record or beneficially owned by Toyota Motor Credit
Corporation or any of its affiliates) or the indenture trustee acting on behalf
of the holders of such notes, will also have the right under certain
circumstances to terminate the servicer. In addition, those noteholders will
have the right to waive certain events of default or defaults involving the
servicer. See "Description of the Notes--The Indenture--EVENTS OF DEFAULT;
RIGHTS UPON EVENT OF DEFAULT" and "Description of the Transfer and Servicing
Agreements--Rights upon Servicer Default" and "--Waiver of Past Defaults" in the
accompanying prospectus.
PAID-AHEAD SIMPLE INTEREST CONTRACTS MAY AFFECT THE WEIGHTED AVERAGE
LIFE OF THE NOTES.
If an obligor on a simple interest contract makes a payment on the
contract ahead of schedule (for example, because the obligor intends to go on
vacation), the weighted average life of the notes could be affected. This is
because the additional scheduled payments will be treated as a principal
prepayment and applied to reduce the principal balance of the related contract
and the obligor will generally not be required to make any scheduled payments
during the period for which it was paid-ahead. During this paid-ahead period,
interest will continue to accrue on the principal balance of the contract, as
reduced by the application of the additional scheduled payments, but the
obligor's contract would not be considered delinquent during this period. While
the servicer may be required to make interest advances during this period, no
principal advances will be made. Furthermore, when the obligor resumes his
required payments, the payments so paid may be insufficient to cover the
interest that has accrued since the last payment by the obligor. This situation
will continue until the regularly scheduled payments are once again sufficient
to cover all accrued interest and to reduce the principal balance of the
contract.
The payment by the trust of the paid-ahead principal amount on the
notes will generally shorten the weighted average life of the notes. However,
depending on the length of time during which a paid-ahead simple interest
contract is not amortizing as described above, the weighted average life of the
notes may be extended. In addition, to the extent the servicer makes advances on
a paid-ahead simple interest contract which subsequently goes into default, the
loss on this contract may be larger than would have been the case had advances
not been made because liquidation proceeds for the contract will be applied
first to reimburse the servicer its advances.
TMCC's portfolio of retail installment sale contracts has historically
included simple interest contracts which have been paid-ahead by one or more
scheduled monthly payments. There can be no assurance as to the number of
contracts in the trust which may become paid-ahead simple interest contracts as
described above or the number or the principal amount of the scheduled payments
which may be paid-ahead.
THE ABSENCE OF A SECONDARY MARKET FOR THE NOTES COULD LIMIT YOUR
ABILITY TO RESELL THE NOTES.
The notes are not expected to be listed on any securities exchange.
There have been times in the past when the absence of a liquid secondary market
for similar asset backed securities has caused the holders thereof to be unable
to sell their securities at all or other than at a significant loss. The absence
of a liquid secondary market for the notes could similarly limit your ability to
resell them. This means that if you want to sell your notes in the future, you
may have difficulty finding a buyer at all and, if you find a buyer, the selling
price may be less than it would have been if a liquid secondary market existed
for the notes. There is currently no secondary market for the notes. Although
the underwriters have stated that they intend to make a market in each class of
notes, they are not obligated to do so. A secondary market may not ever develop
for the notes. Even if such a market does develop, it may not provide sufficient
liquidity or continue for the life of your notes.
BECAUSE THE NOTES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE
EXERCISED INDIRECTLY
Because the notes will be issued in book-entry form, you will be
required to hold your interest in the notes through The Depository Trust Company
in the United States, or Clearstream Banking societe anonyme or the Euroclear
system in Europe or Asia. Transfers of interests in the notes within The
Depository Trust Company, Clearstream Banking societe anonyme or the Euroclear
system must be made in accordance with
S-15
<PAGE>
the usual rules and operating procedures of those systems. So long as the notes
are in book-entry form, you will not be entitled to receive a definitive note or
certificate representing your interest. The notes will remain in book-entry form
except in the limited circumstances described under the caption "Certain
Information Regarding the Securities-Book-Entry Registration" in the
accompanying prospectus. Unless and until the notes cease to be held in
book-entry form, the indenture trustee will not recognize you as a Noteholder
and the owner trustee will not recognize you as a "Securityholder", as that term
is used in the trust agreement. As a result, you will only be able to exercise
the rights of noteholders indirectly through The Depository Trust Company (if in
the United States) and its participating organizations, or Clearstream Banking
societe anonyme and the Euroclear system (in Europe or Asia) and their
participating organizations. Holding the notes in book-entry form could also
limit your ability to pledge your notes to persons or entities that do not
participate in The Depository Trust Company, Clearstream Banking societe anonyme
or the Euroclear system and to take other actions that require a physical
certificate representing the notes.
Interest and principal on the notes will be paid by the trust to The
Depository Trust Company as the record holder of the notes while they are held
in book-entry form. The Depository Trust Company will credit payments received
from the trust to the accounts of its participants which, in turn, will credit
those amounts to noteholders either directly or indirectly through indirect
participants. This process may delay your receipt of principal and interest
payments from the trust.
THE TRUST
GENERAL
The Toyota Auto Receivables 2000-B Owner Trust (the "Trust") is a
Delaware business trust formed pursuant to the trust agreement (the "Trust
Agreement") between Toyota Motor Credit Receivables Corporation, as seller
("TMCRC", or the "Seller"), the Owner Trustee and U.S. Bank Trust National
Association, as Delaware trustee (the "Delaware Trustee"). After its formation,
the Trust will not engage in any activity other than (i) acquiring, holding and
managing the receivables described below under "The Receivables Pool" (the
"Receivables") and the other assets of the Trust and proceeds therefrom, (ii)
issuing the Class A-1 Notes (the "Class A-1 Notes"), Class A-2 Notes (the "Class
A-2 Notes"), Class A-3 Notes (the "Class A-3 Notes"), Class A-4 Notes (the
"Class A-4 Notes" and, together with the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes, the "Class A Notes" or the "Notes") and the
subordinated seller's interest (the "Subordinated Seller's Interest" and,
together with the Notes, the "Securities"), (iii) making payments on the Notes
and the Subordinated Seller's Interest and (iv) engaging in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will initially be capitalized with the Notes and the
Subordinated Seller's Interest. The Trust will use the Notes and the
Subordinated Seller's Interest as consideration for the Receivables transferred
to the Trust by the Seller pursuant to the Sale and Servicing Agreement
described in the "Summary of Terms" (the "Sale and Servicing Agreement"). The
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes are being offered
hereby. TMCRC will sell the Class A-1 Notes to Toyota Motor Credit Corporation
("TMCC") in a separate transaction. TMCRC will deliver the net proceeds from the
sale of the Notes and a subordinated non-recourse promissory note, to TMCC as
consideration for the Receivables transferred to TMCRC by TMCC pursuant to the
Receivables Purchase Agreement described in the "Summary of Terms" (the
"Receivables Purchase Agreement"). The Subordinated Seller's Interest,
evidencing an undivided beneficial interest in the Trust that is fully
subordinate to the interest of the holders of the Notes (i.e., an equity
interest in the Trust), will be retained by TMCRC.
TMCC will be appointed to act as the servicer of the Receivables (the
"Servicer"). TMCC, as Servicer, will service the Receivables pursuant to the
Sale and Servicing Agreement and the Trust Agreement and TMCC will perform
additional administrative services for the Trust, the Owner Trustee and the
Indenture Trustee pursuant to the Administration Agreement. TMCC (or any
successor servicer or successor administrator) will be compensated for such
services as described under "Transfer and Servicing
S-16
<PAGE>
Agreements--Servicing Compensation" in this Prospectus Supplement and
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" in the Prospectus.
Pursuant to agreements between TMCC and the Dealers, each Dealer will
repurchase from TMCC those contracts that do not meet certain representations
and warranties made by the Dealer when sold by the Dealer. These Dealer
repurchase obligations are referred to herein as "Dealer Recourse". These
representations and warranties relate primarily to the origination of the
contracts and the perfection of the security interests in the related financed
vehicles, and do not typically relate to the creditworthiness of the related
obligors or the collectability of the contracts. Although the Dealer agreements
with respect to the Receivables will not be assigned to the Trust, the Sale and
Servicing Agreement will require that any recovery by TMCC in respect of any
Receivable pursuant to any Dealer Recourse be deposited in the Collection
Account in satisfaction of TMCC's repurchase obligations under the Sale and
Servicing Agreement. The sales by the Dealers of installment sales contracts to
TMCC do not generally provide for recourse against the Dealers for unpaid
amounts in the event of a default by an obligor thereunder, other than in
connection with the breach of the foregoing representations and warranties.
The Notes will be secured by and payable from the property of the Trust.
The Trust property includes the Receivables, and certain monies due or received
thereunder on or after the Cutoff Date. The Trust property also includes (i)
such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Sale and Servicing
Agreement, as described below; (ii) security interests in the Financed Vehicles
and any accessions thereto; (iii) the rights to proceeds with respect to the
Receivables under physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be; (iv) the
right to receive proceeds from any Dealer Recourse; (v) the rights of the Seller
under the Receivables Purchase Agreement; (vi) the right to realize upon any
property (including the right to receive future proceeds of liquidation of
Defaulted Receivables) that shall have secured a Receivable and that shall have
been acquired by the Owner Trustee; and (vii) any and all proceeds of the
foregoing.
The Trust's principal offices are in Chicago, Illinois, in care of U.S.
Bank Trust National Association, as Owner Trustee, at the address set forth
below under "--The Owner Trustee".
S-17
<PAGE>
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
the Closing Date, as if the issuance and sale of the Notes and the Subordinated
Seller's Interest had taken place on such date:
Class A-1 Notes............................................ $ 366,759,000
Class A-2 Notes............................................ $ 429,000,000
Class A-3 Notes............................................ $ 407,000,000
Class A-4 Notes............................................ $ 209,038,000
Subordinated Seller's Interest............................. $ 43,664,330
-----------------
Total................................................... $ 1,455,461,330
=================
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
U.S. Bank Trust National Association is the Owner Trustee (the "Owner
Trustee") under the Trust Agreement. Its principal executive office is located
at 111 East Wacker Drive, Chicago, Illinois 60601. U.S. Bank National
Association is the Indenture Trustee (the "Indenture Trustee") under the
Indenture. Its principal executive office is located at 111 East Wacker Drive,
Chicago, Illinois 60601. The Seller and its affiliates may maintain normal
commercial banking relations with the Owner Trustee, the Indenture Trustee and
their affiliates.
THE SELLER AND THE SERVICER
On July 7, 2000, Toyota Financial Services Corporation was
incorporated to oversee Toyota Motor Corporation's worldwide financial services
operations, including those in the United States. On October 1, 2000 Toyota
Financial Services Corporation assumed ownership of TMCC, which previously had
been a subsidiary of Toyota Motor Sales, U.S.A., Inc. All of the outstanding
stock of Toyota Motor Credit Corporation is now owned by Toyota Financial
Services Americas Corporation, a wholly-owned subsidiary of Toyota Financial
Services Corporation.
In April 2000, TMCC completed the national launch of an expanded
tiered pricing program for retail installment sales contracts. The objective of
the expanded program is to better match customer risk with contract rates
charged to allow profitable purchases of a wider range of risk levels.
Implementation of this expanded program is expected to result in both increased
contract yields and increased credit losses in connection with purchases of
higher risk contracts.
Additional information regarding the Seller and the Servicer is set
forth under the captions "The Seller" and "The Servicer" in the Prospectus.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include the
Receivables purchased as of September 1, 2000 (the "Cutoff Date"). The
Receivables were originated by Dealers in accordance with TMCC's requirements
and subsequently purchased by TMCC. The Receivables evidence the indirect
financing made available by TMCC to the related purchasers (the "Obligors") of
the vehicles financed by the Receivables (the "Financed Vehicles"). On or before
the date of initial issuance of the Notes (the "Closing Date"), TMCC will sell
the Receivables to the Seller pursuant to the receivables purchase agreement
(the "Receivables Purchase Agreement") between the Seller and TMCC. The Seller
will, in turn, sell the Receivables to the Trust pursuant to the Sale and
Servicing Agreement. During the term of the Sale and Servicing Agreement,
neither the Seller nor TMCC may substitute any other retail installment sales
contract for any Receivable sold to the Trust.
S-18
<PAGE>
The Receivables in the Receivables Pool are required to meet certain
selection criteria as of the Cutoff Date. Pursuant to such criteria, each
Receivable:
<TABLE>
<S> <C>
o falls within the range of:
remaining principal balance..................................................$250 to $50,000
APRs...............................................................................8% to 15%
original number of monthly payments ("Scheduled Payments") .........................12 to 72
remaining number of Scheduled Payments...............................................4 to 72
o has a maximum number of:
days past due for payment............................................................30 days
Scheduled Payments paid ahead of schedule...............................6 Scheduled Payments
o was, at the time of origination, secured by a new or used automobile or light duty truck;
o was originated in the United States;
o provides for scheduled monthly payments that fully amortize the
amount financed by such Receivable over its original term (except for
minimally different payments in the first or last month in the life
of the Receivable);
o is being serviced by Toyota Motor Credit Corporation;
o to the best knowledge of the Seller, is not due from any obligor who is presently the subject of a
bankruptcy proceeding
or is bankrupt or insolvent;
o does not relate to a vehicle that has been repossessed without reinstatement as of the Cutoff Date; and
o does not relate to a vehicle as to which insurance has been force-placed as of the Cutoff Date.
</TABLE>
Toyota Motor Credit Corporation does not originate retail installment
sales contracts in Hawaii, and retail installment sales contracts originated in
Texas or by a TMCC subsidiary in Puerto Rico will not be included in the Trust.
No selection procedures believed by the Seller to be adverse to Noteholders have
been used in selecting the Receivables.
Based on the addresses of the originating Dealers, the Receivables
have been originated in 48 states. Except in the case of any breach of
representations and warranties by the related Dealer, the Receivables generally
do not provide for recourse against the originating Dealer. The following are
additional characteristics of the Receivables:
<TABLE>
<S> <C>
o as a percentage of the aggregate principal balance, as of the Cutoff Date:
Precomputed Receivables...............................................................15.71%
Simple interest Receivables...........................................................84.29%
New vehicles financed by TMCC.........................................................61.03%
Used vehicles financed by TMCC........................................................38.97%
Receivables representing financing of vehicles manufactured or distributed
by Toyota Motor Corporation or its affiliates........................................91.96%
o as a percentage of the number of Receivables, as of the Cutoff Date:
New vehicles financed by TMCC.........................................................53.30%
Used vehicles financed by TMCC........................................................46.70%
</TABLE>
S-19
<PAGE>
The composition, distribution by annual percentage rate and geographic
distribution of the Receivables as of the Cutoff Date are as set forth in the
following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Total Cutoff Date Principal Balance........................................................ $ 1,455,461,330
Number of Receivables...................................................................... 105,023
Average Cutoff Date Principal Balance...................................................... $ 13,859
Range of Cutoff Date Principal Balances................................................. $ 259 to 49,725
Average Original Amount Financed........................................................... $ 17,225
Range of Original Amount Financed....................................................... $ 1,239 to 70,158
Weighted Average APR(1) ................................................................... 10.34%
Range of APRs........................................................................... 8% to 15%
Weighted Average Original Number of Scheduled Payments(1) ................................. 60.8
Range of Original Number of Scheduled Payments.......................................... 12 to 72
Weighted Average Remaining Number of Scheduled Payments(1) ................................ 49.9
Range of Remaining Number of Scheduled Payments......................................... 5 to 72
--------------
(1) Weighted by Principal Balance as of the Cutoff Date.
</TABLE>
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER OF TOTAL NUMBER OF CUTOFF
OF OF CUTOFF DATE DATE POOL
RANGE OF APRS RECEIVABLES RECEIVABLES PRINCIPAL BALANCE BALANCE
--------------- ------------ -------------- -------------------- -------------
<S> <C> <C> <C> <C>
8.00 - 8.99............................... 15,305 14.57% $ 231,660,086.54 15.92%
9.00 - 9.99............................... 40,603 38.66 542,683,558.70 37.29
10.00 - 10.99............................... 24,179 23.02 331,693,659.36 22.79
11.00 - 11.99............................... 11,287 10.75 155,070,481.37 10.65
12.00 - 12.99............................... 6,790 6.47 98,209,426.96 6.75
13.00 - 13.99............................... 4,535 4.32 63,276,075.18 4.35
14.00 - 14.99............................... 2,213 2.11 31,583,942.87 2.17
15.00....................................... 111 0.11 1,284,099.22 0.09
------------ -------------- -------------------- -------------
Total(1) ............................ 105,023 100.00% $ 1,455,461,330.20 100.00%
============ ============== ==================== =============
--------------
(1) Percentages may not add to 100% due to rounding.
</TABLE>
S-20
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES BY STATE(1)
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF TOTAL CUTOFF DATE PERCENTAGE OF
RECEIVABLES NUMBER OF RECEIVABLES PRINCIPAL BALANCE OF CUTOFF DATE
STATE POOL BALANCE
------- ----------- --------------------- ------------------ --------------
<S> <C> <C> <C> <C>
Alabama..................................... 111 0.11% $ 2,390,993.14 0.16%
Alaska...................................... 104 0.10 1,675,713.56 0.12
Arizona..................................... 2,265 2.16 36,204,331.10 2.49
Arkansas.................................... 1,745 1.66 21,446,417.70 1.47
California.................................. 16,971 16.16 251,441,974.99 17.28
Colorado.................................... 1,224 1.17 19,266,744.45 1.32
Connecticut................................. 2,551 2.43 31,367,619.88 2.16
Delaware.................................... 494 0.47 6,799,044.46 0.47
Florida..................................... 579 0.55 11,516,865.54 0.79
Georgia..................................... 213 0.20 5,004,483.36 0.34
Idaho....................................... 288 0.27 4,421,588.51 0.30
Illinois.................................... 8,349 7.95 114,982,871.79 7.90
Indiana..................................... 1,281 1.22 15,509,912.36 1.07
Iowa........................................ 225 0.21 2,805,351.53 0.19
Kansas...................................... 942 0.90 13,131,523.10 0.90
Kentucky.................................... 621 0.59 9,224,944.96 0.63
Louisiana................................... 2,325 2.21 30,947,651.77 2.13
Maine....................................... 123 0.12 1,376,906.42 0.09
Maryland.................................... 12,141 11.56 169,577,132.17 11.65
Massachusetts............................... 4,907 4.67 57,755,660.64 3.97
Michigan.................................... 1,159 1.10 14,630,360.92 1.01
Minnesota................................... 1,152 1.10 16,498,214.87 1.13
Mississippi................................. 541 0.52 7,188,068.07 0.49
Missouri.................................... 2,303 2.19 30,105,735.16 2.07
Montana..................................... 56 0.05 838,311.44 0.06
Nebraska.................................... 138 0.13 1,935,078.45 0.13
Nevada...................................... 832 0.79 13,659,400.43 0.94
New Hampshire............................... 1,690 1.61 19,160,129.81 1.32
New Jersey.................................. 7,519 7.16 104,219,499.23 7.16
New Mexico.................................. 958 0.91 14,015,050.72 0.96
New York.................................... 6,807 6.48 90,779,465.79 6.24
North Carolina.............................. 390 0.37 8,326,988.46 0.57
North Dakota................................ 7 0.01 129,544.45 0.01
Ohio........................................ 2,243 2.14 31,224,182.27 2.15
Oklahoma.................................... 331 0.32 5,014,744.73 0.34
Oregon...................................... 1,787 1.70 24,174,505.20 1.66
Pennsylvania................................ 4,808 4.58 62,403,040.61 4.29
Rhode Island................................ 672 0.64 7,568,457.53 0.52
South Carolina.............................. 82 0.08 1,610,169.49 0.11
South Dakota................................ 24 0.02 236,904.83 0.02
Tennessee................................... 2,334 2.22 33,165,964.61 2.28
Utah........................................ 597 0.57 9,307,382.45 0.64
Vermont..................................... 507 0.48 5,561,000.06 0.38
Virginia.................................... 6,658 6.34 89,194,086.40 6.13
Washington.................................. 2,703 2.57 40,417,887.84 2.78
West Virginia............................... 187 0.18 2,706,139.20 0.19
Wisconsin................................... 1,007 0.96 13,451,641.79 0.92
Wyoming..................................... 72 0.07 1,091,643.96 0.08
------------ ----------------------------------------- -------------
Total(2) ................................ 105,023 100.00% $ 1,455,461,330.20 100.00%
============ ========================================= =============
Number of States Represented: 48
--------------
(1) Based solely on the addresses of the originating Dealers.
(2) Percentages may not add to 100% due to rounding.
</TABLE>
S-21
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning Toyota Motor Credit
Corporation's experience with respect to its portfolio of new and used
automobile and light duty truck retail installment sales contracts which it has
funded and is servicing, including contracts that have been securitized. The
information set forth below does not include retail installment sales contracts
serviced by an independent finance company conducting business in five
southeastern states of the United States for the years 1996 and 1995.
The data presented in the following tables are for illustrative
purposes only. There is no assurance that Toyota Motor Credit Corporation's
delinquency, credit loss and repossession experience with respect to automobile
and light duty truck retail installment sales contracts in the future, or the
experience of the Trust with respect to the Receivables, will be similar to that
set forth below. The percentages in the tables below have not been adjusted to
eliminate the effect of the growth of TMCC's portfolio. Accordingly, the
delinquency, repossession and net loss percentages would be expected to be
higher than those shown if a group of receivables were isolated at a period in
time and the delinquency, repossession and net loss data showed the activity
only for that isolated group over the periods indicated.
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT JUNE 30, ------------------------------------------------------
2000 1999 1998 1997 1996 1995
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding contracts(1) ................... 872,547 762,199 667,639 605,632 574,439 517,325
Delinquencies as a percentage of contracts
outstanding(2) ..........................
31-60 ................................... 1.40% 1.28% 1.34% 1.79% 1.46% 1.25%
61-90 days............................... 0.12% 0.09% 0.10% 0.16% 0.14% 0.11%
Over 90 days............................. 0.06% 0.06% 0.08% 0.10% 0.08% 0.06%
--------------
(1) Number of contracts outstanding at end of period.
(2) The period of delinquency is based on the number of days payments are
contractually past due. A payment is deemed to be past due if less than
90% of such payment is made on the related due date.
</TABLE>
S-22
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
-------------------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding(1)... $11,180,947 $9,699,078 $8,075,636 $6,795,213 $5,930,100 $4,930,711
Average Principal Amount
Outstanding(2)................. $10,440,013 $8,887,357 $7,435,425 $6,362,657 $5,430,406 $4,843,927
Number of Contracts Outstanding... 872,547 762,199 667,639 605,632 574,439 517,325
Average Number of Contracts
Outstanding(2)................. 817,373 714,919 636,636 590,036 545,882 515,723
Number of Repossessions(3)........ 8,176 9,930 10,906 10,994 8,981 8,438
Number of Repossessions as a
Percent of the Number of
Contracts Outstanding.......... 1.25% 1.30% 1.63% 1.82% 1.56% 1.63%
Number of Repossessions as a
Percent of the Average Number
of Contracts Outstanding....... 1.33% 1.39% 1.71% 1.86% 1.65% 1.64%
Gross Charge-Offs(4).............. $ 39,759 $ 49,942 $ 56,956 $ 51,191 $ 33,017 $ 27,282
Recoveries(5)..................... $ 6,371 $ 8,060 $ 7,898 $ 6,864 $ 6,604 $ 5,957
Net Losses........................ $ 33,388 $ 41,882 $ 49,058 $ 44,327 $ 26,413 $ 21,325
Net Losses as a Percentage of
Principal Amount Outstanding... 0.40%(6) 0.43% 0.61% 0.65% 0.45% 0.43%
Net Losses as a Percentage of
Average Principal Amount
Outstanding.................... 0.43%(6) 0.47% 0.66% 0.70% 0.49% 0.44%
--------------
(1) Principal Amount Outstanding includes payoff amount for simple interest
contracts and net principal amount for precomputed contracts and
unamortized dealer reserve for all contracts.
(2) Average of the principal amount or number of contracts outstanding as of the beginning and end of the indicated periods.
(3) Includes bankrupt repossessions but excludes bankruptcies.
(4) Amount charged off is the net remaining principal balance, including earned but not yet received finance charges,
repossession expenses and unpaid extension fees, less any proceeds from
the liquidation of the related vehicle. Also includes dealer reserve
charge-offs.
(5) Includes all recoveries from post-disposition monies received on
previously charged-off contracts including any proceeds from the
liquidation of the related vehicle after the related charge-off. Also
includes recoveries for dealer reserve charge-offs and dealer reserve
chargebacks.
(6) Annualized.
</TABLE>
USE OF PROCEEDS
The Seller will use the net proceeds from the sale of the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes (approximately $1,042,588,861
in the aggregate), together with the net proceeds from the sale of the Class A-1
Notes to TMCC and a subordinated non-recourse promissory note issued to TMCC to
purchase the Receivables from TMCC pursuant to the Receivables Purchase
Agreement and to fund the Reserve Account.
S-23
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the Notes is set forth under "Risk Factors--PREPAYMENTS ON
RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN REINVESTMENT RISK
TO YOU", "Description of the Notes--Payments of Principal" and "Weighted Average
Lives of the Notes" in this Prospectus Supplement.
Because the rate of payment of principal of each class of Notes
depends primarily on the rate of payment (including prepayments) of the
principal balance of the Receivables, final payment of any class of Notes could
occur significantly earlier or later than their respective Final Scheduled
Payment Dates. Noteholders will bear the risk of being able to reinvest
principal payments on the Notes at yields at least equal to the yield on their
respective Notes. Such reinvestment risk includes the risk that interest rates
may be lower at the time such holders received payments from the Trust than
interest rates would otherwise have been had such prepayments not been made or
had such prepayments been made at a different time. No prediction can be made as
to the rate of prepayments on the Receivables in either stable or changing
interest rate environments.
Principal payments generally will not be made on the Class A-2 Notes
until the Class A-1 Notes have been paid in full. Principal payments generally
will not be made on the Class A-3 Notes until the Class A-2 Notes have been paid
in full, and principal payments generally will not be made on the Class A-4
Notes until the Class A-3 Notes have been paid in full. However, upon the
occurrence and during the continuation of an Event of Default resulting in
acceleration of the Notes, the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes, will be paid principal on a pro rata basis. It is expected
that final payment of each class of Notes will occur on or prior to the
respective Final Scheduled Payment Dates.
Failure to make final payment of any class of Notes on or prior to the
respective Final Scheduled Payment Dates will constitute an Event of Default
under the Indenture, which may accelerate payments in respect of classes that
have not reached their respective Final Scheduled Payment Dates. However, as the
rate of payment of principal of each class of Notes depends on the rate of
payment (including prepayments) of the principal balance of the Receivables,
sufficient funds may not be available to pay each class of Notes in full on or
prior to the respective Final Scheduled Payment Dates. If sufficient funds are
not available, final payment of any class of Notes could occur later than such
dates, and the holders of such Notes could suffer a loss.
The rate of prepayments of the Receivables may be influenced by a
variety of economic, social and other factors, and under certain circumstances
relating to breaches of representations, warranties or covenants, the Seller
and/or the Servicer will be obligated to repurchase Receivables from the Trust.
A higher than anticipated rate of prepayments will reduce the aggregate
principal balance of the Receivables more quickly than expected and thereby
reduce anticipated aggregate interest payments on the Notes. See "Risk
Factors--PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES,
RESULTING IN REINVESTMENT RISK TO YOU."
Noteholders should consider, in the case of Notes purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the Receivables could result in an actual yield that is less than the
anticipated yield and, in the case of Notes purchased at a premium, the risk
that a faster than anticipated rate of principal payments on the Receivables
could result in an actual yield that is less than the anticipated yield.
Certain events that are not entirely within the control of the Trust
may cause Events of Default under the Indenture. Certain Events of Default under
the Indenture will not result in acceleration of the Notes unless a majority of
holders of Notes (excluding for such purposes the outstanding principal amount
of any Notes held of record or beneficially owned by TMCC or any of its
affiliates), voting as a single class, instruct the Indenture Trustee to
accelerate the Notes. The holders of any class of Notes may not have sufficient
voting interests to cause or to prevent an acceleration of the Notes. If any
Event of Default under the Indenture results in the acceleration of the Notes,
the Indenture Trustee may be required to liquidate the assets of the Trust.
Liquidation would be likely to accelerate payment of all Notes that are then
outstanding. If a liquidation occurs close to the date when any class otherwise
would have been paid in full, repayment of such class might be delayed while
liquidation of the assets is occurring. The Trust cannot predict the length of
time that will be
S-24
<PAGE>
required for liquidation of the assets of the Trust to be completed. Even if
liquidation proceeds are sufficient to repay the Notes in full, any liquidation
that causes principal of a class of Notes to be paid before the related Final
Scheduled Payment Date will involve the prepayment risks described in this
Prospectus Supplement under "Risk Factors--PREPAYMENTS ON RECEIVABLES MAY CAUSE
PREPAYMENTS ON THE NOTES, RESULTING IN REINVESTMENT RISK TO YOU".
The proceeds of any liquidation of the assets of the Trust may be
insufficient to pay in full all accrued interest on and principal of each
outstanding class of Notes. Also, acceleration of the Notes as a result of any
Event of Default under the Indenture will cause the priority of payments of all
Class A Notes to change, from pro rata payments of interest followed by
sequential payments of principal, to pro rata payments of interest followed by
pro rata payments of principal to all outstanding classes of Class A Notes.
Therefore, all outstanding Class A Notes will be affected by any shortfall in
liquidation proceeds.
WEIGHTED AVERAGE LIVES OF THE NOTES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables in question are the same size and
amortize at the same rate and that each receivable in each month of its life
will either be paid as scheduled or be prepaid in full. For example, in a pool
of receivables originally containing 10,000 receivables, a 1% ABS rate means
that 100 receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend
on the rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of Notes could occur significantly
earlier than the respective Final Scheduled Payment Dates. Reinvestment risk
associated with early payment of the Notes of any class will be borne
exclusively by the holders of such Notes.
The table captioned "Percent of Initial Note Principal Amount at
Various ABS Percentages" (the "ABS Table") has been prepared on the basis of the
characteristics of the Receivables described under "The Receivables Pool". The
ABS Table assumes that (i) the Receivables prepay in full at the specified
constant percentage of ABS monthly, with no defaults, losses or repurchases,
(ii) each scheduled monthly payment on each Receivable is scheduled to be made
and is made on the last day of each month commencing September 30, 2000 and each
month has 30 days, (iii) the Notes are issued on October 11, 2000 and payments
are made on the Notes on each Payment Date (and each such date is assumed to be
the fifteenth day of each applicable month), and (iv) except as otherwise
indicated, the Servicer exercises its option to purchase the Receivables on the
earliest Payment Date on which such option may be exercised. The hypothetical
pools each have an assumed Cutoff Date of September 1, 2000. The ABS Table
indicates the projected weighted average life of each class of Notes and sets
forth the percent of the initial principal amount of each class of Notes that is
projected to be outstanding after each of the Payment Dates shown at various
constant ABS percentages.
S-25
<PAGE>
The ABS Table also assumes that the Receivables have been aggregated
into hypothetical pools with all of the receivables within each such pool having
the following characteristics and that the level scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, APR,
original term to maturity and remaining term to maturity as of the assumed
cutoff date) will be such that each pool will be fully amortized by the end of
its remaining term to maturity.
<TABLE>
<CAPTION>
REMAINING ORIGINAL
TERM TO TERM TO
NUMBER OF AGGREGATE MATURITY MATURITY
POOL RECEIVABLES PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
------ --------------- --------------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1................................. 2,114 $ 6,027,231.18 9.6415 9 50
2................................. 3,003 14,716,265.02 9.6789 15 54
3................................. 4,637 31,850,662.05 9.7359 21 54
4................................. 5,081 42,621,111.59 9.8312 26 55
5................................. 6,757 70,713,041.63 10.0132 33 53
6................................. 7,987 93,559,764.40 10.1065 39 57
7................................. 21,342 286,094,341.35 10.1350 45 59
8................................. 24,263 356,151,704.38 10.3284 50 60
9................................. 18,591 323,145,200.14 10.4913 58 61
10................................ 6,056 119,239,321.82 10.5603 62 70
11................................ 5,010 107,189,509.44 11.0990 70 72
12................................ 182 4,153,177.20 11.4033 72 72
--------------- ---------------------
105,023 $ 1,455,461,330.20
=============== =====================
</TABLE>
The actual characteristics and performance of the Receivables will
differ from the assumptions used in constructing the ABS Table. The assumptions
used are hypothetical and have been provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the Receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the Receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of Notes.
S-26
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT AT VARIOUS ABS PERCENTAGES
CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
------------------------------ ------------------------------ ------------------------------
PAYMENT DATE 0.50% 1.00% 1.50% 1.80% 0.50% 1.00% 1.50% 1.80% 0.50% 1.00% 1.50% 1.80%
------------- ------- ------- ------- ------- ------- ------- ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/00............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/00............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/00............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
01/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
02/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
03/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
04/15/01............. 100.00 100.00 100.00 94.05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
05/15/01............. 100.00 100.00 93.24 82.17 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
06/15/01............. 100.00 100.00 82.66 70.16 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
07/15/01............. 100.00 91.21 72.40 59.41 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
08/15/01............. 100.00 82.47 62.35 48.50 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
09/15/01............. 92.46 73.84 52.52 37.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/01............. 84.93 65.31 42.90 27.60 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/01............. 77.42 56.89 33.51 17.61 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/01............. 69.94 48.58 24.33 7.92 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
01/15/02............. 62.69 40.56 15.49 0.00 100.00 100.00 100.00 98.49 100.00 100.00 100.00 100.00
02/15/02............. 55.46 32.65 6.86 0.00 100.00 100.00 100.00 88.93 100.00 100.00 100.00 100.00
03/15/02............. 48.25 24.85 0.00 0.00 100.00 100.00 98.37 79.69 100.00 100.00 100.00 100.00
04/15/02............. 41.07 17.16 0.00 0.00 100.00 100.00 89.73 70.75 100.00 100.00 100.00 100.00
05/15/02............. 33.90 9.58 0.00 0.00 100.00 100.00 81.32 62.14 100.00 100.00 100.00 100.00
06/15/02............. 26.75 2.11 0.00 0.00 100.00 100.00 73.16 53.85 100.00 100.00 100.00 100.00
07/15/02............. 19.96 0.00 0.00 0.00 100.00 94.75 65.37 45.89 100.00 100.00 100.00 100.00
08/15/02............. 13.19 0.00 0.00 0.00 100.00 87.38 57.80 38.23 100.00 100.00 100.00 100.00
09/15/02............. 6.44 0.00 0.00 0.00 100.00 80.13 50.46 30.87 100.00 100.00 100.00 100.00
10/15/02............. 0.00 0.00 0.00 0.00 99.70 73.00 43.34 23.82 100.00 100.00 100.00 100.00
11/15/02............. 0.00 0.00 0.00 0.00 92.63 65.98 36.45 17.06 100.00 100.00 100.00 100.00
12/15/02............. 0.00 0.00 0.00 0.00 85.96 59.36 29.93 10.62 100.00 100.00 100.00 100.00
01/15/03............. 0.00 0.00 0.00 0.00 79.32 52.85 23.61 4.45 100.00 100.00 100.00 100.00
02/15/03............. 0.00 0.00 0.00 0.00 72.69 46.46 17.51 0.00 100.00 100.00 100.00 97.22
03/15/03............. 0.00 0.00 0.00 0.00 66.09 40.17 11.63 0.00 100.00 100.00 100.00 86.33
04/15/03............. 0.00 0.00 0.00 0.00 59.52 34.01 5.96 0.00 100.00 100.00 100.00 76.01
05/15/03............. 0.00 0.00 0.00 0.00 52.96 27.96 0.53 0.00 100.00 100.00 100.00 66.26
06/15/03............. 0.00 0.00 0.00 0.00 46.43 22.03 0.00 0.00 100.00 100.00 90.88 57.11
07/15/03............. 0.00 0.00 0.00 0.00 40.42 16.57 0.00 0.00 100.00 100.00 81.50 0.00
08/15/03............. 0.00 0.00 0.00 0.00 34.43 11.22 0.00 0.00 100.00 100.00 72.53 0.00
09/15/03............. 0.00 0.00 0.00 0.00 28.46 5.98 0.00 0.00 100.00 100.00 63.97 0.00
10/15/03............. 0.00 0.00 0.00 0.00 22.51 0.85 0.00 0.00 100.00 100.00 55.83 0.00
11/15/03............. 0.00 0.00 0.00 0.00 16.59 0.00 0.00 0.00 100.00 91.89 0.00 0.00
12/15/03............. 0.00 0.00 0.00 0.00 10.69 0.00 0.00 0.00 100.00 82.36 0.00 0.00
01/15/04............. 0.00 0.00 0.00 0.00 5.36 0.00 0.00 0.00 100.00 73.75 0.00 0.00
02/15/04............. 0.00 0.00 0.00 0.00 0.05 0.00 0.00 0.00 100.00 65.35 0.00 0.00
03/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 89.81 57.15 0.00 0.00
04/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 79.57 49.17 0.00 0.00
05/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 69.37 0.00 0.00 0.00
06/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 59.22 0.00 0.00 0.00
07/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 51.88 0.00 0.00 0.00
08/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average
Life (Years)(1)..... 1.45 1.22 1.00 0.88 2.69 2.36 2.00 1.78 3.72 3.44 2.98 2.66
Weighted Average
Life (Years)(1)(2).. 1.45 1.22 1.00 0.88 2.69 2.36 2.00 1.78 3.88 3.58 3.16 2.83
--------------
(1) The weighted average life of a Note is determined by (x) multiplying the
amount of each principal payment on a Note by the number of years from
the date of issuance of the Note to the related Payment Date, (y) adding
the results and (z) dividing the sum by the original principal amount of
the Note.
(2) This calculation assumes that the Servicer does not exercise its option to
purchase the Receivables.
</TABLE>
This table has been prepared based on the assumptions described above
under "Weighted Average Lives of the Notes" (including the assumptions regarding
the characteristics and performance of the Receivables, which will differ from
the actual characteristics and performance thereof) and should be read in
conjunction therewith.
S-27
<PAGE>
POOL FACTORS AND TRADING INFORMATION
The "Pool Factor" with respect to any class of Notes will be a
seven-digit decimal indicating the principal amount of such class of Notes as of
the close of business on the Payment Date in such month as a fraction of the
respective principal amount thereof as of the Closing Date. The Servicer will
compute each Pool Factor each month. Each Pool Factor will initially be
1.0000000 and thereafter will decline to reflect reductions in the principal
amount of each class of Notes. Each such principal amount will be computed by
allocating payments in respect of the Receivables to principal and interest
using the actuarial method for the Precomputed Receivables and using the simple
interest method for the Simple Interest Receivables. The portion of the
principal amount of any class of Notes for a given month allocable to a
Noteholder can be determined by multiplying the original denomination of the
holder's Note by the related Pool Factor for that month.
Pursuant to the Indenture, the Noteholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the related Pool Factors and various other items of information pertaining to
the Trust. Noteholders during each calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities--Reports to Securityholders" in
the Prospectus.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a
form of which has been filed as an exhibit to the Registration Statement. A copy
of the Indenture will be filed with the Securities and Exchange Commission (the
"SEC") following the issuance of the Notes. The following summary describes
certain terms of the Notes and the Indenture. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Notes and the Indenture. Where particular provisions
or terms used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Notes of
any given series and the related Indenture set forth in the Prospectus, to which
description reference is hereby made.
PAYMENTS OF INTEREST
The Class A Notes will constitute Fixed Rate Securities, as such term
is defined under "Certain Information Regarding the Securities--Fixed Rate
Securities" in the Prospectus. Interest on the principal balances of the Class A
Notes will accrue at the respective per annum interest rates set forth on the
front cover of this prospectus supplement (each, an "Interest Rate") and will be
payable to the related Noteholders monthly on the fifteenth of each month (or,
if such date is not a Business Day, on the next succeeding Business Day) (each
such date, a "Payment Date") commencing October 16, 2000. A "Business Day" is
any day except a Saturday or Sunday, or a day on which banks in New York, San
Francisco or Chicago are closed.
Interest will accrue for the period (i) with respect to the Class A-1
Notes, from and including the Closing Date (in the case of the first Payment
Date) or from and including the most recent Payment Date on which interest has
been paid to but excluding the following Payment Date and (ii) with respect to
the Class A-2, Class A-3 and Class A-4 Notes, from and including the Closing
Date (in the case of the first Payment Date) or from and including the fifteenth
day of the most recent calendar month during which interest was paid preceding
each Payment Date to but excluding the fifteenth day of the following calendar
month (each an "Interest Period").
Interest on the Class A-1 Notes will be calculated on the basis of the
actual days elapsed during the Interest Period and a 360-day year. Interest on
the Class A-2, Class A-3 and Class A-4 Notes will be
S-28
<PAGE>
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest accrued as of any Payment Date but not paid on such Payment Date will
be due on the next Payment Date, together with interest on such amount at the
applicable Interest Rate (to the extent lawful).
Interest payments on the Notes will generally be made from funds on
deposit in the Collection Account with respect to the Collection Period
preceding the related Payment Date (including any Advances made by the Servicer
and any funds deposited therein from the Reserve Account or Payments Ahead
withdrawn for application with respect to such Collection Period) remaining
after reimbursement of Advances made by the Servicer and payment of the
Servicing Fee. Interest payments on all classes of Class A Notes will have the
same priority. See "Payments to Noteholders" in this Prospectus Supplement.
Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Class A Notes,
in which case each class of Class A Noteholders will receive their ratable share
(based upon the aggregate amount of such amounts due to such class of
Noteholders) of the aggregate amount available to be paid in respect of interest
on the Class A-1, Class A-2, Class A-3 and Class A-4 Notes on such Payment Date.
See "Payments to Noteholders" and "Subordination; Reserve Account" in this
Prospectus Supplement.
An Event of Default will occur if the full amount of interest due on
any class of Class A Notes is not paid within five days of the related Payment
Date. Upon such an Event of Default, the Indenture Trustee may accelerate the
maturity of the Notes and take actions to liquidate the assets of the Trust. See
"Description of Notes--The Indenture--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF
DEFAULT" in the prospectus.
PAYMENTS OF PRINCIPAL
Principal payments generally will be made to the Noteholders on each
Payment Date commencing October 16, 2000, in an aggregate amount equal to the
amount deposited in the Principal Distribution Account on such Payment Date. See
"Payments to Noteholders" in this Prospectus Supplement. Principal payments
generally will be made to holders of each class of Class A Notes in sequential
order until the principal balance of each such class is reduced to zero.
Following and during the continuance of an Event of Default that results in
acceleration of the Notes, principal payments to holders of all classes of Class
A Notes will be made on a pro rata basis, based on their outstanding principal
balances.
The principal balance of each class of Notes will be due on the Final
Scheduled Payment Date indicated on the front cover of this Prospectus
Supplement (the "Class A-1 Final Scheduled Payment Date," the "Class A-2 Final
Scheduled Payment Date", the "Class A-3 Final Scheduled Payment Date" and the
"Class A-4 Final Scheduled Payment Date", respectively). The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Final Scheduled Payment Dates set forth above
based on a variety of factors, including those described under "Prepayment and
Yield Considerations" and "Weighted Average Lives of the Notes" in this
Prospectus Supplement and in the Prospectus.
INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Upon an "Event of
Default" (which term is defined in the Prospectus), the Noteholders will have
the rights set forth in the Prospectus under "Description of the Notes--The
Indenture--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT." The Indenture
Trustee may sell the Receivables subject to certain conditions set forth in the
Indenture following an Event of Default under the Indenture, including a default
in the payment of any unpaid principal of a class of Notes on its Final
Scheduled Payment Date or a default for five days or more in the payment of any
interest on any Note. In the case of an Event of Default not involving any such
default in payment, the Indenture Trustee is prohibited from selling the
Receivables unless one of the conditions set forth in the Prospectus under
"Description of the Notes--The Indenture--EVENTS OF DEFAULT, RIGHTS UPON EVENT
OF DEFAULT" has been satisfied. In the event of a sale of the
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Receivables by the Indenture Trustee following an Event of Default, the
Noteholders will receive notice and an opportunity to submit a bid in respect of
such sale.
NOTICES
Noteholders of record will be notified in writing by the Indenture
Trustee of any Event of Default or termination of, or appointment of a successor
to, the Servicer promptly upon a Responsible Officer (as defined in the Sale and
Servicing Agreement) obtaining actual knowledge thereof. While Notes are held in
book-entry form, these notices will be delivered by the Indenture Trustee to
DTC. If Notes are issued in definitive form, these notices will mailed to the
addresses provided to the Indenture Trustee by the holders of record as of the
relevant record date. Such notices will be deemed to have been given as of the
date of delivery to DTC or mailing.
PRESCRIPTION
In the event that any Noteholder shall not surrender its Notes for
retirement within six months after the date specified in the written notice
given by the Indenture Trustee of the date for final payment thereof, the
Indenture Trustee shall give a second written notice to the remaining
Noteholders to surrender their Notes for retirement and receive the final
payment with respect thereto. If within one year after such second notice any
Notes shall not have been surrendered, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Noteholders concerning surrender of their Notes, and the cost thereof shall be
paid out of the funds and other assets that remain subject to the Indenture. Any
funds remaining unclaimed after exhaustion of such remedies shall be paid by the
Indenture Trustee to a charity specified in the Indenture.
GOVERNING LAW
The Indenture and Notes are governed by and shall be construed in
accordance with the laws of the State of New York applicable to agreements made
in and to be performed wholly within such jurisdiction.
PAYMENTS TO NOTEHOLDERS
On the second Business Day preceding each Payment Date (each, a
"Determination Date"), the Servicer will inform the Owner Trustee of, among
other things, the amount of funds collected on or in respect of the Receivables,
the amount of Advances to be made by and reimbursed to the Servicer and the
Servicing Fee and other servicing compensation payable to the Servicer, in each
case with respect to the immediately preceding Collection Period. On or prior to
each Determination Date, the Servicer shall also determine the Principal
Distribution Amount and, based on the available funds and other amounts
available for payment on the related Payment Date as described below, the amount
to be paid to the Noteholders.
On or before each Payment Date, the Indenture Trustee will cause
Payments Ahead previously deposited in the Payahead Account or held by the
Servicer in respect of the related Collection Period to be transferred to the
Collection Account.
The Owner Trustee will make payments to the Noteholders out of the
amounts on deposit in the Collection Account. The amounts to be distributed to
the Noteholders "Payments to Noteholders" will be determined in the manner
described below.
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CALCULATION OF AVAILABLE COLLECTIONS
The amount of funds available for payment on a Payment Date (without
taking account of amounts held in the Reserve Account) ("Available Collections")
will generally be the sum of the following amounts with respect to the
Collection Period preceding such Payment Date or, in the case of the first
payment date, the period from September 1, 2000 through the last day of the
calendar month preceding such payment date:
(i) all collections on or in respect of the Receivables other than
Defaulted Receivables (including Payments Ahead being applied in
such Collection Period but excluding Payments Ahead to be
applied in one or more future Collection Periods);
(ii) all proceeds of the liquidation of Defaulted Receivables, net of
expenses incurred by the Servicer in accordance with its
customary servicing procedures in connection with such
liquidation, including amounts received in subsequent Collection
Periods ("Net Liquidation Proceeds");
(iii) all Advances made by the Servicer; and
(iv) all Warranty Purchase Payments with respect to Warranty
Receivables repurchased by the Seller and Administrative
Purchase Payments with respect to Administrative Receivables
purchased by the Servicer, in each case in respect of such
Collection Period.
Available Collections on any Payment Date will exclude (i) amounts
received on a particular Receivable (other than a Defaulted Receivable) to the
extent that the Servicer has previously made an unreimbursed Advance in respect
of such Receivable, (ii) Net Liquidation Proceeds with respect to a particular
Receivable to the extent of unreimbursed Advances in respect of such Receivable,
(iii) recoveries from collections with respect to Advances that the Servicer has
determined are unlikely to be repaid, (iv) late fees, extension fees and other
administrative fees and expenses or similar charges collected by the Servicer
and (v) any rebates of unearned interest charges with respect to Precomputed
Receivables.
A "Defaulted Receivable" will be a Receivable (other than an
Administrative Receivable or a Warranty Receivable) as to which (a) all or any
part of a Scheduled Payment is 150 or more days past due and the Servicer has
not repossessed the related Financed Vehicle or (b) the Servicer has, in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related Financed Vehicle or repossessed and held the related Financed Vehicle in
its repossession inventory for 90 days, whichever occurs first. The principal
balance of any Receivable that becomes a Defaulted Receivable will be deemed to
be zero as of the date it becomes a Defaulted Receivable.
CALCULATION OF PRINCIPAL DISTRIBUTION AMOUNT
"Principal Distribution Amount" means, with respect to any Payment
Date, an amount equal to the excess, if any, of (a) the Pool Balance as of the
end of the Collection Period preceding the related Collection Period, or as of
the Cut-off Date, in the case of the first Collection Period, over (b) the Pool
Balance as of the end of the related Collection Period, together with any
portion of the Principal Distribution Amount that was to be deposited into the
Principal Distribution Account on any prior Payment Date but was not because
sufficient funds were not available to make such deposit; provided, however,
that the Principal Distribution Amount shall not exceed the outstanding
principal amount of all the Notes on such Payment Date (prior to giving effect
to any principal payments made on such Payment Date); and provided, further,
that (i) the Principal Distribution Amount on the Class A-1 Final Scheduled
Payment Date shall not be less than the amount that is necessary to reduce the
outstanding principal amount of the Class A-1 Notes to zero; (ii) the Principal
Distribution Amount on the Class A-2 Final Scheduled Payment Date shall not be
less than the amount that is necessary to reduce the outstanding principal
amount of the Class A-2 Notes to zero; (iii) the Principal Distribution Amount
on the Class A-3 Final Scheduled Payment Date shall not be less than the amount
that is necessary to reduce the outstanding principal amount of the Class A-3
Notes to zero; and (iv) the Principal Distribution Amount on the Class A-4 Final
Scheduled Payment Date shall not be less than the amount that is necessary to
reduce the outstanding principal amount of the Class A-4 Notes to zero.
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PAYMENTS
On each Payment Date, from Available Collections for the related
Collection Period and amounts withdrawn from the Reserve Account, the Trust will
make the following payments in the following order of priority:
1. SERVICING FEE--the Servicing Fee payable to the Servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and
unpaid interest on the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes, together with any amounts that were to be paid
pursuant to this clause (2) on any prior Payment Date but were
not paid because sufficient funds were not available to make such
payment (with interest accrued on such unpaid amounts at the rate
or rates at which interest accrued on the related Notes during
the relevant accrual period or periods);
3. ALLOCATION OF PRINCIPAL--to the Principal Distribution Account,
the Principal Distribution Amount;
4. RESERVE ACCOUNT DEPOSIT--to the Reserve Account, the amount, if
any, necessary to cause the balance of funds therein to equal the
required balance described under "Reserve Account" below; and
5. EXCESS AMOUNTS--any remaining amounts in the Collection Account
will be distributed to the Seller as payment on the Subordinated
Seller's Interest.
On each Payment Date, from the amounts deposited into the Principal
Distribution Account from the allocations of principal described in clause (3)
above, the Trust will pay principal of the Notes in the following priority:
1. to the Class A-1 Notes until an amount equal to the principal
balance thereof has been paid;
2. to the Class A-2 Notes until an amount equal to the principal
balance thereof has been paid;
3. to the Class A-3 Notes until an amount equal to the principal
balance thereof has been paid;
4. to the Class A-4 Notes, until an amount equal to the principal
balance thereof has been paid;
5. after the Notes are paid in full, to the Subordinated Seller's
Interest any remaining funds.
PAYMENTS AFTER OCCURRENCE OF EVENT OF DEFAULT AND ACCELERATION
After an Event of Default that results in an acceleration of the
Notes, the Trust will make the following payments in the following order of
priority from Available Collections for the related Collection Period and
amounts withdrawn from the Reserve Account:
1. SERVICING FEE--the Servicing Fee payable to the Servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and
unpaid interest on the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes, together with any amounts that were to be paid
pursuant to this clause (2) on any prior Payment Date but were
not paid because sufficient funds were not available to make such
payment (with interest accrued on such unpaid amounts at the rate
or rates at which interest accrued on the related Notes during
the relevant accrual period or periods);
3. ALLOCATION OF PRINCIPAL--to all Class A Noteholders on a pro rata
basis, until the outstanding principal balance of each such class
of Notes has been reduced to zero;
4. EXCESS AMOUNTS--any remaining amounts in the Collection Account
will be distributed to the Seller as payment on the Subordinated
Seller's Interest.
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SUBORDINATION; RESERVE ACCOUNT
The rights of the Noteholders to receive payments with respect to the
Receivables will be subordinated to the rights of the Servicer to receive the
Servicing Fee, any additional servicing compensation as described
under "Transfer and Servicing Agreements--Servicing Compensation" in this
Prospectus Supplement and the reimbursement of Advances.
SUBORDINATION
As long as any Notes remain outstanding, payments on the Subordinated
Seller's Interest will be subordinated to payments of interest and principal on
the Notes.
RESERVE ACCOUNT
The Noteholders will have the benefit of the Reserve Account. The
Reserve Account will be a segregated trust account held by the Indenture
Trustee. Any amounts held on deposit in the Reserve Account will be owned by the
Seller, subject to the right of the Indenture Trustee to withdraw such amounts
as described below, and any investment earnings thereon will be taxable to the
Seller for federal income tax purposes. On the Closing Date, the Seller will
deposit $3,638,653 (0.25% of the outstanding principal balance of the
Receivables as of the Cutoff Date) into the Reserve Account for the Trust.
On each Payment Date, if Available Collections are insufficient to pay
the first three items listed under "Payments to Noteholders--Payments" above,
the Indenture Trustee will withdraw funds (if available) from the Reserve
Account to pay those amounts.
If the principal balance of a class of Notes is not paid in full on
the related Final Scheduled Payment Date, the Indenture Trustee will withdraw
amounts from the Reserve Account (if available) to pay that class in full.
The amount required to be on deposit in the Reserve Account at the
close of business on any Payment Date (the "Specified Reserve Account Balance")
will be the greater of 0.75% of the outstanding principal balance of the
receivables as of the end of the related Collection Period or (b) $7,277,307
(0.50% of the outstanding principal balance of the Receivables as of the Cutoff
Date); provided however, that if, on any Payment Date (x) the average of the
Charge-off Rates for the three preceding Collection Periods exceeds 1.25% or (y)
the average of the Delinquency Percentages for the three preceding Collection
Periods exceeds 1.25%, the Specified Reserve Account Balance will be the
greatest of (a) 0.75% of the outstanding principal balance of the receivables as
of the end of the related Collection Period, (b) $7,277,307 (0.50% of the
outstanding principal balance of the Receivables as of the Cutoff Date) and (c)
5.50% of the Class A Note Balance as of such Payment Date (after giving effect
to any principal payments made on the Notes on such Payment Date); provided
further, that the Specified Reserve Account Balance with respect to any date
shall not exceed the sum of the Class A Note Balance as of the preceding Payment
Date (after giving effect to any principal payments made on the Notes on such
preceding Payment Date).
As of any Payment Date, the amount of funds actually on deposit in the
Reserve Account may, in certain circumstances, be less than the Specified
Reserve Account Balance. On each Payment Date, the Trust will, to the extent
available, deposit the amount, if any, necessary to cause the balance of funds
on deposit in the Reserve Account to equal the Specified Reserve Account Balance
to the extent set forth above under "Payments to Noteholders".
The "Charge-off Rate" with respect to a Collection Period will equal
the Aggregate Net Losses with respect to the Receivables that become Defaulted
Receivables during that Collection Period expressed, on an annualized basis, as
a percentage of the average of (i) the Pool Balance on the last day of the
immediately preceding Collection Period and (ii) the Pool Balance on the last
day of such Collection Period.
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The "Aggregate Net Losses" with respect to a Collection Period will
equal the principal balance of all Receivables newly designated during such
Collection Period as Defaulted Receivables minus the sum of (x) Net Liquidations
Proceeds collected during such Collection Period with respect to all Defaulted
Receivables and (y) the portion of amounts subsequently received in respect of
Receivables liquidated in prior Collection Periods specified in the Sale and
Servicing Agreement.
The "Delinquency Percentage" with respect to a Collection Period will
equal (a) the number of all outstanding Receivables 61 days or more delinquent
(after taking into account permitted extensions) as of the last day of such
Collection Period (excluding Receivables as to which the Financed Vehicle has
been liquidated during that Collection Period), determined in accordance with
the Servicer's normal practices, plus (b) the number of repossessed Financed
Vehicles that have not been liquidated (to the extent the related Receivable is
not otherwise reflected in clause (a) above), expressed as a percentage of the
aggregate number of Current Receivables on the last day of such Collection
Period.
A "Current Receivable" will be a Receivable that is not a Defaulted
Receivable or a Liquidated Receivable. A "Liquidated Receivable" will be a
Receivable that has been the subject of a Prepayment in full or otherwise has
been paid in full or, in the case of a Defaulted Receivable, a Receivable as to
which the Servicer has determined that the final amounts in respect thereof have
been paid.
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each of Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. (each a
"Rating Agency") to approve a formula for determining the Specified Reserve
Account Balance that is different from those described above or make certain
changes with respect to the manner by which the Reserve Account is funded. If
each Rating Agency delivers a letter to the Owner Trustee to the effect that the
use of any such new formulation will not result in a qualification, reduction or
withdrawal of its then-current rating of any class of Notes, then the Specified
Reserve Account Balance will be determined in accordance with such new formula.
The Sale and Servicing Agreement will accordingly be amended, without the
consent of any Noteholder, to reflect such new calculation.
As of the close of business on any Payment Date on which the amount on
deposit in the Reserve Account is greater than the Specified Reserve Account
Balance for such Payment Date, subject to certain limitations, the Servicer will
instruct the Indenture Trustee to release and distribute such excess to the
Seller. Upon any distribution to the Seller of amounts from the Reserve Account,
the Noteholders will have no rights in, or claims to, such amounts.
Funds on deposit in the Reserve Account may be invested in Eligible
Investments. Investment income on monies on deposit in the Reserve Account will
not be available for payment to Noteholders or otherwise subject to any claims
or rights of the Noteholders and will be paid to the Seller. Any loss on such
investments will be charged to the Reserve Account.
After the payment in full, or the provision for such payment, of (i)
all accrued and unpaid interest on the Notes and (ii) the outstanding principal
balance of the Notes, any funds remaining on deposit in the Reserve Account,
subject to certain limitations, will be paid to the Seller.
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TRANSFER AND SERVICING AGREEMENTS
THE TRANSFER AND SERVICING AGREEMENTS
The description of the terms of the Indenture, Sale and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements") in this Prospectus Supplement does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements. Forms
of the Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement. Copies of the Transfer and Servicing Agreements will be
filed with the SEC following the issuance of the Notes. Any description of the
Transfer and Servicing Agreements herein supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Transfer and Servicing Agreements set forth in the Prospectus,
to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables
from the Seller to the Trust on the Closing Date pursuant to the Sale and
Servicing Agreement is set forth under "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables" in the Prospectus.
ACCOUNTS
In addition to the accounts referred to under "Description of the
Transfer and Servicing Agreements--Accounts" in the Prospectus, the Seller will
also establish and will maintain with the Indenture Trustee the Reserve Account
for the benefit of the Noteholders. The Reserve Account will not be an asset of
the Trust. The Servicer will establish the Payahead Account with the Indenture
Trustee for the benefit of the Noteholders and the Seller as holder of the
Subordinated Seller's Interest. The Payahead Account will not be an asset of the
Trust. The Indenture Trustee will establish an administrative subaccount within
the Collection Account entitled the Principal Distribution Account (the
"Principal Distribution Account"), for the benefit of the Noteholders.
SERVICING COMPENSATION
The Servicing Fee with respect to each Collection Period will be
one-twelfth of 1.00% (the "Servicing Fee Rate") of the outstanding principal
balance of the Receivables as of the first day of the related Collection Period
or, in the case of the first Payment Date, the outstanding principal balance of
the Receivables as of the Cutoff Date and will be paid from Available
Collections as described under "Payments to Noteholders" in this Prospectus
Supplement. The Servicer will be entitled to collect and retain as additional
servicing compensation in respect of each Collection Period any late fees,
extension fees and any other administrative fees and expenses or similar charges
collected during such Collection Period, plus any investment earnings or
interest earned during such Collection Period from the investment of monies on
deposit in the Collection Account or Payahead Account. See "--Collections" below
and "Description of the Transfer and Servicing Agreements--Servicing
Compensation and Payment of Expenses" in the Prospectus.
COLLECTIONS
The Servicer generally may retain all payments on or in respect of the
Receivables received from Obligors and all proceeds of Receivables collected
during each Collection Period without segregation in its own accounts until
deposited in the Collection Account on the related Payment Date. However, if (i)
TMCC ceases to be the Servicer, (ii) an Event of Default exists and is
continuing under the Indenture or (iii) the short-term unsecured debt of TMCC
ceases to be rated at least P-1 by Moody's Investors Service, Inc. and A-1 by
Standard & Poor's Ratings Services, and alternative arrangements acceptable to
the Rating Agencies are not made, the Servicer will deposit all such payments
and proceeds into the Collection Account not later than two
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Business Days after receipt. Pending deposit into the Collection Account, the
Servicer may invest collections at its own risk and for its own benefit. Such
amounts will not be segregated from its own funds. The Servicer, at its own risk
and for its own benefit, may instruct the Owner Trustee to invest amounts held
in the Collection Account or Payahead Account in Eligible Investments from the
time deposited until the related Payment Date. The Seller, at its own risk and
for its own benefit, may instruct the Indenture Trustee to invest amounts held
in the Reserve Fund in Eligible Investments from each Payment Date (or the
Closing Date) to the next Payment Date. The Seller or the Servicer, as the case
may be, will remit the aggregate Warranty Purchase Payments and Administrative
Purchase Payments of any Receivables to be purchased from the Trust into the
Collection Account on or before the Business Day immediately preceding the
related Payment Date. See "Description of the Transfer and Servicing
Agreements--Collections" in the Prospectus.
"Eligible Investments" will be specified in the Transfer and Servicing
Agreements and will be limited to investments which meet the criteria of each
Rating Agency from time to time as being consistent with its then-current
ratings of the Notes.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or certain other similar fees
or charges will be applied first to any outstanding Advances made by the
Servicer with respect to such Receivable, and then to the related Scheduled
Payment. Any collections on or in respect of a Receivable remaining after such
applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
in respect of such Receivable (each, a "Prepayment"). All other Excess Payments
in respect of Precomputed Receivables will be held by the Servicer (or if any of
the conditions in clauses (i) through (iii) in the second preceding paragraph is
not satisfied, deposited in the Payahead Account), as a Payment Ahead. See
"Description of the Transfer and Servicing Agreements--Collections" in the
Prospectus.
ADVANCES
The Servicer will be required to make Advances in respect of Scheduled
Payments that are not received in full by the end of the month in which they are
due to the extent described under "Description of the Transfer and Servicing
Agreements--Advances" in the Prospectus, unless the Servicer determines, in its
sole discretion, that such Advances will not be recoverable from certain
collections available to reimburse such Advances. Under certain circumstances,
if the Servicer determines that reimbursement from such collections is unlikely,
the Servicer will be entitled to recover unreimbursed Advances from collections
on or in respect of other Receivables. See "Description of the Transfer and
Servicing Agreements--Advances" in the Prospectus.
The Servicer will make all Advances by depositing into the Collection
Account an amount equal to the aggregate of the Precomputed Advances and Simple
Interest Advances due in respect of a Collection Period on the Business Day
immediately preceding the related Payment Date.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to
remit collections daily as described in "--Collections" above, the Servicer will
be permitted to make the deposit of collections, aggregate Advances and amounts
deposited in respect of purchases of Receivables by the Seller or the Servicer
for or with respect to the related Collection Period net of payments to be made
to the Servicer with respect to such Collection Period. The Servicer, however,
will account to the Owner Trustee as if all of the foregoing deposits and
payments were made individually. See "Description of the Transfer and Servicing
Agreements--Net Deposits" in the Prospectus.
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OPTIONAL PURCHASE
The Notes will be redeemed in whole, but not in part, on any Payment
Date on which the Servicer exercises its option to purchase the Receivables. The
Servicer, or any successor to the Servicer, may purchase the Receivables when
the outstanding principal balance of the Receivables shall have declined to 10%
or less of the outstanding principal balance of the Receivables as of the Cutoff
Date, as described in the Prospectus under "Description of The Transfer and
Servicing Agreements--Termination". The "Redemption Price" for the outstanding
Notes will be equal to the unpaid principal amount of the outstanding Notes plus
accrued and unpaid interest thereon.
REMOVAL OF SERVICER
The Indenture Trustee or the holders of at least 51% of the
outstanding principal amount of the Class A Notes (excluding for such purposes
the outstanding principal amount of any Notes held of record or beneficially
owned by TMCC or any of its affiliates), voting as a single class, may terminate
the rights and obligations of the Servicer under the Sale and Servicing
Agreement, or waive any Servicer Default without the consent of any holder of
the Subordinated Seller's Interest, if a Servicer Default occurs.
Upon receipt of notice of the occurrence of a Servicer default, the
Indenture Trustee shall give notice thereof to the Rating Agencies.
For more information regarding the removal of the Servicer, see
"Description of the Transfer and Servicing Agreements--Rights Upon Servicer
Default" in the Prospectus.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
U.S. Bank Trust National Association will be the Owner Trustee under
the Trust Agreement. As a matter of Delaware law, the Trust will be viewed as a
separate legal entity, distinct from the Owner Trustee, and the Trust will be
viewed as the issuer of the Subordinated Seller's Interest. U.S. Bank National
Association will be the Indenture Trustee under the Indenture. The Owner
Trustee, the Indenture Trustee and any of their respective affiliates may hold
the Notes in their own names or as pledges. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Owner Trustee acting
jointly (or in some instances, the Owner Trustee acting alone) will have the
power to appoint co-trustees or separate trustees of all or any part of the
Trust. In the event of such an appointment, all rights, powers, duties and
obligations conferred or imposed upon the Owner Trustee by the Sale and
Servicing Agreement and the Trust Agreement will be conferred or imposed upon
the Owner Trustee and each such separate trustee or co-trustee jointly, or, in
any jurisdiction in which the Owner Trustee will be incompetent or unqualified
to perform certain acts, singly upon such separate trustee or co-trustee who
will exercise and perform such rights, powers, duties and obligations solely at
the direction of the Owner Trustee.
The Owner Trustee and the Indenture Trustee may resign at any time
and, under the Trust Agreement, U.S. Bank Trust National Association will be
required to resign as Owner Trustee if any Event of Default under the Indenture
occurs. If the Owner Trustee or Indenture Trustee resigns, the Servicer will be
obligated to appoint a successor thereto. TMCC as administrator under the
Administration Agreement may also remove the Owner Trustee or the Indenture
Trustee if either ceases to be eligible to continue as such under the Trust
Agreement or the Indenture, as the case may be, becomes legally unable to act
(including, but not limited to, pursuant to the provisions of the Trust
Indenture Act in connection with the occurrence of an Event of Default) or
becomes insolvent. In such circumstances, the Servicer will be obligated to
appoint a successor Owner Trustee or Indenture Trustee, as applicable. Any
resignation or removal of the Owner Trustee or Indenture Trustee and appointment
of a successor thereto will not become effective until acceptance of the
appointment by such successor.
The Trust Agreement will provide that the Servicer will pay the fees
and expenses of the Owner Trustee and the Indenture Trustee in connection with
their duties under the Trust Agreement and Indenture,
S-37
<PAGE>
respectively. The Trust Agreement and Indenture will further provide that the
Owner Trustee and Indenture Trustee will be entitled to indemnification by TMCC
for, and will be held harmless against, any loss, liability or expense incurred
by the Owner Trustee or Indenture Trustee not resulting from its own willful
misfeasance, bad faith or negligence (other than by reason of a breach of any of
its representations or warranties to be set forth in the Trust Agreement or
Indenture, as the case may be).
DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee will make no representations as to the validity or
sufficiency of the Trust Agreement, the Notes or of any Receivables or related
documents. The Owner Trustee will not be accountable for the use or application
by the Seller or the Servicer of any funds paid to the Seller or the Servicer in
respect of the Notes or the Receivables, or the investment of any monies by the
Servicer before such monies are deposited into the Collection Account or
Payahead Account. The Owner Trustee will not independently verify the
Receivables. If no Event of Default has occurred and is continuing, the Owner
Trustee will be required to perform only those duties specifically required of
it under the Trust Agreement. Generally, those duties will be limited to the
receipt of the various certificates, reports or other instruments required to be
furnished to the Owner Trustee under the Trust Agreement, in which case it will
only be required to examine them to determine whether they conform to the
requirements of the Trust Agreement. The Owner Trustee will not be charged with
knowledge of a failure by the Servicer to perform its duties under the Trust
Agreement or Sale and Servicing Agreement unless the Owner Trustee obtains
actual knowledge of such failure as will be specified in the Trust Agreement.
The Indenture Trustee will make no representations as to the validity
or sufficiency of the Indenture, the Notes (other than the execution and
authentication thereof) or of any Receivables or related documents, and will not
be accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer in respect of the Notes, or the
Receivables, or the investment of any monies by the Servicer before such monies
are deposited into the Collection Account or Payahead Account. If no Event of
Default has occurred and is continuing, the Indenture Trustee will be required
to perform only those duties specifically required of it under the Indenture.
Generally, those duties will be limited to the receipt of the various
certificates, reports or other instruments required to be furnished to the
Indenture Trustee under the Indenture, in which case it will only be required to
examine them to determine whether they conform to the requirements of the
Indenture. The Indenture Trustee will not be charged with knowledge of a failure
by the Servicer to perform its duties under the Trust Agreement or Sale and
Servicing Agreement or of TMCC to perform its duties under the Administration
Agreement, unless the Indenture Trustee obtains actual knowledge of such failure
as will be specified in the Indenture.
The Indenture Trustee will be under no obligation to exercise any of
the rights or powers vested in it by the Indenture or to make any investigation
of matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the Noteholders, unless such Noteholders have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Noteholder will have any right under
the Indenture to institute any proceeding with respect to the Indenture, unless
such holder previously has given to the Indenture Trustee written notice of the
occurrence of an Event of Default and (i) the Event of Default arises from the
Servicer's failure to remit payments when due or (ii) the holders of the Notes
(excluding for such purposes the outstanding principal amount of any Notes held
of record or beneficially owned by TMCC or any of its affiliates), evidencing
not less than 25% of the voting interests of such class of Notes, have made
written request upon the Indenture Trustee to institute such proceeding in its
own name as the Indenture Trustee thereunder and have offered to the Indenture
Trustee reasonable indemnity and the Indenture Trustee for 30 days has neglected
or refused to institute any such proceedings. See "Description of the Notes--The
Indenture" in this Prospectus Supplement.
S-38
<PAGE>
ERISA CONSIDERATIONS
The Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes may
be purchased by an employee benefit plan or an individual retirement account (a
"Plan") subject to ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"). 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. For additional information regarding treatment of
the Notes under ERISA and the risks associated with the Notes being treated as
"equity interests" under the Plan Assets Regulation, see "ERISA Considerations"
in the Prospectus.
Certain exemptions from the prohibited transaction rules could be
applicable to the purchase and holding of the Class A-2 Notes, the Class A-3
Notes or the Class A-4 Notes by a Plan depending on the type and circumstances
of the plan fiduciary making the decision to acquire the Class A-2 Notes, the
Class A-3 Notes or the Class A-4 Notes. Potentially available exemptions would
include, without limitation, Prohibited Transaction Class Exemption ("PTCE")
90-1, which exempts certain transactions involving insurance company general
accounts; PTCE 91-38, which exempts certain transactions involving bank
collective investment funds; PTCE 84-14, which exempts certain transactions
effected on behalf of a Plan by a "qualified professional asset manager"; and
PTCE 96-23, which exempts certain transactions effected on behalf of a Plan by
an "in-house asset manager." Insurance company general accounts should also
discuss with their legal counsel the availability of relief under Section 401(c)
of ERISA. A purchaser of the Class A-2 Notes, the Class A-3 Notes or the Class
A-4 Notes should be aware, however, that even if the conditions specified in one
or more exemptions are met, the scope of the relief provided by the applicable
exemption or exemptions might not cover all acts that might be construed as
prohibited exemptions.
The Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes may
not be purchased with the assets of a Plan if the Seller, the Servicer, the
Indenture Trustee, the Owner Trustee or any of their affiliates (a) has
investment or administrative discretion with respect to such Plan assets; (b)
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 (i) will serve as a primary basis for investment
decisions with respect to such Plan assets and (ii) will be based on the
particular investment needs for such Plan; or (c) is an employer maintaining or
contributing to such Plan. None of the Class A-2 Notes, the Class A-3 Notes or
the Class A-4 Notes may be purchased with the assets of a Plan if the Seller is
a fiduciary with respect to those Plan assets and participates in the decision
to purchase these Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of O'Melveny & Myers LLP, tax counsel to the trust
("Tax Counsel"), under current law and subject to the discussion set forth
below, the Trust will not be classified as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes. Further,
with respect to the Notes, Tax Counsel will advise the Trust that the Class A-2,
Class A-3 and Class A-4 Notes will be classified as debt for federal income tax
purposes. The Noteholders will be deemed to agree, by their purchase of the
Notes, to treat the Notes as debt for federal income tax purposes.
In addition, Tax Counsel has prepared or reviewed the statements under
the heading "Summary of Terms--Tax Status" as they relate to federal income tax
matters and under the heading "Certain Federal Income Tax Consequences" herein
and in the Prospectus and is of the opinion that such statements are correct in
all material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership for
federal income tax purposes on investors generally and of related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to the investor's specific tax
circumstances that would be provided by an investor's own tax adviser.
Accordingly, each investor is advised to consult its own tax advisor with regard
to the tax consequences to it of investing in Notes.
S-39
<PAGE>
For additional information regarding the federal and state tax
treatment of the Trust, and the federal and state tax consequences of the
purchase, ownership and disposition of the Notes, prospective investors should
refer to the discussion in the accompanying Prospectus under the heading
"Certain Federal Income Tax Consequences--Tax Treatment of Owner Trusts--TAX
CONSEQUENCES TO HOLDERS OF THE NOTES."
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Seller has agreed to cause the Trust to sell to each of the Class
A-2 Note/Class A-3 Note/Class A-4 Note Underwriters named below (collectively,
the "Class A-2 Note/Class A-3 Note/Class A-4 Note Underwriters"), and each of
the Class A-2 Note/Class A-3 Note/Class A-4 Note Underwriters has severally
agreed to purchase the initial principal amount of Class A-2 Notes, Class A-3
Notes and Class A-4 Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITERS CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
Deutsche Bank Securities Inc................................ $ 125,650,000 $ 119,700,000 $ 73,165,000
Morgan Stanley & Co. Incorporated........................... 125,650,000 119,700,000 73,164,000
Chase Securities Inc........................................ 35,900,000 34,200,000 20,903,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 35,900,000 34,200,000 20,903,000
Salomon Smith Barney Inc.................................... 35,900,000 34,200,000 20,903,000
Total.................................................... $ 359,000,000 $ 342,000,000 $ 209,038,000
</TABLE>
The Seller has been advised by the Class A-2 Note/Class A-3 Note/Class
A-4 Note Underwriters that they propose initially to offer the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes offered by this prospectus
supplement to the public at the prices set forth herein. After the initial
public offering of such Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
the public offering price may change.
In addition, the Seller has agreed to cause the Issuer to sell
directly to affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated a
total principal amount of $70,000,000 of Class A-2 Notes pursuant to a Class A-2
Note purchase agreement and $65,000,000 of Class A-3 Notes pursuant to a Class
A-3 Note purchase agreement. Each such purchaser has agreed to purchase such
Notes at the public offering price therefore set forth herein. The Seller has
agreed to pay Merrill Lynch, Pierce, Fenner & Smith Incorporated, as placement
agent with respect to such Notes, a placement fee of 0.125% of the principal
amount of the Class A-2 Notes so purchased and 0.175% of the principal amount of
the Class A-3 Notes so purchased.
The underwriting discounts and commissions, the selling concessions
that the Underwriters may allow to certain dealers, and the discounts that such
dealers may reallow to certain other dealers, each expressed as a percentage of
the principal amount of the related class of Notes and as an aggregate dollar
amount, shall be as follows:
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNT AND
COMMISSIONS SELLING
AND NET PROCEEDS CONCESSIONS NOT REALLOWANCE NOT
PLACEMENT FEES TO THE SELLER(1) TO EXCEED TO EXCEED
-------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Class A-2 Notes.......................... 0.125% 99.87017% 0.075% 0.040%
Class A-3 Notes.......................... 0.175% 99.81599% 0.105% 0.055%
Class A-4 Notes.......................... 0.255% 99.74012% 0.155% 0.075%
Total for the offered Notes........... $1,781,547 $ 1,043,188,861
--------------
(1) Before deducting expenses payable by the Seller, estimated to be $600,000.
</TABLE>
Until the distribution of the Notes is completed, rules of the SEC may
limit the ability of the Underwriters and certain selling group members to bid
for and purchase the Notes. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions to stabilize the price of the Notes.
Such
S-40
<PAGE>
transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection
with this offering, (i.e., they sell more Notes than are set forth on the cover
page of this Prospectus Supplement), the Underwriters may reduce that short
position by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Underwriters purchase Notes in
the open market to reduce the Underwriters' short position or to stabilize the
price of the Notes, they may reclaim the amount of the selling concession from
any Underwriter or selling group member who sold those Notes as part of the
offering.
In general, purchases of a security for the purposes of stabilization
or to reduce a short position could cause the price of the security to be higher
that it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Seller nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that any of the
transactions described above may have on the price of the Notes. In addition,
neither the Seller nor any of the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Notes are new issues of securities and there currently is no
secondary market for the Notes. The Underwriters for the Notes expect to make a
market in such Notes but will not be obligated to do so. There is no assurance
that a secondary market for the Notes will develop. If a secondary market for
the Notes does develop, it might end at any time or it might not be sufficiently
liquid to enable you to resell any of your Notes.
The Indenture Trustee may, from time to time, invest the funds in the
Collection Account and the Reserve Account in investments acquired from or
issued by the Underwriters or the placement agent.
In the ordinary course of business, the Underwriters and their
affiliates have engaged and may engage in investment banking and commercial
banking transactions with the Servicer and its affiliates.
The Seller and TMCC have agreed to indemnify the Underwriters and the
placement agent against certain liabilities, including civil liabilities under
the Securities Act, or to contribute to payments which the Underwriters or the
placement agent may be required to make in respect thereof.
The underwriters have informed the Seller that they do not expect
discretionary sales by the Underwriters to exceed 5% of the principal amount of
the Notes offered by this Prospectus Supplement.
It is expected that the delivery of the Notes will be made against
payment therefor on or about the Closing Date, which is expected to be the
eleventh business day following the date hereof. Under Rule 15c-6 under the
Exchange Act, trades in the secondary market generally are required to settle
within three business days, unless the parties thereto expressly agree
otherwise. Accordingly, purchasers who wish to trade the Notes on the date
hereof and for a period of days hereafter will be required, by virtue of the
fact that the Notes initially will settle eleven business days after the date
hereof, to specify an alternate settlement cycle at the time of any such trade
to avoid a failed settlement.
Each Underwriter and the placement agent will represent that (i) it
has not offered or sold and will not offer or sell, prior to the date six months
after their date of issuance, any Notes to persons in the United Kingdom, except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted in and
will not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply
S-41
<PAGE>
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Notes in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the issuance of the Notes to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1997 or is a person to whom the document can otherwise
lawfully be issued or passed on.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Notes and certain federal income tax and
California state income tax and other matters will be passed upon for the Trust
by O'Melveny & Myers LLP. Certain legal matters relating to the Notes will be
passed upon for the Underwriters and the placement agent by Stroock & Stroock &
Lavan LLP.
S-42
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
ABS............................................. S-25 Scheduled Payments........................... S-19
ABS Table....................................... S-25 SEC.......................................... S-28
Aggregate Net Losses............................ S-33 Securities................................... S-16
Available Collections........................... S-30 Securityholder............................... S-16
Business Day.................................... S-28 Seller....................................... S-16
Charge-off Rate................................. S-33 Servicer..................................... S-16
Class A Notes................................... S-14 Servicer Default............................. S-15
Class A-1 Final Scheduled Payment Date.......... S-29 Servicing Fee Rate........................... S-35
Class A-1 Notes................................. S-16 Specified Reserve Account Balance............ S-33
Class A-2 Final Scheduled Payment Date.......... S-29 Subordinated Seller's Interest............... S-16
Class A-2 Notes................................. S-16 Summary of Terms............................. S-16
Class A-3 Final Scheduled Payment Date.......... S-29 Tax Counsel.................................. S-39
Class A-3 Notes................................. S-16 TMCC......................................... S-16
Class A-4 Final Scheduled Payment Date.......... S-29 TMCRC........................................ S-16
Class A-4 Notes................................. S-16 Transfer and Servicing Agreements............ S-35
Closing Date.................................... S-18 Trust........................................ S-16
Code............................................ S-39 Trust Agreement.............................. S-16
Current Receivable.............................. S-34 U.S. Person.................................. A-3
Cutoff Date..................................... S-18
Dealer Recourse................................. S-17
Defaulted Receivable............................ S-31
Delaware Trustee................................ S-16
Delinquency Percentage.......................... S-34
Determination Date.............................. S-30
Eligible Investments............................ S-36
Event of Default................................ S-29
Excess Payment.................................. S-36
Financed Vehicles............................... S-18
Global Note..................................... A-1
Indenture Trustee............................... S-18
Interest Period................................. S-28
Interest Rate................................... S-28
Liquidated Receivable........................... S-34
Net Liquidation Proceeds........................ S-31
Non-U.S. Person................................. A-4
Notes........................................... S-16
Obligors........................................ S-18
Owner Trustee................................... S-18
Payment Date.................................... S-28
Payments to Noteholders......................... S-29
Plan............................................ S-39
Pool Factor..................................... S-28
Prepayment...................................... S-36
Principal Distribution Account.................. S-35
Principal Distribution Amount................... S-31
Rating Agency................................... S-34
Receivables..................................... S-16
Receivables Pool................................ S-18
Receivables Purchase Agreement.................. S-16
Redemption Price................................ S-37
Sale and Servicing Agreement.................... S-16
</TABLE>
S-43
<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes
(the "Global Notes") will be available only in book-entry form. Investors in the
Global Notes may hold such Global Notes through DTC, Clearstream Banking societe
anonyme ("Clearstream Banking Luxembourg") or the Euroclear system. The Global
Notes will be tradable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Notes
through Clearstream Banking Luxembourg and the Euroclear system 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., three calendar day settlement).
Secondary market trading between investors holding Global Notes
through DTC will be conducted according to the rules and procedure applicable to
U.S. corporate debt obligations and prior asset-backed notes issues.
Secondary cross-market trading between Clearstream Banking Luxembourg
or the Euroclear system and DTC Participants holding notes will be effected on a
delivery-against-payment basis through the depositaries of Clearstream Banking
Luxembourg and the Euroclear system (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Notes will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the notes clearing organizations or
their participants.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Clearstream Banking Luxembourg and
the Euroclear system will hold positions on behalf of their participants through
their depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Notes through DTC will follow
DTC settlement practice. Investor notes custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Clearstream
Banking Luxembourg or the Euroclear system accounts will follow the settlement
procedures applicable to conventional eurobonds, except that there will be no
temporary global security and no "lock-up" or restricted period. Global Notes
will be credited to notes custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
asset-backed notes issues in same-day funds.
TRADING BETWEEN CLEARSTREAM BANKING LUXEMBOURG AND/OR EUROCLEAR SYSTEM
PARTICIPANTS. Secondary market trading between Clearstream Banking Luxembourg
Participants or Euroclear system Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
TRADING BETWEEN DTC SELLER AND CLEARSTREAM BANKING LUXEMBOURG OR
EUROCLEAR SYSTEM PARTICIPANTS. When Global Notes are to be transferred from the
account of a DTC Participant to the account of a Clearstream Banking Luxembourg
Participant or a Euroclear system Participant, the purchaser will send
instructions to Clearstream Banking Luxembourg or the Euroclear system through a
Clearstream Banking Luxembourg Participant or Euroclear system Participant at
least one business day prior to settlement. Clearstream Banking Luxembourg or
the Euroclear system will instruct the respective depositary, as the case may
be, to receive the Global Notes against payment. Payment will include interest
accrued on the Global Notes from and including the last coupon payment date to
and excluding the settlement date, on the basis of the actual number of days in
such accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Notes. After settlement has been completed, the Global Notes will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream Banking Luxembourg
Participant's or Euroclear system Participant's account. The notes credit will
appear the next day (European time) and the cash debt will be back-valued to,
and the interest on the Global Notes 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 Banking Luxembourg or Euroclear system cash debt will be valued
instead as of the actual settlement date.
Clearstream Banking Luxembourg Participants and Euroclear system
Participants will need to make available to the respective clearing systems the
funds necessary to process same-day funds settlement. The most direct means of
doing so is to preposition funds for settlement, either from cash on hand or
existing lines of credit, as they would for any settlement occurring within
Clearstream Banking Luxembourg or the Euroclear system. Under this approach,
they may take on credit exposure to Clearstream Banking Luxembourg or the
Euroclear system until the Global Notes are credited to their accounts one day
later.
As an alternative, if Clearstream Banking Luxembourg or the Euroclear
system has extended a line of credit to them, Clearstream Banking Luxembourg
Participants or Euroclear system Participants can elect not to preposition funds
and allow that credit line to be drawn upon to finance settlement. Under this
procedure, Clearstream Banking Luxembourg Participants or Euroclear system
Participants purchasing Global Notes would incur overdraft charges for one day,
assuming they clear the overdraft when the Global Notes are credited to their
accounts. However, interest on the Global Notes would accrue from the value
date. Therefore, in many cases the investment income on the Global Notes 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 Banking
Luxembourg Participant's or Euroclear system Participant's particular cost of
funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Notes to
the respective European Depositary for the benefit of Clearstream Banking
Luxembourg Participants or Euroclear system Participants. The sale proceeds will
be available to the DTC seller on the settlement date. Thus, to the DTC
Participants a cross-market transaction will settle no differently than a trade
between two DTC Participants.
TRADING BETWEEN CLEARSTREAM BANKING LUXEMBOURG OR EUROCLEAR SYSTEM
SELLER AND DTC PURCHASER. Due to time zone differences in their favor,
Clearstream Banking Luxembourg Participants and Euroclear system Participants
may employ their customary procedures for transactions in which Global Notes are
to be transferred by the respective clearing system, through the respective
Depositary, to a DTC Participant. The seller will send instructions to
Clearstream Banking Luxembourg or the Euroclear system through a Clearstream
Banking Luxembourg Participant or Euroclear system Participant at least one
business day prior to settlement. In these cases, Clearstream Banking Luxembourg
or the Euroclear system will instruct the Relevant Depositary, as appropriate,
to deliver the Global Notes to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Notes from and including the
last coupon payment to and excluding the settlement date on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
A-2
<PAGE>
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the account of the Clearstream Banking
Luxembourg Participant or Euroclear system Participant the following day, and
receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant's
or Euroclear system 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 Banking Luxembourg Participant or Euroclear system Participant
have a line of credit with its respective clearing system and elect to be in
debt in anticipation of receipt of the sale proceeds in its account, the back
valuation will extinguish any overdraft incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade fails),
receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant's
or Euroclear system Participant's account would instead be valued as of the
actual settlement date.
Finally, day traders that use Clearstream Banking Luxembourg or the
Euroclear system and that purchase Global Notes from DTC Participants for
delivery to Clearstream Banking Luxembourg Participants or Euroclear system
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:
(a) borrowing through Clearstream Banking Luxembourg or the Euroclear
system for one day (until the purchase side of the day trade is reflected in
their Clearstream Banking Luxembourg or Euroclear system accounts) in accordance
with the clearing system's customary procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their Clearstream Banking Luxembourg or
Euroclear system account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the Clearstream Banking Luxembourg
Participant or Euroclear system Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Notes holding notes through Clearstream
Banking Luxembourg or the Euroclear system (or through DTC if the holder has an
address outside the U.S.) will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (i) each clearing system, bank or
other financial institution that holds customers' notes in the ordinary course
of its trade or business in the chain of intermediaries between such beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of
Global Notes that are Non-U.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign
Status of Beneficial Owner for United States Tax Withholding). If the
information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, generally 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 residing in a country that has a tax
treaty with the United States can obtain an exemption or
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reduced tax rate depending on the treaty terms) by filing Form W-8BEN (claiming
treaty benefits). Form W-8BEN may be filed by the beneficial owners or their
agents.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE.
The Certificate Owner of a Global Security or his agent, files by
submitting the appropriate form to the person though whom it holds (the clearing
agency, in the case of persons holding directly on the books of the clearing
agency).
A Form W-8BEN on which the beneficial owner of a Global Security
provides a U.S. taxpayer identification number generally remains in effect until
a change in circumstances causes any of the information on the form to be
incorrect. A Form W-8ECI (and a Form W-8BEN on which a U.S. taxpayer
identification number is not provided) generally remains in effect for three
calendar years, absent a change in circumstances causing any information on the
form to be incorrect.
As used in the foregoing discussion, the term "U.S. Person" means (i)
a citizen or resident of the United States who is a natural person, (ii) a
corporation or partnership (or an entity treated as a corporation or
partnership) organized in or under the laws of the United States or any state
thereof, including the District of Columbia (unless, in the case of a
partnership, Treasury Regulations are adopted that provide otherwise), (iii) an
estate, the income of which is subject to United States Federal income taxation,
regardless of its source or (iv) a trust, if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons (as such term is defined in the Code and
Treasury Regulations) have the authority to control all substantial decisions of
the trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury Regulations, certain trusts in existence prior to August 20, 1996 that
are eligible to elect and have made a valid election to be treated as United
States persons (despite not satisfying the requirements in clause (iv) above)
shall also be U.S. Persons. The term "Non-U.S. Person" means any person who is
not a U.S. Person. This summary does not deal with all aspects of U.S. federal
income tax withholding that may be relevant to foreign holders of Global Notes.
Investors are advised to consult their tax advisors for specific tax advice
concerning their holding and disposing of Global Notes.
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PROSPECTUS
TOYOTA AUTO RECEIVABLES TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE 9 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
This prospectus does not contain complete information about the
offering of the securities. You are urged to read both this prospectus and the
related prospectus supplement that will provide additional information about the
securities being offered to you. No one may use this prospectus to offer and
sell the securities unless it is accompanied by the related prospectus
supplement. If any statement in the prospectus supplement conflicts with
statements in this prospectus, the statements in the prospectus supplement will
control.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES OR DETERMINED THAT THIS PROSPECTUS OR THE PROSPECTUS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Notes of a given series issued by a trust will be obligations of that
trust only. Certificates of a given series issued by a trust will represent
beneficial interests in that trust only. The securities will not be obligations
of, interests in, and are not guaranteed or insured by, Toyota Motor Credit
Corporation, Toyota Motor Credit Receivables Corporation, Toyota Financial
Services Corporation, Toyota Motor Sales, U.S.A., Inc. or any of their
affiliates. Neither the securities nor the receivables owned by the trust are
insured or guaranteed by any governmental agency.
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THE TRUSTS -
o A new trust will be formed to issue each series of
securities.
o The assets of each trust:
- will be described in a related prospectus supplement;
- will primarily be a pool of retail installment sales
contracts secured by new or used automobiles and light
duty trucks;
- will include related assets such as:
- security interests in the financed vehicles;
- proceeds from claims on related insurance policies; and
- amounts deposited in specified bank accounts.
THE SECURITIES -
o will be asset-backed securities sold periodically in one or
more series;
o will be paid only from the assets of the related trust;
o will be issued in one or more classes; and
o will consist of:
- notes (which will be treated as indebtedness of the
related trust) and/or
- certificates (which will represent an undivided
ownership interest in the related trust).
The amounts, prices and terms of each offering of securities will
be determined at the time of sale and will be described in a
prospectus supplement that will be attached to this prospectus.
The date of this Prospectus is September 26, 2000.
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the securities is provided in two separate
documents that progressively provide more detail:
o this prospectus, which provides general information, some of
which may not apply to a particular series of securities
including your series; and
o the accompanying prospectus supplement, which will describe
the specific terms of your series of securities including:
-- the timing of interest and principal payments;
-- the priority of interest and principal payments for
each class of offered securities;
-- financial and other information about the receivables
owned by the trust;
-- information about the credit enhancement for each class
of offered securities;
-- the rating of each class of offered securities; and
-- the method for selling the securities.
IF THE TERMS OF A PARTICULAR SERIES OF SECURITIES VARY BETWEEN
THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE
INFORMATION IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this
prospectus and the accompanying prospectus supplement, including any
information incorporated by reference. No one has been authorized to
provide you with different information. The securities are not being
offered in any state where their offer is not permitted.
Cross-references in this prospectus and in the prospectus
supplement have been provided to captions in these materials where you
can find further related discussions of a particular topic. The Table
of Contents on the back cover page of this prospectus provides the
pages on which these captions are located.
You can find a listing of the pages where capitalized terms used
in this prospectus are defined under the caption "Index of Terms"
beginning on page 85 in this prospectus.
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SUMMARY OF TERMS
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS
DOCUMENT AND PROVIDES A GENERAL OVERVIEW OF RELEVANT TERMS OF THE
SECURITIES. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING, YOU SHOULD
READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT.
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ISSUER............................................. The trust to be formed for each series of securities. If the trust issues
notes and certificates, it will be formed by a trust agreement between the
seller and the trustee of the trust. If the trust issues only certificates,
it will be formed by a pooling and servicing agreement among the seller, the
servicer and the trustee of the trust.
SELLER............................................. Toyota Motor Credit Receivables Corporation. The principal executive offices
of Toyota Motor Credit Receivables Corporation are located at 19300 Gramercy
Place, North Building, Torrance, Ca, telephone number is (310) 468-7332.
SERVICER........................................... Toyota Motor Credit Corporation. The principal executive offices of Toyota
Motor Credit Corporation are located at 19001 South Western Avenue, Torrance,
California 90509, its telephone number is (310) 468-1310 and its facsimile
number is (310) 468-6194.
TRUSTEE............................................ The trustee for each series of securities will be named in the prospectus
supplement for that series.
INDENTURE TRUSTEE.................................. If the trust issues notes, the trustee for the indenture will be named in
the prospectus supplement for that series.
SECURITIES......................................... NOTES--A series of securities may include one or more classes of notes.
Notes of a series will be issued pursuant to an indenture.
CERTIFICATES--Each series of securities will include one or more classes of
certificates, whether or not a class of notes is issued as part of the
series. If a series of securities includes classes of notes, holders of
notes may have the right to receive their payments before holders of
certificates are paid. In addition, classes of notes may have the right to
receive their payments before holders of other classes of notes are paid,
and classes of certificates may have the right to receive their payments
before holders of other classes of certificates are paid. This is referred
to as "sequential payment". In addition, payments on certain classes of
notes or certificates may be subject to reduction to make amounts available
to cover payments to other classes of notes or certificates. This is
referred to as "subordination". The prospectus supplement will describe the
payment priorities and any subordination provisions that apply to a class of
notes or certificates.
TERMS--The terms of each class of notes and certificates in a series will be
described in the prospectus supplement including:
o stated principal amount (notes) and stated certificate balance
(certificates); and
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o interest rate (which may be fixed, variable, adjustable or some
combination of these rates) or method of determining the interest rate.
A class of notes may differ from other classes of notes and a class of
certificates may differ from other classes of certificates in certain
respects including:
o timing and priority of payments;
o seniority;
o allocations of losses;
o interest rate or formula;
o amount of principal or interest payments;
o whether interest or principal will be payable to holders of the class if
certain events occur; and
o the right to receive collections from designated portions of the
receivables owned by the trust.
FORM--If you acquire a beneficial ownership interest in the securities you
will generally hold them through The Depository Trust Company in the United
States or Clearstream Banking societe anonyme or the Euroclear System in
Europe or Asia. This is referred to as "book-entry" form. As long as the
securities are held in book-entry form, you will not receive a definitive
certificate representing the securities.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "CERTAIN INFORMATION
REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" IN THIS PROSPECTUS.
DENOMINATION--Securities will be issued in the denominations specified in
the related prospectus supplement.
THE TRUST PROPERTY................................. The assets of each trust:
o will be described in the prospectus supplement;
o will primarily be a pool of retail installment sales contracts (the
"receivables") secured by new or used automobiles and light duty trucks
("financed vehicles") and amounts due or collected under the contracts on or
after a specified cutoff date; and
o will include related assets such as:
-- security interests in the financed vehicles,
-- proceeds from claims on related insurance policies, and
-- amounts deposited in specified bank accounts.
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Purchasers of Toyota and Lexus cars and light duty trucks often finance
their purchases by entering into retail installment sales contracts with
Toyota and Lexus dealers who then resell the contracts to Toyota Motor
Credit Corporation. The purchasers of the financed vehicles are referred to
as the "obligors" under the receivables. The terms of the contracts must
meet requirements specified by Toyota Motor Credit Corporation.
On or before the date the securities of a series are issued, Toyota Motor
Credit Corporation will sell a specified amount of receivables to Toyota
Motor Credit Receivables Corporation, the seller. The seller will, in turn,
sell them to the TRUST. The sale by the seller to the trust will be
documented under:
o a pooling and servicing agreement among the seller, the servicer and the
trustee (if the trust will be treated as a grantor trust for federal income
tax purposes); or
o a sale and servicing agreement among the seller, the servicer and the
trust (if the trust will be treated as an owner trust for federal income tax
purposes).
The receivables to be sold by Toyota Motor Credit Corporation to the seller
and resold to the trust will be selected based on criteria specified in the
sale and servicing agreement or the pooling and servicing agreement,
whichever is applicable. These criteria will be described in the applicable
prospectus supplement.
The trust will use collections on the receivables to pay interest and
principal to holders of each class of securities. The prospectus supplement
will describe whether:
o collections received each month will be passed through to holders of
securities on a monthly basis; or
o whether payments will instead be made on a quarterly, semi-annual, annual
or other basis.
If payments are made other than monthly, the trust will need to invest the
collections until the relevant payment date. These investments will be
highly rated and must satisfy criteria specified in the related pooling and
servicing agreement or sale and servicing agreement. Because of the
administrative difficulties involved in obtaining investments that will
provide payments to the trust on the day before payments are to be made to
holders of securities and that earn a sufficient amount of interest, in some
cases the investments will be demand notes issued by Toyota Motor Credit
Corporation. These demand notes will be unsecured general obligations of
Toyota Motor Credit Corporation and will rank equally with all other
outstanding unsecured and unsubordinated debt of Toyota Motor Credit
Corporation.
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YOU SHOULD REFER TO THE APPLICABLE PROSPECTUS SUPPLEMENT FOR MORE
INFORMATION ABOUT THE TERMS AND CONDITIONS OF ANY TMCC DEMAND NOTES. IN
ADDITION, YOU SHOULD REFER TO "TMCC DEMAND NOTES" IN THIS PROSPECTUS.
CREDIT AND CASH FLOW ENHANCEMENT................... The trusts may include certain features designed to provide protection to one
or more classes of securities. These features are referred to as "credit
enhancement". Credit enhancement may include any one or more of the
following:
o sequential payment or other payment prioritization of certain classes;
o subordination of one or more other classes of securities;
o reserve fund;
o over-collateralization;
o letters of credit or other credit facilities;
o surety bonds;
o guaranteed investment contracts;
o repurchase obligations;
o cash deposits; or
o other agreements or arrangements providing for other third party payments
or other support.
In addition, the trusts may include certain features designed to ensure the
timely payment of amounts owed to securityholders. These features may
include any one or more of the following:
o yield maintenance agreements;
o swap transactions;
o liquidity facilities;
o cash deposits; or
o other agreements or arrangements providing for other third party payments
or other support.
The specific terms of any credit or cash flow enhancement applicable to a
trust or to the securities issued by a trust will be described in detail in
the applicable prospectus supplement, including any limitations or
exclusions from coverage.
SERVICING.......................................... Toyota Motor Credit Corporation will be appointed to act as servicer for
the RECEIVABLES. In that capacity, the servicer will handle all collections,
administer defaults and delinquencies and otherwise service the contracts.
The trust will pay the servicer a monthly fee equal to 1/12 of 1.00% of the
total principal balance of the receivables as of the first day of the
preceding month. The servicer will also receive additional servicing
compensation in the form of investment earnings, late fees and other
administrative
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fees and expenses or similar charges received by the servicer during such
month.
The servicer will also be obligated to advance to the trust interest on the
receivables that is due but unpaid by the obligor. In addition, the servicer
will be obligated to advance to the trust due but unpaid principal of any
receivables that are classified as precomputed receivables rather than as
simple interest receivables. The servicer will not be required to make any
advance if it determines that it will not be able to recover an advance from
an obligor. The trust will reimburse the servicer from late collections on
the receivables for which it has made advances, or from collections
generally if the servicer determines that an advance will not be recoverable
with respect to such receivable.
FOR MORE DETAILED INFORMATION ON ADVANCES AND REIMBURSEMENT OF ADVANCES, SEE
"DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENT--ADVANCES" IN THIS
PROSPECTUS.
OPTIONAL REDEMPTION................................ The servicer may purchase all of the receivables when the outstanding
aggregate principal balance of the receivables declines to 10% or less of
the original total principal balance of the receivables as of the cutoff
date, which would cause early redemption of the securities.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "DESCRIPTION OF THE
TRANSFER AND SERVICING AGREEMENT--TERMINATION" IN THIS PROSPECTUS.
TAX STATUS......................................... GRANTOR TRUSTS--The applicable prospectus supplement will specify whether
a trust will be treated as a grantor trust for federal income tax purposes.
If a trust is referred to as a "grantor trust" in the applicable prospectus
supplement, special tax counsel to the trust will be required to deliver an
opinion that:
o the trust will be treated as a grantor trust for federal income tax
purposes, and California franchise and income tax purposes; and
o the trust will not be subject to federal income tax.
OWNER TRUSTS--If the trust is referred to as an "owner trust" in the
applicable prospectus supplement, special tax counsel to the trust will be
required to deliver an opinion for federal income tax purposes and
California income and franchise tax purposes:
o as to the characterization as debt of the notes issued by the trust; and
o that the trust will not be characterized as an association publicly traded
partnership) taxable as a corporation.
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If a trust is referred to as an "owner trust" in the applicable prospectus
supplement:
o by purchasing a note you will be agreeing to treat the note as
indebtedness for tax purposes; and
o by purchasing a certificate, you will be agreeing to treat the trust (i)
as a partnership in which you are a partner or (ii) if you are the sole
beneficial owner of the certificates, as a "disregarded entity," for federal
income tax purposes and California income and franchise tax purposes.
Applicable taxing authorities could impose alternative tax characterizations
of the trust and the certificates. However, these characterizations
generally will not result in material adverse tax consequences to
certificateholders.
FOR ADDITIONAL INFORMATION CONCERNING THE APPLICATION OF FEDERAL AND
CALIFORNIA TAX LAWS, YOU SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" AND "CERTAIN STATE TAX CONSEQUENCES" IN THIS PROSPECTUS.
ERISA CONSIDERATIONS............................... NOTES--Notes will generally be eligible for purchase by employee benefit plans.
UNSUBORDINATED GRANTOR TRUST CERTIFICATES--Certificates of a class issued by
a grantor trust that are not subordinated to any other class will generally
be eligible for purchase by employee benefit plans.
OTHER CERTIFICATES--Subordinated classes of certificates issued by a grantor
trust and certificates issued by owner trusts generally will not be eligible
for purchase by an employee benefit plan or individual retirement account.
FOR MORE DETAILED INFORMATION REGARDING THE ERISA ELIGIBILITY OF ANY CLASS
OF SECURITIES, YOU SHOULD REFER TO "ERISA CONSIDERATIONS" IN THIS PROSPECTUS
AND THE RELATED PROSPECTUS SUPPLEMENT.
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS IN DECIDING
WHETHER TO PURCHASE SECURITIES OF ANY CLASS. IN ADDITION, YOU SHOULD
REFER TO THE SECTION CAPTIONED "RISK FACTORS" IN THE ACCOMPANYING
PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF FURTHER MATERIAL RISKS TO
YOUR INVESTMENT IN THE SECURITIES.
THE TRUST'S SECURITY INTERESTS IN FINANCED VEHICLES MAY BE
UNENFORCEABLE OR DEFEATED.
The certificates of title for vehicles financed by Toyota Motor
Credit Corporation name Toyota Motor Credit Corporation as the secured
party. The certificates of title for financed vehicles under contracts
assigned to the trust will not be amended to identify the trust as the
new secured party because it would be administratively burdensome to
do so. However, financing statements showing the transfer to the trust
of Toyota Motor Credit Corporation's and the seller's interest in the
receivables will be filed with the appropriate governmental
authorities. Toyota Motor Credit Corporation, as servicer, will retain
the documentation for the receivables and the certificates of title.
Because of these arrangements, another person could acquire an
interest in the receivables and the financed vehicles that is judged
by a court of law to be superior to the trust's interest. Examples of
these persons are other creditors of the obligors, a subsequent
purchaser of a financed vehicle or another lender who finances the
vehicle. Some of the ways this could happen are described in this
prospectus under the caption "Certain Legal Aspects of the
Receivables". In some circumstances, either the seller or the servicer
will be required to purchase receivables if a security interest
superior to the claims of others has not been properly established and
maintained. The details of this obligation are described in this
prospectus under the caption "Certain Legal Aspects of the
Receivables".
BANKRUPTCY OF TOYOTA MOTOR CREDIT CORPORATION COULD RESULT IN
LOSSES OR DELAYS IN PAYMENTS ON THE SECURITIES.
If Toyota Motor Credit Corporation becomes subject to bankruptcy
proceedings, you could experience losses or delays in the payments on
your securities. Toyota Motor Credit Corporation will sell the
receivables to the seller, and the seller will in turn transfer the
receivables to the trust. However, if Toyota Motor Credit Corporation
becomes subject to a bankruptcy proceeding, the court in the
bankruptcy proceeding could conclude that Toyota Motor Credit
Corporation effectively still owns the receivables by concluding that
the sale to the seller was not a "true sale" or that the seller should
be consolidated with Toyota Motor Credit Corporation for bankruptcy
purposes. If a court were to reach this conclusion, you could
experience losses or delays in payments on the securities as a result
of, among other things:
o the "automatic stay" which prevents secured creditors from
exercising remedies against a debtor in bankruptcy without
permission from the court and provisions of the U.S.
Bankruptcy Code that permit substitution of collateral in
certain circumstances;
o certain tax or government liens on Toyota Motor Credit
Corporation property (that arose prior to the transfer of a
receivable to the trust) having a prior claim on collections
before the collections are used to make payments on your
securities; and
o the trust not having a perfected security interest in (a)
one or more of the vehicles securing the receivables or (b)
any cash collections held by Toyota Motor Credit Corporation
at the time Toyota Motor Credit Corporation becomes the
subject of a bankruptcy proceeding.
The seller will take steps in structuring each transaction
described in this prospectus to minimize the risk that a court would
consolidate the seller with Toyota Motor Credit Corporation for
bankruptcy purposes or conclude that the sale of receivables to the
seller was not a "true sale." See "Certain Legal Aspects of the
Receivables--Certain Bankruptcy Considerations" in this prospectus.
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RECEIVABLES THAT FAIL TO COMPLY WITH CONSUMER PROTECTION LAWS MAY
BE UNENFORCEABLE, RESULTING IN DELAYS IN RECEIPT OF COLLECTIONS.
Numerous federal and state consumer protection laws regulate
consumer contracts such as the receivables. If any of the receivables
do not comply with one or more of these laws, the servicer may be
prevented from or delayed in collecting the receivables. If that
happens, payments on the certificates could be delayed or reduced. The
seller will make representations and warranties relating to the
receivables' compliance with law and the trust's ability to enforce
the contracts. If the seller breaches any of these representations or
warranties, the trust's sole remedy will be to require the seller to
repurchase the affected receivables. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws" in this prospectus.
FUNDS HELD BY THE SERVICER THAT ARE INTENDED TO BE USED TO MAKE
PAYMENTS ON THE SECURITIES MAY BE EXPOSED TO A RISK OF LOSS.
The servicer generally may retain all payments and proceeds
collected on the receivables during each collection period. The
servicer is generally not required to segregate those funds from its
own accounts until the funds are deposited in the collection account
on each payment date. Until any collections or proceeds are deposited
into the collection account, the servicer will be able to invest those
amounts for its own benefit at its own risk. The trust and
securityholders are not entitled to any amount earned on the funds
held by the servicer. If the servicer does not deposit the funds in
the collection account as required on any payment date, the trust may
be unable to make the payments owed on your securities.
IF THE TRUST ENTERS INTO A CURRENCY OR AN INTEREST RATE SWAP,
PAYMENTS ON THE SECURITIES WILL BE DEPENDANT ON PAYMENTS MADE UNDER
THE SWAP AGREEMENT.
If the trust enters into a currency swap, interest rate swap or a
combined currency and interest rate swap, its ability to protect
itself from shortfalls in cash flow caused by currency or interest
rate changes will depend to a large extent on the terms of the swap
agreement and whether the swap counterparty performs its obligations
under the swap. If the trust does not receive the payments it expects
from the swap counterparty, the trust may not have adequate funds to
make all payments to securityholders when due, if ever.
If the trust issues securities with adjustable interest rates,
interest will be due on the securities at adjustable rates, while
interest will be earned on the receivables at fixed rates. In this
circumstance, the trust may enter into an interest rate swap to reduce
its exposure to changes in interest rates. An interest rate swap
requires one party to make payments to the other party in an amount
calculated by applying an interest rate (for example a floating rate)
to a specified notional amount in exchange for the other party making
a payment calculated by applying a different interest rate (for
example a fixed rate) to the same notional amount. For example, if the
trust issues $100 million of securities bearing interest at a floating
LIBOR rate, it might enter into a swap agreement under which the trust
would pay interest to the swap counterparty in an amount equal to an
agreed upon fixed rate on $100 million in exchange for receiving
interest on $100 million at the floating LIBOR rate. The $100 million
would be the "notional" amount because it is used simply to make the
calculation. In an interest rate swap, no principal payments are
exchanged.
If the trust issues securities denominated in a currency other
than U.S. dollars, the trust will need to make payments on the
securities in a currency other than U.S. dollars, as described in the
related prospectus supplement. Payments collected on the receivables,
however, will be made in U.S. dollars. In this circumstance, the trust
may enter into a currency swap to reduce its exposure to changes in
currency exchange rates. A currency swap requires one party to provide
a specified amount of a currency to the other party at specified times
in exchange for the other party providing a different currency at a
predetermined exchange ratio. For example, if the trust issues
securities denominated in Swiss Francs, it might enter into a swap
agreement with a swap counterparty under which the trust would use the
collections on the receivables to pay U.S. dollars to the swap
counterparty in exchange for receiving Swiss Francs at a predetermined
exchange rate to make the payments owed on the securities.
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In some cases, a trust may enter into a swap with Toyota Motor
Credit Corporation as the swap counterparty. The terms of any swap
will be described in more detail in the applicable prospectus
supplement.
TERMINATION OF A SWAP AGREEMENT WILL CAUSE TERMINATION OF THE
TRUST.
A swap agreement may be terminated if certain events occur. Most
of these events are generally beyond the control of the trust or the
swap counterparty. If the swap agreement is terminated, the trust
generally will also terminate. In that event, the trustee will sell
the assets of the trust and the trust will terminate. In this type of
situation, it is impossible to predict how long it would take to sell
the assets of the trust or what amount of proceeds would be received.
Some of the possible adverse consequences of such a sale are:
o The proceeds from the sale of assets under such
circumstances may not be sufficient to pay all amounts owed
to you.
o Amounts available to pay you will be further reduced if the
trust is required to make a termination payment to the swap
counterparty.
o The termination of the swap agreement may expose the trust
to currency or interest rate risk, further reducing amounts
available to pay you.
o The sale may result in payments to you significantly earlier
than expected, reducing the weighted average life of the
securities and the yield to maturity.
o Conversely, a significant delay in arranging a sale could
result in a delay in principal payments. This would, in
turn, increase the weighted average life of the securities
and could reduce the yield to maturity.
See "The Swap Agreement--Early Termination of Swap Agreement" for
more information concerning the termination of a swap agreement and
the sale of trust assets. Additional information about this subject,
including a description of the circumstances that may cause a
termination of the swap agreement and the trust and how the proceeds
of a sale would be distributed, will be included in the related
prospectus supplement.
THE RATING OF A SWAP COUNTERPARTY OR THE ISSUER OF DEMAND NOTES
MAY AFFECT THE RATINGS OF THE SECURITIES.
If a trust enters into a swap or invests in Toyota Motor Credit
Corporation demand notes, the rating agencies that rate the trust's
securities will consider the provisions of the swap agreement or the
demand notes and the rating of the swap counterparty and Toyota Motor
Credit Corporation, as issuer of the demand notes in rating the
securities. Toyota Motor Credit Corporation may also be the swap
counterparty. If a rating agency downgrades the debt rating of the
swap counterparty or Toyota Motor Credit Corporation, it is also
likely to downgrade the rating of the securities. Any downgrade in the
rating of the securities could have severe adverse consequences on
their liquidity or market value.
As of the date of this prospectus, Toyota Motor Credit
Corporation's long term debt ratings are Aa1 by Moody's Investors
Service, Inc. and AAA by Standard and Poor's Ratings Service, a
division of The McGraw-Hill Companies, Inc., and its short term debt
ratings are P-1 by Moody's Investors Service, Inc. and A-1+ by
Standard and Poor's Ratings Service, a division of The McGraw-Hill
Companies, Inc. A downgrade, suspension or withdrawal of any rating of
the debt of Toyota Motor Credit Corporation by a rating agency may
result in the downgrade, suspension or withdrawal of the rating
assigned by that rating agency to any class (or all classes) of notes
or certificates. A downgrade, suspension or withdrawal of the rating
assigned by a rating agency to a class of notes or certificates would
likely have adverse consequences on their liquidity or market value.
In the past, Moody's and Standard & Poor's have placed the
long-term debt ratings of Toyota Motor Corporation, Toyota Motor
Credit Corporation's ultimate parent, and its subsidiaries (including
Toyota Motor Credit Corporation) under review for possible downgrade
on the basis of their respective reviews of factors
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specific to those companies and factors external to those companies,
including their "country ceilings" for ratings of foreign
currency-denominated debt and bank deposits and yen-denominated
securities issued or guaranteed by the government of Japan. In the
past, Moody's has downgraded the long-term debt of Toyota Motor
Corporation and its subsidiaries (including Toyota Motor Credit
Corporation) to Aa1 from Aaa. If either rating agency lowers its
credit rating for Japan below that rating agency's then current credit
rating of Toyota Motor Corporation and its subsidiaries (including
Toyota Motor Credit Corporation), that rating agency would likely
lower its credit rating of Toyota Motor Corporation and its
subsidiaries (including Toyota Motor Credit Corporation) to the same
extent.
To provide some protection against the adverse consequences of a
downgrade, the swap counterparty may be permitted, but generally not
required, to take the following actions if the rating agencies reduce
its debt ratings below certain levels:
o assign the swap agreement to another party;
o obtain a replacement swap agreement on substantially the
same terms as the swap agreement; or
o establish any other arrangement satisfactory to the rating
agencies.
If Toyota Motor Credit Corporation is the swap counterparty, it
may be able to cure the effects of a downgrade by taking the actions
described above. However, if Toyota Motor Credit Corporation is both
the demand note issuer and the swap counterparty, these actions may
not be sufficient to prevent a downgrade.
Any swap or demand notes involve a high degree of risk. A trust
will be exposed to this risk should it use either of these mechanisms.
For this reason, only investors capable of understanding these risks
should invest in the securities. You are strongly urged to consult
with your financial advisors before deciding to invest in the
securities if a swap or demand notes are involved.
THE CALCULATIONS FOR THE PAYMENTS OF PRINCIPAL OR INTEREST MAY BE
BASED ON AN INDEX WHICH MAY RESULT IN PAYMENTS TO YOU OF LESS
PRINCIPAL OR INTEREST THAN A NON-INDEXED SECURITY.
The calculation of interest or principal on a series of
securities may be based on a currency, commodity, interest rate or
other index. In this situation, the amount of principal or interest
payable on the securities may be less than that payable on a
conventional debt security issued at the same time, including the
possibility that no interest or principal will be paid. In addition,
if the formula for calculating the payments on the securities includes
a feature that multiplies the effect of any change in the index,
changes to the index could result in even greater changes in the value
of the securities or the payments to be made on the securities.
You may not be able to easily trade these types of securities
after you purchase them. A market for the resale of securities is
referred to as a "secondary market." It cannot be predicted whether
there will be a secondary market for these types of securities or if
one develops, how liquid it would be. Any secondary market for these
types of securities will be affected by a number of factors that are
not dependent on the performance of the trust and its assets. These
factors include the complexity and volatility of any applicable index,
the method of calculating the principal and interest payments on the
securities, the time remaining to the maturity of the securities, the
outstanding amount of the securities and market interest rates. The
value of the index will depend on a number of interrelated factors
which cannot be controlled by the trust, including economic, financial
and political events. For these reasons, you may not be able to
readily sell your securities or receive the price you expected for
their sale.
In recent years, many indices have been highly volatile, and the
volatility may continue in the future. You should review carefully the
historical experience of any index applicable to calculations for any
series of securities, but should not take that historical experience
as a predictor of future performance of any index during the term of
any security. The credit ratings assigned to the securities do not
reflect the potential impact of the factors discussed above, or what
the impact may be on your securities' market value at any time. For
this reason, only investors capable of understanding the risks
involved should invest in indexed securities. In
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addition, investors whose investment activities are restricted by law
or subject to regulation may not be able to purchase these types of
securities. Investors are responsible for determining whether they may
purchase indexed securities. You are strongly urged to consult with
your financial advisors before deciding to invest in indexed
securities.
THE TRUSTS
The Seller will establish each trust (each, a "Trust") pursuant
to a Trust Agreement (as amended and supplemented from time to time
the "Trust Agreement") or Pooling and Servicing Agreement (as amended
from time to time, the "Pooling and Servicing Agreement"), as
applicable. The property of each Trust will include a pool (a
"Receivables Pool") of retail installment sales contracts (the
"Receivables") between Toyota and Lexus dealers (the "Dealers") and
the obligors (the "Obligors") of new and used automobiles and/or light
duty trucks and all payments due thereunder on and after the
applicable cutoff date (the "Cutoff Date"), as specified in the
related Prospectus Supplement. The Dealers will originate, and TMCC
will purchase, the Receivables of each Receivables Pool in the
ordinary course of business pursuant to agreements with Dealers (the
"Dealer Agreements"). On the applicable Closing Date, the Seller will
sell the Receivables comprising the related Receivables Pool to the
Trust pursuant to the related Pooling and Servicing Agreement, if the
trust is to be treated as a grantor trust for federal income tax
purposes, or the related Sale and Servicing Agreement among the
Seller, the Servicer and the Trust (as amended and supplemented from
time to time, the "Sale and Servicing Agreement") if the Trust is to
be treated as an owner trust for federal income tax purposes.
The property of each Trust will also include (i) such amounts as
from time to time may be held in separate accounts established and
maintained by the Servicer or Seller with the Trustee pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing
Agreement; (ii) security interests in the vehicles financed by the
Receivables (the "Financed Vehicles") and any accessions thereto;
(iii) the rights to proceeds from claims on certain physical damage,
credit life and disability insurance policies covering the Financed
Vehicles or the Obligors, as the case may be; (iv) the right of the
Seller to receive any proceeds from Dealer Recourse, if any, on
Receivables or Financed Vehicles; (v) the rights of the Seller under
the Sale and Servicing Agreement or the Pooling and Servicing
Agreement, as applicable; (vi) the right to realize upon any property
(including the right to receive future Liquidation Proceeds) that
shall have secured a Receivable and that shall have been repossessed
by or on behalf of the applicable Trust; and (vii) any and all
proceeds of the foregoing. Various forms of credit enhancement may be
used to provide credit enhancement for the benefit of holders of the
related Securities, including a Yield Maintenance Account or a Reserve
Fund. Additionally, pursuant to contracts between TMCC and the
Dealers, the Dealers will be required to repurchase Receivables as to
which Dealers have made certain misrepresentations.
The terms of each series of notes (the "Notes") or certificates
(the "Certificates" and, together with the Notes, the "Securities")
issued by each Trust (the "Issuer"), and additional information
concerning the assets of each Trust and any applicable credit
enhancement will be set forth in a supplement to this Prospectus (a
"Prospectus Supplement").
THE TRUSTEE
The trustee for each Trust (the "Trustee") and/or the trustee
under any Indenture pursuant to which Notes are issued (the "Indenture
Trustee") will be specified in the related Prospectus Supplement. The
Trustee's liability in connection with the issuance and sale of the
related Securities is limited solely to the express obligations of
such Trustee or Indenture Trustee set forth in the related Trust
Agreement, and/or Sale and Servicing Agreement, Indenture or Pooling
and Servicing Agreement, as applicable. A Trustee or Indenture Trustee
may resign at any time, in which event the Servicer, or its successor,
will be obligated to appoint a successor thereto. The Administrator of
a Trust that is an owner trust and the Servicer in respect of a Trust
that is a grantor trust may also remove a Trustee or Indenture Trustee
that ceases to be eligible to continue in such capacity under the
related Trust Agreement or Pooling and Servicing Agreement, as
applicable, or becomes
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insolvent. In such circumstances, the Servicer or the Administrator,
as the case may be, will be obligated to appoint a successor thereto.
Any resignation or removal of a Trustee or Indenture Trustee and
appointment of a successor trustee will not become effective until
acceptance of the appointment by such successor.
THE SELLER
Toyota Motor Credit Receivables Corporation (the "Seller") was
incorporated in the State of California on June 24, 1993, as a
wholly-owned, limited purpose subsidiary of Toyota Motor Credit
Corporation. The principal executive offices of the Seller are located
at 19300 Gramercy Place, North Building, Torrance, California 90509,
Attn: President, and its telephone number is (310) 468-7332.
The Seller was organized primarily for the purpose of acquiring
installment sales contracts similar to the Receivables and associated
rights from TMCC, causing the issuance of securities similar to the
Securities and engaging in related transactions. The Seller's articles
of incorporation limit the activities of the Seller to the foregoing
purposes and to any activities incidental to and necessary for such
purposes.
THE SERVICER
Toyota Motor Credit Corporation ("TMCC" or the "Servicer") was
incorporated in California on October 4, 1982, and commenced
operations in May 1983. At August 31, 2000, TMCC had three regional
offices and 33 branches in various locations in the United States, a
branch in Puerto Rico and a centralized customer service center in
Iowa. The address of TMCC's principal executive offices is 19001 South
Western Avenue, Torrance, California 90509. TMCC has one wholly owned
subsidiary engaged through subsidiaries organized in various
jurisdictions in the insurance business, a wholly-owned subsidiary
that provides retail and wholesale financing and other financial
services to authorized Toyota and Lexus vehicle dealers and their
customers in Puerto Rico, a wholly-owned limited purpose subsidiary
formed to acquire and securitize retail finance receivables and a
wholly-owned limited purpose subsidiary formed to acquire and
securitize lease receivables. TMCC and its subsidiaries are
collectively referred to as "TMCC".
TMCC provides retail and wholesale financing, retail leasing and
certain other financial services to authorized Toyota and Lexus
vehicle and Toyota industrial equipment dealers and their customers in
the United States (excluding Hawaii) and the Commonwealth of Puerto
Rico. In addition, each of TMCC's branches provides underwriting and
loan servicing support to dealers and customers for most financial
services offered by TMCC. TMCC's primary business is providing vehicle
retail and wholesale financing and retail leasing. TMCC is a
wholly-owned subsidiary of Toyota Financial Services Americas
Corporation.
On July 7, 2000, Toyota Financial Services Corporation was
incorporated to oversee Toyota Motor Corporation's worldwide financial
services operations, including those in the United States. On October
1, 2000 Toyota Financial Services Corporation assumed ownership of
TMCC, which previously had been a subsidiary of Toyota Motor Sales,
U.S.A., Inc. All of the outstanding stock of Toyota Motor Credit
Corporation is now owned by Toyota Financial Services Americas
Corporation, a wholly-owned subsidiary of Toyota Financial Services
Corporation.
UNDERWRITING OF MOTOR VEHICLE LOANS
TMCC purchases automobile and/or light truck retail installment
sales contracts from approximately 1,200 Toyota and Lexus dealers
located throughout the United States, excluding Hawaii. Underwriting
of such retail installment sales contracts is performed by each branch
using similar underwriting standards. Dealers originate these
receivables in accordance with TMCC's requirements as specified in
existing agreements between TMCC and such dealers. The receivables are
purchased in accordance with TMCC's underwriting standards which
emphasize, among other factors, the applicant's willingness and
ability to pay and the value of the vehicle to be financed.
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Applications received from Dealers must be signed by the
applicant and must contain, among other information, the applicant's
name, address, residential status, source and amount of monthly income
and amount of monthly rent or mortgage payment. Dealers then send
completed customer applications via facsimile or data transmission to
one of TMCC's retail branches where they are entered into TMCC's
internally-developed Application Processing System ("APS"). The APS
then automatically generates and transmits credit bureau requests to
one of the major credit bureaus which provide a credit report to TMCC.
Key data from the bureaus are combined with data from the customer
applications, including ratios such as car payment to income and total
debt payments to total income, and weighted by a statistically
validated credit scoring process to provide objective evaluations of
customer repayment probabilities. The branches receive credit scores,
bureau data (both summarized and in raw form) and applicant
information and TMCC credit investigators then perform income and
employment verification on non-"A" rated risks. Once income and
employment have been verified, all data is passed on-line to TMCC
credit analysts for decisions.
In April, 2000, TMCC completed the national launch of an expanded
tiered pricing program for retail installment sales contracts. The
objective of the expanded program is to better match customer risk
with contract rates charged to allow profitable purchases of a wider
range of risk levels. Implementation of this expanded program is
expected to result in both increased contract yields and increased
credit losses in connection with purchases of higher risk contracts.
The final credit decision is made based upon the degree of credit
risk perceived and the amount of credit requested. If an application
is conditionally approved or rejected, the dealer is notified of the
conditions required for the approval or reasons for rejection.
Additionally, an Equal Credit Opportunity Act adverse action notice is
sent to the customer specifying the reasons for modification or
rejection of the application for credit.
TMCC's retail installment sales contracts require obligors to
maintain specific levels of physical damage insurance during the term
of the contract. At the time of purchase, an obligor signs a statement
indicating he has or will have in effect the levels of insurance
required by TMCC and provides the name and address of his insurance
company and agent. Obligors are generally required to provide TMCC
with evidence of compliance with the foregoing insurance requirements.
The terms of each Receivable allow, but do not require, TMCC to (and
TMCC, in accordance with its current normal servicing procedures, does
not) obtain any such coverage on behalf of the Obligor.
SERVICING OF MOTOR VEHICLE LOANS
Each branch services the loans it originates using the same
servicing system and procedures, except that centralized tracking
units monitor bankruptcy administration and recovery. The collection
department of each branch manages the liquidation of each receivable.
TMCC considers an obligor to be past due if less than 90% of a
regularly scheduled payment is received by the due date. TMCC uses an
on-line collection system that prioritizes loans for collections
efforts, including the generation of past-due notices and signaling
TMCC collections personnel to attempt to make telephone contact with
delinquent obligors based on a behavioral scoring method (which
analyzes borrowers' past performance to predict future payment
behavior). TMCC generally determines whether to commence repossession
efforts before a receivable is 60 days past due. Repossessed vehicles
are held in inventory to comply with statutory requirements and then
sold at public auctions. Any deficiencies remaining after sale or
after full charge-off are pursued by TMCC to the extent practical and
legally permitted. See "Certain Legal Aspects of the
Receivables--Deficiency Judgments and Excess Proceeds". Collections of
deficiencies are administered at a centralized facility. TMCC's policy
is to charge-off an auto loan as soon as disposition of the vehicle
has been effected and sales proceeds have been received. When
repossession and disposition of the collateral has not been effected,
the charge-off occurs as soon as TMCC determines that the vehicle
cannot be recovered.
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WHERE YOU CAN FIND MORE INFORMATION ABOUT YOUR SECURITIES
THE TRUST--The Trustee, will provide to securityholders
("Securityholders") (which shall be Cede & Co. as the nominee of DTC
unless definitive Securities are issued under the limited
circumstances described herein) unaudited monthly and annual reports
concerning the Receivables and certain other matters. See "Certain
Information Regarding the Securities--Reports to Securityholders" and
"Description of the Transfer and Servicing Agreements--Evidence as to
Compliance" in the Prospectus. If and for so long as any Securities
listed on an exchange and the rules of such exchange so require, each
such report (including a statement of the outstanding principal
balance of each class of Securities) also shall be delivered to such
exchange on the related Payment Date or date for delivery of such
reports. Copies of such reports may be obtained at no charge at the
offices specified in the applicable Prospectus Supplement.
THE SELLER--Toyota Motor Credit Receivables Corporation, as
Seller of the Receivables, has filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933 (the
"Securities Act") of which this Prospectus forms a part. The
Registration Statement is available for inspection without charge at
the public reference facilities maintained at the principal office of
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven
World Trade Center, Suite 1300, New York, New York 10048. You may
obtain information on the operation of the SEC's reference room by
calling the SEC at (800) SEC-0330. You may obtain copies of such
materials at prescribed rates by writing to the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a website
(http://www.sec.gov) that contains reports, registration statements,
proxy and information statements, and other information regarding
issuers that file electronically with the SEC.
TMCC--If the trust invests in demand notes issued by TMCC, TMCC,
in its capacity as issuer of demand notes, will be a registrant under
the Registration Statement. In that capacity, TMCC will be subject to
the informational requirements of the United States Securities
Exchange Act. In accordance with that law, TMCC will file annual,
quarterly and special reports and other information with the SEC. If
you want more information about TMCC, you may review the Registration
Statement and TMCC's periodic filings, obtain copies of such documents
at prescribed rates or access the SEC's website. The relevant contact
information for the SEC is set forth in the paragraph captioned "The
Seller" above.
TMCC's filed periodic reports contain important information
regarding TMCC. If the Trust invests in demand notes issued by TMCC,
TMCC incorporates by reference the reports listed below and any
filings made by it with the SEC under Sections 13(a) or 15(d) of the
United States Securities Exchange Act after the initial filing of the
registration statement. Any information in any such reports filed with
the SEC subsequent to the date of this Prospectus will automatically
update this Prospectus.
o Annual Report on Form 10-K for the year ended September 30,
1999; and
o Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1999, March 31, 2000 and June 30, 2000.
If and for so long as Securities are listed on an exchange and
the rules of such exchange so require, the applicable Prospectus
Supplement will include the address of an office in the jurisdictions
specified by the rules of such exchange at which copies of the
Registration Statement filed by TMCRC and TMCC (including all
documents incorporated therein) and TMCC's periodic SEC reports can be
obtained for so long as those Securities are outstanding. If so
required by the rules of such exchange, copies of those documents will
also be filed with such exchange for so long as those Securities are
outstanding. Copies of the operative agreements relating to the
Securities will also be filed with the SEC and with any such exchange
that so requires.
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THE RECEIVABLES POOLS
The Receivables Pools will include the Receivables purchased as
of the Cutoff Date. The Receivables were originated by Dealers in
accordance with TMCC's requirements and subsequently purchased by
TMCC. The Receivables evidence the indirect financing made available
by TMCC to the related obligors (the "Obligors") in connection with
the purchase by such Obligors of the vehicles financed thereby (the
"Financed Vehicles"). On or before the date of initial issuance of the
Securities (the "Closing Date"), TMCC will sell the Receivables to the
Seller pursuant to the receivables purchase agreement (the
"Receivables Purchase Agreement") between the Seller and TMCC. The
Seller will, in turn, sell the Receivables to the Trust pursuant to
the related Transfer and Servicing Agreement. During the term of the
related Transfer and Servicing Agreement, neither the Seller nor TMCC
may substitute any other retail installment sales contract for any
Receivable sold to the Trust.
The Receivables in each Receivables Pool will have been purchased
by the Servicer from Dealers in the ordinary course of business
through its branches located in the United States. The Receivables are
purchased from Dealers pursuant to Dealer Agreements. TMCC purchases
Receivables originated in accordance with its credit standards which
are based upon the vehicle buyer's ability and willingness to repay
the obligation as well as the value of the vehicle being financed.
The Receivables to be held by each Trust for inclusion in a
Receivables Pool will be selected from TMCC's portfolio of auto and/or
light duty truck retail installment sales contracts that meet several
criteria. Unless otherwise provided in the related Prospectus
Supplement, these criteria require that each Receivable (i) is secured
by a new or used vehicle, (ii) was originated in the United States or
a particular state, (iii) provides for monthly payments that fully
amortize the amount financed over its original term to maturity
(except for minimally different payments in the first or last month in
the life of the Receivables), and (iv) satisfies the other criteria,
if any, set forth in the related Prospectus Supplement. No selection
procedures believed by the Seller to be adverse to the Securityholders
of any series will be used in selecting the related Receivables.
Each Receivable will provide for the allocation of payments
according to (i) the simple interest method ("Simple Interest
Receivables"), (ii) the "actuarial" method ("Actuarial Receivables")
or (iii) the "sum of periodic balances" or "sum of monthly payments"
method ("Rule of 78s Receivables" and, together with the Actuarial
Receivables, the "Precomputed Receivables").
SIMPLE INTEREST RECEIVABLES. Payments on Simple Interest
Receivables will be applied first to interest accrued through the date
immediately preceding the date of payment and then to unpaid
principal. Accordingly, if an Obligor pays an installment before its
due date, the portion of the payment allocable to interest for the
payment period will be less than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal
balance will be correspondingly greater, and the principal balance
will be amortized more rapidly than scheduled. Conversely, if an
Obligor pays an installment after its due date, the portion of the
payment allocable to interest for the payment period will be greater
than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be
correspondingly less, and the principal balance will be amortized more
slowly than scheduled, in which case a larger portion of the principal
balance may be due on the final scheduled payment date. No adjustment
to the scheduled monthly payments is made in the event of early or
late payments, although in the case of late payments the Obligor may
be subject to a late charge.
ACTUARIAL RECEIVABLES. An Actuarial Receivable provides for
amortization of the loan over a series of fixed level monthly
installments. Each Scheduled Payment is deemed to consist of an amount
of interest equal to 1/12 of the stated annual percentage rate ("APR")
of the Receivable multiplied by the scheduled principal balance of the
Receivable and an amount of principal equal to the remainder of the
Scheduled Payment. No adjustment to the scheduled monthly payments is
made in the event of early or late payments, although in the case of
late payments the Obligor may be subject to a late charge.
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RULE OF 78S RECEIVABLES. A Rule of 78s Receivable provides for
the payment by the Obligor of a specified total amount of payments,
payable in monthly installments on the related due date, which total
represents the principal amount financed and finance charges in an
amount calculated on the basis of the related APR for the term of such
Receivable. The rate at which such amount of finance charges is earned
and, correspondingly, the amount of each Scheduled Payment allocated
to reduction of the outstanding principal balance of a Rule of 78s
Receivable are calculated in accordance with the Rule of 78s. Under
the Rule of 78s, the portion of each payment allocable to interest is
higher during the early months of the term of a Rule of 78s Receivable
and lower during later months than that under a constant yield method
for allocating payments between interest and principal.
Notwithstanding the foregoing, all payments received by the Servicer
on or in respect of the Rule of 78s Receivables will be allocated
pursuant to the related Transfer and Servicing Agreement, as the case
may be, on an actuarial basis. No adjustment is made in the event of
early or late payments, although in the case of late payments the
Obligor may be subject to a late charge.
In the event of a prepayment in full (voluntarily or by
acceleration) of a Precomputed Receivable, a "Rebate" will be made to
the Obligor of that portion of the total amount of payments under the
Receivable allocable to "unearned" finance charges or other charges.
In the event of the prepayment in full (voluntarily or by
acceleration) of a Simple Interest Receivable, a Rebate will not be
made to the Obligor, but the Obligor will be required to pay interest
only to the date immediately preceding the date of prepayment. The
amount of a Rebate under a Precomputed Receivable will always be less
than or equal to the remaining scheduled payments of interest that
would have been due under a Simple Interest Receivable for which all
remaining payments were made on schedule. Payments to Securityholders
will not be affected by such Rebates under the Rule of 78s Receivables
because pursuant to the related Transfer and Servicing Agreement such
payments will be determined using the actuarial method.
Unless otherwise provided in the related Prospectus Supplement,
each Trust will account for the Rule of 78s Receivables as if such
Receivables were Actuarial Receivables. Amounts received upon
prepayment in full of a Rule of 78s Receivable in excess of the then
outstanding principal balance of such Receivable and accrued interest
thereon (calculated pursuant to the actuarial method) will not be paid
to the Noteholders or passed through to the Certificateholders of the
applicable series but will be deemed to be an Excess Amount and
released to the Seller or otherwise applied as set forth in the
related Prospectus Supplement.
Additional information with respect to each Receivables Pool will
be set forth in the related Prospectus Supplement, including, to the
extent appropriate, the composition, the distribution by APR and by
the states of origination, the portion of such Receivables Pool
consisting of Precomputed Receivables and of Simple Interest
Receivables and the portion of such Receivables Pool secured by new
vehicles and by used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning TMCC's experience pertaining to
delinquencies, repossessions and net losses with respect to its
portfolio of new and used retail automobile and/or light duty truck
receivables (including receivables previously sold which TMCC
continues to service) will be set forth in each Prospectus Supplement.
There can be no assurance that the delinquency, repossession and net
loss experience on any Receivables Pool will be comparable to prior
experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average lives of the Securities of any series 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 repurchases or purchases by the Seller or TMCC,
as the case may be, of certain Receivables for administrative reasons
or for breaches of representations and warranties. The term
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"weighted average life" means the average amount of time during which
each dollar of principal of a Receivable is outstanding.
All of the Receivables will be prepayable at any time without
penalty to the Obligor. However, partial prepayments on the
Precomputed Receivables made by Obligors will not be paid on the
Payment Date following the Collection Period in which they were
received but will be retained and applied towards payments due in
later Collection Periods. If prepayments in full are received on the
Precomputed Receivables or if full or partial prepayments are received
on the Simple Interest Receivables, the actual weighted average life
of the Receivables may be shorter than the scheduled weighted average
life of the Receivables set forth in the related Prospectus
Supplement. 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.
No prediction can be made as to the rate of prepayment on the
Receivables in either stable or changing interest rate environments.
TMCC maintains limited records of the historical prepayment experience
of the automobile retail installment sales contracts included in its
portfolio and is not aware of any publicly available industry
statistics for the entire industry on an aggregate basis that set
forth principal prepayment experience for retail installment sales
contracts similar to the Receivables over an extended period of time.
TMCC believes that its prepayment experience is consistent with that
generally found in the industry. However, no assurance can be given
that prepayments on the Receivables will conform to historical
experience and no prediction can be made as to the actual prepayment
experience on the Receivables. The rate of prepayment on the
Receivables may also be influenced by the structure of the related
loan.
Under certain circumstances, the Seller or Servicer will be
obligated to repurchase Receivables from a given Trust pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing
Agreement as a result of breaches of certain representations and
warranties or covenants. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables" and
"--Servicing Procedures". In addition, pursuant to agreements between
TMCC and the Dealers, each Dealer is obligated to repurchase from TMCC
contracts which do not meet certain representations and warranties
made by such Dealer (such Dealer repurchase obligations are referred
to herein as "Dealer Recourse"). Such representations and warranties
relate primarily to the origination of the contracts and the
perfection of the security interests in the related Financed Vehicles,
and do not typically relate to the creditworthiness of the related
Obligors or the collectability of such contracts. Although the Dealer
Agreements with respect to the Receivables will not be assigned to the
Trustee, the related Sale and Servicing Agreement or Pooling and
Servicing Agreement will require that TMCC deposit any recovery in
respect of any Receivable pursuant to any Dealer Recourse in the
related Collection Account. The sales by the Dealers of installment
sales contracts to TMCC do not generally provide for recourse against
the Dealers for unpaid amounts in the event of a default by an Obligor
thereunder, other than in connection with the breach of the foregoing
representations and warranties. See "Description of the Transfer and
Servicing Agreements--Sale and Assignment of Receivables" and
"--Servicing Procedures".
Early retirement of the Securities may be effected by the
exercise of the option of the Servicer, or any successor to the
Servicer, to purchase all of the Receivables remaining in the Trust
when the Pool Balance is 10% or less of the Pool Balance as of the
Cutoff Date. See "Description of the Transfer and Servicing
Agreements--Termination". Certain Events of Default could result in
liquidation of the assets of the Trust and acceleration of the related
Securities. See "Description of the Notes--The Indenture--Events of
Default; Rights upon Event of Default". If the Trust is a party to a
swap agreement, events resulting in termination of the swap agreement
generally will also result in liquidation of the assets of the Trust
and acceleration of the related Securities. See "The Swap
Agreement--Termination Events" regarding events that would result in a
termination of a swap.
Any reinvestment risk resulting from the rate of prepayments of
the Receivables and the payment of such prepayments to Securityholders
will be borne entirely by the Securityholders.
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In light of the above considerations, there can be no assurance
as to the amount of principal payments to be made on the Securities of
a given series on each Payment Date, since such amount will depend, in
part, on the amount of principal collected on the related Receivables
Pool during the applicable Collection Period. No prediction can be
made as to the actual prepayment experience on the Receivables, and
any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne entirely by the
Securityholders of a given series.
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.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a
seven-digit decimal which the Servicer will compute prior to each
payment with respect to such class of Notes. The Note Pool Factor
represents the remaining outstanding principal balance of such class
of Notes, as of the close of business on the applicable Payment Date,
as a fraction of the initial outstanding principal balance of such
class of Notes. The "Certificate Balance" for each class will
initially equal the principal balance as of the relevant Closing Date
(the "Original Certificate Balance") and, on each Payment Date
thereafter, will be reduced by all amounts allocable to principal paid
on or prior to the Payment Date in respect of each class of Notes. The
"Certificate Pool Factor" for each class of Certificates will be a
seven-digit decimal which the Servicer will compute prior to each
payment with respect to such class of Certificates indicating the
remaining Certificate Balance of such class of Certificates, as of the
close of business on the applicable Payment Date, as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note
Pool Factor and each Certificate Pool Factor will initially be
1.0000000 and thereafter will decline to reflect reductions in the
outstanding principal balance of the applicable class of Notes, or the
reduction of the Certificate Balance of the applicable class of
Certificates, as the case may be. A Certificateholder's portion of the
aggregate outstanding principal balance of the related class of Notes
is the product of (i) the original denomination of such
Certificateholder's Note and (ii) the applicable Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate
Balance for the related class of Certificates is the product of (a)
the original denomination of such Certificateholder's Certificate and
(b) the applicable Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement
with respect to each Trust, the Securityholders will receive reports
on or about each Payment Date concerning (i) with respect to the
Collection Period immediately preceding such Payment Date, payments
received on the Receivables, the Pool Balance (as such term is defined
in the related Prospectus Supplement, the "Pool Balance"), each
Certificate Pool Factor or Note Pool Factor, as applicable, and
various other items of information, and (ii) with respect to the
Collection Period second preceding such Payment Date, as applicable,
amounts allocated or paid on the preceding Payment Date and any
reconciliation of such amounts with information provided by the
Servicer prior to such current Payment Date. In addition,
Securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date
permitted by law. See "Certain Information Regarding the
Securities--Reports to Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement,
the Seller will use the net proceeds from the sale of the Securities
of a given series, together with a subordinated non-recourse
promissory note, to purchase Receivables from TMCC and to make the
initial deposit into any Reserve Fund or Yield Maintenance Account, if
applicable.
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DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes
(each, a "class") of Notes of the related series will be issued
pursuant to the terms of an indenture (the "Indenture"), a form of
which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not
purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Notes and the
Indenture.
Unless otherwise specified in the related Prospectus Supplement,
each class of Notes will initially be represented by one or more
Notes, in each case registered in the name of the nominee of DTC
(together with any successor depository selected by the Trust, the
"Depository") except as set forth below. Notes will be available for
purchase in the denominations specified in the related Prospectus
Supplement in book-entry form only (unless otherwise specified in the
related Prospectus Supplement). The Seller has been informed by DTC
that DTC's nominee will be Cede, unless another nominee is specified
in the related Prospectus Supplement. Accordingly, such nominee is
expected to be the holder of record of the Notes (a "Noteholder") of
each class. Unless and until Definitive Notes are issued under the
limited circumstances described herein or in the related Prospectus
Supplement, no Noteholder will be entitled to receive a physical
certificate representing a Note. All references herein and in the
related Prospectus Supplement to actions by Noteholders refer to
actions taken by DTC upon instructions from its participating
organizations (the "DTC Participants") and all references herein and
in the related Prospectus Supplement to payments, notices, reports and
statements to Noteholders refer to payments, notices, reports and
statements to DTC or its nominee, as the registered holder of the
Notes, for distribution to Noteholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding
the Securities--Book-Entry Registration" and "--Definitive
Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The related Prospectus Supplement will describe the timing and
priority of payment, seniority, allocations of losses, interest rate
(the "Interest Rate") and amount of or method of determining payments
of principal and interest on each class of Notes of a given series.
Payments of interest on and principal of any Notes will be made on the
dates specified in the related Prospectus Supplement (each, a "Payment
Date") in such amounts as are described in the Prospectus Supplement.
The right of holders of any class of Notes to receive payments of
principal and interest may be senior or subordinate to the rights of
holders of any other class or classes of Notes of such series.
Payments of interest on the Notes will generally be made prior to
payments of principal. A series may include one or more classes of
Notes (the "Strip Notes") entitled to (i) principal payments with
disproportionate, nominal or no interest payments or (ii) interest
payments with disproportionate, nominal or no principal payments. Each
class of Notes may have a different Interest Rate, which may be a
fixed, variable or adjustable Interest Rate (and which may be zero for
certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for
each class of Notes of a given series or the method for determining
such Interest Rate. See also "Certain Information Regarding the
Securities Fixed Rate Securities" and "--Floating Rate Securities".
One or more classes of Notes of a series may be redeemable in whole or
in part, including as a result of the Seller exercising its option to
purchase the related Receivables Pool or other early termination of
the related trust.
One or more classes of Notes of a given series may have fixed
principal payment schedules, in the manner and to the extent set forth
in the related Prospectus Supplement. Noteholders of such Notes would
be entitled to receive as payments of principal on any given Payment
Date the amounts set forth on such schedule with respect to such
Notes.
Unless otherwise specified in the related Prospectus Supplement,
payments to Noteholders of all classes within a series in respect of
interest will have the same priority. Under certain circumstances, on
any Payment
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Date the amount available for such payments could be less than the
amount of interest payable on the Notes. If this is the case, each
class of Noteholders will receive its ratable share (based upon the
aggregate amount of interest due to such class of Noteholders) of the
aggregate amount of interest available for payment on the Notes. See
"Description of the Transfer and Servicing Agreements--Payments" and
"--Credit and Cash Flow Enhancement".
If a series of Notes includes two or more classes of Notes, the
sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable
to the determination thereof, of each such class will be set forth in
the related Prospectus Supplement. Payments in respect of principal
and interest of any class of Notes will be made on a pro rata basis
among all the Noteholders of such class.
THE INDENTURE
MODIFICATION OF INDENTURE. If a Trust has issued Notes pursuant
to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of not less than 51% of the outstanding Notes
of the related series (excluding Notes held by TMCC, TMCRC or any
affiliate thereof), 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 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.
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: (i) 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; (ii) impair the right to institute suit for the enforcement
of certain provisions of the related Indenture regarding payment;
(iii) 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; (iv) 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; (v) 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 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; (vii)
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 (vii) 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 collateral for 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.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to
the Notes of a given series, unless otherwise specified in the related
Prospectus Supplement, "Events of Default" under the related Indenture
will consist of: (i) a default for five days or more in the payment of
any interest on any such Note; (ii) a default in
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the payment of the principal of or any installment of the principal of
any such Note when the same becomes due and payable; (iii) 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 90 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 acting together as a single
class; (iv) 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 a 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 acting together as a single class; or (v) certain events
of bankruptcy, insolvency, receivership or liquidation of the
applicable Trust. However, the amount of principal required to be paid
to Noteholders of such series under the related Indenture will
generally be limited to amounts available to be deposited in the
Collection Account. 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.
If an Event of Default should occur and be continuing with
respect to the Notes of any series, the related Indenture Trustee or
holders of a majority in principal amount of such Notes then
outstanding (excluding Notes held by TMCC, TMCRC or any affiliate
thereof) 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 (excluding Notes held by TMCC, TMCRC or any
affiliate thereof).
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 Trust
property, exercise remedies as a secured party, sell the related
Receivables 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 more in the
payment of any interest on any Note of such series, unless (i) the
holders of all such outstanding Notes (excluding Notes held by TMCC,
TMCRC or any affiliate thereof) consent to such sale, (ii) 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 (iii) such Indenture Trustee determines that the proceeds of
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 (excluding Notes held by TMCC, TMCRC
or any affiliate thereof). Unless otherwise specified in the
Prospectus Supplement, in the event of the sale of the Receivables by
the Indenture Trustee following an Event of Default, the Noteholders
will receive notice and opportunity to submit a bid in respect of such
sale.
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 might be incurred by it in complying
with such request. Subject to the provisions for indemnification and
certain limitations contained in the related Indenture, the holders of
not less than 51% of the principal amount of the outstanding Notes
(excluding Notes held by TMCC, TMCRC or any affiliate thereof) of a
given 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, and the holders of a majority in principal amount
of such Notes (excluding Notes held by TMCC, TMCRC or any affiliate
thereof) then outstanding may, in certain cases, waive any default
with respect thereto, except a default in the deposit of collections
or other required amounts, any required payment from amounts held in
any trust
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account in respect of amounts due on the Notes, payment of principal
or interest or a default in respect of a covenant or provision of such
Indenture that cannot be modified without the waiver or consent of all
the holders of such outstanding Notes (excluding Notes held by TMCC,
TMCRC or any affiliate thereof).
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 (i) such
holder previously has given to the applicable Indenture Trustee
written notice of a continuing Event of Default, (ii) the holders of
not less than 25% in principal amount of the outstanding Notes of such
series (other than TMCC, TMCRC or any affiliate thereof) have made
written request to such Indenture Trustee to institute such proceeding
in its own name as Indenture Trustee, (iii) such holder or holders
have offered such Indenture Trustee reasonable indemnity, (iv) such
Indenture Trustee has for 60 days failed to institute such proceeding
and (v) 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
(other than TMCC, TMCRC or any affiliate thereof).
In addition, each Indenture Trustee and the related Noteholders
(other than TMCC, TMCRC or any affiliate thereof), by accepting the
related Notes, will covenant 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.
With respect to any Trust, neither the related Indenture Trustee
nor the related Trustee in its individual capacity, nor any holder of
a Certificate representing an ownership interest in such 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 the related 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,
among other things, (i) 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, (ii) 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, (iii) no Event of Default shall have occurred and be
continuing immediately after such merger or consolidation, (iv) such
Trust has been advised that the rating of the Securities 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 (v) such
Trust has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence
to the Trust or to any related Noteholder or Certificateholder.
Each Trust will not, among other things, (i) except as expressly
permitted by the applicable Indenture, the applicable Transfer and
Servicing Agreements or certain related documents with respect to such
Trust (collectively, the "Related Documents"), sell, transfer,
exchange or otherwise dispose of any of the assets of such Trust, (ii)
claim any credit on or make any deduction from the principal and
interest payable in respect of the Notes of the related series (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 such Trust,
(iii) except as expressly permitted by the Related Documents, dissolve
or liquidate in whole or in part, (iv) 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 (v) 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 the assets of such Trust
or any part thereof, or any interest therein or the proceeds thereof.
No Trust may engage in any activity other than as specified in
this Prospectus or in the related Prospectus Supplement. No Trust will
incur, assume or guarantee any indebtedness other than indebtedness
incurred pursuant to the related Notes and the related Indenture,
pursuant to any Advances made to it by the Servicer or otherwise in
accordance with the Related Documents.
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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
Trust 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 such 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 collateral securing the related Notes
upon the delivery to the related Indenture Trustee for cancellation of
all such Notes or, with certain limitations, upon deposit with such
Indenture Trustee of funds sufficient for the payment in full of all
such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in
the related Prospectus Supplement. The Indenture Trustee for any
series generally may resign at any time and, if the Indenture Trustee
and the Owner Trustee are the same entity or are affiliates, the
Indenture Trustee generally will resign upon the occurrence of any
event that may give rise to a conflict of interest for such entity
acting in both such capacities. Upon resignation of the Indenture
Trustee, the Issuer will be obligated to appoint a successor thereto
for such series. The Issuer or Administrator 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 Issuer will be
obligated to appoint a successor thereto for the applicable series of
Notes. Any resignation or removal of the Indenture Trustee and
appointment of a successor thereto for any series of Notes will not
become effective until acceptance of the appointment by such
successor.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust that issues Certificates, one or more
classes (each, a "class") of Certificates of the related series will
be issued pursuant to the terms of a Trust Agreement or a Pooling and
Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a
part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Certificates and the Trust Agreement or Pooling and
Servicing Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement
and except for the Certificates, if any, of a given series purchased
by the Seller, each class of Certificates will initially be
represented by one or more Certificates registered in the name of the
nominee for DTC, except as set forth below. Unless otherwise specified
in the related Prospectus Supplement and except for the Certificates,
if any, of a given series purchased by the Seller, the Certificates
will be available for purchase in the denominations specified in the
related Prospectus Supplement in book-entry form only (unless
otherwise specified in the related Prospectus Supplement). The Seller
has been informed by DTC that DTC's nominee will be Cede, unless
another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of
the Certificates (a "Certificateholder") of any series that are not
purchased by the Seller. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the
related Prospectus Supplement, no Certificateholder (other than the
Seller) will be entitled to receive a physical certificate
representing a Certificate. All references herein and in the related
Prospectus Supplement to actions by Certificateholders refer to
actions taken by DTC upon instructions from the Participants and all
references herein and in the related Prospectus Supplement to
distributions, notices, reports and statements to
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Certificateholders refer to distributions, notices, reports and
statements given, made or sent to DTC or its nominee, as the case may
be, as the registered holder of the Certificates, for distribution to
Certificateholders in accordance with DTC's procedures with respect
thereto. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities". Any Certificates of a
given series owned by the Seller or its affiliates will be entitled to
equal and proportionate benefits under the applicable Trust Agreement,
except that such Certificates will be deemed not to be outstanding for
the purpose of determining whether the requisite percentage of
Certificateholders have given any request, demand, authorization,
direction, notice, consent or other action under the Related
Documents.
PAYMENTS OF PRINCIPAL AND INTEREST
The timing and priority of payments, seniority, allocations of
losses, interest rate or pass through rate (the "Pass Through Rate")
and amount of or method of determining payments with respect to
principal and interest of each class of Certificates will be described
in the related Prospectus Supplement. Payments of interest on and
principal of such Certificates will be made on the dates specified in
the related Prospectus Supplement (each, a "Payment Date") and in the
amounts described in the related Prospectus Supplement. To the extent
provided in the related Prospectus Supplement, a series may include
one or more classes of Certificates (the "Strip Certificates")
entitled to (i) payments in respect of principal with
disproportionate, nominal or no interest payments or (ii) interest
payments with disproportionate, nominal or no payments in respect of
principal. Each class of Certificates may have a different Pass
Through Rate, which may be a fixed, variable or adjustable Pass
Through Rate (and which may be zero for certain classes of Strip
Certificates) or any combination of the foregoing. The related
Prospectus Supplement will specify the Pass Through Rate for each
class of Certificates of a given series or the method for determining
such Pass Through Rate. See also "Certain Information Regarding the
Securities--Fixed Rate Securities" and "--Floating Rate Securities".
Unless otherwise provided in the related Prospectus Supplement,
payments in respect of the Certificates of a given series that
includes Notes may be paid sequentially later than or be subordinated
to payments in respect of the Notes of such series as more fully
described in the related Prospectus Supplement. The rights of holders
of any class of Certificates to receive payments of principal and
interest may also be paid sequentially later than or be subordinated
to the rights of holders of any other class or classes of Certificates
of such series as more fully described in the related Prospectus
Supplement. Payments in respect of interest on and principal of any
class of Certificates will be made on a pro rata basis among all the
Certificateholders of such class.
In the case of a series of Certificates which includes two or
more classes of Certificates, the timing, sequential order, priority
of payment or amount of payments in respect of interest and principal,
and any schedule or formula or other provisions applicable to the
determination thereof, of each such class shall be as set forth in the
related Prospectus Supplement.
If and as provided in the related Prospectus Supplement, certain
amounts remaining on deposit in the Collection Account after all
required payments to the related Securityholders have been made may be
released to the Seller, TMCC or one or more third party credit or
liquidity enhancement providers.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Any class of Securities (other than certain classes of Strip
Notes or Strip Certificates) may bear interest at a fixed rate per
annum ("Fixed Rate Securities") or at a variable or adjustable rate
per annum ("Floating Rate Securities"), as more fully described below
and in the applicable Prospectus Supplement. 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. Unless otherwise set forth in the
applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve
30-day months. See "Description of the Notes--Principal and Interest
on the Notes" and "Description of the Certificates--Payments of
Principal and Interest".
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FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest during
each applicable Interest Period at a rate per annum determined by
reference to an interest rate basis (the "Base Rate"), plus or minus
the Spread, if any, or multiplied by the Spread Multiplier, if any, in
each case as specified in the related Prospectus Supplement.
The "Spread" is the number of basis points to be added to or
subtracted from the related Base Rate applicable to such Floating Rate
Securities. The "Spread Multiplier" is the percentage of the related
Base Rate applicable to such Floating Rate Securities by which such
Base Rate will be multiplied to determine the applicable interest rate
on such floating Rate Securities. The "Index Maturity" is the period
to maturity of the instrument or obligation with respect to which the
Base Rate will be calculated.
The applicable Prospectus Supplement will designate one of the
following Base Rates as applicable to a given Floating Rate Security:
(i) LIBOR (a "LIBOR Security"), (ii) the Commercial Paper Rate (a
"Commercial Paper Rate Security"), (iii) the Treasury Rate (a
"Treasury Rate Security"), (iv) the Federal Funds Rate (a "Federal
Funds Rate Security"), (v) the CD Rate (a "CD Rate Security") or (vii)
such other Base Rate as is set forth in such Prospectus Supplement.
"H.15(519)" means the weekly statistical release designated as
H.15(519), or any successor publication, published by the Board of
Governors of the Federal Reserve System. "H.15 Daily Update" means the
daily update of H.15(519), available through the world-wide-web site
of the Board of Governors of the Federal Reserve System at
http://www.bog.frb.fed.us/releases/ h15/update, or any successor site
or publication. "Interest Reset Date" will be the first day of the
applicable Interest Reset Period, or such other day as may be
specified in the related Prospectus Supplement with respect to a class
of Floating Rate Securities.
Each applicable Prospectus Supplement will specify whether the
rate of interest on the related Floating Rate Securities will be reset
daily, weekly, monthly, quarterly, semiannually, annually or such
other specified period (each, an "Interest Reset Period") and the
dates on which such Interest Rate will be reset (each, an "Interest
Reset Date"). Unless otherwise specified in the applicable Prospectus
Supplement, the Interest Reset Date will be, in the case of Floating
Rate Securities which reset: (i) daily, each Business Day; (ii)
weekly, the Wednesday of each week (with the exception of weekly reset
Treasury Rate Securities which will reset the Tuesday of each week,
except as specified below); (iii) monthly, the third Wednesday of each
month; (iv) quarterly, the third Wednesday of March, June, September
and December of each year; (v) semiannually, the third Wednesday of
the two months specified in the applicable Prospectus Supplement; and
(vi) annually, the third Wednesday of the month specified in the
applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
if any Interest Reset Date for any Floating Rate Security would
otherwise be a day that is not a Business Day, such Interest Reset
Date will be postponed to the next succeeding day that is a Business
Day, except that in the case of a Floating Rate Security as to which
LIBOR is an applicable Base Rate, if such Business Day falls in the
next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day. Unless specified otherwise in the
applicable Prospectus Supplement, "Business Day" means a day other
than a Saturday, a Sunday or a day on which banking institutions in
New York, New York, or San Francisco, California are authorized or
obligated by law, regulation, executive order or decree to be closed.
Unless otherwise specified in the applicable Prospectus Supplement,
with respect to Notes as to which LIBOR is an applicable Base Rate,
the definition of Business Day will include all London Business Days.
"London Business Day" means any day (a) if the Index Currency (as
defined below) is other than the Euro, on which dealings in deposits
in such Index Currency are transacted in the London interbank market
or (b) if the Index Currency is the Euro a day on which the
Trans-European Automated Real-time Gross Settlement Express Transfer
System ("TARGET system") is open and on which commercial banks and
foreign exchange markets settle payments in London and New York.
Unless otherwise specified in the related Prospectus Supplement,
if any Payment Date for any Floating Rate Security (other than the
Final Payment Date) would otherwise be a day that is not a Business
Day, such
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Payment Date will be the next succeeding day that is a Business Day
except that in the case of a Floating Rate Security as to which LIBOR
is the applicable Base Rate, if such Business Day falls in the next
succeeding calendar month, such Payment Date will be the immediately
preceding Business Day. Unless otherwise specified in the related
Prospectus Supplement, if the final Payment Date of a Floating Rate
Security falls on a day that is not a Business Day, the payment of
principal, premium, if any, and interest will be made on the next
succeeding Business Day, and no interest on such payment shall accrue
for the period from and after such Final Payment Date.
Except as otherwise specified in the applicable Prospectus
Supplement, each Floating Rate Security will accrue interest on an
"Actual/360" basis, an "Actual/Actual" basis, or a "30/360" basis, in
each case as specified in the applicable Prospectus Supplement. For
Floating Rate Securities calculated on an Actual/360 basis and
Actual/Actual basis, accrued interest for each Interest Period will be
calculated by multiplying (i) the face amount of such Floating Rate
Security, (ii) the applicable interest rate, and (iii) the actual
number of days in the related Interest Period, and dividing the
resulting product by 360 or 365, as applicable (or, with respect to an
Actual/Actual basis Floating Rate Security, if any portion of the
related Interest Period falls in a leap year, the product of (i) and
(ii) above will be multiplied by the sum of (X) the actual number of
days in that portion of such Interest Period falling in a leap year
divided by 366 and (Y) the actual number of days in that portion of
such Interest Period falling in a non-leap year divided by 365). For
Floating Rate Securities calculated on a 30/360 basis, accrued
interest for an Interest Period will be computed on the basis of a
360-day year of twelve 30-day months, irrespective of how many days
are actually in such Interest Period. Unless otherwise specified in
the related Prospectus Supplement, with respect to any Floating Rate
Security that accrues interest on a 30/360 basis, if any Payment Date
including the related Final Payment Date falls on a day that is not a
Business Day, the related payment of principal or interest will be
made on the next succeeding Business Day as if made on the date such
payment was due, and no interest will accrue on the amount so payable
for the period from and after such Payment Date. The "Interest Period"
with respect to any class of Floating Rate Securities will be set
forth in the related Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating
Rate Securities of a given class may also have either or both of the
following (in each case expressed as a rate per annum): (i) a maximum
limitation, or ceiling, on the rate at which interest may accrue
during any interest period and (ii) a minimum limitation, or floor, on
the rate at which interest may accrue during any interest period. In
addition to any maximum interest rate that may be applicable to any
class of Floating Rate Securities, the interest rate applicable to any
class of Floating Rate Securities will in no event be higher than the
maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate
Securities will be issued will appoint, and enter into agreements
with, a calculation agent (each, a "Calculation Agent") to calculate
interest rates on each such class of Floating Rate Securities issued
with respect thereto. The applicable Prospectus Supplement will set
forth the identity of the Calculation Agent for each such class of
Floating Rate Securities of a given series, which may be the related
Trustee or Indenture Trustee with respect to such series. All
determinations of interest by the Calculation Agent shall, in the
absence of manifest error, be conclusive for all purposes and binding
on the holders of Floating Rate Securities of a given class. Unless
otherwise specified in the applicable Prospectus Supplement, all
percentages resulting from any calculation on Floating Rate Securities
will be rounded to the nearest one hundred-thousandth of a percentage
point, with five one millionths of a percentage point rounded upwards
(e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such
calculation on Floating Rate Securities will be rounded to the nearest
cent (with one-half cent being rounded upward).
CD RATE SECURITIES. Each CD Rate Security will bear interest for
each Interest Reset Period at the interest rate calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus
Supplement.
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Unless otherwise specified in the applicable Prospectus
Supplement, the "CD Rate" for each Interest Reset Period shall be the
rate as of the second Business Day prior to the Interest Reset Date
for such Interest Reset Period (a "CD Rate Determination Date") for
negotiable United States dollar certificates of deposit having the
Index Maturity specified in the applicable Prospectus Supplement as
published in H.15(519), as defined below, under the heading "CDs
(secondary market)".
The following procedures will be followed if the CD Rate cannot
be determined as described above:
(1) If the rate referred to above is not so published by 3:00
p.m., New York City time, on the related Calculation Date, then the CD
Rate on the applicable CD Rate Determination Date will be the rate for
negotiable United States dollar certificates of deposit of the Index
Maturity specified in the applicable Prospectus Supplement as
published in H.15 Daily Update (as defined below), or other recognized
electronic source used for the purpose of displaying the applicable
rate, under the caption "CDs (secondary market)".
(2) If the rate referred to in clause (1) above is not so
published by 3:00 p.m., New York City time, on the related Calculation
Date, then the CD Rate on the applicable CD Rate Determination Date
will be the rate calculated by the Calculation Agent as the arithmetic
mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on the applicable CD Rate Determination Date of three
leading nonbank dealers in negotiable United States dollar
certificates of deposit in the City of New York selected by the
Calculation Agent for negotiable United States dollar certificates of
deposit of major United States money market banks for negotiable
certificates of deposit with a remaining maturity closest to the Index
Maturity specified in the applicable Prospectus Supplement in an
amount that is representative for a single transaction in that market
at the time.
(3) If the dealers selected by the Calculation Agent are not
quoting as set forth in clause (2) above, the CD Rate on the
applicable CD Rate Determination Date will be the rate in effect on
the applicable CD Rate Determination Date.
The "Calculation Date" pertaining to any CD Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after
such CD Rate Determination Date or, if such day is not a business day,
the next succeeding business day or (b) the Business Day preceding the
applicable Payment Date.
COMMERCIAL PAPER RATE SECURITIES. Each Commercial Paper Rate
Security will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the Commercial Paper Rate
and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Commercial Paper Rate" for each Interest Reset Period
will be determined by the Calculation Agent for such Commercial Paper
Rate Security as of the second Business Day prior to the Interest
Reset Date for such Interest Reset Period (a "Commercial Paper Rate
Determination Date") and shall be the Money Market Yield, as defined
below, on the applicable Commercial Paper Rate Determination Date of
the rate for commercial paper having the Index Maturity specified in
the applicable Prospectus Supplement published in H.15(519) under the
heading "Commercial Paper--Nonfinancial."
The following procedures will be followed if the Commercial Paper
Rate cannot be determined as described above:
(1) If the rate referred to above is not published by 3:00 p.m.,
New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on the applicable
Commercial Paper Rate Determination Date of the rate for commercial
paper having the Index Maturity specified in the applicable Prospectus
Supplement published in H.15 Daily Update, or other recognized
electronic source for the purpose of displaying the applicable rate
under the caption "Commercial Paper--Nonfinancial".
(2) If by 3:00 p.m., New York City time, on the related
Calculation Date the Commercial Paper Rate is not yet published in
either H.15(519) or H.15 Daily Update, then the Commercial Paper Rate
for the applicable
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Commercial Paper Rate Determination Date will be calculated by the
Calculation Agent as the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 a.m., New York City time, on
the applicable Commercial Paper Rate Determination Date of three
leading dealers of United States dollar commercial paper in The City
of New York, which may include the Calculation Agent and its
affiliates, selected by the Calculation Agent for commercial paper
having the Index Maturity designated in the applicable Prospectus
Supplement placed for industrial issuers whose bond rating is "Aa", or
the equivalent, from a nationally recognized securities rating
organization.
(3) If the dealers selected by the Calculation Agent are not
quoting as mentioned in clause (2) above, the Commercial Paper Rate
determined on the applicable Commercial Paper Rate Determination Date
will be the rate in effect on the applicable Commercial Paper Rate
Determination Date.
"Money Market Yield" means a yield (expressed as a percentage
rounded upward to the nearest one hundred thousandth of a percentage
point) calculated in accordance with the following formula:
Money Market Yield = D X 360 X 100
----------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper
quoted on a bank discount basis and expressed as a decimal, and "M"
refers to the actual number of days in the Interest Period for which
interest is being calculated.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth
calendar day after such Commercial Paper Rate Determination Date or,
if such day is not a business day, the next succeeding business day or
(b) the second business day preceding the related Payment Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security
will bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Federal Funds Rate and the Spread or
Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Federal Funds Rate" for each Interest Reset Period
shall be the effective rate as of the second Business Day prior to the
Interest Reset Date for such Interest Reset Period (a "Federal Funds
Rate Determination Date" for United States dollar federal funds as
published in H.15(519) under the heading "Federal Funds (Effective),"
as displayed on Bridge Telerate, Inc. or any successor service on page
120 or any other page as may replace the applicable page on that
service ("Telerate Page 120").
The following procedures will be followed if the Federal Funds
Rate cannot be determined as described above:
(1) If the rate referred to above does not appear on Telerate
Page 120 or is not so published by 3:00 p.m., New York City time, on
the related Calculation Date, the Federal Funds Rate for the
applicable Federal Funds Rate Determination Date will be the rate on
the applicable Federal Funds Rate Determination Date for United States
dollar federal funds published in H.15 Daily Update, or other
recognized electronic source for the purpose of displaying the
applicable rate under the heading "Federal Funds (Effective)".
(2) If the Federal Funds Rate is not so published by 3:00 p.m.,
New York City time, on the related Calculation Date, the Federal Funds
Rate for the applicable Federal Funds Rate Determination Date will be
calculated by the Calculation Agent as the arithmetic mean of the
rates for the last transaction in overnight United States dollar
federal funds arranged by three leading brokers of United States
dollar federal funds transactions in The City of New York, which may
include the Calculation Agent and its affiliates, selected by the
Calculation Agent before 9:00 a.m., New York City time on the
applicable Federal Funds Rate Determination Date.
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(3) If the brokers so selected by the Calculation Agent are not
quoting as mentioned in clause (2) above, the Federal Funds Rate for
the applicable Federal Funds Rate Determination Date will be the
Federal Funds Rate in effect on the applicable Federal Funds Rate
Determination Date.
The "Calculation Date" pertaining to any Federal Funds Rate
Determination Date shall be the first to occur of (a) the tenth
calendar day after such Federal Funds Rate Determination Date or, if
such day is not a business day, the next succeeding business day or
(b) the second business day preceding the related Payment Date.
LIBOR SECURITIES. Each LIBOR Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference
to LIBOR and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, with respect to LIBOR indexed to the offered rates for
U.S. dollar deposits, "LIBOR" for each Interest Reset Period will be
determined by the Calculation Agent for any LIBOR Security as follows:
(1) If "LIBOR Telerate" is specified in the applicable Prospectus
Supplement, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Prospectus Supplement as the method for
calculating LIBOR, LIBOR will be the rate for deposits in the Index
Currency having the Index Maturity designated in the applicable
Prospectus Supplement commencing on the second "London Banking Day"
(as defined in the related Transfer and Servicing Agreement)
immediately following the applicable "Interest Determination Date" (as
defined in the related Transfer and Servicing Agreement) that appears
on the Designated LIBOR Page specified in the applicable Prospectus
Supplement as of 11:00 a.m. London time, on the applicable Interest
Determination Date, or
(2) If "LIBOR Reuters" is specified in the applicable Prospectus
Supplement, LIBOR will be the arithmetic mean of the offered rates for
deposits in the Index Currency having the Index Maturity designated in
the applicable Prospectus Supplement, commencing on the second London
Banking Day immediately following the applicable Interest
Determination Date, that appear on the Designated LIBOR Page specified
in the applicable Prospectus Supplement as of 11:00 a.m. London time
on the applicable Interest Determination Date, if at least two offered
rates appear (except as provided in the following sentence). If the
Designated LIBOR Page by its terms provides for only a single rate,
then the single rate will be used.
The following procedures will be followed if LIBOR cannot be
determined as described above:
(1) With respect to an Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be,
on the applicable Designated LIBOR Page as specified above, LIBOR for
the applicable Interest Determination Date will be the rate calculated
by the Calculation Agent as the arithmetic mean of at least two
quotations obtained by the Calculation Agent after requesting the
principal London offices of each of four major reference banks in the
London interbank market, which may include the Calculation Agent and
its affiliates, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity designated in the
applicable Prospectus Supplement, commencing on the second London
Banking Day immediately following the applicable Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such Interest Determination
Date and in a principal amount that is representative for a single
transaction in the applicable Index Currency in that market at that
time. If at least two such quotations are provided, LIBOR determined
on the applicable Interest Determination Date will be the arithmetic
mean of the quotations.
(2) If fewer than two quotations referred to in clause (1) above
are provided, LIBOR determined on the applicable Interest
Determination Date will be the rate calculated by the Calculation
Agent as the arithmetic mean of the rates quoted at approximately
11:00 a.m., or such other time specified in the applicable Prospectus
Supplement, in the applicable Principal Financial Center, on the
applicable Interest Determination Date by
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three major banks, which may include the Calculation Agent and its
affiliates, in that Principal Financial Center selected by the
Calculation Agent for loans in the Index Currency to leading European
banks, having the Index Maturity designated in the applicable
Prospectus Supplement and in a principal amount that is representative
for a single transaction in the Index Currency in that market at that
time.
(3) If the banks so selected by the calculation agent are not
quoting as mentioned in clause (2) above, LIBOR for the applicable
Interest Determination Date will be LIBOR in effect on the applicable
Interest Determination Date.
"Designated LIBOR Page" means either:
(1) If "LIBOR Telerate" is designated in the applicable
Prospectus Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate
is specified in the applicable Prospectus Supplement as the method for
calculating LIBOR, the display on Bridge Telerate, Inc. or any
successor service on the page designated in the applicable Prospectus
Supplement or any page as may replace the designated page on that
service or for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency; or
(2) If "LIBOR Reuters" is designated in the applicable Prospectus
Supplement, the display on the Reuters Monitor Money Rates Service or
any successor service on the page designated in the applicable
Prospectus Supplement or any other page as may replace the designated
page on that service for the purpose of displaying the London
interbank offered rates of major banks for the applicable Index
Currency.
"Index Currency" means the currency specified in the applicable
Prospectus Supplement as the currency for which LIBOR will be
calculated. If no currency is specified in the applicable Prospectus
Supplement, the Index Currency will be United States dollars.
"Principal Financial Center" means, unless otherwise specified in
the applicable Prospectus Supplement, the capital city of the country
to which the Index Currency relates, except that with respect to
United States dollars, Canadian dollars, Deutsche marks, Dutch
guilders, Portuguese escudos, South African Rand and Swiss Francs, the
Principal Financial Center will be the City of New York, Toronto,
Frankfurt, Amsterdam, London, Johannesburg and Zurich, respectively.
TREASURY RATE SECURITIES. Each Treasury Rate Security will bear
interest for each Interest Reset Period at the interest rate
calculated with reference to the Treasury Rate and the Spread or
Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement determined on the "Treasury Rate
Determination Date" specified in such Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus
Supplement, the "Treasury Rate" for each Interest Period will be the
rate for the auction held on the Treasury Rate Determination Date of
direct obligations of the United States ("Treasury bills") having the
Index Maturity specified in the applicable Prospectus Supplement, as
such rate shall be published in H.15(519) under the heading "U.S.
Government Securities--Treasury bills--auction average (investment)"
or, in the event that such rate is not published prior to 3:00 p.m.,
New York City time, on the Calculation Date (as defined below)
pertaining to such Treasury Rate Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury.
In the event that the results of the auction of Treasury bills having
the specified Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date, or
if no such auction is held in a particular week, then the "Treasury
Rate" for such Interest Reset Period will be the rate published in
H.15(510) under the heading "U.S. Government Securities--Treasury
Bills--Secondary Market" (expressed as a bond equivalent yield on the
basis of a 365 or 366 day year, as applicable, on a daily basis), or
if not published by 3:00 p.m. New York City time on the related
Calculation Date, the Treasury Rate will be calculated by the
Calculation Agent for such Treasury Rate Security and shall be the
yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as
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of approximately 3:30 p.m., New York City time on such Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by such Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the specified
Index Maturity; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest
Reset Period will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period.
The "Calculation Date" pertaining to any Treasury Rate
Determination Date shall be the first to occur of (a) the tenth
calendar day after such Treasury Rate Determination Date or, if such a
day is not a Business Day, the next succeeding Business Day or (b) the
second Business Day preceding the date any payment is required to be
made for any period following the applicable Interest Reset Date.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any
class of Securities of a given series may consist of Securities
("Indexed Securities") in which the principal amount payable on the
final Payment Date for such class (the "Indexed Principal Amount")
and/or the interest payable on any Payment Date is determined by
reference to a measure (the "Index") which will be related to the
exchange rates of one or more currencies or composite currencies (the
"Index Currencies"); the price or prices of specified commodities; or
specified stocks, which may be based on U.S. or foreign stocks, on
specified dates specified in the applicable Prospectus Supplement, or
such other price, interest rate, exchange rate or other financial
index or indices as are described in the applicable Prospectus
Supplement. Holders of Indexed Securities may receive a principal
amount on the related final Payment Date that is greater than or less
than the face amount of the Indexed Securities depending upon the
relative value on the related final Payment Date of the specified
indexed item. Information as to the method for determining the
principal amount payable on the related final Payment Date, if any,
and, where applicable, certain historical information with respect to
the specific indexed item or items and special tax considerations
associated with investment in Indexed Securities, will be set forth in
the applicable Prospectus Supplement. Notwithstanding anything to the
contrary herein, for purposes of determining the rights of a
Certificateholder of a Security indexed as to principal in respect of
voting for or against amendments to the related Trust Agreement,
Indenture, or other related agreements as the case may be, and
modifications and the waiver of rights thereunder, the principal
amount of such Indexed Security shall be deemed to be the face amount
thereof upon issuance.
If the determination of the Indexed Principal Amount of an
Indexed Security is based on an Index calculated or announced by a
third party and such third party either suspends the calculation or
announcement of such Index or changes the basis upon which such Index
is calculated (other than changes consistent with policies in effect
at the time such Indexed Security was issued and permitted changes
described in the applicable Prospectus Supplement), then such Index
shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus
Supplement on the same basis, and subject to the same conditions and
controls, as applied to the original third party. If for any reason
such Index cannot be calculated on the same basis and subject to the
same conditions and controls as applied to the original third party,
then the Indexed Principal Amount of such Indexed Security shall be
calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent
shall, in the absence of manifest error, be binding on all parties.
The applicable Prospectus Supplement will describe whether the
principal amount of the related Indexed Security, if any, that would
be payable upon redemption or repayment prior to the applicable final
scheduled Payment Date will be the face amount of such Indexed
Security, the Indexed Principal Amount of such Indexed Security at the
time of redemption or repayment or another amount described in such
Prospectus Supplement.
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BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
each class of Securities offered hereby will be represented by one or
more certificates registered in the name of Cede, as nominee of the
Depository Trust Company ("DTC"). Unless otherwise specified in the
related Prospectus Supplement, Securityholders may hold beneficial
interests in Securities through the DTC (in the United States) or
Clearstream Banking Luxembourg ("Clearstream Banking") or the
Euroclear System ("Euroclear") (in Europe or Asia) directly if they
are participants of such systems, or indirectly through organizations
which are participants in such systems.
No Securityholder will be entitled to receive a certificate
representing such person's interest in the Securities, except as set
forth below. Unless and until Securities of a class are issued in
fully registered certificated form ("Definitive Securities") under the
limited circumstances described below, all references herein to
actions by Noteholders, Certificateholders or Securityholders shall
refer to actions taken by DTC upon instructions from DTC Participants,
and all references herein to distributions, notices, reports and
statements to Noteholders, Certificateholders or Securityholders shall
refer to distributions, notices, reports and statements to Cede, as
the registered holder of the Securities, for distribution to
Securityholders in accordance with DTC procedures. As such, it is
anticipated that the only Noteholder, Certificateholder or
Securityholder will be Cede, as nominee of DTC. Securityholders will
not be recognized by the related Trustee as Noteholders,
Certificateholders or Securityholders as such terms will be used in
the relevant agreements, and Securityholders will only be permitted to
exercise the rights of holders of Securities of the related class
indirectly through DTC and DTC Participants, as further described
below.
Clearstream Banking and Euroclear will hold omnibus positions on
behalf of their participants through customers' securities accounts in
their respective names on the books of their respective Depositaries
which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC.
Transfers between DTC Participants will occur in accordance with
DTC rules. Transfers between Clearstream Banking Participants and
Euroclear Participants will occur in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly
through Clearstream Banking 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, each such cross-market transaction 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. 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 Banking Participants and Euroclear
Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities received
in Clearstream Banking or Euroclear as a result of a transaction with
a DTC Participant will be made during subsequent securities settlement
processing and dated the business day following the DTC settlement
date. Such credits or any transactions in such securities settled
during such processing will be reported to the relevant Euroclear or
Clearstream Banking Participant on such business day. Cash received in
Clearstream Banking or Euroclear as a result of sales of Securities by
or through a Clearstream Banking Participant or a Euroclear
Participant to a DTC Participant will be received with value on the
DTC settlement date but will be available in the relevant Clearstream
Banking or Euroclear cash account only as of the business day
following settlement in DTC.
DTC is a limited purpose trust company organized under the laws
of the State of New York, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve System, a
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"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 participating members
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers,
banks, trust companies and clearing corporations which may include
underwriters, agents or dealers with respect to the Securities of any
class or series. 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 DTC
Participant, either directly or indirectly (the "Indirect DTC
Participants"). The rules applicable to DTC and DTC Participants are
on file with the SEC.
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not DTC Participants or Indirect DTC
Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, Securities may do so only through
DTC Participants and Indirect DTC Participants. DTC Participants will
receive a credit for the Securities on DTC's records. The ownership
interest of each Securityholder will in turn be recorded on respective
records of the DTC Participants and Indirect DTC Participants.
Securityholders will not receive written confirmation from DTC of
their purchase, but Securityholders are expected to receive written
confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the DTC Participant or
Indirect DTC Participant through which the Securityholder entered into
the transaction. Transfers of ownership interests in the Securities of
any class will be accomplished by entries made on the books of DTC
Participants acting on behalf of Securityholders.
To facilitate subsequent transfers, all Securities deposited by
DTC Participants with DTC will be registered in the name of Cede, a
nominee of DTC. The deposit of Securities with DTC and their
registration in the name of Cede will effect no change in beneficial
ownership. DTC will have no knowledge of the actual Securityholders
and its records will reflect only the identity of the DTC Participants
to whose accounts such Securities are credited, which may or may not
be the Securityholders. DTC Participants and Indirect DTC Participants
will remain responsible for keeping account of their holdings on
behalf of their customers. While the Securities of a Series are held
in book-entry form, Securityholders will not have access to the list
of Securityholders of such Series, which may impede the ability of
Securityholders to communicate with each other.
Conveyance of notices and other communications by DTC to DTC
Participants, by DTC Participants to Indirect DTC Participants and by
DTC Participants and Indirect DTC Participants to Securityholders will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Under the rules, regulations and procedures creating and
affecting DTC and its operations, DTC is required to make book-entry
transfers among DTC Participants on whose behalf it acts with respect
to the Securities and is required to receive and transmit payments of
principal of and interest on the Securities. DTC Participants and
Indirect DTC 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.
DTC's practice is to credit DTC Participants' accounts on each
Payment Date in accordance with their respective holdings shown on its
records, unless DTC has reason to believe that it will not receive
payment on such Payment Date. Payments by DTC Participants and
Indirect DTC Participants to Securityholders will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
DTC Participant and not of DTC, the related Indenture Trustee or
Trustee (or any paying agent appointed thereby), the Seller or the
Servicer, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal of and interest
on each class of Securities to DTC will be the responsibility of the
related Indenture Trustee or Trustee (or any paying agent),
disbursement of such payments to DTC Participants will be the
responsibility of DTC and disbursement of such payments to the related
Securityholders will be the
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responsibility of DTC Participants and Indirect DTC Participants. As a
result, under the book-entry format, Securityholders may experience
some delay in their receipt of payments. DTC will forward such
payments to its DTC Participants which thereafter will forward them to
Indirect DTC Participants or Securityholders.
Because DTC can only act on behalf of DTC Participants, who in
turn act on behalf of Indirect DTC 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 otherwise take
actions 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 Securityholder only at the direction of one or more
DTC Participants to whose account with DTC the Securities are
credited. Additionally, DTC has advised the Seller that it will take
such actions with respect to specified percentages of the
Securityholders' interest only at the direction of and on behalf of
DTC Participants whose holdings include undivided interests that
satisfy such specified percentages. DTC may take conflicting actions
with respect to other undivided interests to the extent that such
actions are taken on behalf of DTC Participants whose holdings include
such undivided interests.
Neither DTC nor Cede will consent or vote with respect to the
Securities. Under its usual procedures, DTC will mail an "Omnibus
Proxy" to the related Indenture Trustee or Trustee as soon as possible
after any applicable Record Date for such a consent or vote. The
Omnibus Proxy will assign Cede's consenting or voting rights to those
DTC Participants to whose accounts the related Securities are credited
on that record date (which record date will be identified in a listing
attached to the Omnibus Proxy).
Clearstream Banking is incorporated under the laws of Luxembourg
as a professional depository. Clearstream Banking holds securities for
its participating organizations ("Clearstream Banking Participants")
and facilitates the clearance and settlement of securities
transactions between Clearstream Banking Participants through
electronic book entry changes in accounts of Clearstream Banking
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Clearstream Banking in
any of 28 currencies, including United States dollars. Clearstream
Banking provides to Clearstream Banking Participants, among other
things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending
and borrowing. Clearstream Banking interfaces with domestic markets in
several countries. As a professional depository, Clearstream Banking
is subject to regulation by the Luxembourg Monetary Institute.
Clearstream Banking 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 any underwriters, agents or
dealers with respect to any class or series of Securities offered
hereby. Indirect access to Clearstream Banking is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Clearstream
Banking Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any
risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 27 currencies, including
United States dollars. 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 described above. The
Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System S.C., a
Belgian cooperative corporation (the "Cooperative"). All operations
are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial
intermediaries and may include any underwriters, agents or dealers
with respect to
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any class or series of Securities offered hereby. 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.
The Euroclear Operator is the Belgian branch of a New York
banking corporation which is a member bank of the Federal Reserve
System. As such, it is regulated and examined by the Board of
Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions Governing
Use of Euroclear and the related Operating Procedures of the Euroclear
System and applicable Belgian law (collectively, the "Terms and
Conditions"). The Terms and Conditions govern transfers of securities
and cash within the Euroclear System, withdrawals 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 on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with
persons holding through Euroclear Participants.
Payments with respect to Securities held through Clearstream
Banking or Euroclear will be credited to the cash accounts of
Clearstream Banking Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the
extent received by its Depositary. Such payments will be subject to
tax withholding in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Consequences."
Clearstream Banking or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Securityholder
on behalf of a Clearstream Banking 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.
Although DTC, Clearstream Banking and Euroclear have agreed to
the foregoing procedures in order to facilitate transfers of
Securities among participants of DTC, Clearstream Banking and
Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any
time.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement,
the Notes, if any, and the Certificates of a given series will be
issued in fully registered, certificated form ("Definitive Notes" and
"Definitive Certificates", respectively, and collectively referred to
herein as "Definitive Securities") to Noteholders or
Certificateholders or their respective nominees, rather than to DTC or
its nominee, only if (i) DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such
Securities and such Administrator or 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), (ii) the Seller or the Administrator or Trustee, as
applicable, at its option, elects to terminate the book-entry system
through DTC or (iii) after the occurrence of an Event of Default or a
Servicer Default with respect to such Securities, holders representing
at least 51% of the outstanding principal amount of the Notes or the
Certificates, as the case may be, of such series, acting together as a
single class (but excluding any Notes or Certificates held by TMCC,
TMCRC or any affiliate thereof), 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 or Indenture Trustee will
be required to notify all applicable Securityholders of a given series
through Participants of the availability of Definitive Securities.
Upon surrender by DTC of the definitive certificates
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representing the corresponding Securities and receipt of instructions
for re-registration, the applicable Trustee or Indenture Trustee will
reissue such Securities as Definitive Securities to such
Securityholders.
Payments of principal of, and interest on, such Definitive
Securities will thereafter be made by the applicable Trustee or
Indenture Trustee in accordance with the procedures set forth in the
related Indenture or the related Trust Agreement or Pooling and
Servicing Agreement, as applicable, directly to holders of Definitive
Securities in whose names the Definitive Securities were registered at
the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such payments will be
made by check mailed to the address of such holder as it appears on
the register maintained by the applicable Trustee or Indenture
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
payment to the applicable Securityholders. The applicable Trustee or
the Indenture Trustee will provide such notice to the applicable
Securityholders not less than 15 nor more than 30 days prior to the
date on which such final payment is expected to occur.
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. Such 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 Trustee,
obtain access to the list of all Certificateholders maintained by such
Trustee for the purpose of communicating with other Certificateholders
with respect to their rights under the related Trust Agreement or
Pooling and Servicing Agreement or under such Certificates.
The Pooling and Servicing Agreement, Trust Agreement and
Indenture will not provide for the holding of annual or other meetings
of Securityholders.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on
or prior to each Payment Date, the Servicer will prepare and provide
to the related Indenture Trustee a statement to be delivered to the
related Noteholders on such Payment Date. With respect to each series
of Securities that includes Certificates, on or prior to each Payment
Date, the Servicer will prepare and provide to the related Trustee a
statement to be delivered to the related Certificateholders. With
respect to each series of Securities, each such statement to be
delivered to Securityholders will include (to the extent applicable)
the following information (and any other information so specified in
the related Prospectus Supplement) as to the Notes of such series and
as to the Certificates of such series with respect to such Payment
Date or the period since the previous Payment Date, as applicable:
(i) the amount of the payment allocable to the principal
amount of each class of such Notes and to the Certificate Balance
of each class of such Certificates;
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(ii) the amount of the payment allocable to interest on or
with respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the
last day of the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the
Note Pool Factor for each class of such Notes, and the
Certificate Balance and the Certificate Pool Factor for each
class of such Certificates, each after giving effect to all
payments reported under clause (i) above on such date;
(v) the amount of the Basic, Supplemental and Total
Servicing Fee paid to the Servicer with respect to the related
Collection Period;
(vi) the Interest Rate or Pass Through Rate for the Interest
Period relating to the succeeding Payment Date for any class of
Notes or Certificates of such series with variable or adjustable
rates;
(vii) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the
Certificateholders' Interest Carryover Shortfall and the
Certificateholders' Principal Carryover Shortfall (each as
defined in the related Prospectus Supplement), if any, in each
case as applicable to each class of Securities, and the change in
such amounts from the preceding statement;
(viii) the aggregate amount of monthly payments (or portions
thereof) determined by the Servicer to be due in one or more
future Collections Periods ("Payments Ahead") on deposit in the
related Payahead Account or held by the Servicer with respect to
the related Receivables and the change in such amount from the
immediately preceding Payment Date;
(ix) the amount of Advances made in respect of the related
Receivables and the related Collection Period and the amount of
unreimbursed Advances on such Payment Date; and
(x) the balance of any related Reserve Fund, Yield
Maintenance Account or other credit or liquidity enhancement on
such date, after giving effect to changes thereto on such date
and the amount of such changes.
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 such
Trust and received any payment thereon a statement containing certain
information for the purposes of such Securityholder's preparation of
federal income tax returns. See "Certain Federal Income Tax
Consequences".
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Seller and the Servicer will agree to service such
Receivables, each Trust Agreement (in the case of a grantor trust, the Pooling
and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued thereby and each Administration Agreement pursuant
to which TMCC will undertake certain administrative duties with respect to a
Trust that issues Notes (collectively, the "Transfer and Servicing Agreements").
Forms of the Transfer and Servicing Agreements have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part. The provisions
of any of the Transfer and Servicing Agreements may differ from those described
in this Prospectus and, if so, will be described in the related Prospectus
Supplement. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date specified with respect to any given Trust
in the related Prospectus Supplement (the "Closing Date"), TMCC will sell and
assign to the Seller, without recourse, pursuant to a Receivables Purchase
Agreement (the "Receivables Purchase Agreement"), its entire interest in the
Receivables comprising the related Receivables Pool, including the security
interests in the Financed Vehicles. On the Closing Date, the Seller will
transfer and assign to the applicable Trustee on behalf of the Trust, without
recourse, pursuant to a Sale and Servicing Agreement or a Pooling and Servicing
Agreement, as applicable, its entire interest in the Receivables comprising the
related Receivables Pool, including its security interests in the related
Financed Vehicles. Each such Receivable will be identified in a schedule
appearing as an exhibit to such Sale and Servicing Agreement or such Pooling and
Servicing Agreement (a "Schedule of Receivables"). The applicable Trustee will,
concurrently with such transfer and assignment, on behalf of the Trust, execute
and deliver the related Notes and/or Certificates. Unless otherwise provided in
the related Prospectus Supplement, the net proceeds received from the sale of
the Certificates and the Notes of a given series will be applied to the purchase
of the related Receivables from TMCC and, to the extent specified in the related
Prospectus Supplement, to make any required initial deposit into the Reserve
Fund or Yield Maintenance Account.
TMCC, pursuant to a Receivables Purchase Agreement, and the Seller,
pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, will represent and warrant, with respect to whether, among other
things: (i) the information provided in the related Schedule of Receivables is
true and correct in all material respects as of the opening of business on the
Cutoff Date, and no selection procedures adverse to the Certificateholders shall
have been utilized in selecting the Receivables; (ii) the terms of each
Receivable require the related Obligor to maintain physical damage insurance
covering the Financed Vehicle in accordance with the Seller's normal
requirements; (iii) as of the applicable Closing Date, to the best of its
knowledge, the related Receivables are free and clear of all security interests,
liens, charges and encumbrances that are prior to, or of the same priority with,
the security interests in the Financed Vehicles granted by the related
Receivables, and no offsets, defenses or counterclaims have been asserted or
threatened; (iv) as of the Closing Date, each of such Receivables is secured by
a first perfected security interest in favor of TMCC in the Financed Vehicle or
all necessary and appropriate actions have been taken to perfect a first
priority security interest; (v) each related Receivable, at the time it was
originated, complied and, as of the Closing Date, 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 (vi) any other representations and warranties that may be set forth in the
related Prospectus Supplement are true and correct in all material respects.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller so elects, the first) 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
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any Receivable, the Seller, unless the breach is cured in all material
respects, will repurchase such Receivable (a "Warranty Receivable") from such
Trust and, pursuant to the Receivables Purchase Agreement, TMCC will purchase
such Warranty Receivable from the Seller, at a price equal to the Warranty
Purchase Payment for such Receivable. The "Warranty Purchase Payment" (1) for a
Precomputed Receivable, will be equal to (a) the sum of (i) all remaining
Scheduled Payments (and any applicable Yield Maintenance Amounts), (ii) all past
due Scheduled Payments for which an Advance has not been made, (iii) all
outstanding Advances made by the Servicer in respect of such Precomputed
Receivable and (iv) an amount equal to any reimbursements of outstanding
Advances made by the Servicer with respect to such Precomputed Receivable from
collections made on or in respect of other Receivables, minus (b) the sum of (i)
the Rebate, if any, paid to the Obligor on a Precomputed Receivable on or before
the date of such purchase and (ii) any other proceeds previously received (e.g.,
insurance or other proceeds in respect of the liquidation of such Precomputed
Receivable) to the extent applied to reduce the Principal Balance of such
Precomputed Receivable and (2) for a Simple Interest Receivable, will be equal
to its unpaid principal balance, plus interest thereon at a rate equal to the
sum of the Interest Rate or Pass Through Rate specified in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement and the Servicing Fee
Rate to the last day of the Collection Period relating to such repurchase. This
repurchase obligation will constitute the sole remedy available to the
Securityholders, the Trustee or the Trust for any such uncured breach by the
Seller. The obligation of the Seller to repurchase a Receivable will not be
conditioned on performance by TMCC of its obligation to purchase such Receivable
from the Seller pursuant to the Receivables Purchase Agreement.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing both the Receivables and the
Servicer's own portfolio of automobile and/or light duty truck installment sales
contracts, as well as to reduce administrative costs, the Seller and each Trust
will designate the Servicer as custodian to maintain possession (directly, or
through an agent), on behalf of such Trust, of the related installment sale
contracts and any other documents relating to the Receivables. The Receivables
will not be physically segregated from other automobile and/or light duty truck
installment sales contracts of the Servicer, or those which the Servicer
services for others, to reflect the transfer to the related Trust. However, UCC
financing statements reflecting the sale and assignment of the Receivables by
TMCC to the Seller and by the Seller to the applicable Trust will be filed, and
the respective accounting records and computer files of TMCC and the Seller will
reflect such sale and assignment. Because the Receivables will remain in the
possession of the Servicer or its agent and will not be stamped or otherwise
marked to reflect the assignment to the Trustee, if a subsequent purchaser were
able to take physical possession of the Receivables without knowledge of the
assignment, the Trustee's interest in the Receivables could be defeated. See
"Certain Legal Aspects of the Receivables--Security Interests". In addition,
under certain circumstances the Trustee's security interest in collections that
have been received by the Servicer but not yet remitted to the related
Collection Account could be defeated.
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts (each, a
"Collection Account"), in the name of the Indenture Trustee on behalf of the
related Securityholders, into which payments made on or with respect to the
related Receivables and all amounts released from any Yield Maintenance Account,
Reserve Fund or other form of credit enhancement will be deposited for payment
to the related Securityholders. With respect to each Trust that does not issue
Notes, the Servicer will also establish and maintain a Collection Account and
any other Trust Account in the name of the related Trustee on behalf of the
related Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series of Securities an additional account (the "Payahead
Account"), in the name of the related Trustee or, if such Trust issues Notes,
the Indenture Trustee, into which, to the extent required by the Sale and
Servicing Agreement or Pooling and Servicing Agreement, early payments by or on
behalf of Obligors on Precomputed Receivables will be deposited until such time
as the related payment becomes due. Until such time as payments ahead are
transferred from the Payahead Account to a Collection Account, they will not
constitute collected interest or
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collected principal and will not be available for payment to the applicable
Noteholders or Certificateholders. The Payahead Account will initially be
maintained with the applicable Indenture Trustee or Trustee.
Any other accounts to be established with respect to a Trust, including any
Yield Maintenance Account or any Reserve Fund will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the related Collection Account, any
Yield Maintenance Account, the Reserve Fund and such other accounts as may be
identified in the related Prospectus Supplement (collectively, the "Trust
Accounts") will be invested as provided in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement in Eligible Investments. "Eligible
Investments" will be specified in the related Transfer and Servicing Agreements
and are generally limited to investments acceptable to the Rating Agencies
rating such Securities as being consistent with the rating of such Securities.
Except as described below or in the related Prospectus Supplement, Eligible
Investments are 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, funds in any Trust Account may be invested in securities that
will not mature prior to the date of the next payment with respect to such
Certificates or Notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Fund at any time may be less than the balance of
the Reserve Fund. If the amount required to be withdrawn from any Reserve Fund
to cover shortfalls in collections on the related Receivables (as provided in
the related Prospectus Supplement) exceeds the amount of cash in the Reserve
Fund, a temporary shortfall in the amounts paid to the related Noteholders or
Certificateholders could result, which could, in turn, increase the average life
of the Notes or the Certificates of such series. Except as otherwise specified
in the related Prospectus Supplement, investment earnings on funds deposited in
the Trust Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), shall be released to the Servicer on each Payment Date
and shall be the property thereof.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository 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), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee (if it is the
Paying Agent under the Trust Agreement), as applicable, or (b) 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.
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 or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable retail
installment sale contracts it services for itself or others. Consistent with its
normal procedures, the Servicer will be authorized to grant certain Rebates,
adjustments or extensions with respect to the Receivables without the prior
written consent of the Trustee. However, if any such modification alters the APR
or the Amount Financed or the total number of Scheduled Payments of a Receivable
or extends the maturity of a Receivable beyond the final scheduled maturity date
set forth in the applicable Prospectus Supplement (the "Final Maturity Scheduled
Date"), the Servicer will be obligated either to purchase such Receivable as
described in the next paragraph or make Advances on each subsequent Payment Date
in amounts equal to the amount of any reduction to the related Scheduled
Payments to be paid by the related Obligors during the subsequent Collection
Periods.
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In the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Servicer will covenant that except as otherwise contemplated
therein, (i) it will not release any Financed Vehicle from the security interest
granted in the related Receivable, (ii) it will do nothing to impair the rights
of the Securityholders in the Receivables and (iii) it will not amend any
Receivable such that the total number of Scheduled Payments, the Amount Financed
or the APR is altered or the maturity of a Receivable is extended beyond the
Final Scheduled Maturity Date unless it is making Advances corresponding to
reductions to Scheduled Payments as described above. As of the last day of the
second (or, if the Servicer so elects, the first) Collection Period following
the Collection Period in which the Seller, the Servicer or the Trustee discovers
or receives notice of a breach of any such covenant that materially and
adversely affects the interests of the Certificateholders in a Receivable, the
Servicer, unless the breach is cured in all material respects, will purchase the
Receivable (an "Administrative Receivable") from the Trustee at a price equal to
the Administrative Purchase Payment for such Receivable. The "Administrative
Purchase Payment" (1) for a Precomputed Receivable, will be equal to (a) the sum
of (i) all remaining Scheduled Payments (plus any applicable Yield Maintenance
Amount), (ii) an amount equal to any reimbursements of outstanding Advances made
by the Servicer with respect to such Precomputed Receivable from collections on
or in respect of other Receivables and (iii) all past due Scheduled Payments for
which an Advance has not been made, minus (b) all Payments Ahead with respect to
such Receivable then on deposit in the Payahead Account and the Rebate, if any,
paid to the Obligor on a Precomputed Receivable on or before the date of such
purchase and (2) for a Simple Interest Receivable, will be equal to its unpaid
Principal Balance, plus interest thereon at a rate equal to the sum of the
Interest Rate or Pass Through Rate specified in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and the Servicing Fee Rate to the
last day of the Collection Period relating to such purchase. Upon the purchase
of any Administrative Receivable, the Servicer will for all purposes of the Sale
and Servicing Agreement or the Pooling Agreement, as applicable, be deemed to
have released all claims for the reimbursement of outstanding Advances made in
respect of such Receivable. This purchase obligation will constitute the sole
remedy available to the Certificateholders, the Trust or the Trustee for any
such uncured breach by the Servicer.
If the Servicer determines that eventual payment in full of a Receivable is
unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon such Receivable, including the repossession and
disposition of the related Financed Vehicle at a public or private sale, or the
taking of any other action permitted by applicable law. See "Certain Legal
Aspects of the Receivables".
INSURANCE ON FINANCED VEHICLES
Each Receivable requires the related Obligor to maintain both comprehensive
and collision insurance covering the Financed Vehicle in an amount not less than
the actual cash value thereof pursuant to which TMCC is named as a loss payee.
Since the Obligors may select their own insurers to provide the requisite
coverage, the specific terms and conditions of their policies may vary. The
terms of each Receivable allow, but do not require, TMCC to (and TMCC, in
accordance with its current normal servicing procedures, does not) obtain any
such coverage on behalf of the Obligor. TMCC currently does not monitor ongoing
insurance compliance in connection with its customary servicing procedures. In
the event that the failure of an Obligor to maintain any such required insurance
results in a shortfall in amounts to be paid to Certificateholders, to the
extent such shortfall is not covered by amounts on deposit in the Reserve Fund
or other methods of credit enhancement, the Securityholders could suffer a loss
on their investment.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account.
The Servicer may retain all payments on or in respect of the Receivables
received from Obligors and all proceeds of Receivables collected during each
Collection Period without segregation in its own accounts until
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deposited in the Collection Account on the Business Day immediately
preceding the related Payment Date unless and until (i) TMCC ceases to be the
Servicer, (ii) an Event of Default exists and is continuing or (iii) the
short-term unsecured debt of TMCC ceases to be rated at least P-1 by Moody's and
A-1 by Standard & Poor's, and alternative arrangements acceptable to the Rating
Agencies are not made. Thereafter, the Servicer will deposit all such payments
and proceeds into the Collection Account not later than two Business Days after
receipt. However, pending deposit into the Collection 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, and the Servicer, at its own risk and for its
own benefit, may instruct the Trustee to invest amounts held in the Collection
Account or the Payahead Account from the time deposited until the related
Payment Date in Eligible Investments. The Seller or the Servicer, as the case
may be, will remit the aggregate Warranty Purchase Payments and Administrative
Purchase Payments of any Receivables to be purchased from the Trust into the
Collection Account on or before the Business Day immediately preceding the
related Payment Date. If the Servicer were unable to remit such funds,
Securityholders might incur a loss.
"Eligible Investments" will be specified in the Transfer and Servicing
Agreements and will be limited to investments that meet the criteria of each
Rating Agency from time to time as being consistent with its then-current
ratings of the Securities.
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 Warranty Purchase Payments and Administrative Purchase Payments with
respect to Receivables required to be repurchased by the Seller or the Servicer,
as applicable.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or certain other similar fees
or charges will be applied first to any outstanding Advances made by the
Servicer with respect to such Receivable, and then to the related Scheduled
Payment. Any collections on or in respect of a Receivable remaining after such
applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
in respect of such Receivable (each, a "Prepayment"). All other Excess Payments
in respect of Precomputed Receivables will be held by the Servicer (or if the
Servicer has not satisfied the conditions in clauses (i) through (iii) in the
third preceding paragraph, deposited in the Payahead Account), as a Payment
Ahead.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, if the
Scheduled Payment due on a Precomputed Receivable (other than an Administrative
Receivable or a Warranty Receivable) is not received in full by the end of the
month in which it is due, whether as the result of any extension granted to the
Obligor or otherwise, the amount of Payments Ahead, if any, not previously
applied with respect to such Precomputed Receivable, shall be applied by the
Servicer to the extent of the shortfall and the Payments Ahead shall be reduced
accordingly. If any shortfall remains, the Servicer will make an advance to the
Trust in an amount equal to the amount of such shortfall (each, a "Precomputed
Advance"). The Servicer will not be obligated to make a Precomputed Advance to
the extent that it determines, in its sole discretion, that such Precomputed
Advance will not be recovered from subsequent collections on or in respect of
the related Precomputed Receivable. All Precomputed Advances shall be
reimbursable to the Servicer, without interest, if and when a payment relating
to a Receivable with respect to which a Precomputed Advance has previously been
made is subsequently received (other than from Administrative Purchase
Payments). Upon the determination by the Servicer that reimbursement from the
preceding source is unlikely, it will be entitled to recover unreimbursed
Precomputed Advances from collections on or in respect of other Receivables.
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In addition, if the Scheduled Payment on a Simple Interest Receivable
(other than an Administrative Receivable or a Warranty Receivable) is not
received in full by the end of the month in which it is due, the Servicer shall,
subject to the limitations set forth below, advance to the Trust an amount with
respect to such Simple Interest Receivable equal to the product of the Principal
Balance of such Simple Interest Receivable as of the first day of the related
Collection Period and one-twelfth of its APR minus the amount of interest
actually received on such Simple Interest Receivable during the related
Collection Period (each, a "Simple Interest Advance", and together with the
Precomputed Advances, the "Advances"). If such a calculation results in a
negative number, an amount equal to such negative amount shall be paid to the
Servicer in reimbursement of outstanding Simple Interest Advances. In addition,
in the event that a Simple Interest Receivable becomes a Liquidated Receivable,
the amount of accrued and unpaid interest thereon (but not including interest
for the current Collection Period) shall, up to the amount of all outstanding
Simple Interest Advances in respect thereof, be withdrawn from the related
Collection Account and paid to the Servicer in reimbursement of such outstanding
Simple Interest Advances. No advances of principal will be made with respect to
Simple Interest Receivables. The Servicer will not be obligated to make a Simple
Interest Advance (other than in respect of an interest shortfall arising from
the prepayment of a Simple Interest Receivable) to the extent that it
determines, in its sole discretion, that such Simple Interest Advance will not
be recovered from subsequent collections on or in respect of the related Simple
Interest Receivable. All Simple Interest Advances shall be reimbursable to the
Servicer, without interest, when a payment relating to a Receivable with respect
to which a Simple Interest Advance has previously been made is subsequently
received (other than from Administrative Purchase Payments). Upon the
determination by the Servicer that reimbursement from the preceding source is
unlikely, it will be entitled to recover unreimbursed Simple Interest Advances
from collections on or in respect of other Receivables.
The Servicer will also be required to make Advances with respect to each
Receivable that it does not purchase as described above under "--Servicing
Procedures" as to which it has made any modification that reduces the amount of
Scheduled Payments to be paid by the related Obligor during subsequent
Collection Periods.
The Servicer will make all Advances by depositing into the related
Collection Account an amount equal to the aggregate of the Precomputed Advances
and Simple Interest Advances due in respect of a Collection Period on the
Business Day immediately preceding the related Payment Date.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to any
Trust, the Servicer will be entitled to receive the servicing fees for each
Collection Period in an amount equal to a specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") of the
Pool Balance as of the first day of the related Collection Period (the "Basic
Servicing Fee"). The Total Servicing Fee (together with any portion of all
servicing fees that remains unpaid from prior Payment Dates) will be paid as
provided in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement with respect
to a given Trust, the Servicer will also be entitled to collect and retain any
late fees, prepayment charges, extension fees and other administrative fees or
similar charges allowed by applicable law with respect to the related
Receivables as additional servicing compensation (the "Supplemental Servicing
Fee," and together with the Basic Servicing Fee, the "Total Servicing Fee") and
will be entitled to reimbursement from the Trust for certain liabilities. The
Servicer may also be entitled to receive any interest earned during a Collection
Period from the investment of monies in the Trust Accounts. 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 Total 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, providing
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payment information, paying costs of collections and policing the
collateral. The Servicing Fee also will compensate the Servicer for
administering the particular Receivables Pool, including making Advances,
accounting for collections and furnishing monthly and annual statements to the
related Trustee and Indenture Trustee with respect to payments and generating
federal income tax information for such Trust and for the related Noteholders
and Certificateholders. The Total Servicing Fee also will reimburse the Servicer
for certain taxes, the fees of the related Trustee and Indenture Trustee, if
any, accounting fees, outside auditor fees, data processing costs and other
costs incurred in connection with administering the applicable Receivables Pool.
The "Pool Balance" will equal the aggregate Principal Balance of the
Receivables. The "Principal Balance" of a Receivable as of any date will equal
the Amount Financed (as defined in the related Transfer and Servicing Agreement)
minus the sum of (i) in the case of a Precomputed Receivable, that portion of
all Scheduled Payments due on or prior to such date allocable to principal,
computed in accordance with the actuarial method, (ii) in the case of a Simple
Interest Receivable, that portion of all Scheduled Payments actually received on
or prior to such date allocable to principal, (iii) any Warranty Purchase
Payment or Administrative Purchase Payment with respect to such Receivable
allocable to principal (to the extent not included in clauses (i) and (ii)
above) and (iv) any Prepayments or other payments applied to reduce the unpaid
principal balance of such Receivable (to the extent not included in clauses (i),
(ii) and (iii) above).
PAYMENTS
With respect to each series of Securities, beginning on the Payment Date
specified in the related Prospectus Supplement, payments of principal and
interest (or, where applicable, of principal or interest only) on each class of
such Securities entitled thereto will be made by the applicable Indenture
Trustee to the Noteholders and by the applicable Trustee to the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all payments to each class of Certificateholders of such series
will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date collections on the related
Receivables will be withdrawn from the related Collection Account and will be
paid to the Noteholders and/or Certificateholders to the extent provided in the
related Prospectus Supplement. Credit enhancement, such as a Reserve Fund, will
be available to cover any shortfalls in the amount available for payment to the
Securityholders on such date to the extent specified in the related Prospectus
Supplement. As more fully described in the related Prospectus Supplement, and
unless otherwise specified therein, (i) payments in respect of principal of a
class of Securities of a given series will be subordinate to payments in respect
of interest on such class; (ii) payments in respect of one or more classes of
Certificates of such series may be subordinate to payments in respect of Notes,
if any, of such series or other classes of Certificates of such series; and
(iii) payments in respect of one or more classes of Notes of such series may be
subordinated to payments in respect of other classes of Notes of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Funds, over-collateralization, letters of credit, credit
or liquidity facilities, surety bonds, guaranteed investment contracts, swaps or
other interest rate protection agreements, repurchase obligations, yield
maintenance agreements, other agreements with respect to third party payments or
other support, cash deposits or such other arrangements as may be described in
the related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit or cash
flow enhancement for a
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class of Securities may cover one or more other classes of Securities of
the same series, and credit or cash flow enhancement for a series of Securities
may cover one or more other series of Securities.
The presence of a Reserve Fund and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such 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 interest thereon. 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 deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one class or series of Securities, Securityholders of any such
class or series will be subject to the risk that such credit enhancement will be
exhausted by the claims of Securityholders of other classes or series.
RESERVE FUND. If so provided in the related Prospectus Supplement, pursuant
to the related Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Seller or a third party will establish for a series or class of Securities
an account, as specified in the related Prospectus Supplement (the "Reserve
Fund"), which will be maintained with the related Trustee or Indenture Trustee,
as applicable. Unless otherwise provided in the related Prospectus Supplement,
the Reserve Fund will be funded by an initial deposit by the Seller or a third
party on the Closing Date in the amount set forth in the related Prospectus
Supplement (the "Reserve Fund Initial Deposit"). To the extent provided in the
related Prospectus Supplement, the amount on deposit in the Reserve Fund will be
increased on each Payment Date thereafter up to the Specified Reserve Fund
Balance (as defined in the related Prospectus Supplement) by the deposit therein
of the amount of collections on the related Receivables remaining on each such
Payment Date after the payment of all other required payments on such date. The
related Prospectus Supplement will describe the circumstances and manner under
which payments may be made out of the Reserve Fund, either to holders of the
Securities covered thereby or to the Seller or a third party.
YIELD MAINTENANCE ACCOUNT; YIELD MAINTENANCE AGREEMENT
YIELD MAINTENANCE ACCOUNT. A "Yield Maintenance Account" may be established
with respect to any class or series of Securities. The terms relating to any
such account will be set forth in the related Prospectus Supplement. Each Yield
Maintenance Account will be designed to hold funds to be applied by the related
Trustee or, if such Trust issues Notes, the Indenture Trustee, to provide
payments to Securityholders in respect of Receivables that have APRs less than
the sum of the Pass Through Rate or Interest Rate specified in the related
Prospectus Supplement plus the Servicing Fee Rate specified in the related
Prospectus Supplement (the "Required Rate"). Unless otherwise specified in the
related Prospectus Supplement, each Yield Maintenance Account will be maintained
with the same entity with which the related Collection Account is maintained and
will be created with an initial deposit in an amount and by the Seller or other
person specified in the related Prospectus Supplement.
On each Payment Date, the related Trustee or Indenture Trustee will
transfer to the Collection Account from monies on deposit in the Yield
Maintenance Account an amount specified in the related Prospectus Supplement
(the "Yield Maintenance Deposit" ) in respect of the Receivables having APRs
less than the Required Rate for such Payment Date. Unless otherwise specified in
the related Prospectus Supplement, amounts on deposit on any Payment Date in the
Yield Maintenance Account in excess of the "Required Yield Maintenance Amount"
specified in the related Prospectus Supplement, after giving effect to all
payments to be made on such Payment Date, will be released to the Seller. Monies
on deposit in the Yield Maintenance Account may be invested in Eligible
Investments under the circumstances and in the manner described in the related
Pooling and Servicing Agreement or Trust Agreement. Any monies remaining on
deposit in the Yield Maintenance Account upon the termination of the Trust also
will be released to the Seller.
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YIELD MAINTENANCE AGREEMENT. If a Yield Maintenance Account is established
with respect to any class or series of Securities which allows or requires any
party to make deposits therein after the Closing Date, TMCC, the Seller, any
third party responsible for such deposits and the related Trustee or Indenture
Trustee, as the case may be, will enter into a "Yield Maintenance Agreement"
pursuant to which, on each Payment Date, such party will deposit into the Yield
Maintenance Account the difference between the amount held on deposit in the
Yield Maintenance Account as of such Payment Date and the Required Yield
Maintenance Amount, in each case determined after giving effect to all required
withdrawals from the Yield Maintenance Account on such Payment Date.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily (as described in "--Collections" above), the Servicer will be
permitted to make the deposit of collections, aggregate Advances and
Administrative Purchase Amounts for any Trust for or with respect to the related
Collection Period on a monthly basis and net of payments to be made to the
Servicer for such Trust with respect to such Collection Period. The Servicer may
cause to be made a single, net transfer from the Collection Account to the
Payahead Account, if any, or vice versa. The Servicer, however, will account to
the Trustee, any Indenture Trustee, the Noteholders, if any, and the
Certificateholders with respect to each Trust as if all deposits, payments and
transfers were made individually. With respect to any Trust that issues both
Certificates and Notes, if the related Payment Dates are not the same for all
classes of Securities, all distributions, deposits or other remittances made on
a Payment Date will be treated as having been distributed, deposited or remitted
on the same Payment Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on a Payment Date.
STATEMENTS TO TRUSTEES AND TRUST
On a Business Day in each month that precedes each Payment Date (each a
"Determination Date" to be specified in the related Prospectus Supplement), the
Servicer will provide to the applicable Indenture Trustee, if any, and the
applicable Trustee a statement setting forth with respect to a series of
Securities substantially the same information as is required to be provided in
the periodic reports provided to Securityholders of such series described under
"Certain Information Regarding the Securities--Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of nationally recognized independent accountants will
furnish to the related Trust and Indenture Trustee or Trustee, as applicable,
annually a statement as to compliance in all material respects by the Servicer
during the preceding twelve months (or, in the case of the first such
certificate, from the applicable Closing Date, which may be a longer or shorter
period) with certain standards relating to the servicing of the applicable
Receivables.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) in all material respects or, if there
has been a default in the fulfillment of any such obligation, describing each
such default. The Servicer has agreed to give each Indenture Trustee and each
Trustee notice of certain Servicer Defaults under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
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CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that TMCC may not resign from its obligations and duties as Servicer
thereunder, except upon determination that TMCC's performance of such duties is
no longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee or Trustee, as applicable, or a
successor servicer has assumed TMCC's servicing obligations and duties under
such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling 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 Pooling and Servicing Agreement or for errors in judgment; except that
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 and Pooling 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 or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Under the circumstances specified in each Sale and Servicing Agreement and
Pooling 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 all or
substantially all of the business of the Servicer will be the successor of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer to deliver
to the Trustee the Servicer's Certificate for the related Collection Period, or
any failure by the Servicer (or the Seller, so long as TMCC is the Servicer) to
deliver to the applicable Trustee or Indenture Trustee for deposit in any of the
Trust Accounts any required payment or to direct the applicable Trustee or
Indenture Trustee to make any required distributions therefrom, which failure
continues unremedied for three Business Days after receipt by the Servicer of
written notice of such failure given (A) to the Servicer (or the Seller, so long
as TMCC is the Servicer) by the applicable Trustee or Indenture Trustee or (B)
to the Seller or the Servicer, as the case may be, and to the applicable Trustee
and Indenture Trustee, by the holders of Notes or Certificates of the related
series evidencing not less than 25% in principal amount of such outstanding
Notes or Certificates (in each case, excluding Securities held by TMCC, TMCRC or
any affiliate thereof); (ii) any failure by the Servicer duly to observe or
perform in any material respect any other covenant or agreement in such Sale and
Servicing Agreement or Pooling 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 90 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 Indenture Trustee or (B) to the Servicer or
the Seller, as the case may be, and to the applicable Trustee and Indenture
Trustee, by the holders of Notes or Certificates of the related series
evidencing not less than 25% in principal amount of such outstanding Notes or
Certificates (in each case, excluding Securities held by TMCC, TMCRC or any
affiliate thereof); and (iii) the occurrence of an Insolvency Event with respect
to the Servicer. Notwithstanding the foregoing, a delay in or failure of
performance referred to under clause (i) above for a period of ten Business Days
shall not constitute a Servicer Default if such failure or delay is caused by an
event of force majeure. Upon the occurrence of any such event, the Servicer
shall not be relieved from using all commercially reasonable efforts to perform
its obligations in a timely manner in accordance with the terms of the Servicing
Agreement, and the Servicer shall provide to the
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Trustee, the Indenture Trustee, the Seller and the Securityholders prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations.
"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 Notes of the related series evidencing not less than 51% of principal
amount of such Notes then outstanding (excluding any Notes held by TMCC, TMCRC
or any affiliate thereof), acting together as a single class, may terminate all
the rights and obligations of the Servicer under such Sale and Servicing
Agreement, whereupon 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. In the case of any Trust that has
not issued Notes, unless otherwise provided in the related Prospectus
Supplement, as long as a Servicer Default under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement remains unremedied, the related
Trustee or holders of Certificates of the related series evidencing not less
than 51% of the principal amount of such Certificates then outstanding
(excluding any Certificates held by TMCC, TMCRC or any affiliate thereof),
acting together as a single class, may terminate all the rights and obligations
of the Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement, whereupon such Trustee or a successor servicer appointed by such
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements. If 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 such Indenture Trustee, such Noteholders,
such Trustee or such Certificateholders from effecting a transfer of servicing.
In the event that such Indenture Trustee or 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 $50,000,000 and whose
regular business includes the servicing of automobile and/or light duty truck
receivables. Such Indenture Trustee or Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement. Notwithstanding such termination, the Servicer shall be
entitled to payment of certain amounts payable to it prior to such termination
for services rendered prior to such termination.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, (i) the holders of Notes evidencing not
less than 51% of the principal amount of the then outstanding Notes of the
related series, acting together as a single class (excluding any Notes held by
TMCC, TMCRC or any affiliate thereof) or (ii) in the case of any Servicer
Default which does not adversely affect the related Indenture Trustee or such
Noteholders, the holders of the Certificates of such series evidencing not less
than 51% of the outstanding Certificate Balance (excluding any Certificates held
by TMCC, TMCRC or any affiliate thereof); acting together as a single class,
may, on behalf of all such Noteholders or Certificateholders, waive any default
by the Servicer in the performance of its obligations under the related Sale and
Servicing Agreement and its consequences, except 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. With respect to each Trust
that has not issued Notes, holders of Certificates of such series evidencing not
less than 51% of the principal amount of such Certificates then outstanding
(excluding any Certificates held by TMCC, TMCRC or any affiliate thereof),
acting together as a single class, may, on behalf of all such
Certificateholders, waive any
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default by the Servicer in the performance of its obligations under the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, except a
Servicer Default in making any required deposits to or payments from the related
Trust Accounts in accordance with such Sale and Servicing Agreement or Pooling
and Servicing Agreement or in respect of a covenant or provision of the related
Sale and Servicing Agreement or Pooling and Servicing Agreement that cannot be
modified or amended without the consent of the Holder of each Certificate. No
such waiver will impair such Noteholders' or Certificateholders' rights with
respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements may be amended by the parties thereto, without
the consent of the related Noteholders or Certificateholders to cure any
ambiguity, to correct or supplement any provisions in the Transfer and Servicing
Agreements or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the related Trustee or Indenture Trustee, as applicable,
materially and adversely affect the interest of any such Noteholder or
Certificateholder.
Each Transfer and Servicing Agreement may also be amended by the parties
thereto without the consent of any Noteholder or Certificateholder for the
purpose of changing the formula for determining the Specified Reserve Fund
Balance, the manner in which a Reserve Fund is funded, changing the remittance
schedule for deposit of collections in accounts or changing the definition of
Eligible Investments if (a) the relevant trustee has been provided a letter from
each Rating Agency to the effect that such amendment will not result in the
qualification, reduction or withdrawal of any rating it currently assigns to any
class of Notes or Certificates or (b) the relevant trustee has received the
consent of the holders of at least 51% of the outstanding principal amount of
each class of Notes and Certificates (or the relevant class or classes of Notes
or Certificates) of such series, voting together as a single class; provided
that no such amendment shall increase or reduce in any manner or accelerate or
delay the timing of collections on the related contracts or payments required to
be made to the holders of any Notes or Certificates of such series without the
consent of the holders of all of the affected Notes or Certificates.
Unless otherwise specified in the related Prospectus Supplement, the
Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer, the related Trustee and any related Indenture Trustee with the consent
of (i) the holders of Notes evidencing not less than 51% of the principal amount
of then outstanding Notes, if any, of the related series, acting together as a
single class (excluding Notes held by TMCC. TMCRC or any affiliate thereof), or
(ii) in the case of any amendment which does not adversely affect the related
Indenture Trustee or such Noteholders, the holders of the Certificates of such
series evidencing not less than 51% of the outstanding Certificate Balance
(excluding Certificates held by TMCC. TMCRC or any affiliate thereof), acting
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Transfer and
Servicing Agreements or of modifying in any manner the rights of such
Noteholders or Certificateholders; provided, however, that no such amendment
shall (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 which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes or Certificates
of each class affected thereby.
NON-PETITION
Each Trust Agreement will provide that the applicable 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 the Seller) of such Trust and the delivery to such Trustee by each
such
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Certificateholder (including the Seller) 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 given series and the
satisfaction and discharge of the related Indenture, the related 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.
SELLER LIABILITY
Under each Trust Agreement, the Seller will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder in
the capacity of an investor with respect to such Trust) arising out of or based
on the arrangement created by such Trust Agreement as though such arrangement
created a partnership under the Delaware Revised Uniform Limited Partnership Act
in which the Seller was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the disposition
of any amounts received upon liquidation of any property remaining in the Trust,
(ii) the payment to Noteholders, if any, and Certificateholders of the related
series of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements and (iii) the occurrence of any event described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will have the option to
purchase from each Trust, as of the end of any applicable Collection Period, if
the then outstanding Pool Balance with respect to the Receivables held by such
Trust is 10% or less of the Initial Pool Balance, the corpus of the Trust at a
price equal to the aggregate Warranty Purchase Payments or Administrative
Purchase Payments, as the case may be, for the Receivables (including
Receivables that became Defaulted Receivables in the Collection Period preceding
the Payment Date on which such purchase is effected) plus the appraised value of
any other property held as part of the Trust (less liquidation expenses). The
related Trustee and related Indenture Trustee, if any, will give written notice
of termination to each Securityholder.
As described below under "The Swap Agreement", if a Swap Termination
occurs, the principal of each class of Certificates may become immediately
payable and the Trust will terminate. In such event, the Trustee will be
obligated to liquidate the assets of the Trust and the proceeds therefrom (and
amounts held in related accounts) will be applied to pay the Notes and
Certificates of the related series in full, to the extent of amounts available
therefor.
Upon termination of any Trust, the related Trustee shall, or shall direct
the related Indenture Trustee to, promptly sell the assets of such Trust (other
than the Trust Accounts) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation of
the Receivables of such Trust will be treated as collections on such Receivables
and deposited in the related Collection Account. With respect to any Trust, if
the proceeds from the liquidation of the related Receivables and any amounts on
deposit in the related Reserve Fund, if any, Yield Maintenance Account, if any,
Payahead Account, if any, and Collection Account are not sufficient to pay the
Notes, if any, and the Certificates of the related series in full, the amount of
principal returned to Noteholders and Certificateholders thereof will be reduced
and some or all of such Noteholders and Certificateholders will incur a loss.
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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 any
of the events specified above and the subsequent payment to the related
Certificateholders of all amounts required to be paid to them pursuant to the
applicable Trust Agreement or Pooling and Servicing Agreement will effect early
retirement of the Certificates of such series.
ADMINISTRATION AGREEMENT
TMCC, in its capacity as administrator (the "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 pursuant to which 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. If so
specified in the related Prospectus Supplement with respect to any such Trust,
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 of such amount as may be set forth in the related Prospectus Supplement (the
"Administration Fee"), which fee will be paid by the Servicer.
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TMCC DEMAND NOTES
The following summary describes certain terms of demand notes that may be
issued from time to time by TMCC (the "TMCC Demand Notes"). TMCC Demand Notes
will be issued under a Demand Notes Indenture (the "Demand Notes Indenture"),
between TMCC and the trustee thereunder (in such capacity, the "Demand Notes
Indenture Trustee"). The characteristics of any particular series of TMCC Demand
Notes and the provisions of any particular Demand Notes Indenture may differ
from those described in this section and will be more fully described in the
related Prospectus Supplement. In addition, this summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of any Demand Notes Indenture that is entered into by the related
trust.
GENERAL
Collections in respect of the receivables will be applied to make payments
of interest and principal of each class of Securities. If so specified in the
related Prospectus Supplement, payments of interest and/or principal of one or
more classes of Securities may be made on a quarterly, semi-annual or annual
basis, and not simply as a pass-through of collections received during a
particular month. In order to make distributions of principal and/or interest on
a basis other than monthly, the Trustee will be required to invest amounts
otherwise payable as principal or interest of the specified classes of
Securities in highly rated investments maturing on or just prior to specified
Payment Dates and bearing interest at rates specified in the related Prospectus
Supplement as directed by the Servicer. The Trustee may invest some or all such
funds in TMCC Demand Notes, due to the administrative difficulties associated
with regularly obtaining highly rated investments in variable amounts with the
necessary maturities and demand features that earn a sufficient amount of
interest.
The principal amount of the TMCC Demand Notes outstanding will change from
time to time, depending on the amount of collections invested. The aggregate
principal amount of TMCC Demand Notes that may be issued under any Demand Notes
Indenture will be set forth in the related Prospectus Supplement. Interest on
the TMCC Demand Notes will be paid at rates and on terms set forth in the
related Prospectus Supplement. Different forms of TMCC Demand Notes will be used
to represent investments of Collections relating to interest and investments of
Collections relating to principal. Interest related demand notes will generally
mature on the dates on which interest is to be paid to Securityholders.
Principal related demand notes will generally mature on the dates on which
principal is to be paid to Securityholders. In addition, the Trustee will
generally have the right to demand payment of the TMCC Demand Notes in
connection with the reduction of TMCC's rating to a level below that specified
in the related Prospectus Supplement or upon the occurrence of other events
specified in the related Prospectus Supplement. See "Risk Factors--THE SWAP AND
THE DEMAND NOTES MAY AFFECT THE RATINGS OF THE SECURITIES." The payment terms
relating to the TMCC Demand Notes will be set forth in detail in the related
Prospectus Supplement.
TMCC Demand Notes will be unsecured general obligations of TMCC and will
rank PARI PASSU with all other unsecured and unsubordinated indebtedness of TMCC
from time to time outstanding. TMCC Demand Notes will be obligations solely of
TMCC and will not be obligations of, or guaranteed by, TMS or any affiliate of
TMCC or TMS, directly or indirectly. TMCC Demand Notes will not be subject to
redemption by TMCC and will not have the benefit of any sinking fund.
Any TMCC Demand Notes will be issued only in fully registered form without
interest coupons, and payment of principal of and interest on TMCC Demand Notes
will be made by the Demand Notes Indenture Trustee as paying agent by wire
transfer to an account maintained by the Trustee, as the holder of the TMCC
Demand Notes.
No Securityholder will have a direct interest in any TMCC Demand Notes or
have any direct rights under the TMCC Demand Notes or the Demand Notes
Indenture. The Trustee, on behalf of the Trust, will be the only holder of the
TMCC Demand Notes, which it will hold for the benefit of the Securityholders. In
the event any vote or other action, including action upon the occurrence of an
Event of Default under the Demand
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Notes Indenture, is required or permitted by the holders of the TMCC Demand
Notes under the Demand Notes Indenture, the Trustee as such holder will be
permitted to vote or take such other action as it shall deem fit. However, the
Trustee, on behalf of the Trust, shall be permitted to seek the direction of the
Securityholders before taking any such action, all as further described in the
related Prospectus Supplement. References under this caption to "holders of the
TMCC Demand Notes" and phrases of similar import shall be to the Trustee as the
holder of the TMCC Demand Notes.
REMOVAL OF DEMAND NOTES INDENTURE TRUSTEE; SUCCESSOR DEMAND NOTES INDENTURE
TRUSTEE
The Demand Notes Indenture Trustee may resign by providing written notice
to TMCC and the Trust, as holder of the TMCC Demand Notes. The Trust, as holder
of the TMCC Demand Notes, may remove the Demand Notes Indenture Trustee by
written notice thereto and to TMCC, and may appoint a successor Demand Notes
Indenture Trustee. TMCC may remove the Demand Notes Indenture Trustee in the
event that: (a) the Demand Notes Indenture Trustee fails to continue to satisfy
the criteria for eligibility to act as Demand Notes Indenture Trustee; (b) the
Demand Notes Indenture Trustee is adjudged a bankrupt or insolvent; (c) a
receiver or other public officer takes charge of the Demand Notes Indenture
Trustee or its property; or (d) the Demand Notes Indenture Trustee otherwise
becomes incapable of acting in such capacity.
If the Demand Notes Indenture Trustee resigns, is removed or is unable to
act as Demand Notes Indenture Trustee for any reason, TMCC shall promptly
appoint a successor Demand Notes Indenture Trustee, unless the Trust shall
already have done so. Within one year after a successor Demand Notes Indenture
Trustee takes office, the Trust may appoint a successor Demand Notes Indenture
Trustee to replace any successor Demand Notes Indenture Trustee appointed by
TMCC. Any resignation or removal of the Demand Notes Indenture Trustee and
appointment of a successor Demand Notes Indenture Trustee shall become effective
only upon such successor's acceptance of such appointment and the payment of
outstanding fees and expenses due to the prior Demand Notes Indenture Trustee as
set forth in the Demand Notes Indenture.
SUCCESSOR CORPORATION
The Demand Notes Indenture provides that TMCC may consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other corporation, provided, that in any such case: (i) either TMCC
shall be the continuing corporation, or the successor corporation shall be a
corporation organized and existing under the laws of the United States or any
state thereof and shall expressly assume, by execution and delivery to the
Demand Notes Indenture Trustee of a supplemental Demand Notes Indenture in form
satisfactory thereto, all of the obligations of TMCC under the TMCC Demand Notes
and the Demand Notes Indenture; and (ii) TMCC or such successor corporation, as
the case may be, shall not, immediately after such merger or consolidation, or
such sale, lease or conveyance, be in default in the performance of any such
obligation. Subject to certain limitations in the Demand Notes Indenture, the
Demand Notes Indenture Trustee may receive from TMCC an officer's certificate
and an opinion of counsel as conclusive evidence that any such consolidation,
merger, sale, lease or conveyance, and any such assumption, complies with the
provisions of the Demand Notes Indenture.
SUPPLEMENTAL DEMAND NOTES INDENTURES
Supplemental Demand Notes Indentures may be entered into by TMCC and the
Demand Notes Indenture Trustee without the consent of the holder of the TMCC
Demand Notes (a) to cure any ambiguity, to correct or supplement any provisions
thereof that may be inconsistent with any other provision thereof or to add any
other provision with respect to matters or questions arising under the Demand
Notes Indenture which are not inconsistent with the provisions thereof, provided
that any such action will not, in the good faith judgment of the parties,
materially and adversely affect the interest of any holder of TMCC Demand Notes
or any Securityholder and the Demand Notes Indenture Trustee shall be furnished
an opinion of counsel to the effect that such amendment will not materially and
adversely affect the interest of any Securityholder, and (b) for purposes of
appointing a successor trustee hereunder or in connection with any merger or
consolidation
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of TMCC or the transfer or lease of the assets of TMCC in their entirety, in
each case in accordance with the provisions of the Demand Notes Indenture. In
addition, supplemental Demand Notes Indentures may be entered into by TMCC and
the Demand Notes Indenture Trustee with the consent of the holder of the TMCC
Demand Notes (which consent will not be given except at the written direction of
Holders of at least 25% in aggregate principal amount of the Notes issued by a
Trust, or, with respect to a Trust that has not issued Notes, at least 25% in
aggregate principal amount of the outstanding Certificates (in each case
excluding any Securities held by TMCC, TMCRC or any affiliate thereof) acting as
a single class for the purpose of adding any provisions to or changing in any
manner or eliminating any other provisions of the Demand Notes Indenture or of
modifying in any manner the rights with respect to the TMCC Demand Notes,
provided that no supplemental Demand Notes Indenture may, among other things,
reduce the principal amount of or interest on any TMCC Demand Notes, change the
maturity date for the payment of the principal, the date on which interest will
be payable or other terms of payment or reduce the percentage of holders of TMCC
Demand Notes necessary to modify or alter the Demand Notes Indenture, without
the consent of each Holder of Securities affected thereby.
EVENTS OF DEFAULT UNDER THE DEMAND NOTES INDENTURE
The Demand Notes Indenture defines an Event of Default with respect to the
TMCC Demand Notes as being any one of the following events: (i) default in
payment of principal on the TMCC Demand Notes and continuance of such default
for a period of 10 days; (ii) default in payment of any interest on the TMCC
Demand Notes and continuance of such default for a period of 30 days; (iii)
default in the performance, or breach, of any other covenant or warranty of TMCC
in the Demand Notes Indenture continued for 60 days after appropriate notice;
and (iv) certain events of bankruptcy, insolvency or reorganization. If an Event
of Default occurs and is continuing, the Demand Notes Indenture Trustee or the
holders of at least 25% in aggregate principal amount of TMCC Demand Notes may
declare the TMCC Demand Notes to be due and payable. Any past default with
respect to the TMCC Demand Notes may be waived by the holders of a majority in
aggregate principal amount of the outstanding TMCC Demand Notes, except in a
case of failure to pay principal of or interest on the TMCC Demand Notes for
which payment has not been subsequently made or a default in respect of a
covenant or provision of the Demand Notes Indenture which cannot be modified or
amended without the consent of the holder of each outstanding TMCC Demand Note.
TMCC will be required to file with the Demand Notes Indenture Trustee annually
an officer's certificate as to the absence of certain defaults. The Demand Notes
Indenture Trustee may withhold notice to holders of the TMCC Demand Notes of any
default with respect to such series (except in payment of principal or interest)
if it in good faith determines that it is in the interest of such holders to do
so.
Subject to the provisions of the Demand Notes Indenture relating to the
duties of the Demand Notes Indenture Trustee in case an Event of Default shall
occur and be continuing, the Demand Notes Indenture Trustee will be under no
obligation to exercise any of its rights or powers under the Demand Notes
Indenture at the request or direction of any of the holders of TMCC Demand
Notes, unless such holders have offered to the Demand Notes Indenture Trustee
indemnity or security satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction. Subject to provisions in the Demand Notes Indenture for the
indemnification of the Demand Notes Indenture Trustee and to certain other
limitations, the holders of a majority in principal amount of the outstanding
TMCC Demand Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Demand Notes Indenture
Trustee, or exercising any trust or power conferred on the Demand Notes
Indenture Trustee with respect to the TMCC Demand Notes.
ABSENCE OF COVENANTS
The provisions of the Demand Notes Indenture do not contain any covenants
that limit the ability of TMCC to subject its properties to liens, to enter into
any type of transaction or business or to secure any of its other indebtedness
without providing security for the TMCC Demand Notes. The provisions of the
Demand Notes Indenture do not afford the holders of the TMCC Demand Notes
protection in the event of a highly
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leveraged transaction, reorganization, restructuring, change in control, merger
or similar transaction or other event.
DEFEASANCE AND DISCHARGE OF DEMAND NOTES INDENTURE
TMCC may satisfy and discharge its obligations under the Demand Notes
Indenture by delivering to the Demand Notes Indenture Trustee for cancellation
all outstanding TMCC Demand Notes, or depositing with the Demand Notes Indenture
Trustee money sufficient to pay the principal of and interest on the outstanding
TMCC Demand Notes on the date on which any such payments are due and payable in
accordance with the terms of the Demand Notes Indenture and the TMCC Demand
Notes, and in each case by satisfying certain additional conditions in the
Demand Notes Indenture. However, in the case of any such deposit, certain of
TMCC's obligations under the Demand Notes Indenture (including the obligation to
pay the principal and interest on the outstanding TMCC Demand Notes) will
continue until all of the TMCC Demand Notes are paid in full.
REGARDING THE DEMAND NOTES INDENTURE TRUSTEE
The Demand Notes Indenture Trustee may be the applicable Trustee and/or
Indenture Trustee. The Demand Notes Indenture contains certain limitations on
the right of the Demand Notes Indenture Trustee, should it become a creditor of
TMCC, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Demand Notes Indenture Trustee is permitted to engage in other transactions with
TMCC; provided, however, that if the Demand Notes Indenture Trustee acquires any
conflicting interest it must eliminate such conflict or resign.
The Demand Notes Indenture provides that, in case an Event of Default has
occurred and is continuing, the Demand Notes Indenture Trustee is required to
use the degree of care and skill of a prudent person in the conduct of his or
her own affairs in the exercise of its powers.
GOVERNING LAW
The Demand Notes Indenture and the TMCC Demand Notes will be governed by
and construed in accordance with the laws of the State of California.
THE SWAP AGREEMENT
The following summary describes certain terms of a swap agreement that a
Trust may enter into in order to reduce its exposure to currency and/or interest
rate risks. The provisions of any particular swap agreement may differ from
those described in this section and will be more fully described in the related
Prospectus Supplement. In addition, this summary does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the provisions
of any swap agreement that is entered into by the related trust.
PAYMENTS UNDER THE SWAP AGREEMENT
As specified in the related Prospectus Supplement, on the Closing Date a
Trust may enter into a 1992 International Swaps and Derivatives Association,
Inc. ("ISDA") Master Agreement (Multi Currency-Cross Border) (such agreement,
the "1992 Master Agreement") with TMCC or an unaffiliated third party (the "Swap
Counterparty"), as modified to reflect the transactions described below (the
1992 Master Agreement, as so modified, the "Swap Agreement"). The Swap Agreement
will incorporate certain relevant standard definitions published by ISDA.
Under the Swap Agreement, the Trust will generally pay to the Swap
Counterparty amounts in respect of interest and principal, as applicable, due on
each Payment Date under the Swap Agreement and the Swap Counterparty will
generally pay to the Trust amounts equal to the interest or principal payable on
the relevant Securities. If the Trust is unable to make any payment due to be
made by it to the Swap Counterparty under
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the Swap Agreement, the Swap Counterparty generally will not be obligated to
make its corresponding payment to the Trust under the Swap Agreement.
If so specified in the related Prospectus Supplement, if on any specified
payment date under the Swap Agreement the amount of funds from collections and
other sources available to the Trust to make any payment owed to the Swap
Counterparty is less than the amount due to the Swap Counterparty, the
obligation of the Swap Counterparty to pay an amount equal to the interest or
principal otherwise due on the relevant Securities on that date may be reduced
in the same proportion as the proportion that the shortfall in the amount owed
to the Swap Counterparty represents of the total amount due. Under such
circumstances, if on a subsequent specified payment date, amounts are available
and are paid by the Trust to the Swap Counterparty to reimburse all or any part
of the shortfall, then the obligation of the Swap Counterparty to pay an amount
equal to the interest or principal otherwise due on the Securities on that date
will be increased in the same proportion as the proportion that the amount of
the reimbursement represents of the amount otherwise owed by the Swap
Counterparty on that date.
The Trust generally will not be obligated to pay interest to the Swap
Counterparty on any shortfalls in payments, and, correspondingly,
Certificateholders generally will not be entitled to receive interest on any
amounts not paid as a result of the proportional reduction described above.
Unless the Swap Agreement is terminated early as described under "--Early
Termination Of Swap Agreement," the Swap Agreement will terminate on the earlier
of (i) the scheduled maturity date of the Securities and (ii) the date on which
all amounts due in respect of the Swap Agreement have been paid.
CONDITIONS PRECEDENT
The respective obligations of the Swap Counterparty and the Trust to pay
certain amounts due under the Swap Agreement will be subject to the following
conditions precedent: (i) no Swap Event of Default (as defined below under "--
Defaults Under Swap Agreement") or event that with the giving of notice or lapse
of time or both would become an Event of Default shall have occurred and be
continuing and (ii) no Early Termination Date (as defined below under "--Early
Termination Of Swap Agreement") shall have occurred or been effectively
designated.
DEFAULTS UNDER SWAP AGREEMENT
Events of default under the Swap Agreement (each, a "Swap Event of
Default") generally will be limited to: (i) the failure of the Trust or the Swap
Counterparty to pay any amount when due under the Swap Agreement after giving
effect to the applicable grace period, if any; (ii) the occurrence of certain
events of insolvency or bankruptcy of the Trust or the Swap Counterparty and
(iii) certain other standard events of default under the 1992 Master Agreement
including "Breach of Agreement," "Misrepresentation" (generally not applicable
to the Trust) and "Merger without Assumption", as described in Sections
5(a)(ii), 5(a)(iv) and 5(a)(viii) of the 1992 Master Agreement.
TERMINATION EVENTS
Termination events under the Swap Agreement (each, a "Swap Termination
Event") will consist of the following: (i) the Trust or the Transferor becomes
subject to registration as an "investment company" under the Investment Company
Act of 1940; and (ii) certain standard termination events under the 1992 Master
Agreement including "Illegality" (which generally relates to changes in law
causing it to become unlawful for either of the parties to perform its
obligations under the Swap Agreement), "Tax Event" (which generally relates to
either party to the Swap Agreement receiving payments thereunder from which an
amount has been deducted or withheld for or on account of certain taxes) and
"Tax Event Upon Merger" (which generally relates to a party to the Swap
Agreement receiving a payment under the Swap Agreement from which an amount has
been deducted or withheld for or on account of certain taxes as a result of a
party merging with another entity), each as more fully described in Sections
5(b)(i), 5(b)(ii) and 5(b)(iii) of the 1992 Master
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Agreement; provided, however, that the occurrence of a "Tax Event" or "Tax Event
Upon Merger" generally will only constitute a Swap Termination Event if the
requisite percentage of Securityholders specified in the related Prospectus
Supplement directs the Trustee to terminate the Swap Agreement and liquidate the
assets of the Trust.
EARLY TERMINATION OF SWAP AGREEMENT
Upon the occurrence of any Swap Event of Default under the Swap Agreement,
the non-defaulting party will have the right to designate an Early Termination
Date (as defined in the Swap Agreement) upon the occurrence and continuance of
such Swap Event of Default. A Swap Agreement will terminate on an Early
Termination Date. With respect to Termination Events, an Early Termination Date
may be designated by one or both of the parties (as specified in the Swap
Agreement with respect to each Termination Event) and will occur only upon
notice and, in certain cases, after the party causing the Termination Event has
used reasonable efforts to transfer its rights and obligations under such Swap
Agreement to a related entity within a limited period after notice has been
given of the Termination Event, all as set forth in the Swap Agreement. The
occurrence of an Early Termination Date under the Swap Agreement will constitute
a "Swap Termination".
Upon any Swap Termination, the Trust or the Swap Counterparty may be liable
to make a termination payment to the other (regardless, if applicable, of which
of such parties may have caused such termination). Such termination payment will
be calculated on the basis that the Trust is the Affected Party (as defined in
the Swap Agreement), subject to certain exceptions. The amount of any such
termination payment will be based on the market value of the Swap Agreement
computed on the basis of market quotations of the cost of entering into swap
transactions with the same terms and conditions that would have the effect of
preserving the respective full payment obligations of the parties, in accordance
with the procedures set forth in the Swap Agreement (assuming, for purposes of
such calculation, that all outstanding amounts previously due but unpaid to the
Swap Counterparty are due and payable on the first Payment Date that would have
occurred after the Early Termination Date). Any such termination payment could,
if interest or currency exchange rates have changed significantly, be
substantial.
The Prospectus Supplement will specify whether the defaulting party will
not be entitled to any portion of the termination payment related to the market
value of the Swap Agreement because of its default with respect to any
particular Swap Event of Default or Swap Termination Event.
Generally, if a Swap Termination occurs, the principal of each class of
Securities will become immediately payable and the Trustee will be obligated to
liquidate the assets of the Trust. In any such event, the ability of the Trust
to pay interest and/or principal on each class of Securities will depend on (a)
the price at which the assets of the Trust are liquidated, (b) the amount of the
swap termination payment, if any, which may be due to the Swap Counterparty from
the Trust under the Swap Agreement and (c) the amount of the swap termination
payment, if any, which may be due to the Trust from the Swap Counterparty under
the Swap Agreement. In the event that the net proceeds of the liquidation of the
assets of the Trust are not sufficient to make all payments due in respect of
the Securities and for the Trust to meet its obligations, if any, in respect of
the termination of the Swap Agreement, then such amounts will be allocated and
applied in accordance with the priority of payments described in the related
Prospectus Supplement and the claims of the Swap Counterparty in respect of such
net proceeds will rank higher in priority than the claims of the relevant
Securities. If a Swap Termination occurs and the Trust does not terminate, the
Trust will not be protected from the interest rate and currency fluctuations
hedged by the Swap Agreement, and payments to Noteholders and Certificateholders
may be adversely affected.
Generally, the applicable Pooling and Servicing Agreement or Sale and
Servicing Agreement will provide that upon the occurrence of (i) any Swap Event
of Default arising from any action taken, or failure to act, by the Swap
Counterparty, or (ii) a Swap Termination Event (except as described in the
following sentence) with respect to which the Swap Counterparty is an Affected
Party, the Trustee may and will, at the direction of the requisite percentage of
the Securityholders specified in such agreement, by notice to the Swap
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Counterparty, designate an Early Termination Date with respect to the Swap
Agreement. If a Swap Termination Event occurs because the Trust or the Seller
becomes subject to registration as an "investment company" under the Investment
Company Act of 1940, the Trustee will be required by the terms of such agreement
to terminate the Swap Agreement.
TAXATION
Neither the Trust nor the Swap Counterparty will be obligated under the
Swap Agreement to gross up if withholding taxes are imposed on payments made
under the Swap Agreement.
In the event that any withholding or similar tax is imposed on payments by
the Trust to the Swap Counterparty under the Swap Agreement, the Swap
Counterparty will be entitled to deduct amounts in the same proportion (as
calculated in accordance with the Swap Agreement) from subsequent payments due
from it. In the event that the Swap Counterparty is required to withhold amounts
from payments by the Swap Counterparty under the Swap Agreement, the payment
obligations of the Swap Counterparty will be reduced by such amounts and the
payment obligations of the Trust under the Swap Agreement will remain the same.
In either such event, payments on the Securities may be subject to reduction in
proportion to the amount so deducted or withheld. In either such event, a
specified percentage of the Securityholders may direct the Trustee to terminate
the Swap Agreement and liquidate the assets of the Trust, as described above
under "--Termination Events".
ASSIGNMENT
Except as provided below, neither the Trust nor the Swap Counterparty will
be permitted to assign, novate or transfer as a whole or in part any of its
rights, obligations or interests under the Swap Agreement. The Swap Counterparty
may transfer the Swap Agreement to another party on ten Business Days' prior
written notice, provided that (i) such notice will be accompanied by a guarantee
of the Swap Counterparty of such transferee's obligations in form and substance
reasonably satisfactory to the Trustee, (ii) the Swap Counterparty delivers an
opinion of independent counsel of recognized standing in form and substance
reasonably satisfactory to the Trustee confirming that as of the date of such
transfer the transferee will not, as a result of such transfer, be required to
withhold or deduct on account of tax under the Swap Agreement, (iii) a Swap
Termination Event or Swap Event of Default does not occur under the Swap
Agreement as a result of such transfer and (iv) the then current ratings of the
Securities are not adversely affected as a result of such transfer. In addition,
in the event the debt rating of the Swap Counterparty is reduced to a level
below that specified in the related Prospectus Supplement, the Swap Counterparty
generally may assign the Swap Agreement to another party (or otherwise obtain a
replacement swap agreement on substantially the same terms as the Swap
Agreement) and thereby be released from its obligations under the Swap
Agreement; provided that (i) the new swap counterparty, by a written instrument,
accepts all of the obligations of the Swap Counterparty under the Swap Agreement
to the reasonable satisfaction of the Trustee, (ii) the Swap Counterparty
delivers an opinion of independent counsel of recognized standing in form and
substance reasonably satisfactory to the Trustee confirming that as at the date
of such transfer the new swap counterparty will not, as a result of such
transfer or replacement, be required to withhold or deduct on account of tax
under the Swap Agreement, (iii) a Swap Termination Event or Swap Event of
Default does not occur under the Swap Agreement as a result of such transfer and
(iv) the ratings assigned to the Securities after such assignment and release
will be at least equal to the ratings assigned by any applicable Rating Agency
to the Securities at the time of such reduction of the rating of the Swap
Counterparty's long-term debt. Any cost of such transfer or replacement will be
borne by the Swap Counterparty or the new swap counterparty and not by the
Trust; provided, however that the Swap Counterparty shall not be required to
make any payment to the new swap counterparty to obtain an assignment or
replacement swap. The Swap Counterparty shall have no obligation to assign the
Swap Agreement or obtain a replacement swap agreement in the event of a ratings
downgrade and neither the Trust nor the Securityholders will have any remedy
against the Swap Counterparty if the Swap Counterparty fails to make such an
assignment or obtain a replacement swap agreement. In the event that the Swap
Counterparty does not elect to assign the Swap Agreement or obtain a replacement
swap agreement the
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Swap Counterparty may (but shall not be obligated to) establish any other
arrangement satisfactory to the applicable Rating Agency, in each case such that
the ratings of the Securities by the applicable Rating Agency will not be
withdrawn or reduced.
MODIFICATION AND AMENDMENT OF SWAP AGREEMENT
The applicable Pooling and Servicing Agreement or Sale and Servicing
Agreement will contain provisions permitting the Trustee to enter into any
amendment of the Swap Agreement (i) to cure any ambiguity or mistake, (ii) to
correct any defective provisions or to correct or supplement any provision
therein which may be inconsistent with any other provision therein or with the
Agreement or (iii) to add any other provisions with respect to matters or
questions arising under the Swap Agreement; provided, in the case of clause
(iii) that such amendment will not adversely affect in any material respect the
interest of any specified Securityholder. Any such amendment shall be deemed not
to adversely affect in any material respect the interests of any specified
Securityholder if the Trustee receives written confirmation from each rating
agency rating the Securities that such amendment will not cause such Rating
Agency to reduce the then current rating thereof.
THE SWAP COUNTERPARTY
TMCC may act as the Swap Counterparty. A description of TMCC is provided
under "The Servicer" herein. Information regarding TMCC is publicly available as
described under "Where You Can Find More Information About Your
Securities--TMCC" herein. Where indicated by the context, as used herein "Swap
Counterparty" includes any party that replaces the initial Swap Counterparty as
described above under "--Assignment".
GOVERNING LAW
The Swap Agreement will be governed by and construed in accordance with the
laws of the State of New York.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of the Receivables to the applicable Trustee, the perfection
of the security interests in the Receivables and the enforcement of rights to
realize on the Financed Vehicles as collateral for the Receivables are subject
to a number of federal and state laws, including the UCC as in effect in various
states. The Servicer and the Seller will take the action described below to
perfect the rights of the applicable Trustee in the Receivables. If, through
inadvertence or otherwise, another party purchases (including the taking of a
security interest in) the Receivables for new value in the ordinary course of
its business, without actual knowledge of the Trust's interest, and takes
possession of the Receivables, such purchaser would acquire an interest in the
Receivables superior to the interest of the Trust.
SECURITY INTERESTS
GENERAL. In states in which retail installment sale contracts such as the
Receivables evidence the credit sale of automobiles and/or light duty trucks by
dealers to obligors, the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
applicable UCC. Perfection of security interests in financed automobiles and/or
light duty trucks is generally governed by the motor vehicle registration laws
of the state in which the vehicle is located. In most states, a security
interest in automobiles and/or light duty trucks is perfected by obtaining the
certificate of title to the Financed Vehicle or notation of the secured party's
lien on the vehicles' certificate of title.
All retail installment sales contracts acquired by TMCC from Dealers name
TMCC as obligee or assignee and as the secured party. TMCC also takes all
actions necessary under the laws of the state in which the related Financed
Vehicle is located to perfect its security interest in such Financed Vehicle,
including, where applicable, having a notation of its lien recorded on the
related certificate of title and obtaining possession of such certificate of
title. Because TMCC continues to service the contracts as Servicer under the
Sale and Servicing Agreement or the Pooling and Servicing Agreement, as
applicable, the Obligors on the contracts will not be notified of the sale from
TMCC to the Seller or the sale from the Seller to the Trust, and no action will
be taken to record the transfer of the security interest from TMCC to the Seller
or from the Seller to the Trust by amendment of the certificates of title for
the Financed Vehicles or otherwise.
PERFECTION. Pursuant to the related Receivables Purchase Agreement, TMCC
will sell and assign its security interest in the Financed Vehicles to the
Seller and, with respect to each Trust, pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, the Seller will assign
its security interest in the Financed Vehicles to such Trust. However, because
of the administrative burden and expense, none of TMCC, the Seller or the
related Trustee will amend any certificate of title to identify such Trust as
the new secured party on such certificate of title relating to a Financed
Vehicle. However, UCC financing statements with respect to the transfer to the
Seller of TMCC's security interest in the Financed Vehicles and the transfer to
the Trustee of the Seller's security interest in the Financed Vehicles will be
filed. In addition, the Servicer will continue to hold any certificates of title
relating to the vehicles in its possession as custodian for the Seller and such
Trust pursuant to the related Sale and Servicing Agreement or Pooling and
Servicing Agreement. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
In most states, an assignment such as that under each Receivables Purchase
Agreement or each Sale and Servicing Agreement or Pooling 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. Although re-registration of
the vehicle is not necessary to convey a perfected security interest in the
Financed Vehicles to the Trust, because the Trust will not be listed as legal
owner on the certificates of title, the security interest of such 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 Servicer or
administrative error by state or local agencies, the notation of TMCC's lien on
the certificates of title will be
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sufficient to protect such Trust against the rights of subsequent
purchasers of a Financed Vehicle or subsequent lenders who take a security
interest in a Financed Vehicle. In each Receivables Purchase Agreement, TMCC
will represent and warrant, and in each Sale and Servicing Agreement or Pooling
and Servicing Agreement, the Seller will represent and warrant, that it has
taken all action necessary to obtain a perfected security interest in each
Financed Vehicle. If there are any Financed Vehicles as to which TMCC failed to
obtain and assign to the Seller a perfected security interest, the security
interest of the Seller would be subordinate to, among others, subsequent
purchasers of the Financed Vehicles and holders of perfected security interests
therein. To the extent such failure has a material and adverse effect on the
Trust's interest in the related Receivables, however, it would constitute a
breach of the warranties of TMCC under the related Receivables Purchase
Agreement or the Seller under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement. Accordingly, pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, the Seller would be
required to repurchase the related Receivable from the Trust and, pursuant to
the related Receivables Purchase Agreement, TMCC would be required to purchase
such Receivable from the Seller, in each case unless the breach was cured.
Pursuant to each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Seller will assign such rights to the related Trust. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables" and "Risk Factors--THE TRUST'S SECURITY INTERESTS IN FINANCED
VEHICLES MAY BE UNENFORCEABLE OR DEFEATED".
CONTINUITY OF PERFECTION. 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 that is different from the one in which it is initially
registered and thereafter until the owner thereof re-registers the vehicle in
the new state. A majority of states generally require surrender of a certificate
of title to re-register a vehicle. In those states (such as California) that
require a secured party to hold possession of the certificate of title to
maintain perfection of the security interest, the secured party would learn of
the re-registration through the request from the obligor under the related
installment sales contract to surrender possession of the certificate of title.
In the case of vehicles registered in states providing for the notation of a
lien on the certificate of title but not possession by the secured party (such
as Texas), the secured party would receive notice of surrender from the state of
re-registration 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. However, these procedural
safeguards will not protect the secured party if through fraud, forgery or
administrative error, the debtor somehow procures a new certificate of title
that does not list the secured party's lien. Additionally, 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 the
Receivables, TMCC will take 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 Financed Vehicle, TMCC 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 and Pooling and Servicing Agreement, the Servicer will be obligated to
take appropriate steps, at the Servicer's expense, to maintain perfection of
security interests in the Financed Vehicles and will be obligated to purchase
the related Receivable if it fails to do so and such failure has a material and
adverse effect on the Trust's interest in the Receivable.
PRIORITY OF LIENS ARISING BY OPERATION OF LAW. Under the laws of most
states (including California), 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. TMCC will represent and warrant to the Seller in each Receivables
Purchase Agreement, and the Seller will represent and warrant to the Trust in
each Sale and Servicing Agreement and Pooling and Servicing Agreement, that, as
of related Closing Date, each security interest in a Financed Vehicle is prior
to all other present liens (other than tax liens and other liens that arise by
operation of law) upon and security interests in such Financed Vehicle. However,
liens for repairs or taxes
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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 Trustee,
any Indenture Trustee, any Noteholders or the Certificateholders in respect of a
given Trust if such a lien arises or confiscation occurs which would not give
rise to the Seller's repurchase obligation under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement or TMCC's repurchase obligation
under the related Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an obligor, the holder of the related 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 repossession by self-help means,
unless such means would constitute a breach of the peace or is otherwise limited
by applicable state law. Unless a vehicle financed by TMCC is voluntarily
surrendered, self-help repossession is the method employed by TMCC in most
states and is accomplished simply by retaking possession thereof. In cases where
an 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, and such vehicle must then be recovered in accordance with that
order. In some jurisdictions, the secured party is required to notify such
obligor of the default and the intent to repossess the collateral and to give
such obligor a time period within which to cure the default prior to
repossession. In most states, under certain circumstances after any such
financed vehicle has been repossessed, the related obligor may reinstate the
related contract by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor under a retail installment sales
contract, some jurisdictions require that the obligor be notified of the default
and be given a time period within which to cure the default prior to
repossession. Generally, this right of cure may only be exercised on a limited
number of occasions during the term of the related contract.
The UCC and other state laws require the secured party to provide an
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. In
most states, an obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
and accrued interest thereon 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, an obligor
has the right to redeem the collateral prior to actual sale by payment of
delinquent installments or the unpaid balance.
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. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. In addition to the notice requirement, the UCC
requires that every aspect of the sale or other disposition, including the
method, manner, time, place and terms, be "commercially reasonable". Generally,
courts have held that when a sale is not "commercially reasonable," the secured
party loses its right to a deficiency judgment. 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 or be uncollectible. In addition, the UCC permits the
debtor or other interested party to recover for any loss caused by noncompliance
with the provisions of the UCC. Also, prior to a sale, the UCC permits the
debtor or other interested person to prohibit the secured party
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from disposing of the collateral if it is established that the secured
party is not proceeding in accordance with the "default" provisions under the
UCC.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or if no such lienholder exists, the UCC requires
the creditor to remit the surplus to the obligor.
CERTAIN BANKRUPTCY CONSIDERATIONS
The Seller, in structuring the transactions contemplated hereby, has taken
steps that are intended to make it unlikely that the voluntary or involuntary
application for relief by TMCC under the United States Bankruptcy Code or
similar applicable state laws (collectively, "Insolvency Laws") will result in
consolidation of the assets and liabilities of the Seller with those of TMCC.
These steps include the creation of the Seller as a wholly-owned, limited
purpose subsidiary pursuant to articles of incorporation and bylaws containing
certain limitations (including requiring that the Seller must at all times have
at least one "Independent Director" and restrictions on the nature of the
Seller's business and on its ability to commence a voluntary case or proceeding
under any Insolvency Law without the affirmative vote of a majority of its
directors, including each Independent Director). In addition, to the extent that
the Seller granted a security interest in the Receivables to the Trust, and that
interest was validly perfected before the bankruptcy or insolvency of TMCC and
was not taken or granted in contemplation of insolvency or with the intent to
hinder, delay or defraud TMCC or its creditors, that security interest should
not be subject to avoidance, and payments to the Trust with respect to the
Receivables should not be subject to recovery by a creditor or trustee in
bankruptcy of TMCC. If, notwithstanding the foregoing, (i) a court concluded
that the assets and liabilities of the Seller should be consolidated with those
of TMCC in the event of the application of applicable Insolvency Laws to TMCC or
following the bankruptcy or insolvency of TMCC the security interest in the
Receivables granted by the Seller to the Trust should be avoided, (ii) a filing
were made under any Insolvency Law by or against the Seller or (iii) an attempt
were made to litigate any of the foregoing issues, delays in payments on the
Certificates and possible reductions in the amount of such payments could occur.
On the Closing Date, the Seller will receive the opinion of O'Melveny &
Myers LLP to the effect that, based on a reasoned analysis of analogous case law
(although there is no precedent based on directly similar facts), and, subject
to certain facts, assumptions and qualifications specified therein and applying
the principles set forth therein, in the event of a voluntary or involuntary
case in respect of TMCC under Title 11 of the United States Bankruptcy Code at a
time when TMCC and the Seller were insolvent, the property of the Seller would
not properly be substantively consolidated with the property of the estate of
TMCC. Among other things, it is assumed in such opinion that the Seller will
follow certain procedures in the conduct of its affairs, including maintaining
records and books of account separate from those of TMCC, refraining from
commingling its assets with those of TMCC, and refraining from holding itself
out as having agreed to pay, or being liable for, the debts of TMCC. The Seller
intends to follow these and other procedures related to maintaining its separate
corporate identity. However, there can be no assurance that a court would not
conclude that the assets and liabilities of the Seller should be consolidated
with those of TMCC.
TMCC will warrant in the Receivables Purchase Agreement that the sale of
the Receivables by it to the Seller is a valid sale. Notwithstanding the
foregoing, if TMCC were to become a debtor in a bankruptcy case a court could
take the position that the sale of Receivables to the Seller should instead be
treated as a pledge of such Receivables to secure a borrowing of such debtor. If
a court were to reach such conclusions, or a filing were made under any
Insolvency Law by or against the Seller, or if an attempt were made to litigate
any of the foregoing issues, delays in payments on the Securities (and possible
reductions in the amount of such payments) could occur. In addition, if the
transfer of Receivables to the Seller is treated as a pledge instead of a sale,
a tax or government lien on the property of TMCC arising before the transfer of
a Receivable to the Seller may have priority over the Seller's interest in such
Receivable. In addition, while TMCC is the
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Servicer, cash collections on the Receivables may be commingled with the
funds of TMCC and, in the event of the bankruptcy of TMCC, the Trust may not
have a perfected interest in such collections.
TMCC and the Seller will treat the transactions described herein as a sale
of the Receivables to the Seller, such that the automatic stay provisions of the
United States Bankruptcy Code should not apply to the Receivables in the event
that TMCC were to become a debtor in a bankruptcy case.
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 Practices 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 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 (and certain related creditors and their assignees) in a
consumer credit transaction 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. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related 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. As to each
Obligor, such claims are limited to a maximum liability equal to the amounts
paid by the Obligor on the related Receivable. Under most state motor vehicle
dealer licensing laws, sellers of motor vehicles are required to be licensed to
sell motor vehicles at retail sale. Furthermore, federal odometer regulations
promulgated under the Motor Vehicle Information and Cost Savings Act require
that all sellers of new and used vehicles furnish a written statement signed by
the seller certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if a written odometer disclosure statement was not provided
to the purchaser of the related financed vehicle, an obligor may be able to
assert a defense against the seller of the vehicle. If an Obligor were
successful in asserting any such claim or defense, such claim or defense would
constitute a breach of the Seller's warranties under the related Sale and
Servicing Agreement or Pooling and Servicing Agreement and a breach of TMCC's
warranties under the related Receivables Purchase Agreement and would create an
obligation of the Seller and TMCC, respectively, to repurchase the Receivable
unless the breach is cured. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
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
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reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
From time to time, TMCC has been involved in litigation under consumer
protection laws. In addition, with respect to the Receivables originated in
California, a significant number may provide that such Receivables may be
rescinded by the related Dealer if such Dealer is unable to assign the
Receivable to a lender within ten days of the date of such Receivable. Although
there is authority, which is not binding on any court, providing that a
conditional sale contract containing such a provision would be unenforceable
under California law, to the knowledge of TMCC and the Seller, this
enforceability issue has not been presented before any California court.
TMCC and the Seller will represent and warrant under each Receivables
Purchase Agreement and each Sale and Servicing Agreement and Pooling and
Servicing Agreement, as applicable, that each Receivable complies with all
requirements of law in all material respects. In addition, with respect to any
Trust as to which 10% or more of the Receivables were originated in California,
on the applicable Closing Date, the Seller will receive an opinion of counsel to
the effect that all of the California Receivables are enforceable under
California law and applicable federal laws, subject to customary exceptions.
Accordingly, if an Obligor has a claim against such Trust for violation of any
law and such claim materially and adversely affects such Trust's interest in a
Receivable, such violation would constitute a breach of the representations and
warranties of TMCC under the Receivables Purchase Agreement and the Seller under
such Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of TMCC and the Seller to repurchase the Receivable unless
the breach is cured. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
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.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
Obligor who enters the military service after the origination of such Obligor's
Receivable (including an Obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the Obligor's Receivable and is
later called to active duty) may not be charged interest above an annual rate of
6% during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, some states, including
California, allow members of the National Guard to extend payments on any
contract obligation if called into active service by the Governor for a period
exceeding 7 days. It is possible that the foregoing could have an effect on the
ability of the Servicer to collect the full amount of interest owing on certain
of the Receivables. In addition, the Soldiers' and Sailors' Relief Act of 1940
and the laws of some states, including California, New York and New Jersey,
impose limitations that would impair the ability of the Servicer to repossess an
affected Receivable during the Obligor's period of active duty status. Thus, in
the event that such a Receivable goes into default, there may be delays and
losses occasioned by the inability to exercise the Trust's rights with respect
to the related Financed Vehicle in a timely fashion.
Any such shortfall pursuant to either of the two preceding paragraphs, to
the extent not covered by amounts payable to the Securityholders from amounts on
deposit in the related Reserve Fund or from coverage provided under any other
credit enhancement mechanism, could result in losses to the Securityholders.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of any series, to the extent it relates to matters of law or legal
conclusions with respect thereto, represents the opinion of tax counsel to each
Trust with respect to the related series on the material matters associated with
such consequences, subject to the qualifications set forth herein. "Tax Counsel"
with respect to each Trust will be O'Melveny & Myers LLP. The summary does not
purport to deal with federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules. For
example, it does not discuss the tax treatment of Noteholders or
Certificateholders that are insurance companies, regulated investment companies
or dealers in securities. Moreover, there are no cases or Internal Revenue
Service ("IRS") rulings on similar transactions involving both debt and equity
interests issued by a trust with terms similar to those of the Notes and the
Certificates. As a result, the IRS may disagree with all or a part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Tax Counsel regarding certain federal income tax matters
discussed below. An opinion of Tax Counsel, however, is not binding on the IRS
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary depending on
whether the Trust will be treated as a partnership or as a grantor trust under
the Code. The Prospectus Supplement for each Series of Certificates will specify
whether the Trust will be treated as a partnership (or other form of entity not
subject to entity-level taxation) or as a grantor trust.
TAX TREATMENT OF OWNER TRUSTS
TAX CHARACTERIZATION OF THE TRUST
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust nominally referred to as an "owner trust" in the
applicable prospectus (an "Owner Trust"), to the extent it relates to matters of
law or legal conclusions with respect thereto, represents the opinion of Tax
Counsel to each Owner Trust with respect to the related series on the material
matters associated with those consequences, subject to the qualifications set
forth in this Prospectus. In addition, Tax Counsel has prepared or reviewed the
statements in this Prospectus under the heading "Certain Federal Income Tax
Consequences--Tax Treatment of Owner Trusts," and is of the opinion that such
statements are correct in all material respects. Such statements are intended as
an explanatory discussion of the related tax matters affecting investors
generally, but do not purport to furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. Accordingly, it is suggested that
each investor consult its own tax advisor with regard to the tax consequences to
it of investing in Notes or Certificates.
Tax Counsel will deliver its opinion that an Owner Trust 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 Related Documents will be complied with, and on Tax 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.
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If the Owner Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Receivables, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes and the Certificates, and Certificateholders could be liable for any
such tax that is not paid by the Owner Trust.
TAX CONSEQUENCES TO OWNERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller and any Noteholders will
agree, and the beneficial owners of the Notes (the "Note Owners") will agree by
their purchase of Notes, to treat the Notes as debt for federal income tax
purposes. Tax Counsel will, except as otherwise provided in the related
Prospectus Supplement, deliver its opinion that the Notes will be classified as
debt for federal income tax purposes. The discussion below assumes this
characterization of the Notes is correct.
OID, INDEXED SECURITIES, ETC. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes (as defined in this Prospectus). 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. In determining whether any OID on the
Notes is de minimis, the Seller expects to use a reasonable assumption regarding
prepayments (a "Prepayment Assumption") to determine the weighted average
maturity of the Notes. 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 Note Owner as
ordinary interest income when received or accrued in accordance with that Note
Owner's method of tax accounting. Under the OID regulations, the Note Owner 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. 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.
The Note Owner 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 Note Owner of a Short-Term Note (and certain
cash method Note Owners, 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 or under a constant yield
method over the term of each interest period. Other cash basis Note Owners 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 Note Owner 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 Note Owner that is not required to report interest income as it accrues
under Section 1281 may elect to accrue interest income on all nongovernment debt
obligations with a term of one year or less, in which case the Note Owner 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 Note Owner sells a Note, the Note Owner
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the Note Owner's adjusted tax basis in the Note.
The adjusted tax basis of a Note to a particular Note Owner will equal the Note
Owner's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included in
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income by such Note Owner 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, and any gain or loss recognized on a prepayment of
the Notes, 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. Capital losses generally may be used only to
offset capital gains.
FOREIGN HOLDERS. Interest paid (or accrued) to a Note Owner who is not a
U.S. Person (a "Foreign Owner") generally will be considered "portfolio
interest," and generally will not be subject to United States federal income tax
and withholding tax if the interest is not effectively connected with the
conduct of a trade or business within the United States by the Foreign Owner and
(i) the Foreign Owner is not actually or constructively a "10 percent
shareholder" of the Trust or the Seller (including a Certificateholder of 10% of
the outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust or the Seller is a "related Owner" within the meaning of the
Code (ii) the Foreign Owner is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code, (iii) the interest is not contingent interest
described in Section 871(h)(4) of the Code, and (iv) the Foreign Owner does not
bear certain relationships to any Certificateholder. To qualify for the
exemption from taxation, the Foreign Owner must provide the applicable Trustee
or other person who is otherwise required to withhold U.S. tax with respect to
the Notes with an appropriate statement (on Form W-8BEN or a similar form),
signed under penalties of perjury, certifying that the Note Owner is a Foreign
Owner and providing the Foreign Owner's name and address. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide the relevant signed
statement to the withholding agent; in that case, however, the signed statement
must be accompanied by a Form W-8BEN or substitute form provided by the Foreign
Owner and the Foreign Owner must notify the financial institution acting on its
behalf of any changes to the information on the Form W-8BEN (or substitute form)
within 30 days of any such change. If interest paid to a Foreign Owner is not
considered portfolio interest, then it will be subject to United States federal
income and withholding tax at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable tax treaty. In order to claim the benefit of any
applicable tax treaty, the Foreign Owner must provide the Trustee or other
person who is required to withhold U.S. tax with respect to the Notes with an
appropriate statement (on Form W-8BEN or a similar form), signed under penalties
of perjury, certifying that the Foreign Owner is entitled to benefits under the
treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a Foreign Owner will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the Foreign Owner and (ii) in the case of an individual Foreign Owner,
the Foreign Owner is not present in the United States for 183 days or more
during the taxable year of disposition.
As used herein, a "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation or a partnership organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate,
the income of which is from sources outside the United States is includible in
gross income for federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States, or (iv) a trust if
(a) a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more United States persons have
authority to control all substantial decisions of the trust or (b) the trust was
in existence on August 20, 1996 and is eligible to elect, and has made a valid
election, to be treated as a U.S. Person despite not meeting the requirements in
clause (a).
BACKUP WITHHOLDING. Each Note Owner (other than an exempt Note Owner such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate (on Form W-9) providing the Note Owner's
name, address, correct federal taxpayer identification number and a statement
that the Note Owner is not subject to backup withholding. Should a nonexempt
Note Owner fail to provide the required certification, the Owner Trust will be
required to
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withhold 31 percent of the amount otherwise payable to the Note Owner, and
remit the withheld amount to the IRS as a credit against the Note Owner's
federal income tax liability.
NEW WITHHOLDING REGULATIONS. Recently, the Treasury Department issued new
regulations (the "New Regulations") which make certain modifications to the
withholding, backup withholding and information reporting rules described above.
The New Regulations attempt to unify certification requirements and modify
reliance standards. The New Regulations will generally be effective for payments
made after December 31, 2000, subject to certain transition rules. It is
suggested that prospective investors consult their own tax advisors regarding
the New Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of 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 Owner Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable 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 Tax Counsel, the Trust might 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 publicly traded partnership could have adverse tax
consequences to certain Note Owners. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to Foreign Owners may be subject to U.S. tax and cause Foreign Owners to
be subject to U.S. tax return filing and withholding requirements, and
individual Note Owners might be subject to certain limitations on their ability
to deduct their share of Trust expenses.
TAX CONSEQUENCES TO OWNERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller and the Servicer will
agree, and the beneficial owners of the Certificates (the "Certificate Owners")
will agree by their purchase of Certificates, to treat the Owner Trust as a
partnership (or as an entity disregarded as separate from the Certificate Owner
in the event that there is a single Certificate Owner) for purposes of federal
and state income tax, franchise tax and any other tax measured in whole or in
part by income. If the trust is treated as a partnership, the assets of the
partnership would be the assets held by the Trust, the partners of the
partnership would be the Certificate Owners (including the Seller in its
capacity as recipient of payments from the Reserve Fund), and the Notes would be
debt of the partnership. However, the proper characterization of the arrangement
involving the Owner Trust, the Certificates, the Notes, the Seller 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 the Seller or the Owner Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificate Owners as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Indexed Securities or Strip Certificates, and that a series of Securities
includes a single class of Certificates. If these conditions are not satisfied
with respect to any given series of Certificates, additional tax considerations
with respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
PARTNERSHIP TAXATION. As a partnership, the Owner Trust will not be subject
to federal income tax. Rather, each Certificate Owner will be required to
separately take into account that owner's allocated share of income, gains,
losses, deductions and credits of the Owner Trust. The Trust's income will
consist primarily of interest and finance charges earned on the Receivables
(including appropriate adjustments for market discount,
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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). In the Trust Agreement, the Certificate
Owners will agree that the yield on a Certificate is intended to qualify as a
"guaranteed payment" and not as a distributive share of partnership income. A
guaranteed payment would be treated by a Certificate Owner as ordinary income,
but may well not be treated as interest income. The Trust Agreement will provide
that, to the extent that such treatment is not respected, the Certificate Owners
of each class of Certificates will be allocated taxable income of the Owner
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass Through Rate for such month and interest on amounts
previously due on the Certificates but not yet paid; (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 Certificate Owners for such month; and (iv)
any other amounts of income payable to the Certificate Owners for such month.
Such allocation will be reduced by any amortization by the Owner Trust of
premium on Receivables that corresponds to any excess of the initial issue price
of Certificates over their initial principal amount. All remaining taxable
income of the Owner Trust will be allocated to the Seller. Except as provided
below, losses and deductions generally will be allocated to the Certificate
Owners only to the extent the Certificate Owners are reasonably expected to bear
the economic burden of such losses or deductions. Any losses allocated to
Certificate Owners could be characterized as capital losses, and the Certificate
Owners generally would only be able to deduct such losses against capital gain
income, and deductions would be subject to the limitations set forth below.
Accordingly, a Certificate Owner's taxable income from the Trust could exceed
the cash it is entitled to receive from the Trust.
Based on the economic arrangement of the parties, this approach for
allocating Trust income and loss 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 Certificate Owners. Moreover, even
under the foregoing method of allocation, Certificate Owners 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
payments of such amount. Thus, cash basis holders will in effect be required to
report income from the Certificates on the accrual basis and Certificate Owners
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 Certificate Owners but
Certificate Owners may be purchasing Certificates at different times and at
different prices, Certificate Owners 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.
For each taxable year of the Certificate Owner, the Certificate Owner will
be required to report items of income, loss and deduction allocated to them by
the Trust for the Trust's taxable year that ends on or before the last day of
such taxable year of the Certificate Owner. The Code prescribes certain rules
for determining the taxable year of the Owner Trust. It is likely that, under
these rules, the taxable year of the Owner Trust will be the calendar year.
However, in the event that all of the Certificate Owners possessing a 5 percent
or greater interest in the equity or profits of the Trust share a taxable year
that is other than the calendar year, the Trust would be required to use that
year as its taxable year.
A significant portion of the taxable income allocated to a Certificate
Owner 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 that Certificate Owner
under the Code.
An individual taxpayer's share of expenses of the Owner Trust (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the
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individual in whole or in part and might result in such Certificate Owner
being taxed on an amount of income that exceeds the amount of cash actually paid
to such Certificate Owner over the life of the Trust.
The Owner Trust intends to make all tax calculations relating to income and
allocations to Certificate Owners 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 Certificate Owners.
DISCOUNT AND PREMIUM. It is believed that the Receivables were not issued
with OID, and, therefore, the Owner 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 Owner Trust will make this calculation on
an aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Owner 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 Certificate
Owners.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Owner 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. If such a termination occurs, the Trust will be considered to
transfer all of it assets and liabilities to a new partnership in exchange for
an interest in the new partnership, after which the Trust would be deemed to
distribute interests in the new partnership to Certificate Owners (including the
purchasing partner who caused the termination) in liquidation of the terminated
partnership. The Trust will not comply with certain technical requirements that
might apply when such a constructive termination occurs. As a result, the Owner
Trust may be subject to certain tax penalties and may incur additional expenses
if it is required to comply with those requirements. Furthermore, the Trust
might not be able to comply due to lack of data.
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 Certificate Owner's tax basis in a Certificate will generally equal the
Certificate Owner's cost increased by the Certificate Owner's share of Trust
income (includible in income) and decreased by any payments 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 Certificate
Owner's share of the Notes and other liabilities of the Owner Trust. A
Certificate Owner 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 Certificate
Owner's share of unrecognized accrued market discount on the Receivables would
generally be treated as ordinary income to the Certificate Owner 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 Owner Trust will elect
to include market discount in income as it accrues.
If a Certificate Owner 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 payments with respect thereto, such excess will generally give rise to a
capital loss upon the retirement of the Certificates.
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ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Owner
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificate Owners
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 Certificate Owner 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 Owner Trust might be reallocated among the Certificate Owners. The Seller
is authorized to revise the Owner Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
SECTION 754 ELECTION. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (lower) basis in the Certificates than the selling Certificate Owner had.
The tax basis of the Owner 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 election. As a
result, Certificate Owners might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Owner Trustee is required to keep or have kept
complete and accurate books of the Owner 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 set forth in the related Prospectus Supplement. The Trustee
will file a partnership information return (IRS Form 1065) with the IRS for each
taxable year of the Trust during which the Trust is treated as a partnership for
federal income tax purposes and for each such taxable year will report each
Certificate Owner's allocable share of items of Trust income and expense to
Certificate Owners and the IRS on Schedule K-1. The Trust will provide the
Schedule K-1 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 Certificate Owners. Generally, Certificate
Owners must file tax returns that are consistent with the information return
filed by the Trust or be subject to penalties unless the Certificate Owner
timely 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 Owner
Trust with a statement containing certain information on the nominee, the
Certificate 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 Certificate Owner (x) the name, address and identification number of
such person, (y) whether such person is a U. S. Person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, is designated to receive notice on behalf of, and
to provide notice to those Certificate Owners not receiving notice from, the
IRS, and to represent the Certificate Owners in certain disputes 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
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return of the Owner Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificate Owners, and, under
certain circumstances, a Certificate Owner may be precluded from separately
litigating a proposed adjustment to the items of the Owner Trust. As the tax
matters partner, the Seller may enter into a binding settlement on behalf of all
Certificate Owners with a less than 1 percent interest in the Trust (except for
any group of such Certificate Owners with an aggregate interest of 5 percent or
more in Trust profits that elects to form a notice group or Certificate Owners
who otherwise notify the IRS that the Seller is not authorized to settle on
their behalf). In the absence of a proceeding at the Trust level, a Certificate
Owner under certain circumstances may pursue a claim for credit or refund on his
own behalf by filing a request for administrative adjustment of a Trust item.
Each Certificate Owner is advised to consult its own tax advisor with respect to
the impact of these procedures on its particular case. An adjustment could also
result in an audit of a Certificate Owner'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
Owner 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
Certificate Owners that are not U.S. Persons ("Foreign Certificate Owners")
because there is no clear authority dealing with that issue under facts
substantially similar to those described in this Prospectus. Although it is not
expected that the Owner 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 Certificate Owners pursuant to Section 1446
of the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for Foreign Certificate Owners that are taxable as
corporations and 39.6% for all other Foreign Certificate Owners. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a Foreign Certificate Owner's withholding status, the Trust may rely
on IRS Form W-8BEN or successor form, IRS Form W-9 or the Certificate Owner's
certification of nonforeign status signed under penalties of perjury.
Each Foreign Certificate Owner 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 Owner Trust's income. Each Foreign
Certificate Owner must obtain a taxpayer identification number from the IRS and
submit that number to the Trust on Form W-8BEN in order to assure appropriate
crediting of the taxes withheld. A Foreign Certificate Owner 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 Foreign Certificate Owner 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", in which case Foreign Certificate Owners would be subject to United
States federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a Foreign
Certificate Owner 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. Payments made on the Certificates and proceeds from the
sale of the Certificates will be subject to a "backup" withholding tax of 31%
if, in general, the Certificate Owner fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. See "Tax Consequences to Owners of the Notes
--Backup Withholding."
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TAX TREATMENT OF GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the Certificates of a
Trust nominally referred to as a "grantor trust" in the applicable prospectus
supplement (a "Grantor Trust"), to the extent it relates to matters of law or
legal conclusions with respect thereto, represents the opinion of Tax Counsel to
each Grantor Trust with respect to the related series on the material matters
associated with such consequences, subject to the qualifications set forth in
this Prospectus. In addition, Tax Counsel has prepared or reviewed the
statements in this Prospectus under the heading "Certain Federal Income Tax
Consequences--Tax Treatment of Grantor Trusts", and is of the opinion that such
statements are correct in all material respects. Those statements are intended
as an explanatory discussion of the possible effects of the classification of
any Trust as a grantor trust for federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
an investor's specific tax circumstances that would be provided by an investor's
own tax advisor. Accordingly, it is suggested that each investor consult its own
tax advisor with regard to the tax consequences to it of investing in
Certificates of a Grantor Trust ("Grantor Trust Certificates").
Tax Counsel will deliver its opinion that the Grantor Trust will not be
classified as an association taxable as a corporation and that such Trust will
be classified as a grantor trust under subpart E, Part I of subchapter J of
Chapter 1 of Subtitle A of the Code. In this case, beneficial owners of Grantor
Trust Certificates (referred to herein as "Grantor Trust Certificateholders")
could be considered to own either (i) an undivided interest in a single debt
obligation held by the Grantor Trust and having a principal amount equal to the
total stated principal amount of the Receivables and an interest rate equal to
the relevant Pass Through Rate or (ii) an interest in each of the Receivables
and any other Trust property.
The determination of whether the economic substance of a property transfer
is a sale or a loan secured by the transferred property has been made by the IRS
and the courts on the basis of numerous factors designed to determine whether
the transferor has relinquished (and the transferee has obtained) substantial
incidents of ownership in the property. Among those factors, the primary factors
examined are whether the transferee has the opportunity to gain if the property
increases in value, and has the risk of loss if the property decreases in value.
The relevant pooling and servicing agreement will express the intent of the
Seller to sell, and the Grantor Trust Certificateholders to purchase, the
Receivables, and the Seller and each Grantor Trust Certificateholder, by
accepting a beneficial interest in a Grantor Trust Certificate, will agree to
treat the Grantor Trust Certificates as ownership interests in the Receivables
and any other Trust property.
TREATMENT AS DEBT OBLIGATION. If a Grantor Trust Certificateholder was
considered to own an undivided interest in a single debt obligation, the
principles described under "Tax Treatment of Owner Trusts--Tax Consequences to
Owners of the Notes" would apply. Each Grantor Trust Certificateholder, rather
than reporting its share of the interest accrued on each Receivable, would, in
general, be required to include in income interest accrued or received on the
principal amount of the Grantor Trust Certificates at the relevant Pass Through
Rate in accordance with its usual method of accounting.
The Grantor Trust Certificates would be subject to the original issue
discount ("OID") rules, described below under "--Stripped Bonds and Stripped
Coupons-Original Issue Discount." In determining whether such OID is de minimis,
the weighted average life of the Grantor Trust Certificates would be determined
using a reasonable assumption regarding anticipated prepayments (a "Prepayment
Assumption"). OID includible in income for any accrual period (generally, the
period between payment dates) would generally be calculated using a Prepayment
Assumption and an anticipated yield established as of the date of initial sale
of the Grantor Trust Certificates, and would increase or decrease to reflect
prepayments at a faster or slower rate than anticipated. The Grantor Trust
Certificates would also be subject to the market discount provisions of the
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Code to the extent that a Grantor Trust Certificateholder purchased such
Certificates at a discount from the initial issue price (as adjusted to reflect
prior accruals of OID).
The remainder of the discussion herein assumes that a Grantor Trust
Certificateholder will be treated as owning an interest in each Receivable (and
the proceeds therefrom) and any other Trust property, although for
administrative convenience, the Servicer will report information on an aggregate
basis (as though all of the Receivables were a single obligation). The amount,
and in some instances, character, of the income reported to a Grantor Trust
Certificateholder may differ under this method for a particular period from that
which would be reported on a precise asset-by-asset basis.
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Grantor Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption, late payment charges received by the Servicer and
any gain recognized upon collection or disposition of the Receivables. Under
Sections 162 or 212, each Grantor Trust Certificateholder will be entitled to
deduct its pro rata share of servicing fees, prepayment fees, assumption fees,
any loss recognized upon an assumption and late payment charges retained by the
Servicer, provided that such amounts are reasonable compensation for services
rendered to the Trust. Grantor Trust Certificateholders that are individuals,
estates or trusts will be entitled to deduct their share of expenses only to the
extent such expenses plus all other Section 212 expenses exceed two percent of
its adjusted gross income.
A Grantor Trust Certificateholder using the cash method of accounting must
take into account its pro rata share of income and deductions as and when
collected by or paid to the Servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the Servicer, whichever is
earlier. Because (1) interest accrues on the Receivables over differing monthly
periods and is paid in arrears and (2) interest collected on a Receivable
generally is paid Grantor Trust Certificateholders in the following month, the
amount of interest accruing to a Grantor Trust Certificateholder during any
calendar month will not equal the interest distributed in that month. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Receivables. The Receivables would then be subject to the
"stripped bond" and "coupon stripping" rules of the Code discussed below.
DISCOUNT AND PREMIUM. In determining whether a Grantor Trust
Certificateholder has purchased its interest in the Receivables (or any
Receivable) held by the related Trust at a discount or premium and whether the
Receivables (or any Receivable) have OID, market discount, or amortizable
premium, a portion of the purchase price of a Certificate should be allocated to
the Grantor Trust Certificateholder's undivided interest in accrued but unpaid
interest, and amounts collected at the time of purchase but not distributed. As
a result, the portion of the purchase price allocable to a Grantor Trust
Certificateholder's undivided interest in the Receivables (or any Receivable)
will be increased or decreased, as applicable, and the potential OID, market
discount, or amortizable premium on the Receivables (or any Receivable) could be
increased or decreased accordingly.
PREMIUM. A Grantor Trust Certificateholder that acquires an interest in
Receivables at a premium over the "stated redemption price at maturity" of the
Receivables may elect to amortize that premium under a
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constant interest method. Amortizable bond premium will be treated as an
offset to interest income on that Grantor Trust Certificate. The basis for that
Grantor Trust Certificate will be reduced to the extent that amortizable premium
is applied to offset interest payments. It is not clear whether a reasonable
prepayment assumption should be used in computing amortization of premium
allowable under Section 171. With some exceptions, a Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that the Grantor Trust Certificateholder holds during the year of the
election or thereafter. Absent an election to amortize bond premium, the premium
will be deductible as an ordinary loss upon disposition of the Certificate or
pro rata as principal is paid on the Receivables.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to such Receivable. If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
STRIPPED BONDS AND STRIPPED COUPONS. Although the tax treatment of stripped
bonds is not entirely clear, based on recent guidance from the IRS, each
purchaser of a Grantor Trust Certificate will be treated as the purchaser of a
stripped bond which generally should be treated as a single debt instrument
issued on the day it is purchased for purposes of calculating any original issue
discount. Generally, under applicable Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code), such
stripped bond will be considered to have been issued with OID. See "Original
Issue Discount." Based on the preamble to the Section 1286 Treasury Regulations,
Tax Counsel is of the opinion that, although the matter is not entirely clear,
the interest income on the Certificates at the sum of the Pass Through Rate and
the portion of the total Servicing Fee Rate that does not constitute excess
servicing will be treated as "qualified stated interest" within the meaning of
the Section 1286 Treasury Regulations and such income will be so treated in the
Trustee's tax information reporting.
ORIGINAL ISSUE DISCOUNT. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently Sections 1271 through 1273 and
1275) will be applicable to a Grantor Trust Certificateholder's interest in
those Receivables meeting the conditions necessary for these sections to apply.
Generally, a Grantor Trust Certificateholder that acquires an undivided interest
in a Receivable issued or acquired with OID must include in gross income the sum
of the "daily portions," as defined below, of the OID on such Receivable for
each day on which it owns a Grantor Trust Certificate, including the date of
purchase but excluding the date of disposition. In the case of an original
Grantor Trust Certificateholder, the daily portions of OID with respect to a
Receivable generally would be determined as follows. A calculation will be made
of the portion of OID that accrues on the Receivable during each successive
monthly accrual period (or shorter period in respect of the date of original
issue or the final Payment Date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the Receivable under the prepayment assumption used
in respect of the Receivables and (ii) any payments received during such accrual
period, and subtracting from that total the "adjusted issue price" of the
Receivable at the beginning of such accrual period. No representation is made
that the Receivables will prepay at any prepayment assumption. The "adjusted
issue price" of a Receivable at the beginning of the first accrual period is its
issue price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Receivable at the beginning of a subsequent accrual
period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such
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accrual period will then be divided by the number of days in the period to
determine the daily portion of OID for each day in the period. With respect to
an initial accrual period shorter than a full monthly accrual period, the daily
portions of OID must be determined according to a reasonable method, provided
that such method is consistent with the method used to determine the yield to
maturity of the Receivables.
With respect to the Receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the Receivables. Subsequent purchasers that purchase Receivables at
more than a de minimis discount should consult their tax advisors with respect
to the proper method to accrue such OID.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such Certificateholder's undivided
interest over such Certificateholder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than 0.25%
of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A Grantor Trust Certificateholder who acquired a Grantor Trust Certificate
at a market discount also may be required to defer a portion of its interest
deductions for the taxable year attributable to any indebtedness incurred or
continued to purchase or carry such Grantor Trust Certificate purchased with
market discount. For these purposes, the de minimis rule referred to above
applies. Any such deferred interest expense would not exceed the market discount
that accrues during such taxable year and is, in general, allowed
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as a deduction not later than the year in which such market discount is
includible in income. If such Grantor Trust Certificateholder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such Grantor Trust Certificateholder in that taxable
year or thereafter, the interest deferral rule described above will not apply.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable except with the
approval of the IRS.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the Grantor
Trust Certificateholder's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the Grantor Trust Certificateholder's
purchase price for the Grantor Trust Certificate, increased by the OID included
in the Grantor Trust Certificateholder's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
FOREIGN PERSONS. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 to (i) a Grantor Trust Certificateholder
that is not a U.S. Person (as defined herein) (a "Foreign Grantor Trust
Certificateholder") or (ii) a Grantor Trust Certificateholder holding on behalf
of a Foreign Grantor Trust Certificateholder, as well as accrued OID recognized
by a Foreign Grantor Trust Certificateholder on the sale or exchange of such a
Grantor Trust Certificate, will not be subject to withholding to the extent that
a Grantor Trust Certificate evidences ownership in Receivables issued after July
18, 1984 by natural persons if such Foreign Grantor Trust Certificateholder
complies with certain identification requirements (including delivery of a
statement, signed by the Foreign Grantor Trust Certificateholder under penalties
of perjury, certifying that such Foreign Grantor Trust Certificateholder is not
a U.S. Person and providing the name and address of such Grantor Trust
Certificateholder). Additional restrictions apply to Receivables where the
obligor is not a natural person in order to qualify for the exemption from
withholding.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a Grantor Trust
Certificateholder fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be
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required with respect to any payments. Any amounts deducted and withheld
from a payment to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
CERTAIN STATE TAX CONSEQUENCES
TAX TREATMENT OF OWNER TRUSTS
The activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in California. The State of California imposes a
state individual income tax and a corporate franchise tax on corporations,
partnerships and other entities doing business in the State of California. This
discussion relates only to Owner Trusts, and is based upon present provisions of
California statutes and the regulations promulgated thereunder, and applicable
judicial or ruling authority, all of which are subject to change, which change
may be retroactive.
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. Note Owners and Certificate Owners 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.
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 Owner Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
TAX TREATMENT OF THE TRUST
Based on regulations issued by the Franchise Tax Board with respect to the
California tax characterization of an Owner Trust as a partnership and not as an
association taxable as a corporation or other taxable entity, Tax Counsel will
opine that an Owner Trust will not be an association (or publicly traded
partnership) treated as a corporation for California tax purposes. In such case,
the resulting constructive partnership should not be treated as doing business
in California but rather should be viewed as a passive holder of investments
and, as a result, should not be subject to the California franchise tax (which,
if applicable, could possibly result in reduced payments to Certificateholders).
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Tax Counsel will advise each Owner Trust that issues
Notes that, assuming the Notes will be treated as debt for federal income tax
purposes, the Notes will be treated as debt for California income and franchise
tax purposes. Accordingly, Note Owners not otherwise subject to taxation in
California should not become subject to taxation in California solely because of
a Note Owner's ownership of Notes. However, a Note Owner already subject to
California's income tax or franchise tax could be required to pay additional
California tax as a result of the Note Owner's ownership or disposition of
Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
Under current law, Certificateholders that are nonresidents of California
and are not otherwise subject to California income tax may be subject to
California income tax on the income from the constructive partnership. In any
event, classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in California to pay
California tax on income beyond that derived from the Certificates.
If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity should not be subject to the
California franchise tax (which, if applicable, could result in reduced payments
to Certificateholders). A
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Certificateholder not otherwise subject to tax in California would not
become subject to California tax as a result of its mere ownership of such an
interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON YOUR
PARTICULAR TAX SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES TO YOU 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.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to such Benefit Plan. ERISA also imposes certain duties on persons who are
fiduciaries of Benefit Plans subject to ERISA and prohibits certain transactions
between a Benefit Plan and parties in interest with respect to such Benefit
Plans. Under ERISA, any person who exercises any authority or control with
respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit Plan (subject to certain exceptions
not here relevant). A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
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 nor to Section 4975 of the Code. However,
governmental plans may be subject to state or local laws that impose similar
requirements. In addition, governmental plans and church plans that are
"qualified" under Section 401(a) of the code are subject to restrictions with
respect to prohibited transactions under Section 503(a)(1)(B) of the Code, the
sanction for violation being loss of "qualified" status.
Due to the complexities of the "prohibited transaction" rules and the
penalties imposed upon persons involved in prohibited transactions, it is
important that the fiduciary of any Benefit Plan considering the purchase of
Securities consult with its tax and/or legal advisors regarding whether the
assets of the related Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to
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purchase, the principal amount of each class of Notes and Certificates, as
the case may be, of the related series set forth therein and in the related
Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
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 related Notes and Certificates, as the case may be, 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
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that TMCC and the Seller will
indemnify the underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by O'Melveny &
Myers LLP. In addition, certain United States federal and California state tax
and other matters will be passed upon for the related Trust by O'Melveny & Myers
LLP.
EXPERTS
If the Trust invests in demand notes issued by TMCC, the financial
statements of TMCC included in TMCC's Annual Report on Form 10-K for the year
ended September 30, 1999 will be incorporated by reference herein. These
financial statements will be so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of TMCC
for the nine-month periods ended June 30, 2000 and 1999, which will be
incorporated by reference in this Prospectus if the Trust invests in demand
notes issued by TMCC, PricewaterhouseCoopers LLP reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated August 11, 2000, which
will be incorporated by reference in this Prospectus if the Trust invests in
demand notes issued by TMCC, states that they did not audit and they do not
express an opinion on that unaudited consolidated financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their report on the unaudited consolidated
financial information because that report is not a "report"
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or a "part" of the registration statement prepared or certified by
PricewaterhouseCoopers LLP within the meaning of section 7 and 11 of the
Securities Act.
If the Trust does not invest in demand notes issued by TMCC, the financial
statements and unaudited financial information of TMCC will not be incorporated
by reference in this Prospectus. In such an event, neither
PricewaterhouseCoopers LLP nor TMCC will be subject to the liability provisions
of section 11 of the Securities Act for the financial statements appearing in
TMCC's Annual Report on Form 10-K for the year ended September 30, 1999 or for
PricewaterhouseCoopers' reports on the unaudited consolidated financial
information of TMCC because those financial statements and reports are not a
"report" or a "part" of the registration statement.
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<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
PAGE
<S> <C>
1992 Master Agreement.................................................................................... 57
Actuarial Receivables.................................................................................... 17
Administration Agreement................................................................................. 53
Administration Fee....................................................................................... 53
Administrative Purchase Payment.......................................................................... 43
Administrative Receivable................................................................................ 43
Administrator............................................................................................ 53
Advances................................................................................................. 45
APR...................................................................................................... 17
Base Rate................................................................................................ 27
Basic Servicing Fee...................................................................................... 45
Benefit Plan............................................................................................. 82
Business Day............................................................................................. 27
Calculation Agent........................................................................................ 28
Calculation Date......................................................................................... 30
CD Rate.................................................................................................. 29
CD Rate Determination Date............................................................................... 29
CD Rate Security......................................................................................... 27
Certificate Balance...................................................................................... 20
Certificate Owners....................................................................................... 71
Certificate Pool Factor.................................................................................. 20
Certificateholder........................................................................................ 25
Certificates............................................................................................. 13
class.................................................................................................... 21,25
Clearstream Banking...................................................................................... 34
Clearstream Banking Participants......................................................................... 36
Closing Date............................................................................................. 17
Code..................................................................................................... 68
Collection Account....................................................................................... 41
Collection Period........................................................................................ 43
Commercial Paper Rate Determination Date................................................................. 29
Commercial Paper Rate Security........................................................................... 27
Cooperative.............................................................................................. 36
Cutoff Date.............................................................................................. 13
Dealer Agreements........................................................................................ 13
Dealer Recourse.......................................................................................... 19
Dealers.................................................................................................. 13
Definitive Certificates.................................................................................. 37
Definitive Notes......................................................................................... 37
Definitive Securities.................................................................................... 34
Demand Notes Indenture................................................................................... 54
Demand Notes Indenture Trustee........................................................................... 54
Depository............................................................................................... 21
Designated LIBOR Page.................................................................................... 32
disqualified persons..................................................................................... 82
DTC...................................................................................................... 34
DTC Participants......................................................................................... 35
Eligible Deposit Account................................................................................. 42
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Eligible Institution..................................................................................... 42
Eligible Investments..................................................................................... 42
ERISA.................................................................................................... 82
Euroclear................................................................................................ 34
Euroclear Operator....................................................................................... 36
Euroclear Participants................................................................................... 36
Events of Default........................................................................................ 22
Excess Payment........................................................................................... 44
Federal Funds Rate Determination Date.................................................................... 30
Federal Funds Rate Security.............................................................................. 27
Final Maturity Scheduled Date............................................................................ 42
financed vehicles........................................................................................ 4
Financed Vehicles........................................................................................ 13,17
Fixed Rate Securities.................................................................................... 26
Floating Rate Securities................................................................................. 26
Foreign Certificate Owners............................................................................... 75
Foreign Grantor Trust Certificateholder.................................................................. 80
Foreign Owner............................................................................................ 70
grantor trust............................................................................................ 7,76
Grantor Trust Certificateholders......................................................................... 76
Grantor Trust Certificates............................................................................... 76
Indenture................................................................................................ 21
Indenture Trustee........................................................................................ 13
Index.................................................................................................... 33
Index Currencies......................................................................................... 33
Index Maturity........................................................................................... 27
Indexed Principal Amount................................................................................. 33
Indexed Securities....................................................................................... 33
Indirect DTC Participants................................................................................ 35
Insolvency Event......................................................................................... 50
Insolvency Laws.......................................................................................... 65
Interest Determination Date.............................................................................. 31
Interest Period.......................................................................................... 28
Interest Rate............................................................................................ 21
Interest Reset Date...................................................................................... 27
Interest Reset Period.................................................................................... 27
Investment Earnings...................................................................................... 42
IRS...................................................................................................... 68
ISDA..................................................................................................... 57
Issuer................................................................................................... 13
LIBOR.................................................................................................... 31
LIBOR Security........................................................................................... 27
London Banking Day....................................................................................... 31
London Business Day...................................................................................... 27
Money Market Yield....................................................................................... 30
New Regulations.......................................................................................... 71
Note Owners.............................................................................................. 69
Note Pool Factor......................................................................................... 20
Noteholder............................................................................................... 21
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Notes.................................................................................................... 13
Obligors................................................................................................. 13,17
OID...................................................................................................... 69
OID regulations.......................................................................................... 69
Original Certificate Balance............................................................................. 20
owner trust.............................................................................................. 7,68
Pass Through Rate........................................................................................ 26
Payahead Account......................................................................................... 41
Payment Date............................................................................................. 21
Payments Ahead........................................................................................... 39
Plan Assets Regulation................................................................................... 82
Pool Balance............................................................................................. 20
Pooling and Servicing Agreement.......................................................................... 13
Precomputed Advance...................................................................................... 44
Precomputed Receivables.................................................................................. 17
prepayment............................................................................................... 44
Prepayment Assumption.................................................................................... 69,76
prepayments.............................................................................................. 18
Principal Balance........................................................................................ 46
Principal Financial Center............................................................................... 32
prohibited transaction................................................................................... 82
Prospectus Supplement.................................................................................... 13
Rebate................................................................................................... 18
Receivables.............................................................................................. 4,13
Receivables Pool......................................................................................... 13
Receivables Purchase Agreement........................................................................... 17
Registration Statement................................................................................... 16
Related Documents........................................................................................ 24
Required Rate............................................................................................ 47
Required Yield Maintenance Amount........................................................................ 47
Reserve Fund............................................................................................. 47
Reserve Fund Initial Deposit............................................................................. 47
Rule of 78s Receivables.................................................................................. 17
Sale and Servicing Agreement............................................................................. 13
Schedule of Receivables.................................................................................. 40
SEC...................................................................................................... 16
Section 1286 Treasury Regulations........................................................................ 78
Securities............................................................................................... 13
Securities Act........................................................................................... 16
Securityholders.......................................................................................... 16
Seller................................................................................................... 14
Servicer................................................................................................. 14
Servicer Default......................................................................................... 49
Servicing Fee Rate....................................................................................... 45
Short-Term Note.......................................................................................... 69
Simple Interest Advance.................................................................................. 45
Simple Interest Receivables.............................................................................. 17
Spread................................................................................................... 27
Spread Multiplier........................................................................................ 27
Strip Certificates....................................................................................... 26
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Strip Notes.............................................................................................. 21
Swap Agreement........................................................................................... 57
Swap Counterparty........................................................................................ 57,61
Swap Termination......................................................................................... 59
Swap Termination Event................................................................................... 58
TARGET system............................................................................................ 27
Tax Counsel.............................................................................................. 68
Terms and Conditions..................................................................................... 37
TMCC..................................................................................................... 14
TMCC Demand Notes........................................................................................ 54
TMS...................................................................................................... 54
Total Servicing Fee...................................................................................... 45
Transfer and Servicing Agreements........................................................................ 40
Treasury Rate............................................................................................ 32
Treasury Rate Determination Date......................................................................... 32
Treasury Rate Security................................................................................... 27
Trust.................................................................................................... 13
Trust Accounts........................................................................................... 42
Trust Agreement.......................................................................................... 13
Trustee.................................................................................................. 13
U.S. Person.............................................................................................. 70
Underwriting Agreements.................................................................................. 82
Warranty Purchase Payment................................................................................ 41
Warranty Receivable...................................................................................... 41
weighted average life.................................................................................... 19
Yield Maintenance Account................................................................................ 47
Yield Maintenance Agreement.............................................................................. 48
Yield Maintenance Deposit................................................................................ 47
</TABLE>
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<TABLE>
========================================================== ======================================================
<S> <C>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. WE HAVE NOT AUTHORIZED $1,045,038,000
ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT
CLAIM THE ACCURACY OF THE INFORMATION IN THIS TOYOTA AUTO RECEIVABLES
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AS OF ANY 2000-B OWNER TRUST
DATE OTHER THAN THE DATE STATED ON THE COVER PAGE. WE
ARE NOT OFFERING THE NOTES IN ANY JURISDICTION WHERE $429,000,000 6.75% ASSET
IT IS NOT PERMITTED. BACKED NOTES, CLASS A-2
-------------------------------
$407,000,000 6.76% ASSET
BACKED NOTES, CLASS A-3
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT $209,038,000 6.80% ASSET
PAGE BACKED NOTES, CLASS A-4
Summary of Terms................................ S-3 TOYOTA MOTOR CREDIT
Risk Factors.................................... S-13 RECEIVABLES
The Trust....................................... S-16 CORPORATION,
Capitalization of the Trust..................... S-18 SELLER
The Owner Trustee and Indenture Trustee......... S-18
The Seller and the Servicer..................... S-18 TOYOTA MOTOR CREDIT
The Receivables Pool............................ S-18 CORPORATION,
Delinquencies, Repossessions and Net Losses..... S-22 SERVICER
Use of Proceeds................................. S-23
Prepayment and Yield Considerations............. S-24
Weighted Average Lives of the Notes............. S-25
Pool Factors and Trading Information............ S-28
Description of the Notes........................ S-28
Payments to Noteholders......................... S-30
Subordination; Reserve Account.................. S-33
Transfer and Servicing Agreements............... S-35
The Owner Trustee and Indenture Trustee......... S-37
ERISA Considerations............................ S-39
Certain Federal Income Tax Consequences......... S-39 -------------------------------
Underwriting.................................... S-40
Legal Opinions.................................. S-42 PROSPECTUS SUPPLEMENT
Index of Terms.................................. S-43 -------------------------------
ANNEX A: Global Clearance, Settlement and
Documentation Procedures..................... A-1
PROSPECTUS
Summary of Terms................................ 3
Risk Factors.................................... 9 JOINT GLOBAL COORDINATORS
The Trusts...................................... 13
The Trustee..................................... 13 DEUTSCHE BANC ALEX. BROWN
The Seller...................................... 14 MORGAN STANLEY DEAN WITTER
The Servicer.................................... 14
Where You Can Find More Information About Your CO-MANAGERS
Securities................................... 16
The Receivables Pools........................... 17 CHASE SECURITIES INC.
Delinquencies, Repossessions and Net Losses..... 18 MERRILL LYNCH & CO.
Weighted Average Life of the Securities......... 18 SALOMON SMITH BARNEY
Pool Factors and Trading Information............ 20
Use of Proceeds................................. 20
Description of the Notes........................ 21
Description of the Certificates................. 25
Certain Information Regarding the Securities.... 26
Description of the Transfer and Servicing
Agreement ................................... 40
TMCC Demand Notes............................... 54
The Swap Agreement.............................. 57
Certain Legal Aspects of the Receivables........ 62
Certain Federal Income Tax Consequences......... 68
ERISA Considerations............................ 82
Plan of Distribution............................ 82
Legal Opinions.................................. 83
Experts......................................... 83
Index of Terms.................................. 85
DEALER PROSPECTUS DELIVERY OBLIGATION. UNTIL DECEMBER 24, 2000 ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE NOTES, WHETHER OR NOT PARTICIPATING IN THE
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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</TABLE>
