<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 2000
REGISTRATION NO. 333-41568
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
TOYOTA AUTO RECEIVABLES TRUSTS
(Issuer with respect to the Securities)
TOYOTA MOTOR CREDIT CORPORATION
(Issuer of the TMCC Demand Notes)
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION
(Originator of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
CALIFORNIA 6146 33-0593804
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NO.)
</TABLE>
19300 GRAMERCY PLACE
TORRANCE, CALIFORNIA 90509
310-468-7332
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF ORIGINATOR'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
ALAN F. COHEN, ESQ.
C/O TOYOTA FINANCIAL SERVICES
19001 SOUTH WESTERN AVENUE
TORRANCE, CALIFORNIA 90509
310-468-3885
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE WITH RESPECT TO THE REGISTRANT)
----------------------
COPIES TO:
DAVID J. JOHNSON, JR., ESQ.
AND DANIEL F. PASSAGE, ESQ.
O'MELVENY & MYERS LLP
400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071
(213) 430-6605
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
==========================================================================================================================
PROPOSED TITLE OF SECURITIES PROPOSED MAXIMUM PROPOSED AMOUNT OF MAXIMUM REGISTRATION
TO BE REGISTERED AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING FEE
REGISTERED PER UNIT(1) PRICE(1)
--------------------------------------------------------------------------------------------------------------------------
Asset Backed Securities $2,100,000,000 100% $2,100,000,000 $554,400.00(3)
--------------------------------------------------------------------------------------------------------------------------
TMCC Demand Notes (2) (2) (2) (2)
==========================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee on the basis of the proposed maximum offering price per
unit.
(2) The TMCC Demand Notes represent investments by the Trust of Collections in demand notes issued from time to time by TMCC.
(3) Of which $264.00 previously has been paid.
-------------------------
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to
the offering of one or more series of Asset Backed Notes and/or Asset Backed
Certificates by various Trusts created from time to time by Toyota Motor Credit
Receivables Corporation and (ii) two forms of Prospectus Supplement relating to
the offering by each separate trust of a particular series of Asset Backed
Certificates or of Asset Backed Notes and Asset Backed Certificates described
therein. Each form of Prospectus Supplement relates only to the securities
described therein and is a form which may be used, among others, by Toyota Motor
Credit Receivables Corporation to offer Asset Backed Notes and/or Asset Backed
Certificates under this Registration Statement.
<PAGE>
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 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.
********************************************************************************
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 August 7, 2000.
<PAGE>
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
77 in this prospectus.
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.
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
2
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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 propectus
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
o interest rate (which may be fixed,
variable, adjustable or some
combination of these rates) or
method of determining the interest
rate.
3
<PAGE>
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 designatedportions 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.
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
4
<PAGE>
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).
o a sale and servicing agreement
agreement among the seller, the
servicer and the trust (if the
trust will be treated as an owner
trust for federal income tax
purposes); or
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.
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.
5
<PAGE>
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 arrangement
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
6
<PAGE>
investment earnings, late fees and
other administrative 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
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.
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
7
<PAGE>
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.
8
<PAGE>
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.
9
<PAGE>
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.
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.
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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 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
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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 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.
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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 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.
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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 March 31, 1999, 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 Motor Sales, U.S.A., Inc. ("TMS"), which is
primarily engaged in the wholesale distribution of automobiles, light-duty
trucks, industrial equipment and related replacement parts and accessories
throughout the United States (excluding Hawaii). Substantially all of TMS's
products are purchased from Toyota Motor Corporation, the parent of TMS, or its
affiliates.
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. Toyota Financial Services Corporation is
scheduled to assume ownership of TMCC, currently a subsidiary of Toyota Motor
Sales, U.S.A., Inc., in October, 2000.
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.
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.
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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.
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.
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
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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. Any information contained in reports filed with the SEC subsequent to the
date of this Prospectus will automatically update this Prospectus. TMCC, as
issuer of demand notes, 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.
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 and March 31, 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.
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.
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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.
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.
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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 "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
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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.
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
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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.
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.
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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 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; (vi)
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 the payment of the principal of or any installment of the
principal of any such Note when the same becomes due and
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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 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).
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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.
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
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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 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.
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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".
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.
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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 (vi) 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 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
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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.
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
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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 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:
D X 360
Money Market Yield = ------------------ 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.
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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.
(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
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(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 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
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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 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.
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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.
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.
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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 "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
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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 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 any class
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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 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
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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;
(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;
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(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".
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
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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 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
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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 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
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
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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.
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) 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
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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
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
second 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
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source is unlikely, it will be entitled to recover unreimbursed Precomputed
Advances from collections on or in respect of other Receivables.
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 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
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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 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
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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.
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
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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.
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.
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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 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
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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 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.
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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 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)
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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.
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.
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
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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 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
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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 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
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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 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.
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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 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.
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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 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
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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
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
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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 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.
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
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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 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
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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 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
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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 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),
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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 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
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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 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
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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.
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
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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.
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 minimus, 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 income by such Note
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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 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
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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, 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
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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 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.)
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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.
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.
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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 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.
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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."
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.
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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 minimus,
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 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.
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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 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
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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 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 as a
deduction not later than the
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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 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.
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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 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
74
<PAGE>
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
section 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 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
75
<PAGE>
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 six-month periods ended March 31, 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 May 12, 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" 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.
76
<PAGE>
INDEX OF DEFINED TERMS
PAGE
----
1992 Master Agreement..............................53
Actuarial Receivables..............................17
Administration Agreement...........................49
Administration Fee.................................49
Administrative Purchase Payment....................40
Administrative Receivable..........................40
Administrator......................................49
Advances...........................................42
APR................................................17
Base Rate..........................................25
Basic Servicing Fee................................42
Benefit Plan.......................................75
Business Day.......................................26
Calculation Agent..................................27
Calculation Date...................................28
CD Rate............................................27
CD Rate Determination Date.........................27
CD Rate Security...................................26
Certificate Balance................................19
Certificate Owners.................................65
Certificate Pool Factor............................19
Certificateholder..................................24
Certificates.......................................13
class...........................................20,24
Clearstream Banking................................32
Clearstream Banking Participants...................34
Closing Date.......................................16
Code...............................................62
Collection Account.................................39
Collection Period..................................41
Commercial Paper Rate Determination Date...........28
Commercial Paper Rate Security.....................26
Cooperative........................................34
Cutoff Date........................................13
Dealer Agreements..................................13
Dealer Recourse....................................18
Dealers............................................13
Definitive Certificates............................35
Definitive Notes...................................35
Definitive Securities..............................32
Demand Notes Indenture.............................49
Demand Notes Indenture Trustee.....................49
Depository.........................................20
Designated LIBOR Page..............................30
disqualified persons...............................75
DTC................................................32
DTC Participants...................................33
Eligible Deposit Account...........................39
Eligible Institution...............................39
Eligible Investments...............................39
ERISA..............................................75
Euroclear..........................................32
Euroclear Operator.................................34
Euroclear Participants.............................34
77
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Events of Default..................................21
Excess Payment.....................................41
Federal Funds Rate Determination Date..............29
Federal Funds Rate Security........................26
Final Maturity Scheduled Date......................40
financed vehicles...................................4
Financed Vehicles...............................13,16
Fixed Rate Securities..............................25
Floating Rate Securities...........................25
Foreign Certificate Owners.........................68
Foreign Grantor Trust Certificateholder............73
Foreign Owner......................................64
grantor trust....................................7,69
Grantor Trust Certificateholders...................69
Grantor Trust Certificates.........................69
Indenture..........................................20
Indenture Trustee..................................13
Index..............................................31
Index Currencies...................................31
Index Maturity.....................................25
Indexed Principal Amount...........................31
Indexed Securities.................................31
Indirect DTC Participants..........................33
Insolvency Event...................................46
Insolvency Laws....................................59
Interest Determination Date........................29
Interest Period....................................27
Interest Rate......................................20
Interest Reset Date................................26
Interest Reset Period..............................26
Investment Earnings................................39
IRS................................................62
ISDA...............................................53
Issuer.............................................13
LIBOR..............................................29
LIBOR Security.....................................26
London Banking Day.................................29
London Business Day................................26
Money Market Yield.................................28
New Regulations....................................64
Note Owners........................................63
Note Pool Factor...................................19
Noteholder.........................................20
Notes..............................................13
Obligors........................................13,16
OID................................................63
OID regulations....................................63
Original Certificate Balance.......................19
owner trust......................................7,62
Pass Through Rate..................................25
Payahead Account...................................39
Payment Date.......................................20
Payments Ahead.....................................37
Plan Assets Regulation.............................75
Pool Balance.......................................19
78
<PAGE>
Pooling and Servicing Agreement....................13
Precomputed Advance................................41
Precomputed Receivables............................17
Prepayment.........................................41
Prepayment Assumption...........................63,70
prepayments........................................18
Principal Balance..................................43
Principal Financial Center.........................30
prohibited transaction.............................75
Prospectus Supplement..............................13
Rebate.............................................17
Receivables......................................4,13
Receivables Pool...................................13
Receivables Purchase Agreement.....................16
Registration Statement.............................15
Related Documents..................................23
Required Rate......................................44
Required Yield Maintenance Amount..................44
Reserve Fund.......................................44
Reserve Fund Initial Deposit.......................44
Rule of 78s Receivables............................17
Sale and Servicing Agreement.......................13
Schedule of Receivables............................37
SEC................................................15
Section 1286 Treasury Regulations..................71
Securities.........................................13
Securities Act.....................................15
Securityholders....................................15
Seller.............................................13
Servicer...........................................14
Servicer Default...................................46
Servicing Fee Rate.................................42
Short-Term Note....................................63
Simple Interest Advance............................42
Simple Interest Receivables........................17
Spread.............................................25
Spread Multiplier..................................25
Strip Certificates.................................25
Strip Notes........................................20
Swap Agreement.....................................53
Swap Counterparty...............................53,56
Swap Termination...................................54
Swap Termination Event.............................54
TARGET system......................................26
Tax Counsel........................................62
Terms and Conditions...............................35
TMCC...............................................14
TMCC Demand Notes..................................49
TMS................................................14
Total Servicing Fee................................42
Transfer and Servicing Agreements..................37
Treasury Rate......................................31
Treasury Rate Determination Date...................31
Treasury Rate Security.............................26
79
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Trust..............................................13
Trust Accounts.....................................39
Trust Agreement....................................13
Trustee............................................13
U.S. Person........................................64
Underwriting Agreements............................75
Warranty Purchase Payment..........................38
Warranty Receivable................................38
weighted average life..............................18
Yield Maintenance Account..........................44
Yield Maintenance Agreement........................44
Yield Maintenance Deposit..........................44
80
<PAGE>
Subject to completion, dated ______________
Prospectus Supplement To Prospectus Dated August 7, 2000
TOYOTA AUTO RECEIVABLES ____-__ OWNER TRUST
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
$____________________ ASSET BACKED NOTES
$____________________ ASSET BACKED CERTIFICATES
********************************************************************************
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE S-13 OF THIS SUPPLEMENT AND PAGE 9 IN THE ACCOMPANYING
PROSPECTUS.
This prospectus supplement does not contain complete information about the
offering of the securities. No one may use this prospectus supplement to offer
and sell the securities 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 SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The securities are asset backed securities issued by the trust. The
securities are not obligations of Toyota Motor Credit Corporation, Toyota Motor
Credit Receivables Corporation, Toyota Motor Sales, U.S.A., Inc. or any of their
respective affiliates. Neither the securities nor the receivables are insured or
guaranteed by any governmental agency.
********************************************************************************
The trust will issue the following securities:
<TABLE>
<CAPTION>
First Scheduled Final
Pass Interest Principal Scheduled
Principal Interest Through Interest Payment Payment Payment
Amount Rate Rate Period Date Date Date
--------- -------- ------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Notes(1)......
Class A-2 Notes(1)......
Class A-3 Notes(1)......
Certificates (1)........
</TABLE>
(1) The certificates are subordinated to the notes, as described in this
prospectus supplement.
The terms of the offering are as follows:
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT SELLER(2)
----------------- ------------ -----------
<S> <C> <C> <C>
Per Class A-1 Note..... $_____________ _______% $_____________
Per Class A-2 Note..... $_____________ _______% $_____________
Per Class A-3 Note..... $_____________ _______% $_____________
Per Certificate........ $_____________ _______% $_____________
Total.................. $_____________ _______% $_____________
</TABLE>
(1) Plus accrued interest from ____________.
(2) Before deducting expenses payable by TMCRC, as the seller, estimated to be
approximately $__________.
[THE TRUST HAS APPLIED TO LIST THE SECURITIES ON THE LUXEMBOURG STOCK
EXCHANGE AND FOR LISTING AND PERMISSION TO DEAL IN THE SECURITIES ON THE STOCK
EXCHANGE OF HONG KONG LIMITED.]
[UNDERWRITERS]
The date of this Prospectus Supplement is _________.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the securities 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 securities, including
your class; and
o this prospectus supplement, which describes the specific terms of your
class of securities.
IF THE TERMS OF YOUR SECURITIES 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-42 in this prospectus supplement and under the caption "Index of
Terms" beginning on page 77 in the accompanying prospectus.
S-2
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING INFORMATION HIGHLIGHTS SELECTED INFORMATION FROM THIS
DOCUMENT AND PROVIDES A GENERAL OVERVIEW OF THE TERMS OF THE NOTES AND THE
CERTIFICATES. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THESE
SECURITIES, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS. BOTH DOCUMENTS CONTAIN INFORMATION YOU SHOULD CONSIDER WHEN MAKING
YOUR INVESTMENT DECISION.
RELEVANT PARTIES
<TABLE>
<S><C>
ISSUER Toyota Auto Receivables Owner Trust ____-__. The trust will
be established by a trust agreement.
SELLER Toyota Motor Credit Receivables Corporation.
SERVICER Toyota Motor Credit Corporation.
INDENTURE TRUSTEE [____________________]
OWNER TRUSTEE [____________________]
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 and the owner
trustee. The trust agreement 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 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 On or about [__________].
CUTOFF DATE [__________].
PAYMENT DATES The trust will pay interest and principal on the securities
on the fifteenth day of each month. If the fifteenth day of
the month is not a business day, payments on the securities
will be made on the next business day. The date that any
payment is made is
</TABLE>
S-3
<PAGE>
<TABLE>
<S><C>
called a payment date. The first payment date is _____________.
A "business day" is any day except:
o a Saturday or Sunday;
o a day on which banks in New York or
San Francisco are closed; or
o [for payments on the securities
made in Luxembourg or Hong Kong by
a paying agent, a day on which
banks in Luxembourg or Hong Kong
are closed.]
FINAL SCHEDULED PAYMENT DATES The final principal payment for each class of securities 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 securities are in book-entry form, the trust
will make payments on the securities to the holders of
record on the day immediately preceding the payment date. If
the securities are issued in definitive form, the record
date will be the last day of the month preceding the payment
date.
COLLECTION PERIOD The calendar month preceding the related payment date.
DESCRIPTION OF THE SECURITIES
TERMS The trust is offering the following classes of securities by way of this
prospectus supplement:
Final
Aggregate Pass- Scheduled
Principal Original Interest Through Payment
Amount Balance Rate* Rate* Date
--------- -------- -------- ------------ ---------
Class A-1 $ $ % % %
Notes
Class A-2
Notes
Class A-3
Notes
Certificates
-----------
Total
* Calculated based on a 360-day year consisting of twelve 30-day months.
The notes will be secured by the assets of the trust
pursuant to the indenture. The certificates will represent
undivided ownership interests in the trust.
The outstanding principal amount of each class of notes and
the certificate balance of the certificates will be reduced by the
payment of principal to the holders of those securities.
</TABLE>
S-4
<PAGE>
<TABLE>
<S><C>
INTEREST AND PRINCIPAL PAYMENTS In general, securityholders are entitled to receive payments
of interest and principal from the trust only to the extent
that collections from trust assets and funds resulting from
credit enhancements are sufficient to make those payments.
A description of how payments of interest on and principal of
the Notes will be made on each payment date is provided under
"Description of the Notes" and "Payments to Noteholders" in
this prospectus supplement.
[LISTING The trust has applied to list the Class A-1 Notes on the
Luxembourg Stock Exchange and The Stock Exchange of Hong
Kong Limited. The trust has requested that the listings be
made effective on or about _______________.]
MINIMUM DENOMINATIONS The securities will be issued only in denominations of
$1,000 or more. Securities will be issued in multiples of $1
for amounts in excess of $1,000.
REGISTRATION OF THE SECURITIES You will generally hold your interests in the securities
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 certificate representing your
securities except under limited circumstances.
We expect the securities 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 __________.
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 notes will be characterized as debt for tax purposes;
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. If you purchase certificates, you will agree to
treat the trust (1) as a partnership in which the
certificateholders are partners or (2) if you are the sole
beneficial owner of the certificates, as a "disregarded
entity," for federal income and
</TABLE>
S-5
<PAGE>
<TABLE>
<S><C>
California income and franchise tax purposes.
YOU SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" AND "--CERTAIN STATE TAX CONSEQUENCES WITH
RESPECT TO TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE"
IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION
CONCERNING THE APPLICATION OF FEDERAL INCOME AND CALIFORNIA
TAX LAWS TO THE TRUST AND THE SECURITIES.
ERISA CONSIDERATIONS The notes are generally eligible for purchase by employee
benefit plans, subject to certain considerations discussed
under "ERISA Considerations" in this prospectus supplement and
in the accompanying prospectus. The certificates may not be
acquired by any employee benefit plan or by an individual
retirement account.
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
SECURITIES, YOU SHOULD, AMONG OTHER THINGS, CONSULT WITH
YOUR COUNSEL IN DETERMINING WHETHER ALL REQUIRED CONDITIONS
HAVE BEEN SATISFIED.
[ELIGIBILITY FOR PURCHASE BY MONEY MARKET The Class A-1 Notes will be eligible securities for purchase
FUNDS by money market funds under Rule 2a-7 under the Investment
Company Act of 1940, as amended.]
RATINGS It is a condition to the issuance of the securities that:
o the Class A Notes must be rated "AAA" by Standard and
Poor's Ratings Services, a division of The McGraw Hill
Companies, Inc. and at least "Aaa" by Moody's
Investors Service, Inc.; and
o the Certificates must be rated at least "___" by
Standard & Poor's and at least "__" by Moody's.
A SECURITY RATING IS NOT A RECOMMENDATION TO BUY, SELL OR
HOLD SECURITIES. THE RATINGS OF THE SECURITIES ADDRESS THE
LIKELIHOOD OF THE PAYMENT OF PRINCIPAL AND INTEREST ON THE
SECURITIES IN ACCORDANCE WITH THEIR TERMS. EITHER RATING
AGENCY MAY SUBSEQUENTLY LOWER OR WITHDRAW ITS RATING OF THE
SECURITIES. IF THIS HAPPENS, NO PERSON OR ENTITY WILL BE
OBLIGATED TO PROVIDE ANY ADDITIONAL CREDIT ENHANCEMENT FOR
THE SECURITIES. THE TRUST WILL OBTAIN THE RATINGS MENTIONED
ABOVE FROM BY STANDARD AND POOR'S RATINGS SERVICES, A
DIVISION OF THE MCGRAW HILL COMPANIES, INC. AND MOODY'S
INVESTORS SERVICE, INC. HOWEVER, ANOTHER RATING AGENCY MAY
RATE THE CERTIFICATES AND, IF SO, THE RATING MAY BE LOWER
THAN THE RATINGS DESCRIBED ABOVE.
STRUCTURAL SUMMARY [Chart depicting the transfer of receivables from Toyota
Motor Credit Corporation to seller in exchange for the cash
net proceeds of the offering and the subordinated
non-recourse
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promissory note; the transfer of receivables from the seller
to the trust in exchange for the securities; and the
issuance of the securities to investors in exchange for the
proceeds.]
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 securities. These contracts are referred to as
"receivables". The receivables will have a total outstanding
principal balance of $___________ as of ______, the cutoff
date.
Toyota Motor Credit Receivables Corporation will sell the
notes [and certificates] to investors for cash, and will use
this cash to pay part of the purchase price for its purchase
of the receivables. The chart above represents the flow of
funds provided by investors for the securities 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:
o Total Cutoff Date Principal Balance...................
o Number of Receivables.................................
o Average Cutoff Date Principal Balance.................
o Average Original Amount Financed......................
Range of Original Amounts Financed
o Weighted Average APR(1)...............................
Range of APRs
o Weighted Average Original Number of Scheduled
Payments(1).......................................
Range of Original Number of Scheduled Payments........
o Weighted Average Remaining Number of Scheduled
Payments(1).......................................
Range of Remaining Number of Scheduled Payments.......
-------------------
(1) Weighted by principal balance as of the cutoff date.
The assets of the trust will also include:
o certain monies due or received under the receivables
on and after the cutoff date;
o security interests in the vehicles financed under the
receivables;
o certain bank accounts and the proceeds of those
accounts; and
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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 receivables. On each
payment date, 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 related collection
period. The servicer will also receive additional servicing
compensation in the form of 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 receivables that are classified as
precomputed receivables (but not on any that are classified
as simple interest receivables). 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 later
collections on the related delinquent receivable, the trust
may also reimburse the servicer from collections on other
receivables.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "TRANSFER
AND SERVICING AGREEMENTS--SERVICING COMPENSATION AND PAYMENT
OF EXPENSES" IN THE ACCOMPANYING PROSPECTUS, AND TO
"TRANSFER AND SERVICING AGREEMENTS--ADVANCES" IN THIS
PROSPECTUS SUPPLEMENT.
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.
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 Notes will accrue interest on a 30/360 basis from
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(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)
__________. 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, __) 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 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 and Class
A-3 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) [and then to
pay accrued and unpaid interest on the Certificates];
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
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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
interest in 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 Certificates until they are paid in full.
After the Class A Notes and the Certificates 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 such that payments of principal
are made to all three classes of Class A Notes on a pro rata
basis, rather than sequentially.
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 THE CHANGES IN PRIORITIES OF
PAYMENTS AND AMOUNTS AVAILABLE, SEE "DESCRIPTION OF THE
NOTES--PAYMENTS TO NOTEHOLDERS" IN THIS PROSPECTUS
SUPPLEMENT.
D. SUBORDINATION
As long as any Class A Notes remain outstanding, (i) all
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payments on each payment date in respect of interest on the
certificates will be subordinated to the payment of interest
on each class of Class A Notes, (ii) all payments in respect
of principal of the certificates will be subordinated to the
payment of interest on and principal of each class of Class A
Notes and (iii) 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 and on the certificates.
E. RESERVE ACCOUNT
On the closing date, the seller will deposit $_______ (___%
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 "Payment Priorities" above
(excluding amounts payable to the certificateholders), 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) ___% of the outstanding principal balance of
the receivables as of the end of the related collection
period or (b) $_______ (___% of the outstanding principal
balance of the receivables as of the cutoff date), except
that if charge-offs or delinquencies exceed specified
levels, the required amount will be the greatest of (i) ___%
of the outstanding principal balance of the receivables as
of the end of the related collection period, (ii) $_______
(___% of the outstanding principal balance of the
receivables as of the cutoff date), and (iii) ___
% 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 SCHEDULE 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.
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G. OPTIONAL REDEMPTION; CLEANUP CALL
The servicer may purchase all, but not part, of the
receivables on any payment date when the outstanding
aggregate principal balance of the receivables has declined
to 10% or less of the principal balance of the receivables
as of the cut-off date. Such purchase would result in the
redemption of all outstanding securities on such payment
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 THE FACTORS SET
FORTH UNDER "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS) IN DECIDING WHETHER
TO PURCHASE THE SECURITIES OF ANY CLASS.
PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE SECURITIES,
RESULTING IN REINVESTMENT RISK TO YOU.
You may receive payment of principal on your securities 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 securities. Prepayments on the
receivables will shorten the life of the securities 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:
o make early payments, since receivables will generally be
prepayable at any time without penalty;
o default, resulting in the repossession and sale of the financed
vehicle; or
o 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 seller will have the option to purchase the
receivables from the trust on any payment date when the outstanding principal
balance of the receivables has declined to 10% or less of the principal balance
as of the cutoff date. In addition, an event of default under the indenture
could cause the notes to be prepaid.. See "PREPAYMENTS, POTENTIAL LOSSES AND
CHANGES IN ORDER OF PRIORITY OF PAYMENTS FOLLOWING AN EVENT OF DEFAULT UNDER
INDENTURE MAY AFFECT YIELD" 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 securities being shorter than the period from the closing date to
the final scheduled maturity date for the related class.
PAYMENT PRIORITIES INCREASE RISK OF LOSS OR DELAY IN PAYMENT TO THE
CERTIFICATES.
Based on the priorities described under "Payments to Noteholders" I
this prospectus supplement, classes of notes that receive payments, particularly
principal payments, before other classes of notes and the certificates will be
repaid more rapidly than such other securities. In addition, because of such
payment priorities, the certificates and classes with higher 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 during which a
disproportionate amount of credit enhancement may have been applied an not
replenished.
As a result, the yield of the Certificates will be highly sensitive to
losses on the receivables and the timing of such losses, and the yields of the
Class A-3 Notes and Class A-2 Notes will be relatively more sensitive to such
losses and their timing than will the Class A-1 Notes.
If you buy certificates:
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o you will not receive any interest payments until all interest
payable on each class of notes on that date has been paid; and
o you will not receive any principal payments on any payment
date until all principal and interest payable on each class of
notes on that date has been paid.
If the actual rate and amount of losses exceed your expectations, and
if amounts in the reserve fund are insufficient to cover the resulting
shortfalls, the yield to maturity on your securities may be lower than
anticipated, and you could suffer a loss.
Classes of securities that receive payments earlier than expected are
exposed to a greater reinvestment risk, and classes of securities that receive
principal later than expected are exposed to a greater risk of loss. In either
case, the yields on your securities could be materially and adversely affected.
BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS ONLY LIMITED PROTECTION
AGAINST POTENTIAL LOSSES.
The only sources of funds for payments on the securities 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 and certificates 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
securities. 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 securityholders 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 securities 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 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-__ 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
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balance, based on the address of the related dealer, ___%, ___%, ___% and ___%
of the receivables were located in [California, Illinois, Virginia, and New
York], 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 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 CERTIFICATES.
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 certificates 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 certificates.
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 certificates 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 SECURITIES COULD LIMIT YOUR
ABILITY TO RESELL THE SECURITIES.
[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
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liquid secondary market for the securities could limit your ability to resell
them. This means that if you want to sell your securities in the future before
they mature, you may have difficulty finding a buyer. If you find a buyer, the
selling price may be less than it would have been if a secondary market existed
for the securities. There is currently no secondary market for the securities.
Although the underwriters have stated that they intend to make a market in each
class of securities, they are not obligated to do so. A secondary market may not
ever develop for the securities. Even if such a market does develop, it may not
provide sufficient liquidity or continue for the life of your securities.
BECAUSE THE SECURITIES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE
EXERCISED INDIRECTLY.
Because the securities will be issued in book-entry form, you will be
required to hold your interest in the certificates 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 securities
within The Depository Trust Company, Clearstream Banking societe anonyme or the
Euroclear System must be made in accordance with the usual rules and operating
procedures of those systems. So long as the securities are in book-entry form,
you will not be entitled to receive a definitive note or certificate
representing your interest. The securities 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 securities 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 those terms are used in
the trust agreement and sale and servicing agreement. As a result, you will only
be able to exercise the rights of Securityholders 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
securities in book-entry form could also limit your ability to pledge your
securities 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
securities.
Interest and principal on the securities will be paid by the trust to
The Depository Trust Company as the record holder of the securities 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 securityholders 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 ____-__ Owner Trust (the "Trust") is a
Delaware business trust to be formed pursuant to the trust agreement (the "Trust
Agreement") between Toyota Motor Credit Receivables Corporation, as seller (the
"Seller") and ________________ as owner trustee (the "Owner Trustee"). After its
formation, the Trust will not engage in any activity other than (i) acquiring,
holding and managing the receivables as 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" and,
together with the Class A-1 Notes and Class A-2 Notes, the "Class A Notes" or
the "Notes") and the certificates (the "Subordinated Certificates" and, together
with the Notes, the "Securities"), (iii) making payments on the Notes and the
Certificates 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
Certificates. The Trust will use the Notes and the Certificates 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 Notes [and the Certificates] are being
offered hereby..
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Toyota Motor Credit Corporation ("TMCC") will be appointed to act as
the servicer of the Receivables (the "Servicer"). The Servicer will service the
Receivables pursuant to the Sale and Servicing Agreement and the Trust
Agreement. TMCC will also 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 these services as described under
"Transfer and Servicing Agreements--Servicing Compensation" in this Prospectus
Supplement and "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. 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 such
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.
Each Certificate represents an undivided ownership interest in 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 and 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 Reserve Fund will be maintained by the Owner Trustee for the
benefit of the Noteholders [and Certificateholders], but will not be part of the
Trust.
The Trust's principal offices are in _______________, in care of
______________, as Owner Trustee, at the address set forth below under "--The
Owner Trustee".
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 Certificates
had taken place on such date:
[TABLE]
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
___________________ is the Owner Trustee under the Trust Agreement.
_________________ is a _____________ and its principal executive offices are
located at ______________________________. The Seller and its affiliates may
maintain normal commercial banking relations with the Owner Trustee and its
affiliates.
___________________ is the Indenture Trustee under the Indenture.
_________________ is a _____________ and its principal executive offices are
located at ______________________________.
S-17
<PAGE>
The Seller and its affiliates may maintain normal commercial banking relations
with the Indenture Trustee and its affiliates.
PAYING AGENTS
[Under the Trust Agreement, the Owner Trustee will appoint paying
agents in each jurisdiction in which Securities are listed on an exchange whose
rules so require . For so long as any Securities are listed on the [exchange] or
[exchange], the Owner Trustee will maintain paying agents in [jurisdiction] and
[jurisdiction]. The Initial Paying Agents will be ______________ and
______________. Definitive Certificates may be presented for purposes of
payment, transfer or exchange at the offices of the paying agent in
[jurisdiction] at ___________, at the offices of the paying agent in
[jurisdiction] at _____________, or such other paying agents as may be specified
in a written notice to the holders of Securities described below.]
THE SELLER AND THE SERVICER
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 ____________ (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 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 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.
The Receivables in the Receivables Pool are required to meet certain
selection criteria as of the Cutoff Date. Pursuant to such criteria, each
Receivable:
o falls within the range of:
<TABLE>
<S> <C>
remaining principal balance................................. $___ to $_____
APRs.......................................................... __% to __%
original number of monthly ("Scheduled Payments").............. __ to __
remaining number of Scheduled Payments...........................__ to __
</TABLE>
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);
S-18
<PAGE>
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.
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:
o as a percentage of the aggregate principal balance, as of the Cutoff
Date:
Precomputed Receivables.............................. _____%
Simple interest Receivables.......................... _____%
New vehicles financed by TMCC........................ _____%
Used vehicles financed by TMCC....................... _____%
Receivables representing financing
of vehicles manufactured or distributed
by Toyota Motor Corporation or its
affiliates........................................... _____%
o as a percentage of the number of Receivables, as of the Cutoff Date:
New vehicles financed by TMCC........................ _____%
Used vehicles financed by TMCC....................... _____%
The composition, distribution by APR 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 $
-----------------
Number of Receivables $
-----------------
Average Cutoff Date Principal Balance $
-----------------
Average Original Amount Financed. $
-----------------
Range of Cut-off Date Principal Balances $ to
-----------------
$
-----------------
Range of Original Amount Financed $ to
-----------------
$
-----------------
Weighted Average APR(1) %
---------
Range of APRs % to %
--------- ---------
Weighted Average Original Number of Scheduled Payments(1)
---------
</TABLE>
S-19
<PAGE>
<TABLE>
<S> <C>
Range of Original Number of Scheduled Payments
--------- to ---------
Weighted Average Remaining Number of Scheduled Payments(1)
---------
Range of Remaining Number of Scheduled Payments to
--------- ---------
</TABLE>
-------------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
RANGE OF APRS NUMBER OF PERCENTAGE OF CUTOFF DATE PERCENTAGE OF
------------- RECEIVABLES TOTAL NUMBER OF PRINCIPAL BALANCE CUTOFF DATE
----------- RECEIVABLES ----------------- POOL BALANCE
--------------- -------------
<S> <C> <C> <C> <C>
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
Total
</TABLE>
----------------
(1) Percentages may not add to 100.00% due to rounding.
S-20
<PAGE>
DISTRIBUTION OF THE INITIAL RECEIVABLES BY STATE (1)
<TABLE>
<CAPTION>
PERCENTAGE OF CUTOFF DATE PERCENTAGE OF
NUMBER OF NUMBER OF PRINCIPAL CUTOFF DATE
STATE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
----- ----------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Alabama.....................
Alaska......................
Arizona.....................
Arkansas....................
California..................
Colorado....................
Connecticut.................
Delaware....................
Florida.....................
Georgia.....................
Idaho.......................
Illinois....................
Indiana.....................
Iowa........................
Kansas......................
Kentucky....................
Louisiana...................
Maine.......................
Maryland....................
Massachusetts...............
Michigan....................
Minnesota...................
Mississippi.................
Missouri....................
Montana.....................
Nebraska....................
Nevada......................
New Hampshire...............
New Jersey..................
New Mexico..................
New York....................
North Carolina..............
North Dakota................
Ohio........................
Oklahoma....................
Oregon......................
Pennsylvania................
Rhode Island................
South Carolina..............
South Dakota................
Tennessee...................
Utah........................
Vermont.....................
Virginia....................
Washington..................
West Virginia...............
Wisconsin...................
Wyoming.....................
Total (2)...............
</TABLE>
(1) Based solely on the addresses of the originating Dealers.
S-21
<PAGE>
(2) Percentages may not add to 100.00% due to rounding.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning TMCC's experience
with respect to its portfolio of new and used automobile and/or 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 TMCC's delinquency, credit loss and
repossession experience with respect to automobile and/or 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 MARCH 31, -----------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
Contracts(1)
Delinquencies as a
Percentage of
contracts
outstanding(2)
31-60 Days..........
61-90 Days..........
Over 90 Days........
</TABLE>
----------------
(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.
S-22
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
AT OR FOR THE SIX AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
MONTHS ENDED -------------------------------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
----------------- --------- -------- --------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Principal Amount
Outstanding(1).........
Average Principal
Amount
Outstanding(2).........
Number of Contracts
Outstanding............
Average Number of
Contracts
Outstanding............
Number of
Repossessions..........
Number of
Repossessions as a
Percentage of the
Number of Contracts
Outstanding............
Number of
Repossessions as a
Percentage of the
Average Number of
Contracts Outstanding..
Gross Charge-Offs(4)...
Recoveries(5)..........
Net Losses.............
Net Losses as a (6)
Percentage of Principal
Amount Outstanding.....
Net Losses as a (6)
Percentage of Average
Principal Amount
Outstanding............
</TABLE>
----------------------
(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.
S-23
<PAGE>
USE OF PROCEEDS
The Seller will use the net proceeds from the sale of the Securities
(approximately $__________) together with 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 Fund.
PREPAYMENT AND YIELD CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus and "Risk Factors--PREPAYMENTS ON RECEIVABLES MAY
CAUSE PREPAYMENTS ON THE SECURITIES, RESULTING IN REINVESTMENT RISK TO YOU" in
this Prospectus Supplement. Except as otherwise provided in this Prospectus
Supplement, no principal payments will be made on the Class A-2 Notes until the
Class A-1 Notes have been paid in full, no principal payments will be made on
the Class A-3 Notes until the Class A-2 Notes have been paid in full and no
payments of principal with respect to the Certificates will be made until the
Class A-3 Notes have been paid in full and all payments of interest with respect
to Notes due on that Payment Date have been paid. See "Description of the
Notes--Payments of Principal" and "Description of the Certificates--Payments of
Principal" in this Prospectus Supplement.
Because the rate of payment of principal of each class of Notes and the
Certificates depends primarily on the rate of payment (including prepayments) of
the principal balance of the Receivables, final payment of any class of Notes
and the final payment in respect of the Certificates could occur significantly
earlier or later than their respective Final Scheduled Payment Dates.
Securityholders will bear the risk of being able to reinvest principal payments
on the Securities at yields at least equal to the yield on their respective
Securities. No prediction can be made as to the rate of prepayments on the
Receivables in either stable or changing interest rate environments.
The Certificates will provide limited protection against losses on the
Receivables. Accordingly, the yield on the Certificates will be sensitive to the
loss experience of the Receivables and the timing of any such losses. If the
actual rate and amount of losses experienced by the Receivables exceed the rate
and amount of such losses assumed by an investor, the yield to maturity on the
Certificates may be lower than anticipated.
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
S-24
<PAGE>
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 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.
[Although the Receivables have different APRs, each Receivable's APR
exceeds the sum of (i) the weighted average of the Interest Rates for each class
of Notes and the Pass Through Rate for the Certificates plus (ii) the Servicing
Fee Rate. Therefore, disproportionate rates of prepayments between Receivables
with higher and lower APRs should not affect the yield to Securityholders on the
outstanding principal balance of a particular class of Securities.]
POOL FACTORS AND TRADING INFORMATION
The "Pool Factor" with respect to any class of Notes or the
Certificates will be a seven-digit decimal indicating the principal amount of
such class of Notes or the Certificate Balance of the Certificates 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 or the Initial
Certificate Balance, as the case may be. 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 or the Certificate Balance, as the case may be. Each such principal amount
and Certificate Balance 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
or the portion of the Certificate Balance for a given month allocable to a
Noteholder or Certificateholder, as the case may be, can be determined by
multiplying the original denomination of the holder's Note or Certificate by the
related Pool Factor for that month.
Pursuant to the Sale and Servicing Agreement, the Securityholders 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. Securityholders 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.
S-25
<PAGE>
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 [and the
Luxembourg and the Hong Kong Stock Exchanges] following the issuance of the
Securities. 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 that 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
Each class of 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 classes
of the 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 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 ______________. A "Business Day" is any
day except a Saturday or Sunday, a day on which banks in New York or San
Francisco are closed; or [for payments on the Securities made in Luxembourg or
Hong Kong by a paying agent, a day on which banks in Luxembourg or Hong Kong are
closed.]
Interest will accrue for the period 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 will be 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 and Certificateholders" 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 and Class A-3 Notes on such Payment Date. See "Payments to
Noteholders and Certificateholders" 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
S-26
<PAGE>
"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 _____________, in an aggregate amount equal to the
amount deposited in the Principal Distribution Account on such Payment Date. See
"Payments to Noteholders and Certificateholders" 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" and the "Class A-3 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 Life 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 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 The
Depository trust Company ("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.
[For so long as any Notes are listed on the [exchange] and the rules of
the exchange so require, notices to Noteholders will be given by publication in
a leading daily newspaper of general circulation in [jurisdiction] [or, if
publication in [jurisdiction] is not practical, in Europe]. Such publication is
expected to be made in the [publication]. In addition, if Notes are issued other
than in book-entry form, such notices will be mailed to the addresses of
Noteholders as they appear in the register maintained by the Indenture Trustee
prior to such mailing. Such notices will be deemed to have been given on the
date of such publication or mailing.]
S-27
<PAGE>
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 the 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.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement will be filed with the SEC [and the
Luxembourg and Hong Kong Stock Exchanges] following the issuance of the
Securities. The Certificates will evidence undivided ownership interests in the
Trust created pursuant to the Trust Agreement. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Trust Agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
PAYMENTS OF INTEREST
On each Payment Date, commencing ___________, the Certificateholders
will be entitled to interest payments in an amount up to the amount of interest
that accrued on the Certificate Balance for the related Interest Period at the
Pass Through Rate. The Certificates will constitute Fixed Rate Securities, as
such term is defined under "Certain Information Regarding the Securities--Fixed
Rate Securities" in the Prospectus. Interest in respect of a Payment Date will
accrue during the related Interest Period and will be calculated on the basis of
a 360-day year consisting of twelve 30-day months. Interest payments due for any
Payment Date but not paid on such Payment Date will be due on the next Payment
Date increased by an amount equal to interest on such amount at the Pass Through
Rate (to the extent lawful). Interest payments with respect to the Certificates
will generally be funded from amounts available therefor after payment of the
Servicing Fee and payment of accrued and unpaid interest on the Notes.
PAYMENTS OF PRINCIPAL
On each Payment Date, Certificateholders will be entitled to principal
payments only after the principal balance of the Notes have been reduced to
zero, in an amount equal to the amount deposited in the Principal Distribution
Account and available therefor.
NOTICES
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Certificateholders will be notified in writing by the 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 Agreement)
obtaining actual knowledge thereof. Except with respect to the monthly and
annual statements to Certificateholders and Servicing Reports described herein,
the Trustee is not obligated under the Agreement to forward any other notices to
the Certificateholders. There are no provisions in the Agreement for the regular
or special meetings of Certificateholders.
PRESCRIPTION
In the event that any Certificateholder shall not surrender its
Certificates for retirement within six months after the date specified in
written notice given by the Trustee of the date for final payment thereof, the
Trustee shall give a second written notice to the remaining Certificateholders
to surrender their Certificates for retirement and receive the final payment
with respect thereto. If within one year after such second notice any
Certificates shall not have been surrendered, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that remain subject
to this Agreement. Any funds remaining in the Trust after exhaustion of such
remedies shall be paid by the Trustee to a charity specified in the Agreement.
GOVERNING LAW
The Agreement and the Certificates 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 AND CERTIFICATEHOLDERS
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
amounts to be paid to the Noteholders and Certificateholders.
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 and
Certificateholders out of the amounts on deposit in the Collection Account. The
amounts to be distributed to the Noteholders and Certificateholders will be
determined in the manner described below.
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 ________ 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);
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(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 and Certificates 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 Final Scheduled Payment Date for the Certificates shall not be
less than the amount that is necessary to reduce the outstanding principal
amount of the Certificates to zero.
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;
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2. CLASS A NOTE INTEREST-- on a pro rata basis, accrued
and unpaid interest on the Class A-1, Class A-2 and Class A-3
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. CERTIFICATE INTEREST -- accrued and unpaid interest on
the Certificates, 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 such payment (with interest accrued on such unpaid
amounts at the rate at which interest accrued on the
Certificates during the relevant accrual period or periods);
4. ALLOCATION OF PRINCIPAL--to the Principal Distribution
Account, the Principal Distribution Amount;
5. 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
6. EXCESS AMOUNTS--any remaining amounts in the Collection
Account will be distributed to the Seller.
On each Payment Date, from the amounts deposited into the Principal
Distribution Account from the allocations of principal described in clause (4)
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 Certificates, until an amount equal to the principal
balance thereof has been paid;
5. after the Notes and Certificates are paid in full, to the
Seller's 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 and Class A-3
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);
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3. CERTIFICATE INTEREST--accrued and unpaid interest on
the Certificates, 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 such payment (with interest accrued on such unpaid
amounts at the rate at which interest accrued on the
Certificates during the relevant accrual period or periods);
4. 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, and then to
the Certificateholders until the outstanding principal balance
of the Certificates has been reduced to zero;
5. EXCESS AMOUNTS--any remaining amounts in the Collection
Account will be distributed to the Seller.
SUBORDINATION; RESERVE ACCOUNT
The rights of the Noteholders and Certificateholders 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"
and the reimbursement of Advances.
SUBORDINATION.
As long as any Notes remain outstanding, payments on the Certificates
and the Subordinated Seller's Interest will be subordinated to payments of
interest and principal on the Notes as described above, under "Payments to
Noteholders and Certificateholders".
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 $______ (____% 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 four items listed under "Payments to Noteholders--Payments" above
(excluding amounts payable to the Certificateholders), 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 (a) ___% of the outstanding principal balance of the
Receivables as of the end of the related Collection Period or (b) $________
(____% 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 ____% or (y)
the average of the Delinquency Percentages for the three preceding Collection
Periods exceeds ____%, the Specified Reserve Account Balance will be the
greatest of (a) ____% of the outstanding principal balance of the Receivables as
of the end of the related Collection Period, (b) $_______ (____% of the
outstanding principal balance of the Receivables as of the Cutoff Date) and (c)
____% of the Class A Note Balance as of such Payment Date (after giving effect
to any principal payments made on the Securities on such Payment Date); provided
further, that the Specified Reserve
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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 Securities 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.
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 Liquidation
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.
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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.
TRANSFER AND SERVICING AGREEMENTS
THE TRANSFER AND SERVICING AGREEMENTS
The description of the terms of the Indenture, the 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 [and the Luxembourg and Hong Kong Stock Exchanges] following
the issuance of the Securities. 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 "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 Certificateholders. 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 and Certificateholders.
SERVICING COMPENSATION
The Servicing Fee with respect to each Collection Period will be
one-twelfth of 1.00% (the "Servicing Fee Rate") of the Pool Balance as of the
first day of the related Collection Period or, in the case of the first Payment
Date, the Initial Pool Balance, and will be paid to the Servicer as described
under "Payments to Noteholders" in this Prospects 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 "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, except as
described under "Transfer and Servicing Agreements--Collections" in the
Prospectus.
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"Eligible Investments" will be specified in the Indenture 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 Securities.
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 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 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 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 "Description of Transfer and Servicing
Agreements--Collections" in the Prospectus, 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 and to the Certificateholders as if all of the
foregoing deposits and payments were made individually. See "Description of
Transfer and Servicing Agreements--Net Deposits" in the Prospectus.
OPTIONAL PURCHASE
The outstanding Notes and the Certificates 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 may purchase the Receivables on any
payment Date when the Pool Balance shall have declined to 10% or less of the
Initial Pool Balance, as described in the Prospectus under "Description of
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 and for the
Certificates will equal the Certificate Balance on the date of such optional
purchase plus accrued and unpaid interest thereon.
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REMOVAL OF SERVICER
The Indenture Trustee or Noteholders evidencing 51% of the outstanding
principal amount of the Class A Notes (voting as a single class and excluding
any Notes held by TMCC, TMCRC or any Affiliate thereof) may terminate the rights
and obligations of the Servicer under the Sale and Servicing Agreement or waive
any Servicer Default as defined under "Description of Transfer and Servicing
Agreements--Servicer Default" in the Prospectus without the consent of any
Certificateholder or the Seller. For more information regarding removal of the
Servicer, see "Description of Transfer and Servicing Agreements--Rights upon
Servicer Default" in the Prospectus.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
[________________] will be the Owner Trustee under the Trust Agreement.
As a matter of [New York] 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 Securities. [________________] will be the Indenture Trustee under
the Indenture. The Owner Trustee, the Indenture Trustee and any of their
respective affiliates may hold Securities in their own names or as pledgees. 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 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, 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 Certificates (other than the execution
and authentication thereof), 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, the Certificates 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,
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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 Owner Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Trust Agreement 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 Certificateholders, unless such Certificateholders have
offered to the Owner Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby. No
Certificateholder will have any right under the Trust Agreement to institute any
proceeding with respect to the Trust Agreement, unless such holder previously
has given to the Owner Trustee written notice of the occurrence of an event of
default under the Trust Agreement and (i) the event of default arises from the
Servicer's failure to remit payments when due or (ii) the holders of
Certificates evidencing not less than 25% of the voting interests of the
Certificates have made written request upon the Owner Trustee to institute such
proceeding in its own name as the Owner Trustee thereunder and have offered to
the Owner Trustee reasonable indemnity and the Owner Trustee for 30 days has
neglected or refused to institute any such proceedings.
The Indenture Trustee will make no representations as to the validity
or sufficiency of the Indenture, the Certificates, 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, the Certificates 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 Class A-1
Notes, Class A-2 Notes and Class A-3 Notes evidencing not less than 25% of the
voting interests of each such class of Notes (excluding any Notes held by TMCC,
TMCRC or any Affiliate thereof), acting together as a single class, 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.
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MATERIAL INCOME TAX CONSEQUENCES
TAX CHARACTERIZATION OF THE TRUST
In the opinion of O'Melveny & Myers LLP, tax counsel to the
Trust, (i) the Notes will be characterized as debt for tax purposes, and (ii)
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 the Trust were taxable as a corporation for federal income
tax purposes, it would be subject to corporate income tax on its taxable income.
The Trust's taxable income would include all its income on the related
Receivables, which may be 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 distributions on the Certificates, and the Certificate Owners
could be liable for any such tax that is unpaid by the Trust.
TREATMENT OF THE NOTES AS INDEBTEDNESS
The Seller, each Certificateholders and Certificate Owners
will agree, and the beneficial owners of the Notes (the "Note Owners") by their
purchase of the Notes, will agree, to treat the Notes as debt for federal income
tax purposes. The Seller and the Servicer will agree, and the Certificate Owners
will agree by their purchase of the Certificates, to treat the Trust (i) as a
partnership for purposes of federal and state income tax, franchise tax and any
other tax measured in whole or in part by income, with the assets of the
partnership being the assets held by the Trust, the partners of the partnership
being the Certificate Owners, and the Notes being debt of the partnership, or
(ii) if a single beneficial owner owns all of the Certificates and none of the
Notes are characterized as equity interests in the Trust, as an entity that is
to be disregarded for purpose of federal and state income tax, franchise tax and
any other tax measured in whole or in part by income, with the assets of the
Trust and the Notes treated as assets and indebtedness of the Certificate Owner.
However, the proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller and the Servicer is not clear because there
is no authority on transactions closely comparable to the transaction described
in this prospectus supplement.
We refer you to the discussion under "Material Income Tax
Consequences--Tax Treatment of Owner Trusts" in the accompanying prospectus.
ERISA CONSIDERATIONS
THE NOTES
The 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 Asset Regulations, 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 Notes by a Plan depending
on the type and circumstances of the plan fiduciary making the decision to
acquire the Class A 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
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also discuss with their legal counsel the availability of relief under Section
401(c) of ERISA. A purchaser of the Class A 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 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 Notes may be
purchased with the assets of a Plan if the Seller as holder of the Subordinated
Seller's Interest is a fiduciary with respect to those Plan assets and
participates in the decision to purchase these Notes.
THE CERTIFICATES
The Certificates may not be acquired by a Plan or any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity or which uses plan assets to acquire Certificates (a "Plan Investor"). By
its acceptance of a Certificate, each Certificateholder will be deemed to have
represented and warranted that it is not subject to the foregoing limitation. In
addition, a purchaser of Certificates other than a Plan Investor should be aware
that a prohibited Transaction could occur if a Certificateholder (or any of its
affiliates) is or becomes a party in interest or a disqualified person with
respect to a Plan Investor that purchases and holds any Notes unless covered by
one or more applicable exemptions.
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting
Agreement (the "Note Underwriting Agreement"), the Seller has agreed to cause
the Trust to sell to each of the Note Underwriters named below (collectively,
the "Note Underwriters"), and each of the Note Underwriters has severally agreed
to purchase, the principal amount of Notes set forth opposite its name below:
[TABLE]
In the Note Underwriting Agreement, the Note Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Notes if any of the Notes are purchased. This obligation of the Note
Underwriters is subject to certain conditions precedent set forth in the Note
Underwriting Agreement. The Seller has been advised by the Note Underwriters
that they propose initially to offer the Notes to the public at the prices set
forth in this Prospectus Supplement, and to certain dealers at such price less
the initial concession not in excess of ___% of the denominations of the Notes
per Class A-1 Note, ___% per Class A-2 Note and ___% per Class A-3 Note. The
Note Underwriters may allow, and such dealers may reallow, a concession not in
excess of ___% per Class A-1 Note, ___% per Class A-2 Note and ___% per Class
A-3 Note to certain other dealers. After the initial public offering of the
Notes, the public offering price and such concessions may be changed.
Subject to the terms and conditions set forth in an Underwriting
Agreement (the "Certificate Underwriting Agreement"), the Seller has agreed to
cause the Trust to sell to each of the Certificate Underwriters named below (the
"Certificate Underwriters" and, together with the Note Underwriters, the
"Underwriters"), and each of the Certificate Underwriters has severally agreed
to purchase, the principal amount of Certificates set forth opposite its name
below:
[TABLE]
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<PAGE>
In the Certificate Underwriting Agreement, the Certificate Underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the Certificates if any of the Certificates are purchased. This
obligation of the Certificate Underwriters is subject to certain conditions
precedent set forth in the Certificate Underwriting Agreement. The Seller has
been advised by the Certificate Underwriters that they propose initially to
offer the Certificates to the public at the price set forth in this Prospectus
Supplement, and to certain dealers at such price less the initial concession not
in excess of ___% per Certificate. The Certificate Underwriters may allow, and
such dealers may reallow, a concession not in excess of ___% per Certificate to
certain other dealers. After the initial public offering of the Certificates,
the public offering price and such concessions may be changed.
The Seller and TMCC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
The Notes and the Certificates are new issues of securities with no
established trading markets. The Seller has been advised by the Note
Underwriters that they intend to make a market in the Notes of each class and
has been advised by the Certificate Underwriters that they intend to make a
market in the Certificates, in each case as permitted by applicable laws and
regulations. The Underwriters are not obligated, however, to make a market in
the Notes of any class or the Certificates, and such market-making may be
discontinued at any time without notice at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Notes of any class or the Certificates.
The Trust may, from time to time, invest funds in the Accounts in
Eligible Investments acquired from the Underwriters.
The Underwriters have advised the Seller that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Securities of any class at
levels above those that might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the Securities of any class on
behalf of the Underwriters for the purpose of fixing or maintaining the price of
such Securities. A "syndicate covering transaction" is the bid for or the
purchase of such Securities of any class on behalf of the Underwriters to reduce
a short position incurred by the Underwriters in connection with this offering.
A "penalty bid" is an arrangement permitting one of the Underwriters to reclaim
the selling concession otherwise accruing to another Underwriter or syndicate
member in connection with this offering if the Securities of any class
originally sold by such other Underwriter or syndicate member are purchased by
the reclaiming Underwriter in a syndicate covering transaction and has therefore
not been effectively placed by such other Underwriter or syndicate member.
Stabilizing bids and syndicate covering transactions may have the
effect of causing the price of the Securities of any class to be higher than it
might be in the absence thereof, and the imposition of penalty bids might also
have an effect on the price of any Security to the extent that it discouraged
resale of such Security. Neither the Seller nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any such effect
on the prices for the Securities. Neither the Seller nor the Underwriters makes
any representation that the Underwriters will engage in any such transactions or
that, once commenced, any such transactions will not be discontinued without
notice.
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 Securities. 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 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.
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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.
It is expected that the delivery of the Securities will be made against
payment therefor on or about the Closing Date, which is expected to be the ___th
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 Securities on the date hereof and
for a period of days hereafter will be required, by virtue of the fact that the
Securities initially will settle ___ 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 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 Securities to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances 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 with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Securities 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 Securities 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 the Certificates 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 and Certificates will be passed upon for the Underwriters by _________.
S-41
<PAGE>
INDEX OF TERMS
Page
Aggregate Net Losses, ...........................................33
Certificate Underwriters, .......................................39
Certificate Underwriting Agreement, .............................39
Charge-off Rate, ................................................33
Class A-1 Final Scheduled Payment Date, .........................27
Class A-2 Final Scheduled Payment Date, .........................27
Class A-3 Final Scheduled Payment Date, .........................27
Closing Date, ...................................................18
Code, ...........................................................38
Current Receivable, .............................................33
Cutoff Date, ....................................................18
Dealer Recourse, ................................................17
Defaulted Receivable, ...........................................30
Delinquency Percentage, .........................................33
Determination Date, .............................................29
Eligible Investments, ...........................................35
Excess Payment, .................................................35
Financed Vehicles, ..............................................18
Interest Period, ................................................26
Liquidated Receivable, ..........................................33
Net Liquidation Proceeds, .......................................30
Note Underwriters, ..............................................39
Note Underwriting Agreement, ....................................39
Owner Trustee, ..................................................16
Penalty Bid, ....................................................40
Plan, ...........................................................38
Prepayment, ..................................................27,35
Receivables Pool, ...............................................18
Receivables Purchase Agreement, .................................18
Scheduled Payments, .............................................18
Seller, .........................................................16
Servicing Fee Rate, .............................................34
Specified Reserve Fund Balance, .................................32
Stabilizing Bid, ................................................40
Syndicate Covering Transaction, .................................40
Transfer and Servicing Agreements, ..............................34
Trust, ..........................................................16
Trust Agreement, ................................................16
Underwriters, ...................................................39
S-42
<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Class A
Certificates (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
DTC, Clearstream Banking or Euroclear. The Global Securities 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 Securities
through Clearstream Banking and Euroclear will be conducted in the ordinary way
in accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., three calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedure applicable to
U.S. corporate debt obligations and prior asset-backed securities issues.
Secondary cross-market trading between Clearstream Banking or Euroclear
and DTC Participants holding securities will be effected on a
delivery-against-payment basis through the depositaries of Clearstream Banking
and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, Clearstream
Banking and Euroclear 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 Securities through DTC will
follow DTC settlement practice. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the settlement
date.
Investors electing to hold their Global Securities through Clearstream
Banking or Euroclear accounts will follow the settlement procedures applicable
to conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to securities custody accounts on the settlement date against payment
in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that 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 securities issues in same-day funds.
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<PAGE>
Trading between Clearstream Banking and/or Euroclear Participants.
Secondary market trading between Clearstream Banking Participants or Euroclear
Participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC Seller and Clearstream Banking or Euroclear
Participants. When Global Securities are to be transferred from the account of a
DTC Participant to the account of a Clearstream Banking Participant or a
Euroclear Participant, the purchaser will send instructions to Clearstream
Banking or Euroclear through a Clearstream Banking Participant or Euroclear
Participant at least one business day prior to settlement. Clearstream Banking
or Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, 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 Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream
Banking Participant's or Euroclear Participant's account. The securities credit
will appear the next day (European time) and the cash debt will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Clearstream Banking or Euroclear cash debt will be valued instead as of the
actual settlement date.
Clearstream Banking Participants and Euroclear Participants will need
to make available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is to
preposition funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Clearstream Banking or
Euroclear. Under this approach, they may take on credit exposure to Clearstream
Banking or Euroclear until the Global Securities are credited to their accounts
one day later.
As an alternative, if Clearstream Banking or Euroclear has extended a
line of credit to them, Clearstream Banking Participants or Euroclear
Participants can elect not to preposition funds and allow that credit line to be
drawn upon to finance settlement. Under this procedure, Clearstream Banking
Participants or Euroclear Participants purchasing Global Securities would incur
overdraft charges for one day, assuming they clear the overdraft when the Global
Securities are credited to their accounts. However, interest on the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period may
substantially reduce or offset the amount of such overdraft charges, although
this result will depend on each Clearstream Banking Participant's or Euroclear
Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of Clearstream Banking
Participants or Euroclear 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 OR EUROCLEAR SELLER AND DTC
PURCHASER. Due to time zone differences in their favor, Clearstream Banking
Participants and Euroclear Participants may employ their customary procedures
for transactions in which Global Securities 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 or
Euroclear through a Clearstream Banking Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Clearstream Banking
or Euroclear will instruct the Relevant Depositary, as appropriate, to deliver
the Global Securities to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities 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
A-2
<PAGE>
month, payment will 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 Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Clearstream Banking Participant's or
Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
Clearstream Banking Participant or Euroclear 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 Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream Banking or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Clearstream
Banking Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through Clearstream Banking or Euroclear for one
day (until the purchase side of the day trade is reflected in their
Clearstream Banking or Euroclear accounts) in accordance with the
clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their
Clearstream Banking or Euroclear 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 Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Clearstream Banking or Euroclear (or through DTC if the holder has an address
outside the U.S.) will be subject to the 30% U.S. withholding tax that 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' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (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 Securities that are Non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8BEN (Certificate
of Foreign Status 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 generally can obtain an
A-3
<PAGE>
exemption or reduced tax rate depending on the treaty terms) by filing Form
W-8BEN. Form W-8BEN may be filed by the Certificate 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 beneficial owner of a
Global Security 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 remain 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 which
elected to be treated as United States persons prior to such date also shall 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 Securities.
Investors are advised to consult their tax advisors for specific tax advice
concerning their holding and disposing of Global Securities.
A-4
<PAGE>
<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 ANYONE TO GIVE YOU DIFFERENT
INFORMATION. WE DO NOT CLAIM THE ACCURACY OF THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AS OF ANY DATE OTHER THAN THE DATE
STATED ON THE COVER PAGE. WE ARE NOT OFFERING THE
NOTES OR CERTIFICATES IN ANY JURISDICTION IN WHERE
IT IS NOT PERMITTED.
___________________
TABLE OF CONTENTS TOYOTA AUTO RECEIVABLES
PROSPECTUS SUPPLEMENT ____-__ OWNER TRUST
PAGE $_______________ _____% ASSET
----
Summary of Terms............................... S-3
Risk Factors................................... S-13
The Trust...................................... S-16 BACKED NOTES, CLASS A-1
Capitalization of the Trust.................... S-17
The Owner Trustee and Indenture Trustee........ S-17
Paying Agents.................................. S-18
The Seller and the Servicer.................... S-18 $_____________ _____% ASSET
The Receivables Pool........................... S-18
Delinquencies, Repossessions and Net Losses.... S-22 BACKED NOTES, CLASS A-2
Use of Proceeds................................ S-24
Prepayment and Yield Considerations............ S-24
Pool Factors and Trading Information........... S-25 $_____________ ____% ASSET
Description of the Notes....................... S-26
Description of the Certificates................ S-28 BACKED NOTES, CLASS A-3
Payments to Noteholders and Certificateholders. S-29
Subordination; Reserve Account................. S-32 $_____________ ____% ASSET
Transfer and Servicing Agreements.............. S-34
Material Income Tax Consequences............... S-38 BACKED CERTIFICATES
ERISA Considerations........................... S-38
Underwriting................................... S-39 TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION SELLER
Legal Opinions................................. S-41
Index of Terms................................. S-42 TOYOTA MOTOR CREDIT CORPORATION SERVICER
ANNEX A: Global Clearance, Settlement and Tax
Documentation Procedures....................... A-1
PROSPECTUS -------------------
Summary of Terms............................... 2 PROSPECTUS SUPPLEMENT
Risk Factors................................... 9
The Trusts..................................... 13 -------------------
The Trustee.................................... 13
The Seller..................................... 13
The Servicer................................... 14
Where You Can Find More Information
About Your Securities......................... 15
The Receivables Pools.......................... 16
Delinquencies, Repossessions and Net Losses.... 18
Weighted Average Life of the Securities........ 18
Pool Factors and Trading Information........... 19
Use of Proceeds................................ 20
Description of the Notes....................... 20
Description of the Certificates................ 24
Certain Information Regarding the Securities... 25
Description of the Transfer and
Servicing Agreements.......................... 37
TMCC Demand Notes.............................. 49
The Swap Agreement............................. 53
Certain Legal Aspects of the Receivables....... 56
Certain Federal Income Tax Consequences........ 62
Certain State Tax Consequences................. 74
ERISA Considerations........................... 75
Plan of Distribution........................... 75
Legal Opinions................................. 76
Experts........................................ 76
Index of Terms................................. 77
UNTIL __________________ , ALL DEALERS THAT EFFECT
TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
========================================================== =========================================================
</TABLE>
<PAGE>
Subject to completion, dated _________.
Prospectus Supplement to Prospectus dated August 7, 2000
TOYOTA AUTO RECEIVABLES ____-__ GRANTOR TRUST
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
$____________________ ASSET BACKED CERTIFICATES
********************************************************************************
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE S-15 OF THIS SUPPLEMENT AND PAGE 9 IN THE ACCOMPANYING
PROSPECTUS.
This prospectus supplement does not contain complete information about the
offering of the certificates. No one may use this prospectus supplement to offer
and sell the certificates 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 SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The certificates are asset backed securities issued by the trust. The
certificates are not obligations of Toyota Motor Credit Corporation, Toyota
Motor Credit Receivables Corporation, Toyota Motor Sales, U.S.A., Inc. or any of
their affiliates. Neither the certificates nor the receivables are insured or
guaranteed by any governmental agency.
********************************************************************************
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The trust First First Final
will issue Initial Pass Interest Principal Scheduled
the following Principal Through Interest Payment Payment Payment
securities: Amount Rate Period Date Date date
--------- ------- -------- -------- --------- ---------
<S><C>
Class A
Certificates(1)...
Class B
Certificates(1)...
Class C
Certificates(1)...
</TABLE>
(1) The Class B Certificates and Class C Certificates are subordinated to the
Class A Certificates, and the Class C Certificates are subordinated to the
Class B Certificates, in each case to the extent described in this prospectus
supplement.
--------------------------------------------------------------------------------
The terms of the Offering are as follows:
--------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT SELLER(2)
----------------- ------------ -----------
Per Class A Certificate... $_____________ _______% $__________
Per Class B Certificate... $_____________ _______% $__________
Per Class C Certificate... $_____________ _______% $__________
Total..................... $_____________ _______% $__________
(1) Plus accrued interest from ____________.
(2) Before deducting expenses payable by TMCRC, as the seller, estimated to be
approximately $__________.
--------------------------------------------------------------------------------
[THE TRUST HAS APPLIED TO LIST THE CERTIFICATES ON THE LUXEMBOURG STOCK EXCHANGE
AND FOR LISTING AND PERMISSION TO DEAL IN THE CERTIFICATES ON THE STOCK EXCHANGE
OF HONG KONG LIMITED.]
[UNDERWRITERS]
The date of this Prospectus Supplement is _________
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the certificates 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 certificates, including your class; and
o this prospectus supplement, which describes the specific terms
of your class of certificates.
IF THE TERMS OF YOUR CERTIFICATES 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-47 in this prospectus supplement and under the caption "Index of
Terms" beginning on page 77 in the accompanying prospectus.
S-2
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT
AND PROVIDES A GENERAL OVERVIEW OF THE TERMS OF THE CERTIFICATES. TO UNDERSTAND
ALL OF THE TERMS OF THE OFFERING OF THE CERTIFICATES, YOU SHOULD READ CAREFULLY
THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS. BOTH DOCUMENTS CONTAIN
INFORMATION YOU SHOULD CONSIDER WHEN MAKING YOUR INVESTMENT DECISION.
RELEVANT PARTIES
<TABLE>
<S><C>
ISSUER Toyota Auto Receivables Grantor Trust ____-__. The trust will be established by
a pooling and servicing agreement.
SELLER Toyota Motor Credit Receivables Corporation.
SERVICER Toyota Motor Credit Corporation.
TRUSTEE [________________________].
RELEVANT AGREEMENTS
POOLING AND SERVICING The pooling and servicing agreement among the seller, the servicer and the
AGREEMENT trustee. The pooling and servicing agreement provides for the terms relating to
the certificates.
RECEIVABLES PURCHASE The receivables purchase agreement between Toyota Motor Credit Corporation and
AGREEMENT the seller. The receivables purchase agreement governs the sale of the
receivables from Toyota Motor Credit Corporation to the seller.
RELEVANT DATES
CLOSING DATE On or about [____________].
CUTOFF DATE [________________].
PAYMENT DATES The trust will pay interest and principal on the certificates on the fifteenth
day of each month. If the fifteenth day of the month is not a business day,
payments on the certificates 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
__________.
A "business day" is any day except:
o a Saturday or Sunday;
</TABLE>
S-3
<PAGE>
<TABLE>
<S><C>
o a day on which banks in New York or San Francisco are closed; or
o [for payments of the Class A Certificates made in Luxembourg or Hong
Kong by a paying agent, a day on which banks in Luxembourg or Hong Kong
are closed.]
FINAL SCHEDULED PAYMENT The final principal payment for each class of certificates is scheduled to be
DATES made on the related final scheduled payment date specified on the front cover of
this prospectus supplement.
RECORD DATE So long as the certificates are in book-entry form, the trust will make payments
on the certificates to the holders of record on the day immediately preceding
the payment date. If the certificates are issued in definitive form, the record
date will be the last day of the month preceding the payment date.
COLLECTION PERIOD The calendar month preceding the related payment date.
DESCRIPTION OF THE CERTIFICATES
TERMS The trust is offering the following classes of certificates by way of this
prospectus supplement:
Original Pass Through
Class Percentage Certificate Balance Rate*
---------------- ------------------- ------------
Class A % $ %
Certificates
Class B
Certificates
Class C
Certificates
---------------- ------------------- ------------
Total 100% $
----------
* Calculated based on a 360-day year consisting of twelve 30-day months.
Each class of certificates will have an undivided ownership interest in the
trust equal to the class percentage indicated above. The class percentage will
not change. The certificate balance of each class of certificates will be
reduced by the payment of principal to the holders of that class.
</TABLE>
S-4
<PAGE>
<TABLE>
<S><C>
INTEREST AND PRINCIPAL In general, certificateholders are entitled to receive payments of interest and
PAYMENTS principal from the trust only to the extent that collections from trust assets
and funds resulting from credit enhancements are sufficient to make those
payments. Interest and principal collections will be divided among the various
classes of certificates in specified proportions.
The trust will pay interest and principal on a pro rata basis to
certificateholders of record as of the preceding record date.
INTEREST. The amount of interest due on each payment date for any class of
certificates will equal the product of:
o the outstanding class certificate balance as of the preceding payment
date (or, in the case of the first payment date, as of the closing
date); and
o one-twelfth of the pass through rate for that class, on a per annum
basis.
Interest on the certificates will be determined on the basis of a 360-day year
consisting of twelve 30-day months.
The pass through rate for each class of certificates is set forth on the front
cover of this prospectus supplement.
If certificateholders of any class do not receive all interest owed to them on a
payment date, the trust will make payments of interest on later payment dates to
make up the shortfall, to the extent funds from specified sources are available
to cover the shortfall.
PRINCIPAL. The amount of principal due on each payment date for any class of
certificates will equal the applicable class percentage, as shown on the cover
page of this prospectus supplement, of the sum of the following:
o the portion of all scheduled monthly payments on receivables allocable
to principal during the preceding calendar month;
o the portion of all prepayments on receivables allocable to principal
received by the servicer during the preceding calendar month;
o the principal balance of each receivable that was purchased by the
servicer or repurchased by the seller, in either case under an
obligation that arose during the preceding calendar month; and
</TABLE>
S-5
<PAGE>
<TABLE>
<S><C>
o the principal balance of each receivable that became a defaulted
receivable during the preceding calendar month.
The receivables owned by the trust are classified as either precomputed
receivables or simple interest receivables. The portion of the scheduled monthly
payments and prepayments that will be allocable to principal is different for
each of the two types of receivables. These receivables are described in more
detail in "The Receivables Pools" in the accompanying Prospectus. Before each
payment date, the servicer will calculate the amount of principal to be paid to
each class of certificates for that payment date. The amount of principal to be
paid to a class will equal that class' percentage of scheduled payments on
precomputed receivables, principal collections on simple interest receivables
and certain other principal amounts due or collected on the receivables. The
class percentage for each class is detailed in the chart under "Description of
the Certificates--Terms" above.
If certificateholders of any class do not receive all principal owed to them on
a payment date, the trustee will make payments of principal on later payment
dates to make up the shortfall, to the extent funds from specified sources are
available to cover such amounts.
FOR MORE DETAILED INFORMATION REGARDING PAYMENTS OF INTEREST AND PRINCIPAL SEE
"DESCRIPTION OF THE CERTIFICATES--PAYMENTS--CALCULATION OF DISTRIBUTABLE
AMOUNTS".
LISTING [The trust has applied to list the Class A Certificates on the Luxembourg Stock
Exchange and The Stock Exchange of Hong Kong Limited. The trust has requested
that the listings be made effective on or about _______________.]
MINIMUM DENOMINATIONS Certificates will be issued only in denominations of $1,000 or more.
Certificates will be issued in multiples of $1 for amounts in excess of $1,000.
REGISTRATION OF THE You will generally hold your interests in the securities through The Depository
CERTIFICATES 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 certificate representing your securities
except under limited circumstances.
We expect the securities to be delivered through The Depository Trust Company,
Clearstream Banking societe anonyme and the Euroclear System against payment in
</TABLE>
S-6
<PAGE>
<TABLE>
<S><C>
immediately available funds on or about ____________.
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 trust will be treated as a grantor trust for United States federal
income and California franchise and income tax purposes; and
o the trust will not be subject to federal income tax.
If you purchase the certificates, you will be required to report your pro rata
share of all income earned on the receivables (other than amounts, if any,
treated as "stripped coupons"). In addition if you are an individual, trust or
estate, you may deduct your pro rata share of reasonable servicing and other
fees, subject to certain limitations.
YOU SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" IN THE
ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION CONCERNING THE APPLICATION OF
UNITED STATES FEDERAL INCOME TAX LAWS TO THE TRUST AND THE CERTIFICATES.
ERISA CONSIDERATIONS The Class A Certificates are generally eligible for purchase by employee benefit
plans, subject to certain considerations discussed under "ERISA Considerations"
in this prospectus supplement and in the accompanying prospectus.
The Class B Certificates and Class C Certificates, however, may not be acquired
by any employee benefit plan or an individual retirement plan. However, under
limited circumstances, Class B Certificates may be purchased as limited
investments by persons using insurance general accounts or separate accounts.
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 CERTIFICATES OF ANY CLASS, YOU SHOULD, AMONG OTHER THINGS,
CONSULT WITH YOUR COUNSEL TO DETERMINE WHETHER ALL REQUIRED CONDITIONS HAVE BEEN
SATISFIED.
</TABLE>
S-7
<PAGE>
<TABLE>
<S><C>
RATINGS OF THE CERTIFICATES It is a condition to the issuance of the certificates that:
o the Class A Certificates be rated at least "AAA" by Standard & Poor's
Ratings Services, a division of The McGraw Hill Companies, Inc. and at
least "Aaa" by Moody's Investors Service, Inc.;
o the Class B Certificates be rated at least "___" by Standard & Poor's
and at least "___" by Moody's; and
o the Class C Certificates be rated at least "___" by Standard & Poor's
and at least "___" by Moody's.
A SECURITY RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD SECURITIES. THE
RATINGS OF THE CERTIFICATES ADDRESS THE LIKELIHOOD OF THE PAYMENT OF PRINCIPAL
AND INTEREST ON THE CERTIFICATES IN ACCORDANCE WITH THEIR TERMS. EITHER RATING
AGENCY MAY SUBSEQUENTLY LOWER OR WITHDRAW ITS RATING OF THE CERTIFICATES. IF
THIS HAPPENS, NO PERSON OR ENTITY WILL BE OBLIGATED TO PROVIDE ANY ADDITIONAL
CREDIT ENHANCEMENT FOR THE CERTIFICATES. THE TRUST WILL OBTAIN THE RATINGS
MENTIONED ABOVE FROM BY STANDARD AND POOR'S RATINGS SERVICES, A DIVISION OF THE
MCGRAW HILL COMPANIES, INC. AND MOODY'S INVESTORS SERVICE, INC. HOWEVER, ANOTHER
RATING AGENCY MAY RATE THE CERTIFICATES AND, IF SO, THE RATING MAY BE LOWER THAN
THE RATINGS DESCRIBED ABOVE.
STRUCTURAL SUMMARY
[Chart depicting the transfer of receivables from Toyota Motor Credit
Corporation to seller in exchange for the cash net proceeds of the offering and
the subordinated non-recourse promissory note; the transfer of receivables from
the seller to the trust in exchange for the securities; and the issuance of the
securities to investors in exchange for the proceeds.]
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 securities. These
contracts are referred to as "receivables". The receivables will have a total
outstanding principal balance of $___________ as of ______, the cutoff date.
</TABLE>
S-8
<PAGE>
<TABLE>
<S><C>
Toyota Motor Credit Receivables Corporation will sell the certificates to
investors for cash, and will use this cash to pay part of the purchase price for
its purchase of the receivables. The chart above represents the flow of funds
provided by investors for the securities 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:
o Total Cutoff Date Principal Balance.........................................
o Number of Receivables.......................................................
o Average Cutoff Date Principal Balance.......................................
o Average Original Amount Financed............................................
Range of Original Amounts Financed..........................................
o Weighted Average APR(1).....................................................
Range of APRs...............................................................
o Weighted Average Original Number of Scheduled Payments(1)...................
Range of Original Number of Scheduled Payments..............................
o Weighted Average Remaining Number of Scheduled Payments(1)..................
Range of Remaining Number of Scheduled Payments.............................
-------------------
(1) Weighted by principal balance as of the cutoff date.
The assets of the trust will also include:
o certain monies due or received under the receivables on and after the
cutoff date;
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 receivables. On
each payment date, 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 related collection period. The servicer will also receive additional
servicing
</TABLE>
S-9
<PAGE>
<TABLE>
<S><C>
compensation in the form of 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 receivables that are classified as precomputed receivables (but
not on any that are classified as simple interest receivables). 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
later collections on the related delinquent receivable, the trust may also
reimburse the servicer from collections on other receivables.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "TRANSFER AND SERVICING
AGREEMENT--SERVICING COMPENSATION AND PAYMENT OF EXPENSES" IN THE ACCOMPANYING
PROSPECTUS, AND TO "DESCRIPTION OF THE CERTIFICATES--ADVANCES" IN THIS
PROSPECTUS SUPPLEMENT.
PAYMENTS ON PAYMENT DATES TMCC will identify collections on the receivables as either interest or
principal depending on the terms of the related receivables. Collections
identified as interest are sometimes referred to as "interest collections".
Collections identified as principal are sometimes referred to as "principal
collections".
Principal advances made by the servicer will be included in principal
collections. Interest advances made by the servicer will be included in interest
collections. Any reimbursements of interest advances paid to the servicer will
be deducted from interest collections before those collections are used to pay
noteholders and certificateholders. Similarly, any reimbursements of principal
advances paid to the servicer will be deducted from principal collections before
those collections are used to pay noteholders and certificateholders.
PAYMENTS FROM INTEREST COLLECTIONS. Each month, the trust will distribute
interest collections and interest advances received during the prior calendar
month in the following order of priority:
o SERVICING FEE--the monthly servicing fee payable to the servicer;
</TABLE>
S-10
<PAGE>
<TABLE>
<S><C>
o INTEREST ON THE CLASS A Certificates--interest due on the Class A
Certificates, including any unpaid interest from prior payment dates;
o INTEREST ON THE CLASS B Certificates--interest due on the Class B
Certificates, including any unpaid interest from prior payment dates; and
o INTEREST ON THE CLASS C CERTIFICATES--interest due on the Class C
Certificates, including any unpaid interest from prior payment dates.
If interest collections are not sufficient to pay all interest owed to a class
of certificateholders on any payment date, the trust will pay the shortfall from
the following sources in the following order of priority:
o CLASS A CERTIFICATES - from collections otherwise allocable to pay
principal on the Class C Certificates, from collections otherwise
allocable to pay principal on the Class B Certificates and from amounts
on deposit in the reserve fund described below.
o CLASS B CERTIFICATES - from collections
otherwise allocable to pay principal on
the Class C Certificates and from amounts
on deposit in the reserve fund.
o CLASS C CERTIFICATES - from amounts on deposit in the reserve fund.
Unpaid interest on any class of certificates will accrue interest at the pass
through rate for that class.
PAYMENTS FROM PRINCIPAL COLLECTIONS. Each month, the trust will distribute
principal collections and principal advances received during the prior calendar
month in the following order of priority:
o PRINCIPAL ON THE CLASS A CERTIFICATES--principal due on the Class A
Certificates, including any unpaid principal from prior payment dates;
o PRINCIPAL ON THE CLASS B CERTIFICATES--principal due on the Class B
Certificates, including any unpaid principal from prior payment dates;
and
o PRINCIPAL ON THE CLASS C CERTIFICATES--principal due on the Class C
Certificates, including any unpaid principal from prior payment dates.
</TABLE>
S-11
<PAGE>
<TABLE>
<S><C>
If principal collections are not sufficient to pay all principal owed to a class
of certificateholders on any payment date, the shortfall will be paid from
interest collections that are not needed to pay interest to the Class A, B and C
Certificateholders on that date, and from amounts on deposit in the reserve
fund. These amounts will be used first to pay principal owed to the Class A
Certificateholders, second to pay principal owed to the Class B
Certificateholders and finally to pay principal owed to the Class C
Certificateholders.
Excess collections remaining on any payment date after the above interest and
principal payments have been made will be deposited in the reserve fund or
distributed to the seller.
FOR MORE DETAILED INFORMATION CONCERNING PAYMENTS ON THE CERTIFICATES AND
PAYMENT PRIORITIES, YOU SHOULD REFER TO "PAYMENTS TO CERTIFICATEHOLDERS" IN THIS
PROSPECTUS SUPPLEMENT.
CREDIT ENHANCEMENT The pooling and servicing agreement includes certain features designed to
provide protection against losses and delays in payments to the Class A
Certificateholders and, to a lesser extent, the Class B and C
Certificateholders. These features are referred to as "credit enhancement."
Losses on the receivables or other shortfalls of cash flow will be covered by
allocating available cash flow to the more senior classes of certificates - that
is, Class A and B Certificates - before making allocations to subordinate
classes and by withdrawing amounts on deposit in the reserve fund. The
reallocation of funds to the more senior classes of certificates is referred to
as "subordination."
The credit enhancement for the certificates will be as follows:
CLASS A CERTIFICATES
o subordination of the Class B and C Certificates, as described below; and
o the reserve fund.
CLASS B CERTIFICATES
o subordination of the Class C Certificates, as described below; and
o the reserve fund.
</TABLE>
S-12
<PAGE>
<TABLE>
<S><C>
CLASS C CERTIFICATES
o the reserve fund.
SUBORDINATION OF INTEREST AND PRINCIPAL
o CLASS B CERTIFICATES--Interest payments on the Class B Certificates will
be subordinated to interest payments on the Class A Certificates.
Principal payments on the Class B Certificates will be subordinated to
principal payments on the Class A Certificates and, in certain
circumstances, to interest payments on the Class A Certificates.
o CLASS C CERTIFICATES--Interest payments on the Class C Certificates will
be subordinated to interest payments on the Class A Certificates and
Class B Certificates. Principal payments on the Class C Certificates
will be subordinated to principal payments on the Class A Certificates
and Class B Certificates and, in certain circumstances, to interest
payments on the Class A Certificates and Class B Certificates.
RESERVE FUND
On each payment date, if collections on the receivables are insufficient to pay
the amounts due to the servicer and certificateholders as described above, the
trustee will withdraw from the reserve fund, to the extent available, the amount
necessary to make the required payments.
The pooling and servicing agreement specifies the balance that is required to be
maintained for the reserve fund. On the closing date, the seller will deposit
$________ into the reserve fund, which is less than the required balance. On
each payment date, after the trust makes the required payments to the servicer
and certificateholders from collections on the receivables and servicer
advances:
o any remaining amounts will be deposited into the reserve fund to the
extent necessary to maintain the specified reserve fund balance; or
o amounts remaining in the reserve fund in excess of the specified balance
will be paid to the seller.
The trust and certificateholders will have no right to payment or recapture of
any amounts released from the trust or reserve fund and paid to the seller. The
seller will have no obligation to deposit funds into the reserve fund except for
the initial
</TABLE>
S-13
<PAGE>
<TABLE>
<S><C>
deposit on the closing date.
FOR MORE DETAILED INFORMATION CONCERNING THE CREDIT ENHANCEMENT PROVISIONS, YOU
SHOULD REFER TO "SUBORDINATION; RESERVE FUND" IN THIS PROSPECTUS SUPPLEMENT.
OPTIONAL REDEMPTION; CLEANUP CALL
The servicer may purchase all, but not part, of the receivables on any payment
date when the outstanding aggregate principal balance of the receivables has
declined to 10% or less of the principal balance of the receivables as of the
cut-off date. Such purchase would result in the redemption of all outstanding
certificates on such payment date.
FOR MORE DETAILED INFORMATION REGARDING THIS OPTION, YOU SHOULD REFER TO
"TRANSFER AND SERVICING AGREEMENTS--OPTIONAL PURCHASE" IN THIS PROSPECTUS
SUPPLEMENT.
</TABLE>
S-14
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS (AND THE FACTORS SET
FORTH UNDER "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS) IN DECIDING WHETHER
TO PURCHASE THE CERTIFICATES OF ANY CLASS.
PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE CERTIFICATES,
RESULTING IN REINVESTMENT RISK TO YOU.
You may receive payment of principal on your certificates 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 certificates. Prepayments on the
receivables will shorten the life of the certificates 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:
o make early payments, since receivables will generally be
prepayable at any time without penalty;
o default, resulting in the repossession and sale of the
financed vehicle; or
o 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 seller will have the option to purchase the
receivables from the trust on any payment date when the outstanding principal
balance of the receivables has declined to 10% or less of the principal balance
as of the cutoff date.
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 securities being shorter than the period from the closing date to
the final scheduled maturity date for the related class.
PAYMENT PRIORITIES INCREASE RISK OF LOSS OR DELAY IN PAYMENT TO CLASS B
AND CLASS C CERTIFICATES.
If you buy Class B Certificates:
o you will not receive any interest payments on a payment date
until all interest owed on the Class A Certificates on that date
has been paid; and
o you will not receive any principal payments on a payment date
until all principal and interest owed on the Class A Certificates
on that date has been paid.
If you buy Class C Certificates:
S-15
<PAGE>
o you will not receive any interest payments until all interest
owed on the Class A Certificates and Class B Certificates has been
paid; and
o you will not receive any principal payments until all
principal and interest owed on the Class A Certificates and Class
B Certificates has been paid.
Because the Class A Certificates and, to a lesser extent, the Class B
Certificates will receive preferential allocations of interest and principal,
the Class C Certificates and, to a lesser extent, the Class B Certificates, will
be exposed to a greater risk of nonpayment or delayed payment if collections
fall significantly below expected levels.
As a result, the yield on the Class B Certificates will be sensitive,
and the yield on the Class C Certificates will be highly sensitive, to losses on
the receivables and the timing of such losses. If the actual rate and amount of
losses exceed your expectations, and if amounts in the reserve fund are
insufficient to cover the resulting shortfalls, the yield to maturity on your
certificates may be lower than anticipated, and you could suffer a loss.
Classes of securities that receive payments earlier than expected are
exposed to a greater reinvestment risk, and classes of securities that receive
principal later than expected are exposed to a greater risk of loss. In either
case, the yields on your securities could be materially and adversely affected.
BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS ONLY LIMITED PROTECTION
AGAINST POTENTIAL LOSSES.
The only sources of funds for payments on the securities 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 and certificates 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
securities. 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 securityholders 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 securities you hold, you
will suffer a loss.
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-__ 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, ___%, ___%, ___% and ___% of the
receivables were located in [California, Illinois, Virginia, and New York],
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.
S-16
<PAGE>
PAID-AHEAD SIMPLE INTEREST CONTRACTS MAY AFFECT THE WEIGHTED AVERAGE
LIFE OF THE CERTIFICATES.
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 certificates 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 certificates.
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 certificates 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 SECURITIES COULD LIMIT YOUR
ABILITY TO RESELL THE SECURITIES.
[The certificates 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 securities
could limit your ability to resell them. This means that if you want to sell
your securities in the future before they mature, you may have difficulty
finding a buyer. If you find a buyer, the selling price may be less than it
would have been if a secondary market existed for the securities. There is
currently no secondary market for the securities. Although the underwriters have
stated that they intend to make a market in each class of securities, they are
not obligated to do so. A secondary market may not ever develop for the
securities. Even if such a market does develop, it may not provide sufficient
liquidity or continue for the life of your securities.
BECAUSE THE CERTIFICATES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY
BE EXERCISED INDIRECTLY.
Because the certificates will be issued in book-entry form, you will be
required to hold your interest in the certificates through The Depository Trust
Company in the United States, or Clearstream Banking societe anonyme nor the
Euroclear System in Europe or Asia. Transfers of interests in the certificates
within The Depository Trust Company, Clearstream Banking societe anonyme or the
Euroclear System must be made in accordance with the usual rules and operating
procedures of those systems. So
S-17
<PAGE>
long as the securities are in book-entry form, you will not be entitled to
receive a Definitive Certificate representing your interest. The certificates
will remain in book-entry form except in the limited circumstances described
under the caption "Description of the Certificates--Book-Entry Registration" in
the accompanying prospectus. Unless and until the certificates cease to be held
in book-entry form, the trustee will not recognize you as a "Securityholder", as
that term is used in the pooling and servicing agreement. As a result, you will
only be able to exercise the rights of Securityholders 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
certificates in book-entry form could also limit your ability to pledge your
certificates 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
certificates.
Interest and principal on the certificates will be paid by the trust to
The Depository Trust Company as the record holder of the certificates 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 certificateholders 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 ____-__ Grantor Trust (the "Trust") will be
formed by Toyota Motor Credit Receivables Corporation (the "Seller") pursuant to
the Pooling and Servicing Agreement (the "Agreement") dated as of _____________,
among the Seller, Toyota Motor Credit Corporation ("TMCC"), as servicer (in such
capacity, the "Servicer") and ______________, as trustee (the "Trustee"). The
Seller will establish the Trust by selling and assigning the assets of the Trust
to the Trustee in exchange for the Certificates to be issued by the Trust. The
Servicer will service the Receivables pursuant to the Agreement and will be
compensated for acting as the Servicer. See "Description of the
Certificates--Servicing Compensation".
Pursuant to agreements between TMCC and the Dealers, each Dealer will
repurchase from TMCC those retail installment sales contracts that 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, any
recovery by TMCC pursuant to any Dealer Recourse will be deposited in the
Collection Account in satisfaction of TMCC's repurchase obligations under the
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.
Each Certificate represents an undivided ownership interest in 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 trust
accounts established and maintained by the Servicer pursuant to the Agreement,
as described below; (ii)
S-18
<PAGE>
security interests in the Financed Vehicles and any accessions thereto; (iii)
the rights to proceeds with respect to the Receivables from claims on 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 interests of the Seller under the Receivables
Purchase Agreement; (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 acquired by the Trustee; (vii) all other
assets of the Trust; and (viii) any and all proceeds of the foregoing. The
Reserve Fund will be maintained by the Trustee for the benefit of the
Certificateholders, but will not be part of the Trust.
The Trust's principal offices are in ____________________________ , in
care of ___________________________ , as Trustee, at the address set forth below
under "The Trustee."
THE TRUSTEE
__________ is the Trustee under the Agreement. ____________________ is
a _________________ and its principal offices are located at ____________. The
Seller and its affiliates may maintain normal commercial banking relations with
the Trustee and its affiliates.
[Under the Agreement, for so long as any Certificates are listed on an
exchange whose rules so require, the Trustee will appoint paying agents in the
jurisdictions specified by such rules. For so long as the Class A Certificates
are listed on the [exchange] or [exchange], the Trustee will maintain paying
agents in [jurisdiction] and [jurisdiction]. The Initial Paying Agents will be
_______________ and ___________. Definitive Certificates may be presented for
purposes of payment, transfer or exchange at the offices of the paying agent in
[jurisdiction] at ___________, at the offices of the paying agent in
[jurisdiction] at ___________, or such other paying agents as may be specified
in a written notice to the holders of Certificates described below.]
THE SELLER AND THE SERVICER
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 ____________ (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 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 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.
The Receivables in the Receivables Pool are required to meet
certain selection criteria as of the Cutoff Date. Pursuant to such criteria,
each Receivable:
o falls within the range of:
<TABLE>
<S> <C>
remaining principal balance............................$___ to $_____
APRs....................................................... __% to __%
original number of monthly ("Scheduled Payments")...... __ to __
</TABLE>
S-19
<PAGE>
<TABLE>
<S> <C>
remaining number of Scheduled Payments.................__ to __
</TABLE>
o has a maximum number of:
<TABLE>
<S><C>
days past due for payment.............. 30 days
Scheduled Payments paid ahead of schedule.. 6 Scheduled Payments
</TABLE>
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.
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:
o as a percentage of the aggregate principal balance, as of
the Cutoff Date:
<TABLE>
<S> <C>
Precomputed Receivables..............................._____%
Simple interest Receivables.......................... _____%
New vehicles financed by TMCC........................ _____%
Used vehicles financed by TMCC....................... _____%
Receivables representing financing
of vehicles manufactured or distributed
by Toyota Motor Corporation or its
affiliates........................................... _____%
</TABLE>
o as a percentage of the number of Receivables, as of the
Cutoff Date:
<TABLE>
<S> <C>
New vehicles financed by TMCC........................ _____%
Used vehicles financed by TMCC....................... _____%
</TABLE>
The composition, distribution by APR 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 $
-----------------
Number of Receivables $
-----------------
Average Cutoff Date Principal Balance $
-----------------
Average Original Amount Financed. $
-----------------
Range of Cut-off Date Principal Balances $ to
-----------------
$
-----------------
Range of Original Amount Financed $ to
-----------------
</TABLE>
S-20
<PAGE>
<TABLE>
<S> <C>
$
-----------------
Weighted Average APR(1) %
---------
Range of APRs % to %
--------- ---------
Weighted Average Original Number of Scheduled Payments(1)
---------
Range of Original Number of Scheduled Payments
--------- to ---------
Weighted Average Remaining Number of Scheduled Payments(1)
---------
Range of Remaining Number of Scheduled Payments to
--------- ---------
</TABLE>
-------------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
RANGE OF APRS NUMBER OF PERCENTAGE OF CUTOFF DATE PERCENTAGE OF
------------- RECEIVABLES TOTAL NUMBER OF PRINCIPAL BALANCE CUTOFF DATE
----------- RECEIVABLES ----------------- POOL BALANCE
--------------- -------------
<S> <C> <C> <C> <C>
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
...............................
Total
----------------
</TABLE>
(1) Percentages may not add to 100.00% due to rounding.
S-21
<PAGE>
DISTRIBUTION OF THE INITIAL RECEIVABLES BY STATE (1)
<TABLE>
<CAPTION>
PERCENTAGE OF CUTOFF DATE PERCENTAGE OF
NUMBER OF NUMBER OF PRINCIPAL CUTOFF DATE
STATE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
----- ----------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Alabama.....................
Alaska......................
Arizona.....................
Arkansas....................
California..................
Colorado....................
Connecticut.................
Delaware....................
Florida.....................
Georgia.....................
Idaho.......................
Illinois....................
Indiana.....................
Iowa........................
Kansas......................
Kentucky....................
Louisiana...................
Maine.......................
Maryland....................
Massachusetts...............
Michigan....................
Minnesota...................
Mississippi.................
Missouri....................
Montana.....................
Nebraska....................
Nevada......................
New Hampshire...............
New Jersey..................
New Mexico..................
New York....................
North Carolina..............
North Dakota................
Ohio........................
Oklahoma....................
Oregon......................
Pennsylvania................
Rhode Island................
South Carolina..............
South Dakota................
Tennessee...................
Utah........................
Vermont.....................
Virginia....................
Washington..................
West Virginia...............
Wisconsin...................
Wyoming.....................
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF CUTOFF DATE PERCENTAGE OF
NUMBER OF NUMBER OF PRINCIPAL CUTOFF DATE
STATE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
----- ----------------- ------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Total (2)...............
</TABLE>
(1) Based solely on the addresses of the originating Dealers.
(2) Percentages may not add to 100.00% due to rounding.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning TMCC's experience
with respect to its portfolio of new and used automobile and/or 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 provided for
illustrative purposes only. There is no assurance that TMCC'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 MARCH 31, -----------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding Contracts(1)
Delinquencies as a
Percentage of contracts
outstanding(2)
31-60 Days............
61-90 Days............
Over 90 Days..........
--------------------------
</TABLE>
(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.
S-23
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
AT OR FOR THE SIX AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
MONTHS ENDED -------------------------------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
----------------- --------- -------- --------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Principal Amount
Outstanding(1).........
Average Principal
Amount
Outstanding(2).........
Number of Contracts
Outstanding............
Average Number of
Contracts
Outstanding............
Number of
Repossessions..........
Number of
Repossessions as a
Percentage of the
Number of Contracts
Outstanding............
Number of
Repossessions as a
Percentage of the
Average Number of
Contracts Outstanding..
Gross Charge-Offs(4)...
Recoveries(5)..........
Net Losses.............
Net Losses as a (6)
Percentage of Principal
Amount Outstanding.....
Net Losses as a (6)
Percentage of Average
Principal Amount
Outstanding............
</TABLE>
----------------------
(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.
S-24
<PAGE>
USE OF PROCEEDS
The Seller will use the net proceeds from the sale of the Securities
(approximately $__________) together with 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 Fund.
PREPAYMENT AND YIELD CONSIDERATIONS
Information regarding certain maturity and prepayment considerations
with respect to the Certificates is set forth under "Weighted Average Life of
the Securities" in the Prospectus and "Risk Factors--PREPAYMENTS ON RECEIVABLES
MAY CAUSE PREPAYMENTS ON THE CERTIFICATES, RESULTING IN REINVESTMENT RISK TO
YOU" in this prospectus supplement. Because the rate of payment of principal of
each class of Certificates depends on the rate of payment (including prepayments
and liquidations due to default) of the principal balance of the Receivables,
the final payment in respect of the Certificates could occur significantly
earlier than the Final Scheduled Payment date. Certificateholders will bear the
risk of being able to reinvest principal payments on the Certificates at yields
at least equal to the yield on their respective Certificates. No prediction can
be made as to the rate of prepayments on the Receivables in either stable or
changing interest rate environments.
The Class C Certificates and, to a lesser extent, the Class B
Certificates, will provide limited protection against losses on the Receivables.
Accordingly, the yield on the Class C Certificates and, to a lesser extent, the
Class B Certificates, will be extremely sensitive to the loss experience of the
Receivables and the timing of any such losses. If the actual rate and amount of
losses experienced by the Receivables exceed the rate and amount of such losses
assumed by an investor, the yield to maturity on the Class C Certificates and/or
the Class B Certificates may be lower than anticipated.
[Although the Receivables have different APRs, each Receivable's APR
exceeds the sum of (i) the weighted average of the Class A Pass Through Rate,
the Class B Pass Through Rate and the Class C Pass Through Rate plus (ii) the
Servicing Fee Rate. Therefore, disproportionate rates of prepayments between
Receivables with higher and lower APRs should not affect the yield to
Certificateholders on the outstanding principal balance of a particular Class of
Certificates.]
POOL FACTORS AND TRADING INFORMATION
The "Pool Factor" for a particular class of Certificates will be a
seven-digit decimal indicating the Class A Certificate Balance, Class B
Certificate Balance and Class C Certificate Balance as of the close of business
on the Payment Date in such month as a fraction of the Original Class A
Certificate Balance, Original Class B Certificate Balance or Original Class C
Certificate Balance, as the case may be. The Servicer will compute the Pool
Factor for each class of Certificates each month. Each Pool Factor will
initially be 1.0000000 and thereafter will decline to reflect reductions in each
Class Certificate Balance. Each Class Certificate Balance 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 Class
Certificate Balance for a given month allocable to each Certificateholder of a
particular class of Certificates can be determined by multiplying the original
denomination of the holder's Certificate by the related Pool Factor for that
month.
Pursuant to the Agreement, the Certificateholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the related Pool Factor and various other items of information pertaining to the
Trust. Certificateholders during each calendar year will be furnished
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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 CERTIFICATES
The following summary describes certain terms of the Certificates and
the Agreement. The summary does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all the provisions of the
Certificates and the Agreement. The following summary supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and
provisions of the Certificates of any given series and the related Agreement set
forth in the Prospectus, to which description reference is hereby made.
GENERAL
The Certificates will be issued pursuant to the terms of the Agreement,
a form of which has been filed as an exhibit to the Registration Statement. A
copy of the Agreement will be filed with the SEC and the [Luxembourg and Hong
Kong Stock Exchanges] following the issuance of the Securities. The Certificates
will evidence undivided ownership interests in the Trust created pursuant to the
Agreement. Each class of Certificates issued by the Trust will represent an
undivided ownership interest in the Trust equal to the class percentage set
forth on the front cover of this prospectus supplement. In general, and subject
to the prior rights of any senior classes of Certificates, it is intended that
Certificateholders of each class receive, on each Payment Date, the related
Class Principal Distributable Amount plus interest at the related Class Pass
Through Rate on the related Class Principal Balance.
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 Agreement is
set forth under "Transfer and Servicing Agreements--Sale and Assignment of
Receivables" in the Prospectus.
ACCOUNTS
In addition to the Accounts referred to under "Transfer and Servicing
Agreements--Accounts" in the Prospectus, the Servicer will also establish and
will maintain with the Trustee a Payahead Account in the name of the Trustee on
behalf of the Certificateholders.
SERVICING COMPENSATION
The Servicing Fee with respect to the calendar month immediately
preceding any Payment Date (a "Collection Period") will be one-twelfth of 1.00%
(the "Servicing Fee Rate") of the Pool Balance as of the first day of such
Collection Period or, in the case of the first Payment Date, the Initial Pool
Balance. The Servicing Fee, together with any previously unpaid Servicing Fee,
will be paid on each Payment Date solely to the extent of Available Interest.
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 interest or investment earnings earned
during such Collection Period from the investment of monies on deposit in the
Accounts. See "--Collections" below and "Transfer and Servicing
Agreements--Servicing Compensation and Payment of Expenses" in the Prospectus.
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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 or (iii) the short-term unsecured debt of TMCC ceases to be rated at
least P-1 by Moody's and A-1 by S&P, 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 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 also instruct the Trustee to invest amounts held in the Collection
Account in Eligible Investments from the time deposited until the related
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
"Transfer and Servicing Agreements--Collections" in the Prospectus.
"Eligible Investments" will be specified in the Agreement 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 each class of the
Certificates.
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
"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, 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 "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.
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NET DEPOSITS
As an administrative convenience, unless the Servicer is required to
remit collections daily (as described under "--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 Trustee and to the Certificateholders as if all of
the foregoing deposits and payments were made individually. See "Transfer and
Servicing Agreements--Net Deposits" in the Prospectus.
OPTIONAL PURCHASE
The outstanding Certificates will be redeemed in whole, but not in
part, on any Payment Date on which the Servicer or the Seller exercises its
option to purchase the Receivables. The Seller may purchase the Receivables when
the Pool Balance shall have declined to 10% or less of the Initial Pool Balance,
as described in the Prospectus under "Transfer and Servicing
Agreements--Termination". The "Redemption Price" for the outstanding
Certificates will equal the Certificate Balance on the date of such optional
purchase plus accrued and unpaid interest thereon.
REMOVAL OF SERVICER
The Trustee or Holders of Certificates evidencing 51% of the voting
interests of Certificates (voting as a single class) may terminate the rights
and obligations of the Servicer under the Pooling and Servicing Agreement upon
the: (i) failure by the Servicer to deliver to the Trustee for payment to the
Certificateholders any required payment or to deliver the related Servicer's
Certificate, which failure continues unremedied for three Business Days after
discovery of the failure by an officer of the Servicer or receipt by the
Servicer of notice thereof from the Trustee or receipt by the Trustee and the
Servicer (or the Seller, so long as the Servicer is TMCC) of notice from Holders
of Certificates evidencing not less than 25% of the aggregate principal amount
of the Class A Certificates and the Class B Certificates voting together as a
single class (but excluding for purposes of such calculation and action all
Certificates held by the Seller, the Servicer or any of their affiliates); (ii)
failure by the Servicer to observe or to perform in any material respect any
other covenants or agreements set forth in the Agreement, which failure
materially and adversely affects the rights of Certificateholders and is not
remedied within 90 days of written notice thereof to the Servicer; or (iii)
certain events of insolvency or bankruptcy of the Servicer occur. Under such
circumstances, authority and power shall, without further action, pass to and be
vested in the Trustee or a Successor Servicer appointed under the Agreement.
Upon receipt of notice of the occurrence of a Servicer default, the Trustee
shall give notice thereof to the Rating Agencies.
THE TRUSTEE
[_______________________] will be the Trustee under the Agreement. As a
matter of [New York] law, the Trust will be viewed as a separate legal entity,
distinct from the Trustee, and the Trust will be viewed as the issuer of the
Certificates. The Trustee and any of its affiliates may hold Certificates in
their own names or as pledgees. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Trustee acting
jointly (or in some instances, the 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 Trustee by the Agreement will be conferred or
imposed upon the Trustee and each such separate trustee or co-trustee jointly
or, in any jurisdiction in which the Trustee will be incompetent or unqualified
to perform
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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 Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement, becomes legally unable to act or becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by such successor
Trustee.
The Agreement will provide that the Servicer will pay the Trustee's
fees and expenses in connection with its duties under the Agreement. The
Agreement will further provide that the Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by the 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 Agreement).
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of the Agreement, the Certificates (other than the execution and
authentication thereof) or of any Receivables or related documents. The 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 Certificates
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
Trustee will not independently verify the Receivables. If no Event of Default
has occurred and is continuing, the Trustee will be required to perform only
those duties specifically required of it under the Agreement. Generally, those
duties will be limited to the receipt of the various certificates, reports or
other instruments required to be furnished to the Trustee under the Agreement,
in which case it will only be required to examine them to determine whether they
conform to the requirements of the Agreement. The Trustee will not be charged
with knowledge of a failure by the Servicer to perform its duties under the
Agreement which failure constitutes an Event of Default unless the Trustee
obtains actual knowledge of such failure as will be specified in the Agreement.
The Trustee will be under no obligation to exercise any of the rights
or powers vested in it by the Agreement 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
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Certificateholder will have any
right under the Agreement to institute any proceeding with respect to the
Agreement, unless such holder previously has given to the 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
Certificates evidencing not less than 25% of the voting interests of the Class A
Certificates, Class B Certificates and Class C Certificates excluding any
Certificates held by TMCC, TMCRC or any affiliate thereof, acting together as a
single class, have made written request upon the Trustee to institute such
proceeding in its own name as the Trustee thereunder and have offered to the
Trustee reasonable indemnity and the Trustee for 30 days has neglected or
refused to institute any such proceedings.
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NOTICES
Certificateholders will be notified in writing by the 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 Agreement)
obtaining actual knowledge thereof. Except with respect to the monthly and
annual statements to Certificateholders and Servicing Reports described herein,
the Trustee is not obligated under the Agreement to forward any other notices to
the Certificateholder. There are no provisions in the Agreement for the regular
or special meetings of Certificateholders.
[If required by the Luxembourg Stock Exchange, for so long as the Class
A Certificates are listed on the Luxembourg Stock Exchange, notices to holders
of the Class A Certificates will be given by publication in a leading daily
newspaper of general circulation in Luxembourg or, if publication in Luxembourg
is not practical, in Europe. Such publication is expected to be made in the
LUXEMBOURGER WORT. If required by The Stock Exchange of Hong Kong Limited, for
so long as the Class A Certificates are listed on The Stock Exchange of Hong
Kong Limited, notices to holders of the Class A Certificates will be given in a
leading daily newspaper of general circulation in the English language in Hong
Kong. Such publication is expected to be made in the SOUTH CHINA MORNING POST.
In addition, if Definitive Certificates are issued, such notices will be mailed
to the addresses of holders of Definitive Certificates at the addresses therefor
as they appear in the register maintained by the Trustee prior to such mailing.
Such notices will be deemed to have been given on the date of such publication
or mailing.]
PRESCRIPTION
In the event that any Certificateholder shall not surrender its
Certificates for retirement within six months after the date specified in
written notice given by the Trustee of the date for final payment thereof, the
Trustee shall give a second written notice to the remaining Certificateholders
to surrender their Certificates for retirement and receive the final payment
with respect thereto. If within one year after such second notice any
Certificates shall not have been surrendered, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that remain subject
to this Agreement. Any funds remaining in the Trust after exhaustion of such
remedies shall be paid by the Trustee to a charity specified in the Agreement.
GOVERNING LAW
The Agreement and the Certificates 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 CERTIFICATEHOLDERS
GENERAL. The trust will pay interest and principal on the certificates
on the fifteenth day of each month. If the fifteenth day of the month is not a
Business Day, payments on the certificates will be made on the next business
day. The date that any such payment is made is called a "Payment Date." The
first distribution date is __________. A "Business Day" is any day except a
Saturday or Sunday, a day on which banks in New York or San Francisco are
closed; or [for payments on the Class A Certificates made in Luxembourg or Hong
Kong by a paying agent, a day on which banks in Luxembourg or Hong Kong are
closed.]
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On the second Business Day preceding each Payment Date (each, a
"Determination Date"), the Servicer will inform the 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 Class A
Distributable Amount, the Class B Distributable Amount, the Class C
Distributable 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 Certificateholders of each Class.
On or before each Payment Date, the 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 Trustee will make payments to the Certificateholders out of the
amounts on deposit in the Collection Account. The amount to be paid to the
Certificateholders will be determined in the manner described below.
CALCULATION OF AVAILABLE AMOUNTS. The amount of funds available for
payment on a Payment Date (without taking account of amounts held in the Reserve
Fund) will generally equal the sum of Available Interest and Available
Principal. Generally, Available Interest and Available Principal on a particular
Payment Date consist of that portion of the following amounts allocable to
interest and principal, respectively:
(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) any Yield Maintenance Deposits;
(iii) 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");
(iv) all Advances made by the Servicer; and
(v) 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.
More specifically, "Available Interest" for a Payment Date will equal
the sum of the amounts described in clauses (i) through (iv) above received or
allocated by the Servicer in respect of interest on or in respect of the
Receivables during the related Collection Period (which in the case of the
Precomputed Receivables shall be computed in accordance with the actuarial
method and in the case of the Simple Interest Receivables shall be calculated in
accordance with the simple interest method).
"Available Principal" for a Payment Date will equal the sum of the
amounts described in clauses (i), (iii), (iv) and (v) above received or
allocated by the Servicer in respect of principal on or in respect of the
Receivables during the related Collection Period (which in the case of the
Precomputed Receivables shall be computed in accordance with the actuarial
method).
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Available Interest and Available Principal 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 and (iii) recoveries from collections with respect to
Advances that the Servicer has determined are unlikely to be repaid.
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.
CALCULATION OF DISTRIBUTABLE AMOUNTS. The "Class Distributable Amount"
for each class of Certificates with respect to a Payment Date will equal the sum
of (i) the related Principal Distributable Amount (each such amount, the "Class
A Principal Distributable Amount", "Class B Principal Distributable Amount" and
"Class C Principal Distributable Amount"), and (ii) the related Interest
Distributable Amount (each such amount the "Class A Interest Distributable
Amount", "Class B Interest Distributable Amount" and "Class C Interest
Distributable Amount").
The "Principal Distributable Amount" for a particular class consists of
the Class A, Class B or Class C Percentage, as applicable, of the following
items: (a) in the case of Precomputed Receivables, the principal portion of all
Scheduled Payments due during the related Collection Period, computed in
accordance with the actuarial method, (b) in the case of Simple Interest
Receivables, the principal portion of all Scheduled Payments actually received
during the related Collection Period, (c) the principal portion of all
Prepayments on Simple Interest Receivables and prepayments in full of
Precomputed Receivables received during the related Collection Period (to the
extent such amounts are not included in clauses (a) and (b) above) and (d) the
Principal Balance of each Receivable that the Servicer became obligated to
purchase, the Seller became obligated to repurchase or that became a Defaulted
Receivable during the related Collection Period (to the extent such amounts are
not included in clauses (a), (b) and (c) above).
The "Interest Distributable Amount" for a particular class consists of
one month's interest at the related Pass Through Rate on the related Certificate
Balance as of the immediately preceding Payment Date (after giving effect to
payments of principal made on such immediately preceding Payment Date) or, in
the case of the first Payment Date, the related Original Class Certificate
Balance (such amounts the "Class A Interest Distributable Amount", "Class B
Interest Distributable Amount" and "Class C Interest Distributable Amount").
The "Class A Certificate Balance" will initially equal the Original
Class A Certificate Balance and, on any Payment Date, will equal the Original
Class A Certificate Balance, reduced by all amounts allocable to principal and
paid on or prior to such Payment Date on the Class A Certificates. In addition,
on each Payment Date from and including the Payment Date on which both the Class
B Certificate Balance and the Class C Certificate Balance have been reduced to
zero, the Class A Certificate Balance will be reduced by the amount, if any,
necessary to cause it to equal the Pool Balance as of the last day of the
related Collection Period after taking account of all payments, deposits and
withdrawals to be made on such Payment Date.
The "Class B Certificate Balance" will initially equal the Original
Class B Certificate Balance and, on any Payment Date, will equal the Original
Class B Certificate Balance, reduced by all amounts
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allocable to principal and paid on or prior to such Payment Date on the Class B
Certificates. In addition, on each Payment Date from and including the Payment
Date on which the Class C Certificate Balance is reduced to zero, the Class B
Certificate Balance will be reduced by the amount, if any, necessary to cause it
to equal the excess, if any, of the Pool Balance as of the last day of the
related Collection Period over the Class A Certificate Balance after taking
account of all payments, deposits and withdrawals to be made on such Payment
Date.
The "Class C Certificate Balance" will initially equal the Original
Class C Certificate Balance and, on any Payment Date, will equal the amount by
which the Pool Balance on the last day of the related Collection Period exceeds
the sum of the Class A Certificate Balance and the Class B Certificate Balance
on such Payment Date after giving effect to payments in respect of principal to
Class A Certificateholders and Class B Certificateholders and all other deposits
or withdrawals required to be made on such Payment Date.
The Certificate Balance of a class of Certificates will be reduced as a
result of shortfalls in collections available to be paid on a Payment Date in
respect of interest on or principal of such class or any other class of
Certificates only if available amounts on deposit in the Reserve Fund are
insufficient to cover such shortfall. See "Subordination; Reserve Fund".
PAYMENTS OF INTEREST. On each Payment Date, commencing _________, the
Certificateholders will be entitled to interest payments in an amount up to the
amount of interest that accrued on the Certificate Balance for the related
Interest Period at the related Pass Through Rate. The Certificates will
constitute Fixed Rate Securities, as such term is defined under "Certain
Information Regarding the Securities--Fixed Rate Securities" in the Prospectus.
Interest in respect of a Payment Date will accrue during the related Interest
Period and will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. Interest payments due for any Payment Date but not paid on
such Payment Date will be due on the next Payment Date increased by an amount
equal to interest on such amount at the Pass Through Rate (to the extent
lawful). Interest payments with respect to a class of Certificates will
generally be funded from the portion of Available Interest and funds available
in the Reserve Fund remaining after payment of the Servicing Fee and payment of
the Interest Distributable Amount for any senior class of Certificates. See
"Transfer and Servicing Agreements--Payments" and "--Reserve Fund" in the
Prospectus.
PAYMENTS OF PRINCIPAL. On each Payment Date, commencing _____, each
class of Certificates will be entitled to principal payments in an amount
generally equal to the Principal Distributable Amount for such class. Principal
payments for a class of Certificates will generally be funded from the portion
of Available Principal remaining after payment of the Principal Distributable
Amount for any senior class of Certificates. Under certain circumstances,
amounts otherwise allocable to pay principal on a class of Certificates will be
applied to cover shortfalls in amounts available to make payments of interest on
a more senior class of Certificates.
PAYMENT OF DISTRIBUTABLE AMOUNTS. Prior to each Payment Date, the
Servicer will calculate the amount to be paid to the Certificateholders. On each
Payment Date, the Trustee will pay to Certificateholders the following amounts
in the following order of priority, to the extent of funds available for payment
on such Payment Date:
(i) to the Servicer, the Servicing Fee, including any
unpaid Servicing Fees with respect to one or more prior Collection
Periods, such amounts to be paid from Available Interest;
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(ii) to the Class A Certificateholders, an amount equal
to the Class A Interest Distributable Amount and any unpaid Class A
Interest Carryover Shortfall, such amount to be paid from Available
Interest (after giving effect to any reduction in Available Interest
described in clause (i) above); and if such Available Interest is
insufficient, the Class A Certificateholders will be entitled to
receive such amount first, from the Class C Percentage of Available
Principal, second from the Class B Percentage of Available Principal
and third, if such amounts are insufficient, from monies transferred
from the Reserve Fund to the Collection Account;
(iii) to the Class B Certificateholders, an amount equal
to the Class B Interest Distributable Amount and any unpaid Class B
Interest Carryover Shortfall, such amount to be paid from Available
Interest (after giving effect to any reduction in Available Interest
described in clauses (i) and (ii) above); and if such Available
Interest is insufficient, the Class B Certificateholders will be
entitled to receive such amount first, from the Class C Percentage of
Available Principal (after giving effect to any reduction in the Class
C Percentage of Available Principal described in Clause (ii) above) and
second, if such amounts are insufficient, from monies transferred from
the Reserve Fund to the Collection Account;
(iv) to the Class C Certificateholders, an amount equal
to the Class C Interest Distributable Amount and any unpaid Class C
Interest Carryover Shortfall, such amount to be paid from Available
Interest (after giving effect to the reduction in Available Interest
described in clauses (i) through (iii) above); and if such Available
Interest is insufficient, the Class C Certificateholders will be
entitled to receive such amount from monies transferred from the
Reserve Fund to the Collection Account;
(v) to the Class A Certificateholders, an amount equal
to the Class A Principal Distributable Amount and any unpaid Class A
Principal Carryover Shortfall, such amount to be paid from Available
Principal (after giving effect to any reduction in Available Principal
described in clauses (ii) and (iii) above); and if such Available
Principal is insufficient, the Class A Certificateholders will be
entitled to receive such amount first, from Available Interest (after
giving effect to any reduction in Available Interest described in
clauses (i) through (iv) above) and second, if such amounts are
insufficient, from monies transferred from the Reserve Fund to the
Collection Account;
(vi) to the Class B Certificateholders, an amount equal
to the Class B Principal Distributable Amount and any unpaid Class B
Principal Carryover Shortfall, such amount to be paid from Available
Principal (after giving effect to any reduction in Available Principal
described in clauses (ii), (iii) and (v) above); and if such Available
Principal is insufficient, the Class B Certificateholders will be
entitled to receive such amount first, from Available Interest (after
giving effect to any reduction in Available Interest described in
clauses (i) through (v) above) and second, if such amounts are
insufficient, from monies transferred from the Reserve Fund to the
Collection Account; and
(vii) to the Class C Certificateholders, an amount equal
to the Class C Principal Distributable Amount and any unpaid Class C
Principal Carryover Shortfall, such amount to be paid from Available
Principal (after giving effect to any reduction in Available Principal
described in clauses (ii), (iii), (v) and (vi) above); and if such
Available Principal is insufficient, the Class C Certificateholders
will be entitled to receive such amount first, from Available Interest
(after giving effect to the reductions in Available Interest described
in clauses (i) through (vi) above) and second, if such amounts are
insufficient, from monies transferred from the Reserve Fund to the
Collection Account.
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An "Interest Carryover Shortfall" with respect to any class of
Certificates on any Payment Date will equal the excess, if any, of (x) the
related Interest Distributable Amount for such class on such Payment Date and
any outstanding related Interest Carryover Shortfall for such class from the
immediately preceding Payment Date plus interest on such outstanding Interest
Carryover Shortfall, to the extent permitted by law, at the related Pass Through
Rate from such immediately preceding Payment Date through the current Payment
Date, over (y) the amount of interest paid to the related Certificateholders on
such Payment Date (each such shortfall, the "Class A Interest Carryover
Shortfall", "Class B Interest Carryover Shortfall" and "Class C Interest
Carryover Shortfall", as applicable).
A "Principal Carryover Shortfall" with respect to any class of
Certificates on any Payment Date will equal the excess, if any, of (x) the
related Principal Distributable Amount for such class on such Payment Date and
any outstanding Principal Carryover Shortfall for such class from the
immediately preceding Payment Date over (y) the amount of principal actually
paid to the related Certificateholders on such Payment Date (each such
shortfall, the "Class A Principal Carryover Shortfall", Class B Principal
Carryover Shortfall" and "Class C Principal Carryover Shortfall", as
applicable).
Even if the Certificate Balance of any class of Certificates is reduced
to zero prior to the termination of the Trust and prior to the final payment in
respect of amounts payable on the Certificates of all classes, any Interest or
Principal Carryover Shortfalls with respect to such class will continue as
obligations of the Trust payable from amounts on deposit in the Collection
Account or Reserve Fund, including Excess Amounts, before any further deposit of
Excess Amounts into the Reserve Fund or release of amounts therein to the
Seller.
After the above payments have been made any remaining amounts (such
amounts, "Excess Amounts") will be deposited in the Reserve Fund until the
amount on deposit therein equals the Specified Reserve Fund Balance and the
remainder, if any, will be paid to the Seller.
SUBORDINATION; RESERVE FUND
SUBORDINATION. The rights of the Certificateholders 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 "Description of the Certificates--Servicing Compensation" and
the reimbursement of certain unreimbursed Advances.
In addition, the rights of the Class B Certificateholders and the Class
C Certificateholders to receive payments with respect to collections on the
Receivables will be subordinated to the rights of the Class A Certificateholders
to the extent described herein, and the rights of the Class C Certificateholders
to receive payments with respect to the Receivables will be subordinated to the
Class B Certificateholders to the extent described herein. This subordination is
intended to enhance the likelihood of timely receipt by the Class A
Certificateholders and, to a lesser extent, the Class B Certificateholders, of
the full amount of interest and principal required to be paid to them, and to
afford such Certificateholders limited protection against losses in respect of
the Receivables.
The Class B Certificateholders and Class C Certificateholders will not
receive any payments of interest with respect to a Payment Date until the full
amount of interest on the Class A Certificates relating to such Payment Date has
been paid to the Class A Certificateholders. In addition, the Class B
Certificateholders and Class C Certificateholders will not receive any payments
of principal with respect to such Payment Date until the full amount of interest
on and principal of the Class A Certificates relating to such Payment Date has
been paid to the Class A Certificateholders. Payments of interest on the Class B
Certificates and Class C Certificates, to the extent of collections on
Receivables allocable to interest
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and certain available amounts on deposit in the Reserve Fund, will not be
subordinated to the payment of principal on the Class A Certificates.
The Class C Certificateholders will not receive any payments of
interest with respect to a Payment Date until the full amount of interest on the
Class A Certificates and Class B Certificates relating to such Payment Date has
been paid to the Class A Certificateholders and the Class B Certificateholders,
respectively. In addition, the Class C Certificateholders will not receive any
payments of principal with respect to such Payment Date until the full amount of
interest on and principal of the Class A Certificates and Class B Certificates
relating to such Payment Date has been paid to the Class A Certificateholders
and the Class B Certificateholders, respectively. Payments of interest on the
Class C Certificates, to the extent of collections on Receivables allocable to
interest and certain available amounts on deposit in the Reserve Fund, will not
be subordinated to the payment of principal on the Class A Certificates or the
Class B Certificates.
RESERVE FUND. The Certificateholders will also have the benefit of the
Reserve Fund. The Reserve Fund will be a segregated trust account held by the
Trustee and will not be an asset of the Trust. Any amounts held on deposit in
the Reserve Fund are owned by the Seller and any investment earnings thereon
will be taxable to the Seller for federal income tax purposes. The Reserve Fund
will be created with an initial deposit by the Seller of an amount equal to $
_________________ (the "Reserve Fund Initial Deposit"). If on any subsequent
Payment Date the amount on deposit in the Reserve Fund is less than the
Specified Reserve Fund Balance, Excess Amounts will be deposited in the Reserve
Fund until the monies in the Reserve Fund reach an amount equal to the Specified
Reserve Fund Balance.
The "Specified Reserve Fund Balance" will initially be $______________.
However, on any Payment Date the Specified Reserve Fund Balance will be an
amount equal to the greater of (a) $_____________ or (b) ____% of the sum of the
outstanding Certificate Balances of any outstanding classes of Certificates as
of the close of business on such Payment Date if either of the following tests
is met:
(i) the average of the Charge-off Rates for the three preceding
Collection Periods exceeds ____%; or
(ii) the average of the Delinquency Percentages for the three preceding
Collection Periods exceeds ____%.
The Specified Reserve Fund Balance shall in no event be more than the
sum of the Certificate Balances of any outstanding classes of Certificates. As
of any Payment Date, the amount of funds actually on deposit in the Reserve Fund
may, in certain circumstances, be less than the Specified Reserve Fund Balance.
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.
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 Liquidation
Proceeds collected during such Collection Period with respect to all Defaulted
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Receivables and (y) the portion of amounts subsequently received in respect of
Receivables liquidated in prior Collection Periods specified in the 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 Rating Agency to approve a formula for determining the
Specified Reserve Fund Balance that is different from those described above or
change the manner by which the Reserve Fund is funded. If each Rating Agency
delivers a letter to the 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 Certificates, then the Specified Reserve
Fund Balance will be determined in accordance with such new formula. The
Agreement will accordingly be amended, without the consent of any
Certificateholder, to reflect such new calculation.
As of the close of business on any Payment Date on which the amount on
deposit in the Reserve Fund is greater than the Specified Reserve Fund Balance,
the Trustee will release and distribute such excess, together with any Excess
Amounts not required to be deposited into the Reserve Fund, to the Seller. Upon
any such release of amounts from the Reserve Fund, the Certificateholders will
have no further rights in, or claim to, such amounts.
Amounts held from time to time in the Reserve Fund will continue to be
held for the benefit of the Certificateholders. Funds on deposit in the Reserve
Fund may be invested in Eligible Investments. Investment income on monies on
deposit in the Reserve Fund will not be available for payment to
Certificateholders or otherwise subject to any claims or rights of the
Certificateholders and will be paid to the Seller. Any loss on such investments
will be charged to the Reserve Fund.
If on any Payment Date the Class C Certificate Balance equals zero and
amounts on deposit in the Reserve Fund have been depleted as a result of losses
in respect of the Receivables, the protection afforded to the Class A
Certificateholders and the Class B Certificateholders by the subordination of
the Class C Certificates and by the Reserve Fund will be exhausted and the Class
B Certificateholders will bear directly the risks associated with ownership of
the Receivables. From and after such date, all such losses realized during a
Collection Period will be allocated first to the Class B Certificates, resulting
in the reduction of the Class B Certificate Balance, and second, if the Class B
Certificate Balance is reduced to zero thereby, to the Class A Certificates. If
on any Payment Date the Class B Certificate Balance equals zero and amounts on
deposit in the Reserve Fund have been depleted as a result of losses in respect
of the Receivables, the protection afforded to the Class A Certificateholders by
the subordination of the Class B Certificates, the Class C Certificates and by
the Reserve Fund will be exhausted and the Class A Certificateholders will bear
directly the risks associated with ownership of the Receivables. From and after
such date, all such losses realized during a Collection Period will be allocated
to the Class A
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Certificates and such allocation will result in the reduction of the Class A
Certificate Balance on the related Payment Date.
MATERIAL INCOME TAX CONSEQUENCES
CLASSIFICATION OF THE TRUST
Under current law and assuming execution of, and compliance with, the
Agreement, the Trust will be classified for federal income tax purposes and
California franchise and income tax purposes as a grantor trust and not as an
association taxable as a corporation.
For federal income tax purposes, each beneficial owner of the Offered
Certificates ("Grantor Trust Certificateholder") will be considered to own an
undivided interest in the Trust's assets, be required to include in its gross
income, for federal income tax purposes, its share of the gross income of the
Trust and be entitled to deduct (subject both to possible recharacterization of
specified fees paid by the Trust to the Servicer and to any limitations
generally applicable to that holder) its share of the expenses of the Trust
allocable to it.
Although each Grantor Trust Certificateholder will be considered, for
federal income tax purposes, to own its pro rata share of the principal of the
Receivables in the Trust, each Grantor Trust Certificateholder's share of the
right to interest on the Receivables, however, is not entirely certain. Each
Grantor Trust Certificateholder's right to interest with respect to a particular
Receivable should be limited to its pro rata share of the lesser of (1) the
interest that accrues on the principal of that Receivable at the Pass Through
Rate plus its pro rata share of the Servicer and Trustee fees allocable to it
(which fees will be deemed to be paid over, on behalf of the holder, to the
Servicer and the Trustee, respectively) and (2) the total interest payable on
that Receivable.
For administrative convenience, however, the Trustee may report
information with respect to a Grantor Trust Certificateholder's investment in an
Offered Certificate on an aggregate basis as though that Grantor Trust
Certificateholder's investment in the Receivables and other assets were equal to
that Grantor Trust Certificateholder's share of the initial Class Principal
Balance and on which interest is payable at a combined rate equal to the sum of
the Pass Through Rate and the Servicing Fee. If the IRS were to require
reporting on an asset-by-asset basis, the amount of income reportable for a
period could differ from the amount reportable on an aggregate basis.
ORIGINAL ISSUE DISCOUNT, PREMIUM, IMPUTED INTEREST AND MARKET DISCOUNT
ORIGINAL ISSUE DISCOUNT; GENERAL. The Receivables bear interest at
varying rates. Because a Grantor Trust Certificateholder will be viewed as
owning an interest in each of the Trust's assets, a portion of the Grantor Trust
Certificateholder's purchase price of an Offered Certificate (whether on initial
sale or in a subsequent transaction) may be required to be allocated among each
of the Trust's assets based on their respective fair market values. See
discussion under "Material Income Tax Consequences--Tax Treatment of Grantor
Trusts--Discount and Premium" in the accompanying prospectus.
PREMIUM. A Grantor Trust Certificateholder that purchases an Offered
Certificate for an amount greater than its outstanding principal balance may
elect under Section 171 of the Code to amortize premium in respect of the
Receivables in order to accrue income based on the Grantor Trust
Certificateholder's yield rather than at the Pass Through Rate. That election
would apply to all of the taxable debt instruments held at or acquired after the
first day of the holder's first taxable year to which
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that election applies, and may be revoked only with the consent of the IRS. See
discussion under "Material Income Tax Consequences--Tax Treatment of Grantor
Trusts--Premium" in the accompanying prospectus.
IMPUTED INTEREST AND MARKET DISCOUNT. Some or all of the Receivables
may have imputed interest and/or market discount. If a Receivable did not have
"adequate stated interest" (as the term is defined in Section 483 of the Code)
when originated, then that Receivable would be treated as having "imputed
interest." Under the imputed interest rules of the Code, a portion of the
Receivable's stated principal amount equal to that total unstated interest would
be recharacterized as interest and the Receivable's principal amount would be
correspondingly reduced. If the imputed interest rules applied, the total
unstated interest would be included in the Grantor Trust Certificateholder's
gross income over the term of the Receivable using a constant yield-to-maturity
method. It is uncertain whether the imputed interest rules would apply to a
Grantor Trust Certificateholder. If these rules do not apply, or with respect to
Receivables which had adequate stated interest when issued, the market discount
rules instead may be applicable.
In general, under the market discount provisions of the Code, principal
payments received by the Trust, and all or a portion of the gain recognized upon
a sale or other disposition of a Receivable or upon the sale or other
disposition of an Offered Certificate by a Grantor Trust Certificateholder, will
be treated as ordinary income to the extent of accrued market discount. Any gain
recognized by a Grantor Trust Certificateholder upon a sale or other disposition
of an Offered Certificate will be treated as capital gain to the extent the gain
exceeds accrued market discount.
A portion of the interest deductions on an Offered Certificate
attributable to any indebtedness treated as incurred or continued to purchase or
carry a Receivable may have to be deferred, unless a Grantor Trust
Certificateholder makes an election to include market discount in income
currently as it accrues (in lieu of including accrued market discount in income
at the time principal payments are received or at the time of disposition). That
election would apply to all debt instruments acquired by the taxpayer on or
after the first day of the first taxable year to which that election applies,
and may be revoked only with consent of the IRS. Taxpayers may, in general,
elect to accrue market discount either (1) under a constant yield-to-maturity
method or (2) in the proportion that the stated interest paid on the obligation
for the current period bears to the total remaining interest on the obligation.
See discussion under "Material Income Tax Consequences--Tax Treatment of Grantor
Trusts--Market Discount" in the accompanying prospectus.
ACCRUING INCOME ON A SEPARATE ASSET BASIS. Although the matter is not
entirely certain, it appears that, as a technical matter, each Grantor Trust
Certificateholder should calculate income separately for its interest in each
Receivable (by first allocating to each Receivable and to each other asset in
the Trust a portion of the holder's basis in the Offered Certificate). Further,
in the case of any "affected investor" (as defined below), in computing yield to
maturity, all interest on the Receivables allocable to the Offered Certificates,
including interest effectively paid over to the Servicer and the Trustee, is
taken into account. For this purpose "affected investors" are individuals,
persons, including estates and trusts, that compute taxable income in the same
manner as an individual and some "pass through entities." If required to report
income in respect of the Offered Certificates to the IRS and/or Grantor Trust
Certificateholders holding the Offered Certificates, however, the Servicer and
Trustee currently intend to accrue income on an aggregate basis, based on an
assumed initial offering price of the Offered Certificates and based on the net
amounts distributable on the Offered Certificates. This method of reporting on a
net basis may not be permitted. Furthermore, subsequent purchasers of the
Offered Certificates will have to adjust the amounts reported to them based upon
their basis in the Offered Certificates.
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POSSIBLE ALTERNATIVE CHARACTERIZATION. Prospective investors should be
aware that the IRS could take the position that, in accruing OID, and possibly
market discount, a Receivable-by-Receivable or pool-wide prepayment assumption
should be used to determine yield and time to maturity. If the holder purchased
its Offered Certificate at a yield higher than the Pass Through Rate on the
Offered Certificates (that is, for an amount less than the principal amount of
Receivables allocable to the Offered Certificate), that assumption could
accelerate income on the Offered Certificate. Prospective investors should also
be aware that, although the Seller believes that none of:
1. the Class A Grantor Trust Certificateholders' right to be paid prior to
payment being made on the class B certificates and the class C certificates;
2. the Class B Grantor Trust Certificateholders' right to be paid prior to
payment being made on the class C certificates; or
3. the Class A, Class B and Class C Grantor Trust Certificateholders' right to
be paid out of the Reserve Fund;
should be treated as an asset separate from the Class A, Class B and Class C
Grantor Trust Certificateholders' rights in the Receivables, the IRS could take
a contrary view. If any of those rights were characterized as a separate asset,
a portion of that holder's basis in its certificate could be required to be
allocated to those rights or a Grantor Trust Certificateholder might be
considered to own a greater percentage of the right to interest on the
Receivables (and be deemed to pay over that additional interest as a guarantee
or other fee as it is paid or accrued).
SALE OR PREPAYMENT
Upon the sale, exchange or retirement of an Offered Certificate, a
Grantor Trust Certificateholder will recognize taxable gain or loss in respect
of its undivided interest in each asset held by the Trust. Gain or loss with
respect to each undivided interest in a Trust asset is equal to the difference
between the allocable portion of the amount realized and the Grantor Trust
Certificateholder's adjusted basis in that asset. See discussion under "Material
Income Tax Consequences--Tax Treatment of Grantor Trusts--Sale or Exchange of a
Grantor Trust Certificate" in the accompanying Prospectus.
A disposition or retirement of an Offered Certificate for no net gain
or loss may for tax purposes consist of a sale of one asset (e.g., an interest
in some Receivables) for a gain and the disposition of another asset at a loss
(e.g., an interest in other Receivables). Although those gains or losses
generally should be treated as offsetting capital gains and losses (unless
earned by a dealer), absent the making of an election to include market discount
currently in income (as discussed above), gain realized on an interest in
Receivables acquired with market discount may yield ordinary gain to the extent
of accrued market discount, which (1) for a corporate taxpayer could not be
offset by, and (2) for an individual taxpayer could only be offset by up to
$3,000 of, any capital loss attributable to an interest in any other Receivables
or Trust assets. See "--Original Issue Discount, Imputed Interest and Market
Discount--Accruing Income on a Separate Asset Basis" above. In general, gain or
loss on any sale, exchange or retirement of an Offered Certificate would be
capital gain or loss. However, it is possible that the Servicer will take the
position that, under the rules for accruing OID, gain on any prepayment of the
Receivables will be ordinary income.
FOREIGN CERTIFICATEHOLDERS
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Interest attributable to Receivables which is received by a Grantor
Trust Certificateholder that is not a "U.S. person" (as defined in the
accompanying prospectus under "Material Income Tax Consequences--Tax Treatment
of Owner Trusts--Tax Consequences to Owner of the Notes--Foreign Owners") and
has no connection with the United States other than owning the Offered
Certificate would generally constitute "portfolio interest" and, accordingly,
not be subject to the normal 30% withholding tax imposed with respect to those
payments, provided that that Grantor Trust Certificateholder fulfills specified
certification requirements. See discussion under "Material Income Tax
Consequences--Tax Treatment of GrantorTrusts--Foreign Persons" in the
accompanying prospectus.
MATERIAL STATE TAX CONSEQUENCES
For California tax purposes, Grantor Trust Certificateholders could be
considered to own either (1) an undivided interest in a single debt obligation
held by the Trust and having a principal amount equal to the total stated
principal amount of the Receivables and an interest rate equal to the related
Pass Through Rate or (2) an interest in each of the Receivables and any other
Trust assets. It is suggested that Grantor Trust Certificateholders consult
their tax advisors regarding the state tax consequences associated with the
purchase, ownership and disposition of the Grantor Trust Certificates.
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
Subject to the considerations set forth below and under "ERISA
Considerations" in the Prospectus, the Class A Certificates may be purchased by
an employee benefit plan or an individual retirement account (a "Benefit Plan")
subject to ERISA or Section 4975 of the United States Internal Revenue Code of
1986, as amended (the "Code"). A fiduciary of a Benefit Plan must determine that
the purchase of a Class A Certificate 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.
The United States Department of Labor (the "DOL") has granted to
_____________________ and ________________________ administrative exemptions
(Prohibited Transaction Exemptions _____ and _____ (the "Exemptions")) from
certain of the prohibited transaction rules of ERISA with respect to the initial
purchase, the holding and the subsequent resale by Benefit Plans of certificates
representing interests in asset backed pass-through trusts that consist of
certain receivables, loans and other obligations that meet the conditions and
requirements of the Exemptions. The receivables covered by the Exemptions
include motor vehicle installment obligations such as the Receivables. The
Exemptions also apply to transactions in connection with the servicing,
management and operation of the Trust which might otherwise constitute
prohibited transactions.
Among the conditions that must be satisfied for either of the
Exemptions to apply to the acquisition by a Benefit Plan of the Class A
Certificates are the following:
(i) The acquisition of the Class A Certificates by a
Benefit Plan is on terms (including the price for the Class A
Certificates) that are at least as favorable to the Benefit Plan as
they would be in an arm's-length transaction with an unrelated party.
(ii) The rights and interests evidenced by the Class A
Certificates acquired by the Benefit Plan are not subordinated to the
rights and interests evidenced by other certificates of the Trust.
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(iii) The Class A Certificates acquired by the Benefit
Plan have received a rating at the time of such acquisition that is in
one of the three highest generic rating categories from Standard &
Poor's, Moody's, Duff & Phelps Inc. or Fitch Investors Service LP.
(iv) The Trustee is not an affiliate of any member of the
Restricted Group (as defined below).
(v) The sum of all payments made to and retained by the
Underwriters in connection with the payment of the Class A Certificates
represents not more than reasonable compensation for underwriting the
Class A Certificates. The sum of all payments made to and retained by
the Seller pursuant to the sale of the Receivables to the Trust
represents not more than the fair market value of such Receivables. The
sum of all payments made to and retained by the Servicer represents not
more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith.
(vi) The Benefit Plan investing in the Class A Certificates is
an "accredited investor" as defined in Rule 501(a)(1) of Regulation D
of the Commission under the Securities Act.
The Trust must also meet the following requirements:
(a) The corpus of the Trust must consist solely of assets of
the type that have been included in other investment pools.
(b) Certificates in such other investment pools must have been
rated in one of the three highest generic rating categories of S&P,
Moody's, Duff & Phelps Inc. or Fitch Investors Service LP. for at least
one year prior to the Benefit Plan's acquisition of certificates.
(c) Certificates evidencing interests in such other investment
pools must have been purchased by investors other than Benefit Plans
for at least one year prior to any Benefit Plan's acquisition of Class
A Certificates.
The Exemptions do not apply in all respects to Benefit Plans sponsored
by the Seller, the Underwriters, the Trustee, the Servicer, any Obligor with
respect to the Receivables included in the Trust constituting more than 5% of
the aggregate unamortized principal balance of the assets in the Trust or any
affiliate of such parties (the "Restricted Group"). As of the date hereof, no
Obligor with respect to the Receivables included in the Trust constitutes more
than 5% of the aggregate unamortized principal balance of the Trust (i.e., the
initial principal amount of the Certificates). Moreover, each Exemption provides
relief from certain self-dealing/conflict of interest prohibited transactions
only if, among other requirements, (i) in the case of the acquisition of Class A
Certificates in connection with the initial issuance, at least 50% of each class
of Certificates in which Benefit Plans have invested is acquired by persons
independent of the Restricted Group and at least 50% of the aggregate interest
in the Trust is acquired by persons independent of the Restricted Group, (ii) a
Benefit Plan's investment in the Class A Certificates does not exceed 25% of all
of the Class A Certificates outstanding at the time of the acquisition and (iii)
immediately after the acquisition, no more than 25% of the assets of a Benefit
Plan with respect to which a person has discretionary authority or renders
investment advice are invested in certificates representing interests in trusts
containing assets sold or serviced by the same entity.
The Seller believes that the Exemptions will apply to the acquisition,
holding and resale of the Class A Certificates by a Benefit Plan and that all
conditions of the Exemptions other than those within the control of investors
will be met. However, there can be no assurance that the DOL or the Internal
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Revenue Service will not take a contrary position, nor that such position will
be sustained. One or more alternative exemptions may be available with respect
to certain prohibited transactions to which the Exemptions are not applicable,
depending in part upon the type of Benefit Plan's fiduciary making the decision
to acquire the Class A Certificates and the circumstances under which such
decision is made, including, but not limited to, (a) Prohibited Transactions
Class Exemption ("PTCE") 91-38, regarding investments by bank collective
investment funds or (b) PTCE 90-1, regarding investments by insurance company
pooled separate accounts. Before purchasing the Class A Certificates, a Benefit
Plan's fiduciary should consult with its counsel to determine whether the
conditions of the Exemption or any other exemption would be met. A purchaser of
the Class A Certificates 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 transactions.
As described above, the acquisition of a Class A Certificate by a
Benefit Plan could result in various unfavorable consequences for the Benefit
Plan or its fiduciaries under the regulations unless one of the exceptions in
the regulations or an exemption is available. See "ERISA Considerations" in the
Prospectus.
Prospective Benefit Plan investors should consult with their legal
advisors concerning the impact of ERISA and the Code, the applicability of the
Exemptions or any other exemptions, and the potential consequences of any
purchase in their specific circumstances, prior to making an investment in a
Class A Certificate. Any Benefit Plan which acquires a beneficial ownership
interest in Class A Certificates will be deemed, by virtue of the acceptance and
acquisition of such ownership interest, to have represented to the Seller and
the Trustee that such Benefit Plan is an "accredited investor" for purposes of
Rule 501(a)(1) of Regulation D under the Securities Act.
A governmental plan as defined in Section 3(32) of ERISA is not subject
to ERISA or Code Section 4975. However, such a governmental plan may be subject
to federal, state or local law which is to a material extent similar to the
provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the need for and
availability of any exemptive relief under Similar Law.
The Exemptions will not apply to the acquisition, holding or resale of
the Class B Certificates or Class C Certificates.
THE CLASS B CERTIFICATES AND CLASS C CERTIFICATES
Class B Certificates and Class C Certificates may not be acquired by an
employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to
the provisions of Title I of ERISA or Section 4975(e)(1) of the Code or any
person acting on behalf of such a plan or using the assets of such a plan to
acquire the Class B Certificates or Class C Certificates or any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity, except as provided below with respect to insurance company general
accounts. By its acceptance of a Class B Certificate or Class C Certificate,
each holder thereof will be deemed to have represented and warranted that it is
not subject to the foregoing limitation.
In 1995, the DOL issued PTCE 95-60. Section III of PTCE 95-60 exempts
from the application of the prohibited transaction provisions of Sections
406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code transactions in
connection with the servicing, management and operation of a trust (such as the
Trust) in which an insurance company general account has an interest as a result
of its acquisition of certificates issued by the trust, provided that certain
conditions are satisfied. If these conditions are met,
S-43
<PAGE>
insurance company general accounts would be allowed to purchase classes of
Certificates (such as the Class B Certificates or Class C Certificates) which do
not meet the requirements of the Exemptions solely because they (i) are
subordinated to other classes of Certificates in the Trust and/or (ii) have not
received a rating at the time of the acquisition in one of the three generic
highest rating categories from Standard & Poor's, Moody's, Duff & Phelps, Inc.
or Fitch Investors Service LP. All other conditions of the Exemptions would have
to be satisfied in order for PTCE 95-60 to be available. Before purchasing Class
B Certificates or Class C Certificates, an insurance company general account
seeking to rely on Section III of PTCE 95-60 should itself confirm that all
applicable conditions and other requirements have been satisfied.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement
relating to the Certificates (the "Underwriting Agreement"), the Seller has
agreed to sell to each of the Underwriters named below, and each of the
Underwriters has severally agreed to purchase, the principal amount of Class A
Certificates, Class B Certificates and Class C Certificates set forth opposite
its name below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES
------------- ----------------------- ---------------------- -------------------------
<S> <C> <C> <C>
----------------------- ---------------------- -------------------------
Total........................
======================= ====================== =========================
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Certificates
if any of the Certificates are purchased. Such obligation of the Underwriters is
subject to certain conditions precedent set forth in the Underwriting Agreement.
The Seller has been advised by the Underwriters that they propose to offer the
Certificates of each class to the public at the respective public offering
prices set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price less a concession not in excess of [_____]% of the Class A
Certificate denominations, [_____]% of the Class B Certificate denominations and
[_____]% of the Class C Certificate denominations and that the Underwriters may
allow and such dealers may reallow a discount not in excess of [_____]% of the
Class A Certificate denominations, [_____]% of the Class B Certificate
denominations and [_____]% of the Class C Certificate denominations to certain
other dealers. After the initial public offering, the public offering prices and
such concessions and discounts to dealers may be changed by the Underwriters.
The Seller and TMCC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
S-44
<PAGE>
The Certificates are new issues of securities with no established
trading markets. The Seller has been advised by the Underwriters that the
Underwriters intend to make a market in the Certificates of each class, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Certificates of any class and such
market-making may be discontinued at any time at the sole discretion of the
Underwriters without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Certificates of any class.
The Trust may, from time to time, invest funds in the Accounts in
Eligible Investments acquired from the Underwriters.
The Underwriters have advised the Seller that, pursuant to Regulation M
under the Securities Act, certain persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Certificates of any class at
levels above those that might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the Certificates of any class
on behalf of the Underwriters for the purpose of fixing or maintaining the price
of such Certificates. A "syndicate covering transaction" is the bid for or the
purchase of such Certificates of any class on behalf of the Underwriters to
reduce a short position incurred by the Underwriters in connection with this
offering. A "penalty bid" is an arrangement permitting one of the Underwriters
to reclaim the selling concession otherwise accruing to another Underwriter or
syndicate member in connection with this offering if the Certificates of any
class originally sold by such other Underwriter or syndicate member are
purchased by the reclaiming Underwriter in a syndicate covering transaction and
has therefore not been effectively placed by such other Underwriter or syndicate
member.
Stabilizing bids and syndicate covering transactions may have the
effect of causing the price of the Certificates of any class to be higher than
it might be in the absence thereof, and the imposition of penalty bids might
also have an effect on the price of any Certificate to the extent that it
discouraged resale of such Certificate. Neither the Seller nor the Underwriters
makes any representation or prediction as to the direction or magnitude of any
such effect on the prices for the Certificates. Neither the Seller nor the
Underwriters makes any representation that the Underwriters will engage in any
such transactions or that, once commenced, any such transactions will not be
discontinued without notice.
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 Certificates. 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 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.
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.
It is expected that the delivery of the Certificates will be made
against payment therefor on or about the Closing Date, which is expected to be
the ___th 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 Certificates on the
date hereof and for a period of days hereafter will be required, by
S-45
<PAGE>
virtue of the fact that the Certificates initially will settle ___ 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 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 Certificates 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 with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Certificates 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 Certificates 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 Certificates and certain federal income
tax and other matters will be passed upon for the Trust by O'Melveny & Myers
LLP. Certain legal matters relating to the Notes and Certificates will be passed
upon for the Underwriters by _________.
S-46
<PAGE>
INDEX OF TERMS
PAGE
Aggregate Net Losses, ..........................................36
Available Interest, ............................................31
Available Principal, ...........................................31
Benefit Plan, ..................................................41
Charge-off Rate, ...............................................36
Class A Certificate Balance, ...................................32
Class A Interest Distributable Amount, .........................32
Class A Principal Distributable Amount, ........................32
Class B Certificate Balance, ...................................32
Class B Interest Distributable Amount, .........................32
Class B Principal Distributable Amount, ........................32
Class C Certificate Balance, ...................................33
Class C Interest Distributable Amount, .........................32
Class C Principal Distributable Amount, ........................32
Class Distributable Amount, ....................................32
Current Receivable, ............................................37
Cutoff Date, ...................................................19
Dealer Recourse, ...............................................18
Defaulted Receivable, ..........................................32
Delinquency Percentage, ........................................37
DOL, ...........................................................41
Excess Amounts, ................................................35
Excess Payment, ................................................27
Exemptions, ....................................................41
Interest Carryover Shortfall, ..................................35
Interest Distributable Amount, .................................32
Liquidated Receivable, .........................................37
Net Liquidation Proceeds, ......................................31
Pool Factor, ...................................................25
Prepayment, ....................................................27
Principal Carryover Shortfall, .................................35
Principal Distributable Amount, ................................32
Receivables Purchase Agreement, ................................19
Reserve Fund Initial Deposit, ..................................36
Restricted Group, ..............................................42
Scheduled Payments, ............................................19
Specified Reserve Fund Balance, ................................36
Underwriting Agreement, ........................................44
S-47
<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Class A
Certificates (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
DTC, Clearstream Banking societe anonyme ("Clearstream Banking") or the
Euroclear System ("Euroclear"). The Global Securities will be tradeable 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 Securities
through Clearstream Banking and Euroclear will be conducted in the ordinary way
in accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., three calendar day settlement).
Secondary market trading between investors holding Global Securities through DTC
will be conducted according to the rules and procedure applicable to U.S.
corporate debt obligations and prior asset-backed securities issues. Secondary
cross-market trading between Clearstream Banking or Euroclear and DTC
Participants holding securities will be effected on a delivery-against-payment
basis through the depositaries of Clearstream Banking and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, Clearstream
Banking and Euroclear 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 Securities through DTC will
follow DTC settlement practice. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the settlement
date. Investors electing to hold their Global Securities through Clearstream
Banking or Euroclear accounts will follow the settlement procedures applicable
to conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to securities custody accounts on the settlement date against payment
in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that 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 securities issues in same-day funds.
A-1
<PAGE>
Trading between Clearstream Banking and/or Euroclear Participants.
Secondary market trading between Clearstream Banking Participants or Euroclear
Participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CLEARSTREAM BANKING OR EUROCLEAR
PARTICIPANTS. When Global Securities are to be transferred from the account of a
DTC Participant to the account of a Clearstream Banking Participant or a
Euroclear Participant, the purchaser will send instructions to Clearstream
Banking or Euroclear through a Clearstream Banking Participant or Euroclear
Participant at least one business day prior to settlement. Clearstream Banking
or Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, 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 Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream
Banking Participant's or Euroclear Participant's account. The securities credit
will appear the next day (European time) and the cash debt will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Clearstream Banking or Euroclear cash debt will be valued instead as of the
actual settlement date.
Clearstream Banking Participants and Euroclear Participants will need
to make available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is to
preposition funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Clearstream Banking or
Euroclear. Under this approach, they may take on credit exposure to Clearstream
Banking or Euroclear until the Global Securities are credited to their accounts
one day later.
As an alternative, if Clearstream Banking or Euroclear has extended a
line of credit to them, Clearstream Banking Participants or Euroclear
Participants can elect not to preposition funds and allow that credit line to be
drawn upon to finance settlement. Under this procedure, Clearstream Banking
Participants or Euroclear Participants purchasing Global Securities would incur
overdraft charges for one day, assuming they clear the overdraft when the Global
Securities are credited to their accounts. However, interest on the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period may
substantially reduce or offset the amount of such overdraft charges, although
this result will depend on each Clearstream Banking Participant's or Euroclear
Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of Clearstream Banking
Participants or Euroclear 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 OR EUROCLEAR SELLER AND DTC
PURCHASER. Due to time zone differences in their favor, Clearstream Banking
Participants and Euroclear Participants may employ their customary procedures
for transactions in which Global Securities are to be transferred by the
respective clearing system, through the respective Depositary, to a DTC
Participant. The seller will send
A-2
<PAGE>
instructions to Clearstream Banking or Euroclear through a Clearstream Banking
Participant or Euroclear Participant at least one business day prior to
settlement. In these cases, Clearstream Banking or Euroclear will instruct the
Relevant Depositary, as appropriate, to deliver the Global Securities to the DTC
Participant's account against payment. Payment will include interest accrued on
the Global Securities 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 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 Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the
Clearstream Banking Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Clearstream Banking Participant or Euroclear
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
Participant's or Euroclear Participant's account would instead be valued as of
the actual settlement date.
Finally, day traders that use Clearstream Banking or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Clearstream
Banking Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through Clearstream Banking or Euroclear for one
day (until the purchase side of the day trade is reflected in their
Clearstream Banking or Euroclear accounts) in accordance with the
clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their
Clearstream Banking or Euroclear 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 Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Clearstream Banking or Euroclear (or through DTC if the holder has an address
outside the U.S.) will be subject to the 30% U.S. withholding tax that 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' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (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 Securities that are Non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8BEN (Certificate
of Foreign Status 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.
A-3
<PAGE>
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 reduced tax rate
depending on the treaty terms) by filing Form W-8BEN. Form W-8BEN may be filed
by the Certificate 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 beneficial owner of a
Global Security 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 remain 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 which
elected to be treated as United States persons prior to such date also shall 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 Securities.
Investors are advised to consult their tax advisors for specific tax advice
concerning their holding and disposing of Global Securities.
A-4
<PAGE>
<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
ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT
CLAIM THE ACCURACY OF THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AS OF ANY
DATE OTHER THAN THE DATE STATED ON THE COVER PAGE. WE
ARE NOT OFFERING THE CERTIFICATES IN ANY JURISDICTION
IN WHERE IT IS NOT PERMITTED.
___________________ $_______________
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT TOYOTA AUTO RECEIVABLES
PAGE
----
Summary of Terms............................... S-3 ____-__ GRANTOR TRUST
Risk Factors................................... S-15
The Trust...................................... S-18
The Trustee.................................... S-19 $_______________ _____% ASSET
The Seller and the Servicer.................... S-19
The Receivables Pool........................... S-19 BACKED CERTIFICATES, CLASS A
Delinquencies, Repossessions and Net Losses.... S-23
Use of Proceeds................................ S-25
Prepayment and Yield Considerations............ S-25 $_____________ _____% ASSET
Pool Factors and Trading Information........... S-25
Description of the Certificates................ S-26 BACKED CERTIFICATES, CLASS B
Payments to Certificateholders................. S-30
Subordination; Reserve Fund.................... S-35
Material Income Tax Consequences............... S-38 $_____________ ____% ASSET
ERISA Considerations........................... S-41
Underwriting................................... S-44 BACKED CERTIFICATES, CLASS C
Legal Opinions................................. S-46
Index of Terms................................. S-47
ANNEX A: Global Clearance, Settlement and Tax
Documentation Procedures....................... A-1 TOYOTA MOTOR CREDIT
RECEIVABLES CORPORATION
SELLER
PROSPECTUS TOYOTA MOTOR CREDIT
Summary of Terms............................... 2 CORPORATION SERVICER
Risk Factors................................... 9
The Trusts..................................... 13
The Trustee.................................... 13 ------------------
The Seller..................................... 13
The Servicer................................... 14 PROSPECTUS SUPPLEMENT
Where You Can Find More Information About
Your Securities............................... 15 ------------------
The Receivables Pools.......................... 16
Delinquencies, Repossessions and Net Losses.... 18
Weighted Average Life of the Securities........ 18
Pool Factors and Trading Information........... 19
Use of Proceeds................................ 20
Description of the Notes....................... 20
Description of the Certificates................ 24
Certain Information Regarding the Securities... 25
Description of the Transfer and
Servicing Agreements.......................... 37
TMCC Demand Notes.............................. 49
The Swap Agreement............................. 53
Certain Legal Aspects of the Receivables....... 56
Certain Federal Income Tax Consequences........ 62
Certain State Tax Consequences................. 74
ERISA Considerations........................... 75
Plan of Distribution........................... 75
Legal Opinions................................. 76
Experts........................................ 76
Index of Terms................................. 77
UNTIL __________________ , ALL DEALERS THAT EFFECT
TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
========================================================== =========================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee.......................................... $ 554,400
Blue Sky Fees and Expenses................................ $ 15,000
Printing Expenses......................................... $ 300,000
Trustee Fees and Expenses................................. $ 60,000
Legal Fees and Expenses................................... $ 350,000
Accounting Fees and Expenses.............................. $ 200,000
Rating Agencies' Fees..................................... $ 600,000
Miscellaneous............................................. $ 20,600
Total..................................................... $2,100,000
* All amounts except registration fee are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Toyota Motor Credit Corporation ("TMCC") and Toyota Motor Credit
Receivables Corporation ("TMCRC") were incorporated as California corporations.
Section 317 of the California Corporations Code authorizes a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding (other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that such person is or
was an officer or director of the corporation, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of the
corporation and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of such person was unlawful.
Each of TMCC's and TMCRC's Bylaws authorize TMCC and TMCRC to indemnify
their officers and directors to the maximum extent permitted by the California
Corporations Code. TMCC has entered into indemnification agreements with its
officers and directors to indemnify such officers and directors to the maximum
extent permitted by the California Corporations Code.
[Remainder of Page Intentionally Left Blank]
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
4.1 Form of Trust Agreement between the Registrant and the Owner Trustee*
4.2 Form of Indenture between the Trust and the Indenture Trustee*
4.3 Form of Sale and Servicing Agreement among the Registrant, the Servicer
and the Owner Trust
4.4 Form of Pooling and Servicing Agreement among the Registrant, the
Servicer and the Trustee
4.5 Form of Receivables Purchase Agreement between TMCC and the Registrant*
4.6 Form of Administration Agreement among the Trust, the Administrator and
the Indenture Trustee*
4.7 Form of Demand Note Indenture between TMCC and the Demand Note Indenture
Trustee*
4.8 Form of ISDA Master Agreement between TMCC and the Trust
5.1(A) Opinion of O'Melveny and Myers LLP regarding Notes
5.1(B) Opinion of O'Melveny and Myers LLP regarding Certificates
8.1 Opinion of O'Melveny and Myers LLP with respect to tax matters
23.1 Consent of O'Melveny and Myers LLP (included as part of Exhibits 5.1and
5.2)
23.2 Consent of O'Melveny and Myers LLP (included as part of Exhibit 8.1)
23.3 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney of Directors and Officers of the Registrant*
25.1 Statement of Eligibility on Form T-1 of Trustee under the Indenture
25.2 Statement of Eligibility on Form T-1 of Trustee under the Demand Note
Indenture
------------------------
* Previously filed with the initial Registration Statement on July 17, 2000.
ITEM 17. UNDERTAKINGS
(a) As to Rule 415: The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
change in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement.
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<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) As to documents subsequently filed that are incorporated by reference: The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934), as amended, that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(c) As to indemnification: Insofar as indemnification for liabilities arising
under the Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
described under Item 15 above, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
(d) As to Rule 430A: The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933, as amended, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
(e) As to qualifications of trust indentures under the Trust Indenture Act of
1939 for delayed offerings: The undersigned registrant hereby undertakes to file
an application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act of 1939, as
amended, in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act of 1939, as
amended.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Torrance, State of California, on
August 7, 2000.
TOYOTA AUTO RECEIVABLES TRUSTS
By: TOYOTA MOTOR CREDIT RECEIVABLES
CORPORATION, as originator of Toyota
Auto Receivables Trusts
By: /s/ LLOYD MISTELE
-----------------------------------
Lloyd Mistele
DIRECTOR AND PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S><C>
NAME TITLE DATE
---- ----- ----
/s/ LLOYD MISTELE Director, President, and Principal Executive August 7, 2000
------------------------------------ Officer
Lloyd Mistele
/s/ NOBUKAZU TSURUMI* Director and Principal Financial Officer and August 7, 2000
------------------------------------ Principal Accounting Officer
Nobukazu Tsurumi
/s/ DONALD J. PUGLISI* Director August 7, 2000
------------------------------------
Donald J. Puglisi
*By: /s/ LLOYD MISTELE August 7, 2000
--------------------------------
Lloyd Mistele
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Torrance, State of California, on
August 7, 2000.
TOYOTA MOTOR CREDIT CORPORATION,
solely as issuer of the TMCC Demand Notes
By: /S/ GEORGE BORST
-----------------------------------
George Borst
SENIOR VICE PRESIDENT AND
GENERAL MANAGER
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S><C>
NAME TITLE DATE
---- ----- ----
/s/ GEORGE BORST Director, Senior Vice President and August 7, 2000
------------------------------------ General Manager of TMCC
George Borst (principal executive officer)
/s/ ROBERT PITTS* Director and Secretary of TMCC August 7, 2000
------------------------------------
Robert Pitts
/s/ NOBUKAZU TSURUMI* Director, Senior Vice President and August 7, 2000
------------------------------------ Treasurer of TMCC (principal financial
Nobukazu Tsurumi officer)
/s/ DOUGLAS WEST* Director of TMCC August 7, 2000
------------------------------------
Douglas West
/s/ JAMES PRESS* Director of TMCC August 7, 2000
------------------------------------
James Press
*By: /s/ LLOYD MISTELE August 7, 2000
---------------------------------
Lloyd Mistele
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Torrance, State of California, on
August 7, 2000.
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION
By: /s/ LLOYD MISTELE
----------------------------------------
Lloyd Mistele
DIRECTOR AND PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S><C>
NAME TITLE DATE
---- ----- ----
/s/ LLOYD MISTELE Director, President, and Principal Executive August 7, 2000
------------------------------------ Officer
Lloyd Mistele
/s/ NOBUKAZU TSURUMI* Director and Principal Financial Officer and August 7, 2000
------------------------------------ Principal Accounting Officer
Nobukazu Tsurumi
/s/ DONALD J. PUGLISI* Director August 7, 2000
------------------------------------
Donald J. Puglisi
*By: /s/ LLOYD MISTELE August 7, 2000
--------------------------------
Lloyd Mistele
ATTORNEY-IN-FACT
</TABLE>
II-6
