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Filed Persuant to Rule 424 (b)(5)
Registration No. 333-41568
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY 11, 2001
$1,186,452,000
TOYOTA AUTO RECEIVABLES 2001-A OWNER TRUST
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
$440,000,000 5.380% ASSET BACKED NOTES, CLASS A-2
$440,000,000 FLOATING RATE ASSET BACKED NOTES, CLASS A-3
$306,452,000 FLOATING RATE ASSET BACKED NOTES, CLASS A-4
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE S-14 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 9 IN THE
ACCOMPANYING PROSPECTUS.
This prospectus supplement does not contain complete information about the
offering of the notes. No one may use this prospectus supplement to offer and
sell the notes unless it is accompanied by the prospectus. If any statements in
this prospectus supplement conflict with statements in the prospectus, the
statements in this prospectus supplement will control.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NOTES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes are asset backed securities issued by the trust. The notes are
not obligations of Toyota Motor Credit Corporation, Toyota Motor Credit
Receivables Corporation, Toyota Motor Sales, U.S.A., Inc., Toyota Financial
Services Corporation, Toyota Financial Services Americas Corporation, or any of
their respective affiliates. Neither the notes nor the receivables are insured
or guaranteed by any governmental agency.
The trust will issue the following notes:
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FINAL
INITIAL FIRST SCHEDULED
PRINCIPAL INTEREST ACCRUAL INTEREST PAYMENT
AMOUNT RATE METHOD(2) PAYMENT DATE DATE
------------ --------- ---------- ------------- -----------
Class A-1 Notes(1). $317,048,000 5.613% Actual/360 2/15/2001 1/15/2002
Class A-2 Notes.... $440,000,000 5.380% 30/360 2/15/2001 12/15/2003
1-mo
LIBOR +
Class A-3 Notes(3). $440,000,000 0.08% Actual/360 2/15/2001 3/15/2005
1-mo
LIBOR +
Class A-4 Notes(3). $306,452,000 0.11% Actual/360 2/15/2001 9/17/2007
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(1) The Class A-1 Notes will not be offered to third party investors by
this prospectus supplement.
(2) Interest generally will accrue on the Class A-1, Class A-3 and Class
A-4 Notes from payment date to payment date, and on the Class A-2
Notes from the 15th day of each month to the 15th day of the
succeeding month.
(3) The interest rate on these classes of notes will be adjusted on a
monthly basis to one-month LIBOR plus the applicable spread. The trust
and Toyota Motor Credit Corporation will enter into an interest rate
swap agreement to convert some of the fixed rate interest yield on the
receivables owned by the trust to a floating rate consistent with the
interest accrual on the Class A-3 and Class A-4 Notes.
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The terms of the offering are as follows:
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INITIAL PUBLIC UNDERWRITING
OFFERING DISCOUNT AND PROCEEDS TO
PRICE(1) PLACEMENT FEE SELLER(2)
---------------- -------------- ---------------
Per Class A-2 Note........... 99.993255% 0.125% 99.868255%
Per Class A-3 Note........... 100.000000% 0.175% 99.825000%
Per Class A-4 Note........... 100.000000% 0.255% 99.745000%
Total........................ $1,186,422,322 $2,101,453 $1,184,320,869
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(1) Plus accrued interest, if any, from January 25, 2001.
(2) Before deducting expenses payable by Toyota Motor Credit Receivables
Corporation, as the seller, estimated to be $850,000. The notes will
be delivered in book-entry form only on or about January 25, 2001.
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JOINT GLOBAL COORDINATORS
DEUTSCHE BANC ALEX. BROWN MERRILL LYNCH & CO.
CO-MANAGERS
JP MORGAN
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
The date of this prospectus supplement is January 11, 2001
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the notes is provided in two separate documents that
progressively provide more detail:
o the accompanying prospectus, which provides general information, some
of which may not apply to a particular class of notes, including your
notes; and
o this prospectus supplement, which describes the specific terms of your
class of notes.
IF THE TERMS OF YOUR NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT.
Cross-references are included in this prospectus supplement and in the
prospectus which direct you to more detailed descriptions of a particular topic.
You can also find references to key topics in the table of contents on the back
cover of the prospectus.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "Index of Terms" beginning
on page S-47 in this prospectus supplement and under the caption "Index of
Terms" beginning on page 84 in the accompanying prospectus.
S-2
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SUMMARY OF TERMS
THE FOLLOWING INFORMATION HIGHLIGHTS SELECTED INFORMATION FROM THIS
DOCUMENT AND PROVIDES A GENERAL OVERVIEW OF THE TERMS OF THE NOTES. TO
UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THESE NOTES, YOU SHOULD READ
CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS. BOTH DOCUMENTS
CONTAIN INFORMATION YOU SHOULD CONSIDER WHEN MAKING YOUR INVESTMENT DECISION.
RELEVANT PARTIES
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ISSUER.......................................... Toyota Auto Receivables 2001-A Owner Trust, a Delaware business trust.
SELLER.......................................... Toyota Motor Credit Receivables Corporation.
SERVICER........................................ Toyota Motor Credit Corporation.
SWAP COUNTERPARTY............................... Toyota Motor Credit Corporation.
INDENTURE TRUSTEE............................... U.S. Bank National Association.
OWNER TRUSTEE................................... U.S. Bank Trust National Association.
RELEVANT AGREEMENTS
INDENTURE....................................... The indenture between the issuer and the indenture trustee. The indenture
provides for the terms relating to the notes.
TRUST AGREEMENT................................. The trust agreement between the seller, the owner trustee and the Delaware
trustee. The trust agreement governs the creation of the trust and provides
for the terms relating to the certificates.
SALE AND SERVICING AGREEMENT.................... The sale and servicing agreement between the servicer and the seller. The sale
and servicing agreement governs the transfer of the receivables by the seller to
the trust and the servicing of the receivables by the servicer.
ADMINISTRATION AGREEMENT........................ The administration agreement between Toyota Motor Credit Corporation as the
administrator, the owner trustee and the indenture trustee. The administration
agreement governs the provision of reports by the administrator and the
performance by the administrator of other administrative duties for the trust.
RECEIVABLES PURCHASE AGREEMENT.................. The receivables purchase agreement between Toyota Motor Credit Corporation and
the seller. The receivables purchase agreement governs the sale of the
receivables from Toyota Motor Credit Corporation to the seller.
SWAP AGREEMENT.................................. The swap agreement between the trust and Toyota Motor Credit Corporation, as
swap counterparty. Under the swap agreement, on each payment date the trust is
obligated to pay to the swap counterparty an amount equal to interest accrued on
notional amounts equal to the respective principal balances of the Class A-3
and Class A-4 Notes at notional fixed rates of 5.432% and 5.580%, respectively,
and the swap counterparty is obligated to pay to the trust interest accrued on
the Class A-3 and Class A-4 Notes at the respective floating rates specified on
the cover of this prospectus supplement. Payments (including payment of any
termination payment) due under the swap will be made on a net basis between the
trust and the swap counterparty.
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RELEVANT DATES
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CLOSING DATE.................................... Expected to be January 25, 2001.
CUTOFF DATE..................................... January 1, 2001.
PAYMENT DATES................................... The trust will pay interest and principal on the notes on the fifteenth day of
each month. If the fifteenth day of the month is not a business day, payments on
the notes will be made on the next business day. The date that any payment is
made is called a payment date. The first payment date is February 15, 2001.
A "business day" is any day except:
o a Saturday or Sunday; or
o a day on which banks in New York, Chicago or San Francisco are
closed.
Interest will accrue on the Class A-1, Class A-3 and Class A-4 Notes
from payment date to payment date, and on the Class A-2 Notes from the
fifteenth day of each calendar month to the fifteenth day of the next
calendar month, except that for all classes of notes the first interest
accrual period will begin on the closing date. The Seller's fractional
undivided interest (described below) will not bear interest.
FINAL SCHEDULED PAYMENT DATES................... The final principal payment for each class of notes is scheduled to be made on
the related final scheduled payment date specified on the front cover of this
prospectus supplement.
RECORD DATE..................................... So long as the notes are in book-entry form, the trust will make payments on the
notes to the holders of record on the day immediately preceding the related
payment date. If the notes are issued in definitive form, the record date will
be the last day of the month preceding the related payment date.
COLLECTION PERIOD................................. The calendar month preceding the related payment date.
DESCRIPTION OF THE NOTES.......................... The trust is offering the classes of notes listed below by way of this
prospectus supplement. All of the notes will be secured by the assets of the
trust pursuant to the indenture.
Class A-2 5.380% Asset Backed Notes in the aggregate initial principal
amount of $440,000,000 CUSIP No. 89232TAA7.
Class A-3 Floating Rate Asset Backed Notes in the aggregate initial
principal amount of $440,000,000 CUSIP No. 89232TAB5.
Class A-4 Floating Rate Asset Backed Notes in the aggregate initial
principal amount of $306,452,000 CUSIP No. 89232TAC3.
The trust will also issue Class A-1 5.613% Asset Backed Notes in the aggregate
initial principal amount of $317,048,000. The Class A-1 Notes are not offered
by this prospectus supplement. Instead, the Class A-1 Notes will be sold in a
separate transaction to Toyota Motor Credit Corporation. Any information
relating to the Class A-1 Notes contained in this prospectus supplement is
included only for informational purposes to facilitate a better understanding
of the Class A-2, Class A-3 and Class A-4 Notes.
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A description of how payments of interest on and principal of the Class
A Notes will be made on each payment date is provided under "Description
of the Notes" and "Payments to Noteholders" in this prospectus
supplement.
SUBORDINATED SELLER'S INTEREST.................... The trust will issue to Toyota Motor Credit Receivables Corporation, as the
Seller, in certificated form, a fractional undivided interest in the trust that
includes the right to payment of certain available amounts in excess of those
necessary to make payments on the notes on each payment date to the extent
specified in this prospectus supplement. This fractional undivided interest will
not bear interest and is not offered by this prospectus supplement.
MINIMUM DENOMINATIONS............................. The notes will be issued only in denominations of $1,000 or more.
REGISTRATION OF THE NOTES......................... You will generally hold your interests in the notes through The Depository Trust
Company in the United States, or Clearstream Banking societe anonyme or the
Euroclear System in Europe or Asia. This is referred to as book-entry form. You
will not receive a definitive note except under limited circumstances.
We expect the notes to be delivered through The Depository Trust
Company, Clearstream Banking societe anonyme and the Euroclear System
against payment in immediately available funds on or about January 25,
2001.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "ANNEX A: GLOBAL
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES" IN THIS
PROSPECTUS SUPPLEMENT AND "CERTAIN INFORMATION REGARDING THE
SECURITIES--BOOK-ENTRY REGISTRATION" IN THE ACCOMPANYING PROSPECTUS.
TAX STATUS........................................ Subject to important considerations described in this prospectus supplement and
the prospectus, O'Melveny & Myers LLP, special tax counsel to the trust, will
deliver its opinion that:
o the Class A-2, Class A-3 and Class A-4 Notes will be characterized as
debt; and
o the trust will not be characterized as an association or a publicly
traded partnership taxable as a corporation for federal income and
California income and franchise tax purposes.
If you purchase the notes, you will agree to treat the notes as debt.
YOU SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL
INFORMATION CONCERNING THE APPLICATION OF FEDERAL INCOME AND CALIFORNIA
TAX LAWS TO THE TRUST AND THE NOTES.
ERISA CONSIDERATIONS.............................. The notes are generally eligible for purchase by employee benefit plans, subject
to the considerations discussed under "ERISA Considerations" in this prospectus
supplement and in the accompanying prospectus, to which you should refer.
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IF YOU ARE A BENEFIT PLAN FIDUCIARY CONSIDERING PURCHASE OF THE NOTES,
YOU SHOULD, AMONG OTHER THINGS, CONSULT WITH YOUR COUNSEL IN DETERMINING
WHETHER ALL REQUIRED CONDITIONS HAVE BEEN SATISFIED.
RATINGS........................................... It is a condition to the issuance of the notes that the Class A-2, Class A-3 and
Class A-4 Notes be rated "AAA" by Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc., and "Aaa" by Moody's Investors Service, Inc.
The ratings of the Class A Notes take into account the provisions of the swap
agreement and the ratings currently assigned to the debt obligations of the
swap counterparty. A downgrade, suspension or withdrawal of any rating of the
debt of the swap counterparty may result in the downgrade, suspension or
withdrawal of the rating assigned to any Class A Notes. FOR MORE SPECIFIC
INFORMATION CONCERNING RISKS ASSOCIATED WITH THE SWAP AGREEMENT, SEE "RISK
FACTORS-- POTENTIAL TERMINATION OF THE SWAP AGREEMENT PRESENTS SWAP
COUNTERPARTY RISK, RISK OF PREPAYMENT OF THE NOTES AND RISK OF LOSS UPON
LIQUIDATION OF THE TRUST ASSETS" IN THIS PROSPECTUS SUPPLEMENT AND "RISK
FACTORS" IN THE ACCOMPANYING PROSPECTUS.
A SECURITY RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD NOTES. THE
RATINGS OF THE NOTES ADDRESS THE LIKELIHOOD OF THE PAYMENT OF PRINCIPAL AND
INTEREST ON THE NOTES IN ACCORDANCE WITH THEIR TERMS. A RATING AGENCY MAY
SUBSEQUENTLY LOWER OR WITHDRAW ITS RATING OF ANY CLASS OF THE NOTES. IF THIS
HAPPENS, NO PERSON OR ENTITY WILL BE OBLIGATED TO PROVIDE ANY ADDITIONAL
CREDIT ENHANCEMENT FOR THE NOTES.
THE TRUST WILL OBTAIN THE RATINGS MENTIONED ABOVE FROM MOODY'S INVESTORS
SERVICE, INC. AND STANDARD & POOR'S RATINGS SERVICES, A DIVISION OF THE
MCGRAW-HILL COMPANIES, INC. HOWEVER, ANOTHER RATING AGENCY MAY RATE THE NOTES
AND, IF SO, THE RATING MAY BE LOWER THAN THE RATINGS OBTAINED BY THE TRUST.
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STRUCTURAL SUMMARY
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OVERVIEW........................................ TOYOTA AUTO RECEIVABLES 2001-A OWNER TRUST
STRUCTURAL DIAGRAM
[GRAPHIC]
ASSETS OF THE TRUST............................. Purchasers of Toyota and Lexus cars and light duty trucks often finance their
purchases by entering into retail installment sales contracts with Toyota and
Lexus dealers who then resell the contracts to Toyota Motor Credit Corporation.
The purchasers of the vehicles are referred to as the "obligors" under the
contracts. Toyota Motor Credit Receivables Corporation will purchase a specified
amount of these contracts from Toyota Motor Credit Corporation and on the
closing date will sell them to the trust in exchange for the notes. These
contracts are referred to as the "receivables." The receivables will have a
total outstanding principal balance of approximately $1,550,000,068 as of the
cutoff date.
Toyota Motor Credit Receivables Corporation will sell the Class A-2, Class A-3
and Class A-4 Notes to investors for cash and will use this cash to pay part of
the purchase price for its purchase of the receivables from Toyota Motor Credit
Corporation. Toyota Motor Credit Receivables Corporation will pay the remainder
of the purchase price from the net proceeds from the sale of the Class A-1 Notes
to Toyota Motor Credit Corporation and by issuing to Toyota Motor Credit
Corporation a subordinated non-recourse promissory note. The structural diagram
above represents the flow of funds provided by investors for the notes and the
receivables sold by Toyota Motor Credit Corporation.
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On the closing date, the trust will purchase receivables having the following
characteristics as of the cutoff date:
Total Cutoff Date Principal Balance....... $ 1,550,000,068
Number of Receivables..................... 97,350
Average Cutoff Date Principal Balance..... $ 15,922
Range of Cutoff Date Principal Balance. $ 277-50,000
Average Original Amount Financed.......... $ 17,350
Range of Original Amount Financed...... $ 1,200-50,000
Weighted Average APR(1)................... 10.03%
Range of APRs.......................... 8%-15%
Weighted Average Original Number of
Scheduled Payments(1).................. 59.2
Range of Original Number of Scheduled
Payments............................. 12-72
Weighted Average Remaining Number of
Scheduled Payments(1).................. 54.2
Range of Remaining Number of Scheduled
Payments............................. 4-72
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(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;
o proceeds from claims undercertain insurance policies relating to the
financed vehicles or the obligors under the receivables and certain
rights of the seller under the receivables purchase agreement; and
o proceeds of the swap agreement and the rights of the trust under the
swap agreement.
FOR A MORE DETAILED DESCRIPTION OF THE ASSETS OF THE TRUST, SEE "THE
TRUST--GENERAL" IN THIS PROSPECTUS SUPPLEMENT.
SERVICING.......................................... Toyota Motor Credit Corporation will be appointed to act as servicer for the
receivables owned by the trust. The servicer will handle all collections,
administer defaults and delinquencies and otherwise service the contracts. On
each payment date, the trust will pay the servicer a monthly fee equal to
one-twelfth of 1.00% of the total principal balance of the receivables as of
the first day of the related collection period. The servicer will also receive
additional servicing compensation in the form of certain investment earnings,
late fees and other administrative fees and expenses or similar charges
received by the servicer during such month.
The servicer will be obligated to advance to the trust interest on any
receivable that is due but unpaid by the obligor. In addition, the servicer
will be obligated to advance to the trust principal that is due but unpaid
by the obligor on any
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precomputed receivable (but not on any simple interest receivable). However,
the servicer will not be required to make an advance if it determines that
the advance will not ultimately be recoverable. The trust will reimburse the
servicer from later collections on the related delinquent receivable. If the
servicer determines that the advance will not ultimately be recoverable from
proceeds of the related receivable, the servicer may be reimbursed from
collections on other receivables.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO "TRANSFER AND SERVICING
AGREEMENT--ADVANCES" IN THIS PROSPECTUS SUPPLEMENT AND TO "TRANSFER AND
SERVICING AGREEMENTS--SERVICING COMPENSATION AND PAYMENT OF EXPENSES" IN THE
ACCOMPANYING PROSPECTUS.
INTEREST AND PRINCIPAL PAYMENTS.................... In general, noteholders are entitled to receive payments of interest and
principal from the trust only to the extent that collections on the
receivables, any net swap payments by the swap counterparty to the trust,
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-1, Class A-3 and Class A-4 Notes will accrue interest on an
actual/360 basis from (and including) a payment date to (but excluding) the
next payment date, except that the first interest accrual period will be
from (and including) the closing date to (but excluding) February 15, 2001.
This means that the interest due on each payment date will be the product
of: (i) the outstanding principal balance, (ii) the interest rate, and (iii)
the actual number of days since the previous payment date (or, in the case
of the first payment date, since the closing date) divided by 360. The Class
A-3 and Class A-4 Notes will continue to accrue interest at their respective
floating rates even if the swap is terminated.
The Class A-2 Notes will accrue interest on a 30/360 basis from (and
including) the 15th day of each calendar month to (but excluding) the 15th
day of the succeeding calendar month except that the first interest accrual
period will be from (and including) the closing date to (but excluding)
February 15, 2001. 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, 20)
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
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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. If the full amount of interest due is not paid
within five days of a payment date, an event of default also will occur that
may result in acceleration of the notes.
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 and any net swap payment from the swap
counterparty to the trust (including any swap termination payment) will be
included in collections, and reimbursements of servicer advances and any net
swap payment to the swap counterparty by the trust (including any swap
termination payment) 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, Class A-3 and Class
A-4 Notes, together with any amounts that were to be paid
pursuant to this clause (2) on any prior payment date but
were not paid because sufficient funds were not available
to make the payment (with interest accrued on any unpaid
amounts as described under "Payments to Noteholders" in
this prospectus supplement);
3. ALLOCATION OF PRINCIPAL--to the principal distribution account, an
amount equal to the excess, if any, of (x) the principal balance of
the receivables as of the end of the collection period preceding the
related collection period (or, in the case of the first collection
period, as of the cutoff date) over (y) the principal balance of the
receivables as of the end of the related collection period, together
with any amounts that were to be paid pursuant to this clause (3) on
any prior payment date but were not paid because sufficient funds
were not available to make the payment;
4. RESERVE ACCOUNT DEPOSIT--to the reserve account, the amount, if any,
necessary to cause the balance of funds in the account to equal the
required balance described under "Reserve Account" below; and
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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 Class A-4 Notes until they are paid in full.
After the Class A Notes are paid in full, any remaining funds will be paid
to Toyota Motor Credit Receivables Corporation as payment on its fractional
undivided interest in the trust.
However, if an event of default under the indenture (including any
termination of the swap agreement) results in acceleration of the notes or
involves an uncured payment default, the "Payment Priorities" described
above will change from pro rata payments of interest followed by sequential
payments of principal, to pro rata payments of interest followed by pro rata
payments of principal to all four classes of Class A Notes. Under those
circumstances, the amounts available to make payments to any class of Class
A Notes may be reduced based on (i) the sufficiency of proceeds from the
liquidation of the assets of the trust and (ii) any obligation of the trust
to make a swap termination payment to the swap counterparty, which
obligation will be senior in priority to all distributions to holders of the
Class A Notes.
FOR INFORMATION CONCERNING SUCH CHANGES IN PRIORITIES OF PAYMENTS AND
AMOUNTS AVAILABLE, SEE "PAYMENTS TO NOTEHOLDERS"AND "SWAP AGREEMENT" IN THIS
PROSPECTUS SUPPLEMENT.
D. SUBORDINATION
As long as any Class A Notes remain outstanding, all payments on each
payment date in respect of Toyota Motor Credit Receivables Corporation's
undivided beneficial interest in the trust will be subordinated to payments
of interest and principal on the Class A Notes.
E. RESERVE ACCOUNT
On the closing date, the seller will deposit approximately $3,875,000 (0.25%
of the outstanding principal balance of the receivables as of the cutoff
date) into the reserve account for the trust.
On each payment date, if collections on the receivables, any net swap
payments and advances by the servicer are insufficient to pay the first
three items listed under "Interest
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and Principal Payments--Payment Priorities" above, the indenture trustee
will withdraw funds (if available) from the reserve account to pay those
amounts.
If the principal balance of a class of notes is not paid in full on the
related final scheduled payment date, the indenture trustee will withdraw
amounts from the reserve account (if available) to pay that class in full.
The amount required to be on deposit in the reserve account at the close of
business on any payment date will be the greater of (a) 0.75% of the
outstanding principal balance of the receivables as of the end of the
related collection period or (b) approximately $7,750,000 (0.50% of the
outstanding principal balance of the receivables as of the cutoff date),
except that if charge-offs or delinquencies exceed specified levels, the
required amount will be the greatest of (i) 0.75% of the outstanding
principal balance of the receivables as of the end of the related collection
period, (ii) approximately $7,750,000 (0.50% of the outstanding principal
balance of the receivables as of the cutoff date), and (iii) 5.50% of the
outstanding principal balance of the notes as of that payment date (after
giving effect to payments of principal made on that date). On each payment
date, the trust will deposit, to the extent available, the amount, if any,
necessary to cause the balance of funds on deposit in the reserve account to
equal the required balance set forth above.
F. FINAL SCHEDULED PAYMENT DATES
The trust is required to pay the outstanding principal amount of each class
of notes in full on or before the related final scheduled payment date
specified on the cover of this prospectus supplement.
G. OPTIONAL REDEMPTION; CLEAN-UP CALL
The servicer may redeem the Class A Notes in whole, but not in part, at a
price at least equal to the unpaid principal amount of those notes plus any
accrued and unpaid interest on the notes, plus any amount payable by the
trust to the Swap Counterparty under the swap agreement, on any payment date
when the outstanding principal balance of the receivables has declined to
10% or less of the principal balance of the receivables as of the cutoff
date.
FOR MORE DETAILED INFORMATION REGARDING THIS OPTION, YOU SHOULD REFER TO
"TRANSFER AND SERVICING AGREEMENTS--OPTIONAL PURCHASE" IN THIS PROSPECTUS
SUPPLEMENT.
SWAP AGREEMENT................................. The trust will enter into a swap agreement with Toyota Motor Credit
Corporation, as swap counterparty. Under the swap agreement, on each payment
date the trust will be obligated to pay to the swap counterparty an amount
equal to interest accrued on notional amounts equal to the respective
principal balances of the Class A-3 and Class A-4 Notes at notional fixed
rates of 5.432% and 5.580%, respectively, and the swap counterparty will be
obligated to pay to the trust interest accrued on the Class A-3 and Class A-4
Notes at their
</TABLE>
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<TABLE>
<S><C>
respective floating rates. Payments (including any swap termination payment)
of amounts due under the swap will be made on a net basis between the trust
and the swap counterparty.
Certain events that are not entirely within the control of the trust or the
swap counterparty may, and any event of default under the indenture that
results in the acceleration of the notes will, cause the termination of the
swap agreement. Upon a termination of the swap agreement, if the Notes are
accelerated, the principal of the Class A Notes will be immediately due and
payable and the indenture trustee will be obligated to liquidate the assets
of the trust. Certain events that would cause termination of the swap
agreement would also cause the trust to be obligated to make a swap
termination payment to the swap counterparty (the amount of which the trust
cannot estimate at the date of this prospectus supplement, but which may be
significant). Any swap termination payment owed to the swap counterparty
would reduce the amounts available to be paid to all noteholders following
any termination and liquidation. In this event, holders of the Class A Notes
may suffer a loss.
Toyota Motor Credit Corporation's long term debt ratings are Aa1 and AAA by
Moody's Investors Service, Inc. ("Moody's") and Standard and Poor's Ratings
Service, a division of the McGraw-Hill Companies, Inc. ("S&P"),
respectively, and its short term debt ratings are P-1 and A-1+ by Moody's
and S&P, respectively. In the event the long term debt ratings of the swap
counterparty are reduced below Aa3 by Moody's or AA- by S&P, or the
short-term ratings are reduced below P-1 by Moody's or A-1+ by S&P (or, in
either case, such lower ratings as may be permitted by Moody's and S&P
without causing a downgrade in the ratings applicable to the notes), the
swap counterparty may assign the swap agreement to another party, obtain a
replacement swap agreement on substantially the same terms as the swap
agreement or collateralize its obligations under the swap agreement.
However, the swap counterparty shall have no obligation to assign the swap
agreement, obtain a replacement swap agreement or collateralize its
obligations under the swap agreement in the event of a ratings downgrade,
and neither the trust nor noteholders will have any remedy against the swap
counterparty with respect to these events.
</TABLE>
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS (AND THOSE SET FORTH UNDER
"RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS) IN DECIDING WHETHER TO PURCHASE
ANY CLASS A NOTES.
PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING
IN REINVESTMENT RISK TO YOU.
You may receive payment of principal on your notes earlier than you
expected. If that happens, you may not be able to reinvest the principal you
receive at a rate as high as the rate on your notes. Prepayments on the
receivables will shorten the life of the notes to an extent that cannot be
predicted. Prepayments may occur for a number of reasons. Some prepayments may
be caused by the obligors under the receivables. For example, obligors may:
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 servicer will have the option to purchase the
receivables from the trust when the total outstanding principal balance of the
receivables is 10% or less of the total outstanding principal balance of the
receivables as of the cutoff date. In addition, an event of default under the
indenture (including any termination of the swap agreement) could cause your
notes to be prepaid. See "BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS ONLY
LIMITED PROTECTION AGAINST POTENTIAL LOSSES" below.
The rate of prepayments on the receivables may be influenced by a variety
of economic, social and other factors. The seller has limited historical
experience with respect to prepayments and cannot predict the actual prepayment
rates for the receivables. The seller, however, believes that the actual rate of
payments, including prepayments, will result in the weighted average life of
each class of notes being shorter than the period from the closing date to the
related final scheduled maturity date.
POTENTIAL TERMINATION OF THE SWAP AGREEMENT PRESENTS SWAP COUNTERPARTY
RISK, RISK OF PREPAYMENT OF THE NOTES AND RISK OF LOSS UPON LIQUIDATION OF THE
TRUST ASSETS.
GENERAL. The trust is obligated to make payments of interest accrued on
the Class A-3 and Class A-4 Notes at floating interest rates, but the
receivables that are assets of the trust bear interest at fixed rates. The trust
has entered into the swap agreement with Toyota Motor Credit Corporation as the
swap counterparty to enable the trust to issue notes bearing interest at
floating rates. On each payment date, the trust will owe the swap counterparty
the amount of interest deemed to accrue on a notational amount equal to the
outstanding principal balance of the Class A-3 Notes at 5.432% per annum, and on
a notational amount equal to the outstanding principal balance of the Class A-4
Notes at 5.580% per annum, and the swap counterparty will owe the trust the
amount of interest that accrued on the Class A-3 and Class A-4 Notes at their
respective floating rates of interest. Payments (including any swap termination
payment) under the swap will be made on a net basis between the trust and the
swap counterparty. For a description of the key provisions of the swap
agreement, see "SWAP AGREEMENT" in this Prospectus Supplement.
SWAP COUNTERPARTY RISK; PERFORMANCE AND RATINGS RISKS. The amounts
available to the trust to pay interest and principal of all classes of Class A
Notes depend in part on the operation of the swap agreement and the performance
by the swap counterparty of its obligations under the swap agreement. The
ratings of all of the Class A Notes (including the Class A-2 Notes) take into
account the provisions of the swap agreement and the ratings currently assigned
to Toyota Motor Credit Corporation's debt obligations, because Toyota Motor
Credit Corporation is the swap counterparty.
During those periods in which the floating LIBOR-based rate payable on
the Class A-3 and Class A-4 Notes is substantially greater than the amount
payable by the trust to the swap counterparty, the trust will be more
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dependent on receiving payments from the swap counterparty in order to make
payments on the notes. If the swap counterparty fails to pay the net amount due,
the amount of credit enhancement available in the current or any future period
may be reduced and you may experience delays and/or reductions in the interest
and principal payments on your notes. On the other hand, during those periods in
which the amounts payable by the swap counterparty are less than the amounts
payable by the trust under the swap agreement, the trust will be obligated to
make payments to the swap counterparty. The swap counterparty will have a claim
on the assets of the trust for the net swap payment due to the swap counterparty
from the trust. The swap counterparty's claim will be higher in priority than
payments on the notes. On any payment date, if there are not enough funds
available from collections or advances to pay all of the trust's obligations for
that payment date, the swap counterparty will receive full payment of the net
amount due to it under the swap agreement before you receive payments on your
Notes. If there is a shortage of funds available on any payment date, you may
experience delays and/or reductions in interest and principal payments on your
notes.
As of the date of this prospectus supplement, Toyota Motor Credit
Corporation's long term debt ratings are Aa1 and AAA by Moody's Investors
Service, Inc. and Standard and Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc., respectively, and its short term debt ratings are
P-1 and A-1+ by Moody's Investors Service, Inc. and Standard and Poor's Ratings
Service, a division of the McGraw-Hill Companies, Inc., respectively. 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 such rating agency to any class (or all
classes) of notes. A downgrade, suspension or withdrawal of the rating assigned
by a rating agency to a class of notes would likely have adverse consequences on
the liquidity or market value of those notes.
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 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.
If the long-term debt rating of Toyota Motor Credit Corporation, as swap
counterparty, is reduced to a level below Aa3 by Moody's Investors Service, Inc.
or AA- by Standard & Poor's Ratings Service, a division of the McGraw-Hill
Companies, Inc., or the short-term debt rating of Toyota Motor Credit
Corporation, as swap counterparty, is reduced to a level below P-1 by Moody's
Ratings Service, a division of the McGraw-Hill Companies, Inc. or A-1+ by
Standard & Poor's Ratings Service, a division of the McGraw-Hill Companies, Inc.
(or, in either case, such lower ratings as may be permitted by Moody's and S&P
without causing a downgrade in the ratings applicable to the Notes), Toyota
Motor Credit Corporation, as swap counterparty, may, but will not be required
to, assign the swap agreement to another party, obtain a replacement swap
agreement on substantially the same terms as the swap agreement, collateralize
its obligations under the swap agreement or establish any other arrangement
satisfactory to the applicable rating agency. Neither the Trust nor any
noteholder will have any remedy against Toyota Motor Credit Corporation if it
elects not to do so or otherwise fails to do so. In such event, it is likely
that the ratings on your notes will be downgraded.
Investors should make their own determinations as to the likelihood of
performance by the swap counterparty of its obligations under the swap
agreement.
EARLY TERMINATION MAY AFFECT WEIGHTED AVERAGE LIFE AND YIELD. Certain
events (including some that are not within the control of the trust or the swap
counterparty) may cause the termination of the swap agreement. Certain of these
events will not cause a termination of the swap agreement unless a majority of
holders of Class A-2, Class A-3 and Class A-4 Notes vote to instruct the
indenture trustee (as assignee of the rights of the owner trustee) to terminate
the swap agreement. The holders of any class of notes may not have sufficient
voting interests to cause or to prevent a termination of the swap agreement. If
the swap agreement is terminated (or certain other events of default under the
indenture occur) and the notes are accelerated, the indenture trustee will
liquidate the assets of the trust. Liquidation would likely 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
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trust to be completed. In addition, liquidation proceeds may not be sufficient
to repay the notes in full, particularly after any termination payment owing to
the swap counterparty is made prior to any payments on the notes. 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.
RISK OF LOSS UPON TERMINATION. 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. In addition, if the swap
agreement is terminated, the trust may be obligated to make a swap termination
payment to the swap counterparty in an amount that the trust cannot now
estimate. Any swap termination payment paid by the trust will reduce the amounts
available to be paid to noteholders. Also, termination of the swap agreement
will be an event of default under the indenture and 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 four classes of Class A Notes.
Therefore, all outstanding Class A Notes will be adversely affected by any
shortfall in liquidation proceeds and any payment by the trust of a swap
termination payment.
STRUCTURED SECURITIES ARE SOPHISTICATED INSTRUMENTS, CAN INVOLVE A HIGH
DEGREE OF RISK AND ARE INTENDED FOR SALE ONLY TO INVESTORS CAPABLE OF
UNDERSTANDING THE RISKS ENTAILED IN SUCH INSTRUMENTS. POTENTIAL INVESTORS IN ANY
CLASS A NOTES ARE STRONGLY ENCOURAGED TO CONSULT WITH THEIR FINANCIAL ADVISORS
BEFORE MAKING ANY INVESTMENT DECISION.
PAYMENT PRIORITIES INCREASE RISK OF LOSS OR DELAY IN PAYMENT TO CERTAIN
NOTES.
Based on the priorities described under "Payments to Noteholders",
classes of notes that receive payments, particularly principal payments, before
other classes will be repaid more rapidly than the other classes. In addition,
because principal of each class of notes will be paid sequentially, classes of
notes that have higher sequential numerical class designations will be
outstanding longer and therefore will be exposed to the risk of losses on the
receivables during periods after other classes have been receiving most or all
amounts payable on their notes, and after which a disproportionate amount of
credit enhancement may have been applied and not replenished.
As a result, the yields of the Class A-3 and A-4 Notes will be relatively
more sensitive to losses on the receivables and the timing of such losses than
the Class A-2 Notes. If the actual rate and amount of losses exceed your
expectations, and if amounts in the reserve account are insufficient to cover
the resulting shortfalls, the yield to maturity on your notes may be lower than
anticipated, and you could suffer a loss.
Classes of notes that receive payments earlier than expected are exposed
to greater reinvestment risk, and classes of notes that receive principal later
than expected are exposed to greater risk of loss. In either case, the yields on
your notes could be materially and adversely affected.
BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS ONLY LIMITED PROTECTION
AGAINST POTENTIAL LOSSES.
The only sources of funds for payments on the notes are collections on
the receivables (which include proceeds of the liquidation of repossessed
vehicles and of relevant insurance policies), advances by the servicer, net swap
payments by the swap counterparty to the trust and the reserve account. The
notes are not obligations of, and will not be insured or guaranteed by, any
governmental agency or the seller, the servicer, Toyota Financial Services
Americas Corporation, Toyota Financial Services Corporation, 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, net swap payments by the
swap counterparty to the trust and amounts available in the reserve account for
payments on the notes. Although funds in the reserve account will be available
to cover shortfalls in payments of interest and principal on each payment date,
the amounts deposited in the reserve account will be limited. If the entire
reserve account has been used, the trust will depend solely on current
collections on the receivables, net swap payments by the swap counterparty to
the trust and advances by the servicer to make payments on the notes. Any excess
amounts released from the reserve account to the seller will no longer be
available to noteholders on any later payment date. See "Subordination; Reserve
Account" in this prospectus supplement. If the assets of the trust are not
sufficient to pay interest and principal on the notes you hold, you will suffer
a loss.
Certain events (including some that are not within the control of the
trust or Toyota Motor Credit Corporation) may result in events of default under
the indenture (including termination of the swap agreement) and
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cause acceleration of all outstanding Class A Notes. Upon the occurrence of an
event of default under the indenture, including any termination of the swap
agreement, 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 or involves an uncured payment default 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. See
"PREPAYMENTS OR RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN
PREPAYMENT RISK TO YOU" and "POTENTIAL TERMINATION OF THE SWAP AGREEMENT
PRESENTS SUCH COUNTERPARTY RISK, RISK OF PREPAYMENT OF THE NOTES AND RISK OF
LOSS UPON LIQUIDATION OF THE TRUST assets" above.
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-23 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, 20.01%, 7.70%, 6.60%, 5.81% and 5.14% of the
receivables were located in California, Illinois, New York, New Jersey and
Virginia respectively. By cutoff date principal balance, based on the address of
the related dealer, not more than 5% of the receivables were located in any
other state.
CERTAIN NOTEHOLDERS MAY HAVE LITTLE OR NO CONTROL WITH RESPECT TO
IMPORTANT ACTIONS.
The trust will pledge the property of the trust (including the rights of
the trust under the swap agreement) 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. Holders of a majority of outstanding
principal balances of the Class A-2, Class A-3 and Class A-4 Notes will have the
right to direct the indenture trustee to terminate the swap agreement in
connection with certain events of default under the swap agreement, which
direction would result in the acceleration of all outstanding Class A Notes. See
"Swap Agreement" in this prospectus supplement.
PAID-AHEAD SIMPLE INTEREST CONTRACTS MAY AFFECT THE WEIGHTED AVERAGE LIFE
OF THE NOTES.
If an obligor on a simple interest contract makes a payment on the
contract ahead of schedule (for example, because the obligor intends to go on
vacation), the weighted average life of the notes could be affected. This is
because the additional scheduled payments will be treated as a principal
prepayment and applied to reduce the principal balance of the related contract
and the obligor will generally not be required to make any scheduled payments
during the period for which it was paid-ahead. During this paid-ahead period,
interest will continue to accrue on the principal balance of the contract, as
reduced by the application of the additional scheduled payments,
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but the obligor's contract would not be considered delinquent during this
period. While the servicer may be required to make interest advances during this
period, no principal advances will be made. Furthermore, when the obligor
resumes his required payments, the payments so paid may be insufficient to cover
the interest that has accrued since the last payment by the obligor. This
situation will continue until the regularly scheduled payments are once again
sufficient to cover all accrued interest and to reduce the principal balance of
the contract.
The payment by the trust of the paid-ahead principal amount on the notes
will generally shorten the weighted average life of the notes. However,
depending on the length of time during which a paid-ahead simple interest
contract is not amortizing as described above, the weighted average life of the
notes may be extended. In addition, to the extent the servicer makes advances on
a paid-ahead simple interest contract which subsequently goes into default, the
loss on this contract may be larger than would have been the case had advances
not been made because liquidation proceeds for the contract will be applied
first to reimburse the servicer its advances.
TMCC's portfolio of retail installment sale contracts has historically
included simple interest contracts which have been paid-ahead by one or more
scheduled monthly payments. There can be no assurance as to the number of
contracts in the trust which may become paid-ahead simple interest contracts as
described above or the number or the principal amount of the scheduled payments
which may be paid-ahead.
THE ABSENCE OF A SECONDARY MARKET FOR THE NOTES COULD LIMIT YOUR ABILITY
TO RESELL THE NOTES.
The notes are not expected to be listed on any securities exchange. There
have been times in the past when the absence of a liquid secondary market for
similar asset backed securities has caused the holders of the securities to be
unable to sell their securities at all or other than at a significant loss. The
absence of a liquid secondary market for the notes could similarly limit your
ability to resell them. This means that if you want to sell your notes in the
future, you may have difficulty finding a buyer at all and, if you find a buyer,
the selling price may be less than it would have been if a liquid secondary
market existed for the notes. There is currently no secondary market for the
notes. Although the underwriters have stated that they intend to make a market
in each class of notes, they are not obligated to do so. A secondary market may
not ever develop for the notes. Even if such a market does develop, it may not
provide sufficient liquidity or continue for the life of your notes.
BECAUSE THE NOTES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE
EXERCISED INDIRECTLY
Because the notes will be issued in book-entry form, you will be required
to hold your interest in the notes through The Depository Trust Company in the
United States, or Clearstream Banking societe anonyme or the Euroclear system in
Europe or Asia or their successors or assigns. Transfers of interests in the
notes within The Depository Trust Company, Clearstream Banking societe anonyme
or the Euroclear system must be made in accordance with the usual rules and
operating procedures of those systems. So long as the notes are in book-entry
form, you will not be entitled to receive a definitive note or certificate
representing your interest. The notes will remain in book-entry form except in
the limited circumstances described under the caption "Certain Information
Regarding the Securities-Book-Entry Registration" in the accompanying
prospectus. Unless and until the notes cease to be held in book-entry form, the
indenture trustee will not recognize you as a Noteholder and the owner trustee
will not recognize you as a "Securityholder", as that term is used in the trust
agreement. As a result, you will only be able to exercise the rights of
noteholders indirectly through The Depository Trust Company (if in the United
States) and its participating organizations, or Clearstream Banking societe
anonyme and the Euroclear system (in Europe or Asia) and their participating
organizations. Holding the notes in book-entry form could also limit your
ability to pledge your notes to persons or entities that do not participate in
The Depository Trust Company, Clearstream Banking societe anonyme or the
Euroclear system and to take other actions that require a physical certificate
representing the notes.
Interest and principal on the notes will be paid by the trust to The
Depository Trust Company as the record holder of the notes while they are held
in book-entry form. The Depository Trust Company will credit payments received
from the trust to the accounts of its participants which, in turn, will credit
those amounts to noteholders either directly or indirectly through indirect
participants. This process may delay your receipt of principal and interest
payments from the trust.
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THE TRUST
GENERAL
The Toyota Auto Receivables 2001-A Owner Trust (the "Trust") is a
Delaware business trust formed pursuant to the trust agreement (the "Trust
Agreement") between Toyota Motor Credit Receivables Corporation, as seller
("TMCRC", or the "Seller"), the Owner Trustee and U.S. Bank Trust National
Association, as Delaware trustee (the "Delaware Trustee"). After its formation,
the Trust will not engage in any activity other than (i) acquiring, holding and
managing the receivables described below under "The Receivables Pool" (the
"Receivables") and the other assets of the Trust and proceeds therefrom, (ii)
issuing the Class A-1 Notes (the "Class A-1 Notes"), Class A-2 Notes (the "Class
A-2 Notes"), Class A-3 Notes (the "Class A-3 Notes"), Class A-4 Notes (the
"Class A-4 Notes" and, together with the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes and Class A-4 Notes, the "Class A Notes" or the "Notes") and the
subordinated seller's interest (the "Subordinated Seller's Interest" and,
together with the Notes, the "Securities"), (iii) entering into the Swap
Agreement, (iv) making payments on the Notes and the Subordinated Seller's
Interest or to the Swap Counterparty and (v) engaging in other activities that
are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will initially be capitalized with the Notes and the
Subordinated Seller's Interest. The Trust will use the Notes and the
Subordinated Seller's Interest as consideration for the Receivables transferred
to the Trust by the Seller pursuant to the Sale and Servicing Agreement
described in the "Summary of Terms" (the "Sale and Servicing Agreement"). The
Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes are being offered
hereby. TMCRC will sell the Class A-1 Notes to Toyota Motor Credit Corporation
("TMCC") in a separate transaction. TMCRC will deliver the net proceeds from the
sale of the Notes and a subordinated non-recourse promissory note, to TMCC as
consideration for the Receivables transferred to TMCRC by TMCC pursuant to the
Receivables Purchase Agreement described in the "Summary of Terms" (the
"Receivables Purchase Agreement"). The Subordinated Seller's Interest,
evidencing an undivided beneficial interest in the Trust that is fully
subordinate to the interest of the holders of the Notes (i.e., an equity
interest in the Trust), will be retained by TMCRC.
TMCC will be appointed to act as the servicer of the Receivables (the
"Servicer"). TMCC, as Servicer, will service the Receivables pursuant to the
Sale and Servicing Agreement and the Trust Agreement and TMCC will perform
additional administrative services for the Trust, the Owner Trustee and the
Indenture Trustee pursuant to the Administration Agreement. TMCC (or any
successor servicer or successor administrator) will be compensated for such
services as described under "Transfer and Servicing Agreements--Servicing
Compensation" in this Prospectus Supplement and "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" in the
Prospectus. TMCC will also be the initial Swap Counterparty pursuant to the Swap
Agreement as described in this Prospectus Supplement under "Description of the
Swap Agreement".
Pursuant to agreements between TMCC and the Dealers, each Dealer will
repurchase from TMCC those contracts that do not meet certain representations
and warranties made by the Dealer when sold by the Dealer. These Dealer
repurchase obligations are referred to herein as "Dealer Recourse". These
representations and warranties relate primarily to the origination of the
contracts and the perfection of the security interests in the related financed
vehicles, and do not typically relate to the creditworthiness of the related
obligors or the collectibility of the contracts. Although the Dealer agreements
with respect to the Receivables will not be assigned to the Trust, the Sale and
Servicing Agreement will require that any recovery by TMCC in respect of any
Receivable pursuant to any Dealer Recourse be deposited in the Collection
Account in satisfaction of TMCC's repurchase obligations under the Sale and
Servicing Agreement. The sales by the Dealers of installment sales contracts to
TMCC do not generally provide for recourse against the Dealers for unpaid
amounts in the event of a default by an obligor thereunder, other than in
connection with the breach of the foregoing representations and warranties.
The Notes will be secured by and payable from the property of the Trust.
The Trust property includes the Receivables, and certain monies due or received
thereunder on or after the Cutoff Date. The Trust property also includes (i)
such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Sale and Servicing
Agreement, as described below; (ii) security interests in the Financed Vehicles
and any accessions thereto; (iii) the rights to proceeds with respect to the
Receivables under physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be; (iv) the
right to receive proceeds from any Dealer Recourse; (v) the rights of the Seller
under the Receivables Purchase Agreement; (vi) the right to realize upon any
property (including the right to receive future proceeds of liquidation of
Defaulted Receivables) that shall have secured a Receivable and that shall have
been acquired by the
S-19
<PAGE>
Owner Trustee; and (vii) the rights of the Trust and powers of the Owner Trustee
under the Swap Agreement, and the amounts payable to the Trust thereunder, and
(viii) any and all proceeds of the foregoing.
The Trust's principal offices are in Chicago, Illinois, in care of U.S.
Bank Trust National Association, as Owner Trustee, at the address set forth
below under "--The Owner Trustee"
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes and the Subordinated
Seller's Interest had taken place on such date:
Class A-1 Notes.................................... $ 317,048,000.00
Class A-2 Notes.................................... $ 440,000,000.00
Class A-3 Notes.................................... $ 440,000,000.00
Class A-4 Notes.................................... $ 306,452,000.00
Subordinated Seller's Interest..................... $ 46,500,067.58
--------------------
Total........................................... $ 1,550,000,067.58
====================
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
U.S. Bank Trust National Association is the Owner Trustee (the "Owner
Trustee") under the Trust Agreement. Its principal executive office is located
at 111 East Wacker Drive, Chicago, Illinois 60601. U.S. Bank National
Association is the Indenture Trustee (the "Indenture Trustee") under the
Indenture. Its principal executive office is located at 111 East Wacker Drive,
Chicago, Illinois 60601. The Seller and its affiliates may maintain normal
commercial banking relations with the Owner Trustee, the Indenture Trustee and
their affiliates.
THE SELLER AND THE SERVICER
On July 7, 2000, Toyota Financial Services Corporation was incorporated
to oversee Toyota Motor Corporation's worldwide financial services operations,
including those in the United States. On October 1, 2000, Toyota Financial
Services Corporation assumed ownership of TMCC, which previously had been a
subsidiary of Toyota Motor Sales, U.S.A., Inc. All of the outstanding stock of
Toyota Motor Credit Corporation is now owned by Toyota Financial Services
Americas Corporation, a wholly-owned subsidiary of Toyota Financial Services
Corporation.
Additional information regarding the Seller and the Servicer is set forth
under the captions "The Seller" and "The Servicer" in the Prospectus.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include the
Receivables purchased as of January 1, 2001 (the "Cutoff Date"). The Receivables
were originated by Dealers in accordance with TMCC's requirements and
subsequently purchased by TMCC. The Receivables evidence the indirect financing
made available by TMCC to the related purchasers (the "Obligors") of the
vehicles financed by the Receivables (the "Financed Vehicles"). On or before the
date of initial issuance of the Notes (the "Closing Date"), TMCC will sell the
Receivables to the Seller pursuant to the receivables purchase agreement (the
"Receivables Purchase Agreement") between the Seller and TMCC. The Seller will,
in turn, sell the Receivables to the Trust pursuant to the Sale and Servicing
Agreement. During the term of the Sale and Servicing Agreement, neither the
Seller nor TMCC may substitute any other retail installment sales contract for
any Receivable sold to the Trust.
S-20
<PAGE>
The Receivables in the Receivables Pool are required to meet certain
selection criteria as of the Cutoff Date. Pursuant to such criteria, each
Receivable:
<TABLE>
<S><C>
o falls within the range of:
remaining principal balance.........................................................$250 to $50,000
APRs......................................................................................8% to 15%
original number of monthly payments ("Scheduled Payments") ................................12 to 72
remaining number of Scheduled Payments......................................................4 to 72
o has a maximum number of:
days past due for payment...................................................................30 days
Scheduled Payments paid ahead of schedule....................................6 Scheduled Payments
</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 Maryland 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 47 states. Except in the case of any breach of
representations and warranties by the related Dealer, the Receivables generally
do not provide for recourse against the originating Dealer. The following are
additional characteristics of the Receivables:
<TABLE>
<S><C>
o as a percentage of the aggregate principal balance, as of the Cutoff Date:
Precomputed Receivables................................................................4.50%
Simple interest Receivables...........................................................95.50%
New vehicles financed by TMCC.........................................................60.00%
Used vehicles financed by TMCC........................................................40.00%
Receivables representing financing of vehicles manufactured or distributed
by Toyota Motor Corporation or its affiliates........................................91.93%
o as a percentage of the number of Receivables, as of the Cutoff Date:
New vehicles financed by TMCC.........................................................53.42%
Used vehicles financed by TMCC........................................................46.58%
</TABLE>
S-21
<PAGE>
The composition, distribution by annual percentage rate and geographic
distribution of the Receivables as of the Cutoff Date are as set forth in the
following tables.
COMPOSITION OF THE RECEIVABLES
Total Cutoff Date Principal Balance......................... $ 1,550,000,068
Number of Receivables....................................... 97,350
Average Cutoff Date Principal Balance....................... $ 15,922
Range of Cutoff Date Principal Balances.................. $ 277-50,000
Average Original Amount Financed............................ $ 17,350
Range of Original Amount Financed........................ $ 1,200-50,000
Weighted Average APR (1).................................... 10.03%
Range of APRs............................................ 8% to 15%
Weighted Average Original Number of Scheduled Payments (1).. 59.2
Range of Original Number of Scheduled Payments........... 12 - 72
Weighted Average Remaining Number of Scheduled Payments (1). 54.2
Range of Remaining Number of Scheduled Payments.......... 4 - 72
--------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF CUTOFF
NUMBER OF TOTAL NUMBER CUTOFF DATE DATE POOL
RANGE OF APRS RECEIVABLES OF RECEIVABLES PRINCIPAL BALANCE BALANCE
--------------- ------------ -------------- ------------------- -------------
<S> <C> <C> <C> <C>
8.00% - 8.99%.................................. 42,479 43.64% $ 667,524,067.46 43.07%
9.00% - 9.99%.................................. 18,047 18.54 302,527,966.66 19.52
10.00% - 10.99%................................ 10,425 10.71 170,051,897.47 10.97
11.00% - 11.99%................................ 8,675 8.91 136,898,416.30 8.83
12.00% - 12.99%................................ 6,797 6.98 104,970,719.21 6.77
13.00% - 13.99%................................ 5,240 5.38 82,112,797.45 5.30
14.00% - 14.99%................................ 4,848 4.98 74,303,260.10 4.79
15.00%......................................... 839 0.86 11,610,942.93 0.75
------------ -------------- ------------------- -------------
Total (1)............................... 97,350 100.00% $ 1,550,000,067.58 100.00%
============ ============== =================== =============
--------------
(1) Percentages may not add to 100% due to rounding.
</TABLE>
S-22
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES BY STATE(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF TOTAL CUTOFF DATE
NUMBER OF NUMBER OF CUTOFF DATE PRINCIPAL
STATE RECEIVABLES RECEIVABLES PRINCIPAL BALANCE BALANCE
------- ------------ ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
Alabama............................. 190 0.20% $ 4,416,952.39 0.28
Alaska.............................. 56 0.06 969,498.27 0.06
Arizona............................. 2,245 2.31 36,618,733.16 2.36
Arkansas............................ 2,263 2.32 33,966,979.16 2.19
California.......................... 18,937 19.45 310,185,840.93 20.01
Colorado............................ 1,567 1.61 25,896,861.62 1.67
Connecticut......................... 2,414 2.48 36,192,372.14 2.33
Delaware............................ 369 0.38 6,169,474.90 0.40
Florida............................. 1,224 1.26 26,177,320.71 1.69
Georgia............................. 330 0.34 8,034,997.61 0.52
Idaho............................... 213 0.22 3,330,302.77 0.21
Illinois............................ 7,324 7.52 119,382,923.58 7.70
Indiana............................. 1,337 1.37 20,925,608.73 1.35
Iowa................................ 348 0.36 5,543,809.68 0.36
Kansas.............................. 1,696 1.74 26,108,413.32 1.68
Kentucky............................ 1,435 1.47 21,880,603.99 1.41
Louisiana........................... 2,494 2.56 40,708,778.14 2.63
Maine............................... 252 0.26 3,815,606.85 0.25
Massachusetts....................... 4,648 4.77 69,183,831.89 4.46
Michigan............................ 1,898 1.95 30,471,044.70 1.97
Minnesota........................... 1,605 1.65 25,867,716.88 1.67
Mississippi......................... 760 0.78 12,222,956.89 0.79
Missouri............................ 2,694 2.77 41,306,385.32 2.66
Montana............................. 48 0.05 691,966.61 0.04
Nebraska............................ 289 0.30 4,539,296.45 0.29
Nevada.............................. 946 0.97 16,350,808.38 1.05
New Hampshire....................... 1,602 1.65 22,545,649.75 1.45
New Jersey.......................... 5,919 6.08 90,085,704.17 5.81
New Mexico.......................... 943 0.97 14,528,886.68 0.94
New York............................ 6,742 6.93 102,349,412.04 6.60
North Carolina...................... 550 0.56 12,280,488.08 0.79
North Dakota........................ 56 0.06 926,055.59 0.06
Ohio................................ 4,323 4.44 64,841,826.97 4.18
Oklahoma............................ 790 0.81 13,149,235.29 0.85
Oregon.............................. 1,466 1.51 22,028,155.30 1.42
Pennsylvania........................ 4,450 4.57 68,227,787.45 4.40
Rhode Island........................ 719 0.74 9,963,198.75 0.64
South Carolina...................... 154 0.16 3,687,045.11 0.24
South Dakota........................ 73 0.07 1,144,002.82 0.07
Tennessee........................... 2,602 2.67 43,523,861.67 2.81
Utah................................ 663 0.68 10,417,635.78 0.67
Vermont............................. 377 0.39 5,134,939.96 0.33
Virginia............................ 4,814 4.95 79,625,158.37 5.14
Washington.......................... 1,877 1.93 30,103,212.24 1.94
West Virginia....................... 250 0.26 4,054,369.41 0.26
Wisconsin........................... 1,294 1.33 18,766,343.54 1.21
Wyoming............................. 104 0.11 1,658,013.54 0.11
------------ ------------------- ----------------- --------------
Total (2)........................ 97,350 100.00% $1,550,000,067.58 100.00%
============ =================== ================= ==============
</TABLE>
Number of States Represented........ 47
--------------
(1) Based solely on the addresses of the originating Dealers.
(2) Percentages may not add to 100% due to rounding.
S-23
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning Toyota Motor Credit
Corporation's experience with respect to its portfolio of new and used
automobile and light duty truck retail installment sales contracts which it has
funded and is servicing, including contracts that have been securitized. The
information set forth below for 1996 does not include retail installment sales
contracts serviced by an independent finance company conducting business in five
southeastern states of the United States.
The data presented in the following tables are for illustrative purposes
only. There is no assurance that Toyota Motor Credit Corporation's delinquency,
credit loss and repossession experience with respect to automobile and light
duty truck retail installment sales contracts in the future, or the experience
of the Trust with respect to the Receivables, will be similar to that set forth
below. The percentages in the tables below have not been adjusted to eliminate
the effect of the growth of TMCC's portfolio. Accordingly, the delinquency,
repossession and net loss percentages would be expected to be higher than those
shown if a group of receivables were isolated at a period in time and the
delinquency, repossession and net loss data showed the activity only for that
isolated group over the periods indicated.
During fiscal 2000, TMCC completed the national launch of an expanded
tiered pricing program for retail installment sales contracts. The objective of
the 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 the purchase of higher risk
contracts. Most of the contracts included in the Series 2001-A pool will have
been originated under the tiered pricing program and may perform differently
than has TMCC's entire portfolio during the periods described in the following
tables.
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Outstanding Contracts(1)................................ 921,508 762,199 667,639 605,632 574,439
Delinquencies as a Percentage of Contracts
Outstanding(2)
31-60 days.............................................. 1.68% 1.28% 1.34% 1.79% 1.46%
61-90 days.............................................. 0.17% 0.09% 0.10% 0.16% 0.14%
Over 90 days............................................ 0.08% 0.06% 0.08% 0.10% 0.08%
</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-24
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Principal Amount Outstanding (1)......... $ 11,984,915 $ 9,699,078 $ 8,075,636 $ 6,795,213 $ 5,930,100
Average Principal Amount Outstanding (2). $ 10,841,997 $ 8,887,357 $ 7,435,425 $ 6,362,657 $ 5,430,406
Number of Contracts Outstanding.......... 921,508 762,199 667,639 605,632 574,439
Average Number of Contracts
Outstanding (2)....................... 841,854 714,919 636,636 590,036 545,882
Number of Repossessions (3).............. 11,449 9,930 10,906 10,994 8,981
Number of Repossessions as a
Percent of the Number of Contracts
Outstanding......................... 1.24% 1.30% 1.63% 1.82% 1.56%
Number of Repossessions as a Percent
of the Average Number of Contracts
Outstanding......................... 1.36% 1.39% 1.71% 1.86% 1.65%
Gross Charge-Offs (4).................... $ 54,621 $ 49,942 $ 56,956 $ 51,191 $ 33,017
Recoveries (5)........................... $ 8,487 $ 8,060 $ 7,898 $ 6,864 $ 6,604
Net Losses............................... $ 46,134 $ 41,882 $ 49,058 $ 44,327 $ 26,413
Net Losses as a Percentage of
Principal Amount Outstanding........ 0.38% 0.43% 0.61% 0.65% 0.45%
Net Losses as a Percentage of Average
Principal Amount Outstanding........ 0.43% 0.47% 0.66% 0.70% 0.49%
</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.
USE OF PROCEEDS
The Seller will use the net proceeds from the sale of the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes (approximately $1,183,470,869
in the aggregate), together with the net proceeds from the sale of the Class A-1
Notes to TMCC and a subordinated non-recourse promissory note issued to TMCC to
purchase the Receivables from TMCC pursuant to the Receivables Purchase
Agreement and to fund the Reserve Account.
S-25
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the Notes is set forth under "Risk FACTORS--PREPAYMENTS ON
RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN REINVESTMENT RISK
TO YOU", "Description of the Notes--Payments of Principal" and "Weighted Average
Lives of the Notes" in this Prospectus Supplement.
Because the rate of payment of principal of each class of Notes depends
primarily on the rate of payment (including prepayments) of the principal
balance of the Receivables, final payment of any class of Notes could occur
significantly earlier or later than their respective Final Scheduled Payment
Dates. Noteholders will bear the risk of being able to reinvest principal
payments on the Notes at yields at least equal to the yield on their respective
Notes. Such reinvestment risk includes the risk that interest rates may be lower
at the time such holders received payments from the Trust than interest rates
would otherwise have been had such prepayments not been made or had such
prepayments been made at a different time. No prediction can be made as to the
rate of prepayments on the Receivables in either stable or changing interest
rate environments.
Principal payments generally will not be made on the Class A-2 Notes
until the Class A-1 Notes have been paid in full. Principal payments generally
will not be made on the Class A-3 Notes until the Class A-2 Notes have been paid
in full, and principal payments generally will not be made on the Class A-4
Notes until the Class A-3 Notes have been paid in full. However, upon the
occurrence and during the continuation of an Event of Default, including
following any termination of the Swap Agreement, resulting in acceleration of
the Notes or involving an uncured payment default, the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes will be paid principal on a pro
rata basis. It is expected that final payment of each class of Notes will occur
on or prior to the respective Final Scheduled Payment Dates.
Failure to make final payment of any class of Notes on or prior to the
respective Final Scheduled Payment Dates will constitute an Event of Default
under the Indenture, which may accelerate payments in respect of classes that
have not reached their respective Final Scheduled Payment Dates. However, as the
rate of payment of principal of each class of Notes depends on the rate of
payment (including prepayments) of the principal balance of the Receivables,
sufficient funds may not be available to pay each class of Notes in full on or
prior to the respective Final Scheduled Payment Dates. If sufficient funds are
not available, final payment of any class of Notes could occur later than such
dates, and the holders of such Notes could suffer a loss.
The rate of prepayments of the Receivables may be influenced by a variety
of economic, social and other factors, and under certain circumstances relating
to breaches of representations, warranties or covenants, the Seller and/or the
Servicer will be obligated to repurchase Receivables from the Trust. A higher
than anticipated rate of prepayments will reduce the aggregate principal balance
of the Receivables more quickly than expected and thereby reduce anticipated
aggregate interest payments on the Notes. See "Risk Factors--PREPAYMENTS ON
RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN REINVESTMENT RISK
TO YOU."
Noteholders should consider, in the case of Notes purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the Receivables could result in an actual yield that is less than the
anticipated yield and, in the case of Notes purchased at a premium, the risk
that a faster than anticipated rate of principal payments on the Receivables
could result in an actual yield that is less than the anticipated yield.
Certain events (including some that are not within the control of the
Trust or the Swap Counterparty) may cause an Event of Default under the
Indenture or the termination of the Swap Agreement. Certain of these events will
not cause a termination of the Swap Agreement unless a majority of holders of
Class A-2, Class A-3 and Class A-4 Notes vote to instruct the Indenture Trustee
(as assignee of the rights of the Owner Trustee) to terminate the Swap
Agreement. The holders of any class of Notes may not have sufficient voting
interests as of any date to cause or to prevent a termination of the Swap
Agreement or acceleration of the notes. If the Swap Agreement is terminated (or
certain other Events of Default under the Indenture occur), and the Notes are
accelerated, the Indenture Trustee will 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
S-26
<PAGE>
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. In addition, if the Swap Agreement is terminated,
the Trust may be obligated to make a swap termination payment to the Swap
Counterparty in an amount that the Trust cannot estimate as of the date of this
prospectus supplement. Any swap termination payment paid by the Trust will
reduce the amounts available to be paid to Noteholders. Also, acceleration of
the Notes as a result of any Event of Default under the Indenture, or involving
an uncured payment default or termination of the Swap Agreement, will cause the
priority of payments of all Class A Notes to change to pro rata payments of
interest followed by pro rata payments of principal to all four classes of Class
A Notes. Therefore, all outstanding Class A Notes will be affected by any
shortfall in liquidation proceeds and any payment by the Trust of a swap
termination payment.
WEIGHTED AVERAGE LIVES OF THE NOTES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables in question are the same size and
amortize at the same rate and that each receivable in each month of its life
will either be paid as scheduled or be prepaid in full. For example, in a pool
of receivables originally containing 10,000 receivables, a 1% ABS rate means
that 100 receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend on
the rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of Notes could occur significantly
earlier than the respective Final Scheduled Payment Dates. Reinvestment risk
associated with early payment of the Notes of any class will be borne
exclusively by the holders of such Notes.
The table captioned "Percent of Initial Note Principal Amount at Various
ABS Percentages" (the "ABS Table") has been prepared on the basis of the
characteristics of the Receivables described under "The Receivables Pool". The
ABS Table assumes that (i) the Receivables prepay in full at the specified
constant percentage of ABS monthly, with no defaults, losses or repurchases,
(ii) each scheduled monthly payment on each Receivable is scheduled to be made
and is made on the last day of each month commencing January 31, 2001 and each
month has 30 days, (iii) the Notes are issued on January 25, 2001 and payments
are made on the Notes on each Payment Date (and each such date is assumed to be
the fifteenth day of each applicable month), (iv) the balance in the reserve
account on each payment date is the required amount described in the summary
under "Reserve Account", (v) except as otherwise indicated, the Servicer
exercises its option to purchase the Receivables on the earliest Payment Date on
which such option may be exercised, and (vi) there is no swap termination or
other event resulting in the acceleration of the Class A Notes or involving an
uncured payment default. The hypothetical pools each have an assumed Cutoff Date
of January 1, 2001. The ABS Table indicates the projected weighted average life
of each class of Notes and sets forth the percent of the initial principal
amount of each class of Notes that is projected to be outstanding after each of
the Payment Dates shown at various constant ABS percentages.
S-27
<PAGE>
The ABS Table also assumes that the Receivables have been aggregated into
hypothetical pools with all of the receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools (which is based on its aggregate principal balance, APR, original
term to maturity and remaining term to maturity as of the assumed cutoff date)
will be such that each pool will be fully amortized by the end of its remaining
term to maturity.
<TABLE>
<CAPTION>
REMAINING ORIGINAL
TERM TO TERM TO
NUMBER OF AGGREGATE PRINCIPAL APR MATURITY MATURITY
POOL RECEIVABLES BALANCE ($) (%) (IN MONTHS) (IN MONTHS)
---- ------------ ------------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1..................................... 3,144 $ 24,356,713.17 9.012 20 28
2..................................... 5,259 59,998,035.46 9.276 33 36
3..................................... 2,608 25,245,496.15 9.273 32 48
4..................................... 9,121 121,015,265.07 9.753 45 48
5..................................... 14,776 199,970,932.31 9.140 44 60
6..................................... 49,979 859,695,019.59 10.062 57 60
7..................................... 1,382 25,257,005.52 8.982 57 71
8..................................... 11,081 234,461,600.31 11.281 69 71
</TABLE>
------------ -------------------
97,350 $1,550,000,067.58
============ ===================
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the Receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the Receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of Notes.
S-28
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
------------------------------ ------------------------------ ------------------------------
PAYMENT DATE 0.50% 1.00% 1.50% 1.80% 0.50% 1.00% 1.50% 1.80% 0.50% 1.00% 1.50% 1.80%
===================== ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
02/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
03/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
04/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
05/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
06/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
07/15/01............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
08/15/01............. 100.00 100.00 97.00 89.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
09/15/01............. 100.00 100.00 86.86 77.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/01............. 100.00 92.47 76.87 66.99 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/01............. 100.00 84.02 67.04 56.28 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/01............. 92.87 75.65 57.36 45.77 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
01/15/02............. 85.76 67.37 47.84 35.47 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
02/15/02............. 78.66 59.17 38.47 25.37 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
03/15/02............. 71.58 51.06 29.27 15.49 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
04/15/02............. 64.51 43.03 20.24 5.81 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
05/15/02............. 57.46 35.10 11.37 0.00 100.00 100.00 100.00 96.36 100.00 100.00 100.00 100.00
06/15/02............. 50.43 27.25 2.67 0.00 100.00 100.00 100.00 87.12 100.00 100.00 100.00 100.00
07/15/02............. 43.42 19.50 0.00 0.00 100.00 100.00 94.14 78.10 100.00 100.00 100.00 100.00
08/15/02............. 36.42 11.83 0.00 0.00 100.00 100.00 85.78 69.31 100.00 100.00 100.00 100.00
09/15/02............. 29.45 4.27 0.00 0.00 100.00 100.00 77.60 60.75 100.00 100.00 100.00 100.00
10/15/02............. 22.76 0.00 0.00 0.00 100.00 97.03 69.78 52.58 100.00 100.00 100.00 100.00
11/15/02............. 16.08 0.00 0.00 0.00 100.00 89.88 62.14 44.63 100.00 100.00 100.00 100.00
12/15/02............. 9.43 0.00 0.00 0.00 100.00 82.82 54.67 36.91 100.00 100.00 100.00 100.00
01/15/03............. 2.79 0.00 0.00 0.00 100.00 75.86 47.38 29.42 100.00 100.00 100.00 100.00
02/15/03............. 0.00 0.00 0.00 0.00 96.18 68.99 40.27 22.15 100.00 100.00 100.00 100.00
03/15/03............. 0.00 0.00 0.00 0.00 89.58 62.23 33.33 15.12 100.00 100.00 100.00 100.00
04/15/03............. 0.00 0.00 0.00 0.00 83.01 55.56 26.58 8.33 100.00 100.00 100.00 100.00
05/15/03............. 0.00 0.00 0.00 0.00 76.45 48.99 20.01 1.77 100.00 100.00 100.00 100.00
06/15/03............. 0.00 0.00 0.00 0.00 69.92 42.52 13.63 0.00 100.00 100.00 100.00 93.48
07/15/03............. 0.00 0.00 0.00 0.00 63.41 36.15 7.44 0.00 100.00 100.00 100.00 84.77
08/15/03............. 0.00 0.00 0.00 0.00 56.92 29.89 1.44 0.00 100.00 100.00 100.00 76.42
09/15/03............. 0.00 0.00 0.00 0.00 50.45 23.74 0.00 0.00 100.00 100.00 93.74 68.42
10/15/03............. 0.00 0.00 0.00 0.00 44.18 17.81 0.00 0.00 100.00 100.00 85.79 60.84
11/15/03............. 0.00 0.00 0.00 0.00 38.31 12.30 0.00 0.00 100.00 100.00 78.43 53.86
12/15/03............. 0.00 0.00 0.00 0.00 32.47 6.88 0.00 0.00 100.00 100.00 71.34 47.21
01/15/04............. 0.00 0.00 0.00 0.00 26.65 1.56 0.00 0.00 100.00 100.00 64.50 40.91
02/15/04............. 0.00 0.00 0.00 0.00 20.85 0.00 0.00 0.00 100.00 94.75 57.94 0.00
03/15/04............. 0.00 0.00 0.00 0.00 15.07 0.00 0.00 0.00 100.00 87.41 51.64 0.00
04/15/04............. 0.00 0.00 0.00 0.00 9.31 0.00 0.00 0.00 100.00 80.22 45.62 0.00
05/15/04............. 0.00 0.00 0.00 0.00 3.58 0.00 0.00 0.00 100.00 73.18 39.88 0.00
06/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 96.95 66.30 0.00 0.00
07/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 88.80 59.57 0.00 0.00
08/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 80.67 53.00 0.00 0.00
09/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 72.59 46.59 0.00 0.00
10/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 65.86 41.16 0.00 0.00
11/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 59.97 36.40 0.00 0.00
12/15/04............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 54.11 0.00 0.00 0.00
01/15/05............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 48.27 0.00 0.00 0.00
02/15/05............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 42.46 0.00 0.00 0.00
03/15/05............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 36.68 0.00 0.00 0.00
04/15/05............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average
Life (Years) (1).... 1.44 1.20 1.00 0.90 2.70 2.35 2.00 1.81 3.93 3.59 3.13 2.83
Weighted Average
Life (Years) (1)(2). 1.44 1.20 1.00 0.90 2.70 2.35 2.00 1.81 4.01 3.70 3.26 2.95
--------------
</TABLE>
(1) The weighted average life of a Note is determined by (x) multiplying the
amount of each principal payment on a Note by the number of years from
the date of issuance of the Note to the related Payment Date, (y) adding
the results and (z) dividing the sum by the original principal amount of
the Note.
(2) This calculation assumes that the Servicer does not exercise its option to
purchase the Receivables.
This table has been prepared based on the assumptions described above under
"Weighted Average Lives of the Notes" (including the assumptions regarding the
characteristics and performance of the Receivables, which will differ from the
actual characteristics and performance thereof) and should be read in
conjunction therewith.
S-29
<PAGE>
POOL FACTORS AND TRADING INFORMATION
The "Pool Factor" with respect to any class of Notes will be a seven-digit
decimal indicating the principal amount of such class of Notes as of the close
of business on the Payment Date in such month as a fraction of the respective
principal amount thereof as of the Closing Date. The Servicer will compute each
Pool Factor each month. Each Pool Factor will initially be 1.0000000 and
thereafter will decline to reflect reductions in the principal amount of each
class of Notes. Each such principal amount will be computed by allocating
payments in respect of the Receivables to principal and interest using the
actuarial method for the Precomputed Receivables and using the simple interest
method for the Simple Interest Receivables. The portion of the principal amount
of any class of Notes for a given month allocable to a Noteholder can be
determined by multiplying the original denomination of the holder's Note by the
related Pool Factor for that month.
Pursuant to the Indenture, the Noteholders will receive monthly reports
concerning the payments received on the Receivables, the Pool Balance, the
related Pool Factors and various other items of information pertaining to the
Trust. Noteholders during each calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities--Reports to Securityholders" in
the Prospectus.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Indenture and of the Swap Agreement will be filed with the Securities and
Exchange Commission (the "SEC") following the issuance of the Notes. The
following summary describes certain terms of the Notes, the Indenture and the
Swap Agreement. 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, the Indenture and the Swap Agreement. Where particular provisions or
terms used in the Indenture or Swap Agreement are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summary. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Notes of any given series and the related Indenture and Swap
Agreement set forth in the Prospectus, to which description reference is hereby
made.
PAYMENTS OF INTEREST
The Class A-1 and Class A-2 Notes will constitute Fixed Rate Securities, as
such term is defined under "Certain Information Regarding the Securities--Fixed
Rate Securities" in the Prospectus. The Class A-3 and Class A-4 Notes will
constitute Floating Rate Securities, as such term is defined under "Certain
Information Regarding the Securities--Floating Rate Securities" in the
Prospectus.
Interest on the principal balances of the Class A Notes will accrue at the
respective per annum interest rates set forth on the front cover of this
prospectus supplement (each, an "Interest Rate") and will be payable to the
related Noteholders monthly on the fifteenth of each month (or, if such date is
not a Business Day, on the next succeeding Business Day) (each such date, a
"Payment Date") commencing February 15, 2001. A "Business Day" is any day except
a Saturday or Sunday, or a day on which banks in New York, San Francisco or
Chicago are closed.
Interest will accrue for the period (i) with respect to the Class A-1,
Class A-3 and Class A-4 Notes, from and including the Closing Date (in the case
of the first Payment Date) or from and including the most recent Payment Date on
which interest has been paid to but excluding the following Payment Date and
(ii) with respect to the Class A-2 Notes, from and including the Closing Date
(in the case of the first Payment Date) or from and including the fifteenth day
of the most recent calendar month during which interest was paid preceding each
Payment Date to but excluding the fifteenth day of the following calendar month
(each an "Interest Period"). Interest on the Class A-1, Class A-3 and Class A-4
Notes will be calculated on the basis of the actual days elapsed during the
Interest Period and a 360-day year. Interest on the Class A-2 Notes 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).
S-30
<PAGE>
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, amounts paid
by the Swap Counterparty under the Swap Agreement and any funds deposited
therein from the Reserve Account or Payments Ahead withdrawn for application
with respect to such Collection Period) remaining after reimbursement of
Advances made by the Servicer and payment of the Servicing Fee. Interest
payments on all classes of Class A Notes will have the same priority. See
"Payments to Noteholders" in this Prospectus Supplement.
In order to issue the Class A-3 and Class A-4 Notes bearing interest at
floating rates when the Receivables bear fixed interest rates, the Trust has
entered into the Swap Agreement with the Swap Counterparty. Pursuant to the Swap
Agreement, on each Payment Date the Trust is obligated to pay to the Swap
Counterparty in respect of the Class A-3 Notes an amount equal to the amount
deemed to accrue on a notional amount equal to the outstanding principal balance
of the Class A-3 Notes as of the preceding Payment Date at a fixed rate of
interest of 5.432% (the "Class A-3 Notional Rate") calculated on a 30/360 basis
(the "Class A-3 Swap Interest Amount"). The amount to be paid to the Trust by
the Swap Counterparty in respect of the Class A-3 Notes on any payment date will
be the amount of interest that accrued thereon at the related floating interest
rate from the preceding Payment Date to such current Payment Date (the "Class
A-3 Interest Amount").
Similarly, the amount to be paid by the Trust to the Swap Counterparty in
respect of the Class A-4 Notes on each Payment Date will be an amount equal to
the amount deemed to accrue on a notional amount equal to the outstanding
principal balance of the Class A-4 Notes as of the preceding Payment Date at a
fixed rate of interest of 5.580% (the "Class A-4 Notional Rate" and, such rate
and the Class A-3 Notional Rate, each a "Notional Rate") calculated on a 30/360
basis (the "Class A-4 Swap Interest Amount"). The amount to be paid by the Swap
Counterparty in respect of the Class A-4 Notes on any Payment Date will be the
amount of interest that accrued thereon at the related floating interest rate
from the preceding Payment Date to such current Payment Date (the "Class A-4
Interest Amount").
Any net amounts payable by the Trust to the Swap Counterparty on any
Payment Date will be deducted from Collections for the related Collection Period
prior to making any payments of interest or principal of the Notes.
Under certain circumstances, the amount available for interest payments
could be less than the amount of interest payable on the Class A Notes, in which
case each class of Class A Noteholders will receive their ratable share (based
upon the aggregate amount of such amounts due to such class of Noteholders) of
the aggregate amount available to be paid in respect of interest on the Class
A-1, Class A-2, Class A-3 and Class A-4 Notes on such Payment Date. See
"Payments to Noteholders" and "Subordination; Reserve Account" in this
Prospectus Supplement.
An Event of Default will occur if the full amount of interest due on any
class of Class A Notes is not paid within five days of the related Payment Date.
In addition, the Swap Agreement may be terminated by the Swap Counterparty
(which event would constitute an Event of Default under the Indenture) if the
Swap Counterparty does not receive the Class A-3 Swap Interest Amount or Class
A-4 Swap Interest Amount within five days of the related Payment Date. The Swap
Agreement also may be terminated by the Trust (by action taken in accordance
with the vote of a majority of the holders of the outstanding Class A-2, Class
A-3 and Class A-4 Notes) if the Swap Counterparty does not pay to the Trust the
Class A-3 Interest Amount or Class A-4 Interest Amount within five days of the
Payment Date on which such amounts are due. See "Description of Notes--The
Indenture--Events of Default; Rights upon Event of Default" and "Description of
the Swap Agreement" herein.
PAYMENTS OF PRINCIPAL
Principal payments generally will be made to the Noteholders on each
Payment Date commencing February 15, 2001, in an aggregate amount equal to the
amount deposited in the Principal Distribution Account on such Payment Date. See
"Payments to Noteholders" in this Prospectus Supplement. Principal payments
generally will be made to holders of each class of Class A Notes in sequential
order until the principal balance of each such class is reduced to zero.
Following and during the continuance of an Event of Default (including a
termination of the Swap Agreement) that results in acceleration of the Notes or
involves an uncured payment default, 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
S-31
<PAGE>
Scheduled Payment Date", the "Class A-3 Final Scheduled Payment Date" and the
"Class A-4 Final Scheduled Payment Date", respectively). The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Final Scheduled Payment Dates set forth above
based on a variety of factors, including those described under "Prepayment and
Yield Considerations" and "Weighted Average Lives of the Notes" in this
Prospectus Supplement and in the Prospectus.
INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Upon an "Event of Default"
(which term is defined in the Prospectus, but as used in this Prospectus
Supplement also includes termination of the Swap Agreement in connection with
any Swap Event of Default or Swap Termination Event), 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, and will liquidate the assets of the Trust in connection
with any termination of the Swap Agreement. In the case of an Event of Default
not involving any such default in payment and not involving any termination of
the Swap Agreement, 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, any Swap Event of Default, any Swap Termination Event,
or termination of, or appointment of a successor to, the Servicer promptly upon
a Responsible Officer (as defined in the Sale and Servicing Agreement) obtaining
actual knowledge thereof. While Notes are held in book-entry form, these notices
will be delivered by the Indenture Trustee to DTC. If Notes are issued in
definitive form, these notices will mailed to the addresses provided to the
Indenture Trustee by the holders of record as of the relevant record date. Such
notices will be deemed to have been given as of the date of delivery to DTC or
mailing.
PRESCRIPTION
In the event that any Noteholder shall not surrender its Notes for
retirement within six months after the date specified in the written notice
given by the Indenture Trustee of the date for final payment thereof, the
Indenture Trustee shall give a second written notice to the remaining
Noteholders to surrender their Notes for retirement and receive the final
payment with respect thereto. If within one year after such second notice any
Notes shall not have been surrendered, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Noteholders concerning surrender of their Notes, and the cost thereof shall be
paid out of the funds and other assets that remain subject to the Indenture. Any
funds remaining unclaimed after exhaustion of such remedies shall be paid by the
Indenture Trustee to a charity specified in the Indenture.
GOVERNING LAW
The Indenture, Swap Agreement and Notes are governed by and shall be
construed in accordance with the laws of the State of New York applicable to
agreements made in and to be performed wholly within such jurisdiction.
PAYMENTS TO NOTEHOLDERS
On the second Business Day preceding each Payment Date (each, a
"Determination Date"), the Servicer will inform the Owner Trustee of, among
other things, the amount of funds collected on or in respect of the Receivables,
the amount of Advances to be made by and reimbursed to the Servicer and the
Servicing Fee and other servicing compensation payable to the Servicer, in each
case with respect to the immediately preceding Collection Period. On or prior to
each Determination Date, the Servicer shall also determine the Class A-3 Swap
Interest Amount and Class A-3 Interest Amount, the Class A-4 Swap Interest
Amount and Class A-4 Interest Amount, the Principal Distribution Amount and,
based on the available funds and other amounts available for payment on the
related
S-32
<PAGE>
Payment Date as described below, the amount to be distributed to the Noteholders
and payable to the Swap Counterparty. On or before each Payment Date, the
Indenture Trustee will cause Payments Ahead previously deposited in the Payahead
Account or held by the Servicer in respect of the related Collection Period to
be transferred to the Collection Account.
The Owner Trustee will make payments to the Noteholders out of the amounts
on deposit in the Collection Account. The amounts to be distributed to the
Noteholders "Payments to Noteholders" will be determined in the manner described
below.
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 the Cutoff Date through the last day of the calendar month
preceding such payment date:
(i) all collections on or in respect of the Receivables other than
Defaulted Receivables (including Payments Ahead being applied in
such Collection Period but excluding Payments Ahead to be applied
in one or more future Collection Periods);
(ii) all proceeds of the liquidation of Defaulted Receivables, net of
expenses incurred by the Servicer in accordance with its customary
servicing procedures in connection with such liquidation, including
amounts received in subsequent Collection Periods ("Net Liquidation
Proceeds");
(iii) all Advances made by the Servicer;
(iv) the amount (if positive) of any payment to be made by the Swap
Counterparty to the Trust on such Payment Date, net of any payment
(including any swap termination payment) to be made by the Trust
to the Swap Counterparty on such Payment Date, in each case
calculated pursuant to the Swap Agreement; 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.
Available Collections on any Payment Date will exclude (i) the amount (if
positive) of any payment to be made by the Trust to the Swap Counterparty on
such Payment Date, net of any payment to be made by the Swap Counterparty to the
Trust on such Payment Date, in each case calculated pursuant to the Swap
Agreement, (ii) 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, (iii) Net Liquidation
Proceeds with respect to a particular Receivable to the extent of unreimbursed
Advances in respect of such Receivable, (iv) recoveries from collections with
respect to Advances that the Servicer has determined are unlikely to be repaid,
(v) late fees, extension fees and other administrative fees and expenses or
similar charges collected by the Servicer and (vi) any rebates of unearned
interest charges with respect to Precomputed Receivables. Available Collections
on any Payment Date following the termination of the Swap Agreement will exclude
an amount equal to the amount of any Swap Termination Payment due from the Trust
to the Swap Counterparty, but will include an amount equal to the amount of any
Swap Termination Payment due from the Swap Counterparty to the Trust.
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
S-33
<PAGE>
the Cutoff Date, in the case of the first Collection Period, over (b) the Pool
Balance as of the end of the related Collection Period, together with any
portion of the Principal Distribution Amount that was to be deposited into the
Principal Distribution Account on any prior Payment Date but was not because
sufficient funds were not available to make such deposit; provided, however,
that the Principal Distribution Amount shall not exceed the outstanding
principal amount of all the Notes on such Payment Date (prior to giving effect
to any principal payments made on such Payment Date); and provided, further,
that (i) the Principal Distribution Amount on the Class A-1 Final Scheduled
Payment Date shall not be less than the amount that is necessary to reduce the
outstanding principal amount of the Class A-1 Notes to zero; (ii) the Principal
Distribution Amount on the Class A-2 Final Scheduled Payment Date shall not be
less than the amount that is necessary to reduce the outstanding principal
amount of the Class A-2 Notes to zero; (iii) the Principal Distribution Amount
on the Class A-3 Final Scheduled Payment Date shall not be less than the amount
that is necessary to reduce the outstanding principal amount of the Class A-3
Notes to zero; and (iv) the Principal Distribution Amount on the Class A-4 Final
Scheduled Payment Date shall not be less than the amount that is necessary to
reduce the outstanding principal amount of the Class A-4 Notes to zero.
PAYMENTS
On each Payment Date, the Trust will make the following payments in the
following order of priority from Available Collections for the related
Collection Period and amounts withdrawn from the Reserve Account:
1. SERVICING FEE--the Servicing Fee payable to the Servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and unpaid
interest on the Class A-1, Class A-2, Class A-3 and Class A-4 Notes,
together with any amounts that were to be paid pursuant to this clause
(2) on any prior Payment Date but were not paid because sufficient
funds were not available to make such payment (with interest accrued
on such unpaid amounts at the rate or rates at which interest accrued
on the related Notes during the relevant accrual period or periods);
3. ALLOCATION OF PRINCIPAL--to the Principal Distribution Account, the
Principal Distribution Amount;
4. RESERVE ACCOUNT DEPOSIT--to the Reserve Account, the amount, if any,
necessary to cause the balance of funds therein to equal the required
balance described under "Reserve Account" below; and
5. EXCESS AMOUNTS--any remaining amounts in the Collection Account will
be distributed to the Seller as payment on the Subordinated Seller's
Interest.
On each Payment Date, from the amounts deposited into the Principal
Distribution Account from the allocations of principal described in clause (3)
above, the Trust will pay principal of the Notes in the following priority:
1. to the Class A-1 Notes, until an amount equal to the principal balance
thereof has been paid;
2. to the Class A-2 Notes, until an amount equal to the principal balance
thereof has been paid;
3. to the Class A-3 Notes, until an amount equal to the principal balance
thereof has been paid;
4. to the Class A-4 Notes, until an amount equal to the principal balance
thereof has been paid;
5. after the Notes are paid in full, to the Subordinated Seller's
Interest any remaining funds.
PAYMENTS AFTER OCCURRENCE OF EVENT OF DEFAULT AND ACCELERATION
After an Event of Default specified in the Indenture relating to the
termination of the Swap Agreement, a default in the payment of interest on any
Notes (if it lasts 5 days or more) or in the payment of any principal of any
class of Notes on the related Final Scheduled Payment Date, or as to which the
Noteholders direct the Trustee to accelerate the Notes, the Trust will make the
following payments in the following order of priority from Available Collections
for the related Collection Period and amounts withdrawn from the Reserve
Account:
1. SERVICING FEE-the Servicing Fee payable to the Servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and unpaid
interest on the Class A-1, Class A-2, Class A-3 and Class A-4 Notes,
together with any amounts that were to be paid pursuant to this clause
(2) on any prior Payment Date but were not paid because sufficient
funds were not available to
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make such payment (with interest accrued on such unpaid amounts at the
rate or rates at which interest accrued on the related Notes during
the relevant accrual period or periods);
3. ALLOCATION OF PRINCIPAL--to all Class A Noteholders on a pro rata
basis, until the outstanding principal balance of each such class of
Notes has been reduced to zero;
4. EXCESS AMOUNTS--any remaining amounts in the Collection Account will
be distributed to the Seller as payment on the Subordinated Seller's
Interest.
SUBORDINATION; RESERVE ACCOUNT
The rights of the Noteholders to receive payments with respect to the
Receivables will be subordinated to the rights of the Servicer to receive the
Servicing Fee, any additional servicing compensation as described under
"Transfer and Servicing Agreements--Servicing Compensation" in this Prospectus
Supplement, the right of the swap counterparty to receive payments to be made to
it by the Issuer under the Swap Agreement and the reimbursement of Advances.
SUBORDINATION
As long as any Notes remain outstanding, payments on the Subordinated
Seller's Interest will be subordinated to payments of interest and principal on
the Notes.
RESERVE ACCOUNT
The Noteholders will have the benefit of the Reserve Account. The Reserve
Account will be a segregated trust account held by the Indenture Trustee. Any
amounts held on deposit in the Reserve Account will be owned by the Seller,
subject to the right of the Indenture Trustee to withdraw such amounts as
described below, and any investment earnings thereon will be taxable to the
Seller for federal income tax purposes. On the Closing Date, the Seller will
deposit approximately $ 3,875,000 (0.25% of the outstanding principal balance of
the Receivables as of the Cutoff Date) into the Reserve Account for the Trust.
On each Payment Date, if Available Collections are insufficient to pay the
first three items listed under "Payments to Noteholders--Payments" above, the
Indenture Trustee will withdraw funds (if available) from the Reserve Account to
pay those amounts.
If the principal balance of a class of Notes is not paid in full on the
related Final Scheduled Payment Date, the Indenture Trustee will withdraw
amounts from the Reserve Account (if available) to pay that class in full.
The amount required to be on deposit in the Reserve Account at the close of
business on any Payment Date (the "Specified Reserve Account Balance") will be
the greater of 0.75% of the outstanding principal balance of the receivables as
of the end of the related Collection Period or (b) approximately $7,750,000
(0.50% of the outstanding principal balance of the Receivables as of the Cutoff
Date); provided however, that if, on any Payment Date (x) the average of the
Charge-off Rates for the three preceding Collection Periods exceeds 1.25% or (y)
the average of the Delinquency Percentages for the three preceding Collection
Periods exceeds 1.25%, the Specified Reserve Account Balance will be the
greatest of (a) 0.75% of the outstanding principal balance of the receivables as
of the end of the related Collection Period, (b) approximately $7,750,000 (0.50%
of the outstanding principal balance of the Receivables as of the Cutoff Date)
and (c) 5.50% of the Class A Note Balance as of such Payment Date (after giving
effect to any principal payments made on the Notes on such Payment Date);
provided further, that the Specified Reserve Account Balance with respect to any
date shall not exceed the sum of the Class A Note Balance as of the preceding
Payment Date (after giving effect to any principal payments made on the Notes on
such preceding Payment Date).
As of any Payment Date, the amount of funds actually on deposit in the
Reserve Account may, in certain circumstances, be less than the Specified
Reserve Account Balance. On each Payment Date, the Trust will, to the extent
available, deposit the amount, if any, necessary to cause the balance of funds
on deposit in the Reserve Account to equal the Specified Reserve Account Balance
to the extent set forth above under "Payments to Noteholders".
The "Charge-off Rate" with respect to a Collection Period will equal the
Aggregate Net Losses with respect to the Receivables that become Defaulted
Receivables during that Collection Period expressed, on an annualized basis,
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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 Liquidations Proceeds
collected during such Collection Period with respect to all Defaulted
Receivables and (y) the portion of amounts subsequently received in respect of
Receivables liquidated in prior Collection Periods specified in the Sale and
Servicing Agreement.
The "Delinquency Percentage" with respect to a Collection Period will equal
(a) the number of all outstanding Receivables 61 days or more delinquent (after
taking into account permitted extensions) as of the last day of such Collection
Period (excluding Receivables as to which the Financed Vehicle has been
liquidated during that Collection Period), determined in accordance with the
Servicer's normal practices, plus (b) the number of repossessed Financed
Vehicles that have not been liquidated (to the extent the related Receivable is
not otherwise reflected in clause (a) above), expressed as a percentage of the
aggregate number of Current Receivables on the last day of such Collection
Period.
A "Current Receivable" will be a Receivable that is not a Defaulted
Receivable or a Liquidated Receivable. A "Liquidated Receivable" will be a
Receivable that has been the subject of a Prepayment in full or otherwise has
been paid in full or, in the case of a Defaulted Receivable, a Receivable as to
which the Servicer has determined that the final amounts in respect thereof have
been paid.
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each of Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. (each a
"Rating Agency") to approve a formula for determining the Specified Reserve
Account Balance that is different from those described above or make certain
changes with respect to the manner by which the Reserve Account is funded. If
Standard & Poor's 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, and the Owner
Trustee has provided Moody's with 10 days prior written notice of such amendment
and Moody's shall not have notified the Indenture Trustee and/or the Owner
Trustee, as the case may be, that such amendment might or would result in the
qualification, reduction or withdrawal of the rating it has currently assigned
to any class of Notes, then the Specified Reserve Account Balance will be
determined in accordance with such new formula. The Sale and Servicing Agreement
will accordingly be amended, without the consent of any Noteholder, to reflect
such new calculation.
As of the close of business on any Payment Date on which the amount on
deposit in the Reserve Account is greater than the Specified Reserve Account
Balance for such Payment Date, subject to certain limitations, the Servicer will
instruct the Indenture Trustee to release and distribute such excess to the
Seller. Upon any distribution to the Seller of amounts from the Reserve Account,
the Noteholders will have no rights in, or claims to, such amounts.
Funds on deposit in the Reserve Account may be invested in Eligible
Investments. Investment income on monies on deposit in the Reserve Account will
not be available for payment to Noteholders or otherwise subject to any claims
or rights of the Noteholders and will be paid to the Seller. Any loss on such
investments will be charged to the Reserve Account.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Notes and (ii) the outstanding principal
balance of the Notes, any funds remaining on deposit in the Reserve Account,
subject to certain limitations, will be paid to the Seller.
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TRANSFER AND SERVICING AGREEMENTS
THE TRANSFER AND SERVICING AGREEMENTS
The description of the terms of the Indenture, Sale and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements") in this Prospectus Supplement does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements. Forms
of the Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement. Copies of the Transfer and Servicing Agreements will be
filed with the SEC following the issuance of the Notes. Any description of the
Transfer and Servicing Agreements herein supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Transfer and Servicing Agreements set forth in the Prospectus,
to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables from
the Seller to the Trust on the Closing Date pursuant to the Sale and Servicing
Agreement is set forth under "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in the Prospectus.
ACCOUNTS
In addition to the accounts referred to under "Description of the Transfer
and Servicing Agreements--Accounts" in the Prospectus, the Seller will also
establish and will maintain with the Indenture Trustee the Reserve Account for
the benefit of the Noteholders. The Reserve Account will not be an asset of the
Trust. The Servicer will establish the Payahead Account with the Indenture
Trustee for the benefit of the Noteholders and the Seller as holder of the
Subordinated Seller's Interest. The Payahead Account will not be an asset of the
Trust. The Indenture Trustee will establish an administrative subaccount within
the Collection Account entitled the Principal Distribution Account (the
"Principal Distribution Account"), for the benefit of the Noteholders.
SERVICING COMPENSATION
The Servicing Fee with respect to each Collection Period will be
one-twelfth of 1.00% (the "Servicing Fee Rate") of the outstanding principal
balance of the Receivables as of the first day of the related Collection Period
or, in the case of the first Payment Date, the outstanding principal balance of
the Receivables as of the Cutoff Date and will be paid from Available
Collections as described under "Payments to Noteholders" in this Prospectus
Supplement. The Servicer will be entitled to collect and retain as additional
servicing compensation in respect of each Collection Period any late fees,
extension fees and any other administrative fees and expenses or similar charges
collected during such Collection Period, plus any investment earnings or
interest earned during such Collection Period from the investment of monies on
deposit in the Collection Account or Payahead Account. See "--Collections" below
and "Description of the Transfer and Servicing Agreements--Servicing
Compensation and Payment of Expenses" in the Prospectus.
COLLECTIONS
The Servicer generally may retain all payments on or in respect of the
Receivables received from Obligors and all proceeds of Receivables collected
during each Collection Period without segregation in its own accounts until
deposited in the Collection Account on the related Payment Date. However, if (i)
TMCC ceases to be the Servicer, (ii) an Event of Default exists and is
continuing under the Indenture or (iii) the short-term unsecured debt of TMCC
ceases to be rated at least P-1 by Moody's Investors Service, Inc. and A-1 by
Standard & Poor's Ratings Services, and alternative arrangements acceptable to
the Rating Agencies are not made, the Servicer will deposit all such payments
and proceeds into the Collection Account not later than two Business Days after
receipt. Pending deposit into the Collection Account, the Servicer may invest
collections at its own risk and for its own benefit. Such amounts will not be
segregated from its own funds. The Servicer, at its own risk and for its own
benefit, may instruct the Owner Trustee to invest amounts held in the Collection
Account or Payahead Account in Eligible Investments from the time deposited
until the related Payment Date. The Seller, at its own risk and for its own
benefit, may instruct the Indenture Trustee to invest amounts held in the
Reserve Fund in Eligible Investments from each Payment Date (or the Closing
Date) to the next Payment Date. The Seller or the Servicer, as the case may be,
will remit the aggregate Warranty Purchase Payments and Administrative Purchase
Payments of any Receivables to
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be purchased from the Trust into the Collection Account on or before the
Business Day immediately preceding the related Payment Date. See "Description of
the Transfer and Servicing Agreements--Collections" in the Prospectus.
"Eligible Investments" will be specified in the Transfer and Servicing
Agreements and will be limited to investments which meet the criteria of each
Rating Agency from time to time as being consistent with its then-current
ratings of the Notes.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or certain other similar fees
or charges will be applied first to any outstanding Advances made by the
Servicer with respect to such Receivable, and then to the related Scheduled
Payment. Any collections on or in respect of a Receivable remaining after such
applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
in respect of such Receivable (each, a "Prepayment"). All other Excess Payments
in respect of Precomputed Receivables will be held by the Servicer (or if any of
the conditions in clauses (i) through (iii) in the second preceding paragraph is
not satisfied, deposited in the Payahead Account), as a Payment Ahead. See
"Description of the Transfer and Servicing Agreements--Collections" in the
Prospectus.
ADVANCES
The Servicer will be required to make Advances in respect of Scheduled
Payments that are not received in full by the end of the month in which they are
due to the extent described under "Description of the Transfer and Servicing
Agreements--Advances" in the Prospectus, unless the Servicer determines, in its
sole discretion, that such Advances will not be recoverable from certain
collections available to reimburse such Advances. Under certain circumstances,
if the Servicer determines that reimbursement from such collections is unlikely,
the Servicer will be entitled to recover unreimbursed Advances from collections
on or in respect of other Receivables. See "Description of the Transfer and
Servicing Agreements--Advances" in the Prospectus.
The Servicer will make all Advances by depositing into the Collection
Account an amount equal to the aggregate of the Precomputed Advances and Simple
Interest Advances due in respect of a Collection Period on the Business Day
immediately preceding the related Payment Date.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily as described in "--Collections" above, the Servicer will be
permitted to make the deposit of collections, aggregate Advances and amounts
deposited in respect of purchases of Receivables by the Seller or the Servicer
for or with respect to the related Collection Period net of payments to be made
to the Servicer with respect to such Collection Period. The Servicer, however,
will account to the Owner Trustee as if all of the foregoing deposits and
payments were made individually. See "Description of the Transfer and Servicing
Agreements--Net Deposits" in the Prospectus.
OPTIONAL PURCHASE
The Notes will be redeemed in whole, but not in part, on any Payment Date
on which the Servicer exercises its option to purchase the Receivables. The
Servicer, or any successor to the Servicer, may purchase the Receivables on any
Payment Date on or after the date when the outstanding principal balance of the
Receivables shall have declined to 10% or less of the outstanding principal
balance of the Receivables as of the Cutoff Date, as described in the Prospectus
under "Description of The Transfer and Servicing Agreements--Termination". The
"Redemption Price" for the outstanding Notes will be at least equal to the
unpaid principal amount of the outstanding Notes plus accrued and unpaid
interest thereon plus any amount payable by the trust to the Swap Counterparty
under the swap agreement.
REMOVAL OF SERVICER
The Indenture Trustee or the holders of at least 51% of the outstanding
principal amount of the Class A Notes (excluding for such purposes the
outstanding principal amount of any Notes held of record or beneficially owned
by TMCC or any of its affiliates), voting as a single class, may terminate the
rights and obligations of the Servicer under the Sale and Servicing Agreement,
or waive any Servicer Default without the consent of any holder of the
Subordinated Seller's Interest, if a Servicer Default occurs.
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Upon receipt of notice of the occurrence of a Servicer default, the
Indenture Trustee shall give notice thereof to the Rating Agencies.
For more information regarding the removal of the Servicer, see
"Description of the Transfer and Servicing Agreements--Rights Upon Servicer
Default" in the Prospectus.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
U.S. Bank Trust National Association will be the Owner Trustee under the
Trust Agreement. As a matter of Delaware law, the Trust will be viewed as a
separate legal entity, distinct from the Owner Trustee, and the Trust will be
viewed as the issuer of the Subordinated Seller's Interest. U.S. Bank National
Association will be the Indenture Trustee under the Indenture. The Owner
Trustee, the Indenture Trustee and any of their respective affiliates may hold
the Notes in their own names or as pledges. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Owner Trustee acting
jointly (or in some instances, the Owner Trustee acting alone) will have the
power to appoint co-trustees or separate trustees of all or any part of the
Trust. In the event of such an appointment, all rights, powers, duties and
obligations conferred or imposed upon the Owner Trustee by the Sale and
Servicing Agreement and the Trust Agreement will be conferred or imposed upon
the Owner Trustee and each such separate trustee or co-trustee jointly, or, in
any jurisdiction in which the Owner Trustee will be incompetent or unqualified
to perform certain acts, singly upon such separate trustee or co-trustee who
will exercise and perform such rights, powers, duties and obligations solely at
the direction of the Owner Trustee.
The Owner Trustee and the Indenture Trustee may resign at any time and,
under the Trust Agreement, U.S. Bank Trust National Association will be required
to resign as Owner Trustee if any Event of Default under the Indenture occurs.
If the Owner Trustee or Indenture Trustee resigns, the Servicer will be
obligated to appoint a successor thereto. TMCC as administrator under the
Administration Agreement may also remove the Owner Trustee or the Indenture
Trustee if either ceases to be eligible to continue as such under the Trust
Agreement or the Indenture, as the case may be, becomes legally unable to act
(including, but not limited to, pursuant to the provisions of the Trust
Indenture Act in connection with the occurrence of an Event of Default) or
becomes insolvent. In such circumstances, the Servicer will be obligated to
appoint a successor Owner Trustee or Indenture Trustee, as applicable. Any
resignation or removal of the Owner Trustee or Indenture Trustee and appointment
of a successor thereto will not become effective until acceptance of the
appointment by such successor.
The Trust Agreement will provide that the Servicer will pay the fees and
expenses of the Owner Trustee and the Indenture Trustee in connection with their
duties under the Trust Agreement and Indenture, respectively. The Trust
Agreement and Indenture will further provide that the Owner Trustee and
Indenture Trustee will be entitled to indemnification by TMCC for, and will be
held harmless against, any loss, liability or expense incurred by the Owner
Trustee or Indenture Trustee not resulting from its own willful misfeasance, bad
faith or negligence (other than by reason of a breach of any of its
representations or warranties to be set forth in the Trust Agreement or
Indenture, as the case may be).
DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee will make no representations as to the validity or
sufficiency of the Trust Agreement, the Notes or of any Receivables or related
documents. The Owner Trustee will not be accountable for the use or application
by the Seller or the Servicer of any funds paid to the Seller or the Servicer in
respect of the Notes or the Receivables, or the investment of any monies by the
Servicer before such monies are deposited into the Collection Account or
Payahead Account. The Owner Trustee will not independently verify the
Receivables. If no Event of Default has occurred and is continuing, the Owner
Trustee will be required to perform only those duties specifically required of
it under the Trust Agreement. Generally, those duties will be limited to the
receipt of the various certificates, reports or other instruments required to be
furnished to the Owner Trustee under the Trust Agreement, in which case it will
only be required to examine them to determine whether they conform to the
requirements of the Trust Agreement. The Owner Trustee will not be charged with
knowledge of a failure by the Servicer to perform its duties under the Trust
Agreement or Sale and Servicing Agreement unless the Owner Trustee obtains
actual knowledge of such failure as will be specified in the Trust Agreement.
The Indenture Trustee will make no representations as to the validity or
sufficiency of the Indenture, the Notes (other than the execution and
authentication thereof) or of any Receivables or related documents, and will not
be accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer
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in respect of the Notes, or the Receivables, or the investment of any monies by
the Servicer before such monies are deposited into the Collection Account or
Payahead Account. If no Event of Default has occurred and is continuing, the
Indenture Trustee will be required to perform only those duties specifically
required of it under the Indenture. Generally, those duties will be limited to
the receipt of the various certificates, reports or other instruments required
to be furnished to the Indenture Trustee under the Indenture, in which case it
will only be required to examine them to determine whether they conform to the
requirements of the Indenture. The Indenture Trustee will not be charged with
knowledge of a failure by the Servicer to perform its duties under the Trust
Agreement or Sale and Servicing Agreement or of TMCC to perform its duties under
the Administration Agreement, unless the Indenture Trustee obtains actual
knowledge of such failure as will be specified in the Indenture.
The Indenture Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Indenture or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the Noteholders, unless such Noteholders have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Noteholder will have any right under
the Indenture to institute any proceeding with respect to the Indenture, unless
such holder previously has given to the Indenture Trustee written notice of the
occurrence of an Event of Default and (i) the Event of Default arises from the
Servicer's failure to remit payments when due or (ii) the holders of the Notes
(excluding for such purposes the outstanding principal amount of any Notes held
of record or beneficially owned by TMCC or any of its affiliates), evidencing
not less than 25% of the voting interests of such class of Notes, have made
written request upon the Indenture Trustee to institute such proceeding in its
own name as the Indenture Trustee thereunder and have offered to the Indenture
Trustee reasonable indemnity and the Indenture Trustee for 30 days has neglected
or refused to institute any such proceedings. See "Description of the Notes--The
Indenture" in this Prospectus Supplement.
THE SWAP AGREEMENT
THE FOLLOWING SUMMARY DESCRIBES CERTAIN TERMS OF THE SWAP AGREEMENT. THE
SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, THE PROVISIONS OF THE SWAP AGREEMENT.
PAYMENTS UNDER THE SWAP AGREEMENT
On the Closing Date the Trust will enter into a 1992 International Swaps
and Derivatives Association, Inc. ("ISDA") Master Agreement (Multi
Currency-Cross Border) (such agreement, the "1992 Master Agreement") with 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 equal to the Class A-3 Swap Interest Amount and Class A-4 Swap Interest
Amount due on each Payment Date and the Swap Counterparty will generally pay to
the Trust amounts equal to the Class A-3 Interest Amount and the Class A-4
Interest Amount due on such Payment Date; provided that 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 will not be obligated to make its corresponding
payment to the Trust under the Swap Agreement.
Unless the Swap Agreement is terminated early as described below under
"--Early Termination of Swap Agreement", the Swap Agreement will terminate (i)
with respect to the Class A-3 Notes on the earlier of (x) the Class A-3 Final
Scheduled Payment Date and (y) the date on which the principal balance of the
Class A-3 Notes has been reduced to zero, and (ii) with respect to the Class A-4
Notes on the earlier of (x) the Class A-4 Final Scheduled Payment Date and (y)
the date on which the principal balance of the Class A-4 Notes has been reduced
to zero.
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 a Swap 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") are 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 any
applicable grace period; (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" (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.
SWAP TERMINATION EVENTS
"Swap Termination Events" under the Swap Agreement consist of the
following: (i) certain events of insolvency or bankruptcy of the Trust
or Swap Counterparty; (ii) any Event of Default under the Indenture that results
in the acceleration of the Notes or involving an uncured payment default;
(iii) the Trust or Swap Counterparty becomes subject to registration as an
"investment company" under the Investment Company Act of 1940; and (iv) 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.
EARLY TERMINATION OF SWAP AGREEMENT
Upon the occurrence and continuance of any Swap Event of Default, the
non-defaulting party will have the right to designate an "Early Termination
Date" (as defined in the Swap Agreement). On the Early Termination Date, the
Swap Agreement will terminate. With respect to Swap 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 Swap Termination Event) and will
occur only upon notice and, in certain cases, after the party causing the Swap
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 Swap 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".
The Owner Trustee will assign its rights under the Swap Agreement to the
Indenture Trustee in connection with the Owner Trustee's pledge of the assets of
the Trust as collateral for the Notes. The Indenture provides 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) any Swap Termination Event
(except as described in the following sentence) with respect to which the Swap
Counterparty is an Affected Party, the Indenture Trustee may and will, at the
direction of holders of Class A-2, Class A-3 and/or Class A-4 Notes evidencing
51% or more of the aggregate of the outstanding principal balances of all such
classes voting as a single class, by notice to the Swap Counterparty, designate
an Early Termination Date with respect to the Swap Agreement. If a Swap
Termination Event occurs (i) as a result of the insolvency or bankruptcy of the
Trust or the Swap Counterparty or (ii) because the Trust or the Swap
Counterparty becomes subject to registration as an "investment company" under
the Investment Company Act of 1940, the Indenture Trustee will be required by
the terms of the Indenture (as assignee of the rights of the Trust under the
Swap Agreement) to terminate the Swap Agreement.
Upon any Swap Termination, the Trust or the Swap Counterparty may be liable
to make a termination payment to the other, in some cases regardless, of which
of such parties may have caused such termination (any such payment, a "Swap
Termination Payment"). Any Swap 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 Swap 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 shortfalls in amounts payable as Class A-3 Swap Interest Amounts
and Class A-4 Swap Interest Amounts are due and payable on the first
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<PAGE>
Payment Date that would have occurred after the Early Termination Date). Any
Swap Termination Payment could, if interest rates have changed significantly, be
substantial.
Notwithstanding the foregoing, if the Swap Agreement is terminated as a
result of a Termination Event resulting from the Trust or the Swap
Counterparty becoming subject to registration as an "investment company" for
purposes of the Investment Company Act of 1940, as amended, other than as a
result of the amendment of such statue or the regulations promulgated thereunder
after the Closing Date, neither party will be required to pay a termination
payment.
A Swap Termination will constitute an Event of Default under the Indenture.
Upon the occurrence of any Event of Default (including any swap termination
event) that results in acceleration of the Notes or involving an uncured payment
default, the principal of each class of Class A Notes will become immediately
payable and the Indenture Trustee will be obligated to liquidate the assets of
the Trust. In any such event, the ability of the Trust to pay interest on each
class of Notes will depend on (a) the price at which the assets of the Trust are
liquidated, (b) the amount of the Swap Termination Payment, if any, which may be
due to the Swap Counterparty from the Trust under the Swap Agreement and (c) the
amount of the Swap Termination Payment, if any, which may be due to the Trust
from the Swap Counterparty under the Swap Agreement. In the event that the net
proceeds of the liquidation of the assets of the Trust are not sufficient to
make all payments due in respect of the Notes 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 herein and the claims of the Swap Counterparty in respect of
such net proceeds will rank higher in priority than the claims of the
Noteholders. See "Description of the Notes" and "Payments on the Notes" in this
Prospectus Supplement.
TAXATION
Neither the Trust nor the Swap Counterparty is obligated under the Swap
Agreement to gross up if withholding taxes are imposed on payments made under
the Swap Agreement. If payments by the Swap Counterparty to the Trust become
subject to withholding taxes, holders of Class A-2, Class A-3 and/or
Class A-4 Notes evidencing 51% or more of the aggregate of the outstanding
principal balances of all such classes voting as a single class may direct the
Indenture Trustee to terminate the Swap Agreement, as described above under
"--Swap Termination Events".
ASSIGNMENT
Except as provided below, neither the Trust nor the Swap Counterparty is
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 Indenture Trustee (as assignee of the rights of
the Trust under the Swap Agreement), (ii) the Swap Counterparty delivers an
opinion of independent counsel of recognized standing in form and substance
reasonably satisfactory to the Indenture Trustee (as assignee of the rights of
the Trust under the Swap Agreement) 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 as a result of such
transfer and (iv) the then current ratings of the Notes are not adversely
affected as a result of such transfer.
In addition, in the event the long-term debt rating of the Swap
Counterparty is reduced to a level below Aa3 by Moody's or AA- by Standard &
Poor's or the short-term debt rating of the Swap Counterparty is reduced to a
level below P-1 by Moody's or A-1+ by Standard & Poor's (or, in either case,
such lower ratings as may be permitted by Moody's and S&P without causing a
downgrade in the ratings applicable to the Notes), the Swap Counterparty may,
but is not obligated to, (i) collateralize its payment obligation thereunder,
provided that (a) a Swap Termination Event or Swap Event of Default does not
occur under the Swap Agreement as a result of such collaterization, and (b) if
the Swap Counterparty posts collateral, the ratings assigned to the Notes after
the posting of such collateral will be at least equal to the ratings assigned by
Moody's and Standard & Poor's (or their successors) to the Notes at the time of
such reduction of the rating of the Swap Counterparty's long-term debt; or (ii)
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
in the case of an assignment pursuant to clause (ii), (a) 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
Indenture
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<PAGE>
Trustee (as assignee of the rights of the Trust under the Swap Agreement), (b)
the Swap Counterparty delivers an opinion of independent counsel of recognized
standing in form and substance reasonably satisfactory to the Indenture Trustee
(as assignee of the rights of the Trust under the Swap Agreement) 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, (c) a Swap Termination Event or Swap
Event of Default does not occur under the Swap Agreement as a result of such
transfer and (d) the ratings assigned to the Notes after such assignment and
release will be at least equal to the ratings assigned by Moody's and Standard &
Poor's to the Notes at at the time of such reduction of the rating of the
Swap Counterparty's long-term debt.
Any cost of any 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 collateralize its payment
obligations or assign the Swap Agreement or obtain a replacement swap agreement
in the event of a ratings downgrade, and neither the Trust nor the Noteholders
will have any remedy against the Swap Counterparty if the Swap Counterparty
fails to collateralize its payment obligations or make such an assignment or
obtain a replacement swap agreement. In the event that the Swap Counterparty
does not elect to collateralize its payment obligations or 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 Notes by the
applicable Rating Agency will not be withdrawn or reduced.
MODIFICATION AND AMENDMENT OF SWAP AGREEMENT
The Indenture contains provisions permitting the Indenture Trustee (as
assignee of the rights of the Trust under the Swap Agreement) 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
Indenture 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 Noteholder. Any such amendment shall be deemed not to adversely
affect in any material respect the interests of any Noteholder if Standard and
Poor's delivers a letter to the Indenture Trustee to the effect that the
amendment will not result in a qualification, reduction or withdrawal of its
then-current rating of any class of Notes, and if the Indenture Trustee has
provided Moody's with 10 days prior written notice of the amendment and Moody's
shall not have notified the Indenture or Owner Trustee that the amendment might
or would result in the qualification, reduction or withdrawal of the rating it
has currently assigned to any class of Notes.
THE SWAP COUNTERPARTY
A description of the initial Swap Counterparty is provided under "The
Seller and the Servicer" herein and under "The Seller" in the Prospectus.
Information regarding the initial Swap Counterparty is publicly available as
described under "Where You Can Find More Information About Your Securities" in
the Prospectus. Where indicated by the context, as used herein "Swap
Counterparty" includes any party that replaces TMCC as Swap Counterparty as
described above under "--Assignment".
ERISA CONSIDERATIONS
The Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes may be
purchased by an employee benefit plan or an individual retirement account (a
"Plan") subject to ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"). A fiduciary of a Plan must determine that the purchase
of a Note is consistent with its fiduciary duties under ERISA and does not
result in a nonexempt prohibited transaction as defined in Section 406 of ERISA
or Section 4975 of the Code. For additional information regarding treatment of
the Notes under ERISA and the risks associated with the Notes being treated as
"equity interests" under the Plan Assets Regulation, see "ERISA Considerations"
in the Prospectus.
Certain exemptions from the prohibited transaction rules could be
applicable to the purchase and holding of the Class A-2 Notes, the Class A-3
Notes or the Class A-4 Notes by a Plan depending on the type and circumstances
of the plan fiduciary making the decision to acquire the Class A-2 Notes, the
Class A-3 Notes or the Class A-4 Notes. Potentially available exemptions would
include, without limitation, Prohibited Transaction Class Exemption
S-43
<PAGE>
("PTCE") 90-1, which exempts certain transactions involving insurance company
general accounts; PTCE 91-38, which exempts certain transactions involving bank
collective investment funds; PTCE 84-14, which exempts certain transactions
effected on behalf of a Plan by a "qualified professional asset manager"; and
PTCE 96-23, which exempts certain transactions effected on behalf of a Plan by
an "in-house asset manager." Insurance company general accounts should also
discuss with their legal counsel the availability of relief under Section 401(c)
of ERISA. A purchaser of the Class A-2 Notes, the Class A-3 Notes or the Class
A-4 Notes should be aware, however, that even if the conditions specified in one
or more exemptions are met, the scope of the relief provided by the applicable
exemption or exemptions might not cover all acts that might be construed as
prohibited exemptions.
The Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes may not be
purchased with the assets of a Plan if the Seller, the Servicer, the Indenture
Trustee, the Owner Trustee or any of their affiliates (a) has investment or
administrative discretion with respect to such Plan assets; (b) has authority or
responsibility to give, or regularly gives, investment advice with respect to
such Plan assets, for a fee and pursuant to an agreement or understanding that
such advice (i) will serve as a primary basis for investment decisions with
respect to such Plan assets and (ii) will be based on the particular investment
needs for such Plan; or (c) is an employer maintaining or contributing to such
Plan. None of the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes
may be purchased with the assets of a Plan if the Seller is a fiduciary with
respect to those Plan assets and participates in the decision to purchase these
Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of O'Melveny & Myers LLP, tax counsel to the trust ("Tax
Counsel"), under current law and subject to the discussion set forth below, the
Trust will not be classified as an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further, with respect
to the Notes, Tax Counsel will advise the Trust that the Class A-2, Class A-3
and Class A-4 Notes will be classified as debt for federal income tax purposes.
The Noteholders will be deemed to agree, by their purchase of the Notes, to
treat the Notes as debt for federal income tax purposes.
In addition, Tax Counsel has prepared or reviewed the statements under the
heading "Summary of Terms--Tax Status" as they relate to federal income tax
matters and under the heading "Certain Federal Income Tax Consequences" herein
and in the Prospectus and is of the opinion that such statements are correct in
all material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership for
federal income tax purposes on investors generally and of related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to the investor's specific tax
circumstances that would be provided by an investor's own tax adviser.
Accordingly, each investor is advised to consult its own tax advisor with regard
to the tax consequences to it of investing in Notes.
For additional information regarding the federal and state tax treatment of
the Trust, and the federal and state tax consequences of the purchase, ownership
and disposition of the Notes, prospective investors should refer to the
discussion in the accompanying Prospectus under the heading "Certain Federal
Income Tax Consequences--Tax Treatment of Owner Trusts."
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Seller has agreed to cause the Trust to sell to each of the Class
A-2 Note/Class A-3 Note/Class A-4 Note Underwriters named below (collectively,
the "Class A-2 Note/Class A-3 Note/Class A-4 Note Underwriters"), and each of
the Class A-2 Note/Class A-3 Note/Class A-4 Note Underwriters has severally
agreed to purchase the initial principal amount of Class A-2 Notes, Class A-3
Notes and Class A-4 Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITERS CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Deutsche Bank Securities Inc................................ $154,000,000 $154,000,000 $107,260,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................ 154,000,000 154,000,000 107,260,000
Chase Securities Inc........................................ 33,000,000 33,000,000 22,983,000
Lehman Brothers Inc......................................... 33,000,000 33,000,000 22,983,000
Morgan Stanley & Co. Incorporated........................... 33,000,000 33,000,000 22,983,000
Salomon Smith Barney Inc.................................... 33,000,000 33,000,000 22,983,000
Total.................................................... $440,000,000 $440,000,000 $306,452,000
</TABLE>
The Seller has been advised by the Class A-2 Note/Class A-3 Note/Class A-4
Note Underwriters that they propose initially to offer the Class A-2 Notes, the
Class A-3 Notes and the Class A-4 Notes offered by this prospectus supplement to
the public at the prices set forth herein. After the initial public offering of
such Class A-2 Notes, Class A-3 Notes and Class A-4 Notes, the public offering
price may change.
The underwriting discounts and commissions, the selling concessions that
the Underwriters may allow to certain dealers, and the discounts that such
dealers may reallow to certain other dealers, each expressed as a percentage of
the principal amount of the related class of Notes and as an aggregate dollar
amount, shall be as follows:
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNT AND SELLING
COMMISSIONS AND NET PROCEEDS CONCESSIONS REALLOWANCE
PLACEMENT FEES TO THE SELLER(1) NOT TO EXCEED NOT TO EXCEED
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Class A-2 Notes.......................... 0.125% 99.868255% 0.075% 0.040%
Class A-3 Notes.......................... 0.175% 99.825000% 0.105% 0.055%
Class A-4 Notes.......................... 0.255% 99.745000% 0.155% 0.075%
Total for the offered Notes........... $2,101,453 $1,184,320,869
</TABLE>
--------------
(1) Before deducting expenses payable by the Seller, estimated to be
$850,000.
Until the distribution of the Notes is completed, rules of the SEC may
limit the ability of the Underwriters and certain selling group members to bid
for and purchase the Notes. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions to stabilize the price of the Notes.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering, (i.e., they sell more Notes than are set forth on the cover page
of this Prospectus Supplement), the Underwriters may reduce that short position
by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Notes in the
open market to reduce the Underwriters' short position or to stabilize the price
of the Notes, they may reclaim the amount of the selling concession from any
Underwriter or selling group member who sold those Notes as part of the
offering.
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<PAGE>
In general, purchases of a security for the purposes of stabilization or to
reduce a short position could cause the price of the security to be higher that
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Seller nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that any of the
transactions described above may have on the price of the Notes. In addition,
neither the Seller nor any of the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Notes are new issues of securities and there currently is no secondary
market for the Notes. The Underwriters for the Notes expect to make a market in
such Notes but will not be obligated to do so. There is no assurance that a
secondary market for the Notes will develop. If a secondary market for the Notes
does develop, it might end at any time or it might not be sufficiently liquid to
enable you to resell any of your Notes.
The Indenture Trustee may, from time to time, invest the funds in the
Collection Account and the Reserve Account in investments acquired from or
issued by the Underwriters or the placement agent.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with the Servicer and its affiliates.
The Seller and TMCC have agreed to indemnify the Underwriters agent against
certain liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
The underwriters have informed the Seller that they do not expect
discretionary sales by the Underwriters to exceed 5% of the principal amount of
the Notes offered by this Prospectus Supplement.
It is expected that the delivery of the Notes will be made against payment
therefor on or about the Closing Date, which is expected to be the ninth
business day following the date hereof. Under Rule 15c-6 under the Exchange Act,
trades in the secondary market generally are required to settle within three
business days, unless the parties thereto expressly agree otherwise.
Accordingly, purchasers who wish to trade the Notes on the date hereof and for a
period of days hereafter will be required, by virtue of the fact that the Notes
initially will settle ninth business days after the date hereof, to specify an
alternate settlement cycle at the time of any such trade to avoid a failed
settlement.
Each Underwriter and the placement agent will represent that (i) it has not
offered or sold and will not offer or sell, prior to the date six months after
their date of issuance, any Notes to persons in the United Kingdom, except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted in and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Notes to a person who is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1997 or is a person to whom the document can otherwise
lawfully be issued or passed on.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Notes and certain federal income tax and
California state income tax and other matters will be passed upon for the Trust
by O'Melveny & Myers LLP. Certain legal matters relating to the Notes will be
passed upon for the Underwriters and the placement agent by Stroock & Stroock &
Lavan LLP.
S-46
<PAGE>
<TABLE>
<CAPTION>
INDEX OF TERMS
<S> <C> <C> <C>
ABS............................................. 27 Scheduled Payments.......................... 21
ABS Table....................................... 28 SEC......................................... 30
Aggregate Net Losses............................ 36 Securities.................................. 19
Available Collections........................... 33 Securityholder.............................. 18
Business Day.................................... 30 Seller...................................... 20
Charge-off Rate................................. 35 Servicer.................................... 20
Class A Notes................................... 19 Servicing Fee Rate.......................... 37
Class A-1 Final Scheduled Payment Date.......... 31 Specified Reserve Account Balance........... 35
Class A-1 Notes................................. 19 Swap Agreement.............................. 40
Class A-2 Final Scheduled Payment Date.......... 31 Swap Event of Default....................... 41
Class A-2 Notes................................. 19 Swap Termination Event...................... 41
Class A-3 Final Scheduled Payment Date.......... 32 Swap Termination Payment.................... 41
Class A-3 Notes................................. 19 Subordinated Seller's Interest.............. 19
Class A-4 Final Scheduled Payment Date.......... 32 Summary of Terms............................ 3
Class A-4 Notes................................. 19 Tax Counsel................................. 44
Closing Date.................................... 20 Tax Event................................... 41
Code............................................ 43 TMCC........................................ 19
Current Receivable.............................. 36 TMCRC....................................... 19
Cutoff Date..................................... 20 Transfer and Servicing Agreements........... 37
Dealer Recourse................................. 19 Trust....................................... 19
Defaulted Receivable............................ 33 Trust Agreement............................. 19
Delaware Trustee................................ 19 U. S. Person................................ A-3
Delinquency Percentage.......................... 36
Determination Date.............................. 32
Early Termination Date.......................... 41
Eligible Investments............................ 38
Event of Default................................ 32
Excess Payment.................................. 38
Financed Vehicles............................... 20
Global Note..................................... A-1
Indenture Trustee............................... 20
Interest Period................................. 30
Interest Rate................................... 30
Liquidated Receivable........................... 36
Net Liquidation Proceeds........................ 33
Non-U. S. Person................................ A-4
Notes........................................... 19
Obligors........................................ 20
Owner Trustee................................... 20
Payment Date.................................... 30
Payments to Noteholders......................... 33
Plan............................................ 43
Pool Factor..................................... 30
Prepayment...................................... 38
Principal Distribution Account.................. 37
Principal Distribution Amount................... 33
Rating Agency................................... 36
Receivables..................................... 19
Receivables Pool................................ 20
Receivables Purchase Agreement.................. 20
Redemption Price................................ 38
</TABLE>
S-47
<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes (the
"Global Notes") will be available only in book-entry form. Investors in the
Global Notes may hold such Global Notes through DTC, Clearstream Banking societe
anonyme ("Clearstream Banking Luxembourg") or the Euroclear system (or their
successors or assigns). The Global Notes will be tradable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Notes through
Clearstream Banking Luxembourg and the Euroclear system will be conducted in the
ordinary way in accordance with their normal rules and operating procedures and
in accordance with conventional eurobond practice (i.e., three calendar day
settlement).
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedure applicable to U.S.
corporate debt obligations and prior asset-backed notes issues.
Secondary cross-market trading between Clearstream Banking Luxembourg or
the Euroclear system and DTC Participants holding notes will be effected on a
delivery-against-payment basis through the depositaries of Clearstream Banking
Luxembourg and the Euroclear system (in such capacity) and as DTC Participants.
Non-U.S. Persons (as defined below under "--Certain U.S. Federal Income Tax
Documentation Requirements) holding Global Notes will be subject to U.S.
withholding taxes unless such holders meet certain requirements and deliver
appropriate U.S. tax documents to the notes clearing organizations or their
participants.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of Cede
& Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Clearstream Banking Luxembourg and
the Euroclear system will hold positions on behalf of their participants through
their depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Notes through DTC will follow DTC
settlement practice. Investor notes custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Clearstream Banking
Luxembourg or the Euroclear system accounts will follow the settlement
procedures applicable to conventional eurobonds, except that there will be no
temporary global security and no "lock-up" or restricted period. Global Notes
will be credited to notes custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
asset-backed notes issues in same-day funds.
TRADING BETWEEN CLEARSTREAM BANKING LUXEMBOURG AND/OR EUROCLEAR SYSTEM
PARTICIPANTS. Secondary market trading between Clearstream Banking Luxembourg
Participants or Euroclear system Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CLEARSTREAM BANKING LUXEMBOURG OR EUROCLEAR
SYSTEM PARTICIPANTS. When Global Notes are to be transferred from the account of
a DTC Participant to the account of a Clearstream Banking Luxembourg Participant
or a Euroclear system Participant, the purchaser will send instructions to
Clearstream Banking Luxembourg or the Euroclear system through a Clearstream
Banking Luxembourg Participant or Euroclear system Participant at least one
business day prior to settlement. Clearstream Banking Luxembourg or the
Euroclear system will instruct the respective depositary, as the case may be, to
receive the Global Notes against payment.
A-1
<PAGE>
Payment will include interest accrued on the Global Notes from and including the
last coupon payment date to and excluding the settlement date, on the basis of
the actual number of days in such accrual period and a year assumed to consist
of 360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by the respective Depositary to the DTC Participant's
account against delivery of the Global Notes. After settlement has been
completed, the Global Notes will be credited to the respective clearing system
and by the clearing system, in accordance with its usual procedures, to the
Clearstream Banking Luxembourg Participant's or Euroclear system Participant's
account. The notes credit will appear the next day (European time) and the cash
debt will be back-valued to, and the interest on the Global Notes will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Clearstream Banking Luxembourg or Euroclear system cash
debt will be valued instead as of the actual settlement date.
Clearstream Banking Luxembourg Participants and Euroclear system
Participants will need to make available to the respective clearing systems the
funds necessary to process same-day funds settlement. The most direct means of
doing so is to preposition funds for settlement, either from cash on hand or
existing lines of credit, as they would for any settlement occurring within
Clearstream Banking Luxembourg or the Euroclear system. Under this approach,
they may take on credit exposure to Clearstream Banking Luxembourg or the
Euroclear system until the Global Notes are credited to their accounts one day
later.
As an alternative, if Clearstream Banking Luxembourg or the Euroclear
system has extended a line of credit to them, Clearstream Banking Luxembourg
Participants or Euroclear system Participants can elect not to preposition funds
and allow that credit line to be drawn upon to finance settlement. Under this
procedure, Clearstream Banking Luxembourg Participants or Euroclear system
Participants purchasing Global Notes would incur overdraft charges for one day,
assuming they clear the overdraft when the Global Notes are credited to their
accounts. However, interest on the Global Notes would accrue from the value
date. Therefore, in many cases the investment income on the Global Notes earned
during that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each Clearstream Banking
Luxembourg Participant's or Euroclear system Participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Notes to the
respective European Depositary for the benefit of Clearstream Banking Luxembourg
Participants or Euroclear system Participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
Participants a cross-market transaction will settle no differently than a trade
between two DTC Participants.
TRADING BETWEEN CLEARSTREAM BANKING LUXEMBOURG OR EUROCLEAR SYSTEM SELLER
AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream
Banking Luxembourg Participants and Euroclear system Participants may employ
their customary procedures for transactions in which Global Notes are to be
transferred by the respective clearing system, through the respective
Depositary, to a DTC Participant. The seller will send instructions to
Clearstream Banking Luxembourg or the Euroclear system through a Clearstream
Banking Luxembourg Participant or Euroclear system Participant at least one
business day prior to settlement. In these cases, Clearstream Banking Luxembourg
or the Euroclear system will instruct the Relevant Depositary, as appropriate,
to deliver the Global Notes to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Notes from and including the
last coupon payment to and excluding the settlement date on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the account of the Clearstream Banking
Luxembourg Participant or Euroclear system Participant the following day, and
receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant's
or Euroclear system Participant's account would be back-valued to the value date
(which would be the preceding day, when settlement occurred in New York). Should
the Clearstream Banking Luxembourg Participant or Euroclear system Participant
have a line of credit with its respective clearing system and elect to be in
debt in anticipation of receipt of the sale proceeds in its account, the back
valuation will extinguish any overdraft incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade fails),
receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant's
or Euroclear system Participant's account would instead be valued as of the
actual settlement date.
Finally, day traders that use Clearstream Banking Luxembourg or the
Euroclear system and that purchase Global Notes from DTC Participants for
delivery to Clearstream Banking Luxembourg Participants or Euroclear
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system Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Clearstream Banking Luxembourg or the Euroclear
system for one day (until the purchase side of the day trade is reflected in
their Clearstream Banking Luxembourg or Euroclear system accounts) in accordance
with the clearing system's customary procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their Clearstream Banking Luxembourg or
Euroclear system account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the Clearstream Banking Luxembourg
Participant or Euroclear system Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Notes holding notes through Clearstream
Banking Luxembourg or the Euroclear system (or through DTC if the beneficial
owner has an address outside the U.S.) will be subject to the 30% U.S.
withholding tax that generally applies to payments of interest (including
original issue discount) on registered debt issued by U.S. Persons, unless (i)
each clearing system, bank or other financial institution that holds customers'
notes in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8BEN). Beneficial owners of Global
Notes that are Non-U.S. Persons generally can obtain a complete exemption from
the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign
Status of Beneficial Owner for United States Tax Withholding). If the
information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
W-8ECI). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, generally can obtain an exemption
from the withholding tax by filing Form W-8ECI (Certificate of Foreign Person's
Claim For Exemption from Withholding of Tax on Income Effectively Connected with
the Conduct of a Trade or Business in the United States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM W-8BEN). Non-U.S. Persons residing in a country that has a tax treaty with
the United States can obtain an exemption or reduced tax rate depending on the
treaty terms) by filing Form W-8BEN (claiming treaty benefits). Form W-8BEN may
be filed by the beneficial owners or their agents.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE.
The Certificate Owner of a Global Security or his agent, files by
submitting the appropriate form to the person though whom it holds (the clearing
agency, in the case of persons holding directly on the books of the clearing
agency).
A Form W-8BEN on which the beneficial owner of a Global Security provides a
U.S. taxpayer identification number generally remains in effect until a change
in circumstances causes any of the information on the form to be incorrect. A
Form W-8ECI (and a Form W-8BEN on which a U.S. taxpayer identification number is
not provided) generally remains in effect for three calendar years, absent a
change in circumstances causing any information on the form to be incorrect.
As used in the foregoing discussion, the term "U.S. Person" means (i) a
citizen or resident of the United States who is a natural person, (ii) a
corporation or partnership (or an entity treated as a corporation or
partnership) organized in or under the laws of the United States or any state
thereof, including the District of Columbia (unless, in the case of a
partnership, Treasury Regulations are adopted that provide otherwise), (iii) an
estate, the income of
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<PAGE>
which is subject to United States Federal income taxation, regardless of its
source or (iv) a trust, if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons (as such term is defined in the Code and Treasury Regulations)
have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence prior to August 20, 1996 that are
eligible to elect and have made a valid election to be treated as United States
persons (despite not satisfying the requirements in clause (iv) above) shall
also be U.S. Persons. The term "Non-U.S. Person" means any person who is not a
U.S. Person. This summary does not deal with all aspects of U.S. federal income
tax withholding that may be relevant to foreign holders of Global Notes.
Investors are advised to consult their tax advisors for specific tax advice
concerning their holding and disposing of Global Notes.
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<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 Financial
Services Corporation, Toyota Financial Services Americas 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 January 11, 2001.
<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 85
in this prospectus.
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<PAGE>
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 Place, North Building, Torrance,
California, and its telephone number is
(310) 468-7332.
SERVICER.................. Toyota Motor Credit Corporation. The principal
executive offices of Toyota Motor
Credit Corporation are located at
19001 South Western Avenue,
Torrance, California 90509, its
telephone number is (310)
468-1310 and its facsimile number
is (310) 468-6194.
TRUSTEE................... The trustee for each series of securities will be
named in the prospectus supplement for that series.
INDENTURE TRUSTEE......... If the trust issues notes, the trustee for the
indenture will be named in the prospectus
supplement for that series.
SECURITIES................ NOTES--A series of securities may include one or
more classes of notes. Notes of a series will be
issued pursuant to an indenture.
CERTIFICATES--Each series of securities will include
one or more classes of certificates, whether or not
a class of notes is issued as part of the series. If
a series of securities includes classes of notes,
holders of notes may have the right to receive their
payments before holders of certificates are paid. In
addition, classes of notes may have the right to
receive their payments before holders of other
classes of notes are paid, and classes of
certificates may have the right to receive their
payments before holders of other classes of
certificates are paid. This is referred to as
"sequential payment". In addition, payments on
certain classes of notes or certificates may be
subject to reduction to make amounts available to
cover payments to other classes of notes or
certificates. This is referred to as
"subordination". The prospectus supplement will
describe the payment priorities and any
subordination provisions that apply to a class of
notes or certificates.
TERMS--The terms of each class of notes and
certificates in a series will be described in the
prospectus supplement including:
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<PAGE>
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.
A class of notes may differ from other classes of
notes and a class of certificates may differ from
other classes of certificates in certain respects
including:
o timing and priority of payments;
o seniority;
o allocations of losses;
o interest rate or formula;
o amount of principal or interest payments;
o whether interest or principal will be payable
to holders of the class if certain events
occur; and
o the right to receive collections from
designated portions of the receivables owned
by the trust.
FORM--If you acquire a beneficial ownership interest
in the securities you will generally hold them
through The Depository Trust Company in the United
States or Clearstream Banking societe anonyme or the
Euroclear System in Europe or Asia. This is referred
to as "book-entry" form. As long as the securities
are held in book-entry form, you will not receive a
definitive certificate representing the securities.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO
"CERTAIN INFORMATION REGARDING THE
SECURITIES--BOOK-ENTRY REGISTRATION" IN THIS
PROSPECTUS.
DENOMINATION--Securities will be issued in the
denominations specified in the related prospectus
supplement.
THE TRUST PROPERTY....... The assets of each trust:
o will be described in the prospectus
supplement;
o will primarily be a pool of retail
installment sales contracts (the
"receivables") secured by new or used
automobiles and light duty trucks ("financed
vehicles") and amounts due or collected under
the contracts on or after a specified cutoff
date; and
o will include related assets such as:
-- security interests in the financed
vehicles,
-- proceeds from claims on related insurance
policies, and
-- amounts deposited in specified bank
accounts.
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<PAGE>
Purchasers of Toyota and Lexus cars and light duty
trucks often finance their purchases by entering
into retail installment sales contracts with Toyota
and Lexus dealers who then resell the contracts to
Toyota Motor Credit Corporation. The purchasers of
the financed vehicles are referred to as the
"obligors" under the receivables. The terms of the
contracts must meet requirements specified by Toyota
Motor Credit Corporation.
On or before the date the securities of a series are
issued, Toyota Motor Credit Corporation will sell a
specified amount of receivables to Toyota Motor
Credit Receivables Corporation, the seller. The
seller will, in turn, sell them to the TRUST. The
sale by the seller to the trust will be documented
under:
o a pooling and servicing agreement among the
seller, the servicer and the trustee (if the
trust will be treated as a grantor trust for
federal income tax purposes); or
o a sale and servicing agreement among the
seller, the servicer and the trust (if the
trust will be treated as an owner trust for
federal income tax purposes).
The receivables to be sold by Toyota Motor Credit
Corporation to the seller and resold to the trust
will be selected based on criteria specified in the
sale and servicing agreement or the pooling and
servicing agreement, whichever is applicable. These
criteria will be described in the applicable
prospectus supplement.
The trust will use collections on the receivables to
pay interest and principal to holders of each class
of securities. The prospectus supplement will
describe whether:
o collections received each month will be
passed through to holders of securities on a
monthly basis; or
o whether payments will instead be made on a
quarterly, semi-annual, annual or other
basis.
If payments are made other than monthly, the trust
will need to invest the collections until the
relevant payment date. These investments will be
highly rated and must satisfy criteria specified in
the related pooling and servicing agreement or sale
and servicing agreement. Because of the
administrative difficulties involved in obtaining
investments that will provide payments to the trust
on the day before payments are to be made to holders
of securities and that earn a sufficient amount of
interest, in some cases the investments will be
demand notes issued by Toyota Motor Credit
Corporation. These demand notes will be unsecured
general obligations of Toyota Motor Credit
Corporation and will rank equally with all other
outstanding unsecured and unsubordinated debt of
Toyota Motor Credit Corporation.
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<PAGE>
YOU SHOULD REFER TO THE APPLICABLE PROSPECTUS
SUPPLEMENT FOR MORE INFORMATION ABOUT THE TERMS AND
CONDITIONS OF ANY TMCC DEMAND NOTES. IN ADDITION,
YOU SHOULD REFER TO "TMCC DEMAND NOTES" IN THIS
PROSPECTUS.
CREDIT AND CASH FLOW
ENHANCEMENT............ The trusts may include certain features designed to
provide protection to one or more classes of
securities. These features are referred to as
"credit enhancement". Credit enhancement may
include any one or more of the following:
o sequential payment or other payment
prioritization of certain classes;
o subordination of one or more other classes of
securities;
o reserve fund;
o over-collateralization;
o letters of credit or other credit facilities;
o surety bonds;
o guaranteed investment contracts;
o repurchase obligations;
o cash deposits; or
o other agreements or arrangements providing
for other third party payments or other
support.
In addition, the trusts may include certain features
designed to ensure the timely payment of amounts
owed to securityholders. These features may include
any one or more of the following:
o yield maintenance agreements;
o swap transactions;
o liquidity facilities;
o cash deposits; or
o other agreements or arrangements providing
for other third party payments or other
support.
The specific terms of any credit or cash flow
enhancement applicable to a trust or to the
securities issued by a trust will be described in
detail in the applicable prospectus supplement,
including any limitations or exclusions from
coverage.
SERVICING............... Toyota Motor Credit Corporation will be appointed to
act as servicer for the receivables. In that
capacity, the servicer will handle all collections,
administer defaults and delinquencies and otherwise
service the contracts. The trust will pay the
servicer a monthly fee equal to 1/12 of 1.00% of the
total principal balance of the receivables as of the
first day of the preceding month. The servicer will
also receive additional servicing compensation in
the form of investment earnings, late fees and
other administrative
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<PAGE>
fees and expenses or similar charges received by the
servicer during such month.
The servicer will also be obligated to advance to
the trust interest on the receivables that is due
but unpaid by the obligor. In addition, the servicer
will be obligated to advance to the trust due but
unpaid principal of any receivables that are
classified as precomputed receivables rather than as
simple interest receivables. The servicer will not
be required to make any advance if it determines
that it will not be able to recover an advance from
an obligor. The trust will reimburse the servicer
from late collections on the receivables for which
it has made advances, or from collections generally
if the servicer determines that an advance will not
be recoverable with respect to such receivable.
FOR MORE DETAILED INFORMATION ON ADVANCES AND
REIMBURSEMENT OF ADVANCES, SEE "DESCRIPTION OF THE
TRANSFER AND SERVICING AGREEMENT--ADVANCES" IN THIS
PROSPECTUS.
OPTIONAL REDEMPTION...... The servicer may purchase all of the receivables
when the outstanding aggregate principal balance of
the receivables declines to 10% or less of the
original total principal balance of the receivables
as of the cutoff date, which would cause early
redemption of the securities.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO
"DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENT--TERMINATION" IN THIS PROSPECTUS.
TAX STATUS............... GRANTOR TRUSTS--The applicable prospectus supplement
will specify whether a trust will be treated as a
grantor trust for federal income tax purposes. If
a trust is referred to as a "grantor trust" in
the applicable prospectus supplement, special tax
counsel to the trust will be required to deliver
an opinion that:
o the trust will be treated as a grantor trust
for federal income tax purposes, and
California franchise and income tax purposes;
and
o the trust will not be subject to federal
income tax.
OWNER TRUSTS--If the trust is referred to as an
"owner trust" in the applicable prospectus
supplement, special tax counsel to the trust will be
required to deliver an opinion for federal income
tax purposes and California income and franchise tax
purposes:
o as to the characterization as debt of the
notes issued by the trust; and
o that the trust will not be characterized as
an association publicly traded partnership)
taxable as a corporation.
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<PAGE>
If a trust is referred to as an "owner trust" in the
applicable prospectus supplement:
o by purchasing a note you will be agreeing to
treat the note as indebtedness for tax
purposes; and
o by purchasing a certificate, you will be
agreeing to treat the trust (i) as a
partnership in which you are a partner or
(ii) if you are the sole beneficial owner of
the certificates, as a "disregarded entity,"
for federal income tax purposes and
California income and franchise tax purposes.
Applicable taxing authorities could impose
alternative tax characterizations of the trust and
the certificates. However, these characterizations
generally will not result in material adverse tax
consequences to certificateholders.
FOR ADDITIONAL INFORMATION CONCERNING THE
APPLICATION OF FEDERAL AND CALIFORNIA TAX LAWS, YOU
SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" AND "CERTAIN STATE TAX CONSEQUENCES"
IN THIS PROSPECTUS.
ERISA CONSIDERATIONS...... NOTES--Notes will generally be eligible for
purchase by employee benefit plans.
UNSUBORDINATED GRANTOR TRUST
CERTIFICATES--Certificates of a class issued by a
grantor trust that are not subordinated to any other
class will generally be eligible for purchase by
employee benefit plans.
OTHER CERTIFICATES--Subordinated classes of
certificates issued by a grantor trust and
certificates issued by owner trusts may be eligible
for purchase by an employee benefit plan or
individual retirement account, depending upon the
circumstances of the particular certificates being
offered.
FOR MORE DETAILED INFORMATION REGARDING THE ERISA
ELIGIBILITY OF ANY CLASS OF SECURITIES, YOU SHOULD
REFER TO "ERISA CONSIDERATIONS" IN THIS PROSPECTUS
AND THE RELATED PROSPECTUS SUPPLEMENT.
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<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.
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RECEIVABLES THAT FAIL TO COMPLY WITH CONSUMER PROTECTION LAWS MAY BE
UNENFORCEABLE, RESULTING IN DELAYS IN RECEIPT OF COLLECTIONS.
Numerous federal and state consumer protection laws regulate consumer
contracts such as the receivables. If any of the receivables do not comply with
one or more of these laws, the servicer may be prevented from or delayed in
collecting the receivables. If that happens, payments on the certificates could
be delayed or reduced. The seller will make representations and warranties
relating to the receivables' compliance with law and the trust's ability to
enforce the contracts. If the seller breaches any of these representations or
warranties, the trust's sole remedy will be to require the seller to repurchase
the affected receivables. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws" in this prospectus.
FUNDS HELD BY THE SERVICER THAT ARE INTENDED TO BE USED TO MAKE PAYMENTS
ON THE SECURITIES MAY BE EXPOSED TO A RISK OF LOSS.
The servicer generally may retain all payments and proceeds collected on
the receivables during each collection period. The servicer is generally not
required to segregate those funds from its own accounts until the funds are
deposited in the collection account on each payment date. Until any collections
or proceeds are deposited into the collection account, the servicer will be able
to invest those amounts for its own benefit at its own risk. The trust and
securityholders are not entitled to any amount earned on the funds held by the
servicer. If the servicer does not deposit the funds in the collection account
as required on any payment date, the trust may be unable to make the payments
owed on your securities.
IF THE TRUST ENTERS INTO A CURRENCY OR AN INTEREST RATE SWAP, PAYMENTS ON
THE SECURITIES WILL BE DEPENDANT ON PAYMENTS MADE UNDER THE SWAP AGREEMENT.
If the trust enters into a currency swap, interest rate swap or a
combined currency and interest rate swap, its ability to protect itself from
shortfalls in cash flow caused by currency or interest rate changes will depend
to a large extent on the terms of the swap agreement and whether the swap
counterparty performs its obligations under the swap. If the trust does not
receive the payments it expects from the swap counterparty, the trust may not
have adequate funds to make all payments to securityholders when due, if ever.
If the trust issues securities with adjustable interest rates, interest
will be due on the securities at adjustable rates, while interest will be earned
on the receivables at fixed rates. In this circumstance, the trust may enter
into an interest rate swap to reduce its exposure to changes in interest rates.
An interest rate swap requires one party to make payments to the other party in
an amount calculated by applying an interest rate (for example a floating rate)
to a specified notional amount in exchange for the other party making a payment
calculated by applying a different interest rate (for example a fixed rate) to
the same notional amount. For example, if the trust issues $100 million of
securities bearing interest at a floating LIBOR rate, it might enter into a swap
agreement under which the trust would pay interest to the swap counterparty in
an amount equal to an agreed upon fixed rate on $100 million in exchange for
receiving interest on $100 million at the floating LIBOR rate. The $100 million
would be the "notional" amount because it is used simply to make the
calculation. In an interest rate swap, no principal payments are exchanged.
If the trust issues securities denominated in a currency other than U.S.
dollars, the trust will need to make payments on the securities in a currency
other than U.S. dollars, as described in the related prospectus supplement.
Payments collected on the receivables, however, will be made in U.S. dollars. In
this circumstance, the trust may enter into a currency swap to reduce its
exposure to changes in currency exchange rates. A currency swap requires one
party to provide a specified amount of a currency to the other party at
specified times in exchange for the other party providing a different currency
at a predetermined exchange ratio. For example, if the trust issues securities
denominated in Swiss Francs, it might enter into a swap agreement with a swap
counterparty under which the trust would use the collections on the receivables
to pay U.S. dollars to the swap counterparty in exchange for receiving Swiss
Francs at a predetermined exchange rate to make the payments owed on the
securities.
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In some cases, a trust may enter into a swap with Toyota Motor Credit
Corporation as the swap counterparty. The terms of any swap will be described in
more detail in the applicable prospectus supplement.
TERMINATION OF A SWAP AGREEMENT WILL CAUSE TERMINATION OF THE TRUST.
A swap agreement may be terminated if certain events occur. Most of these
events are generally beyond the control of the trust or the swap counterparty.
If the swap agreement is terminated, the trust generally will also terminate. In
that event, the trustee will sell the assets of the trust and the trust will
terminate. In this type of situation, it is impossible to predict how long it
would take to sell the assets of the trust or what amount of proceeds would be
received. Some of the possible adverse consequences of such a sale are:
o The proceeds from the sale of assets under such circumstances may not
be sufficient to pay all amounts owed to you.
o Amounts available to pay you will be further reduced if the trust is
required to make a termination payment to the swap counterparty.
o The termination of the swap agreement may expose the trust to
currency or interest rate risk, further reducing amounts available to
pay you.
o The sale may result in payments to you significantly earlier than
expected, reducing the weighted average life of the securities and
the yield to maturity.
o Conversely, a significant delay in arranging a sale could result in a
delay in principal payments. This would, in turn, increase the
weighted average life of the securities and could reduce the yield to
maturity.
See "The Swap Agreement--Early Termination of Swap Agreement" for more
information concerning the termination of a swap agreement and the sale of trust
assets. Additional information about this subject, including a description of
the circumstances that may cause a termination of the swap agreement and the
trust and how the proceeds of a sale would be distributed, will be included in
the related prospectus supplement.
THE RATING OF A SWAP COUNTERPARTY OR THE ISSUER OF DEMAND NOTES MAY
AFFECT THE RATINGS OF THE SECURITIES.
If a trust enters into a swap or invests in Toyota Motor Credit
Corporation demand notes, the rating agencies that rate the trust's securities
will consider the provisions of the swap agreement or the demand notes and the
rating of the swap counterparty and Toyota Motor Credit Corporation, as issuer
of the demand notes in rating the securities. Toyota Motor Credit Corporation
may also be the swap counterparty. If a rating agency downgrades the debt rating
of the swap counterparty or Toyota Motor Credit Corporation, it is also likely
to downgrade the rating of the securities. Any downgrade in the rating of the
securities could have severe adverse consequences on their liquidity or market
value.
As of the date of this prospectus, Toyota Motor Credit Corporation's long
term debt ratings are Aa1 by Moody's Investors Service, Inc. and AAA by Standard
and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc., and
its short term debt ratings are P-1 by Moody's Investors Service, Inc. and A-1+
by Standard and Poor's Ratings Service, a division of The McGraw-Hill Companies,
Inc. A downgrade, suspension or withdrawal of any rating of the debt of Toyota
Motor Credit Corporation by a rating agency may result in the downgrade,
suspension or withdrawal of the rating assigned by that rating agency to any
class (or all classes) of notes or certificates. A downgrade, suspension or
withdrawal of the rating assigned by a rating agency to a class of notes or
certificates would likely have adverse consequences on their liquidity or market
value.
In the past, Moody's and Standard & Poor's have placed the long-term debt
ratings of Toyota Motor Corporation, Toyota Motor Credit Corporation's ultimate
parent, and its subsidiaries (including Toyota Motor Credit Corporation) under
review for possible downgrade on the basis of their respective reviews of
factors
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specific to those companies and factors external to those companies, including
their "country ceilings" for ratings of foreign currency-denominated debt and
bank deposits and yen-denominated securities issued or guaranteed by the
government of Japan. In the past, Moody's has downgraded the long-term debt of
Toyota Motor Corporation and its subsidiaries (including Toyota Motor Credit
Corporation) to Aa1 from Aaa. If either rating agency lowers its credit rating
for Japan below that rating agency's then current credit rating of Toyota Motor
Corporation and its subsidiaries (including Toyota Motor Credit Corporation),
that rating agency would likely lower its credit rating of Toyota Motor
Corporation and its subsidiaries (including Toyota Motor Credit Corporation) to
the same extent.
To provide some protection against the adverse consequences of a
downgrade, the swap counterparty may be permitted, but generally not required,
to take the following actions if the rating agencies reduce its debt ratings
below certain levels:
o collateralize its obligations under the swap agreement;
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
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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.
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
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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.
The Seller was organized primarily for the purpose of acquiring
installment sales contracts similar to the Receivables and associated rights
from TMCC, causing the issuance of securities similar to the Securities and
engaging in related transactions. The Seller's articles of incorporation limit
the activities of the Seller to the foregoing purposes and to any activities
incidental to and necessary for such purposes.
THE SERVICER
Toyota Motor Credit Corporation ("TMCC" or the "Servicer") was
incorporated in California on October 4, 1982, and commenced operations in May
1983. At August 31, 2000, TMCC had three regional offices and 33 branches in
various locations in the United States, a branch in Puerto Rico and a
centralized customer service center in Iowa. The address of TMCC's principal
executive offices is 19001 South Western Avenue, Torrance, California 90509.
TMCC has one wholly owned subsidiary engaged through subsidiaries organized in
various jurisdictions in the insurance business, a wholly-owned subsidiary that
provides retail and wholesale financing and other financial services to
authorized Toyota and Lexus vehicle dealers and their customers in Puerto Rico,
a wholly-owned limited purpose subsidiary formed to acquire and securitize
retail finance receivables and a wholly-owned limited purpose subsidiary formed
to acquire and securitize lease receivables. TMCC and its subsidiaries are
collectively referred to as "TMCC".
TMCC provides retail and wholesale financing, retail leasing and certain
other financial services to authorized Toyota and Lexus vehicle and Toyota
industrial equipment dealers and their customers in the United States (excluding
Hawaii) and the Commonwealth of Puerto Rico. In addition, each of TMCC's
branches provides underwriting and loan servicing support to dealers and
customers for most financial services offered by TMCC. TMCC's primary business
is providing vehicle retail and wholesale financing and retail leasing. TMCC is
a wholly-owned subsidiary of Toyota Financial Services Americas Corporation.
On July 7, 2000, Toyota Financial Services Corporation was incorporated
to oversee Toyota Motor Corporation's worldwide financial services operations,
including those in the United States. On October 1, 2000 Toyota Financial
Services Corporation assumed ownership of TMCC, which previously had been a
subsidiary of Toyota Motor Sales, U.S.A., Inc. All of the outstanding stock of
Toyota Motor Credit Corporation is now owned by Toyota Financial Services
Americas Corporation, a wholly-owned subsidiary of Toyota Financial Services
Corporation.
UNDERWRITING OF MOTOR VEHICLE LOANS
TMCC purchases automobile and/or light truck retail installment sales
contracts from approximately 1,200 Toyota and Lexus dealers located throughout
the United States, excluding Hawaii. Underwriting of such retail installment
sales contracts is performed by each branch using similar underwriting
standards. Dealers originate these receivables in accordance with TMCC's
requirements as specified in existing agreements between TMCC and such dealers.
The receivables are purchased in accordance with TMCC's underwriting
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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.
In April, 2000, TMCC completed the national launch of an expanded tiered
pricing program for retail installment sales contracts. The objective of the
expanded program is to better match customer risk with contract rates charged to
allow profitable purchases of a wider range of risk levels. Implementation of
this expanded program is expected to result in both increased contract yields
and increased credit losses in connection with purchases of higher risk
contracts.
The final credit decision is made based upon the degree of credit risk
perceived and the amount of credit requested. If an application is conditionally
approved or rejected, the dealer is notified of the conditions required for the
approval or reasons for rejection. Additionally, an Equal Credit Opportunity Act
adverse action notice is sent to the customer specifying the reasons for
modification or rejection of the application for credit.
TMCC's retail installment sales contracts require obligors to maintain
specific levels of physical damage insurance during the term of the contract. At
the time of purchase, an obligor signs a statement indicating he has or will
have in effect the levels of insurance required by TMCC and provides the name
and address of his insurance company and agent. Obligors are generally required
to provide TMCC with evidence of compliance with the foregoing insurance
requirements. The terms of each Receivable allow, but do not require, TMCC to
(and TMCC, in accordance with its current normal servicing procedures, does not)
obtain any such coverage on behalf of the Obligor.
SERVICING OF MOTOR VEHICLE LOANS
Each branch services the loans it originates using the same servicing
system and procedures, except that centralized tracking units monitor bankruptcy
administration and recovery. The collection department of each branch manages
the liquidation of each receivable. TMCC considers an obligor to be past due if
less than 90% of a regularly scheduled payment is received by the due date. TMCC
uses an on-line collection system that prioritizes loans for collections
efforts, including the generation of past-due notices and signaling TMCC
collections personnel to attempt to make telephone contact with delinquent
obligors based on a behavioral scoring method (which analyzes borrowers' past
performance to predict future payment behavior). TMCC generally determines
whether to commence repossession efforts before a receivable is 60 days past
due. Repossessed vehicles are held in inventory to comply with statutory
requirements and then sold at public auctions. Any deficiencies remaining after
sale or after full charge-off are pursued by TMCC to the extent practical and
legally permitted. See "Certain Legal Aspects of the Receivables--Deficiency
Judgments and Excess Proceeds". Collections of deficiencies are administered at
a centralized facility. TMCC's policy is to charge-off an auto loan as soon as
disposition of the vehicle has been effected and sales proceeds have been
received. When repossession and disposition of the collateral has not been
effected, the charge-off occurs as soon as TMCC determines that the vehicle
cannot be recovered.
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WHERE YOU CAN FIND MORE INFORMATION ABOUT YOUR SECURITIES
THE TRUST--The Trustee, will provide to securityholders
("Securityholders") (which shall be Cede & Co. as the nominee of DTC unless
definitive Securities are issued under the limited circumstances described
herein) unaudited monthly and annual reports concerning the Receivables and
certain other matters. See "Certain Information Regarding the
Securities--Reports to Securityholders" and "Description of the Transfer and
Servicing Agreements--Evidence as to Compliance" in the Prospectus. If and for
so long as any Securities listed on an exchange and the rules of such exchange
so require, each such report (including a statement of the outstanding principal
balance of each class of Securities) also shall be delivered to such exchange on
the related Payment Date or date for delivery of such reports. Copies of such
reports may be obtained at no charge at the offices specified in the applicable
Prospectus Supplement.
THE SELLER--Toyota Motor Credit Receivables Corporation, as Seller of the
Receivables, has filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933 (the "Securities Act") of which this Prospectus forms a
part. The Registration Statement is available for inspection without charge at
the public reference facilities maintained at the principal office of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New
York, New York 10048. You may obtain information on the operation of the SEC's
reference room by calling the SEC at (800) SEC-0330. You may obtain copies of
such materials at prescribed rates by writing to the Public Reference Section of
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
SEC also maintains a website (http://www.sec.gov) that contains reports,
registration statements, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
TMCC--If the trust invests in demand notes issued by TMCC, TMCC, in its
capacity as issuer of demand notes, will be a registrant under the Registration
Statement. In that capacity, TMCC will be subject to the informational
requirements of the United States Securities Exchange Act. In accordance with
that law, TMCC will file annual, quarterly and special reports and other
information with the SEC. If you want more information about TMCC, you may
review the Registration Statement and TMCC's periodic filings, obtain copies of
such documents at prescribed rates or access the SEC's website. The relevant
contact information for the SEC is set forth in the paragraph captioned "The
Seller" above.
TMCC's filed periodic reports contain important information regarding
TMCC. If the Trust invests in demand notes issued by TMCC, TMCC incorporates by
reference its Annual Report on Form 10-K for the year ended September 30, 2000,
and any filings made by it with the SEC under Sections 13(a) or 15(d) of the
United States Securities Exchange Act after the initial filing of the
registration statement. Any information in any such reports filed with the SEC
subsequent to the date of this Prospectus will automatically update this
Prospectus.
If and for so long as Securities are listed on an exchange and the rules
of such exchange so require, the applicable Prospectus Supplement will include
the address of an office in the jurisdictions specified by the rules of such
exchange at which copies of the Registration Statement filed by TMCRC and TMCC
(including all documents incorporated therein) and TMCC's periodic SEC reports
can be obtained for so long as those Securities are outstanding. If so required
by the rules of such exchange, copies of those documents will also be filed with
such exchange for so long as those Securities are outstanding. Copies of the
operative agreements relating to the Securities will also be filed with the SEC
and with any such exchange that so requires.
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THE RECEIVABLES POOLS
The Receivables Pools will include the Receivables purchased as of the
Cutoff Date. The Receivables were originated by Dealers in accordance with
TMCC's requirements and subsequently purchased by TMCC. The Receivables evidence
the indirect financing made available by TMCC to the related obligors (the
"Obligors") in connection with the purchase by such Obligors of the vehicles
financed thereby (the "Financed Vehicles"). On or before the date of initial
issuance of the Securities (the "Closing Date"), TMCC will sell the Receivables
to the Seller pursuant to the receivables purchase agreement (the "Receivables
Purchase Agreement") between the Seller and TMCC. The Seller will, in turn, sell
the Receivables to the Trust pursuant to the related Transfer and Servicing
Agreement. During the term of the related Transfer and Servicing Agreement,
neither the Seller nor TMCC may substitute any other retail installment sales
contract for any Receivable sold to the Trust.
The Receivables in each Receivables Pool will have been purchased by the
Servicer from Dealers in the ordinary course of business through its branches
located in the United States. The Receivables are purchased from Dealers
pursuant to Dealer Agreements. TMCC purchases Receivables originated in
accordance with its credit standards which are based upon the vehicle buyer's
ability and willingness to repay the obligation as well as the value of the
vehicle being financed.
The Receivables to be held by each Trust for inclusion in a Receivables
Pool will be selected from TMCC's portfolio of auto and/or light duty truck
retail installment sales contracts that meet several criteria. Unless otherwise
provided in the related Prospectus Supplement, these criteria require that each
Receivable (i) is secured by a new or used vehicle, (ii) was originated in the
United States or a particular state, (iii) provides for monthly payments that
fully amortize the amount financed over its original term to maturity (except
for minimally different payments in the first or last month in the life of the
Receivables), and (iv) satisfies the other criteria, if any, set forth in the
related Prospectus Supplement. No selection procedures believed by the Seller to
be adverse to the Securityholders of any series will be used in selecting the
related Receivables.
Each Receivable will provide for the allocation of payments according to
(i) the simple interest method ("Simple Interest Receivables"), (ii) the
"actuarial" method ("Actuarial Receivables") or (iii) the "sum of periodic
balances" or "sum of monthly payments" method ("Rule of 78s Receivables" and,
together with the Actuarial Receivables, the "Precomputed Receivables").
SIMPLE INTEREST RECEIVABLES. Payments on Simple Interest Receivables will
be applied first to interest accrued through the date immediately preceding the
date of payment and then to unpaid principal. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the payment period will be less than if the payment had been made
on the due date, the portion of the payment applied to reduce the principal
balance will be correspondingly greater, and the principal balance will be
amortized more rapidly than scheduled. Conversely, if an Obligor pays an
installment after its due date, the portion of the payment allocable to interest
for the payment period will be greater than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly less, and the principal balance will be amortized more
slowly than scheduled, in which case a larger portion of the principal balance
may be due on the final scheduled payment date. No adjustment to the scheduled
monthly payments is made in the event of early or late payments, although in the
case of late payments the Obligor may be subject to a late charge.
ACTUARIAL RECEIVABLES. An Actuarial Receivable provides for amortization
of the loan over a series of fixed level monthly installments. Each Scheduled
Payment is deemed to consist of an amount of interest equal to 1/12 of the
stated annual percentage rate ("APR") of the Receivable multiplied by the
scheduled principal balance of the Receivable and an amount of principal equal
to the remainder of the Scheduled Payment. No adjustment to the scheduled
monthly payments is made in the event of early or late payments, although in the
case of late payments the Obligor may be subject to a late charge.
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RULE OF 78S RECEIVABLES. A Rule of 78s Receivable provides for the
payment by the Obligor of a specified total amount of payments, payable in
monthly installments on the related due date, which total represents the
principal amount financed and finance charges in an amount calculated on the
basis of the related APR for the term of such Receivable. The rate at which such
amount of finance charges is earned and, correspondingly, the amount of each
Scheduled Payment allocated to reduction of the outstanding principal balance of
a Rule of 78s Receivable are calculated in accordance with the Rule of 78s.
Under the Rule of 78s, the portion of each payment allocable to interest is
higher during the early months of the term of a Rule of 78s Receivable and lower
during later months than that under a constant yield method for allocating
payments between interest and principal. Notwithstanding the foregoing, all
payments received by the Servicer on or in respect of the Rule of 78s
Receivables will be allocated pursuant to the related Transfer and Servicing
Agreement, as the case may be, on an actuarial basis. No adjustment is made in
the event of early or late payments, although in the case of late payments the
Obligor may be subject to a late charge.
In the event of a prepayment in full (voluntarily or by acceleration) of
a Precomputed Receivable, a "Rebate" will be made to the Obligor of that portion
of the total amount of payments under the Receivable allocable to "unearned"
finance charges or other charges. In the event of the prepayment in full
(voluntarily or by acceleration) of a Simple Interest Receivable, a Rebate will
not be made to the Obligor, but the Obligor will be required to pay interest
only to the date immediately preceding the date of prepayment. The amount of a
Rebate under a Precomputed Receivable will always be less than or equal to the
remaining scheduled payments of interest that would have been due under a Simple
Interest Receivable for which all remaining payments were made on schedule.
Payments to Securityholders will not be affected by such Rebates under the Rule
of 78s Receivables because pursuant to the related Transfer and Servicing
Agreement such payments will be determined using the actuarial method.
Unless otherwise provided in the related Prospectus Supplement, each
Trust will account for the Rule of 78s Receivables as if such Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of 78s
Receivable in excess of the then outstanding principal balance of such
Receivable and accrued interest thereon (calculated pursuant to the actuarial
method) will not be paid to the Noteholders or passed through to the
Certificateholders of the applicable series but will be deemed to be an Excess
Amount and released to the Seller or otherwise applied as set forth in the
related Prospectus Supplement.
Additional information with respect to each Receivables Pool will be set
forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition, the distribution by APR and by the states of
origination, the portion of such Receivables Pool consisting of Precomputed
Receivables and of Simple Interest Receivables and the portion of such
Receivables Pool secured by new vehicles and by used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning TMCC's experience pertaining to
delinquencies, repossessions and net losses with respect to its portfolio of new
and used retail automobile and/or light duty truck receivables (including
receivables previously sold which TMCC continues to service) will be set forth
in each Prospectus Supplement. There can be no assurance that the delinquency,
repossession and net loss experience on any Receivables Pool will be comparable
to prior experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average lives of the Securities of any series will generally
be influenced by the rate at which the principal balances of the related
Receivables are paid, which payment may be in the form of scheduled amortization
or prepayments. For this purpose, the term "prepayments" includes prepayments in
full, partial prepayments (including those related to Rebates of extended
warranty contract costs and insurance premiums), liquidations due to default, as
well as receipts of proceeds from physical damage, credit life and disability
insurance policies and repurchases or purchases by the Seller or TMCC, as the
case may be, of certain Receivables for administrative reasons or for breaches
of representations and warranties. The term
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"weighted average life" means the average amount of time during which each
dollar of principal of a Receivable is outstanding.
All of the Receivables will be prepayable at any time without penalty to
the Obligor. However, partial prepayments on the Precomputed Receivables made by
Obligors will not be paid on the Payment Date following the Collection Period in
which they were received but will be retained and applied towards payments due
in later Collection Periods. If prepayments in full are received on the
Precomputed Receivables or if full or partial prepayments are received on the
Simple Interest Receivables, the actual weighted average life of the Receivables
may be shorter than the scheduled weighted average life of the Receivables set
forth in the related Prospectus Supplement. The rate of prepayment of automotive
receivables is influenced by a variety of economic, social and other factors,
including the fact that an Obligor generally may not sell or transfer the
Financed Vehicle securing a Receivable without the consent of the Seller.
No prediction can be made as to the rate of prepayment on the Receivables
in either stable or changing interest rate environments. TMCC maintains limited
records of the historical prepayment experience of the automobile retail
installment sales contracts included in its portfolio and is not aware of any
publicly available industry statistics for the entire industry on an aggregate
basis that set forth principal prepayment experience for retail installment
sales contracts similar to the Receivables over an extended period of time. TMCC
believes that its prepayment experience is consistent with that generally found
in the industry. However, no assurance can be given that prepayments on the
Receivables will conform to historical experience and no prediction can be made
as to the actual prepayment experience on the Receivables. The rate of
prepayment on the Receivables may also be influenced by the structure of the
related loan.
Under certain circumstances, the Seller or Servicer will be obligated to
repurchase Receivables from a given Trust pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain representations and warranties or covenants. See "Description of the
Transfer and Servicing Agreements--Sale and Assignment of Receivables" and
"--Servicing Procedures". In addition, pursuant to agreements between TMCC and
the Dealers, each Dealer is obligated to repurchase from TMCC contracts which do
not meet certain representations and warranties made by such Dealer (such Dealer
repurchase obligations are referred to herein as "Dealer Recourse"). Such
representations and warranties relate primarily to the origination of the
contracts and the perfection of the security interests in the related Financed
Vehicles, and do not typically relate to the creditworthiness of the related
Obligors or the collectibility of such contracts. Although the Dealer Agreements
with respect to the Receivables will not be assigned to the Trustee, the related
Sale and Servicing Agreement or Pooling and Servicing Agreement will require
that TMCC deposit any recovery in respect of any Receivable pursuant to any
Dealer Recourse in the related Collection Account. The sales by the Dealers of
installment sales contracts to TMCC do not generally provide for recourse
against the Dealers for unpaid amounts in the event of a default by an Obligor
thereunder, other than in connection with the breach of the foregoing
representations and warranties. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and "--Servicing Procedures".
Early retirement of the Securities may be effected by the exercise of the
option of the Servicer, or any successor to the Servicer, to purchase all of the
Receivables remaining in the Trust when the Pool Balance is 10% or less of the
Pool Balance as of the Cutoff Date. See "Description of the Transfer and
Servicing Agreements--Termination". Certain Events of Default could result in
liquidation of the assets of the Trust and acceleration of the related
Securities. See "Description of the Notes--The Indenture--Events of Default;
Rights upon Event of Default". If the Trust is a party to a swap agreement,
events resulting in termination of the swap agreement generally will also result
in liquidation of the assets of the Trust and acceleration of the related
Securities. See "The Swap Agreement--Termination Events" regarding events that
would result in a termination of a swap.
Any reinvestment risk resulting from the rate of prepayments of the
Receivables and the payment of such prepayments to Securityholders will be borne
entirely by the Securityholders.
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In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Securities of a given series on
each Payment Date, since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. No prediction can be made as to the actual prepayment
experience on the Receivables, and any reinvestment risks resulting from a
faster or slower incidence of prepayment of Receivables will be borne entirely
by the Securityholders of a given series.
The related Prospectus Supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to the particular Receivables Pool and the related series of
Securities.
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each payment with respect to
such class of Notes. The Note Pool Factor represents the remaining outstanding
principal balance of such class of Notes, as of the close of business on the
applicable Payment Date, as a fraction of the initial outstanding principal
balance of such class of Notes. The "Certificate Balance" for each class will
initially equal the principal balance as of the relevant Closing Date (the
"Original Certificate Balance") and, on each Payment Date thereafter, will be
reduced by all amounts allocable to principal paid on or prior to the Payment
Date in respect of each class of Notes. The "Certificate Pool Factor" for each
class of Certificates will be a seven-digit decimal which the Servicer will
compute prior to each payment with respect to such class of Certificates
indicating the remaining Certificate Balance of such class of Certificates, as
of the close of business on the applicable Payment Date, as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool Factor
and each Certificate Pool Factor will initially be 1.0000000 and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of Notes, or the reduction of the Certificate Balance of the
applicable class of Certificates, as the case may be. A Certificateholder's
portion of the aggregate outstanding principal balance of the related class of
Notes is the product of (i) the original denomination of such
Certificateholder's Note and (ii) the applicable Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate Balance for
the related class of Certificates is the product of (a) the original
denomination of such Certificateholder's Certificate and (b) the applicable
Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement with
respect to each Trust, the Securityholders will receive reports on or about each
Payment Date concerning (i) with respect to the Collection Period immediately
preceding such Payment Date, payments received on the Receivables, the Pool
Balance (as such term is defined in the related Prospectus Supplement, the "Pool
Balance"), each Certificate Pool Factor or Note Pool Factor, as applicable, and
various other items of information, and (ii) with respect to the Collection
Period second preceding such Payment Date, as applicable, amounts allocated or
paid on the preceding Payment Date and any reconciliation of such amounts with
information provided by the Servicer prior to such current Payment Date. In
addition, Securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Certain Information Regarding the Securities--Reports to
Securityholders".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the
Seller will use the net proceeds from the sale of the Securities of a given
series, together with a subordinated non-recourse promissory note, to purchase
Receivables from TMCC and to make the initial deposit into any Reserve Fund or
Yield Maintenance Account, if applicable.
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DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes (each,
a "class") of Notes of the related series will be issued pursuant to the terms
of an indenture (the "Indenture"), a form of which has been filed as an exhibit
to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Notes and
the Indenture.
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
Notes will be available for purchase in the denominations specified in the
related Prospectus Supplement in book-entry form only (unless otherwise
specified in the related Prospectus Supplement). The Seller has been informed by
DTC that DTC's nominee will be Cede, unless another nominee is specified in the
related Prospectus Supplement. Accordingly, such nominee is expected to be the
holder of record of the Notes (a "Noteholder") of each class. Unless and until
Definitive Notes are issued under the limited circumstances described herein or
in the related Prospectus Supplement, no Noteholder will be entitled to receive
a physical certificate representing a Note. All references herein and in the
related Prospectus Supplement to actions by Noteholders refer to actions taken
by DTC upon instructions from its participating organizations (the "DTC
Participants") and all references herein and in the related Prospectus
Supplement to payments, notices, reports and statements to Noteholders refer to
payments, notices, reports and statements to DTC or its nominee, as the
registered holder of the Notes, for distribution to Noteholders in accordance
with DTC's procedures with respect thereto. See "Certain Information Regarding
the Securities--Book-Entry Registration" and "--Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The related Prospectus Supplement will describe the timing and priority
of payment, seniority, allocations of losses, interest rate (the "Interest
Rate") and amount of or method of determining payments of principal and interest
on each class of Notes of a given series. Payments of interest on and principal
of any Notes will be made on the dates specified in the related Prospectus
Supplement (each, a "Payment Date") in such amounts as are described in the
Prospectus Supplement. The right of holders of any class of Notes to receive
payments of principal and interest may be senior or subordinate to the rights of
holders of any other class or classes of Notes of such series. Payments of
interest on the Notes will generally be made prior to payments of principal. A
series may include one or more classes of Notes (the "Strip Notes") entitled to
(i) principal payments with disproportionate, nominal or no interest payments or
(ii) interest payments with disproportionate, nominal or no principal payments.
Each class of Notes may have a different Interest Rate, which may be a fixed,
variable or adjustable Interest Rate (and which may be zero for certain classes
of Strip Notes), or any combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate for each class of Notes of a given
series or the method for determining such Interest Rate. See also "Certain
Information Regarding the Securities Fixed Rate Securities" and "--Floating Rate
Securities". One or more classes of Notes of a series may be redeemable in whole
or in part, including as a result of the Seller exercising its option to
purchase the related Receivables Pool or other early termination of the related
trust.
One or more classes of Notes of a given series may have fixed principal
payment schedules, in the manner and to the extent set forth in the related
Prospectus Supplement. Noteholders of such Notes would be entitled to receive as
payments of principal on any given Payment Date the amounts set forth on such
schedule with respect to such Notes.
Unless otherwise specified in the related Prospectus Supplement, payments
to Noteholders of all classes within a series in respect of interest will have
the same priority. Under certain circumstances, on any Payment
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Date the amount available for such payments could be less than the amount of
interest payable on the Notes. If this is the case, each class of Noteholders
will receive its ratable share (based upon the aggregate amount of interest due
to such class of Noteholders) of the aggregate amount of interest available for
payment on the Notes. See "Description of the Transfer and Servicing
Agreements--Payments" and "--Credit and Cash Flow Enhancement".
If a series of Notes includes two or more classes of Notes, the
sequential order and priority of payment in respect of principal and interest,
and any schedule or formula or other provisions applicable to the determination
thereof, of each such class will be set forth in the related Prospectus
Supplement. Payments in respect of principal and interest of any class of Notes
will be made on a pro rata basis among all the Noteholders of such class.
THE INDENTURE
MODIFICATION OF INDENTURE. If a Trust has issued Notes pursuant to an
Indenture, the Trust and the Indenture Trustee may, with the consent of the
holders of not less than 51% of the outstanding Notes of the related series
(excluding Notes held by TMCC, TMCRC or any affiliate thereof), execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the related Indenture, or modify (except as provided below)
in any manner the rights of the related Noteholders.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series of Notes, without the consent of the holder of each such
outstanding Note affected thereby no supplemental indenture will: (i) change the
due date of any installment of principal of or interest on any such Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any such Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Receivables if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes of such series; (vii)
decrease the percentage of the aggregate principal amount of such Notes required
to amend the sections of the related Indenture which specify the applicable
percentage of aggregate principal amount of the Notes of such series necessary
to amend such Indenture or certain other related agreements; or (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
related Indenture with respect to any of the collateral for such Notes or,
except as otherwise permitted or contemplated in such Indenture, terminate the
lien of such Indenture on any such collateral or deprive the holder of any such
Note of the security afforded by the lien of such Indenture.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the
Notes of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of: (i)
a default for five days or more in the payment of any interest on any such Note;
(ii) a default in
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the payment of the principal of or any installment of the principal of any such
Note when the same becomes due and payable; (iii) a default in the observance or
performance of any covenant or agreement of the applicable Trust made in the
related Indenture and the continuation of any such default for a period of 90
days after notice thereof is given to such Trust by the applicable Indenture
Trustee or to such Trust and such Indenture Trustee by the holders of at least
25% in principal amount of such Notes then outstanding acting together as a
single class; (iv) any representation or warranty made by such Trust in the
related Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in a material respect as of the time
made, and such breach not having been cured within 30 days after notice thereof
is given to such Trust by the applicable Indenture Trustee or to such Trust and
such Indenture Trustee by the holders of at least 25% in principal amount of
such Notes then outstanding acting together as a single class; or (v) certain
events of bankruptcy, insolvency, receivership or liquidation of the applicable
Trust. However, the amount of principal required to be paid to Noteholders of
such series under the related Indenture will generally be limited to amounts
available to be deposited in the Collection Account. Therefore, unless otherwise
specified in the related Prospectus Supplement, the failure to pay principal on
a class of Notes generally will not result in the occurrence of an Event of
Default until the final scheduled Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any series, the related Indenture Trustee or holders of a majority in
principal amount of such Notes then outstanding (excluding Notes held by TMCC,
TMCRC or any affiliate thereof) may declare the principal of such Notes to be
immediately due and payable. Unless otherwise specified in the related
Prospectus Supplement, such declaration may, under certain circumstances, be
rescinded by the holders of a majority in principal amount of such Notes then
outstanding (excluding Notes held by TMCC, TMCRC or any affiliate thereof).
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
applicable Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables following an Event of Default, other than a default in the payment
of any principal of or a default for five days or more in the payment of any
interest on any Note of such series, unless (i) the holders of all such
outstanding Notes (excluding Notes held by TMCC, TMCRC or any affiliate thereof)
consent to such sale, (ii) the proceeds of such sale are sufficient to pay in
full the principal of and the accrued interest on such outstanding Notes at the
date of such sale or (iii) such Indenture Trustee determines that the proceeds
of Receivables would not be sufficient on an ongoing basis to make all payments
on such Notes as such payments would have become due if such obligations had not
been declared due and payable, and such Indenture Trustee obtains the consent of
the holders of 66 2/3% of the aggregate outstanding amount of such Notes
(excluding Notes held by TMCC, TMCRC or any affiliate thereof). Unless otherwise
specified in the Prospectus Supplement, in the event of the sale of the
Receivables by the Indenture Trustee following an Event of Default, the
Noteholders will receive notice and opportunity to submit a bid in respect of
such sale.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such Indenture
at the request or direction of any of the holders of such Notes, if such
Indenture Trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which might be incurred by it in
complying with such request. Subject to the provisions for indemnification and
certain limitations contained in the related Indenture, the holders of not less
than 51% of the principal amount of the outstanding Notes (excluding Notes held
by TMCC, TMCRC or any affiliate thereof) of a given series will have the right
to direct the time, method and place of conducting any proceeding or any remedy
available to the applicable Indenture Trustee, and the holders of a majority in
principal amount of such Notes (excluding Notes held by TMCC, TMCRC or any
affiliate thereof) then outstanding may, in certain cases, waive any default
with respect thereto, except a default in the deposit of collections or other
required amounts, any required payment from amounts held in any trust
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account in respect of amounts due on the Notes, payment of principal or interest
or a default in respect of a covenant or provision of such Indenture that cannot
be modified without the waiver or consent of all the holders of such outstanding
Notes (excluding Notes held by TMCC, TMCRC or any affiliate thereof).
Unless otherwise specified in the related Prospectus Supplement, no
holder of a Note of any series will have the right to institute any proceeding
with respect to the related Indenture, unless (i) such holder previously has
given to the applicable Indenture Trustee written notice of a continuing Event
of Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Notes of such series (other than TMCC, TMCRC or any affiliate
thereof) have made written request to such Indenture Trustee to institute such
proceeding in its own name as Indenture Trustee, (iii) such holder or holders
have offered such Indenture Trustee reasonable indemnity, (iv) such Indenture
Trustee has for 60 days failed to institute such proceeding and (v) no direction
inconsistent with such written request has been given to such Indenture Trustee
during such 60-day period by the holders of a majority in principal amount of
such outstanding Notes (other than TMCC, TMCRC or any affiliate thereof).
In addition, each Indenture Trustee and the related Noteholders (other
than TMCC, TMCRC or any affiliate thereof), by accepting the related Notes, will
covenant that they will not at any time institute against the applicable Trust
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless, among other things,
(i) the entity formed by or surviving such consolidation or merger is organized
under the laws of the United States, any state or the District of Columbia, (ii)
such entity expressly assumes such Trust's obligation to make due and punctual
payments upon the Notes of the related series and the performance or observance
of every agreement and covenant of such Trust under the Indenture, (iii) no
Event of Default shall have occurred and be continuing immediately after such
merger or consolidation, (iv) such Trust has been advised that the rating of the
Securities of such series then in effect would not be reduced or withdrawn by
the Rating Agencies as a result of such merger or consolidation and (v) such
Trust has received an opinion of counsel to the effect that such consolidation
or merger would have no material adverse tax consequence to the Trust or to any
related Noteholder or Certificateholder.
Each Trust will not, among other things, (i) except as expressly
permitted by the applicable Indenture, the applicable Transfer and Servicing
Agreements or certain related documents with respect to such Trust
(collectively, the "Related Documents"), sell, transfer, exchange or otherwise
dispose of any of the assets of such Trust, (ii) claim any credit on or make any
deduction from the principal and interest payable in respect of the Notes of the
related series (other than amounts withheld under the Code or applicable state
law) or assert any claim against any present or former holder of such Notes
because of the payment of taxes levied or assessed upon such Trust, (iii) except
as expressly permitted by the Related Documents, dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the related Indenture
to be impaired or permit any person to be released from any covenants or
obligations with respect to such Notes under such Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of such Trust or any part thereof,
or any interest therein or the proceeds thereof.
No Trust may engage in any activity other than as specified in this
Prospectus or in the related Prospectus Supplement. No Trust will incur, assume
or guarantee any indebtedness other than indebtedness incurred pursuant to the
related Notes and the related Indenture, pursuant to any Advances made to it by
the Servicer or otherwise in accordance with the Related Documents.
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ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture Trustee as such and any
action taken by it that materially affects the related Notes and that has not
been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series generally
may resign at any time and, if the Indenture Trustee and the Owner Trustee are
the same entity or are affiliates, the Indenture Trustee generally will resign
upon the occurrence of any event that may give rise to a conflict of interest
for such entity acting in both such capacities. Upon resignation of the
Indenture Trustee, the Issuer will be obligated to appoint a successor thereto
for such series. The Issuer or Administrator may also remove any such Indenture
Trustee if such Indenture Trustee ceases to be eligible to continue as such
under the related Indenture or if such Indenture Trustee becomes insolvent. In
such circumstances, the Issuer will be obligated to appoint a successor thereto
for the applicable series of Notes. Any resignation or removal of the Indenture
Trustee and appointment of a successor thereto for any series of Notes will not
become effective until acceptance of the appointment by such successor.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust that issues Certificates, one or more classes
(each, a "class") of Certificates of the related series will be issued pursuant
to the terms of a Trust Agreement or a Pooling and Servicing Agreement, a form
of each of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Certificates and the Trust Agreement or Pooling and
Servicing Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the Seller,
each class of Certificates will initially be represented by one or more
Certificates registered in the name of the nominee for DTC, except as set forth
below. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the Seller,
the Certificates will be available for purchase in the denominations specified
in the related Prospectus Supplement in book-entry form only (unless otherwise
specified in the related Prospectus Supplement). The Seller has been informed by
DTC that DTC's nominee will be Cede, unless another nominee is specified in the
related Prospectus Supplement. Accordingly, such nominee is expected to be the
holder of record of the Certificates (a "Certificateholder") of any series that
are not purchased by the Seller. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the Seller) will be
entitled to receive a physical certificate representing a Certificate. All
references herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants and all references herein and in the related Prospectus Supplement
to distributions, notices, reports and statements to
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Certificateholders refer to distributions, notices, reports and statements
given, made or sent to DTC or its nominee, as the case may be, as the registered
holder of the Certificates, for distribution to Certificateholders in accordance
with DTC's procedures with respect thereto. See "Certain Information Regarding
the Securities--Book-Entry Registration" and "--Definitive Securities". Any
Certificates of a given series owned by the Seller or its affiliates will be
entitled to equal and proportionate benefits under the applicable Trust
Agreement, except that such Certificates will be deemed not to be outstanding
for the purpose of determining whether the requisite percentage of
Certificateholders have given any request, demand, authorization, direction,
notice, consent or other action under the Related Documents.
PAYMENTS OF PRINCIPAL AND INTEREST
The timing and priority of payments, seniority, allocations of losses,
interest rate or pass through rate (the "Pass Through Rate") and amount of or
method of determining payments with respect to principal and interest of each
class of Certificates will be described in the related Prospectus Supplement.
Payments of interest on and principal of such Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Payment Date")
and in the amounts described in the related Prospectus Supplement. To the extent
provided in the related Prospectus Supplement, a series may include one or more
classes of Certificates (the "Strip Certificates") entitled to (i) payments in
respect of principal with disproportionate, nominal or no interest payments or
(ii) interest payments with disproportionate, nominal or no payments in respect
of principal. Each class of Certificates may have a different Pass Through Rate,
which may be a fixed, variable or adjustable Pass Through Rate (and which may be
zero for certain classes of Strip Certificates) or any combination of the
foregoing. The related Prospectus Supplement will specify the Pass Through Rate
for each class of Certificates of a given series or the method for determining
such Pass Through Rate. See also "Certain Information Regarding the
Securities--Fixed Rate Securities" and "--Floating Rate Securities". Unless
otherwise provided in the related Prospectus Supplement, payments in respect of
the Certificates of a given series that includes Notes may be paid sequentially
later than or be subordinated to payments in respect of the Notes of such series
as more fully described in the related Prospectus Supplement. The rights of
holders of any class of Certificates to receive payments of principal and
interest may also be paid sequentially later than or be subordinated to the
rights of holders of any other class or classes of Certificates of such series
as more fully described in the related Prospectus Supplement. Payments in
respect of interest on and principal of any class of Certificates will be made
on a pro rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more
classes of Certificates, the timing, sequential order, priority of payment or
amount of payments in respect of interest and principal, and any schedule or
formula or other provisions applicable to the determination thereof, of each
such class shall be as set forth in the related Prospectus Supplement.
If and as provided in the related Prospectus Supplement, certain amounts
remaining on deposit in the Collection Account after all required payments to
the related Securityholders have been made may be released to the Seller, TMCC
or one or more third party credit or liquidity enhancement providers.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Any class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes--Principal and Interest on the Notes" and
"Description of the Certificates--Payments of Principal and Interest".
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FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest during each
applicable Interest Period at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement.
The "Spread" is the number of basis points to be added to or subtracted
from the related Base Rate applicable to such Floating Rate Securities. The
"Spread Multiplier" is the percentage of the related Base Rate applicable to
such Floating Rate Securities by which such Base Rate will be multiplied to
determine the applicable interest rate on such floating Rate Securities. The
"Index Maturity" is the period to maturity of the instrument or obligation with
respect to which the Base Rate will be calculated.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Security"),
(iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the Federal Funds
Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD Rate Security")
or (vii) such other Base Rate as is set forth in such Prospectus Supplement.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the Federal
Reserve System. "H.15 Daily Update" means the daily update of H.15(519),
available through the world-wide-web site of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/releases/ h15/update, or any
successor site or publication. "Interest Reset Date" will be the first day of
the applicable Interest Reset Period, or such other day as may be specified in
the related Prospectus Supplement with respect to a class of Floating Rate
Securities.
Each applicable Prospectus Supplement will specify whether the rate of
interest on the related Floating Rate Securities will be reset daily, weekly,
monthly, quarterly, semiannually, annually or such other specified period (each,
an "Interest Reset Period") and the dates on which such Interest Rate will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Prospectus Supplement, the Interest Reset Date will be, in the case
of Floating Rate Securities which reset: (i) daily, each Business Day; (ii)
weekly, the Wednesday of each week (with the exception of weekly reset Treasury
Rate Securities which will reset the Tuesday of each week, except as specified
below); (iii) monthly, the third Wednesday of each month; (iv) quarterly, the
third Wednesday of March, June, September and December of each year; (v)
semiannually, the third Wednesday of the two months specified in the applicable
Prospectus Supplement; and (vi) annually, the third Wednesday of the month
specified in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, if any
Interest Reset Date for any Floating Rate Security would otherwise be a day that
is not a Business Day, such Interest Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a Floating
Rate Security as to which LIBOR is an applicable Base Rate, if such Business Day
falls in the next succeeding calendar month, such Interest Reset Date will be
the immediately preceding Business Day. Unless specified otherwise in the
applicable Prospectus Supplement, "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York,
or San Francisco, California are authorized or obligated by law, regulation,
executive order or decree to be closed. Unless otherwise specified in the
applicable Prospectus Supplement, with respect to Notes as to which LIBOR is an
applicable Base Rate, the definition of Business Day will include all London
Business Days. "London Business Day" means any day (a) if the Index Currency (as
defined below) is other than the Euro, on which dealings in deposits in such
Index Currency are transacted in the London interbank market or (b) if the Index
Currency is the Euro a day on which the Trans-European Automated Real-time Gross
Settlement Express Transfer System ("TARGET system") is open and on which
commercial banks and foreign exchange markets settle payments in London and New
York.
Unless otherwise specified in the related Prospectus Supplement, if any
Payment Date for any Floating Rate Security (other than the Final Payment Date)
would otherwise be a day that is not a Business Day, such
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Payment Date will be the next succeeding day that is a Business Day except that
in the case of a Floating Rate Security as to which LIBOR is the applicable Base
Rate, if such Business Day falls in the next succeeding calendar month, such
Payment Date will be the immediately preceding Business Day. Unless otherwise
specified in the related Prospectus Supplement, if the final Payment Date of a
Floating Rate Security falls on a day that is not a Business Day, the payment of
principal, premium, if any, and interest will be made on the next succeeding
Business Day, and no interest on such payment shall accrue for the period from
and after such Final Payment Date.
Except as otherwise specified in the applicable Prospectus Supplement,
each Floating Rate Security will accrue interest on an "Actual/360" basis, an
"Actual/Actual" basis, or a "30/360" basis, in each case as specified in the
applicable Prospectus Supplement. For Floating Rate Securities calculated on an
Actual/360 basis and Actual/Actual basis, accrued interest for each Interest
Period will be calculated by multiplying (i) the face amount of such Floating
Rate Security, (ii) the applicable interest rate, and (iii) the actual number of
days in the related Interest Period, and dividing the resulting product by 360
or 365, as applicable (or, with respect to an Actual/Actual basis Floating Rate
Security, if any portion of the related Interest Period falls in a leap year,
the product of (i) and (ii) above will be multiplied by the sum of (X) the
actual number of days in that portion of such Interest Period falling in a leap
year divided by 366 and (Y) the actual number of days in that portion of such
Interest Period falling in a non-leap year divided by 365). For Floating Rate
Securities calculated on a 30/360 basis, accrued interest for an Interest Period
will be computed on the basis of a 360-day year of twelve 30-day months,
irrespective of how many days are actually in such Interest Period. Unless
otherwise specified in the related Prospectus Supplement, with respect to any
Floating Rate Security that accrues interest on a 30/360 basis, if any Payment
Date including the related Final Payment Date falls on a day that is not a
Business Day, the related payment of principal or interest will be made on the
next succeeding Business Day as if made on the date such payment was due, and no
interest will accrue on the amount so payable for the period from and after such
Payment Date. The "Interest Period" with respect to any class of Floating Rate
Securities will be set forth in the related Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be the related
Trustee or Indenture Trustee with respect to such series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. Unless otherwise specified in the applicable
Prospectus Supplement, all percentages resulting from any calculation on
Floating Rate Securities will be rounded to the nearest one hundred-thousandth
of a percentage point, with five one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation on
Floating Rate Securities will be rounded to the nearest cent (with one-half cent
being rounded upward).
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
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Unless otherwise specified in the applicable Prospectus Supplement, the
"CD Rate" for each Interest Reset Period shall be the rate as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
"CD Rate Determination Date") for negotiable United States dollar certificates
of deposit having the Index Maturity specified in the applicable Prospectus
Supplement as published in H.15(519), as defined below, under the heading "CDs
(secondary market)".
The following procedures will be followed if the CD Rate cannot be
determined as described above:
(1) If the rate referred to above is not so published by 3:00 p.m., New
York City time, on the related Calculation Date, then the CD Rate on the
applicable CD Rate Determination Date will be the rate for negotiable United
States dollar certificates of deposit of the Index Maturity specified in the
applicable Prospectus Supplement as published in H.15 Daily Update (as defined
below), or other recognized electronic source used for the purpose of displaying
the applicable rate, under the caption "CDs (secondary market)".
(2) If the rate referred to in clause (1) above is not so published by
3:00 p.m., New York City time, on the related Calculation Date, then the CD Rate
on the applicable CD Rate Determination Date will be the rate calculated by the
Calculation Agent as the arithmetic mean of the secondary market offered rates
as of 10:00 a.m., New York City time, on the applicable CD Rate Determination
Date of three leading nonbank dealers in negotiable United States dollar
certificates of deposit in the City of New York selected by the Calculation
Agent for negotiable United States dollar certificates of deposit of major
United States money market banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Prospectus Supplement in an amount that is representative for a single
transaction in that market at the time.
(3) If the dealers selected by the Calculation Agent are not quoting as
set forth in clause (2) above, the CD Rate on the applicable CD Rate
Determination Date will be the rate in effect on the applicable CD Rate
Determination Date.
The "Calculation Date" pertaining to any CD Rate Determination Date shall
be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the Business Day preceding the applicable Payment Date.
COMMERCIAL PAPER RATE SECURITIES. Each Commercial Paper Rate Security
will bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by the
Calculation Agent for such Commercial Paper Rate Security as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield,
as defined below, on the applicable Commercial Paper Rate Determination Date of
the rate for commercial paper having the Index Maturity specified in the
applicable Prospectus Supplement published in H.15(519) under the heading
"Commercial Paper--Nonfinancial."
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
(1) If the rate referred to above is not published by 3:00 p.m., New York
City time, on the related Calculation Date, then the Commercial Paper Rate will
be the Money Market Yield on the applicable Commercial Paper Rate Determination
Date of the rate for commercial paper having the Index Maturity specified in the
applicable Prospectus Supplement published in H.15 Daily Update, or other
recognized electronic source for the purpose of displaying the applicable rate
under the caption "Commercial Paper--Nonfinancial".
(2) If by 3:00 p.m., New York City time, on the related Calculation Date
the Commercial Paper Rate is not yet published in either H.15(519) or H.15 Daily
Update, then the Commercial Paper Rate for the applicable
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Commercial Paper Rate Determination Date will be calculated by the Calculation
Agent as the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 a.m., New York City time, on the applicable Commercial Paper
Rate Determination Date of three leading dealers of United States dollar
commercial paper in The City of New York, which may include the Calculation
Agent and its affiliates, selected by the Calculation Agent for commercial paper
having the Index Maturity designated in the applicable Prospectus Supplement
placed for industrial issuers whose bond rating is "Aa", or the equivalent, from
a nationally recognized securities rating organization.
(3) If the dealers selected by the Calculation Agent are not quoting as
mentioned in clause (2) above, the Commercial Paper Rate determined on the
applicable Commercial Paper Rate Determination Date will be the rate in effect
on the applicable Commercial Paper Rate Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded
upward to the nearest one hundred thousandth of a percentage point) calculated
in accordance with the following formula:
Money Market Yield = D X 360
---------------------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the related Payment Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Federal Funds Rate" for each Interest Reset Period shall be the effective rate
as of the second Business Day prior to the Interest Reset Date for such Interest
Reset Period (a "Federal Funds Rate Determination Date" for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)," as displayed on Bridge Telerate, Inc. or any successor service on
page 120 or any other page as may replace the applicable page on that service
("Telerate Page 120").
The following procedures will be followed if the Federal Funds Rate
cannot be determined as described above:
(1) If the rate referred to above does not appear on Telerate Page 120 or
is not so published by 3:00 p.m., New York City time, on the related Calculation
Date, the Federal Funds Rate for the applicable Federal Funds Rate Determination
Date will be the rate on the applicable Federal Funds Rate Determination Date
for United States dollar federal funds published in H.15 Daily Update, or other
recognized electronic source for the purpose of displaying the applicable rate
under the heading "Federal Funds (Effective)".
(2) If the Federal Funds Rate is not so published by 3:00 p.m., New York
City time, on the related Calculation Date, the Federal Funds Rate for the
applicable Federal Funds Rate Determination Date will be calculated by the
Calculation Agent as the arithmetic mean of the rates for the last transaction
in overnight United States dollar federal funds arranged by three leading
brokers of United States dollar federal funds transactions in The City of New
York, which may include the Calculation Agent and its affiliates, selected by
the Calculation Agent before 9:00 a.m., New York City time on the applicable
Federal Funds Rate Determination Date.
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(3) If the brokers so selected by the Calculation Agent are not quoting
as mentioned in clause (2) above, the Federal Funds Rate for the applicable
Federal Funds Rate Determination Date will be the Federal Funds Rate in effect
on the applicable Federal Funds Rate Determination Date.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Federal Funds Rate Determination Date or, if such day is not a business day, the
next succeeding business day or (b) the second business day preceding the
related Payment Date.
LIBOR SECURITIES. Each LIBOR Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to LIBOR
and the Spread or Spread Multiplier, if any, specified in such Security and in
the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, with
respect to LIBOR indexed to the offered rates for U.S. dollar deposits, "LIBOR"
for each Interest Reset Period will be determined by the Calculation Agent for
any LIBOR Security as follows:
(1) If "LIBOR Telerate" is specified in the applicable Prospectus
Supplement, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in
the applicable Prospectus Supplement as the method for calculating LIBOR, LIBOR
will be the rate for deposits in the Index Currency having the Index Maturity
designated in the applicable Prospectus Supplement commencing on the second
"London Banking Day" (as defined in the related Transfer and Servicing
Agreement) immediately following the applicable "Interest Determination Date"
(as defined in the related Transfer and Servicing Agreement) that appears on the
Designated LIBOR Page specified in the applicable Prospectus Supplement as of
11:00 a.m. London time, on the applicable Interest Determination Date, or
(2) If "LIBOR Reuters" is specified in the applicable Prospectus
Supplement, LIBOR will be the arithmetic mean of the offered rates for deposits
in the Index Currency having the Index Maturity designated in the applicable
Prospectus Supplement, commencing on the second London Banking Day immediately
following the applicable Interest Determination Date, that appear on the
Designated LIBOR Page specified in the applicable Prospectus Supplement as of
11:00 a.m. London time on the applicable Interest Determination Date, if at
least two offered rates appear (except as provided in the following sentence).
If the Designated LIBOR Page by its terms provides for only a single rate, then
the single rate will be used.
The following procedures will be followed if LIBOR cannot be determined
as described above:
(1) With respect to an Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
applicable Designated LIBOR Page as specified above, LIBOR for the applicable
Interest Determination Date will be the rate calculated by the Calculation Agent
as the arithmetic mean of at least two quotations obtained by the Calculation
Agent after requesting the principal London offices of each of four major
reference banks in the London interbank market, which may include the
Calculation Agent and its affiliates, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in the
Index Currency for the period of the Index Maturity designated in the applicable
Prospectus Supplement, commencing on the second London Banking Day immediately
following the applicable Interest Determination Date, to prime banks in the
London interbank market at approximately 11:00 a.m., London time, on such
Interest Determination Date and in a principal amount that is representative for
a single transaction in the applicable Index Currency in that market at that
time. If at least two such quotations are provided, LIBOR determined on the
applicable Interest Determination Date will be the arithmetic mean of the
quotations.
(2) If fewer than two quotations referred to in clause (1) above are
provided, LIBOR determined on the applicable Interest Determination Date will be
the rate calculated by the Calculation Agent as the arithmetic mean of the rates
quoted at approximately 11:00 a.m., or such other time specified in the
applicable Prospectus Supplement, in the applicable Principal Financial Center,
on the applicable Interest Determination Date by
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three major banks, which may include the Calculation Agent and its affiliates,
in that Principal Financial Center selected by the Calculation Agent for loans
in the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Prospectus Supplement and in a principal amount
that is representative for a single transaction in the Index Currency in that
market at that time.
(3) If the banks so selected by the calculation agent are not quoting as
mentioned in clause (2) above, LIBOR for the applicable Interest Determination
Date will be LIBOR in effect on the applicable Interest Determination Date.
"Designated LIBOR Page" means either:
(1) If "LIBOR Telerate" is designated in the applicable Prospectus
Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate is specified in the
applicable Prospectus Supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. or any successor service on the page designated
in the applicable Prospectus Supplement or any page as may replace the
designated page on that service or for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency; or
(2) If "LIBOR Reuters" is designated in the applicable Prospectus
Supplement, the display on the Reuters Monitor Money Rates Service or any
successor service on the page designated in the applicable Prospectus Supplement
or any other page as may replace the designated page on that service for the
purpose of displaying the London interbank offered rates of major banks for the
applicable Index Currency.
"Index Currency" means the currency specified in the applicable
Prospectus Supplement as the currency for which LIBOR will be calculated. If no
currency is specified in the applicable Prospectus Supplement, the Index
Currency will be United States dollars.
"Principal Financial Center" means, unless otherwise specified in the
applicable Prospectus Supplement, the capital city of the country to which the
Index Currency relates, except that with respect to United States dollars,
Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos, South
African Rand and Swiss Francs, the Principal Financial Center will be the City
of New York, Toronto, Frankfurt, Amsterdam, London, Johannesburg and Zurich,
respectively.
TREASURY RATE SECURITIES. Each Treasury Rate Security will bear interest
for each Interest Reset Period at the interest rate calculated with reference to
the Treasury Rate and the Spread or Spread Multiplier, if any, specified in such
Security and in the applicable Prospectus Supplement determined on the "Treasury
Rate Determination Date" specified in such Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Period will be the rate for the auction held
on the Treasury Rate Determination Date of direct obligations of the United
States ("Treasury bills") having the Index Maturity specified in the applicable
Prospectus Supplement, as such rate shall be published in H.15(519) under the
heading "U.S. Government Securities--Treasury bills--auction average
(investment)" or, in the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date (as defined below) pertaining
to such Treasury Rate Determination Date, the auction average rate (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury bills
having the specified Index Maturity are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date, or if no such
auction is held in a particular week, then the "Treasury Rate" for such Interest
Reset Period will be the rate published in H.15(510) under the heading "U.S.
Government Securities--Treasury Bills--Secondary Market" (expressed as a bond
equivalent yield on the basis of a 365 or 366 day year, as applicable, on a
daily basis), or if not published by 3:00 p.m. New York City time on the related
Calculation Date, the Treasury Rate will be calculated by the Calculation Agent
for such Treasury Rate Security and shall be the yield to maturity (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as
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of approximately 3:30 p.m., New York City time on such Treasury Rate
Determination Date, of three leading primary United States government securities
dealers selected by such Calculation Agent for the issue of Treasury bills with
a remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a Business Day, the next
succeeding Business Day or (b) the second Business Day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given series may consist of Securities ("Indexed Securities") in
which the principal amount payable on the final Payment Date for such class (the
"Indexed Principal Amount") and/or the interest payable on any Payment Date is
determined by reference to a measure (the "Index") which will be related to the
exchange rates of one or more currencies or composite currencies (the "Index
Currencies"); the price or prices of specified commodities; or specified stocks,
which may be based on U.S. or foreign stocks, on specified dates specified in
the applicable Prospectus Supplement, or such other price, interest rate,
exchange rate or other financial index or indices as are described in the
applicable Prospectus Supplement. Holders of Indexed Securities may receive a
principal amount on the related final Payment Date that is greater than or less
than the face amount of the Indexed Securities depending upon the relative value
on the related final Payment Date of the specified indexed item. Information as
to the method for determining the principal amount payable on the related final
Payment Date, if any, and, where applicable, certain historical information with
respect to the specific indexed item or items and special tax considerations
associated with investment in Indexed Securities, will be set forth in the
applicable Prospectus Supplement. Notwithstanding anything to the contrary
herein, for purposes of determining the rights of a Certificateholder of a
Security indexed as to principal in respect of voting for or against amendments
to the related Trust Agreement, Indenture, or other related agreements as the
case may be, and modifications and the waiver of rights thereunder, the
principal amount of such Indexed Security shall be deemed to be the face amount
thereof upon issuance.
If the determination of the Indexed Principal Amount of an Indexed
Security is based on an Index calculated or announced by a third party and such
third party either suspends the calculation or announcement of such Index or
changes the basis upon which such Index is calculated (other than changes
consistent with policies in effect at the time such Indexed Security was issued
and permitted changes described in the applicable Prospectus Supplement), then
such Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such Index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall, in
the absence of manifest error, be binding on all parties.
The applicable Prospectus Supplement will describe whether the principal
amount of the related Indexed Security, if any, that would be payable upon
redemption or repayment prior to the applicable final scheduled Payment Date
will be the face amount of such Indexed Security, the Indexed Principal Amount
of such Indexed Security at the time of redemption or repayment or another
amount described in such Prospectus Supplement.
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BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each
class of Securities offered hereby will be represented by one or more
certificates registered in the name of Cede, as nominee of the Depository Trust
Company ("DTC"). Unless otherwise specified in the related Prospectus
Supplement, Securityholders may hold beneficial interests in Securities through
the DTC (in the United States) or Clearstream Banking Luxembourg ("Clearstream
Banking") or the Euroclear System ("Euroclear") (in Europe or Asia) directly if
they are participants of such systems, or indirectly through organizations which
are participants in such systems.
No Securityholder will be entitled to receive a certificate representing
such person's interest in the Securities, except as set forth below. Unless and
until Securities of a class are issued in fully registered certificated form
("Definitive Securities") under the limited circumstances described below, all
references herein to actions by Noteholders, Certificateholders or
Securityholders shall refer to actions taken by DTC upon instructions from DTC
Participants, and all references herein to distributions, notices, reports and
statements to Noteholders, Certificateholders or Securityholders shall refer to
distributions, notices, reports and statements to Cede, as the registered holder
of the Securities, for distribution to Securityholders in accordance with DTC
procedures. As such, it is anticipated that the only Noteholder,
Certificateholder or Securityholder will be Cede, as nominee of DTC.
Securityholders will not be recognized by the related Trustee as Noteholders,
Certificateholders or Securityholders as such terms will be used in the relevant
agreements, and Securityholders will only be permitted to exercise the rights of
holders of Securities of the related class indirectly through DTC and DTC
Participants, as further described below.
Clearstream Banking and Euroclear will hold omnibus positions on behalf
of their participants through customers' securities accounts in their respective
names on the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Clearstream Banking Participants and Euroclear
Participants will occur in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Banking or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary. However, each such cross-market transaction
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines. The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Clearstream Banking Participants and
Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities received in
Clearstream Banking or Euroclear as a result of a transaction with a DTC
Participant will be made during subsequent securities settlement processing and
dated the business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Euroclear or Clearstream Banking Participant on such business
day. Cash received in Clearstream Banking or Euroclear as a result of sales of
Securities by or through a Clearstream Banking Participant or a Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Clearstream Banking or
Euroclear cash account only as of the business day following settlement in DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a
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"clearing corporation" within the meaning of the New York UCC and a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. DTC was created
to hold securities for its participating members ("DTC Participants") and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entries, thereby eliminating the need for
physical movement of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies and clearing corporations which may include
underwriters, agents or dealers with respect to the Securities of any class or
series. Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
(the "Indirect DTC Participants"). The rules applicable to DTC and DTC
Participants are on file with the SEC.
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not DTC Participants or Indirect DTC Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Securities may do so only through DTC Participants and Indirect DTC
Participants. DTC Participants will receive a credit for the Securities on DTC's
records. The ownership interest of each Securityholder will in turn be recorded
on respective records of the DTC Participants and Indirect DTC Participants.
Securityholders will not receive written confirmation from DTC of their
purchase, but Securityholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect DTC Participant through which the
Securityholder entered into the transaction. Transfers of ownership interests in
the Securities of any class will be accomplished by entries made on the books of
DTC Participants acting on behalf of Securityholders.
To facilitate subsequent transfers, all Securities deposited by DTC
Participants with DTC will be registered in the name of Cede, a nominee of DTC.
The deposit of Securities with DTC and their registration in the name of Cede
will effect no change in beneficial ownership. DTC will have no knowledge of the
actual Securityholders and its records will reflect only the identity of the DTC
Participants to whose accounts such Securities are credited, which may or may
not be the Securityholders. DTC Participants and Indirect DTC Participants will
remain responsible for keeping account of their holdings on behalf of their
customers. While the Securities of a Series are held in book-entry form,
Securityholders will not have access to the list of Securityholders of such
Series, which may impede the ability of Securityholders to communicate with each
other.
Conveyance of notices and other communications by DTC to DTC
Participants, by DTC Participants to Indirect DTC Participants and by DTC
Participants and Indirect DTC Participants to Securityholders will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit payments of principal of and interest on the
Securities. DTC Participants and Indirect DTC Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders.
DTC's practice is to credit DTC Participants' accounts on each Payment
Date in accordance with their respective holdings shown on its records, unless
DTC has reason to believe that it will not receive payment on such Payment Date.
Payments by DTC Participants and Indirect DTC Participants to Securityholders
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such DTC
Participant and not of DTC, the related Indenture Trustee or Trustee (or any
paying agent appointed thereby), the Seller or the Servicer, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal of and interest on each class of Securities to DTC will be
the responsibility of the related Indenture Trustee or Trustee (or any paying
agent), disbursement of such payments to DTC Participants will be the
responsibility of DTC and disbursement of such payments to the related
Securityholders will be the
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responsibility of DTC Participants and Indirect DTC Participants. As a result,
under the book-entry format, Securityholders may experience some delay in their
receipt of payments. DTC will forward such payments to its DTC Participants
which thereafter will forward them to Indirect DTC Participants or
Securityholders.
Because DTC can only act on behalf of DTC Participants, who in turn act
on behalf of Indirect DTC Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Securityholder only at the direction of one or more DTC Participants
to whose account with DTC the Securities are credited. Additionally, DTC has
advised the Seller that it will take such actions with respect to specified
percentages of the Securityholders' interest only at the direction of and on
behalf of DTC Participants whose holdings include undivided interests that
satisfy such specified percentages. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of DTC Participants whose holdings include such undivided interests.
Neither DTC nor Cede will consent or vote with respect to the Securities.
Under its usual procedures, DTC will mail an "Omnibus Proxy" to the related
Indenture Trustee or Trustee as soon as possible after any applicable Record
Date for such a consent or vote. The Omnibus Proxy will assign Cede's consenting
or voting rights to those DTC Participants to whose accounts the related
Securities are credited on that record date (which record date will be
identified in a listing attached to the Omnibus Proxy).
Clearstream Banking is incorporated under the laws of Luxembourg as a
professional depository. Clearstream Banking holds securities for its
participating organizations ("Clearstream Banking Participants") and facilitates
the clearance and settlement of securities transactions between Clearstream
Banking Participants through electronic book entry changes in accounts of
Clearstream Banking Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Clearstream Banking in
any of 28 currencies, including United States dollars. Clearstream Banking
provides to Clearstream Banking Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream Banking interfaces
with domestic markets in several countries. As a professional depository,
Clearstream Banking is subject to regulation by the Luxembourg Monetary
Institute. Clearstream Banking Participants are recognized financial
institutions around the world including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include any underwriters, agents or dealers with respect
to any class or series of Securities offered hereby. Indirect access to
Clearstream Banking is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Clearstream Banking Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by
Euroclear Bank S.A./N.V. (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 or series
of Securities offered hereby. Indirect
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access to the Euroclear System is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, 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
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applicable Record Date specified for such Securities in the related Prospectus
Supplement. Such payments will be made by check mailed to the address of such
holder as it appears on the register maintained by the applicable Trustee or
Indenture Trustee. The final payment on any such Definitive Security, however,
will be made only upon presentation and surrender of such Definitive Security at
the office or agency specified in the notice of final payment to the applicable
Securityholders. The applicable Trustee or the Indenture Trustee will provide
such notice to the applicable Securityholders not less than 15 nor more than 30
days prior to the date on which such final payment is expected to occur.
Definitive Securities will be transferable and exchangeable at the
offices of the applicable Trustee or of a registrar named in a notice delivered
to holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with
respect to the Notes of any series, three or more holders of the Notes of such
series or one or more holders of such Notes evidencing not less than 25% of the
aggregate outstanding principal balance of such Notes may, by written request to
the related Indenture Trustee, obtain access to the list of all Noteholders
maintained by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the list of Noteholders if it agrees to mail the desired
communication or proxy, on behalf of and at the expense of the requesting
Noteholders, to all Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement with
respect to the Certificates of any series, three or more holders of the
Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of all
Certificateholders maintained by such Trustee for the purpose of communicating
with other Certificateholders with respect to their rights under the related
Trust Agreement or Pooling and Servicing Agreement or under such Certificates.
The Pooling and Servicing Agreement, Trust Agreement and Indenture will
not provide for the holding of annual or other meetings of Securityholders.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or
prior to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on such
Payment Date. With respect to each series of Securities that includes
Certificates, on or prior to each Payment Date, the Servicer will prepare and
provide to the related Trustee a statement to be delivered to the related
Certificateholders. With respect to each series of Securities, each such
statement to be delivered to Securityholders will include (to the extent
applicable) the following information (and any other information so specified in
the related Prospectus Supplement) as to the Notes of such series and as to the
Certificates of such series with respect to such Payment Date or the period
since the previous Payment Date, as applicable:
(i) the amount of the payment allocable to the principal amount of
each class of such Notes and to the Certificate Balance of each class of
such Certificates;
(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;
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(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such
date;
(v) the amount of the Basic, Supplemental and Total Servicing Fee
paid to the Servicer with respect to the related Collection Period;
(vi) the Interest Rate or Pass Through Rate for the Interest Period
relating to the succeeding Payment Date for any class of Notes or
Certificates of such series with variable or adjustable rates;
(vii) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall (each as defined in the related Prospectus
Supplement), if any, in each case as applicable to each class of
Securities, and the change in such amounts from the preceding statement;
(viii) the aggregate amount of monthly payments (or portions
thereof) determined by the Servicer to be due in one or more future
Collections Periods ("Payments Ahead") on deposit in the related Payahead
Account or held by the Servicer with respect to the related Receivables
and the change in such amount from the immediately preceding Payment
Date;
(ix) the amount of Advances made in respect of the related
Receivables and the related Collection Period and the amount of
unreimbursed Advances on such Payment Date; and
(x) the balance of any related Reserve Fund, Yield Maintenance
Account or other credit or liquidity enhancement on such date, after
giving effect to changes thereto on such date and the amount of such
changes.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of each Trust, the applicable Trustee
will mail to each person who at any time during such calendar year has been a
Securityholder with respect to such Trust and received any payment thereon a
statement containing certain information for the purposes of such
Securityholder's preparation of federal income tax returns. See "Certain Federal
Income Tax Consequences".
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Sale and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
purchase Receivables from the Seller and the Servicer will agree to service such
Receivables, each Trust Agreement (in the case of a grantor trust, the Pooling
and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued thereby and each Administration Agreement pursuant
to which TMCC will undertake certain administrative duties with respect to a
Trust that issues Notes (collectively, the "Transfer and Servicing Agreements").
Forms of the Transfer and Servicing Agreements have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part. The provisions
of any of the Transfer and Servicing Agreements may differ from those described
in this Prospectus and, if so, will be described in the related Prospectus
Supplement. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date specified with respect to any given Trust
in the related Prospectus Supplement (the "Closing Date"), TMCC will sell and
assign to the Seller, without recourse, pursuant to a Receivables Purchase
Agreement (the "Receivables Purchase Agreement"), its entire interest in the
Receivables comprising the related Receivables Pool, including the security
interests in the Financed Vehicles. On the Closing Date, the Seller will
transfer and assign to the applicable Trustee on behalf of the Trust, without
recourse, pursuant to a Sale and Servicing Agreement or a Pooling and Servicing
Agreement, as applicable, its entire interest in the Receivables comprising the
related Receivables Pool, including its security interests in the related
Financed Vehicles. Each such Receivable will be identified in a schedule
appearing as an exhibit to such Sale and Servicing Agreement or such Pooling and
Servicing Agreement (a "Schedule of Receivables"). The applicable Trustee will,
concurrently with such transfer and assignment, on behalf of the Trust, execute
and deliver the related Notes and/or Certificates. Unless otherwise provided in
the related Prospectus Supplement, the net proceeds received from the sale of
the Certificates and the Notes of a given series will be applied to the purchase
of the related Receivables from TMCC and, to the extent specified in the related
Prospectus Supplement, to make any required initial deposit into the Reserve
Fund or Yield Maintenance Account.
TMCC, pursuant to a Receivables Purchase Agreement, and the Seller,
pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, will represent and warrant, with respect to whether, among other
things: (i) the information provided in the related Schedule of Receivables is
true and correct in all material respects as of the opening of business on the
Cutoff Date, and no selection procedures adverse to the Certificateholders shall
have been utilized in selecting the Receivables; (ii) the terms of each
Receivable require the related Obligor to maintain physical damage insurance
covering the Financed Vehicle in accordance with the Seller's normal
requirements; (iii) as of the applicable Closing Date, to the best of its
knowledge, the related Receivables are free and clear of all security interests,
liens, charges and encumbrances that are prior to, or of the same priority with,
the security interests in the Financed Vehicles granted by the related
Receivables, and no offsets, defenses or counterclaims have been asserted or
threatened; (iv) as of the Closing Date, each of such Receivables is secured by
a first perfected security interest in favor of TMCC in the Financed Vehicle or
all necessary and appropriate actions have been taken to perfect a first
priority security interest; (v) each related Receivable, at the time it was
originated, complied and, as of the Closing Date, complies in all material
respects with applicable federal and state laws, including, without limitation,
consumer credit, truth-in-lending, equal credit opportunity and disclosure laws;
and (vi) any other representations and warranties that may be set forth in the
related Prospectus Supplement are true and correct in all material respects.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller so elects, the first) month following
the discovery by or notice to the Seller of a breach of any representation or
warranty of the Seller that materially and adversely affects the interests of
the related Trust in
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any Receivable, the Seller, unless the breach is cured in all material respects,
will repurchase such Receivable (a "Warranty Receivable") from such Trust and,
pursuant to the Receivables Purchase Agreement, TMCC will purchase such Warranty
Receivable from the Seller, at a price equal to the Warranty Purchase Payment
for such Receivable. The "Warranty Purchase Payment" (1) for a Precomputed
Receivable, will be equal to (a) the sum of (i) all remaining Scheduled Payments
(and any applicable Yield Maintenance Amounts), (ii) all past due Scheduled
Payments for which an Advance has not been made, (iii) all outstanding Advances
made by the Servicer in respect of such Precomputed Receivable and (iv) an
amount equal to any reimbursements of outstanding Advances made by the Servicer
with respect to such Precomputed Receivable from collections made on or in
respect of other Receivables, minus (b) the sum of (i) the Rebate, if any, paid
to the Obligor on a Precomputed Receivable on or before the date of such
purchase and (ii) any other proceeds previously received (e.g., insurance or
other proceeds in respect of the liquidation of such Precomputed Receivable) to
the extent applied to reduce the Principal Balance of such Precomputed
Receivable and (2) for a Simple Interest Receivable, will be equal to its unpaid
principal balance, plus interest thereon at a rate equal to the sum of the
Interest Rate or Pass Through Rate specified in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and the Servicing Fee Rate to the
last day of the Collection Period relating to such repurchase. This repurchase
obligation will constitute the sole remedy available to the Securityholders, the
Trustee or the Trust for any such uncured breach by the Seller. The obligation
of the Seller to repurchase a Receivable will not be conditioned on performance
by TMCC of its obligation to purchase such Receivable from the Seller pursuant
to the Receivables Purchase Agreement.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing both the Receivables and the
Servicer's own portfolio of automobile and/or light duty truck installment sales
contracts, as well as to reduce administrative costs, the Seller and each Trust
will designate the Servicer as custodian to maintain possession (directly, or
through an agent), on behalf of such Trust, of the related installment sale
contracts and any other documents relating to the Receivables. The Receivables
will not be physically segregated from other automobile and/or light duty truck
installment sales contracts of the Servicer, or those which the Servicer
services for others, to reflect the transfer to the related Trust. However, UCC
financing statements reflecting the sale and assignment of the Receivables by
TMCC to the Seller and by the Seller to the applicable Trust will be filed, and
the respective accounting records and computer files of TMCC and the Seller will
reflect such sale and assignment. Because the Receivables will remain in the
possession of the Servicer or its agent and will not be stamped or otherwise
marked to reflect the assignment to the Trustee, if a subsequent purchaser were
able to take physical possession of the Receivables without knowledge of the
assignment, the Trustee's interest in the Receivables could be defeated. See
"Certain Legal Aspects of the Receivables--Security Interests". In addition,
under certain circumstances the Trustee's security interest in collections that
have been received by the Servicer but not yet remitted to the related
Collection Account could be defeated.
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts (each, a
"Collection Account"), in the name of the Indenture Trustee on behalf of the
related Securityholders, into which payments made on or with respect to the
related Receivables and all amounts released from any Yield Maintenance Account,
Reserve Fund or other form of credit enhancement will be deposited for payment
to the related Securityholders. With respect to each Trust that does not issue
Notes, the Servicer will also establish and maintain a Collection Account and
any other Trust Account in the name of the related Trustee on behalf of the
related Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series of Securities an additional account (the "Payahead
Account"), in the name of the related Trustee or, if such Trust issues Notes,
the Indenture Trustee, into which, to the extent required by the Sale and
Servicing Agreement or Pooling and Servicing Agreement, early payments by or on
behalf of Obligors on Precomputed Receivables will be deposited until such time
as the related payment becomes due. Until such time as payments ahead are
transferred from the Payahead Account to a Collection Account, they will not
constitute collected interest or
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collected principal and will not be available for payment to the applicable
Noteholders or Certificateholders. The Payahead Account will initially be
maintained with the applicable Indenture Trustee or Trustee.
Any other accounts to be established with respect to a Trust, including
any Yield Maintenance Account or any Reserve Fund will be described in the
related Prospectus Supplement.
For any series of Securities, funds in the related Collection Account,
any Yield Maintenance Account, the Reserve Fund and such other accounts as may
be identified in the related Prospectus Supplement (collectively, the "Trust
Accounts") will be invested as provided in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement in Eligible Investments. "Eligible
Investments" will be specified in the related Transfer and Servicing Agreements
and are generally limited to investments acceptable to the Rating Agencies
rating such Securities as being consistent with the rating of such Securities.
Except as described below or in the related Prospectus Supplement, Eligible
Investments are limited to obligations or securities that mature on or before
the next Payment Date for such series. However, to the extent permitted by the
Rating Agencies, funds in any Trust Account may be invested in securities that
will not mature prior to the date of the next payment with respect to such
Certificates or Notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Fund at any time may be less than the balance of
the Reserve Fund. If the amount required to be withdrawn from any Reserve Fund
to cover shortfalls in collections on the related Receivables (as provided in
the related Prospectus Supplement) exceeds the amount of cash in the Reserve
Fund, a temporary shortfall in the amounts paid to the related Noteholders or
Certificateholders could result, which could, in turn, increase the average life
of the Notes or the Certificates of such series. Except as otherwise specified
in the related Prospectus Supplement, investment earnings on funds deposited in
the Trust Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), shall be released to the Servicer on each Payment Date
and shall be the property thereof.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
"Eligible Institution" means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee (if it is the
Paying Agent under the Trust Agreement), as applicable, or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), (i) which has either (A) a long-term unsecured debt rating
acceptable to the Rating Agencies or (B) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due
with respect to the Receivables held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable retail
installment sale contracts it services for itself or others. Consistent with its
normal procedures, the Servicer will be authorized to grant certain Rebates,
adjustments or extensions with respect to the Receivables without the prior
written consent of the Trustee. However, if any such modification alters the APR
or the Amount Financed or the total number of Scheduled Payments of a Receivable
or extends the maturity of a Receivable beyond the final scheduled maturity date
set forth in the applicable Prospectus Supplement (the "Final Maturity Scheduled
Date"), the Servicer will be obligated either to purchase such Receivable as
described in the next paragraph or make Advances on each subsequent Payment Date
in amounts equal to the amount of any reduction to the related Scheduled
Payments to be paid by the related Obligors during the subsequent Collection
Periods.
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In the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Servicer will covenant that except as otherwise contemplated
therein, (i) it will not release any Financed Vehicle from the security interest
granted in the related Receivable, (ii) it will do nothing to impair the rights
of the Securityholders in the Receivables and (iii) it will not amend any
Receivable such that the total number of Scheduled Payments, the Amount Financed
or the APR is altered or the maturity of a Receivable is extended beyond the
Final Scheduled Maturity Date unless it is making Advances corresponding to
reductions to Scheduled Payments as described above. As of the last day of the
second (or, if the Servicer so elects, the first) Collection Period following
the Collection Period in which the Seller, the Servicer or the Trustee discovers
or receives notice of a breach of any such covenant that materially and
adversely affects the interests of the Certificateholders in a Receivable, the
Servicer, unless the breach is cured in all material respects, will purchase the
Receivable (an "Administrative Receivable") from the Trustee at a price equal to
the Administrative Purchase Payment for such Receivable. The "Administrative
Purchase Payment" (1) for a Precomputed Receivable, will be equal to (a) the sum
of (i) all remaining Scheduled Payments (plus any applicable Yield Maintenance
Amount), (ii) an amount equal to any reimbursements of outstanding Advances made
by the Servicer with respect to such Precomputed Receivable from collections on
or in respect of other Receivables and (iii) all past due Scheduled Payments for
which an Advance has not been made, minus (b) all Payments Ahead with respect to
such Receivable then on deposit in the Payahead Account and the Rebate, if any,
paid to the Obligor on a Precomputed Receivable on or before the date of such
purchase and (2) for a Simple Interest Receivable, will be equal to its unpaid
Principal Balance, plus interest thereon at a rate equal to the sum of the
Interest Rate or Pass Through Rate specified in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement and the Servicing Fee Rate to the
last day of the Collection Period relating to such purchase. Upon the purchase
of any Administrative Receivable, the Servicer will for all purposes of the Sale
and Servicing Agreement or the Pooling Agreement, as applicable, be deemed to
have released all claims for the reimbursement of outstanding Advances made in
respect of such Receivable. This purchase obligation will constitute the sole
remedy available to the Certificateholders, the Trust or the Trustee for any
such uncured breach by the Servicer.
If the Servicer determines that eventual payment in full of a Receivable
is unlikely, the Servicer will follow its normal practices and procedures to
recover all amounts due upon such Receivable, including the repossession and
disposition of the related Financed Vehicle at a public or private sale, or the
taking of any other action permitted by applicable law. See "Certain Legal
Aspects of the Receivables".
INSURANCE ON FINANCED VEHICLES
Each Receivable requires the related Obligor to maintain both
comprehensive and collision insurance covering the Financed Vehicle in an amount
not less than the actual cash value thereof pursuant to which TMCC is named as a
loss payee. Since the Obligors may select their own insurers to provide the
requisite coverage, the specific terms and conditions of their policies may
vary. The terms of each Receivable allow, but do not require, TMCC to (and TMCC,
in accordance with its current normal servicing procedures, does not) obtain any
such coverage on behalf of the Obligor. TMCC currently does not monitor ongoing
insurance compliance in connection with its customary servicing procedures. In
the event that the failure of an Obligor to maintain any such required insurance
results in a shortfall in amounts to be paid to Certificateholders, to the
extent such shortfall is not covered by amounts on deposit in the Reserve Fund
or other methods of credit enhancement, the Securityholders could suffer a loss
on their investment.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account.
The Servicer may retain all payments on or in respect of the Receivables
received from Obligors and all proceeds of Receivables collected during each
Collection Period without segregation in its own accounts until
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deposited in the Collection Account on the Business Day immediately preceding
the related Payment Date unless and until (i) TMCC ceases to be the Servicer,
(ii) an Event of Default exists and is continuing or (iii) the short-term
unsecured debt of TMCC ceases to be rated at least P-1 by Moody's and A-1 by
Standard & Poor's, and alternative arrangements acceptable to the Rating
Agencies are not made. Thereafter, the Servicer will deposit all such payments
and proceeds into the Collection Account not later than two Business Days after
receipt. However, pending deposit into the Collection Account, collections may
be invested by the Servicer at its own risk and for its own benefit and will not
be segregated from its own funds, and the Servicer, at its own risk and for its
own benefit, may instruct the Trustee to invest amounts held in the Collection
Account or the Payahead Account from the time deposited until the related
Payment Date in Eligible Investments. The Seller or the Servicer, as the case
may be, will remit the aggregate Warranty Purchase Payments and Administrative
Purchase Payments of any Receivables to be purchased from the Trust into the
Collection Account on or before the Business Day immediately preceding the
related Payment Date. If the Servicer were unable to remit such funds,
Securityholders might incur a loss.
"Eligible Investments" will be specified in the Transfer and Servicing
Agreements and will be limited to investments that meet the criteria of each
Rating Agency from time to time as being consistent with its then-current
ratings of the Securities.
To the extent set forth in the related Prospectus Supplement, the
Servicer may, in order to satisfy the requirements described above, obtain a
letter of credit or other security for the benefit of the related Trust to
secure timely remittances of collections on the related Receivables and payment
of the aggregate Warranty Purchase Payments and Administrative Purchase Payments
with respect to Receivables required to be repurchased by the Seller or the
Servicer, as applicable.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or certain other similar fees
or charges will be applied first to any outstanding Advances made by the
Servicer with respect to such Receivable, and then to the related Scheduled
Payment. Any collections on or in respect of a Receivable remaining after such
applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
in respect of such Receivable (each, a "Prepayment"). All other Excess Payments
in respect of Precomputed Receivables will be held by the Servicer (or if the
Servicer has not satisfied the conditions in clauses (i) through (iii) in the
third preceding paragraph, deposited in the Payahead Account), as a Payment
Ahead.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, if the
Scheduled Payment due on a Precomputed Receivable (other than an Administrative
Receivable or a Warranty Receivable) is not received in full by the end of the
month in which it is due, whether as the result of any extension granted to the
Obligor or otherwise, the amount of Payments Ahead, if any, not previously
applied with respect to such Precomputed Receivable, shall be applied by the
Servicer to the extent of the shortfall and the Payments Ahead shall be reduced
accordingly. If any shortfall remains, the Servicer will make an advance to the
Trust in an amount equal to the amount of such shortfall (each, a "Precomputed
Advance"). The Servicer will not be obligated to make a Precomputed Advance to
the extent that it determines, in its sole discretion, that such Precomputed
Advance will not be recovered from subsequent collections on or in respect of
the related Precomputed Receivable. All Precomputed Advances shall be
reimbursable to the Servicer, without interest, if and when a payment relating
to a Receivable with respect to which a Precomputed Advance has previously been
made is subsequently received (other than from Administrative Purchase
Payments). Upon the determination by the Servicer that reimbursement from the
preceding source is unlikely, it will be entitled to recover unreimbursed
Precomputed Advances from collections on or in respect of other Receivables.
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In addition, if the Scheduled Payment on a Simple Interest Receivable
(other than an Administrative Receivable or a Warranty Receivable) is not
received in full by the end of the month in which it is due, the Servicer shall,
subject to the limitations set forth below, advance to the Trust an amount with
respect to such Simple Interest Receivable equal to the product of the Principal
Balance of such Simple Interest Receivable as of the first day of the related
Collection Period and one-twelfth of its APR minus the amount of interest
actually received on such Simple Interest Receivable during the related
Collection Period (each, a "Simple Interest Advance", and together with the
Precomputed Advances, the "Advances"). If such a calculation results in a
negative number, an amount equal to such negative amount shall be paid to the
Servicer in reimbursement of outstanding Simple Interest Advances. In addition,
in the event that a Simple Interest Receivable becomes a Liquidated Receivable,
the amount of accrued and unpaid interest thereon (but not including interest
for the current Collection Period) shall, up to the amount of all outstanding
Simple Interest Advances in respect thereof, be withdrawn from the related
Collection Account and paid to the Servicer in reimbursement of such outstanding
Simple Interest Advances. No advances of principal will be made with respect to
Simple Interest Receivables. The Servicer will not be obligated to make a Simple
Interest Advance (other than in respect of an interest shortfall arising from
the prepayment of a Simple Interest Receivable) to the extent that it
determines, in its sole discretion, that such Simple Interest Advance will not
be recovered from subsequent collections on or in respect of the related Simple
Interest Receivable. All Simple Interest Advances shall be reimbursable to the
Servicer, without interest, when a payment relating to a Receivable with respect
to which a Simple Interest Advance has previously been made is subsequently
received (other than from Administrative Purchase Payments). Upon the
determination by the Servicer that reimbursement from the preceding source is
unlikely, it will be entitled to recover unreimbursed Simple Interest Advances
from collections on or in respect of other Receivables.
The Servicer will also be required to make Advances with respect to each
Receivable that it does not purchase as described above under "--Servicing
Procedures" as to which it has made any modification that reduces the amount of
Scheduled Payments to be paid by the related Obligor during subsequent
Collection Periods.
The Servicer will make all Advances by depositing into the related
Collection Account an amount equal to the aggregate of the Precomputed Advances
and Simple Interest Advances due in respect of a Collection Period on the
Business Day immediately preceding the related Payment Date.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to
any Trust, the Servicer will be entitled to receive the servicing fees for each
Collection Period in an amount equal to a specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") of the
Pool Balance as of the first day of the related Collection Period (the "Basic
Servicing Fee"). The Total Servicing Fee (together with any portion of all
servicing fees that remains unpaid from prior Payment Dates) will be paid as
provided in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement with
respect to a given Trust, the Servicer will also be entitled to collect and
retain any late fees, prepayment charges, extension fees and other
administrative fees or similar charges allowed by applicable law with respect to
the related Receivables as additional servicing compensation (the "Supplemental
Servicing Fee," and together with the Basic Servicing Fee, the "Total Servicing
Fee") and will be entitled to reimbursement from the Trust for certain
liabilities. The Servicer may also be entitled to receive any interest earned
during a Collection Period from the investment of monies in the Trust Accounts.
Payments by or on behalf of Obligors will be allocated to scheduled payments and
late fees and other charges in accordance with the Servicer's normal practices
and procedures.
The Total Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of motor vehicle receivables as an agent for
their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors on the Receivables, investigating
delinquencies, providing
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payment information, paying costs of collections and policing the collateral.
The Servicing Fee also will compensate the Servicer for administering the
particular Receivables Pool, including making Advances, accounting for
collections and furnishing monthly and annual statements to the related Trustee
and Indenture Trustee with respect to payments and generating federal income tax
information for such Trust and for the related Noteholders and
Certificateholders. The Total Servicing Fee also will reimburse the Servicer for
certain taxes, the fees of the related Trustee and Indenture Trustee, if any,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the applicable Receivables Pool.
The "Pool Balance" will equal the aggregate Principal Balance of the
Receivables. The "Principal Balance" of a Receivable as of any date will equal
the Amount Financed (as defined in the related Transfer and Servicing Agreement)
minus the sum of (i) in the case of a Precomputed Receivable, that portion of
all Scheduled Payments due on or prior to such date allocable to principal,
computed in accordance with the actuarial method, (ii) in the case of a Simple
Interest Receivable, that portion of all Scheduled Payments actually received on
or prior to such date allocable to principal, (iii) any Warranty Purchase
Payment or Administrative Purchase Payment with respect to such Receivable
allocable to principal (to the extent not included in clauses (i) and (ii)
above) and (iv) any Prepayments or other payments applied to reduce the unpaid
principal balance of such Receivable (to the extent not included in clauses (i),
(ii) and (iii) above).
PAYMENTS
With respect to each series of Securities, beginning on the Payment Date
specified in the related Prospectus Supplement, payments of principal and
interest (or, where applicable, of principal or interest only) on each class of
such Securities entitled thereto will be made by the applicable Indenture
Trustee to the Noteholders and by the applicable Trustee to the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all payments to each class of Certificateholders of such series
will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date collections on the
related Receivables will be withdrawn from the related Collection Account and
will be paid to the Noteholders and/or Certificateholders to the extent provided
in the related Prospectus Supplement. Credit enhancement, such as a Reserve
Fund, will be available to cover any shortfalls in the amount available for
payment to the Securityholders on such date to the extent specified in the
related Prospectus Supplement. As more fully described in the related Prospectus
Supplement, and unless otherwise specified therein, (i) payments in respect of
principal of a class of Securities of a given series will be subordinate to
payments in respect of interest on such class; (ii) payments in respect of one
or more classes of Certificates of such series may be subordinate to payments in
respect of Notes, if any, of such series or other classes of Certificates of
such series; and (iii) payments in respect of one or more classes of Notes of
such series may be subordinated to payments in respect of other classes of Notes
of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements
and the provider thereof, if applicable, with respect to each class of
Securities of a given series, if any, will be set forth in the related
Prospectus Supplement. If and to the extent provided in the related Prospectus
Supplement, credit and cash flow enhancement may be in the form of subordination
of one or more classes of Securities, Reserve Funds, over-collateralization,
letters of credit, credit or liquidity facilities, surety bonds, guaranteed
investment contracts, swaps or other interest rate protection agreements,
repurchase obligations, yield maintenance agreements, other agreements with
respect to third party payments or other support, cash deposits or such other
arrangements as may be described in the related Prospectus Supplement or any
combination of two or more of the foregoing. If specified in the applicable
Prospectus Supplement, credit or cash flow enhancement for a
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class of Securities may cover one or more other classes of Securities of the
same series, and credit or cash flow enhancement for a series of Securities may
cover one or more other series of Securities.
The presence of a Reserve Fund and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one class or series of Securities, Securityholders of any such
class or series will be subject to the risk that such credit enhancement will be
exhausted by the claims of Securityholders of other classes or series.
RESERVE FUND. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller or a third party will establish for a series or class of
Securities an account, as specified in the related Prospectus Supplement (the
"Reserve Fund"), which will be maintained with the related Trustee or Indenture
Trustee, as applicable. Unless otherwise provided in the related Prospectus
Supplement, the Reserve Fund will be funded by an initial deposit by the Seller
or a third party on the Closing Date in the amount set forth in the related
Prospectus Supplement (the "Reserve Fund Initial Deposit"). To the extent
provided in the related Prospectus Supplement, the amount on deposit in the
Reserve Fund will be increased on each Payment Date thereafter up to the
Specified Reserve Fund Balance (as defined in the related Prospectus Supplement)
by the deposit therein of the amount of collections on the related Receivables
remaining on each such Payment Date after the payment of all other required
payments on such date. The related Prospectus Supplement will describe the
circumstances and manner under which payments may be made out of the Reserve
Fund, either to holders of the Securities covered thereby or to the Seller or a
third party.
YIELD MAINTENANCE ACCOUNT; YIELD MAINTENANCE AGREEMENT
YIELD MAINTENANCE ACCOUNT. A "Yield Maintenance Account" may be
established with respect to any class or series of Securities. The terms
relating to any such account will be set forth in the related Prospectus
Supplement. Each Yield Maintenance Account will be designed to hold funds to be
applied by the related Trustee or, if such Trust issues Notes, the Indenture
Trustee, to provide payments to Securityholders in respect of Receivables that
have APRs less than the sum of the Pass Through Rate or Interest Rate specified
in the related Prospectus Supplement plus the Servicing Fee Rate specified in
the related Prospectus Supplement (the "Required Rate"). Unless otherwise
specified in the related Prospectus Supplement, each Yield Maintenance Account
will be maintained with the same entity with which the related Collection
Account is maintained and will be created with an initial deposit in an amount
and by the Seller or other person specified in the related Prospectus
Supplement.
On each Payment Date, the related Trustee or Indenture Trustee will
transfer to the Collection Account from monies on deposit in the Yield
Maintenance Account an amount specified in the related Prospectus Supplement
(the "Yield Maintenance Deposit" ) in respect of the Receivables having APRs
less than the Required Rate for such Payment Date. Unless otherwise specified in
the related Prospectus Supplement, amounts on deposit on any Payment Date in the
Yield Maintenance Account in excess of the "Required Yield Maintenance Amount"
specified in the related Prospectus Supplement, after giving effect to all
payments to be made on such Payment Date, will be released to the Seller. Monies
on deposit in the Yield Maintenance Account may be invested in Eligible
Investments under the circumstances and in the manner described in the related
Pooling and Servicing Agreement or Trust Agreement. Any monies remaining on
deposit in the Yield Maintenance Account upon the termination of the Trust also
will be released to the Seller.
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YIELD MAINTENANCE AGREEMENT. If a Yield Maintenance Account is
established with respect to any class or series of Securities which allows or
requires any party to make deposits therein after the Closing Date, TMCC, the
Seller, any third party responsible for such deposits and the related Trustee or
Indenture Trustee, as the case may be, will enter into a "Yield Maintenance
Agreement" pursuant to which, on each Payment Date, such party will deposit into
the Yield Maintenance Account the difference between the amount held on deposit
in the Yield Maintenance Account as of such Payment Date and the Required Yield
Maintenance Amount, in each case determined after giving effect to all required
withdrawals from the Yield Maintenance Account on such Payment Date.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to
remit collections daily (as described in "--Collections" above), the Servicer
will be permitted to make the deposit of collections, aggregate Advances and
Administrative Purchase Amounts for any Trust for or with respect to the related
Collection Period on a monthly basis and net of payments to be made to the
Servicer for such Trust with respect to such Collection Period. The Servicer may
cause to be made a single, net transfer from the Collection Account to the
Payahead Account, if any, or vice versa. The Servicer, however, will account to
the Trustee, any Indenture Trustee, the Noteholders, if any, and the
Certificateholders with respect to each Trust as if all deposits, payments and
transfers were made individually. With respect to any Trust that issues both
Certificates and Notes, if the related Payment Dates are not the same for all
classes of Securities, all distributions, deposits or other remittances made on
a Payment Date will be treated as having been distributed, deposited or remitted
on the same Payment Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on a Payment Date.
STATEMENTS TO TRUSTEES AND TRUST
On a Business Day in each month that precedes each Payment Date (each a
"Determination Date" to be specified in the related Prospectus Supplement), the
Servicer will provide to the applicable Indenture Trustee, if any, and the
applicable Trustee a statement setting forth with respect to a series of
Securities substantially the same information as is required to be provided in
the periodic reports provided to Securityholders of such series described under
"Certain Information Regarding the Securities--Reports to Securityholders".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of nationally recognized independent accountants will
furnish to the related Trust and Indenture Trustee or Trustee, as applicable,
annually a statement as to compliance in all material respects by the Servicer
during the preceding twelve months (or, in the case of the first such
certificate, from the applicable Closing Date, which may be a longer or shorter
period) with certain standards relating to the servicing of the applicable
Receivables.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trust and Indenture Trustee or
Trustee, as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) in all material respects or, if there
has been a default in the fulfillment of any such obligation, describing each
such default. The Servicer has agreed to give each Indenture Trustee and each
Trustee notice of certain Servicer Defaults under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
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CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that TMCC may not resign from its obligations and duties as
Servicer thereunder, except upon determination that TMCC's performance of such
duties is no longer permissible under applicable law. No such resignation will
become effective until the related Indenture Trustee or Trustee, as applicable,
or a successor servicer has assumed TMCC's servicing obligations and duties
under such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will be under any liability to the related Trust
or the related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties thereunder or by reason
of reckless disregard of its obligations and duties thereunder. In addition,
each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
Under the circumstances specified in each Sale and Servicing Agreement
and Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to all or
substantially all of the business of the Servicer will be the successor of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement,
"Servicer Default" under each Sale and Servicing Agreement and Pooling and
Servicing Agreement will consist of (i) any failure by the Servicer to deliver
to the Trustee the Servicer's Certificate for the related Collection Period, or
any failure by the Servicer (or the Seller, so long as TMCC is the Servicer) to
deliver to the applicable Trustee or Indenture Trustee for deposit in any of the
Trust Accounts any required payment or to direct the applicable Trustee or
Indenture Trustee to make any required distributions therefrom, which failure
continues unremedied for three Business Days after receipt by the Servicer of
written notice of such failure given (A) to the Servicer (or the Seller, so long
as TMCC is the Servicer) by the applicable Trustee or Indenture Trustee or (B)
to the Seller or the Servicer, as the case may be, and to the applicable Trustee
and Indenture Trustee, by the holders of Notes or Certificates of the related
series evidencing not less than 25% in principal amount of such outstanding
Notes or Certificates (in each case, excluding Securities held by TMCC, TMCRC or
any affiliate thereof); (ii) any failure by the Servicer duly to observe or
perform in any material respect any other covenant or agreement in such Sale and
Servicing Agreement or Pooling and Servicing Agreement, which failure materially
and adversely affects the rights of the Noteholders or the Certificateholders of
the related series and which continues unremedied for 90 days after the giving
of written notice of such failure (A) to the Servicer or the Seller, as the case
may be, by the applicable Trustee or Indenture Trustee or (B) to the Servicer or
the Seller, as the case may be, and to the applicable Trustee and Indenture
Trustee, by the holders of Notes or Certificates of the related series
evidencing not less than 25% in principal amount of such outstanding Notes or
Certificates (in each case, excluding Securities held by TMCC, TMCRC or any
affiliate thereof); and (iii) the occurrence of an Insolvency Event with respect
to the Servicer. Notwithstanding the foregoing, a delay in or failure of
performance referred to under clause (i) above for a period of ten Business Days
shall not constitute a Servicer Default if such failure or delay is caused by an
event of force majeure. Upon the occurrence of any such event, the Servicer
shall not be relieved from using all commercially reasonable efforts to perform
its obligations in a timely manner in accordance with the terms of the Servicing
Agreement, and the Servicer shall provide to the
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Trustee, the Indenture Trustee, the Seller and the Securityholders prompt notice
of such failure or delay by it, together with a description of its efforts to so
perform its obligations.
"Insolvency Event" means, with respect to any Person, any of the
following events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such Person and certain actions by such Person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement remains unremedied, the related Indenture Trustee or
holders of Notes of the related series evidencing not less than 51% of principal
amount of such Notes then outstanding (excluding any Notes held by TMCC, TMCRC
or any affiliate thereof), acting together as a single class, may terminate all
the rights and obligations of the Servicer under such Sale and Servicing
Agreement, whereupon such Indenture Trustee or a successor servicer appointed by
such Indenture Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement and will be
entitled to similar compensation arrangements. In the case of any Trust that has
not issued Notes, unless otherwise provided in the related Prospectus
Supplement, as long as a Servicer Default under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement remains unremedied, the related
Trustee or holders of Certificates of the related series evidencing not less
than 51% of the principal amount of such Certificates then outstanding
(excluding any Certificates held by TMCC, TMCRC or any affiliate thereof),
acting together as a single class, may terminate all the rights and obligations
of the Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement, whereupon such Trustee or a successor servicer appointed by such
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements. If a
bankruptcy trustee or similar official has been appointed for the Servicer, and
no Servicer Default other than such appointment has occurred, such trustee or
official may have the power to prevent such Indenture Trustee, such Noteholders,
such Trustee or such Certificateholders from effecting a transfer of servicing.
In the event that such Indenture Trustee or Trustee is unwilling or unable to so
act, it may appoint, or petition a court of competent jurisdiction for the
appointment of, a successor with a net worth of at least $50,000,000 and whose
regular business includes the servicing of automobile and/or light duty truck
receivables. Such Indenture Trustee or Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement. Notwithstanding such termination, the Servicer shall be
entitled to payment of certain amounts payable to it prior to such termination
for services rendered prior to such termination.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise
provided in the related Prospectus Supplement, (i) the holders of Notes
evidencing not less than 51% of the principal amount of the then outstanding
Notes of the related series, acting together as a single class (excluding any
Notes held by TMCC, TMCRC or any affiliate thereof) or (ii) in the case of any
Servicer Default which does not adversely affect the related Indenture Trustee
or such Noteholders, the holders of the Certificates of such series evidencing
not less than 51% of the outstanding Certificate Balance (excluding any
Certificates held by TMCC, TMCRC or any affiliate thereof); acting together as a
single class, may, on behalf of all such Noteholders or Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the related Sale and Servicing Agreement and its consequences, except a Servicer
Default in making any required deposits to or payments from any of the Trust
Accounts in accordance with such Sale and Servicing Agreement. With respect to
each Trust that has not issued Notes, holders of Certificates of such series
evidencing not less than 51% of the principal amount of such Certificates then
outstanding (excluding any Certificates held by TMCC, TMCRC or any affiliate
thereof), acting together as a single class, may, on behalf of all such
Certificateholders, waive any
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default by the Servicer in the performance of its obligations under the related
Sale and Servicing Agreement or Pooling and Servicing Agreement, except a
Servicer Default in making any required deposits to or payments from the related
Trust Accounts in accordance with such Sale and Servicing Agreement or Pooling
and Servicing Agreement or in respect of a covenant or provision of the related
Sale and Servicing Agreement or Pooling and Servicing Agreement that cannot be
modified or amended without the consent of the Holder of each Certificate. No
such waiver will impair such Noteholders' or Certificateholders' rights with
respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of
the Transfer and Servicing Agreements may be amended by the parties thereto,
without the consent of the related Noteholders or Certificateholders to cure any
ambiguity, to correct or supplement any provisions in the Transfer and Servicing
Agreements or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Transfer and Servicing
Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the related Trustee or Indenture Trustee, as applicable,
materially and adversely affect the interest of any such Noteholder or
Certificateholder.
Each Transfer and Servicing Agreement may also be amended by the parties
thereto without the consent of any Noteholder or Certificateholder for the
purpose of changing the formula for determining the Specified Reserve Fund
Balance, the manner in which a Reserve Fund is funded, changing the remittance
schedule for deposit of collections in accounts or changing the definition of
Eligible Investments if (a) the relevant trustee has been provided a letter from
Standard and Poor's 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, and the relevant trustee has provided Moody's
with 10 days prior written notice of the amendment and Moody's shall not have
notified the relevant trustee that the amendment might or would result in the
qualification, reduction or withdrawal of the rating it has currently assigned
to any class of notes or certificates, or (b) the relevant trustee has received
the consent of the holders of at least 51% of the outstanding principal amount
of each class of Notes and Certificates (or the relevant class or classes of
Notes or Certificates) of such series, voting together as a single class;
provided that no such amendment shall increase or reduce in any manner or
accelerate or delay the timing of collections on the related contracts or
payments required to be made to the holders of any Notes or Certificates of such
series without the consent of the holders of all of the affected Notes or
Certificates.
Unless otherwise specified in the related Prospectus Supplement, the
Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer, the related Trustee and any related Indenture Trustee with the consent
of (i) the holders of Notes evidencing not less than 51% of the principal amount
of then outstanding Notes, if any, of the related series, acting together as a
single class (excluding Notes held by TMCC. TMCRC or any affiliate thereof), or
(ii) in the case of any amendment which does not adversely affect the related
Indenture Trustee or such Noteholders, the holders of the Certificates of such
series evidencing not less than 51% of the outstanding Certificate Balance
(excluding Certificates held by TMCC. TMCRC or any affiliate thereof), acting
together as a single class, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Transfer and
Servicing Agreements or of modifying in any manner the rights of such
Noteholders or Certificateholders; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the related Receivables or
distributions that are required to be made for the benefit of such Noteholders
or Certificateholders or (ii) reduce the aforesaid percentage of the Notes or
Certificates of such series which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes or Certificates
of each class affected thereby.
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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) plus the appraised value of
any other property held as part of the Trust (less liquidation expenses), but in
any case an amount at least equal to the unpaid principal amount of the
outstanding Notes and Certificates plus accrued and unpaid interest thereon and,
if so specified in the related prospectus supplement, any amounts payable to the
swap counterparty. 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 Notes and 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
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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.
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TMCC DEMAND NOTES
The following summary describes certain terms of demand notes that may be
issued from time to time by TMCC (the "TMCC Demand Notes"). TMCC Demand Notes
will be issued under a Demand Notes Indenture (the "Demand Notes Indenture"),
between TMCC and the trustee thereunder (in such capacity, the "Demand Notes
Indenture Trustee"). The characteristics of any particular series of TMCC Demand
Notes and the provisions of any particular Demand Notes Indenture may differ
from those described in this section and will be more fully described in the
related Prospectus Supplement. In addition, this summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of any Demand Notes Indenture that is entered into by the related
trust.
GENERAL
Collections in respect of the receivables will be applied to make
payments of interest and principal of each class of Securities. If so specified
in the related Prospectus Supplement, payments of interest and/or principal of
one or more classes of Securities may be made on a quarterly, semi-annual or
annual basis, and not simply as a pass-through of collections received during a
particular month. In order to make distributions of principal and/or interest on
a basis other than monthly, the Trustee will be required to invest amounts
otherwise payable as principal or interest of the specified classes of
Securities in highly rated investments maturing on or just prior to specified
Payment Dates and bearing interest at rates specified in the related Prospectus
Supplement as directed by the Servicer. The Trustee may invest some or all such
funds in TMCC Demand Notes, due to the administrative difficulties associated
with regularly obtaining highly rated investments in variable amounts with the
necessary maturities and demand features that earn a sufficient amount of
interest.
The principal amount of the TMCC Demand Notes outstanding will change
from time to time, depending on the amount of collections invested. The
aggregate principal amount of TMCC Demand Notes that may be issued under any
Demand Notes Indenture will be set forth in the related Prospectus Supplement.
Interest on the TMCC Demand Notes will be paid at rates and on terms set forth
in the related Prospectus Supplement. Different forms of TMCC Demand Notes will
be used to represent investments of Collections relating to interest and
investments of Collections relating to principal. Interest related demand notes
will generally mature on the dates on which interest is to be paid to
Securityholders. Principal related demand notes will generally mature on the
dates on which principal is to be paid to Securityholders. In addition, the
Trustee will generally have the right to demand payment of the TMCC Demand Notes
in connection with the reduction of TMCC's rating to a level below that
specified in the related Prospectus Supplement or upon the occurrence of other
events specified in the related Prospectus Supplement. See "Risk Factors--THE
SWAP AND THE DEMAND NOTES MAY AFFECT THE RATINGS OF THE SECURITIES." The payment
terms relating to the TMCC Demand Notes will be set forth in detail in the
related Prospectus Supplement.
TMCC Demand Notes will be unsecured general obligations of TMCC and will
rank PARI PASSU with all other unsecured and unsubordinated indebtedness of TMCC
from time to time outstanding. TMCC Demand Notes will be obligations solely of
TMCC and will not be obligations of, or guaranteed by, TMS or any affiliate of
TMCC or TMS, directly or indirectly. TMCC Demand Notes will not be subject to
redemption by TMCC and will not have the benefit of any sinking fund.
Any TMCC Demand Notes will be issued only in fully registered form
without interest coupons, and payment of principal of and interest on TMCC
Demand Notes will be made by the Demand Notes Indenture Trustee as paying agent
by wire transfer to an account maintained by the Trustee, as the holder of the
TMCC Demand Notes.
No Securityholder will have a direct interest in any TMCC Demand Notes or
have any direct rights under the TMCC Demand Notes or the Demand Notes
Indenture. The Trustee, on behalf of the Trust, will be the only holder of the
TMCC Demand Notes, which it will hold for the benefit of the Securityholders. In
the event any vote or other action, including action upon the occurrence of an
Event of Default under the Demand
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Notes Indenture, is required or permitted by the holders of the TMCC Demand
Notes under the Demand Notes Indenture, the Trustee as such holder will be
permitted to vote or take such other action as it shall deem fit. However, the
Trustee, on behalf of the Trust, shall be permitted to seek the direction of the
Securityholders before taking any such action, all as further described in the
related Prospectus Supplement. References under this caption to "holders of the
TMCC Demand Notes" and phrases of similar import shall be to the Trustee as the
holder of the TMCC Demand Notes.
REMOVAL OF DEMAND NOTES INDENTURE TRUSTEE; SUCCESSOR DEMAND NOTES INDENTURE
TRUSTEE
The Demand Notes Indenture Trustee may resign by providing written notice
to TMCC and the Trust, as holder of the TMCC Demand Notes. The Trust, as holder
of the TMCC Demand Notes, may remove the Demand Notes Indenture Trustee by
written notice thereto and to TMCC, and may appoint a successor Demand Notes
Indenture Trustee. TMCC may remove the Demand Notes Indenture Trustee in the
event that: (a) the Demand Notes Indenture Trustee fails to continue to satisfy
the criteria for eligibility to act as Demand Notes Indenture Trustee; (b) the
Demand Notes Indenture Trustee is adjudged a bankrupt or insolvent; (c) a
receiver or other public officer takes charge of the Demand Notes Indenture
Trustee or its property; or (d) the Demand Notes Indenture Trustee otherwise
becomes incapable of acting in such capacity.
If the Demand Notes Indenture Trustee resigns, is removed or is unable to
act as Demand Notes Indenture Trustee for any reason, TMCC shall promptly
appoint a successor Demand Notes Indenture Trustee, unless the Trust shall
already have done so. Within one year after a successor Demand Notes Indenture
Trustee takes office, the Trust may appoint a successor Demand Notes Indenture
Trustee to replace any successor Demand Notes Indenture Trustee appointed by
TMCC. Any resignation or removal of the Demand Notes Indenture Trustee and
appointment of a successor Demand Notes Indenture Trustee shall become effective
only upon such successor's acceptance of such appointment and the payment of
outstanding fees and expenses due to the prior Demand Notes Indenture Trustee as
set forth in the Demand Notes Indenture.
SUCCESSOR CORPORATION
The Demand Notes Indenture provides that TMCC may consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other corporation, provided, that in any such case: (i) either TMCC
shall be the continuing corporation, or the successor corporation shall be a
corporation organized and existing under the laws of the United States or any
state thereof and shall expressly assume, by execution and delivery to the
Demand Notes Indenture Trustee of a supplemental Demand Notes Indenture in form
satisfactory thereto, all of the obligations of TMCC under the TMCC Demand Notes
and the Demand Notes Indenture; and (ii) TMCC or such successor corporation, as
the case may be, shall not, immediately after such merger or consolidation, or
such sale, lease or conveyance, be in default in the performance of any such
obligation. Subject to certain limitations in the Demand Notes Indenture, the
Demand Notes Indenture Trustee may receive from TMCC an officer's certificate
and an opinion of counsel as conclusive evidence that any such consolidation,
merger, sale, lease or conveyance, and any such assumption, complies with the
provisions of the Demand Notes Indenture.
SUPPLEMENTAL DEMAND NOTES INDENTURES
Supplemental Demand Notes Indentures may be entered into by TMCC and the
Demand Notes Indenture Trustee without the consent of the holder of the TMCC
Demand Notes (a) to cure any ambiguity, to correct or supplement any provisions
thereof that may be inconsistent with any other provision thereof or to add any
other provision with respect to matters or questions arising under the Demand
Notes Indenture which are not inconsistent with the provisions thereof, provided
that any such action will not, in the good faith judgment of the parties,
materially and adversely affect the interest of any holder of TMCC Demand Notes
or any Securityholder and the Demand Notes Indenture Trustee shall be furnished
an opinion of counsel to the effect that such amendment will not materially and
adversely affect the interest of any Securityholder, and (b) for purposes of
appointing a successor trustee hereunder or in connection with any merger or
consolidation
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of TMCC or the transfer or lease of the assets of TMCC in their entirety, in
each case in accordance with the provisions of the Demand Notes Indenture. In
addition, supplemental Demand Notes Indentures may be entered into by TMCC and
the Demand Notes Indenture Trustee with the consent of the holder of the TMCC
Demand Notes (which consent will not be given except at the written direction of
Holders of at least 25% in aggregate principal amount of the Notes issued by a
Trust, or, with respect to a Trust that has not issued Notes, at least 25% in
aggregate principal amount of the outstanding Certificates (in each case
excluding any Securities held by TMCC, TMCRC or any affiliate thereof) acting as
a single class for the purpose of adding any provisions to or changing in any
manner or eliminating any other provisions of the Demand Notes Indenture or of
modifying in any manner the rights with respect to the TMCC Demand Notes,
provided that no supplemental Demand Notes Indenture may, among other things,
reduce the principal amount of or interest on any TMCC Demand Notes, change the
maturity date for the payment of the principal, the date on which interest will
be payable or other terms of payment or reduce the percentage of holders of TMCC
Demand Notes necessary to modify or alter the Demand Notes Indenture, without
the consent of each Holder of Securities affected thereby.
EVENTS OF DEFAULT UNDER THE DEMAND NOTES INDENTURE
The Demand Notes Indenture defines an Event of Default with respect to
the TMCC Demand Notes as being any one of the following events: (i) default in
payment of principal on the TMCC Demand Notes and continuance of such default
for a period of 10 days; (ii) default in payment of any interest on the TMCC
Demand Notes and continuance of such default for a period of 30 days; (iii)
default in the performance, or breach, of any other covenant or warranty of TMCC
in the Demand Notes Indenture continued for 60 days after appropriate notice;
and (iv) certain events of bankruptcy, insolvency or reorganization. If an Event
of Default occurs and is continuing, the Demand Notes Indenture Trustee or the
holders of at least 25% in aggregate principal amount of TMCC Demand Notes may
declare the TMCC Demand Notes to be due and payable. Any past default with
respect to the TMCC Demand Notes may be waived by the holders of a majority in
aggregate principal amount of the outstanding TMCC Demand Notes, except in a
case of failure to pay principal of or interest on the TMCC Demand Notes for
which payment has not been subsequently made or a default in respect of a
covenant or provision of the Demand Notes Indenture which cannot be modified or
amended without the consent of the holder of each outstanding TMCC Demand Note.
TMCC will be required to file with the Demand Notes Indenture Trustee annually
an officer's certificate as to the absence of certain defaults. The Demand Notes
Indenture Trustee may withhold notice to holders of the TMCC Demand Notes of any
default with respect to such series (except in payment of principal or interest)
if it in good faith determines that it is in the interest of such holders to do
so.
Subject to the provisions of the Demand Notes Indenture relating to the
duties of the Demand Notes Indenture Trustee in case an Event of Default shall
occur and be continuing, the Demand Notes Indenture Trustee will be under no
obligation to exercise any of its rights or powers under the Demand Notes
Indenture at the request or direction of any of the holders of TMCC Demand
Notes, unless such holders have offered to the Demand Notes Indenture Trustee
indemnity or security satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction. Subject to provisions in the Demand Notes Indenture for the
indemnification of the Demand Notes Indenture Trustee and to certain other
limitations, the holders of a majority in principal amount of the outstanding
TMCC Demand Notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Demand Notes Indenture
Trustee, or exercising any trust or power conferred on the Demand Notes
Indenture Trustee with respect to the TMCC Demand Notes.
ABSENCE OF COVENANTS
The provisions of the Demand Notes Indenture do not contain any covenants
that limit the ability of TMCC to subject its properties to liens, to enter into
any type of transaction or business or to secure any of its other indebtedness
without providing security for the TMCC Demand Notes. The provisions of the
Demand Notes Indenture do not afford the holders of the TMCC Demand Notes
protection in the event of a highly
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leveraged transaction, reorganization, restructuring, change in control, merger
or similar transaction or other event.
DEFEASANCE AND DISCHARGE OF DEMAND NOTES INDENTURE
TMCC may satisfy and discharge its obligations under the Demand Notes
Indenture by delivering to the Demand Notes Indenture Trustee for cancellation
all outstanding TMCC Demand Notes, or depositing with the Demand Notes Indenture
Trustee money sufficient to pay the principal of and interest on the outstanding
TMCC Demand Notes on the date on which any such payments are due and payable in
accordance with the terms of the Demand Notes Indenture and the TMCC Demand
Notes, and in each case by satisfying certain additional conditions in the
Demand Notes Indenture. However, in the case of any such deposit, certain of
TMCC's obligations under the Demand Notes Indenture (including the obligation to
pay the principal and interest on the outstanding TMCC Demand Notes) will
continue until all of the TMCC Demand Notes are paid in full.
REGARDING THE DEMAND NOTES INDENTURE TRUSTEE
The Demand Notes Indenture Trustee may be the applicable Trustee and/or
Indenture Trustee. The Demand Notes Indenture contains certain limitations on
the right of the Demand Notes Indenture Trustee, should it become a creditor of
TMCC, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Demand Notes Indenture Trustee is permitted to engage in other transactions with
TMCC; provided, however, that if the Demand Notes Indenture Trustee acquires any
conflicting interest it must eliminate such conflict or resign.
The Demand Notes Indenture provides that, in case an Event of Default has
occurred and is continuing, the Demand Notes Indenture Trustee is required to
use the degree of care and skill of a prudent person in the conduct of his or
her own affairs in the exercise of its powers.
GOVERNING LAW
The Demand Notes Indenture and the TMCC Demand Notes will be governed by
and construed in accordance with the laws of the State of California.
THE SWAP AGREEMENT
The following summary describes certain terms of a swap agreement that a
Trust may enter into in order to reduce its exposure to currency and/or interest
rate risks. The provisions of any particular swap agreement may differ from
those described in this section and will be described in the related
Prospectus Supplement. In addition, this summary does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the provisions
of any swap agreement that is entered into by the related trust.
PAYMENTS UNDER THE SWAP AGREEMENT
As specified in the related Prospectus Supplement, on the Closing Date a
Trust may enter into a 1992 International Swaps and Derivatives Association,
Inc. ("ISDA") Master Agreement (Multi Currency-Cross Border) (such agreement,
the "1992 Master Agreement") with TMCC or an unaffiliated third party (the "Swap
Counterparty"), as modified to reflect the transactions described below (the
1992 Master Agreement, as so modified, the "Swap Agreement"). The Swap Agreement
will incorporate certain relevant standard definitions published by ISDA.
Under the Swap Agreement, the Trust will generally pay to the Swap
Counterparty amounts in respect of interest and principal, as applicable, due on
each Payment Date under the Swap Agreement and the Swap Counterparty will
generally pay to the Trust amounts equal to the interest or principal payable on
the relevant Securities. If the Trust is unable to make any payment due to be
made by it to the Swap Counterparty under
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the Swap Agreement, the Swap Counterparty generally will not be obligated to
make its corresponding payment to the Trust under the Swap Agreement.
If so specified in the related Prospectus Supplement, if on any specified
payment date under the Swap Agreement the amount of funds from collections and
other sources available to the Trust to make any payment owed to the Swap
Counterparty is less than the amount due to the Swap Counterparty, the
obligation of the Swap Counterparty to pay an amount equal to the interest or
principal otherwise due on the relevant Securities on that date may be reduced
in the same proportion as the proportion that the shortfall in the amount owed
to the Swap Counterparty represents of the total amount due. Under such
circumstances, if on a subsequent specified payment date, amounts are available
and are paid by the Trust to the Swap Counterparty to reimburse all or any part
of the shortfall, then the obligation of the Swap Counterparty to pay an amount
equal to the interest or principal otherwise due on the Securities on that date
will be increased in the same proportion as the proportion that the amount of
the reimbursement represents of the amount otherwise owed by the Swap
Counterparty on that date.
The Trust generally will not be obligated to pay interest to the Swap
Counterparty on any shortfalls in payments, and, correspondingly,
Certificateholders generally will not be entitled to receive interest on any
amounts not paid as a result of the proportional reduction described above.
Unless the Swap Agreement is terminated early as described under "--Early
Termination Of Swap Agreement," the Swap Agreement will terminate on the earlier
of (i) the scheduled maturity date of the Securities and (ii) the date on which
all amounts due in respect of the Swap Agreement have been paid.
CONDITIONS PRECEDENT
The respective obligations of the Swap Counterparty and the Trust to pay
certain amounts due under the Swap Agreement will be subject to the following
conditions precedent: (i) no Swap Event of Default (as defined below under "--
Defaults Under Swap Agreement") or event that with the giving of notice or lapse
of time or both would become an Event of Default shall have occurred and be
continuing and (ii) no Early Termination Date (as defined below under "--Early
Termination Of Swap Agreement") shall have occurred or been effectively
designated.
DEFAULTS UNDER SWAP AGREEMENT
Events of default under the Swap Agreement (each, a "Swap Event of
Default") generally will be limited to: (i) the failure of the Trust or the Swap
Counterparty to pay any amount when due under the Swap Agreement after giving
effect to the applicable grace period, if any; (ii) the occurrence of certain
events of insolvency or bankruptcy of the Trust or the Swap Counterparty and
(iii) certain other standard events of default under the 1992 Master Agreement
including "Breach of Agreement," "Misrepresentation" (generally not applicable
to the Trust) and "Merger without Assumption", as described in Sections
5(a)(ii), 5(a)(iv) and 5(a)(viii) of the 1992 Master Agreement.
TERMINATION EVENTS
Termination events under the Swap Agreement (each, a "Swap Termination
Event") will consist of the following: (i) the Trust or the Transferor becomes
subject to registration as an "investment company" under the Investment Company
Act of 1940; and (ii) certain standard termination events under the 1992 Master
Agreement including "Illegality" (which generally relates to changes in law
causing it to become unlawful for either of the parties to perform its
obligations under the Swap Agreement), "Tax Event" (which generally relates to
either party to the Swap Agreement receiving payments thereunder from which an
amount has been deducted or withheld for or on account of certain taxes) and
"Tax Event Upon Merger" (which generally relates to a party to the Swap
Agreement receiving a payment under the Swap Agreement from which an amount has
been deducted or withheld for or on account of certain taxes as a result of a
party merging with another entity), each as more fully described in Sections
5(b)(i), 5(b)(ii) and 5(b)(iii) of the 1992 Master
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Agreement; provided, however, that the occurrence of a "Tax Event" or "Tax Event
Upon Merger" generally will only constitute a Swap Termination Event if the
requisite percentage of Securityholders specified in the related Prospectus
Supplement directs the Trustee to terminate the Swap Agreement and liquidate the
assets of the Trust. Additional or different Termination Events may be specified
in the Prospectus Supplement.
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
or will not be entitled to any portion of the termination payment related to the
market value of the Swap Agreement because of its default with respect to any
particular Swap Event of Default or Swap Termination Event.
Generally, if a Swap Termination occurs, the principal of each class of
Securities will become immediately payable and the Trustee will be obligated to
liquidate the assets of the Trust. In any such event, the ability of the Trust
to pay interest and/or principal on each class of Securities will depend on (a)
the price at which the assets of the Trust are liquidated, (b) the amount of the
swap termination payment, if any, which may be due to the Swap Counterparty from
the Trust under the Swap Agreement and (c) the amount of the swap termination
payment, if any, which may be due to the Trust from the Swap Counterparty under
the Swap Agreement. In the event that the net proceeds of the liquidation of the
assets of the Trust are not sufficient to make all payments due in respect of
the Securities and for the Trust to meet its obligations, if any, in respect of
the termination of the Swap Agreement, then such amounts will be allocated and
applied in accordance with the priority of payments described in the related
Prospectus Supplement and the claims of the Swap Counterparty in respect of such
net proceeds will rank higher in priority than the claims of the relevant
Securities. If a Swap Termination occurs and the Trust does not terminate, the
Trust will not be protected from the interest rate and currency fluctuations
hedged by the Swap Agreement, and payments to Noteholders and Certificateholders
may be adversely affected.
Generally, the applicable Pooling and Servicing Agreement, Sale and
Servicing Agreement or Indenture will provide that upon the occurrence of
(i) any Swap Event of Default arising from any action taken, or failure to act,
by the Swap Counterparty, or (ii) a Swap Termination Event (except as described
in the following sentence) with respect to which the Swap Counterparty is an
Affected Party, the Trustee may and will, at the direction of the requisite
percentage of the Securityholders specified in such agreement, by notice to the
Swap
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Counterparty, designate an Early Termination Date with respect to the Swap
Agreement. If a Swap Termination Event occurs because the Trust or the Seller
becomes subject to registration as an "investment company" under the Investment
Company Act of 1940, the Trustee will be required by the terms of such agreement
to terminate the Swap Agreement.
TAXATION
Neither the Trust nor the Swap Counterparty will be obligated under the
Swap Agreement to gross up if withholding taxes are imposed on payments made
under the Swap Agreement.
In the event that any withholding or similar tax is imposed on payments
by the Trust to the Swap Counterparty under the Swap Agreement, the Swap
Counterparty will be entitled to deduct amounts in the same proportion (as
calculated in accordance with the Swap Agreement) from subsequent payments due
from it. In the event that the Swap Counterparty is required to withhold amounts
from payments by the Swap Counterparty under the Swap Agreement, the payment
obligations of the Swap Counterparty will be reduced by such amounts and the
payment obligations of the Trust under the Swap Agreement will remain the same.
In either such event, payments on the Securities may be subject to reduction in
proportion to the amount so deducted or withheld. In either such event, a
specified percentage of the Securityholders may direct the Trustee to terminate
the Swap Agreement and liquidate the assets of the Trust, as described above
under "--Termination Events".
ASSIGNMENT
Except as provided below, neither the Trust nor the Swap Counterparty
will be permitted to assign, novate or transfer as a whole or in part any of its
rights, obligations or interests under the Swap Agreement. The Swap Counterparty
generally may not transfer the Swap Agreement to another party unless
(i) 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, (ii) a Swap Termination Event or Swap Event of Default
does not occur under the Swap Agreement as a result of such transfer and (iii)
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 may have the right to (a) assign
the Swap Agreement to another party (or otherwise obtain a replacement swap
agreement on substantially the same terms as the Swap Agreement) and thereby be
released from its obligations under the Swap Agreement; provided that (i) the
new swap counterparty, by a written instrument, accepts all of the obligations
of the Swap Counterparty under the Swap Agreement to the reasonable satisfaction
of the Trustee, (ii) the Swap Counterparty delivers an opinion of independent
counsel of recognized standing in form and substance reasonably satisfactory to
the Trustee confirming that as at the date of such transfer the new swap
counterparty will not, as a result of such transfer or replacement, be required
to withhold or deduct on account of tax under the Swap Agreement, (iii) a Swap
Termination Event or Swap Event of Default does not occur under the Swap
Agreement as a result of such transfer and (iv) the ratings assigned to the
Securities after such assignment and release will be at least equal to the
ratings assigned by any applicable Rating Agency to the Securities at the time
of such reduction of the rating of the Swap Counterparty's long-term debt, or
(b) collateralize its payment obligations thereunder, provided that the
conditions described in the preceding clauses (a)(iii) and (a)(iv) are
satisfied with respect to such collateralization. The cost of any 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, obtain a replacement swap agreement or
collateralize its payment obligations thereunder 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, obtain a replacement swap agreement or collateralize its payment
obligations thereunder. In the event that the Swap Counterparty does not elect
to assign the Swap Agreement, obtain a replacement swap agreement or
collateralize its payment obligations thereunder the
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Swap Counterparty may (but shall not be obligated to) establish any other
arrangement satisfactory to the applicable Rating Agency, in each case such that
the ratings of the Securities by the applicable Rating Agency will not be
withdrawn or reduced.
MODIFICATION AND AMENDMENT OF SWAP AGREEMENT
The applicable Pooling and Servicing Agreement or Sale and Servicing
Agreement will contain provisions permitting the Trustee to enter into any
amendment of the Swap Agreement (i) to cure any ambiguity or mistake, (ii) to
correct any defective provisions or to correct or supplement any provision
therein which may be inconsistent with any other provision therein or with the
Agreement or (iii) to add any other provisions with respect to matters or
questions arising under the Swap Agreement; provided, in the case of clause
(iii) that such amendment will not adversely affect in any material respect the
interest of any specified Securityholder. Any such amendment shall be deemed not
to adversely affect in any material respect the interests of any Noteholder if
Standard and Poor's delivers a letter to the Trustee to the effect that the
amendment will not result in a qualification, reduction or withdrawal of its
then-current rating of any class of Notes, and if the Trustee has provided
Moody's with 10 days prior written notice of the amendment and Moody's shall not
have notified the Trustee that the amendment might or would result in the
qualification, reduction or withdrawal of the rating it has currently assigned
to any class of Notes.
THE SWAP COUNTERPARTY
TMCC may act as the Swap Counterparty. A description of TMCC is provided
under "The Servicer" herein. Information regarding TMCC is publicly available as
described under "Where You Can Find More Information About Your
Securities--TMCC" herein. Where indicated by the context, as used herein "Swap
Counterparty" includes any party that replaces the initial Swap Counterparty as
described above under "--Assignment".
GOVERNING LAW
The Swap Agreement will be governed by and construed in accordance with
the laws of the State of New York.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of the Receivables to the applicable Trustee, the perfection
of the security interests in the Receivables and the enforcement of rights to
realize on the Financed Vehicles as collateral for the Receivables are subject
to a number of federal and state laws, including the UCC as in effect in various
states. The Servicer and the Seller will take the action described below to
perfect the rights of the applicable Trustee in the Receivables. If, through
inadvertence or otherwise, another party purchases (including the taking of a
security interest in) the Receivables for new value in the ordinary course of
its business, without actual knowledge of the Trust's interest, and takes
possession of the Receivables, such purchaser would acquire an interest in the
Receivables superior to the interest of the Trust.
SECURITY INTERESTS
GENERAL. In states in which retail installment sale contracts such as the
Receivables evidence the credit sale of automobiles and/or light duty trucks by
dealers to obligors, the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
applicable UCC. Perfection of security interests in financed automobiles and/or
light duty trucks is generally governed by the motor vehicle registration laws
of the state in which the vehicle is located. In most states, a security
interest in automobiles and/or light duty trucks is perfected by obtaining the
certificate of title to the Financed Vehicle or notation of the secured party's
lien on the vehicles' certificate of title.
All retail installment sales contracts acquired by TMCC from Dealers name
TMCC as obligee or assignee and as the secured party. TMCC also takes all
actions necessary under the laws of the state in which the related Financed
Vehicle is located to perfect its security interest in such Financed Vehicle,
including, where applicable, having a notation of its lien recorded on the
related certificate of title and obtaining possession of such certificate of
title. Because TMCC continues to service the contracts as Servicer under the
Sale and Servicing Agreement or the Pooling and Servicing Agreement, as
applicable, the Obligors on the contracts will not be notified of the sale from
TMCC to the Seller or the sale from the Seller to the Trust, and no action will
be taken to record the transfer of the security interest from TMCC to the Seller
or from the Seller to the Trust by amendment of the certificates of title for
the Financed Vehicles or otherwise.
PERFECTION. Pursuant to the related Receivables Purchase Agreement, TMCC
will sell and assign its security interest in the Financed Vehicles to the
Seller and, with respect to each Trust, pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, the Seller will assign
its security interest in the Financed Vehicles to such Trust. However, because
of the administrative burden and expense, none of TMCC, the Seller or the
related Trustee will amend any certificate of title to identify such Trust as
the new secured party on such certificate of title relating to a Financed
Vehicle. However, UCC financing statements with respect to the transfer to the
Seller of TMCC's security interest in the Financed Vehicles and the transfer to
the Trustee of the Seller's security interest in the Financed Vehicles will be
filed. In addition, the Servicer will continue to hold any certificates of title
relating to the vehicles in its possession as custodian for the Seller and such
Trust pursuant to the related Sale and Servicing Agreement or Pooling and
Servicing Agreement. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
In most states, an assignment such as that under each Receivables
Purchase Agreement or each Sale and Servicing Agreement or Pooling and Servicing
Agreement is an effective conveyance of a security interest without amendment of
any lien noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. Although re-registration of
the vehicle is not necessary to convey a perfected security interest in the
Financed Vehicles to the Trust, because the Trust will not be listed as legal
owner on the certificates of title, the security interest of such Trust in the
vehicle could be defeated through fraud or negligence. In such states, in the
absence of fraud or forgery by the vehicle owner or the Servicer or
administrative error by state or local agencies, the notation of TMCC's lien on
the certificates of title will be
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sufficient to protect such Trust against the rights of subsequent purchasers of
a Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. In each Receivables Purchase Agreement, TMCC will represent
and warrant, and in each Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller will represent and warrant, that it has taken all action
necessary to obtain a perfected security interest in each Financed Vehicle. If
there are any Financed Vehicles as to which TMCC failed to obtain and assign to
the Seller a perfected security interest, the security interest of the Seller
would be subordinate to, among others, subsequent purchasers of the Financed
Vehicles and holders of perfected security interests therein. To the extent such
failure has a material and adverse effect on the Trust's interest in the related
Receivables, however, it would constitute a breach of the warranties of TMCC
under the related Receivables Purchase Agreement or the Seller under the related
Sale and Servicing Agreement or Pooling and Servicing Agreement. Accordingly,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Seller would be required to repurchase the related Receivable
from the Trust and, pursuant to the related Receivables Purchase Agreement, TMCC
would be required to purchase such Receivable from the Seller, in each case
unless the breach was cured. Pursuant to each Sale and Servicing Agreement and
Pooling and Servicing Agreement, the Seller will assign such rights to the
related Trust. See "Description of the Transfer and Servicing Agreements--Sale
and Assignment of Receivables" and "Risk Factors--THE TRUST'S SECURITY INTERESTS
IN FINANCED VEHICLES MAY BE UNENFORCEABLE OR DEFEATED".
CONTINUITY OF PERFECTION. Under the laws of most states, the perfected
security interest in a vehicle would continue for four months after the vehicle
is moved to a state that is different from the one in which it is initially
registered and thereafter until the owner thereof re-registers the vehicle in
the new state. A majority of states generally require surrender of a certificate
of title to re-register a vehicle. In those states (such as California) that
require a secured party to hold possession of the certificate of title to
maintain perfection of the security interest, the secured party would learn of
the re-registration through the request from the obligor under the related
installment sales contract to surrender possession of the certificate of title.
In the case of vehicles registered in states providing for the notation of a
lien on the certificate of title but not possession by the secured party (such
as Texas), the secured party would receive notice of surrender from the state of
re-registration if the security interest is noted on the certificate of title.
Thus, the secured party would have the opportunity to re-perfect its security
interest in the vehicle in the state of relocation. However, these procedural
safeguards will not protect the secured party if through fraud, forgery or
administrative error, the debtor somehow procures a new certificate of title
that does not list the secured party's lien. Additionally, in states that do not
require a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing the
Receivables, TMCC will take steps to effect re-perfection upon receipt of notice
of re-registration or information from the obligor as to relocation. Similarly,
when an Obligor sells a Financed Vehicle, TMCC must surrender possession of the
certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related Receivable before release of the lien. Under each Sale and Servicing
Agreement and Pooling and Servicing Agreement, the Servicer will be obligated to
take appropriate steps, at the Servicer's expense, to maintain perfection of
security interests in the Financed Vehicles and will be obligated to purchase
the related Receivable if it fails to do so and such failure has a material and
adverse effect on the Trust's interest in the Receivable.
PRIORITY OF LIENS ARISING BY OPERATION OF LAW. Under the laws of most
states (including California), liens for repairs performed on a motor vehicle
and liens for unpaid taxes take priority over even a perfected security interest
in a financed vehicle. The Code also grants priority to certain federal tax
liens over the lien of a secured party. The laws of certain states and federal
law permit the confiscation of vehicles by governmental authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
vehicle. TMCC will represent and warrant to the Seller in each Receivables
Purchase Agreement, and the Seller will represent and warrant to the Trust in
each Sale and Servicing Agreement and Pooling and Servicing Agreement, that, as
of related Closing Date, each security interest in a Financed Vehicle is prior
to all other present liens (other than tax liens and other liens that arise by
operation of law) upon and security interests in such Financed Vehicle. However,
liens for repairs or taxes
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could arise, or the confiscation of a Financed Vehicle could occur, at any time
during the term of a Receivable. No notice will be given to the Trustee, any
Indenture Trustee, any Noteholders or the Certificateholders in respect of a
given Trust if such a lien arises or confiscation occurs which would not give
rise to the Seller's repurchase obligation under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement or TMCC's repurchase obligation
under the related Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an obligor, the holder of the related retail
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. Among the UCC remedies,
the secured party has the right to perform repossession by self-help means,
unless such means would constitute a breach of the peace or is otherwise limited
by applicable state law. Unless a vehicle financed by TMCC is voluntarily
surrendered, self-help repossession is the method employed by TMCC in most
states and is accomplished simply by retaking possession thereof. In cases where
an obligor objects or raises a defense to repossession, or if otherwise required
by applicable state law, a court order must be obtained from the appropriate
state court, and such vehicle must then be recovered in accordance with that
order. In some jurisdictions, the secured party is required to notify such
obligor of the default and the intent to repossess the collateral and to give
such obligor a time period within which to cure the default prior to
repossession. In most states, under certain circumstances after any such
financed vehicle has been repossessed, the related obligor may reinstate the
related contract by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor under a retail installment sales
contract, some jurisdictions require that the obligor be notified of the default
and be given a time period within which to cure the default prior to
repossession. Generally, this right of cure may only be exercised on a limited
number of occasions during the term of the related contract.
The UCC and other state laws require the secured party to provide an
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
most states, an obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
and accrued interest thereon plus reasonable expenses for repossessing, holding
and preparing the collateral for disposition and arranging for its sale, plus,
in some jurisdictions, reasonable attorneys' fees. In some states, an obligor
has the right to redeem the collateral prior to actual sale by payment of
delinquent installments or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. In addition to the notice requirement, the UCC
requires that every aspect of the sale or other disposition, including the
method, manner, time, place and terms, be "commercially reasonable". Generally,
courts have held that when a sale is not "commercially reasonable," the secured
party loses its right to a deficiency judgment. However, the deficiency judgment
would be a personal judgment against the obligor for the shortfall, and a
defaulting obligor can be expected to have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount or be uncollectible. In addition, the UCC permits the
debtor or other interested party to recover for any loss caused by noncompliance
with the provisions of the UCC. Also, prior to a sale, the UCC permits the
debtor or other interested person to prohibit the secured party
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from disposing of the collateral if it is established that the secured party is
not proceeding in accordance with the "default" provisions under the UCC.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or if no such lienholder exists, the UCC requires
the creditor to remit the surplus to the obligor.
CERTAIN BANKRUPTCY CONSIDERATIONS
The Seller, in structuring the transactions contemplated hereby, has
taken steps that are intended to make it unlikely that the voluntary or
involuntary application for relief by TMCC under the United States Bankruptcy
Code or similar applicable state laws (collectively, "Insolvency Laws") will
result in consolidation of the assets and liabilities of the Seller with those
of TMCC. These steps include the creation of the Seller as a wholly-owned,
limited purpose subsidiary pursuant to articles of incorporation and bylaws
containing certain limitations (including requiring that the Seller must at all
times have at least one "Independent Director" and restrictions on the nature of
the Seller's business and on its ability to commence a voluntary case or
proceeding under any Insolvency Law without the affirmative vote of a majority
of its directors, including each Independent Director). In addition, to the
extent that the Seller granted a security interest in the Receivables to the
Trust, and that interest was validly perfected before the bankruptcy or
insolvency of TMCC and was not taken or granted in contemplation of insolvency
or with the intent to hinder, delay or defraud TMCC or its creditors, that
security interest should not be subject to avoidance, and payments to the Trust
with respect to the Receivables should not be subject to recovery by a creditor
or trustee in bankruptcy of TMCC. If, notwithstanding the foregoing, (i) a court
concluded that the assets and liabilities of the Seller should be consolidated
with those of TMCC in the event of the application of applicable Insolvency Laws
to TMCC or following the bankruptcy or insolvency of TMCC the security interest
in the Receivables granted by the Seller to the Trust should be avoided, (ii) a
filing were made under any Insolvency Law by or against the Seller or (iii) an
attempt were made to litigate any of the foregoing issues, delays in payments on
the Certificates and possible reductions in the amount of such payments could
occur.
On the Closing Date, the Seller will receive the opinion of O'Melveny &
Myers LLP to the effect that, based on a reasoned analysis of analogous case law
(although there is no precedent based on directly similar facts), and, subject
to certain facts, assumptions and qualifications specified therein and applying
the principles set forth therein, in the event of a voluntary or involuntary
case in respect of TMCC under Title 11 of the United States Bankruptcy Code at a
time when TMCC and the Seller were insolvent, the property of the Seller would
not properly be substantively consolidated with the property of the estate of
TMCC. Among other things, it is assumed in such opinion that the Seller will
follow certain procedures in the conduct of its affairs, including maintaining
records and books of account separate from those of TMCC, refraining from
commingling its assets with those of TMCC, and refraining from holding itself
out as having agreed to pay, or being liable for, the debts of TMCC. The Seller
intends to follow these and other procedures related to maintaining its separate
corporate identity. However, there can be no assurance that a court would not
conclude that the assets and liabilities of the Seller should be consolidated
with those of TMCC.
TMCC will warrant in the Receivables Purchase Agreement that the sale of
the Receivables by it to the Seller is a valid sale. Notwithstanding the
foregoing, if TMCC were to become a debtor in a bankruptcy case a court could
take the position that the sale of Receivables to the Seller should instead be
treated as a pledge of such Receivables to secure a borrowing of such debtor. If
a court were to reach such conclusions, or a filing were made under any
Insolvency Law by or against the Seller, or if an attempt were made to litigate
any of the foregoing issues, delays in payments on the Securities (and possible
reductions in the amount of such payments) could occur. In addition, if the
transfer of Receivables to the Seller is treated as a pledge instead of a sale,
a tax or government lien on the property of TMCC arising before the transfer of
a Receivable to the Seller may have priority over the Seller's interest in such
Receivable. In addition, while TMCC is the
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Servicer, cash collections on the Receivables may be commingled with the funds
of TMCC and, in the event of the bankruptcy of TMCC, the Trust may not have a
perfected interest in such collections.
TMCC and the Seller will treat the transactions described herein as a
sale of the Receivables to the Seller, such that the automatic stay provisions
of the United States Bankruptcy Code should not apply to the Receivables in the
event that TMCC were to become a debtor in a bankruptcy case.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer
Credit Code, state adoptions of the National Consumer Act and of the Uniform
Consumer Credit Code and state motor vehicle retail installment sales acts and
other similar laws. Also, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect an assignee's ability to enforce
consumer finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting a seller (and certain related creditors and their assignees) in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. As to each
Obligor, such claims are limited to a maximum liability equal to the amounts
paid by the Obligor on the related Receivable. Under most state motor vehicle
dealer licensing laws, sellers of motor vehicles are required to be licensed to
sell motor vehicles at retail sale. Furthermore, federal odometer regulations
promulgated under the Motor Vehicle Information and Cost Savings Act require
that all sellers of new and used vehicles furnish a written statement signed by
the seller certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if a written odometer disclosure statement was not provided
to the purchaser of the related financed vehicle, an obligor may be able to
assert a defense against the seller of the vehicle. If an Obligor were
successful in asserting any such claim or defense, such claim or defense would
constitute a breach of the Seller's warranties under the related Sale and
Servicing Agreement or Pooling and Servicing Agreement and a breach of TMCC's
warranties under the related Receivables Purchase Agreement and would create an
obligation of the Seller and TMCC, respectively, to repurchase the Receivable
unless the breach is cured. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as
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reasonable or have found that the repossession and resale by the creditor do not
involve sufficient state action to afford constitutional protection to
borrowers.
From time to time, TMCC has been involved in litigation under consumer
protection laws. In addition, with respect to the Receivables originated in
California, a significant number may provide that such Receivables may be
rescinded by the related Dealer if such Dealer is unable to assign the
Receivable to a lender within ten days of the date of such Receivable. Although
there is authority, which is not binding on any court, providing that a
conditional sale contract containing such a provision would be unenforceable
under California law, to the knowledge of TMCC and the Seller, this
enforceability issue has not been presented before any California court.
TMCC and the Seller will represent and warrant under each Receivables
Purchase Agreement and each Sale and Servicing Agreement and Pooling and
Servicing Agreement, as applicable, that each Receivable complies with all
requirements of law in all material respects. In addition, with respect to any
Trust as to which 10% or more of the Receivables were originated in California,
on the applicable Closing Date, the Seller will receive an opinion of counsel to
the effect that all of the California Receivables are enforceable under
California law and applicable federal laws, subject to customary exceptions.
Accordingly, if an Obligor has a claim against such Trust for violation of any
law and such claim materially and adversely affects such Trust's interest in a
Receivable, such violation would constitute a breach of the representations and
warranties of TMCC under the Receivables Purchase Agreement and the Seller under
such Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of TMCC and the Seller to repurchase the Receivable unless
the breach is cured. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an
Obligor who enters the military service after the origination of such Obligor's
Receivable (including an Obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the Obligor's Receivable and is
later called to active duty) may not be charged interest above an annual rate of
6% during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, some states, including
California, allow members of the National Guard to extend payments on any
contract obligation if called into active service by the Governor for a period
exceeding 7 days. It is possible that the foregoing could have an effect on the
ability of the Servicer to collect the full amount of interest owing on certain
of the Receivables. In addition, the Soldiers' and Sailors' Relief Act of 1940
and the laws of some states, including California, New York and New Jersey,
impose limitations that would impair the ability of the Servicer to repossess an
affected Receivable during the Obligor's period of active duty status. Thus, in
the event that such a Receivable goes into default, there may be delays and
losses occasioned by the inability to exercise the Trust's rights with respect
to the related Financed Vehicle in a timely fashion.
Any such shortfall pursuant to either of the two preceding paragraphs, to
the extent not covered by amounts payable to the Securityholders from amounts on
deposit in the related Reserve Fund or from coverage provided under any other
credit enhancement mechanism, could result in losses to the Securityholders.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the Notes
and the Certificates of any series, to the extent it relates to matters of law
or legal conclusions with respect thereto, represents the opinion of tax counsel
to each Trust with respect to the related series on the material matters
associated with such consequences, subject to the qualifications set forth
herein. "Tax Counsel" with respect to each Trust will be O'Melveny & Myers LLP.
The summary does not purport to deal with federal income tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. For example, it does not discuss the tax treatment of Noteholders
or Certificateholders that are insurance companies, regulated investment
companies or dealers in securities. Moreover, there are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving both debt and
equity interests issued by a trust with terms similar to those of the Notes and
the Certificates. As a result, the IRS may disagree with all or a part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Tax Counsel regarding certain federal income tax matters
discussed below. An opinion of Tax Counsel, however, is not binding on the IRS
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary depending on
whether the Trust will be treated as a partnership or as a grantor trust under
the Code. The Prospectus Supplement for each Series of Certificates will specify
whether the Trust will be treated as a partnership (or other form of entity not
subject to entity-level taxation) or as a grantor trust.
TAX TREATMENT OF OWNER TRUSTS
TAX CHARACTERIZATION OF THE TRUST
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust nominally referred to as an "owner trust" in the
applicable prospectus (an "Owner Trust"), to the extent it relates to matters of
law or legal conclusions with respect thereto, represents the opinion of Tax
Counsel to each Owner Trust with respect to the related series on the material
matters associated with those consequences, subject to the qualifications set
forth in this Prospectus. In addition, Tax Counsel has prepared or reviewed the
statements in this Prospectus under the heading "Certain Federal Income Tax
Consequences--Tax Treatment of Owner Trusts," and is of the opinion that such
statements are correct in all material respects. Such statements are intended as
an explanatory discussion of the related tax matters affecting investors
generally, but do not purport to furnish information in the level of detail or
with the attention to an investor's specific tax circumstances that would be
provided by an investor's own tax advisor. Accordingly, it is suggested that
each investor consult its own tax advisor with regard to the tax consequences to
it of investing in Notes or Certificates.
Tax Counsel will deliver its opinion that an Owner Trust will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Related Documents will be complied with, and on Tax Counsel's
conclusions that the nature of the income of the Trust will exempt it from the
rule that certain publicly traded partnerships are taxable as corporations.
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If the Owner Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Receivables, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes and the Certificates, and Certificateholders could be liable for any
such tax that is not paid by the Owner Trust.
TAX CONSEQUENCES TO OWNERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Seller and any Noteholders
will agree, and the beneficial owners of the Notes (the "Note Owners") will
agree by their purchase of Notes, to treat the Notes as debt for federal income
tax purposes. Tax Counsel will, except as otherwise provided in the related
Prospectus Supplement, deliver its opinion that the Notes will be classified as
debt for federal income tax purposes. The discussion below assumes this
characterization of the Notes is correct.
OID, INDEXED SECURITIES, ETC. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes (as defined in this Prospectus). Moreover,
the discussion assumes that the interest formula for the Notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID regulations") relating to original issue discount ("OID"), and that any OID
on the Notes (i.e., any excess of the principal amount of the Notes over their
issue price) does not exceed a de minimis amount (i.e., 1/4% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID regulations. In determining whether any OID on the
Notes is de minimis, the Seller expects to use a reasonable assumption regarding
prepayments (a "Prepayment Assumption") to determine the weighted average
maturity of the Notes. If these conditions are not satisfied with respect to any
given series of Notes, additional tax considerations with respect to such Notes
will be disclosed in the applicable Prospectus Supplement.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Note Owner as
ordinary interest income when received or accrued in accordance with that Note
Owner's method of tax accounting. Under the OID regulations, the Note Owner of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. A purchaser who
buys a Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
The Note Owner of a Note that has a fixed maturity date of not more than
one year from the issue date of such Note (a "Short-Term Note") may be subject
to special rules. An accrual basis Note Owner of a Short-Term Note (and certain
cash method Note Owners, including regulated investment companies, as set forth
in Section 1281 of the Code) generally would be required to report interest
income as interest accrues on a straight-line basis or under a constant yield
method over the term of each interest period. Other cash basis Note Owners of a
Short-Term Note would, in general, be required to report interest income as
interest is paid (or, if earlier, upon the taxable disposition of the Short-Term
Note). However, a cash basis Note Owner of a Short-Term Note reporting interest
income as it is paid may be required to defer a portion of any interest expense
otherwise deductible on indebtedness incurred to purchase or carry the
Short-Term Note until the taxable disposition of the Short-Term Note. A cash
basis Note Owner that is not required to report interest income as it accrues
under Section 1281 may elect to accrue interest income on all nongovernment debt
obligations with a term of one year or less, in which case the Note Owner would
not be subject to the interest expense deferral rule referred to in the
preceding sentence. Certain special rules apply if a Short-Term Note is
purchased for more or less than its principal amount.
SALE OR OTHER DISPOSITION. If a Note Owner sells a Note, the Note Owner
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the Note Owner's adjusted tax basis in the Note.
The adjusted tax basis of a Note to a particular Note Owner will equal the Note
Owner's cost for the Note, increased by any market discount, acquisition
discount, OID and gain previously included in
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income by such Note Owner with respect to the Note and decreased by the amount
of bond premium, if any, previously amortized and by the amount of principal
payments previously received by such Noteholder with respect to such Note. Any
such gain or loss, and any gain or loss recognized on a prepayment of the Notes,
will be capital gain or loss if the Note was held as a capital asset, except for
gain representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used only to offset capital
gains.
FOREIGN HOLDERS. Interest paid (or accrued) to a Note Owner who is not a
U.S. Person (a "Foreign Owner") generally will be considered "portfolio
interest," and generally will not be subject to United States federal income tax
and withholding tax if the interest is not effectively connected with the
conduct of a trade or business within the United States by the Foreign Owner and
(i) the Foreign Owner is not actually or constructively a "10 percent
shareholder" of the Trust or the Seller (including a Certificateholder of 10% of
the outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust or the Seller is a "related Owner" within the meaning of the
Code (ii) the Foreign Owner is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code, (iii) the interest is not contingent interest
described in Section 871(h)(4) of the Code, and (iv) the Foreign Owner does not
bear certain relationships to any Certificateholder. To qualify for the
exemption from taxation, the Foreign Owner must provide the applicable Trustee
or other person who is otherwise required to withhold U.S. tax with respect to
the Notes with an appropriate statement (on Form W-8BEN or a similar form),
signed under penalties of perjury, certifying that the Note Owner is a Foreign
Owner and providing the Foreign Owner's name and address. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide the relevant signed
statement to the withholding agent; in that case, however, the signed statement
must be accompanied by a Form W-8BEN or substitute form provided by the Foreign
Owner and the Foreign Owner must notify the financial institution acting on its
behalf of any changes to the information on the Form W-8BEN (or substitute form)
within 30 days of any such change. If interest paid to a Foreign Owner is not
considered portfolio interest, then it will be subject to United States federal
income and withholding tax at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable tax treaty. In order to claim the benefit of any
applicable tax treaty, the Foreign Owner must provide the Trustee or other
person who is required to withhold U.S. tax with respect to the Notes with an
appropriate statement (on Form W-8BEN or a similar form), signed under penalties
of perjury, certifying that the Foreign Owner is entitled to benefits under the
treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a Foreign Owner will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the Foreign Owner and (ii) in the case of an individual Foreign Owner,
the Foreign Owner is not present in the United States for 183 days or more
during the taxable year of disposition.
As used herein, a "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation or a partnership organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate,
the income of which is from sources outside the United States is includible in
gross income for federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States, or (iv) a trust if
(a) a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more United States persons have
authority to control all substantial decisions of the trust or (b) the trust was
in existence on August 20, 1996 and is eligible to elect, and has made a valid
election, to be treated as a U.S. Person despite not meeting the requirements in
clause (a).
BACKUP WITHHOLDING. Each Note Owner (other than an exempt Note Owner such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate (on Form W-9) providing the Note Owner's
name, address, correct federal taxpayer identification number and a statement
that the Note Owner is not subject to backup withholding. Should a nonexempt
Note Owner fail to provide the required certification, the Owner Trust will be
required to
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withhold 31 percent of the amount otherwise payable to the Note Owner, and remit
the withheld amount to the IRS as a credit against the Note Owner's federal
income tax liability.
NEW WITHHOLDING REGULATIONS. Recently, the Treasury Department issued new
regulations (the "New Regulations") which make certain modifications to the
withholding, backup withholding and information reporting rules described above.
The New Regulations attempt to unify certification requirements and modify
reliance standards. The New Regulations will generally be effective for payments
made after December 31, 2000, subject to certain transition rules. It is
suggested that prospective investors consult their own tax advisors regarding
the New Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion
of Tax Counsel, the IRS successfully asserted that one or more of the Notes did
not represent debt for federal income tax purposes, the Notes might be treated
as equity interests in the Owner Trust. If so treated, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to reduce its taxable income by deductions
for interest expense on Notes recharacterized as equity). Alternatively, and
most likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain Note Owners. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to Foreign Owners may be subject to U.S. tax and cause Foreign Owners to
be subject to U.S. tax return filing and withholding requirements, and
individual Note Owners might be subject to certain limitations on their ability
to deduct their share of Trust expenses.
TAX CONSEQUENCES TO OWNERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Seller and the Servicer will
agree, and the beneficial owners of the Certificates (the "Certificate Owners")
will agree by their purchase of Certificates, to treat the Owner Trust as a
partnership (or as an entity disregarded as separate from the Certificate Owner
in the event that there is a single Certificate Owner) for purposes of federal
and state income tax, franchise tax and any other tax measured in whole or in
part by income. If the trust is treated as a partnership, the assets of the
partnership would be the assets held by the Trust, the partners of the
partnership would be the Certificate Owners (including the Seller in its
capacity as recipient of payments from the Reserve Fund), and the Notes would be
debt of the partnership. However, the proper characterization of the arrangement
involving the Owner Trust, the Certificates, the Notes, the Seller and the
Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Owner Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificate Owners as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a series of
Securities includes a single class of Certificates. If these conditions are not
satisfied with respect to any given series of Certificates, additional tax
considerations with respect to such Certificates will be disclosed in the
applicable Prospectus Supplement.
PARTNERSHIP TAXATION. As a partnership, the Owner Trust will not be
subject to federal income tax. Rather, each Certificate Owner will be required
to separately take into account that owner's allocated share of income, gains,
losses, deductions and credits of the Owner Trust. The Trust's income will
consist primarily of interest and finance charges earned on the Receivables
(including appropriate adjustments for market discount,
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OID and bond premium) and any gain upon collection or disposition of
Receivables. The Trust's deductions will consist primarily of interest accruing
with respect to the Notes, servicing and other fees, and losses or deductions
upon collection or disposition of Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). In the Trust Agreement, the
Certificate Owners will agree that the yield on a Certificate is intended to
qualify as a "guaranteed payment" and not as a distributive share of partnership
income. A guaranteed payment would be treated by a Certificate Owner as ordinary
income, but may well not be treated as interest income. The Trust Agreement will
provide that, to the extent that such treatment is not respected, the
Certificate Owners of each class of Certificates will be allocated taxable
income of the Owner Trust for each month equal to the sum of (i) the interest
that accrues on the Certificates in accordance with their terms for such month,
including interest accruing at the Pass Through Rate for such month and interest
on amounts previously due on the Certificates but not yet paid; (ii) any Trust
income attributable to discount on the Receivables that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificate Owners for such
month; and (iv) any other amounts of income payable to the Certificate Owners
for such month. Such allocation will be reduced by any amortization by the Owner
Trust of premium on Receivables that corresponds to any excess of the initial
issue price of Certificates over their initial principal amount. All remaining
taxable income of the Owner Trust will be allocated to the Seller. Except as
provided below, losses and deductions generally will be allocated to the
Certificate Owners only to the extent the Certificate Owners are reasonably
expected to bear the economic burden of such losses or deductions. Any losses
allocated to Certificate Owners could be characterized as capital losses, and
the Certificate Owners generally would only be able to deduct such losses
against capital gain income, and deductions would be subject to the limitations
set forth below. Accordingly, a Certificate Owner's taxable income from the
Trust could exceed the cash it is entitled to receive from the Trust.
Based on the economic arrangement of the parties, this approach for
allocating Trust income and loss should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificate Owners. Moreover, even
under the foregoing method of allocation, Certificate Owners may be allocated
income equal to the entire Pass Through Rate plus the other items described
above even though the Trust might not have sufficient cash to make current cash
payments of such amount. Thus, cash basis holders will in effect be required to
report income from the Certificates on the accrual basis and Certificate Owners
may become liable for taxes on Trust income even if they have not received cash
from the Trust to pay such taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all Certificate Owners but
Certificate Owners may be purchasing Certificates at different times and at
different prices, Certificate Owners may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
For each taxable year of the Certificate Owner, the Certificate Owner
will be required to report items of income, loss and deduction allocated to them
by the Trust for the Trust's taxable year that ends on or before the last day of
such taxable year of the Certificate Owner. The Code prescribes certain rules
for determining the taxable year of the Owner Trust. It is likely that, under
these rules, the taxable year of the Owner Trust will be the calendar year.
However, in the event that all of the Certificate Owners possessing a 5 percent
or greater interest in the equity or profits of the Trust share a taxable year
that is other than the calendar year, the Trust would be required to use that
year as its taxable year.
A significant portion of the taxable income allocated to a Certificate
Owner that is a pension, profit sharing or employee benefit plan or other
tax-exempt entity (including an individual retirement account) will constitute
"unrelated business taxable income" generally taxable to that Certificate Owner
under the Code.
An individual taxpayer's share of expenses of the Owner Trust (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the
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individual in whole or in part and might result in such Certificate Owner being
taxed on an amount of income that exceeds the amount of cash actually paid to
such Certificate Owner over the life of the Trust.
The Owner Trust intends to make all tax calculations relating to income
and allocations to Certificate Owners on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificate Owners.
DISCOUNT AND PREMIUM. It is believed that the Receivables were not issued
with OID, and, therefore, the Owner Trust should not have OID income. However,
the purchase price paid by the Trust for the Receivables may be greater or less
than the remaining principal balance of the Receivables at the time of purchase.
If so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Owner Trust will make this calculation on
an aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Owner Trust acquires the Receivables at a market discount or
premium, the Trust will elect to include any such discount in income currently
as it accrues over the life of the Receivables or to offset any such premium
against interest income on the Receivables. As indicated above, a portion of
such market discount income or premium deduction may be allocated to Certificate
Owners.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Owner Trust
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
transfer all of it assets and liabilities to a new partnership in exchange for
an interest in the new partnership, after which the Trust would be deemed to
distribute interests in the new partnership to Certificate Owners (including the
purchasing partner who caused the termination) in liquidation of the terminated
partnership. The Trust will not comply with certain technical requirements that
might apply when such a constructive termination occurs. As a result, the Owner
Trust may be subject to certain tax penalties and may incur additional expenses
if it is required to comply with those requirements. Furthermore, the Trust
might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificate Owner's tax basis in a Certificate will generally equal the
Certificate Owner's cost increased by the Certificate Owner's share of Trust
income (includible in income) and decreased by any payments received with
respect to such Certificate. In addition, both the tax basis in the Certificates
and the amount realized on a sale of a Certificate would include the Certificate
Owner's share of the Notes and other liabilities of the Owner Trust. A
Certificate Owner acquiring Certificates at different prices may be required to
maintain a single aggregate adjusted tax basis in such Certificates, and, upon
sale or other disposition of some of the Certificates, allocate a portion of
such aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss on
a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the Certificate
Owner's share of unrecognized accrued market discount on the Receivables would
generally be treated as ordinary income to the Certificate Owner and would give
rise to special tax reporting requirements. The Trust does not expect to have
any other assets that would give rise to such special reporting requirements.
Thus, to avoid those special reporting requirements, the Owner Trust will elect
to include market discount in income as it accrues.
If a Certificate Owner is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash payments with respect thereto, such excess will generally give rise to a
capital loss upon the retirement of the Certificates.
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ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Owner
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificate Owners
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a Certificate Owner purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Owner Trust might be reallocated among the Certificate Owners. The Seller
is authorized to revise the Owner Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
SECTION 754 ELECTION. In the event that a Certificate Owner sells its
Certificates at a profit (loss), the purchasing Certificate Owner will have a
higher (lower) basis in the Certificates than the selling Certificate Owner had.
The tax basis of the Owner Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificate Owners might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
ADMINISTRATIVE MATTERS. The Owner Trustee is required to keep or have
kept complete and accurate books of the Owner Trust. Such books will be
maintained for financial reporting and tax purposes on an accrual basis and the
fiscal year of the Trust will be set forth in the related Prospectus Supplement.
The Trustee will file a partnership information return (IRS Form 1065) with the
IRS for each taxable year of the Trust during which the Trust is treated as a
partnership for federal income tax purposes and for each such taxable year will
report each Certificate Owner's allocable share of items of Trust income and
expense to Certificate Owners and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the Certificate Owners. Generally,
Certificate Owners must file tax returns that are consistent with the
information return filed by the Trust or be subject to penalties unless the
Certificate Owner timely notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Owner
Trust with a statement containing certain information on the nominee, the
Certificate Owners and the Certificates so held. Such information includes (i)
the name, address and taxpayer identification number of the nominee and (ii) as
to each Certificate Owner (x) the name, address and identification number of
such person, (y) whether such person is a U. S. Person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, is designated to receive notice on behalf of, and
to provide notice to those Certificate Owners not receiving notice from, the
IRS, and to represent the Certificate Owners in certain disputes with the IRS.
The Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the
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return of the Owner Trust by the appropriate taxing authorities could result in
an adjustment of the returns of the Certificate Owners, and, under certain
circumstances, a Certificate Owner may be precluded from separately litigating a
proposed adjustment to the items of the Owner Trust. As the tax matters partner,
the Seller may enter into a binding settlement on behalf of all Certificate
Owners with a less than 1 percent interest in the Trust (except for any group of
such Certificate Owners with an aggregate interest of 5 percent or more in Trust
profits that elects to form a notice group or Certificate Owners who otherwise
notify the IRS that the Seller is not authorized to settle on their behalf). In
the absence of a proceeding at the Trust level, a Certificate Owner under
certain circumstances may pursue a claim for credit or refund on his own behalf
by filing a request for administrative adjustment of a Trust item. Each
Certificate Owner is advised to consult its own tax advisor with respect to the
impact of these procedures on its particular case. An adjustment could also
result in an audit of a Certificate Owner's returns and adjustments of items not
related to the income and losses of the Trust.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether
the Owner Trust would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to
Certificate Owners that are not U.S. Persons ("Foreign Certificate Owners")
because there is no clear authority dealing with that issue under facts
substantially similar to those described in this Prospectus. Although it is not
expected that the Owner Trust would be engaged in a trade or business in the
United States for such purposes, the Trust will withhold as if it were so
engaged in order to protect the Trust from possible adverse consequences of a
failure to withhold. The Trust expects to withhold on the portion of its taxable
income that is allocable to Foreign Certificate Owners pursuant to Section 1446
of the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for Foreign Certificate Owners that are taxable as
corporations and 39.6% for all other Foreign Certificate Owners. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Trust to change its withholding procedures. In
determining a Foreign Certificate Owner's withholding status, the Trust may rely
on IRS Form W-8BEN or successor form, IRS Form W-9 or the Certificate Owner's
certification of nonforeign status signed under penalties of perjury.
Each Foreign Certificate Owner might be required to file a U.S.
individual or corporate income tax return (including, in the case of a
corporation, the branch profits tax) on its share of the Owner Trust's income.
Each Foreign Certificate Owner must obtain a taxpayer identification number from
the IRS and submit that number to the Trust on Form W-8BEN in order to assure
appropriate crediting of the taxes withheld. A Foreign Certificate Owner
generally would be entitled to file with the IRS a claim for refund with respect
to taxes withheld by the Trust, taking the position that no taxes were due
because the Trust was not engaged in a U.S. trade or business. However, interest
payments made (or accrued) to a Foreign Certificate Owner generally will be
considered guaranteed payments to the extent such payments are determined
without regard to the income of the Trust. If these interest payments are
properly characterized as guaranteed payments, then the interest will not be
considered "portfolio interest", in which case Foreign Certificate Owners would
be subject to United States federal income tax and withholding tax at a rate of
30 percent, unless reduced or eliminated pursuant to an applicable treaty. In
such case, a Foreign Certificate Owner would only be entitled to claim a refund
for that portion of the taxes in excess of the taxes that should be withheld
with respect to the guaranteed payments.
BACKUP WITHHOLDING. Payments made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" withholding tax of
31% if, in general, the Certificate Owner fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. See "Tax Consequences to Owners of the Notes
--Backup Withholding."
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TAX TREATMENT OF GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the Certificates of a
Trust nominally referred to as a "grantor trust" in the applicable prospectus
supplement (a "Grantor Trust"), to the extent it relates to matters of law or
legal conclusions with respect thereto, represents the opinion of Tax Counsel to
each Grantor Trust with respect to the related series on the material matters
associated with such consequences, subject to the qualifications set forth in
this Prospectus. In addition, Tax Counsel has prepared or reviewed the
statements in this Prospectus under the heading "Certain Federal Income Tax
Consequences--Tax Treatment of Grantor Trusts", and is of the opinion that such
statements are correct in all material respects. Those statements are intended
as an explanatory discussion of the possible effects of the classification of
any Trust as a grantor trust for federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
an investor's specific tax circumstances that would be provided by an investor's
own tax advisor. Accordingly, it is suggested that each investor consult its own
tax advisor with regard to the tax consequences to it of investing in
Certificates of a Grantor Trust ("Grantor Trust Certificates").
Tax Counsel will deliver its opinion that the Grantor Trust will not be
classified as an association taxable as a corporation and that such Trust will
be classified as a grantor trust under subpart E, Part I of subchapter J of
Chapter 1 of Subtitle A of the Code. In this case, beneficial owners of Grantor
Trust Certificates (referred to herein as "Grantor Trust Certificateholders")
could be considered to own either (i) an undivided interest in a single debt
obligation held by the Grantor Trust and having a principal amount equal to the
total stated principal amount of the Receivables and an interest rate equal to
the relevant Pass Through Rate or (ii) an interest in each of the Receivables
and any other Trust property.
The determination of whether the economic substance of a property
transfer is a sale or a loan secured by the transferred property has been made
by the IRS and the courts on the basis of numerous factors designed to determine
whether the transferor has relinquished (and the transferee has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary factors examined are whether the transferee has the opportunity to gain
if the property increases in value, and has the risk of loss if the property
decreases in value.
The relevant pooling and servicing agreement will express the intent of
the Seller to sell, and the Grantor Trust Certificateholders to purchase, the
Receivables, and the Seller and each Grantor Trust Certificateholder, by
accepting a beneficial interest in a Grantor Trust Certificate, will agree to
treat the Grantor Trust Certificates as ownership interests in the Receivables
and any other Trust property.
TREATMENT AS DEBT OBLIGATION. If a Grantor Trust Certificateholder was
considered to own an undivided interest in a single debt obligation, the
principles described under "Tax Treatment of Owner Trusts--Tax Consequences to
Owners of the Notes" would apply. Each Grantor Trust Certificateholder, rather
than reporting its share of the interest accrued on each Receivable, would, in
general, be required to include in income interest accrued or received on the
principal amount of the Grantor Trust Certificates at the relevant Pass Through
Rate in accordance with its usual method of accounting.
The Grantor Trust Certificates would be subject to the original issue
discount ("OID") rules, described below under "--Stripped Bonds and Stripped
Coupons-Original Issue Discount." In determining whether such OID is de minimis,
the weighted average life of the Grantor Trust Certificates would be determined
using a reasonable assumption regarding anticipated prepayments (a "Prepayment
Assumption"). OID includible in income for any accrual period (generally, the
period between payment dates) would generally be calculated using a Prepayment
Assumption and an anticipated yield established as of the date of initial sale
of the Grantor Trust Certificates, and would increase or decrease to reflect
prepayments at a faster or slower rate than anticipated. The Grantor Trust
Certificates would also be subject to the market discount provisions of the
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Code to the extent that a Grantor Trust Certificateholder purchased such
Certificates at a discount from the initial issue price (as adjusted to reflect
prior accruals of OID).
The remainder of the discussion herein assumes that a Grantor Trust
Certificateholder will be treated as owning an interest in each Receivable (and
the proceeds therefrom) and any other Trust property, although for
administrative convenience, the Servicer will report information on an aggregate
basis (as though all of the Receivables were a single obligation). The amount,
and in some instances, character, of the income reported to a Grantor Trust
Certificateholder may differ under this method for a particular period from that
which would be reported on a precise asset-by-asset basis.
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Grantor Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption, late payment charges received by the Servicer and
any gain recognized upon collection or disposition of the Receivables. Under
Sections 162 or 212, each Grantor Trust Certificateholder will be entitled to
deduct its pro rata share of servicing fees, prepayment fees, assumption fees,
any loss recognized upon an assumption and late payment charges retained by the
Servicer, provided that such amounts are reasonable compensation for services
rendered to the Trust. Grantor Trust Certificateholders that are individuals,
estates or trusts will be entitled to deduct their share of expenses only to the
extent such expenses plus all other Section 212 expenses exceed two percent of
its adjusted gross income.
A Grantor Trust Certificateholder using the cash method of accounting
must take into account its pro rata share of income and deductions as and when
collected by or paid to the Servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the Servicer, whichever is
earlier. Because (1) interest accrues on the Receivables over differing monthly
periods and is paid in arrears and (2) interest collected on a Receivable
generally is paid Grantor Trust Certificateholders in the following month, the
amount of interest accruing to a Grantor Trust Certificateholder during any
calendar month will not equal the interest distributed in that month. If the
servicing fees paid to the Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered as an ownership
interest retained by the Servicer (or any person to whom the Servicer assigned
for value all or a portion of the servicing fees) in a portion of the interest
payments on the Receivables. The Receivables would then be subject to the
"stripped bond" and "coupon stripping" rules of the Code discussed below.
DISCOUNT AND PREMIUM. In determining whether a Grantor Trust
Certificateholder has purchased its interest in the Receivables (or any
Receivable) held by the related Trust at a discount or premium and whether the
Receivables (or any Receivable) have OID, market discount, or amortizable
premium, a portion of the purchase price of a Certificate should be allocated to
the Grantor Trust Certificateholder's undivided interest in accrued but unpaid
interest, and amounts collected at the time of purchase but not distributed. As
a result, the portion of the purchase price allocable to a Grantor Trust
Certificateholder's undivided interest in the Receivables (or any Receivable)
will be increased or decreased, as applicable, and the potential OID, market
discount, or amortizable premium on the Receivables (or any Receivable) could be
increased or decreased accordingly.
PREMIUM. A Grantor Trust Certificateholder that acquires an interest in
Receivables at a premium over the "stated redemption price at maturity" of the
Receivables may elect to amortize that premium under a
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constant interest method. Amortizable bond premium will be treated as an offset
to interest income on that Grantor Trust Certificate. The basis for that Grantor
Trust Certificate will be reduced to the extent that amortizable premium is
applied to offset interest payments. It is not clear whether a reasonable
prepayment assumption should be used in computing amortization of premium
allowable under Section 171. With some exceptions, a Grantor Trust
Certificateholder that makes this election for a Grantor Trust Certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that the Grantor Trust Certificateholder holds during the year of the
election or thereafter. Absent an election to amortize bond premium, the premium
will be deductible as an ordinary loss upon disposition of the Certificate or
pro rata as principal is paid on the Receivables.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Receivable that is
allocable to the Grantor Trust Certificate and the portion of the adjusted basis
of the Grantor Trust Certificate that is allocable to such Receivable. If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
STRIPPED BONDS AND STRIPPED COUPONS. Although the tax treatment of
stripped bonds is not entirely clear, based on recent guidance from the IRS,
each purchaser of a Grantor Trust Certificate will be treated as the purchaser
of a stripped bond which generally should be treated as a single debt instrument
issued on the day it is purchased for purposes of calculating any original issue
discount. Generally, under applicable Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code), such
stripped bond will be considered to have been issued with OID. See "Original
Issue Discount." Based on the preamble to the Section 1286 Treasury Regulations,
Tax Counsel is of the opinion that, although the matter is not entirely clear,
the interest income on the Certificates at the sum of the Pass Through Rate and
the portion of the total Servicing Fee Rate that does not constitute excess
servicing will be treated as "qualified stated interest" within the meaning of
the Section 1286 Treasury Regulations and such income will be so treated in the
Trustee's tax information reporting.
ORIGINAL ISSUE DISCOUNT. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently Sections 1271 through 1273 and
1275) will be applicable to a Grantor Trust Certificateholder's interest in
those Receivables meeting the conditions necessary for these sections to apply.
Generally, a Grantor Trust Certificateholder that acquires an undivided interest
in a Receivable issued or acquired with OID must include in gross income the sum
of the "daily portions," as defined below, of the OID on such Receivable for
each day on which it owns a Grantor Trust Certificate, including the date of
purchase but excluding the date of disposition. In the case of an original
Grantor Trust Certificateholder, the daily portions of OID with respect to a
Receivable generally would be determined as follows. A calculation will be made
of the portion of OID that accrues on the Receivable during each successive
monthly accrual period (or shorter period in respect of the date of original
issue or the final Payment Date). This will be done, in the case of each full
monthly accrual period, by adding (i) the present value of all remaining
payments to be received on the Receivable under the prepayment assumption used
in respect of the Receivables and (ii) any payments received during such accrual
period, and subtracting from that total the "adjusted issue price" of the
Receivable at the beginning of such accrual period. No representation is made
that the Receivables will prepay at any prepayment assumption. The "adjusted
issue price" of a Receivable at the beginning of the first accrual period is its
issue price (as determined for purposes of the OID rules of the Code) and the
"adjusted issue price" of a Receivable at the beginning of a subsequent accrual
period is the "adjusted issue price" at the beginning of the immediately
preceding accrual period plus the amount of OID allocable to that accrual period
and reduced by the amount of any payment (other than "qualified stated
interest") made at the end of or during that accrual period. The OID accruing
during such
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accrual period will then be divided by the number of days in the period to
determine the daily portion of OID for each day in the period. With respect to
an initial accrual period shorter than a full monthly accrual period, the daily
portions of OID must be determined according to a reasonable method, provided
that such method is consistent with the method used to determine the yield to
maturity of the Receivables.
With respect to the Receivables, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Receivables. Subsequent purchasers that
purchase Receivables at more than a de minimis discount should consult their tax
advisors with respect to the proper method to accrue such OID.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such Certificateholder's undivided
interest over such Certificateholder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than 0.25%
of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A Grantor Trust Certificateholder who acquired a Grantor Trust
Certificate at a market discount also may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such Grantor Trust Certificate
purchased with market discount. For these purposes, the de minimis rule referred
to above applies. Any such deferred interest expense would not exceed the market
discount that accrues during such taxable year and is, in general, allowed
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as a deduction not later than the year in which such market discount is
includible in income. If such Grantor Trust Certificateholder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such Grantor Trust Certificateholder in that taxable
year or thereafter, the interest deferral rule described above will not apply.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable except with the
approval of the IRS.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the Grantor
Trust Certificateholder's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the Grantor Trust Certificateholder's
purchase price for the Grantor Trust Certificate, increased by the OID included
in the Grantor Trust Certificateholder's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221, and will be long-term or
short-term depending on whether the Grantor Trust Certificate has been owned for
the long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1), so that gain or loss recognized from the sale of a
Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
FOREIGN PERSONS. Generally, interest or OID paid by the person required
to withhold tax under Section 1441 or 1442 to (i) a Grantor Trust
Certificateholder that is not a U.S. Person (as defined herein) (a "Foreign
Grantor Trust Certificateholder") or (ii) a Grantor Trust Certificateholder
holding on behalf of a Foreign Grantor Trust Certificateholder, as well as
accrued OID recognized by a Foreign Grantor Trust Certificateholder on the sale
or exchange of such a Grantor Trust Certificate, will not be subject to
withholding to the extent that a Grantor Trust Certificate evidences ownership
in Receivables issued after July 18, 1984 by natural persons if such Foreign
Grantor Trust Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the Foreign Grantor
Trust Certificateholder under penalties of perjury, certifying that such Foreign
Grantor Trust Certificateholder is not a U.S. Person and providing the name and
address of such Grantor Trust Certificateholder). Additional restrictions apply
to Receivables where the obligor is not a natural person in order to qualify for
the exemption from withholding.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish
or make available, within a reasonable time after the end of each calendar year,
to each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a Grantor Trust
Certificateholder fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income tax
return, 31% backup withholding may be
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required with respect to any payments. Any amounts deducted and withheld from a
payment to a recipient would be allowed as a credit against such recipient's
federal income tax liability.
CERTAIN STATE TAX CONSEQUENCES
TAX TREATMENT OF OWNER TRUSTS
The activities to be undertaken by the Servicer in servicing and
collecting the Receivables will take place in California. The State of
California imposes a state individual income tax and a corporate franchise tax
on corporations, partnerships and other entities doing business in the State of
California. This discussion relates only to Owner Trusts, and is based upon
present provisions of California statutes and the regulations promulgated
thereunder, and applicable judicial or ruling authority, all of which are
subject to change, which change may be retroactive.
Because of the variation in each state's tax laws based in whole or in
part upon income, it is impossible to predict tax consequences to holders of
Notes and Certificates in all of the state taxing jurisdictions in which they
are already subject to tax. Note Owners and Certificate Owners are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of Notes and Certificates.
For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents shall be deemed
to refer, unless otherwise specified herein, to each Owner Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
TAX TREATMENT OF THE TRUST
Based on regulations issued by the Franchise Tax Board with respect to
the California tax characterization of an Owner Trust as a partnership and not
as an association taxable as a corporation or other taxable entity, Tax Counsel
will opine that an Owner Trust will not be an association (or publicly traded
partnership) treated as a corporation for California tax purposes. In such case,
the resulting constructive partnership should not be treated as doing business
in California but rather should be viewed as a passive holder of investments
and, as a result, should not be subject to the California franchise tax (which,
if applicable, could possibly result in reduced payments to Certificateholders).
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Tax Counsel will advise each Owner Trust that issues
Notes that, assuming the Notes will be treated as debt for federal income tax
purposes, the Notes will be treated as debt for California income and franchise
tax purposes. Accordingly, Note Owners not otherwise subject to taxation in
California should not become subject to taxation in California solely because of
a Note Owner's ownership of Notes. However, a Note Owner already subject to
California's income tax or franchise tax could be required to pay additional
California tax as a result of the Note Owner's ownership or disposition of
Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
Under current law, Certificateholders that are nonresidents of California
and are not otherwise subject to California income tax may be subject to
California income tax on the income from the constructive partnership. In any
event, classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in California to pay
California tax on income beyond that derived from the Certificates.
If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity should not be subject to the
California franchise tax (which, if applicable, could result in reduced payments
to Certificateholders). A
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Certificateholder not otherwise subject to tax in California would not become
subject to California tax as a result of its mere ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON YOUR
PARTICULAR TAX SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES
AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to such Benefit Plan. ERISA also imposes certain duties on persons who are
fiduciaries of Benefit Plans subject to ERISA and prohibits certain transactions
between a Benefit Plan and parties in interest with respect to such Benefit
Plans. Under ERISA, any person who exercises any authority or control with
respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit Plan (subject to certain exceptions
not here relevant). A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements nor to Section 4975 of the Code. However,
governmental plans may be subject to state or local laws that impose similar
requirements. In addition, governmental plans and church plans that are
"qualified" under Section 401(a) of the code are subject to restrictions with
respect to prohibited transactions under Section 503(a)(1)(B) of the Code, the
sanction for violation being loss of "qualified" status.
Due to the complexities of the "prohibited transaction" rules and the
penalties imposed upon persons involved in prohibited transactions, it is
important that the fiduciary of any Benefit Plan considering the purchase of
Securities consult with its tax and/or legal advisors regarding whether the
assets of the related Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to
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purchase, the principal amount of each class of Notes and Certificates, as the
case may be, of the related series set forth therein and in the related
Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series
of Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Notes and Certificates or (ii)
specify that the related Notes and Certificates, as the case may be, are to be
resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that TMCC and the Seller will
indemnify the underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust Accounts
in Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by O'Melveny &
Myers LLP. In addition, certain United States federal and California state tax
and other matters will be passed upon for the related Trust by O'Melveny & Myers
LLP.
EXPERTS
If the Trust invests in demand notes issued by TMCC, the financial
statements of TMCC included in TMCC's Annual Report on Form 10-K for the year
ended September 30, 2000 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.
If the Trust does not invest in demand notes issued by TMCC, the
financial statements and any 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, 2000 or for
PricewaterhouseCoopers' reports on the unaudited consolidated financial
information of TMCC for subsequent periods because those financial statements
and reports are not a "report" or a "part" of the registration statement.
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INDEX OF DEFINED TERMS
PAGE
1992 Master Agreement......................................... 57
Actuarial Receivables......................................... 17
Administration Agreement...................................... 53
Administration Fee............................................ 53
Administrative Purchase Payment............................... 43
Administrative Receivable..................................... 43
Administrator................................................. 53
Advances...................................................... 45
APR........................................................... 17
Base Rate..................................................... 27
Basic Servicing Fee........................................... 45
Benefit Plan.................................................. 82
Business Day.................................................. 27
Calculation Agent............................................. 28
Calculation Date.............................................. 30
CD Rate....................................................... 29
CD Rate Determination Date.................................... 29
CD Rate Security.............................................. 27
Certificate Balance........................................... 20
Certificate Owners............................................ 71
Certificate Pool Factor....................................... 20
Certificateholder............................................. 25
Certificates.................................................. 13
class......................................................... 21,25
Clearstream Banking........................................... 34
Clearstream Banking Participants.............................. 36
Closing Date.................................................. 17
Code.......................................................... 68
Collection Account............................................ 41
Collection Period............................................. 43
Commercial Paper Rate Determination Date...................... 29
Commercial Paper Rate Security................................ 27
Cooperative................................................... 36
Cutoff Date................................................... 13
Dealer Agreements............................................. 13
Dealer Recourse............................................... 19
Dealers....................................................... 13
Definitive Certificates....................................... 37
Definitive Notes.............................................. 37
Definitive Securities......................................... 34
Demand Notes Indenture........................................ 54
Demand Notes Indenture Trustee................................ 54
Depository.................................................... 21
Designated LIBOR Page......................................... 32
disqualified persons.......................................... 82
DTC........................................................... 34
DTC Participants.............................................. 35
Eligible Deposit Account...................................... 42
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PAGE
Eligible Institution.......................................... 42
Eligible Investments.......................................... 42
ERISA......................................................... 82
Euroclear..................................................... 34
Euroclear Operator............................................ 36
Euroclear Participants........................................ 36
Events of Default............................................. 22
Excess Payment................................................ 44
Federal Funds Rate Determination Date......................... 30
Federal Funds Rate Security................................... 27
Final Maturity Scheduled Date................................. 42
financed vehicles............................................. 4
Financed Vehicles............................................. 13,17
Fixed Rate Securities......................................... 26
Floating Rate Securities...................................... 26
Foreign Certificate Owners.................................... 75
Foreign Grantor Trust Certificateholder....................... 80
Foreign Owner................................................. 70
grantor trust................................................. 7,76
Grantor Trust Certificateholders.............................. 76
Grantor Trust Certificates.................................... 76
Indenture..................................................... 21
Indenture Trustee............................................. 13
Index......................................................... 33
Index Currencies.............................................. 33
Index Maturity................................................ 27
Indexed Principal Amount...................................... 33
Indexed Securities............................................ 33
Indirect DTC Participants..................................... 35
Insolvency Event.............................................. 50
Insolvency Laws............................................... 65
Interest Determination Date................................... 31
Interest Period............................................... 28
Interest Rate................................................. 21
Interest Reset Date........................................... 27
Interest Reset Period......................................... 27
Investment Earnings........................................... 42
IRS........................................................... 68
ISDA.......................................................... 57
Issuer........................................................ 13
LIBOR......................................................... 31
LIBOR Security................................................ 27
London Banking Day............................................ 31
London Business Day........................................... 27
Money Market Yield............................................ 30
New Regulations............................................... 71
Note Owners................................................... 69
Note Pool Factor.............................................. 20
Noteholder.................................................... 21
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PAGE
Notes......................................................... 13
Obligors...................................................... 13,17
OID........................................................... 69
OID regulations............................................... 69
Original Certificate Balance.................................. 20
owner trust................................................... 7,68
Pass Through Rate............................................. 26
Payahead Account.............................................. 41
Payment Date.................................................. 21
Payments Ahead................................................ 39
Plan Assets Regulation........................................ 82
Pool Balance.................................................. 20
Pooling and Servicing Agreement............................... 13
Precomputed Advance........................................... 44
Precomputed Receivables....................................... 17
prepayment.................................................... 44
Prepayment Assumption......................................... 69,76
prepayments................................................... 18
Principal Balance............................................. 46
Principal Financial Center.................................... 32
prohibited transaction........................................ 82
Prospectus Supplement......................................... 13
Rebate........................................................ 18
Receivables................................................... 4,13
Receivables Pool.............................................. 13
Receivables Purchase Agreement................................ 17
Registration Statement........................................ 16
Related Documents............................................. 24
Required Rate................................................. 47
Required Yield Maintenance Amount............................. 47
Reserve Fund.................................................. 47
Reserve Fund Initial Deposit.................................. 47
Rule of 78s Receivables....................................... 17
Sale and Servicing Agreement.................................. 13
Schedule of Receivables....................................... 40
SEC........................................................... 16
Section 1286 Treasury Regulations............................. 78
Securities.................................................... 13
Securities Act................................................ 16
Securityholders............................................... 16
Seller........................................................ 14
Servicer...................................................... 14
Servicer Default.............................................. 49
Servicing Fee Rate............................................ 45
Short-Term Note............................................... 69
Simple Interest Advance....................................... 45
Simple Interest Receivables................................... 17
Spread........................................................ 27
Spread Multiplier............................................. 27
Strip Certificates............................................ 26
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PAGE
Strip Notes................................................... 21
Swap Agreement................................................ 57
Swap Counterparty............................................. 57,61
Swap Termination.............................................. 59
Swap Termination Event........................................ 58
TARGET system................................................. 27
Tax Counsel................................................... 68
Terms and Conditions.......................................... 37
TMCC.......................................................... 14
TMCC Demand Notes............................................. 54
TMS........................................................... 54
Total Servicing Fee........................................... 45
Transfer and Servicing Agreements............................. 40
Treasury Rate................................................. 32
Treasury Rate Determination Date.............................. 32
Treasury Rate Security........................................ 27
Trust......................................................... 13
Trust Accounts................................................ 42
Trust Agreement............................................... 13
Trustee....................................................... 13
U.S. Person................................................... 70
Underwriting Agreements....................................... 82
Warranty Purchase Payment..................................... 41
Warranty Receivable........................................... 41
weighted average life......................................... 19
Yield Maintenance Account..................................... 47
Yield Maintenance Agreement................................... 48
Yield Maintenance Deposit..................................... 47
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<TABLE>
<S><C>
======================================================= ======================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS $1,186,452,000
SUPPLEMENT OR THE PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT TOYOTA AUTO RECEIVABLES
CLAIM THE ACCURACY OF THE INFORMATION IN THIS 2001-A OWNER TRUST
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AS OF ANY
DATE OTHER THAN THE DATE STATED ON THE COVER PAGE. WE $440,000,000 5.380% ASSET
ARE NOT OFFERING THE NOTES IN ANY JURISDICTION WHERE BACKED NOTES, CLASS A-2
IT IS NOT PERMITTED.
$440,000,000 FLOATING RATE ASSET
BACKED NOTES, CLASS A-3
-------------------------------
$306,452,000 FLOATING RATE ASSET
TABLE OF CONTENTS BACKED NOTES, CLASS A-4
PROSPECTUS SUPPLEMENT
PAGE TOYOTA MOTOR CREDIT
Summary of Terms................................ S-3 RECEIVABLES
Risk Factors.................................... S-14 CORPORATION,
The Trust....................................... S-19 SELLER
Capitalization of the Trust..................... S-20
The Owner Trustee and Indenture Trustee......... S-20 TOYOTA MOTOR CREDIT
The Seller and the Servicer..................... S-20 CORPORATION,
The Receivables Pool............................ S-20 SERVICER
Delinquencies, Repossessions and Net Losses..... S-24
Use of Proceeds................................. S-25
Prepayment and Yield Considerations............. S-26
Weighted Average Lives of the Notes............. S-27
Pool Factors and Trading Information............ S-30
Description of the Notes........................ S-30
Payments to Noteholders......................... S-32 _______________________________
Subordination; Reserve Account.................. S-35
Transfer and Servicing Agreements............... S-37 PROSPECTUS SUPPLEMENT
The Owner Trustee and Indenture Trustee......... S-39 _______________________________
The Swap Agreement.............................. S-40
ERISA Considerations............................ S-43
Certain Federal Income Tax Consequences......... S-44
Underwriting.................................... S-45
Legal Opinions.................................. S-46
Index of Terms.................................. S-47
ANNEX A: Global Clearance, Settlement and JOINT GLOBAL COORDINATORS
Documentation Procedures..................... A-1
DEUTSCHE BANC ALEX. BROWN
PROSPECTUS MERRILL LYNCH & CO.
Summary of Terms................................ 3 CO-MANAGERS
Risk Factors.................................... 9
The Trusts...................................... 13 JP MORGAN
The Trustee..................................... 13 LEHMAN BROTHERS
The Seller...................................... 14 MORGAN STANLEY DEAN WITTER
The Servicer.................................... 14 SALOMON SMITH BARNEY
Where You Can Find More Information About Your
Securities................................... 16
The Receivables Pools........................... 17
Delinquencies, Repossessions and Net Losses..... 18
Weighted Average Life of the Securities......... 18
Pool Factors and Trading Information............ 20
Use of Proceeds................................. 20
Description of the Notes........................ 21
Description of the Certificates................. 25
Certain Information Regarding the Securities.... 26
Description of the Transfer and Servicing
Agreement.................................... 40
TMCC Demand Notes............................... 54
The Swap Agreement.............................. 57
Certain Legal Aspects of the Receivables........ 62
Certain Federal Income Tax Consequences......... 68
ERISA Considerations............................ 82
Plan of Distribution............................ 82
Legal Opinions.................................. 83
Experts......................................... 83
Index of Terms.................................. 84
DEALER PROSPECTUS DELIVERY OBLIGATION. UNTIL APRIL 11,
2001 ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE NOTES,
WHETHER OR NOT PARTICIPATING IN THE OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
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