<PAGE> 1
Filed Pursuant to
Rule 424(b)(2)
Registration No. 333-4336
SUPPLEMENT DATED JULY 17, 1996
TO PROSPECTUS SUPPLEMENT DATED JULY 17, 1996
TO PROSPECTUS DATED JULY 17, 1996
TOYOTA AUTO RECEIVABLES 1996-A GRANTOR TRUST
$722,335,000 6.30% ASSET BACKED CERTIFICATES, CLASS A
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
This Supplement relates to the $722,335,000.00 aggregate principal amount
of 6.30% Asset Backed Certificates, Class A (the "Offered Certificates") to be
issued by the Toyota Auto Receivables 1996-A Grantor Trust (the "Trust")
pursuant to a Pooling and Servicing Agreement, to be dated as of July 1, 1996,
among Toyota Motor Credit Receivables Corporation ("TMCRC" or the "Seller"),
Toyota Motor Credit Corporation ("TMCC" or the "Servicer"), and Bankers Trust
Company, as trustee (the "Trustee"). Concurrently with the issuance of the
Offered Certificates, the Trust will issue $22,632,000.00 aggregate principal
amount of 6.50% Asset Backed Certificates, Class B (the "Class B Certificates")
and $9,430,267.42 aggregate principal amount of 7.35% Asset Backed Certificates,
Class C (the "Class C Certificates" and together with the Offered Certificates
and the Class B Certificates, the "Certificates").
This Supplement does not contain complete information about the Offered
Certificates or the offering of the Offered Certificates. Additional information
is contained in the Prospectus Supplement and Prospectus attached hereto and
which is required to be delivered herewith. Prospective investors are urged to
read this Supplement together with the Prospectus Supplement and the Prospectus
in full.
THE OFFERED CERTIFICATES WILL REPRESENT BENEFICIAL OWNERSHIP INTERESTS IN THE
TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN TOYOTA
MOTOR CREDIT RECEIVABLES CORPORATION, TOYOTA MOTOR CREDIT CORPORATION,
TOYOTA MOTOR SALES, U.S.A., INC. OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE RECEIVABLES ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE OR FOREIGN JURISDICTION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE OR FOREIGN SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS SUPPLEMENT; THE
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
APPLICATION HAS BEEN MADE TO LIST THE OFFERED CERTIFICATES ON THE LUXEMBOURG
STOCK EXCHANGE AND FOR LISTING AND PERMISSION TO DEAL IN THE OFFERED
CERTIFICATES ON THE STOCK EXCHANGE OF HONG KONG LIMITED.
------------------------
JOINT GLOBAL COORDINATORS AND JOINT BOOKRUNNERS
GOLDMAN, SACHS & CO. LEHMAN BROTHERS
------------------------
CO-LEAD MANAGERS
<TABLE>
<S> <C> <C>
CS FIRST BOSTON MERRILL LYNCH & CO. SALOMON BROTHERS INC
</TABLE>
------------------------
CO-MANAGERS
<TABLE>
<S> <C>
CHASE SECURITIES INC. NOMURA INTERNATIONAL PLC
FIRST CHICAGO CAPITAL MARKETS, INC. SBC WARBURG
J.P. MORGAN & CO. A DIVISION OF SWISS BANK CORPORATION
MORGAN STANLEY & CO. UBS SECURITIES
INCORPORATED
</TABLE>
<PAGE> 2
TMCRC, having made all reasonable inquiries, confirms that this Supplement
and the Prospectus Supplement and Prospectus accompanying this Supplement
contain all information with regard to the Trust and the Offered Certificates
that is material in the context of the issuance of the Offered Certificates,
that such information is true and accurate in all material respects and is not
misleading, that the opinions and intentions expressed herein are honestly held
and that there are no other facts the omission of which makes this Supplement
and the accompanying Prospectus Supplement and the Prospectus, including any
information incorporated by reference herein or therein, as a whole, or any of
such information or the expression of any such opinions or intentions
misleading. TMCRC accepts responsibility accordingly.
The Stock Exchange of Hong Kong Limited and the Luxembourg Stock Exchange
take no responsibility for the contents of this Supplement, the Prospectus
Supplement or the Prospectus, make no representation as to their accuracy or
completeness and expressly disclaim any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the contents
of such documents.
In connection with the listing of the Offered Certificates on The Stock
Exchange of Hong Kong Limited, the Underwriters have each represented and agreed
that they have not, directly or indirectly, offered or sold and will not,
directly or indirectly, offer or sell in Hong Kong, by means of any document,
the Offered Certificates other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Ordinance (Cap. 32) of Hong Kong. The Underwriters have further
represented and agreed that, unless they are persons who are permitted to do so
under the securities laws of Hong Kong, they have not issued, or had in their
possession for the purposes of issuing, and they will not issue, or have in
their possession for the purposes of issuing, any advertisement, invitation or
document relating to the Offered Certificates other than with respect to Offered
Certificates intended to be disposed of to persons outside Hong Kong or to
persons whose business involves the acquisition, or disposal or holding of
securities, whether as principal or agent.
This document includes particulars given in compliance with the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
for the purpose of giving information with regard to the Offered Certificates.
For the purposes of such Rules, the Offered Certificates are treated as
"selectively marked debt securities".
Bankers Trust Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450,
Luxembourg, has been appointed as paying agent in Luxembourg in relation to the
Offered Certificates. The Seller will maintain a paying agent in relation to the
Offered Certificates in Luxembourg for so long as the Offered Certificates are
listed on the Luxembourg Stock Exchange.
Each Underwriter has represented 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 Offered Certificates to persons in the United Kingdom, except to
persons whose activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted in and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Certificates in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issuance of the Offered Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the
document can lawfully be issued or passed on.
No action has been taken or will be taken by the Seller or the Underwriters
that would permit a public offering of the Offered Certificates of any Class in
any country or jurisdiction other than in the United States where action for
that purpose is required. Accordingly, the Offered Certificates may not be
offered or sold, directly or indirectly, and neither this Supplement, the
Prospectus Supplement or the Prospectus
-2-
<PAGE> 3
nor any circular, prospectus, form of application, advertisement or other
material may be distributed in or from or published in any country or
jurisdiction except under circumstances that will result in compliance with any
applicable laws and regulations. Persons into whose hands this Supplement, the
Prospectus Supplement or the Prospectus comes are required by the Seller and the
Underwriters to comply with all applicable laws and regulations in each country
or jurisdiction in which they purchase, sell or deliver Offered Certificates or
have in their possession or distribute this Supplement, the Prospectus
Supplement or the Prospectus, in all cases at their own expense.
LISTING AND GENERAL INFORMATION
LISTING
Application has been made for listing the Offered Certificates on the
Luxembourg Stock Exchange and for listing and permission to deal in the Offered
Certificates on The Stock Exchange of Hong Kong Limited. Such permission is
expected to become effective on July 25, 1996. In connection with the listing
application made to the Luxembourg Stock Exchange, the Articles of Incorporation
and Bylaws of TMCRC, the Agreement and a legal notice relating to the issuance
of the Offered Certificates will be deposited prior to the listing with the
Chief Registrar of the District Court of Luxembourg, where copies thereof may be
obtained upon request.
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION
TMCRC was incorporated in the State of California on June 24, 1993, as a
wholly owned, limited purpose subsidiary of TMCC. The principal executive
offices of TMCRC are located at 19001 South Western Avenue, Torrance, California
90509 and its telephone number is (310) 618-4000.
DOCUMENTS AVAILABLE FOR COLLECTION AND INSPECTION
Copies of the Articles of Incorporation and Bylaws of TMCRC, the Agreement
and the Receivables Purchase Agreement described in the Prospectus Supplement
will be available for inspection during the term of the Offered Certificates,
and for so long as the Offered Certificates are listed on the Luxembourg Stock
Exchange or The Stock Exchange of Hong Kong Limited, copies of the reports to
Certificateholders to be delivered by the Trustee will be obtainable at the
offices of Bankers Trust Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450,
Luxembourg, at the offices of Lehman Brothers Inc. of One Pacific Place, 88
Queensway, Hong Kong and at the offices of Goldman Sachs (Asia) L.L.C., 37th
Floor, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Central, Hong
Kong.
AUTHORIZATION
The execution and delivery of the Agreement and the sale of the Offered
Certificates were authorized by the Board of Directors of TMCRC on April 22,
1996.
NO MATERIAL CHANGE
There has been no material adverse change in the information provided
herein with respect to the Receivables or the Trust since the Cutoff Date except
as otherwise disclosed in the Prospectus Supplement or the attached Prospectus.
LITIGATION
Neither TMCC nor any of its subsidiaries are involved in, nor are there
any, legal or arbitration proceedings or claims pending or threatened of which
TMCC is aware which may have or have had during the 12 months prior to the date
hereof a material effect on the financial position of TMCRC or of TMCC and its
subsidiaries on a consolidated basis.
-3-
<PAGE> 4
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP of Los Angeles, California are independent certified
public accountants of TMCC.
EUROCLEAR AND CEDEL
The Offered Certificates have been accepted for clearance through the Cedel
Bank and Euroclear systems. The Common Code for the Offered Certificates is
6818536, and the ISIN number for the Offered Certificates is US892319AC85.
UNITED STATES LAW
Andrews & Kurth L.L.P., a law firm licensed in the states of California,
New York and Texas, and in the District of Columbia, in the United States, has
given and has not withdrawn its consent to the inclusion in the Registration
Statement, the Prospectus Supplement and the Prospectus of the descriptions of
its opinions regarding matters of United States income taxation and other
matters with respect to the Certificates in the forms and contexts in which they
are included, in each case effective as of the dates of such documents.
NOTICES
For so long as the Offered Certificates are listed on the Luxembourg Stock
Exchange, notices to holders of the Offered Certificates will be given by
publication in a leading daily newspaper of general circulation in Luxembourg
or, if publication in Luxembourg is not practical, in Europe. Such publication
is expected to be made in the Luxemburger Wort. For so long as the Offered
Certificates are listed on The Stock Exchange of Hong Kong Limited, notices to
holders of the Offered Certificates will be given by publication in a leading
daily newspaper of general circulation in the English language in Hong Kong.
Such publication is expected to be made in the South China Morning Post. In
addition, if Definitive Certificates are issued, such notices will be mailed to
the addresses of holders of definitive Certificates at the addresses therefor as
they appear in the register maintained by the Trustee prior to such mailing.
Such notices will be deemed to have been given on the date of such publication
or mailing.
-4-
<PAGE> 5
Filed Pursuant to
Rule 424(b)(2)
Registration No. 333-4336
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 17, 1996
$744,967,000
TOYOTA AUTO RECEIVABLES 1996-A GRANTOR TRUST
$722,335,000 6.30% ASSET BACKED CERTIFICATES, CLASS A
$22,632,000 6.50% ASSET BACKED CERTIFICATES, CLASS B
------------------------
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
------------------------
The Toyota Auto Receivables 1996-A Grantor Trust (the "Trust") will be
formed pursuant to a Pooling and Servicing Agreement, to be dated as of July 1,
1996, among Toyota Motor Credit Receivables Corporation (the "Seller"), Toyota
Motor Credit Corporation (the "Servicer") and Bankers Trust Company, as trustee
(the "Trustee"), and will issue $722,335,000.00 aggregate principal amount of
6.30% Asset Backed Certificates, Class A (the "Class A Certificates"),
$22,632,000.00 aggregate principal amount of 6.50% Asset Backed Certificates,
Class B (the "Class B Certificates") and $9,430,267.42 aggregate principal
amount of 7.35% Asset Backed Certificates, Class C (the "Class C Certificates"
and together with the Class A Certificates and the Class B Certificates, the
"Certificates"). The Class A Certificates and the Class B Certificates (the
"Offered Certificates") are the only certificates offered hereby. The Class A
Certificates, Class B Certificates and Class C Certificates will evidence in the
aggregate undivided ownership interests of approximately 95.75%, 3.00% and
1.25%, respectively, in the Trust. The rights of the Class B Certificateholders
and Class C Certificateholders to receive distributions with respect to the
Receivables are subordinated to the rights of the Class A Certificateholders and
the rights of the Class C Certificateholders to receive distributions with
respect to the Receivables are subordinated to the rights of the Class B
Certificateholders, in each case to the extent described herein.
(continued on following page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" COMMENCING ON PAGE S-12 HEREOF AND PAGE 10 IN THE ACCOMPANYING
PROSPECTUS.
------------------------
THE CERTIFICATES WILL REPRESENT BENEFICIAL OWNERSHIP INTERESTS IN THE TRUST ONLY
AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS IN TOYOTA MOTOR CREDIT
RECEIVABLES CORPORATION, TOYOTA MOTOR CREDIT CORPORATION, TOYOTA MOTOR
SALES, U.S.A., INC. OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER
THE CERTIFICATES NOR THE RECEIVABLES ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE OR FOREIGN JURISDICTION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE OR FOREIGN SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) SELLER(1)(3)
----------------- ------------- ---------------
<S> <C> <C> <C>
Per Class A Certificate............... 99.997851% 0.2000% 99.797851%
Per Class B Certificate............... 99.992563 0.3500 99.642563
Total................................. $744,949,793.88 $1,523,882.00 $743,425,911.88
</TABLE>
- ---------------
(1) Plus accrued interest from July 20, 1996.
(2) Toyota Motor Credit Receivables Corporation and Toyota Motor Credit
Corporation have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Seller estimated to be $700,000.
The Offered Certificates are offered by the Underwriters when, as and if
issued and accepted by the Underwriters and subject to their right to reject
orders in whole or in part. Application has been made to list the Class A
Certificates on the Luxembourg Stock Exchange and for listing and for permission
to deal in the Class A Certificates on The Stock Exchange of Hong Kong Limited.
It is expected that delivery of the Offered Certificates will be made in
book-entry form only through the Same Day Funds Settlement System of The
Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System
on or about July 24, 1996 against payment therefor in immediately available
funds.
------------------------
Joint Global Coordinators and Joint Bookrunners
GOLDMAN, SACHS & CO. LEHMAN BROTHERS
------------------------
Co-Lead Managers with respect to the Class A Certificates
CS FIRST BOSTON MERRILL LYNCH & CO. SALOMON BROTHERS INC
------------------------
Co-Managers with respect to the Class A Certificates
<TABLE>
<S> <C>
CHASE SECURITIES INC. NOMURA INTERNATIONAL PLC
FIRST CHICAGO CAPITAL MARKETS, INC. SBC WARBURG
J.P. MORGAN & CO. A DIVISION OF SWISS BANK CORPORATION
MORGAN STANLEY & CO. UBS SECURITIES
INCORPORATED
</TABLE>
The date of this Prospectus Supplement is July 17, 1996.
<PAGE> 6
(continued from preceding page)
The assets of the Trust will primarily include a pool of retail installment
sales contracts (the "Receivables") secured by the new and used automobiles and
light duty trucks financed thereby (the "Financed Vehicles"), certain monies due
or received thereunder on or after July 1, 1996, security interests in the
Financed Vehicles, and certain other property as further described herein.
Principal, and interest to the extent of the Class A Pass Through Rate of
6.30% per annum, the Class B Pass Through Rate of 6.50% per annum and the Class
C Pass Through Rate of 7.35% per annum, will be distributed to the Class A
Certificateholders, Class B Certificateholders and Class C Certificateholders,
respectively, on the twentieth day of each month (or, if such day is not a
Business Day, the next succeeding Business Day) beginning August 20, 1996 (each
a "Distribution Date"). The "Final Scheduled Distribution Date" will be July 20,
2001.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE OFFERED CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
ATTACHED PROSPECTUS AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS
PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS
IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OFFERED
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE AFFECTED WITH RESPECT TO THE CLASS A
CERTIFICATES ON THE LUXEMBOURG STOCK EXCHANGE AND THE STOCK EXCHANGE OF HONG
KONG LIMITED OR OTHERWISE WITH RESPECT TO ANY CLASS OF OFFERED CERTIFICATES.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Seller has filed with the United States Securities and Exchange
Commission (the "Commission"), on behalf of the Trust, a Registration Statement
on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement"), of which this Prospectus Supplement and the
accompanying Prospectus are a part, under the United States Securities Act of
1933, as amended. This Prospectus Supplement and the accompanying Prospectus do
not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement which is available for inspection without charge at the
public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such information can be obtained from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, copies of the Registration Statement
and all of the documents incorporated by reference herein (including the
Agreement and the Receivables Purchase Agreement referred to herein) may be
obtained at no charge at the offices of Bankers Trust Luxembourg S.A., 14
Boulevard F.D. Roosevelt, L-2450, Luxembourg, at the offices of Lehman Brothers
Inc. at One Pacific Place, 88 Queensway, Hong Kong and at the offices of Goldman
Sachs (Asia) L.L.C., 37th Floor, Asia Pacific Finance Tower, Citibank Plaza, 3
Garden Road, Central, Hong Kong. The Servicer, on behalf of the Trust, will also
file or cause to be filed with the Commission such periodic reports as are
required under the United States Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder. Electronic filings
made through the Electronic Data Gathering Analysis and Retrieval System are
publicly available through the Commission's WebSite (http://www.sec.gov).
REPORTS TO CERTIFICATEHOLDERS
Bankers Trust Company, as Trustee, will provide to Certificateholders
(which shall be Cede & Co. as the nominee of DTC unless Definitive Certificates
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. For so long as the Class A Certificates are
outstanding, each such report (including a statement of the outstanding
principal balance of each Class of Certificate) also shall be delivered to the
Luxembourg Stock Exchange and The Stock Exchange of Hong Kong Limited on the
related Distribution Date or date for delivery of such annual report. Copies of
such reports may be obtained at no charge at the offices of Bankers Trust
Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg, at the offices
of Lehman Brothers Inc. at One Pacific Place, 88 Queensway, Hong Kong and at the
offices of Goldman Sachs (Asia) L.L.C., 37th Floor, Asia Pacific Finance Tower,
Citibank Plaza, 3 Garden Road, Central, Hong Kong.
S-2
<PAGE> 7
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
ISSUER..................Toyota Auto Receivables 1996-A Grantor Trust (the
"Trust" or the "Issuer"), a trust to be formed by the
Seller and the Trustee pursuant to a Pooling and
Servicing Agreement to be dated as of July 1, 1996 (as
amended and supplemented from time to time, the
"Agreement"), among the Seller, the Servicer and the
Trustee.
SELLER..................Toyota Motor Credit Receivables Corporation (the
"Seller"), a wholly owned, limited purpose subsidiary of
Toyota Motor Credit Corporation.
SERVICER................Toyota Motor Credit Corporation ("TMCC" or, in its
capacity as servicer, the "Servicer"), a wholly owned
subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS").
TMCC is primarily engaged in providing retail leasing,
retail and wholesale financing 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).
TMS is primarily engaged in the wholesale distribution
of automobiles, light duty trucks, industrial equipment
and related replacement parts and accessories throughout
the United States (excluding Hawaii). Substantially all
of TMS's products are either manufactured by its
affiliates or are purchased from TMS's parent, Toyota
Motor Corporation, or its affiliates.
TRUSTEE.................Bankers Trust Company, as trustee under the Agreement
(the "Trustee").
INITIAL PAYING AGENT....Bankers Trust Luxembourg S.A., as paying agent under the
Agreement (the "Initial Paying Agent").
THE CERTIFICATES........The Trust will issue Toyota Auto Receivables 1996-A
Grantor Trust Asset Backed Certificates (the
"Certificates") in an aggregate initial principal amount
of $754,397,267.42. The Certificates represent undivided
ownership interests in the Trust and will be issued
pursuant to the Agreement.
The Certificates will consist of $722,335,000.00
aggregate principal amount of 6.30% Toyota Auto
Receivables 1996-A Grantor Trust Asset Backed
Certificates, Class A (the "Class A Certificates"),
$22,632,000.00 aggregate principal amount of 6.50%
Toyota Auto Receivables 1996-A Grantor Trust Asset
Backed Certificates, Class B (the "Class B
Certificates") and $9,430,267.42 aggregate principal
amount of 7.35% Toyota Auto Receivables 1996-A Grantor
Trust Certificates, Class C (the "Class C
Certificates"). The Class A Certificates and the Class B
Certificates (the "Offered Certificates") are the only
Certificates offered hereby. Information herein
contained relating to the Class C Certificates is
provided for informational purposes only to provide more
complete information with respect to the Offered
Certificates.
The assets of the Trust will primarily include a pool of
retail installment sales contracts (the "Receivables")
secured by the new and used automobiles and light duty
trucks financed thereby (the "Financed Vehicles"),
certain monies due or received under the Receivables on
and after July 1, 1996 (the "Cutoff Date"), security
interests in the Financed Vehicles, certain bank
accounts and the proceeds thereof, proceeds from claims
under
S-3
<PAGE> 8
certain insurance policies in respect of individual
Financed Vehicles or Obligors and certain rights under
the Agreement. See "The Trust -- General".
The Class A Certificates will evidence in the aggregate
an undivided ownership interest (the "Class A
Percentage") of approximately 95.75% of the Trust
(initially representing $722,335,000.00). The Class B
Certificates will evidence in the aggregate an undivided
ownership interest (the "Class B Percentage") of
approximately 3.00% of the Trust (initially representing
$22,632,000.00). The Class C Certificates will evidence
in the aggregate an undivided ownership interest (the
"Class C Percentage") of approximately 1.25% of the
Trust (initially representing $9,430,267.42). The Class
B Certificates and Class C Certificates will be
subordinated to the Class A Certificates and the Class C
Certificates are subordinated to the Class B
Certificates, in each case to the extent described
herein. See "Summary -- Terms of the Certificates" and
"Description of the Certificates -- Subordination;
Reserve Fund". The Offered Certificates will be issued
in fully registered form in denominations of $1,000 and
integral multiples thereof.
REGISTRATION OF THE
CERTIFICATES..........Persons acquiring beneficial ownership interests in the
Certificates ("Certificate Owners") will hold their
Certificates through The Depository Trust Company
("DTC"), in the United States, or Cedel Bank, societe
anonyme ("Cedel Bank") or the Euroclear System
("Euroclear") in Europe or Asia. Transfers within DTC,
Cedel Bank or Euroclear, as the case may be, will be in
accordance with the usual rules and operating procedures
of the relevant system. So long as the Certificates are
Book-Entry Certificates, such Certificates will be
evidenced by one or more certificates registered in the
name of Cede & Co., as the nominee of DTC, or Citibank
N.A. or Morgan Guaranty Trust Company of New York, the
relevant depositaries of Cedel Bank and Euroclear,
respectively, and each a participating member of DTC. No
Certificate Owner will be entitled to receive a
definitive certificate representing such person's
interest, except in the event that Definitive
Certificates are issued under the limited circumstances
described herein. See "Risk Factors -- Book-Entry
Registration" herein, "ANNEX A: Global Clearance,
Settlement and Tax Documentation Procedures" and
"Certain Information Regarding the
Securities -- Book-Entry Registration" in the
Prospectus. Unless and until Certificates of a Class are
issued in definitive form, all references herein to
distributions, notices, reports and statements and to
actions by and effects upon the related
Certificateholders will refer to the same actions and
effects with respect to DTC or Cede, Cedel Bank or
Euroclear as the case may be, for the benefit of the
related Certificate Owners in accordance with DTC
procedures.
THE RECEIVABLES.........On July 24, 1996 (the "Closing Date"), the Trust will
purchase Receivables (the "Receivables") having an
aggregate principal balance of $754,397,267.42 as of the
Cutoff Date from the Seller pursuant to the Agreement.
See "The Receivables Pool" herein and "The Receivables
Pools" in the Prospectus.
No Receivable has a final scheduled monthly payment due
later than February 1, 2001 (the "Final Scheduled
Maturity Date"), and the Servicer will be obligated to
make Advances (to the extent permitted by the terms of
the Agreement) with respect to or will be obligated to
purchase any
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Receivable as to which it adjusts the maturity to be a
date later than the Final Scheduled Maturity Date. See
"Description of the Transfer and Servicing
Agreements -- Servicing Procedures" and "-- Advances" in
the Prospectus.
The "Pool Balance" will equal the aggregate of the
Principal Balances of the Receivables, excluding
Defaulted Receivables (which are deemed to have a
principal balance of zero). The "Principal Balance" of a
Receivable as of any date will equal the original
principal balance of such Receivable minus the sum of
the following amounts received on or prior to such date
(i) in the case of a Precomputed Receivable (as defined
in the Prospectus), that portion of all Scheduled
Payments (as defined in the Prospectus) 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 (as defined in the
Prospectus), that portion of all Scheduled Payments
actually received on or prior to such date allocable to
principal, (iii) any Warranty Purchase Payment (as
defined in the Prospectus) or Administrative Purchase
Payment (as defined in the Prospectus) with respect to
such Receivable allocable to principal (to the extent
not included in clauses (i) and (ii) above) and (iv) any
Prepayments (as defined herein) 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).
TERMS OF THE
CERTIFICATES..........The principal terms of the Certificates will be as
described below:
A. Class A Pass Through Rate
6.30% per annum (the "Class A Pass Through Rate").
B. Class B Pass Through Rate
6.50% per annum (the "Class B Pass Through Rate").
C. Class C Pass Through Rate
7.35% per annum (the "Class C Pass Through Rate")
D. Distribution Dates
Distributions with respect to the Certificates will be
made on the twentieth day of each month (or, if any such
day is not a Business Day, the next succeeding Business
Day) beginning August 20, 1996 (each, a "Distribution
Date"). Distributions will be made to holders of record
of the Certificates as of the day immediately preceding
such Distribution Date or, if Definitive Certificates
are issued, as of the last day of the preceding month
(each such date, a "Record Date"). The Final Scheduled
Distribution Date will be July 20, 2001. "Business Day"
means any day other than a Saturday or Sunday or a day
on which banking institutions in New York, New York or
Los Angeles, California are authorized or obligated by
law, regulation, executive order or decree to be closed;
provided, that, solely for purposes of identifying any
Distribution Date with respect to the making of payments
on the Class A Certificates in Luxembourg by a paying
agent in Luxembourg, "Business Day" shall also exclude
any day on which banking institutions in Luxembourg are
authorized or obligated by law, regulation, governmental
order or decree to be closed, whether or not payments
are made in any other city on Class A Certificates on
such date, but such
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definition shall not be used for making any other
calculation with respect to the Receivables or the
Certificates of any Class.
E. Interest
On each Distribution Date, the Trustee will distribute
(i) pro rata to the holders of the Class A Certificates
(the "Class A Certificateholders") as of the related
Record Date, interest in an amount equal to one-twelfth
of the product of the Class A Pass Through Rate,
calculated on the basis of a 360-day year consisting of
twelve 30-day months, and the Class A Certificate
Balance as of the immediately preceding Distribution
Date (after giving effect to distributions of principal
made on such immediately preceding Distribution Date)
or, in the case of the first Distribution Date, the
Original Class A Certificate Balance,(ii) pro rata to
holders of record of the Class B Certificates (the
"Class B Certificateholders") as of the related Record
Date, interest in an amount equal to one-twelfth of the
product of the Class B Pass Through Rate, calculated on
the basis of a 360-day year consisting of twelve 30-day
months, and the Class B Certificate Balance as of the
immediately preceding Distribution Date (after giving
effect to distributions of principal made on such
immediately preceding Distribution Date) or, in the case
of the first Distribution Date, the Original Class B
Certificate Balance and (iii) pro rata to holders of
record of the Class C Certificates (the "Class C
Certificateholders" and, together with the Class A
Certificateholders and the Class B Certificateholders,
the "Certificateholders") as of the related Record Date,
interest in an amount equal to one-twelfth of the
product of the Class C Pass Through Rate, calculated on
the basis of 360-day year consisting of twelve 30-day
months, and the Class C Certificate Balance as of the
immediately preceding Distribution Date (after giving
effect to distributions of principal made on such
immediately preceding Distribution Date) or, in the case
of the first Distribution Date, the Original Class C
Certificate Balance. All such distributions in respect
of interest will be subject to (i) the availability of
collections allocable to interest, (ii) the availability
of funds therefor in the Reserve Fund and (iii) the
subordination features described below under
"Subordination". In addition, on each Distribution Date,
to the extent of funds available therefor and subject to
the subordination features described below under
"Subordination", the Class A Certificateholders, Class B
Certificateholders and Class C Certificateholders will
receive payment of any Class A Interest Carryover
Shortfall, Class B Interest Carryover Shortfall or Class
C Interest Carryover Shortfall, respectively, which will
include interest thereon at the Class A Pass Through
Rate, Class B Pass Through Rate or Class C Pass Through
Rate, as the case may be.
The "Class A Certificate Balance" will initially equal
$722,335,000.00 (the "Original Class A Certificate
Balance") and as of the close of business on each
Distribution Date will equal the Original Class A
Certificate Balance reduced by all principal
distributions made on or prior to such Distribution Date
on the Class A Certificates; provided that after the
Class B Certificate Balance and Class C Certificate
Balance have been reduced to zero, the Class A
Certificate Balance will be equal to the Pool Balance as
of the last day of the related Collection Period. The
"Class B Certificate Balance" will initially equal
$22,632,000.00 (the "Original Class B Certificate
Balance") and as of the close of business on each
Distribution Date will equal the Original Class B
Certificate Balance reduced by all principal
distributions
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<PAGE> 11
made on or prior to such Distribution Date on the Class
B Certificates; provided that after the Class C
Certificate Balance has been reduced to zero, the Class
B Certificate Balance will be equal to the Pool Balance
as of the last day of the related Collection Period less
the Class A Certificate Balance as of the close of
business on such Distribution Date. The "Class C
Certificate Balance" will initially equal $9,430,267.42
(the "Original Class C Certificate Balance") and on each
Distribution Date will be equal to the Pool Balance as
of the last day of the related Collection Period less
the sum of the Class A Certificate Balance and the Class
B Certificate Balance as of the close of business on
such Distribution Date. See "Description of the
Certificates -- Distributions". To the extent of any
amounts on deposit in the Reserve Fund on any
Distribution Date, such amounts will be withdrawn
therefrom, as necessary, to cover shortfalls in the
amounts of collections available to be distributed in
respect of interest on and principal of each Class of
Certificates prior to any reduction of the Class A
Certificate Balance, the Class B Certificate Balance or
the Class C Certificate Balance on such Distribution
Date. See "Reserve Fund" below and "Description of the
Certificates -- Subordination; Reserve Fund".
F. Principal
On each Distribution Date, the Trustee will distribute
(i) pro rata to the Class A Certificateholders as of the
related Record Date an amount equal to the Class A
Percentage,(ii) pro rata to the Class B
Certificateholders as of the related Record Date an
amount equal to the Class B Percentage, and (iii) pro
rata to the Class C Certificateholders as of the related
Record Date an amount equal to the Class C Percentage,
of: (a) the principal portion of all scheduled monthly
payments (each, a "Scheduled Payment") on Precomputed
Receivables due during the immediately preceding
calendar month (each, a "Collection Period") and the
principal portion of all Scheduled Payments on Simple
Interest Receivables actually received during such
Collection Period; (b) the principal portion of all
prepayments in full on the Receivables and all partial
prepayments on Simple Interest Receivables, in each case
received by the Servicer during such Collection Period;
(c) the principal balance of each Receivable that was
purchased by the Servicer or repurchased by the Seller,
in either case under an obligation that arose during
such Collection Period; and (d) the principal balance of
each Receivable that became a Defaulted Receivable
during such Collection Period. See "Description of the
Certificates -- Distributions -- Calculation of
Distributable Amounts". All such distributions will be
subject to (i) the availability of collections allocable
to principal, (ii) the availability of funds therefor in
the Reserve Fund and (iii) the subordination features
described below under "Subordination." In addition, on
each Distribution Date, to the extent of funds available
therefor and subject to the subordination features
described below under "Subordination", the Class A
Certificateholders, Class B Certificateholders and Class
C Certificateholders will receive payment of any Class A
Principal Carryover Shortfall, Class B Principal
Carryover Shortfall or Class C Principal Carryover
Shortfall, respectively, which will include interest
thereon at the Class A Pass Through Rate, Class B Pass
Through Rate or Class C Pass Through Rate, as the case
may be.
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<PAGE> 12
G. Optional Purchase
The Seller, the Servicer or any successor to the
Servicer may purchase all of the Receivables remaining
in the Trust after the last day of any Collection Period
during which the Pool Balance declines to 10% or less of
the Initial Pool Balance at a purchase price determined
as described under "Description of the
Certificates -- Termination". Upon such optional
purchase, the Class A Certificateholders will receive an
amount equal to the Class A Certificate Balance together
with accrued and unpaid interest at the Class A Pass
Through Rate, the Class B Certificateholders will
receive an amount equal to the Class B Certificate
Balance together with accrued and unpaid interest at the
Class B Pass Through Rate, the Class C
Certificateholders will receive an amount equal to the
Class C Certificate Balance together with accrued and
unpaid interest at the Class C Pass Through Rate, and
the Certificates will be retired. The "Initial Pool
Balance" will equal the Pool Balance as of the Cutoff
Date. See "Description of the
Certificates -- Termination" herein.
SUBORDINATION...........The rights of the Class B Certificateholders and Class C
Certificateholders to receive distributions to which
they would otherwise be entitled with respect to the
Receivables are subordinated to the rights of the Class
A Certificateholders as described herein. The rights of
the Class C Certificateholders to receive distributions
to which they would otherwise be entitled with respect
to the Receivables are subordinated to the rights of the
Class B Certificateholders as described herein. See
"Description of the Certificates -- Subordination;
Reserve Fund".
The Class B Certificateholders and Class C
Certificateholders will not receive any distributions of
interest with respect to a Distribution Date until the
full amount of interest on the Class A Certificates
relating to such Distribution Date has been distributed
to the Class A Certificateholders. The Class B
Certificateholders and Class C Certificateholders will
not receive any distributions of principal with respect
to such Distribution Date until the full amount of
interest on and principal of the Class A Certificates
relating to such Distribution Date has been distributed
to the Class A Certificateholders. Distributions of
interest on the Class B Certificates and the Class C
Certificates, to the extent of collections on
Receivables allocable to interest and certain available
amounts on deposit in the Reserve Fund, will not be
subordinated to the payment of principal on the Class A
Certificates.
The Class C Certificateholders will not receive any
distributions of interest with respect to a Distribution
Date until the full amount of interest on the Class A
Certificates and Class B Certificates relating to such
Distribution Date has been distributed to the Class A
Certificateholders and the Class B Certificateholders,
respectively. The Class C Certificateholders will not
receive any distributions of principal with respect to
such Distribution Date until the full amount of interest
on and principal of the Class A Certificates and Class B
Certificates relating to such Distribution Date has been
distributed to the Class A Certificateholders and the
Class B Certificateholders, respectively. Distributions
of interest on the Class C Certificates, to the extent
of collections on Receivables allocable to interest and
certain available amounts on deposit in the Reserve
Fund, will not be subordinated to the payment of
principal on the Class A Certificates or the Class B
Certificates.
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<PAGE> 13
The protection afforded to the Class A
Certificateholders and Class B Certificateholders,
respectively, by the subordination features described
above will be effected by affording such
Certificateholders certain preferential rights to
receive current distributions from collections on or in
respect of the Receivables to the limited extent
described herein. See "Description of the
Certificates -- Subordination; Reserve Fund" herein.
RESERVE FUND............Certificateholders will have the benefit of a segregated
trust account maintained by the Trustee for the benefit
of the Certificateholders (the "Reserve Fund") which
will not be an asset of the Trust. The Reserve Fund will
be created with an initial deposit by the Seller on the
Closing Date of cash or Eligible Investments having a
value of $5,657,980 (the "Reserve Fund Initial
Deposit").
The funds in the Reserve Fund will be supplemented on
each Distribution Date by the deposit therein of all
Excess Amounts, until the amount in the Reserve Fund
reaches an amount to be specified in the Agreement (the
"Specified Reserve Fund Balance"). "Excess Amounts" in
respect of a Distribution Date will be all remaining
amounts on deposit in the Collection Account (as defined
in the Prospectus) in respect of such Distribution Date,
after the Servicer has been reimbursed for any
outstanding Advances and has been paid the Servicing Fee
(including any unpaid Servicing Fees with respect to one
or more prior Collection Periods) and after giving
effect to all distributions of interest and principal
required to be made to the Certificateholders on such
Distribution Date.
On each Distribution Date, after giving effect to all
distributions made on such Distribution Date, any
amounts in the Reserve Fund in excess of the Specified
Reserve Fund Balance that are not applied to cover
shortfalls in distributions to Certificateholders as
described below will be distributed to the Seller as
described under "Description of the
Certificates -- Subordination; Reserve Fund". Upon such
distribution, the Certificateholders will have no
further rights in or claims to such amounts.
On each Distribution Date, to the extent available,
funds will be withdrawn from the Reserve Fund as
described herein for distribution first to the Class A
Certificateholders to the extent of shortfalls in the
amount available to make required distributions of
interest on the Class A Certificates, second, to the
Class B Certificateholders to the extent of shortfalls
in the amount available to make required distributions
of interest on the Class B Certificates, third, to the
Class C Certificateholders to the extent of shortfalls
in the amount available to make required distributions
of interest on the Class C Certificates, fourth, to the
Class A Certificateholders to the extent of shortfalls
in the amount available to make required distributions
of principal on the Class A Certificates, fifth, to the
Class B Certificateholders to the extent of shortfalls
in the amount available to make required distributions
of principal on the Class B Certificates and, sixth, to
the Class C Certificateholders to the extent of
shortfalls in the amount available to make required
distributions of principal on the Class C Certificates.
See "Description of the Certificates -- Subordination;
Reserve Fund".
Pursuant to the Agreement, the Specified Reserve Fund
Balance may, under certain circumstances, be reduced on
one or more Distribution Dates.
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<PAGE> 14
ADVANCES................On the Business Day immediately preceding each
Distribution Date, the Servicer will advance to the
Trust, in respect of each (i) Precomputed Receivable,
that portion, if any, of the related Scheduled Payment
that was not timely made (each, a "Precomputed Advance")
and (ii) Simple Interest Receivable, an amount equal to
the product of the Principal Balance of such 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 Receivable during such
Collection Period (each, a "Simple Interest Advance",
and together with the Precomputed Advances, the
"Advances"). If such calculation in respect of a Simple
Interest Receivable results in a negative number, an
amount equal to such negative amount shall be paid to
the Servicer out of interest collections in respect of
the Simple Interest Receivables during the related
Collection Period in reimbursement of outstanding Simple
Interest Advances. Outstanding Precomputed Advances
shall be reimbursable to the Servicer, without interest,
from payments (other than Administrative Purchase
Payments) subsequently received in respect of the
related Precomputed Receivables. 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 Advances made in respect of such
Receivable, be withdrawn from the Collection Account and
paid to the Servicer in reimbursement of such
outstanding Advances. The Servicer will be required to
make an Advance only to the extent that it determines
such Advance will be recoverable from future payments
and collections on or in respect of such Receivable.
Upon the determination by the Servicer that such
reimbursement is unlikely, the Servicer will be entitled
to recover Advances from payments and collections on or
in respect of other Receivables. See "Description of the
Transfer and Servicing Agreements -- Advances" in the
Prospectus.
The Servicer will be obligated to purchase or make
Advances (to the extent permitted by the terms of the
Agreement) with respect to any Receivable if, among
other things, it amends the total number of Scheduled
Payments, the Amount Financed or the APR thereof or
extends the date for final payment by the Obligor of
such Receivable beyond the Final Scheduled Maturity
Date. See "Description of the Transfer and Servicing
Agreements -- Servicing Procedures" and "-- Advances" in
the Prospectus.
SERVICING FEE...........The Servicer will receive a monthly fee, payable on each
Distribution Date, equal to one-twelfth of the product
of 1.00% (the "Servicing Fee Rate") and the Pool Balance
as of the first day of the related Collection Period.
The Servicer will be entitled to receive additional
servicing compensation in the form of investment
earnings on the amounts on deposit in the Collection
Account and Payahead Account, if any, late fees and
other administrative fees and expenses or similar
charges received by the Servicer during such Collection
Period. See "Description of the Transfer and Servicing
Agreement -- Servicing Compensation and Payment of
Expenses" in the Prospectus.
LISTING.................Application has been made for listing of the Class A
Certificates on the Luxembourg Stock Exchange and for
listing of and permission to deal in the Class A
Certificates on The Stock Exchange of Hong Kong Limited.
Such permission is expected to become effective on July
25, 1996.
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<PAGE> 15
TAX STATUS..............In the opinion of Andrews & Kurth L.L.P. ("Tax
Counsel"), the Trust will be treated as a grantor trust
for federal income tax purposes and will not be subject
to federal income tax. Certificate Owners will report
their pro rata share of all income earned on the
Receivables (other than amounts, if any, treated as
"stripped coupons") and, subject to certain limitations
in the case of Certificate Owners who are individuals,
trusts or estates, may deduct their pro rata share of
reasonable servicing and other fees. See "Certain
Federal Income Tax Consequences" in the Prospectus for
additional information concerning the application of
federal income tax laws to the Trust and the
Certificates.
ERISA CONSIDERATIONS....Subject to the considerations discussed under "ERISA
Considerations" herein and in the Prospectus, the Class
A Certificates will be eligible for purchase by employee
benefit plans. The Class B Certificates and Class C
Certificates may not be acquired by any employee benefit
plan subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or by an individual
retirement account, but under limited circumstances may
be purchased as limited investments by persons using
insurance company general accounts or separate accounts.
See "ERISA Considerations" herein and in the Prospectus.
Any benefit plan fiduciary considering purchase of the
Offered Certificates should, among other things, consult
with its counsel in determining whether all required
conditions have been satisfied.
RATINGS OF THE
CERTIFICATES..........It is a condition to the issuance of the Offered
Certificates that the Class A Certificates be rated in
the highest investment rating category by Standard and
Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P") and Moody's Investors Service,
Inc. ("Moodys") and that the Class B Certificates be
rated at least "A-" by S&P and at least "A3" by Moodys.
There can be no assurance that a rating will not be
lowered or withdrawn by a rating agency if circumstances
so warrant. In the event that the rating initially
assigned to the Offered Certificates is subsequently
lowered or withdrawn for any reason, no person or entity
will be obligated to provide any additional credit
enhancement with respect to the Offered Certificates.
There can be no assurance whether any other rating
agency will rate any Class of the Certificates, or if
one does, what rating would be assigned by such other
rating agency. A security rating is not a recommendation
to buy, sell or hold securities.
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<PAGE> 16
RISK FACTORS
Prospective investors in the Offered Certificates should consider the
following risk factors (as well as the factors set forth under "Risk Factors" in
the Prospectus) in connection with the purchase of Offered Certificates. Any
statistical information presented below is based upon the characteristics of the
Receivables proposed to be included in the Trust as of the date of this
Prospectus Supplement. Such information may vary as a result of the possibility
that certain Receivables may be removed from the Trust prior to the Closing
Date.
Limited Liquidity. There is currently no secondary market for the Offered
Certificates. The Underwriters currently intend to make a market in the Offered
Certificates, but they are under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop with respect to any Class of Certificates, that it will provide the
related Certificateholders with liquidity of investment or that it will continue
for the life of such Class of Certificates.
Certain Legal Aspects. Because of the administrative burden and expense
that would be entailed in doing so, the certificates of title for the Financed
Vehicles will not be amended to identify the Trustee as the secured party. If
there are any Financed Vehicles as to which the Trust failed to obtain a
perfected security interest, its security interest would be subordinate to,
among others, subsequent purchasers of the Financed Vehicles and holders of
perfected security interests. Pursuant to the Agreement, the Seller will assign
its security interests in the Financed Vehicles to the Trustee. Under the laws
of some states, such an assignment of security interests may not be sufficient
to convey to the Trustee perfected security interests in the Financed Vehicles.
In addition, because the Trustee will not be listed as legal owner on the
certificates of title to the Financed Vehicles, its security interest could be
defeated through fraud, forgery or negligence. The Seller will covenant in the
Agreement to repurchase any Receivable if, on the Closing Date, a valid,
subsisting and enforceable first priority security interest in the related
Financed Vehicle, which will have been assigned to the Trust, has not been
perfected (or is not in the process of being perfected) in favor of the Seller.
The Seller will also covenant in the Agreement to repurchase any Receivable if,
after the Closing Date, a valid subsisting and enforceable first priority
security interest in the name of the Seller is not maintained on behalf of the
Trust in the related Financed Vehicle. See "Certain Legal Aspects of
Receivables -- Security Interests" in the Prospectus.
Yield and Prepayment Considerations. The weighted average life of the
Certificates will be reduced by full or partial prepayments on the Receivables.
The Receivables will generally be prepayable at any time without penalty.
Prepayments (or, for this purpose, equivalent payments to the Trust) may result
from payments by or on behalf of the related Obligors, liquidations due to
default, the receipt of proceeds from physical damage or credit life and/or
credit disability insurance, repurchases by the Seller as a result of certain
uncured breaches of representations and warranties made with respect to the
Receivables, purchases by the Servicer as a result of certain uncured breaches
of the covenants made by it with respect to the servicing of the Receivables.
The Seller has limited historical experience with respect to prepayments,
has not as of the date hereof prepared data on prepayment rates and is not aware
of publicly available industry statistics that set forth principal prepayment
experience for retail installment sales contracts similar to the Receivables.
The Seller can make no prediction as to the actual prepayment rates that will be
experienced on the Receivables. The Seller, however, believes that the actual
rate of prepayments will result in the weighted average life of the Receivables,
and therefore of the Certificates, being shorter than the period from the
Closing Date to the Final Scheduled Maturity Date.
Book-Entry Registration. Issuance of the Offered Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary trading
market since investors may be unwilling to purchase Certificates for which they
cannot obtain definitive physical securities representing such
Certificateholders' interests, except in certain circumstances described herein.
Certificateholders may experience some delay in their receipt of distributions
of interest on and principal of the Certificates since distributions may be
required to be forwarded by the Trustee to DTC, Cedel Bank or Euroclear and, in
such case, DTC, Cedel Bank or Euroclear, as the case may be, will be required to
credit such
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<PAGE> 17
distributions to the accounts of its participating organization which thereafter
will be required to credit to the accounts of the Certificateholders either
directly or indirectly through indirect participants. See "Certain Information
Regarding the Securities -- Book-Entry Registration" in the Prospectus.
Consumer Protection Laws. The Receivables are subject to federal and state
consumer protection laws which impose requirements with respect to the making,
transfer, acquisition, enforcement and collection of consumer loans. Such laws,
as well as any new laws or rules which may be adopted, may adversely affect the
Servicer's ability to collect on the Receivables. In addition, failure by the
Seller to have complied, or the Servicer to comply, with such requirements could
adversely affect the enforceability of the Receivables. The Seller will make
representations and warranties relating to the validity and enforceability of
the Receivables and its compliance with applicable law in connection with its
performance of the transactions contemplated by the Agreement. Pursuant to the
Agreement, if the Trust's interest in a Receivable is materially and adversely
affected by the failure of such Receivable to comply with applicable
requirements of consumer protection law, such Receivable will be repurchased by
the Seller. The sole remedy if any such representation or warranty is not
complied with and such noncompliance continues beyond the applicable cure period
is that the Receivables affected thereby will be repurchased by the Seller. See
"Certain Legal Aspects of the Receivables -- Consumer Protection Laws" in the
Prospectus.
Trust's Relationship to the Seller and Toyota Motor Credit
Corporation. None of the Seller, TMCC or Toyota Motor Sales, U.S.A., Inc.
("TMS") or their respective affiliates is generally obligated to make any
payments in respect of the Certificates or the Receivables. However, in
connection with the sale of Receivables by the Seller to the Trust, the Seller
will make representations and warranties with respect to the characteristics of
such Receivables and, in certain circumstances, the Seller may be required to
repurchase Receivables with respect to which such representations and warranties
have been breached. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" in the Prospectus. In
addition, under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing
Agreements -- Servicing Procedures" in the Prospectus. Moreover, if TMCC were to
cease acting as Servicer, delays in processing payments on the Receivables and
information in respect thereof could occur and result in delays in payments to
the Certificateholders.
Subordination. Distributions of interest on the Class B Certificates and
Class C Certificates will be subordinated in priority of payment to interest due
on the Class A Certificates. Distributions of principal on the Class B
Certificates and Class C Certificates will be subordinated in priority of
payment to interest and principal due on the Class A Certificates. Consequently,
the Class B Certificateholders and Class C Certificateholders will not receive
any distributions of interest with respect to a Collection Period until the full
amount of interest on the Class A Certificates due on such Distribution Date has
been distributed to the Class A Certificateholders and will not receive any
distributions of principal with respect to a Collection Period until the full
amount of interest on and principal of the Class A Certificates due on such
Distribution Date has been distributed to the Class A Certificateholders.
Similarly, distributions of interest on the Class C Certificates will be further
subordinated in priority of payment to interest due on the Class B Certificates
and distributions of principal on the Class C Certificates will be further
subordinated in priority of payment to interest and principal due on the Class B
Certificates. Consequently, the Class C Certificateholders will not receive any
distributions of interest with respect to a Collection Period until the full
amount of interest due on the Class B Certificates on such Distribution Date has
been distributed to the Class B Certificateholders and will not receive any
distributions of principal with respect to a Collection Period until the full
amount of interest on and principal of the Class B Certificates due on such
Distribution Date has been distributed to the Class B Certificateholders. See
"Description of the Certificates -- Subordination; Reserve Fund".
Limited Assets. The Trust will not have, nor is it permitted or expected to
have, any significant assets or sources of funds other than the Receivables and
the Reserve Fund. The Certificates represent interests solely in the Trust and
are not obligations of, and will not be insured or guaranteed by, the Seller,
the Servicer, TMS or any of their respective affiliates, or the Trustee or any
other person or entity. Holders
S-13
<PAGE> 18
of the Certificates must rely for repayment upon payments on the Receivables
and, if and to the extent available, amounts on deposit in the Reserve Fund.
Similarly, although funds in the Reserve Fund will be available on each
Distribution Date to cover shortfalls in distributions of interest and principal
on the Certificates, amounts to be deposited in the Reserve Fund are limited in
amount. If the Reserve Fund is exhausted, the Trust will depend solely on
current distributions on the Receivables to make payments on the Certificates.
On any Distribution Date when the amount on deposit in the Reserve Fund exceeds
the Specified Reserve Fund Balance, the amount of such excess will be released
to the Seller. Any such amounts released from the Reserve Fund to the Seller
will not be available to the Certificateholders on any subsequent Distribution
Date. See "Description of the Certificates -- Subordination; Reserve Fund".
THE TRUST
GENERAL
The Seller will establish the Trust by selling and assigning the assets of
the Trust to the Trustee in exchange for the Certificates to be issued by the
Trust. The Servicer will service the Receivables pursuant to the Agreement and
will be compensated for acting as the Servicer. See "Description of the
Certificates -- Servicing Compensation". To facilitate servicing and to minimize
administrative burden and expense, the Servicer will be appointed custodian for
the Receivables by the Trustee, but will not stamp the Receivables to reflect
the sale and assignment of the Receivables to the Trust or amend the
certificates of title of the Financed Vehicles. In the absence of amendments to
the certificates of title, the Trustee may not have perfected security interests
in the Financed Vehicles securing the Receivables originated in some states. See
"Risk Factors -- Certain Legal Aspects" herein and "Certain Legal Aspects of the
Receivables -- Security Interests" in the Prospectus.
If the protection provided to the Certificateholders by the Reserve Fund
and in the case of the Class A Certificateholders, the subordination of the
Class B Certificates and Class C Certificates and, in the case of the Class B
Certificateholders, the subordination of the Class C Certificates, is
insufficient, the Trust will look only to the payments made by or on behalf of
the Obligors on or in respect of the Receivables, the proceeds from the
repossession and sale of Financed Vehicles which secure Defaulted Receivables
and the proceeds of any Dealer Recourse (described below) to make distributions
on their respective Certificates. In such event, certain factors, such as the
possibility that the Trust may not have a first priority perfected security
interest in the Financed Vehicles in all states, may affect the Trust's ability
to repossess and sell the collateral securing the Receivables or may limit the
amount realized to less than the amount due from the related Obligors.
Certificateholders may thus be subject to delays in payment and may incur losses
on their investments in the Certificates as a result of defaults or
delinquencies by Obligors and because of depreciation in the value of the
related Financed Vehicles. See "Risk Factors", "Description of the
Certificates -- Distributions" and "-- Subordination; Reserve Fund" herein and
"Certain Legal Aspects of the Receivables" in the Prospectus.
Pursuant to agreements between TMCC and the Dealers, each Dealer is
obligated, after purchase by TMCC of retail installment sales contracts from
such Dealer, to repurchase from TMCC such contracts which do not meet certain
representations and warranties made by such Dealer (such Dealer repurchase
obligations are referred to herein as "Dealer Recourse"). Such representations
and warranties relate primarily to the origination of the contracts and the
perfection of the security interests in the related financed vehicles, and do
not typically relate to the creditworthiness of the related obligors or the
collectability of such contracts. Although the Dealer agreements with respect to
the Receivables will not be assigned to the Trustee, the 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 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.
S-14
<PAGE> 19
Each Certificate represents an undivided ownership interest in the Trust.
The Trust property includes the Receivables, and certain monies due or received
thereunder on or after the Cutoff Date. The Trust property also includes (i)
such amounts as from time to time may be held in one or more trust accounts
established and maintained by the Servicer pursuant to the Agreement, as
described below; (ii) security interests in the Financed Vehicles and any
accessions thereto; (iii) the rights to proceeds with respect to the Receivables
from claims on physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be; (iv) the
right to receive proceeds from any Dealer Recourse; (v) the rights of the Seller
under the Receivables Purchase Agreement; (vi) the right to realize upon any
property (including the right to receive future Liquidation Proceeds) that shall
have secured a Receivable and that shall have been acquired by the Trustee; and
(vii) any and all proceeds of the foregoing. The Reserve Fund will be maintained
by the Trustee for the benefit of the Certificateholders, but will not be part
of the Trust.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include the
Receivables purchased as of the Cutoff Date. The Receivables were originated by
Dealers in accordance with TMCC's requirements and subsequently purchased by
TMCC. The Receivables evidence the indirect financing made available by TMCC to
the related Obligors. On or before the date of initial issuance of the
Certificates (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 Agreement. During the term of the
Agreement, neither the Seller nor TMCC may substitute any other retail
installment sales contract for any Receivable sold to the Trust.
The Receivables Pool will include the Receivables purchased as of the
Cutoff Date based on selection criteria that include: (i) at the time of
origination, each Receivable was secured by a new or used automobile or light
duty truck; (ii) each Receivable was originated in the United States; (iii) each
Receivable provides for level monthly Scheduled Payments that fully amortize the
amount financed by such Receivable over its original term except that the
payment in the first or last month in the life of the Receivable may be
minimally different from the level payment; (iv) each Receivable was originated
prior to May 31, 1996; (v) each Receivable had an original number of scheduled
payments of not less than 12 and not more than 72 and, as of the Cutoff Date,
had a remaining number of scheduled payments of not less than 4 and not more
than 54; (vi) each Receivable provides for the payment of a finance charge at an
APR ranging from 8.00% to 22.00%; (vii) each Receivable does not have a payment
that is more than 30 days past due as of the Cutoff Date; (viii) no Receivable
is a receivable as to which payments ahead of 6 or more scheduled payments have
been received from or on behalf of the related Obligor; (ix) each Receivable is
being serviced by TMCC; (x) to the best knowledge of the Seller, no Receivable
is due from any Obligor who is presently the subject of a bankruptcy proceeding
or is bankrupt or insolvent; (xi) no Financed Vehicle has been repossessed
without reinstatement as of the Cutoff Date; and (xii) no Financed Vehicle was
subject to force-placed insurance as of the Cutoff Date. TMCC does not originate
retail installment sales contracts in Hawaii, and retail installment sales
contracts originated in Texas or serviced by an independent finance company
conducting business in five southeastern states of the United States (Alabama,
Florida, Georgia, North Carolina and South Carolina) on behalf of TMCC will not
be included in the Trust. No selection procedures believed by the Seller to be
adverse to Certificateholders will be used in selecting the Receivables.
The Receivables represent financing of new and used automobiles and light
duty trucks. Approximately 65.7% and 34.3% (based on the Initial Pool Balance)
of the Receivables represent financing of new vehicles and used vehicles,
respectively. As of the Cutoff Date, the average Principal Balance of the
Receivables was approximately $8,984. Based on the addresses of the originating
Dealers, the Receivables have been originated in 48 states. Except in the case
of any breach of representations and warranties by the related Dealer, the
Receivables generally do not provide for recourse against the originating
Dealer. Approximately 50.1% and 49.9% of the Receivables (based on the Initial
Pool Balance) constitute Precomputed Receivables and Simple Interest
Receivables, respectively.
S-15
<PAGE> 20
The composition, distribution by APR and geographic distribution of the
Receivables as of the Cutoff Date are as set forth in the following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Aggregate Cutoff Date Principal Balance..................... $754,397,267.42
Number of Receivables....................................... 83,975
Average Cutoff Date Principal Balance....................... $8,983.59
Average Original Amount Financed............................ $13,762.61
Range of Original Amount Financed......................... $1,019.74 to $50,000.00
Weighted Average APR(1)..................................... 10.47%
Range of APRs............................................. 8.00% to 22.00%
Weighted Average Original Number of Scheduled Payments(1)... 57
Range of Original Number of Scheduled Payments............ 12 to 72
Weighted Average Remaining Number of Scheduled Payments(1).. 40
Range of Remaining Number of Scheduled Payments........... 4 to 54
</TABLE>
- ---------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE CUTOFF DATE PERCENTAGE OF
NUMBER OF NUMBER OF PRINCIPAL CUTOFF DATE
RANGE OF APRS RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
------------- ----------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
8.00% to 8.99%................. 23,165 27.59% $212,055,552.81 28.11%
9.00% to 9.99%................. 20,175 24.03 192,243,449.01 25.48
10.00% to 10.99%................ 14,020 16.70 128,199,460.69 16.99
11.00% to 11.99%................ 9,119 10.86 80,726,976.92 10.70
12.00% to 12.99%................ 7,275 8.66 63,490,206.71 8.42
13.00% to 13.99%................ 3,404 4.05 26,691,196.15 3.54
14.00% to 14.99%................ 2,123 2.53 16,339,673.48 2.17
15.00% to 15.99%................ 1,370 1.63 10,599,452.51 1.41
16.00% to 16.99%................ 880 1.05 6,550,340.00 0.87
17.00% to 17.99%................ 628 0.75 4,559,971.00 0.60
18.00% to 18.99%................ 522 0.62 3,930,118.39 0.52
19.00% to 19.99%................ 602 0.72 4,546,088.31 0.60
20.00% to 20.99%................ 585 0.70 3,990,419.83 0.53
21.00% to 21.99%................ 98 0.12 432,159.10 0.06
22.00%.......................... 9 0.01 42,202.50 0.01
------ ------- --------------- -------
Total(1).............. 83,975 100.00% $754,397,267.42 100.00%
====== ======= =============== =======
</TABLE>
- ---------------
(1) Dollar amounts and percentages do not add to the total or to 100.00%,
respectively, due to rounding.
S-16
<PAGE> 21
DISTRIBUTION OF THE INITIAL RECEIVABLES BY STATE (1)
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE CUTOFF DATE PERCENTAGE OF
NUMBER OF NUMBER OF PRINCIPAL CUTOFF DATE
STATE RECEIVABLES RECEIVABLES BALANCE POOL BALANCE
----- ----------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Alabama....................... 14 0.02% $ 266,026.85 0.04%
Alaska........................ 74 0.09 712,606.75 0.09
Arizona....................... 1,628 1.94 14,856,290.00 1.97
Arkansas...................... 1,648 1.96 13,669,694.07 1.81
California.................... 26,324 31.35 228,893,726.20 30.34
Colorado...................... 1,263 1.50 10,425,720.39 1.38
Connecticut................... 1,177 1.40 9,434,959.72 1.25
Delaware...................... 298 0.35 3,345,192.21 0.44
Florida....................... 91 0.11 1,139,697.50 0.15
Georgia....................... 29 0.03 503,426.56 0.07
Idaho......................... 53 0.06 394,058.64 0.05
Illinois...................... 4,546 5.41 44,298,134.60 5.87
Indiana....................... 281 0.33 2,774,145.63 0.37
Iowa.......................... 205 0.24 2,113,706.98 0.28
Kansas........................ 707 0.84 6,285,572.52 0.83
Kentucky...................... 126 0.15 984,805.05 0.13
Louisiana..................... 2,466 2.94 21,432,337.80 2.84
Maine......................... 394 0.47 3,014,117.84 0.40
Maryland...................... 7,878 9.38 76,061,934.14 10.08
Massachusetts................. 5,685 6.77 46,864,442.71 6.21
Michigan...................... 691 0.82 6,291,789.28 0.83
Minnesota..................... 90 0.11 969,502.88 0.13
Mississippi................... 502 0.60 4,404,902.90 0.58
Missouri...................... 2,074 2.47 17,702,396.26 2.35
Montana....................... 68 0.08 597,319.47 0.08
Nebraska...................... 51 0.06 518,804.72 0.07
Nevada........................ 705 0.84 6,265,564.43 0.83
New Hampshire................. 1,505 1.79 10,869,911.30 1.44
New Jersey.................... 2,396 2.85 21,862,275.58 2.90
New Mexico.................... 474 0.56 4,206,618.70 0.56
New York...................... 2,348 2.80 22,432,451.88 2.97
North Carolina................ 110 0.13 2,155,784.55 0.29
North Dakota.................. 5 0.01 28,333.44 0.00
Ohio.......................... 331 0.39 2,722,079.45 0.36
Oklahoma...................... 312 0.37 2,960,064.13 0.39
Oregon........................ 1,513 1.80 10,851,824.10 1.44
Pennsylvania.................. 2,496 2.97 20,418,714.86 2.71
Rhode Island.................. 848 1.01 7,315,281.63 0.97
South Carolina................ 74 0.09 1,310,951.76 0.17
South Dakota.................. 8 0.01 68,299.93 0.01
Tennessee..................... 2,279 2.71 20,943,140.49 2.78
Utah.......................... 120 0.14 1,413,133.31 0.19
Vermont....................... 317 0.38 2,462,142.22 0.33
Virginia...................... 7,340 8.74 76,648,809.52 10.16
Washington.................... 1,873 2.23 16,199,936.42 2.15
West Virginia................. 69 0.08 751,471.21 0.10
Wisconsin..................... 483 0.58 4,495,749.89 0.60
Wyoming....................... 6 0.01 59,416.92 0.01
------ ------ ---------------- ------
Total(2).................... 83,975 100.00% $ 754,397,267.42 100.00%
====== ====== ================ ======
</TABLE>
- ---------------
(1) Based solely on the addresses of the originating Dealers.
(2) Dollar amounts and percentages do not add to the total or to 100.00%,
respectively, due to rounding.
S-17
<PAGE> 22
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning TMCC's experience with
respect to its portfolio of new and used automobile and light duty truck retail
installment sales contracts which it initially funded and is servicing. Retail
installment sales contracts serviced by an independent finance company
conducting business in five southeastern states of the United States will not be
included in the Trust, and accordingly are not included in the information set
forth below.
The data presented in the following tables are provided for illustrative
purposes only. There is no assurance that TMCC's delinquency, credit loss and
repossession experience with respect to automobile and light duty truck retail
installment sales contracts in the future, or the experience of the Trust with
respect to the Receivables, will be similar to that set forth below.
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MAY 31, -------------------------------------------------------
1996(2) 1995(2) 1994(1) 1993(1) 1992 1991
---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Outstanding at End of
Period.................... 538,241 517,325 514,120 485,540 466,008 421,765
Delinquencies as a
Percentage of Contracts
Outstanding(3)
31-60 Days................ 1.32% 1.25% 1.04% 1.04% 1.25% 1.39%
61-90 Days................ 0.10% 0.11% 0.10% 0.10% 0.13% 0.16%
Over 90 Days.............. 0.07% 0.06% 0.06% 0.07% 0.07% 0.09%
</TABLE>
- ---------------
(1) Includes contracts sold by TMCC in August 1993 in connection with the
formation of the Toyota Auto Receivables 1993-A Grantor Trust, which TMCC is
servicing.
(2) Includes contracts sold by TMCC in August 1993 and September 1995,
respectively, in connection with the formation of the Toyota Auto
Receivables 1993-A Grantor Trust and the formation of the Toyota Auto
Receivables 1995-A Grantor Trust, which TMCC is servicing.
(3) The period of delinquency is based on the number of days scheduled payments
are contractually past due.
S-18
<PAGE> 23
NET LOSS AND REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE YEAR ENDED SEPTEMBER 30,
EIGHT MONTHS ENDED ----------------------------------------------------------------------
MAY 31, 1996(2) 1995(2) 1994(1) 1993(1) 1992 1991
------------------ ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Receivables
Outstanding(3)............ $5,326,595 $4,930,711 $4,757,142 $4,198,373 $3,863,884 $3,396,401
Average Net Receivables
Outstanding(4)............ 5,128,653 4,843,927 4,477,758 4,031,129 3,630,143 3,138,335
Number of Contracts
Outstanding............... 538,241 517,325 514,120 485,540 466,008 421,765
Average Number of Contracts
Outstanding(4)............ 527,783 515,723 499,830 475,774 443,887 386,396
Number of Repossessions..... 5,869 8,438 8,386 8,925 9,183 9,407
Number of Repossessions as a
Percentage of the
Contracts Outstanding..... 1.64%(7) 1.63% 1.63% 1.84% 1.97% 2.23%
Number of Repossessions as a
Percentage of the Average
Number of Contracts
Outstanding............... 1.67%(7) 1.64% 1.68% 1.88% 2.07% 2.43%
Gross Charge-Offs(5)........ $ 20,977 $ 27,282 $ 22,748 $ 26,361 $ 31,594 $ 32,935
Recoveries(6)............... $ 4,207 $ 5,957 $ 6,564 $ 6,587 $ 6,387 $ 6,378
Net Losses(6)............... $ 16,770 $ 21,325 $ 16,184 $ 19,774 $ 25,207 $ 26,557
Net Losses as a Percentage
of Net Receivables
Outstanding............... 0.47%(7) 0.43% 0.34% 0.47% 0.65% 0.78%
Net Losses as a Percentage
of Average Net Receivables
Outstanding............... 0.49%(7) 0.44% 0.36% 0.49% 0.69% 0.85%
</TABLE>
- ---------------
(1) Includes contracts sold by TMCC in August 1993 in connection with the
formation of the Toyota Auto Receivables 1993-A Grantor Trust, which TMCC is
servicing.
(2) Includes contracts sold by TMCC in August 1993 and September 1995,
respectively, in connection with the formation of the Toyota Auto
Receivables 1993-A Grantor Trust and the formation of the Toyota Auto
Receivables 1995-A Grantor Trust, which TMCC is servicing.
(3) Net Receivables Outstanding includes principal, accrued interest and
unamortized dealer reserve.
(4) Average of current period and beginning of period amount or number of
contracts outstanding.
(5) 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.
(6) Recoveries from post-disposition monies received on previously charged-off
contracts including proceeds of liquidation of the related vehicle after the
related charge-off. Also includes recoveries for dealer reserve charge-offs
and dealer reserve chargebacks.
(7) Annualized.
S-19
<PAGE> 24
THE SELLER AND THE SERVICER
Information regarding the Seller and the Servicer is set forth under "The
Seller and the Servicer" in the Prospectus.
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Certificates (approximately $743,232,000 with respect to the Offered
Certificates) will be used by the Seller to purchase the Receivables from TMCC
pursuant to the Receivables Purchase Agreement and to fund the Reserve Fund.
PREPAYMENT AND YIELD CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of each class
of Certificates depends on the rate of payment (including prepayments and
liquidations due to default) of the principal balance of the Receivables, the
final distribution in respect of the Certificates could occur significantly
earlier than the Final Scheduled Distribution Date. Certificateholders will bear
the risk of being able to reinvest principal payments on the Certificates at
yields at least equal to the yield on their respective Certificates. No
prediction can be made as to the rate of prepayments on the Receivables in
either stable or changing interest rate environments.
Although the Receivables have different APRs, each Receivable's APR exceeds
the sum of (i) the weighted average of the Class A Pass Through Rate, the Class
B Pass Through Rate and the Class C Pass Through Rate plus (ii) the Servicing
Fee Rate. Therefore, disproportionate rates of prepayments between Receivables
with higher and lower APRs should not affect the yield to Certificateholders on
the outstanding principal balance of the Class A Certificates, Class B
Certificates or Class C Certificates, as the case may be.
The Class B Certificates and Class C Certificates will provide the Class A
Certificates limited protection against losses on the Receivables. In addition,
the Class C Certificates will provide the Class B Certificates limited
protection against losses on the Receivables. Accordingly, the yield on the
Class B Certificates will be sensitive, and the yield on the Class C
Certificates will be extremely sensitive to the loss experience of the
Receivables and the timing of any such losses. If the actual rate and amount of
losses experienced by the Receivables exceed the rate and amount of such losses
assumed by an investor, and if amounts in the Reserve Fund are insufficient to
cover resulting shortfalls, the yield to maturity on the Class B Certificates
and/or the Class C Certificates may be lower than anticipated.
POOL FACTORS AND TRADING INFORMATION
The "Class A Pool Factor", the "Class B Pool Factor" and the "Class C Pool
Factor" will be seven-digit decimal numbers which the Servicer will compute each
month indicating the Class A Certificate Balance, Class B Certificate Balance
and Class C Certificate Balance as of the close of business on the Distribution
Date in such month as a fraction of the Original Class A Certificate Balance,
Original Class B Certificate Balance or Original Class C Certificate Balance, as
the case may be. Each Pool Factor will initially be 1.0000000 and thereafter
will decline to reflect reductions in the Class A Certificate Balance, Class B
Certificate Balance or Class C Certificate Balance, as the case may be. The
Class A Certificate Balance, Class B Certificate Balance and Class C Certificate
Balance will be computed by allocating payments in respect of the Receivables to
principal and interest using the actuarial method for the Precomputed
Receivables and using the simple interest method for the Simple Interest
Receivables. The portion of the Class A Certificate Balance, Class B Certificate
Balance or Class C Certificate Balance for a given month allocable to a Class A
Certificateholder, Class B Certificateholder or Class C Certificateholder, as
the case may be, can be determined by multiplying the original denomination of
the holder's Certificate by the related Pool Factor for that month.
S-20
<PAGE> 25
Pursuant to the Agreement, the Certificateholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the Class A Pool Factor, the Class B Pool Factor, the Class C Pool Factor and
various other items of information pertaining to the Trust. Certificateholders
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 CERTIFICATES
The Certificates will be issued pursuant to the terms of the Agreement, a
form of which has been filed as an exhibit to the Registration Statement. Copies
of the Agreement and the Receivables Purchase Agreement will be filed with the
Commission, the Luxembourg Stock Exchange and The Stock Exchange of Hong Kong
Limited following the issuance of the Certificates. The following summary
describes certain terms of the Certificates and the Agreement. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Agreement. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Agreement set forth in the
Prospectus, to which description reference is hereby made.
GENERAL
The Certificates will evidence undivided ownership interests in the Trust
created pursuant to the Agreement. The Class A Certificates will evidence in the
aggregate an undivided ownership interest (the "Class A Percentage") of
approximately 95.75% of the Trust, the Class B Certificates will evidence in the
aggregate an undivided ownership interest (the "Class B Percentage") of
approximately 3.00% of the Trust and the Class C Certificates will evidence in
the aggregate an undivided ownership interest (the "Class C Percentage") of
approximately 1.25% of the Trust.
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Principal Distributable Amount plus interest at
the Class A Pass Through Rate on the Class A Principal Balance. Subject to the
prior rights of the Class A Certificateholders, it is intended that the Class B
Certificateholders receive, on each Distribution Date, the Class B Principal
Distributable Amount plus interest at the Class B Pass Through Rate on the Class
B Principal Balance. Subject to the prior rights of the Class A
Certificateholders and Class B Certificateholders, it is intended that the Class
C Certificateholders receive, on each Distribution Date, the Class C Principal
Distributable Amount plus interest at the Class C Pass Through Rate on the Class
C Principal Balance.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables from
the Seller to the Trust on the Closing Date pursuant to the Agreement is set
forth under "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 Servicer will also
establish and will maintain with the Trustee a Payahead Account in the name of
the Trustee on behalf of the Certificateholders. The Reserve Fund will not be an
asset of the Trust.
SERVICING COMPENSATION
The Servicing Fee with respect to any Collection Period will be one-twelfth
of 1.00% (the "Servicing Fee Rate") of the Pool Balance as of the first day of
such Collection Period or, in the case of the first Distribution Date, the
Initial Pool Balance. The Servicing Fee (together with any portion of the
Servicing
S-21
<PAGE> 26
Fee that remains unpaid from prior Distribution Dates) will be paid on each
Distribution Date solely to the extent of Available Interest. The Servicer will
be entitled to collect and retain as additional servicing compensation in
respect of each Collection Period any late fees, extension fees and any other
administrative fees and expenses or similar charges collected during such
Collection Period, plus any interest or investment earnings earned during such
Collection Period from the investment of monies on deposit in the Accounts. See
"-- Collections" herein and "Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of Expenses" in the Prospectus.
COLLECTIONS
The Servicer may retain all payments on or in respect of the Receivables
received from Obligors and all proceeds of Receivables collected during each
Collection Period without segregation in its own accounts until deposited in the
Collection Account on the related Distribution 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 Prime-1
by Moody's and A-1 by S&P, 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 from the time deposited until the related Distribution 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 Distribution Date. See
"Description of the Transfer and Sale Agreements -- Collections" in the
Prospectus.
"Eligible Investments" will be specified in the Agreement and will be
limited to investments which meet the criteria of each Rating Agency from time
to time as being consistent with its then-current ratings of each Class of the
Certificates.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or certain other similar fees
or charges will be applied first to any outstanding Advances made by the
Servicer with respect to such Receivable, and then to the related Scheduled
Payment. Any collections on or in respect of a Receivable remaining after such
applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
in respect of such Receivable (each, a "Prepayment"). All other Excess Payments
in respect of Precomputed Receivables will be held by the Servicer (or if any of
the conditions in clauses (i) through (iii) in the second preceding paragraph is
not satisfied, deposited in the Payahead Account), as a Payment Ahead. See
"Description of the Transfer and Sale Agreements -- Collections" in the
Prospectus.
ADVANCES
The Servicer will be required to make Advances in respect of Scheduled
Payments that are not received in full by the end of the month in which they are
due, unless the Servicer determines, in its sole discretion, that such Advances
will not be recoverable from certain collections available to reimburse such
Advances. Under certain circumstances, upon the determination by the Servicer
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 Sale
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 Distribution Date.
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NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily (as described under "-- Collections" above), the Servicer will
be permitted to make the deposit of collections, aggregate Advances and amounts
deposited in respect of purchases of Receivables by the Seller or the Servicer
for or with respect to the related Collection Period net of distributions to be
made to the Servicer with respect to such Collection Period. The Servicer,
however, will account to the Trustee and to the Certificateholders as if all of
the foregoing deposits and distributions were made individually. See
"Description of the Transfer and Servicing Agreements -- Net Deposits" in the
Prospectus.
DISTRIBUTIONS
On the fifteenth calendar day of each month or, if such day is not a
Business Day, the immediately succeeding Business Day (each, a "Determination
Date"), the Servicer will inform the Trustee of, among other things, the amount
of funds collected on or in respect of the Receivables, the amount of Advances
to be made by the Servicer and the Servicing Fee and other servicing
compensation payable to the Servicer, in each case with respect to the
immediately preceding Collection Period. On or prior to each Determination Date,
the Servicer shall also determine the Class A Distributable Amount, the Class B
Distributable Amount, the Class C Distributable Amount and, based on the
available funds and other amounts available for distribution on the related
Distribution Date as described below, the amount to be distributed to the Class
A Certificateholders, the Class B Certificateholders and the Class C
Certificateholders, respectively.
On or before each Distribution Date, the Trustee will cause Payments Ahead
previously deposited in the Payahead Account or held by the Servicer in respect
of the related Collection Period to be transferred to the Collection Account.
The Trustee will make distributions to the Certificateholders out of the
amounts on deposit in the Collection Account. The amount to be distributed to
the Certificateholders will be determined in the manner described below.
Calculation of Available Amounts. The amount of funds available for
distribution on a Distribution Date will generally equal the sum of Available
Interest and Available Principal.
"Available Interest" for a Distribution Date will equal the sum of the
following amounts allocable to interest received or allocated by the Servicer on
or in respect of the Receivables during the related Collection Period (which in
the case of the Precomputed Receivables shall be computed in accordance with the
actuarial method and in the case of the Simple Interest Receivables shall be
calculated in accordance with the simple interest method) from: (i) all
collections on or in respect of the Receivables other than Defaulted Receivables
(including Payments Ahead being applied in such Collection Period but excluding
Payments Ahead to be applied in one or more future Collection Periods); (ii) all
proceeds of the liquidation of Defaulted Receivables, net of expenses incurred
by the Servicer in accordance with its customary servicing procedures in
connection with such liquidation, including amounts received in subsequent
Collection Periods ("Net Liquidation Proceeds"); (iii) all Advances made by the
Servicer; and (iv) all Warranty Purchase Payments with respect to Warranty
Receivables repurchased by the Seller and Administrative Purchase Payments with
respect to Administrative Receivables purchased by the Servicer, in each case in
respect of such Collection Period.
"Available Principal" for a Distribution Date will equal the sum of the
amounts described in clauses (i) through (iv) of the immediately preceding
paragraph received or allocated by the Servicer in respect of principal on or in
respect of the Receivables during the related Collection Period (which in the
case of the Precomputed Receivables shall be computed in accordance with the
actuarial method).
Available Interest and Available Principal on any Distribution Date will
exclude (i) amounts received on a particular Receivable (other than a Defaulted
Receivable) to the extent that the Servicer has previously made an unreimbursed
Advance in respect of such Receivable and (ii) Net Liquidation Proceeds with
respect to a particular Receivable to the extent of unreimbursed Advances in
respect of
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such Receivable. A "Defaulted Receivable" will be a Receivable (other than an
Administrative Receivable or a Warranty Receivable) as to which (a) all or any
part of a Scheduled Payment is 150 or more days past due and the Servicer has
not repossessed the related Financed Vehicle or (b) the Servicer has, in
accordance with its customary servicing procedures, determined that eventual
payment in full is unlikely and has either repossessed and liquidated the
related Financed Vehicle or repossessed and held the related Financed Vehicle in
its repossession inventory for 90 days, whichever occurs first.
Calculation of Distributable Amounts. The "Class A Distributable Amount"
with respect to a Distribution Date will equal the sum of (i) the "Class A
Principal Distributable Amount", consisting of the Class A Percentage of the
following items: (a) in the case of Precomputed Receivables, the principal
portion of all Scheduled Payments due during the related Collection Period,
computed in accordance with the actuarial method, (b) in the case of Simple
Interest Receivables, the principal portion of all Scheduled Payments actually
received during the related Collection Period, (c) the principal portion of all
Prepayments on Simple Interest Receivables and prepayments in full of
Precomputed Receivables received during the related Collection Period (to the
extent such amounts are not included in clauses (a) and (b) above) and (d) the
Principal Balance of each Receivable that the Servicer became obligated to
purchase, the Seller became obligated to repurchase or that became a Defaulted
Receivable during the related Collection Period (to the extent such amounts are
not included in clauses (a), (b) and (c) above), and (ii) the "Class A Interest
Distributable Amount", consisting of one month's interest at the Class A Pass
Through Rate on the Class A Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of principal made on
such immediately preceding Distribution Date) or, in the case of the first
Distribution Date, the Original Class A Certificate Balance.
The "Class A Certificate Balance" will equal, initially, $722,335,000.00
(the "Original Class A Certificate Balance") and, on any Distribution Date, will
equal the Original Class A Certificate Balance, reduced by all amounts
distributed on or prior to such Distribution Date on the Class A Certificates
and allocable to principal. In addition, on each Distribution Date from and
including the Distribution Date on which both the Class B Certificate Balance
and the Class C Certificate Balance have been reduced to zero, the Class A
Certificate Balance will be reduced by the amount, if any, necessary to cause it
to equal the Pool Balance as of the last day of the related Collection Period
after taking account of all distributions, deposits and withdrawals to be made
on such Distribution Date.
The "Class B Distributable Amount" with respect to a Distribution Date will
be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount", consisting of the Class B Percentage of the amounts set forth under
clauses (i)(a) through (i)(d) in the second preceding paragraph with respect to
the Class A Principal Distributable Amount and (ii) the "Class B Interest
Distributable Amount", consisting of one month's interest at the Class B Pass
Through Rate on the Class B Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to distributions of principal made on
such immediately preceding Distribution Date) or, in the case of the first
Distribution Date, the Original Class B Certificate Balance.
The "Class B Certificate Balance" will initially equal $22,632,000.00 (the
"Original Class B Certificate Balance") and, on any Distribution Date, will
equal Original Class B Certificate Balance, reduced by all amounts distributed
on or prior to such Distribution Date on the Class B Certificates and allocable
to principal. In addition, on each Distribution Date from and including the
Distribution Date on which the Class C Certificate Balance is reduced to zero,
the Class B Certificate Balance will be reduced by the amount, if any, necessary
to cause it to equal the excess, if any, of the Pool Balance as of the last day
of the related Collection Period over the Class A Certificate Balance after
taking account of all distributions, deposits and withdrawals to be made on such
Distribution Date.
The "Class C Distributable Amount" with respect to a Distribution Date will
be an amount equal to the sum of (i) the "Class C Principal Distributable
Amount", consisting of the Class C Percentage of the amounts set forth under
clauses (i)(a) through (i)(d) in the fourth preceding paragraph with respect to
the Class A Principal Distributable Amount and (ii) the "Class C Interest
Distributable Amount",
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consisting of one month's interest at the Class C Pass Through Rate on the Class
C Certificate Balance as of the immediately preceding Distribution Date (after
giving effect to distributions of principal made on such immediately preceding
Distribution Date) or, in the case of the first Distribution Date, the Original
Class C Certificate Balance.
The "Class C Certificate Balance" will initially equal $9,430,267.42 (the
"Original Class C Certificate Balance") and, on any Distribution Date, will
equal the amount by which the Pool Balance on the last day of the related
Collection Period exceeds the sum of the Class A Certificate Balance and the
Class B Certificate Balance on such Distribution Date after giving effect to
distributions in respect of principal to Class A Certificateholders and Class B
Certificateholders and all other deposits or withdrawals required to be made on
such Distribution Date.
No reduction in the Class A Certificate Balance, the Class B Certificate
Balance or the Class C Certificate Balance will be made as a result of
shortfalls in collections available to be distributed on a Distribution Date in
respect of interest on or principal of such Class or any other Class of
Certificates if and to the extent that there are amounts on deposit in the
Reserve Fund allocable to cover such shortfall. See "-- Subordination; Reserve
Fund".
Payment of Distributable Amounts. Prior to each Distribution Date, the
Servicer will calculate the amount to be distributed to the Certificateholders.
On each Distribution Date, the Trustee will distribute to Certificateholders the
following amounts in the following order of priority, to the extent of funds
available for distribution on such Distribution Date:
(i) to the Class A Certificateholders, an amount equal to the Class A
Interest Distributable Amount and any unpaid Class A Interest Carryover
Shortfall, such amount to be paid from Available Interest (as Available
Interest has been reduced by reimbursing the Servicer for the interest
component of any outstanding Advances and paying the Servicer the Servicing
Fee, including any unpaid Servicing Fees with respect to one or more prior
Collection Periods); and if such Available Interest is insufficient, the
Class A Certificateholders will be entitled to receive such amount first,
from the Class C Percentage of Available Principal, second from the Class B
Percentage of Available Principal and third, if such amounts are
insufficient, from monies transferred from the Reserve Fund to the
Collection Account;
(ii) to the Class B Certificateholders, an amount equal to the Class B
Interest Distributable Amount and any unpaid Class B Interest Carryover
Shortfall, such amount to be paid from Available Interest (after giving
effect to the reduction in Available Interest described in clause (i)
above); and if such Available Interest is insufficient, the Class B
Certificateholders will be entitled to receive such amount first, from the
Class C Percentage of Available Principal and second, if such amounts are
insufficient, from monies transferred from the Reserve Fund to the
Collection Account;
(iii) to the Class C Certificateholders, an amount equal to the Class
C Interest Distributable Amount and any unpaid Class C Interest Carryover
Shortfall, such amount to be paid from Available Interest (after giving
effect to the reduction in Available Interest described in clauses (i) and
(ii) above); and if such Available Interest is insufficient, the Class C
Certificateholders will be entitled to receive such amount from monies
transferred from the Reserve Fund to the Collection Account;
(iv) to the Class A Certificateholders, an amount equal to the Class A
Principal Distributable Amount and any unpaid Class A Principal Carryover
Shortfall, such amount to be paid from Available Principal (as Available
Principal has been reduced by reimbursing the Servicer for the principal
component of any outstanding Advances and any reduction in Available
Principal described in clauses (i) and (ii) above); and if such Available
Principal is insufficient, the Class A Certificateholders will be entitled
to receive such amount first, from Available Interest (after giving effect
to the reduction in Available Interest described in clauses (i), (ii) and
(iii) above) and second, if such amounts are insufficient, from monies
transferred from the Reserve Fund to the Collection Account;
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(v) to the Class B Certificateholders, an amount equal to the Class B
Principal Distributable Amount and any unpaid Class B Principal Carryover
Shortfall, such amount to be paid from Available Principal (after giving
effect to the reduction in Available Principal described in clauses (i),
(ii) and (iv) above); and if such Available Principal is insufficient, the
Class B Certificateholders will be entitled to receive such amount first,
from Available Interest (after giving effect to the reductions in Available
Interest described in clauses (i) through (iv) above) and second, if such
amounts are insufficient, from monies transferred from the Reserve Fund to
the Collection Account; and
(vi) to the Class C Certificateholders, an amount equal to the Class C
Principal Distributable Amount and any unpaid Class C Principal Carryover
Shortfall, such amount to be paid from Available Principal (after giving
effect to the reduction in Available Principal described in clauses (i),
(ii), (iv) and (v) above); and if such Available Principal is insufficient,
the Class C Certificateholders will be entitled to receive such amount
first, from Available Interest (after giving effect to the reductions in
Available Interest described in clauses (i) through (v) above) and second,
if such amounts are insufficient, from monies transferred from the Reserve
Fund to the Collection Account.
The "Class A Interest Carryover Shortfall" with respect to any Distribution
Date will equal the excess, if any, of (x) the Class A Interest Distributable
Amount for such Distribution Date and any outstanding Class A Interest Carryover
Shortfall from the immediately preceding Distribution Date plus interest on such
outstanding Class A Interest Carryover Shortfall, to the extent permitted by
law, at the Class A Pass Through Rate from such immediately preceding
Distribution Date through the current Distribution Date, over (y) the amount of
interest distributed to the Class A Certificateholders on such Distribution
Date. The "Class A Principal Carryover Shortfall" with respect to any
Distribution Date will equal the excess, if any, of (x) the Class A Principal
Distributable Amount for such Distribution Date and any outstanding Class A
Principal Carryover Shortfall from the immediately preceding Distribution Dates
plus interest on such outstanding Class A Principal Carryover Shortfall, to the
extent permitted by law, at the Class A Pass Through Rate from such immediately
preceding Distribution Date through the current Distribution Date over (y) the
amount of principal actually distributed to the holders of the Class A
Certificates on such Distribution Date. The "Class B Interest Carryover
Shortfall" and"Class B Principal Carryover Shortfall" and the "Class C Interest
Carryover Shortfall" and "Class C Principal Carryover Shortfall" with respect to
any Distribution Date will be calculated in the same manner as the Class A
Interest Carryover Shortfall and the Class A Principal Carryover Shortfall, as
the case may be, appropriately modified to relate to the Class B Certificates or
Class C Certificates, as the case may be.
Notwithstanding the reduction of the Certificate Balance of any Class to
zero, prior to the termination of the Trust and final distribution in respect of
amounts payable on the Certificates of all Classes, any Interest or Principal
Carryover Shortfalls with respect to such Class will continue as obligations of
the Trust payable from amounts on deposit in the Collection Account or Reserve
Fund, including Excess Amounts, before any further deposit of Excess Amounts
into the Reserve Fund or release of amounts therein to the Seller.
Any excess amounts in the Collection Account with respect to any
Distribution Date, after giving effect to the distributions described in clauses
(i) through (vi) of the third preceding paragraph ("Excess Amounts") will be
deposited in the Reserve Fund until the amount on deposit therein equals the
Specified Reserve Fund Balance and the remainder, if any, will be distributed to
the Seller.
SUBORDINATION; RESERVE FUND
The rights of the Certificateholders to receive distributions with respect
to the Receivables will be subordinated to the rights of the Servicer (to the
extent that the Servicer is paid the Servicing Fee with respect to the related
Collection Period, including any unpaid Servicing Fees with respect to one or
more prior Collection Periods and any additional servicing compensation as
described under "-- Servicing Compensation", and to the extent the Servicer is
reimbursed for certain unreimbursed Advances). In addition, the rights of the
Class B Certificateholders and the Class C Certificateholders to receive
distributions with respect to collections on the Receivables will be
subordinated to the rights of the
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Class A Certificateholders to the extent described above, and the rights of the
Class C Certificateholders to receive distributions with respect to the
Receivables will be subordinated to the Class B Certificateholders to the extent
described above. This subordination is intended to enhance the likelihood of
timely receipt by the Class A Certificateholders and, to a lesser extent, the
Class B Certificateholders, of the full amount of interest and principal
required to be paid to them, and to afford such Certificateholders limited
protection against losses in respect of the Receivables.
The Class B Certificateholders and Class C Certificateholders will not
receive any distributions of interest with respect to a Distribution Date until
the full amount of interest on the Class A Certificates relating to such
Distribution Date has been distributed to the Class A Certificateholders. The
Class B Certificateholders and Class C Certificateholders will not receive any
distributions of principal with respect to such Distribution Date until the full
amount of interest on and principal of the Class A Certificates relating to such
Distribution Date has been distributed to the Class A Certificateholders. The
Class C Certificateholders will not receive any distributions of interest with
respect to a Distribution Date until the full amount of interest on the Class A
Certificates and Class B Certificates relating to such Distribution Date has
been distributed to the Class A Certificateholders and the Class B
Certificateholders, respectively. The Class C Certificateholders will not
receive any distributions of principal with respect to such Distribution Date
until the full amount of interest on and principal of the Class A Certificates
and Class B Certificates relating to such Distribution Date has been distributed
to the Class A Certificateholders and the Class B Certificateholders,
respectively. In the event of delinquencies or losses on the Receivables, the
protection afforded to the Class A Certificateholders and Class B
Certificateholders will be effected by the application of Available Interest and
Available Principal for each Distribution Date in the priority specified under
"-- Distributions -- Payment of Distributable Amounts". Distributions of
interest on the Class B Certificates and Class C Certificates, to the extent of
collections on Receivables allocable to interest and the amount on deposit in
the Reserve Fund, will not be subordinated to the payment of principal on the
Class A Certificates. Distributions of interest on the Class C Certificates, to
the extent of collections on Receivables allocable to interest and certain
available amounts on deposit in the Reserve Fund, will not be subordinated to
the payment of principal on the Class A Certificates or the Class B
Certificates.
In addition, the Certificateholders will have the benefit of the Reserve
Fund. The Reserve Fund will not be a part of or otherwise includible in the
Trust and will be a segregated trust account held by the Trustee. Any amounts
held on deposit in the Reserve Fund are owned by the Seller and any investment
earnings thereon will be taxable to the Seller for federal income tax purposes.
The Reserve Fund will be created with an initial deposit by the Seller of an
amount equal to the Reserve Fund Initial Deposit. Thereafter, the Reserve Fund
will be funded on each Distribution Date on which the amount on deposit therein
is less than the Specified Reserve Fund Balance by the deposit therein of all
Excess Amounts, until the monies in the Reserve Fund reach an amount equal to
the Specified Reserve Fund Balance.
The "Specified Reserve Fund Balance" will be $5,657,980, except that, if on
any Distribution Date (i) the average of the Charge-off Rates for the three
preceding Collection Periods exceeds 1.25% or (ii) the average of the
Delinquency Percentages for the three preceding Collection Periods exceeds
1.25%, then the Specified Reserve Fund Balance will be an amount equal to 5.5%
of the sum of the Class A Certificate Balance, the Class B Certificate Balance
and the Class C Certificate Balance (after giving effect to distributions of
principal to be made on such Distribution Date). As of any Distribution Date,
the amount of funds actually on deposit in the Reserve Fund may, in certain
circumstances, be less than the Specified Reserve Fund Balance; provided,
however, that the Specified Reserve Fund Balance shall in no event be more than
the sum of the Class A Certificate Balance, the Class B Certificate Balance and
the Class C Certificate Balance.
The "Charge-off Rate" with respect to a Collection Period will equal the
Aggregate Net Losses with respect to the Receivables expressed, on an annualized
basis, as a percentage of the average of (i) the Pool Balance on the last day of
the immediately preceding Collection Period and (ii) the Pool Balance on
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the last day of such Collection Period. The "Aggregate Net Losses" with respect
to a Collection Period will equal the Principal Balance of all Receivables newly
designated during such Collection Period as Defaulted Receivables minus the sum
of (x) Net Liquidation Proceeds collected during such Collection Period with
respect to all Defaulted Receivables and (y) the portion of amounts subsequently
received in respect of Receivables liquidated in prior Collection Periods
specified in the 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, determined in accordance with the
Servicer's normal practices, plus (b) the number of repossessed Financed
Vehicles that have not been liquidated (to the extent the related Receivable is
not otherwise reflected in clause (a) above), expressed as a percentage of the
aggregate number of Current Receivables on the last day of such Collection
Period. A "Current Receivable" will be a Receivable that is not a Defaulted
Receivable or a Liquidated Receivable. A "Liquidated Receivable" will be a
Receivable that has been the subject of a Prepayment in full or otherwise has
been paid in full or, in the case of a Defaulted Receivable, a Receivable as to
which the Servicer has determined that the final amounts in respect thereof have
been paid.
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each Rating Agency to approve a formula for determining the
Specified Reserve Fund Balance that is different from those described above and
would result in a decrease in the Specified Reserve Fund Balance or change the
manner by which the Reserve Fund is funded. If each Rating Agency delivers a
letter to the Trustee to the effect that the use of any such new formulation
will not result in a qualification, reduction or withdrawal of its then-current
rating of the Class A Certificates, the Class B Certificates or the Class C
Certificates, as the case may be, then the Specified Reserve Fund Balance will
be determined in accordance with such new formula. The Agreement will
accordingly be amended, without the consent of any Certificateholder, to reflect
such new calculation.
On any Distribution Date on which the amount on deposit in the Reserve Fund
(after giving effect to all deposits or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Fund Balance, the
Trustee will release and distribute such excess, together with any Excess
Amounts not required to be deposited into the Reserve Fund, to the Seller. Upon
any such release of amounts from the Reserve Fund, the Certificateholders will
have no further rights in, or claim to, such amounts.
Amounts held from time to time in the Reserve Fund will continue to be held
for the benefit of the Certificateholders. Funds on deposit in the Reserve Fund
may be invested in Eligible Investments. Investment income on monies on deposit
in the Reserve Fund will not be available for distribution to Certificateholders
or otherwise subject to any claims or rights of the Certificateholders and will
be paid to the Seller. Any loss on such investments will be charged to the
Reserve Fund.
If on any Distribution Date the Class C Certificate Balance equals zero and
amounts on deposit in the Reserve Fund have been depleted as a result of losses
in respect of the Receivables, the protection afforded to the Class A
Certificateholders and the Class B Certificateholders by the subordination of
the Class C Certificates and by the Reserve Fund will be exhausted and the Class
B Certificateholders will bear directly the risks associated with ownership of
the Receivables. From and after such date, all such losses realized during a
Collection Period will be allocated first to the Class B Certificates, resulting
in the reduction of the Class B Certificate Balance, and second, if the Class B
Certificate Balance is reduced to zero thereby, to the Class A Certificates. If
on any Distribution Date the Class B Certificate Balance equals zero and amounts
on deposit in the Reserve Fund have been depleted as a result of losses in
respect of the Receivables, the protection afforded to the Class A
Certificateholders by the subordination of the Class B Certificates, the Class C
Certificates and by the Reserve Fund will be exhausted and the Class A
Certificateholders will bear directly the risks associated with ownership of the
Receivables. From and after such date, all such losses realized during a
Collection Period will be allocated to the Class A Certificates and such
allocation will result in the reduction of the Class A Certificate Balance on
the related Distribution Date.
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No Certificateholder, and neither the Seller nor the Servicer, will be
required to refund any amounts properly distributed or paid to them, whether or
not there are sufficient funds on any subsequent Distribution Date to make full
distributions to Certificateholders of any Class.
OPTIONAL PURCHASE
If the Seller, the Servicer or any successor to the Servicer exercises its
option to purchase the Receivables when the Pool Balance declines to 10% or less
of the Initial Pool Balance, Certificateholders will receive an amount in
respect of the Certificates equal to the outstanding Certificate Balance
together with accrued interest at the applicable Pass Through Rate, which
distribution shall effect the early retirement of the Certificates. See
"Description of the Transfer and Servicing Agreements -- Termination" in the
Prospectus.
THE TRUSTEE
Bankers Trust Company will be the Trustee under the Agreement. As a matter
of New York law, the Trust will be viewed as a separate legal entity, distinct
from the Trustee, and the Trust will be viewed as the issuer of the
Certificates. The Trustee and any of its affiliates may hold Certificates in
their own names or as pledgees. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Trustee acting
jointly (or in some instances, the Trustee acting alone) will have the power to
appoint co-trustees or separate trustees of all or any part of the Trust. In the
event of such an appointment, all rights, powers, duties and obligations
conferred or imposed upon the Trustee by the Agreement will be conferred or
imposed upon the Trustee and each such separate trustee or co-trustee jointly,
or, in any jurisdiction in which the Trustee will be incompetent or unqualified
to perform certain acts, singly upon such separate trustee or co-trustee who
will exercise and perform such rights, powers, duties and obligations solely at
the direction of the Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement, becomes legally unable to act or becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by such successor
Trustee.
The Agreement will provide that the Servicer will pay the Trustee's fees
and expenses in connection with its duties under the Agreement. The Agreement
will further provide that the Trustee will be entitled to indemnification by the
Servicer for, and will be held harmless against, any loss, liability or expense
incurred by the Trustee not resulting from its own willful misfeasance, bad
faith or negligence (other than by reason of a breach of any of its
representations or warranties to be set forth in the Agreement).
Under the Agreement, the Trustee will appoint a paying agent in Luxembourg.
For so long as the Class A Certificates are listed on the Luxembourg Stock
Exchange, the Trustee will maintain a paying agent in Luxembourg. The Initial
Paying Agent will be Bankers Trust Luxembourg S.A. Definitive Certificates may
be presented for purposes of payment, transfer or exchange at the offices of the
paying agent in Luxembourg at 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg,
or such other paying agents as may be specified in a written notice to the
holders of Certificates described below.
The Trustee's Corporate Trust Office is located at Four Albany Street, 10th
Floor, New York, New York 10006.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, the Certificates (other than the execution and authentication
thereof) or of any Receivables or related documents, and will not be accountable
for the use or application by the Seller or the Servicer of any funds paid to
the Seller or the Servicer in respect of the Certificates or the Receivables, or
the investment of any monies by the Servicer before such monies are deposited
into the Collection Account or Payahead Account. The Trustee will not
independently verify the Receivables. If no Event of Default has occurred
S-29
<PAGE> 34
and is continuing, the Trustee will be required to perform only those duties
specifically required of it under the Agreement. Generally, those duties will be
limited to the receipt of the various certificates, reports or other instruments
required to be furnished to the Trustee under the Agreement, in which case it
will only be required to examine them to determine whether they conform to the
requirements of the Agreement. The Trustee will not be charged with knowledge of
a failure by the Servicer to perform its duties under the Agreement which
failure constitutes an Event of Default unless the Trustee obtains actual
knowledge of such failure as will be specified in the Agreement.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Agreement or to make any investigation of matters
arising thereunder or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Certificateholder will have any
right under the Agreement to institute any proceeding with respect to the
Agreement, unless such holder previously has given to the Trustee written notice
of the occurrence of an Event of Default and (i) the Event of Default arises
from the Servicer's failure to remit payments when due or (ii) the holders of
Certificates evidencing not less than 25% of the voting interests of the Class A
Certificates, Class B Certificates and Class C Certificates, acting together as
a single class, have made written request upon the Trustee to institute such
proceeding in its own name as the Trustee thereunder and have offered to the
Trustee reasonable indemnity and the Trustee for 30 days has neglected or
refused to institute any such proceedings.
NOTICES
Certificateholders will be notified in writing by the Trustee of any Event
of Default or termination of, or appointment of a successor to, the Servicer
promptly upon a Responsible Officer (as defined in the Agreement) obtaining
actual knowledge thereof. Except with respect to the monthly and annual
statements to Certificateholders and Servicing Reports described herein, the
Trustee is not obligated under the Agreement to forward any other notices to the
Certificateholder. There are no provisions in the Agreement for the regular or
special meetings of Certificateholders.
For so long as the Class A Certificates are listed on the Luxembourg Stock
Exchange, notices to holders of the Class A Certificates will be given by
publication in a leading daily newspaper of general circulation in Luxembourg
or, if publication in Luxembourg is not practical, in Europe. Such publication
is expected to be made in the Luxemburger Wort. For so long as the Class A
Certificates are listed on The Stock Exchange of Hong Kong Limited, notices to
holders of the Class A Certificates will be given in a leading daily newspaper
of general circulation in the English language in Hong Kong. Such publication is
expected to be made in the South China Morning Post. In addition, if Definitive
Certificates are issued, such notices will be mailed to the addresses of holders
of definitive Certificates at the addresses therefor as they appear in the
register maintained by the Trustee prior to such mailing. Such notices will be
deemed to have been given on the date of such publication or mailing.
GOVERNING LAW
The Agreement and the Certificates are governed by and shall be construed
in accordance with the laws of the State of New York applicable to agreements
made in and to be performed wholly within such jurisdiction.
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
Subject to the considerations set forth below and under "ERISA
Considerations" in the Prospectus, the Class A Certificates may be purchased by
an employee benefit plan or an individual retirement account (a "Benefit Plan")
subject to ERISA or Section 4975 of the United States Internal Revenue Code of
1986, as amended (the "Code"). A fiduciary of a Benefit Plan must determine that
the purchase of a
S-30
<PAGE> 35
Class A Certificate is consistent with its fiduciary duties under ERISA and does
not result in a nonexempt prohibited transaction as defined in Section 406 of
ERISA or Section 4975 of the Code.
The United States Department of Labor (the "DOL") has granted to Goldman,
Sachs & Co. and Lehman Brothers Inc. administrative exemptions (Prohibited
Transaction Exemptions 89-88 and 91-14 (the "Exemptions")) from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Benefit Plans of certificates representing
interests in asset backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The receivables covered by the Exemption include
motor vehicle installment obligations such as the Receivables.
Among the conditions that must be satisfied for either of the Exemptions to
apply to the acquisition by a Benefit Plan of the Class A Certificates are the
following:
(i) The acquisition of the Class A Certificates by a Benefit Plan is
on terms (including the price for the Class A Certificates) that are at
least as favorable to the Benefit Plan as they would be in an arm's-length
transaction with an unrelated party.
(ii) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust.
(iii) The Class A Certificates acquired by the Benefit Plan have
received a rating at the time of such acquisition that is in one of the
three highest generic rating categories from Standard & Poor's, Moody's,
Duff & Phelps Inc. or Fitch Investors Service, Inc.
(iv) The Trustee is not an affiliate of any member of the Restricted
Group (as defined below).
(v) The sum of all payments made to the Underwriters in connection
with the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Seller pursuant to the sale of
the Receivables to the Trust represents not more than the fair market value
of such Receivables. The sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith.
(vi) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Commission under the Securities Act of 1933, as amended.
The Trust must also meet the following requirements:
(a) The corpus of the Trust must consist solely of assets of the type
that have been included in other investment pools.
(b) Certificates in such other investment pools must have been rated
in one of the three highest rating categories of Standard & Poor's,
Moody's, Duff & Phelps Inc. or Fitch Investors Service, Inc. for at least
one year prior to the Benefit Plan's acquisition of certificates.
(c) Certificates evidencing interests in such other investment pools
must have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of certificates.
The Exemptions do not apply in all respects to Benefit Plans sponsored by
the Seller, the Underwriters, the Trustee, the Servicer, any Obligor with
respect to the Receivables included in the Trust constituting more than 5% of
the aggregate unamortized principal balance of the assets in the Trust or any
affiliate of such parties (the "Restricted Group"). As of the date hereof, no
Obligor with respect to the Receivables included in the Trust constitutes more
than 5% of the aggregate unamortized principal balance of the Trust (i.e., the
initial principal amount of the Certificates). Moreover, each Exemption provides
relief from certain self-dealing/conflict of interest prohibited transactions
only if, among other requirements, (i) a Benefit Plan's investment in the Class
A Certificates does not exceed 25% of all of
S-31
<PAGE> 36
the Class A Certificates outstanding at the time of the acquisition and (ii)
immediately after the acquisition, no more than 25% of the assets of a Benefit
Plan with respect to which a person has discretionary authority or renders
investment advice are invested in certificates representing interests in trusts
containing assets sold or serviced by the same entity.
The Seller believes that the Exemptions will apply to the acquisition,
holding and resale of the Class A Certificates by a Benefit Plan and that all
conditions of the Exemptions other than those within the control of investors
will be met. However, there can be no assurance that the DOL or the Internal
Revenue Service will not take a contrary position, nor that such position will
be sustained. One or more alternative exemptions may be available with respect
to certain prohibited transactions to which the Exemptions are not applicable,
depending in part upon the type of Benefit Plan's fiduciary making the decision
to acquire the Class A Certificates and the circumstances under which such
decision is made, including, but not limited to, (a) Prohibited Transactions
Class Exemption ("PTCE") 91-38, regarding investments by bank collective
investment funds or (b) PTCE 90-1, regarding investments by insurance company
pooled separate accounts. Before purchasing the Class A Certificates, a Benefit
Plan's fiduciary should consult with its counsel to determine whether the
conditions of the Exemption or any other exemption would be met. A purchaser of
the Class A Certificates should be aware, however, that even if the conditions
specified in one or more exemptions are met, the scope of the relief provided by
the applicable exemption or exemptions might not cover all acts that might be
construed as prohibited transactions.
As described above, the acquisition of a Class A Certificate by a Benefit
Plan could result in various unfavorable consequences for the Benefit Plan or
its fiduciaries under the regulations unless one of the exceptions in the
regulations or an exemption is available. See "ERISA Considerations" in the
Prospectus.
Prospective Benefit Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemptions
or any other exemptions, and the potential consequences of any purchase in their
specific circumstances, prior to making an investment in a Class A Certificate.
Any Benefit Plan which acquires a beneficial ownership interest in Class A
Certificates will be deemed, by virtue of the acceptance and acquisition of such
ownership interest, to have represented to the Seller and the Trustee that such
Benefit Plan is an "accredited investor" for purposes of Rule 501(a)(1) of
Regulation D under the Securities Act.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Code Section 4975. However, such a governmental plan may be subject to
federal, state or local law which is to a material extent similar to the
provisions of ERISA or Code Section 4975 ("Similar Law"). A fiduciary of a
governmental plan should make its own determination as to the need for and
availability of any exemptive relief under Similar Law.
The Exemptions will not apply to the acquisition, holding or resale of the
Class B Certificates or Class C Certificates.
THE CLASS B CERTIFICATES
The Class B Certificates may not be acquired by an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA or Section 4975(e)(1) of the Code or any person acting on behalf of
such a plan or using the assets of such a plan to acquire the Class B
Certificates, or any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity. By its acceptance of a Class B
Certificate, each Class B Certificateholder will be deemed to have represented
and warranted that it is not subject to the foregoing limitation. For additional
information regarding treatment of the Class B Certificates under ERISA, see
"ERISA Considerations" in the Prospectus.
The DOL recently issued PTCE 95-60. Section III of PTCE 95-60 exempts from
the application of the prohibited transaction provisions of Sections 406(a),
406(b) and 407(a) of ERISA and Section 4975 of
S-32
<PAGE> 37
the Code transactions in connection with the servicing, management and operation
of a trust (such as the Trust) in which an insurance company general account has
an interest as a result of its acquisition of certificates issued by the trust,
provided that certain conditions are satisfied. If these conditions are met,
insurance company general accounts would be allowed to purchase classes of
Certificates (such as the Class B Certificates) which do not meet the
requirements of the Exemptions solely because they (i) are subordinated to other
classes of Certificates in the Trust and/or (ii) have not received a rating at
the time of the acquisition in one of the three highest rating categories from
Standard & Poor's, Moody's, Duff & Phelps, Inc. or Fitch Investors Service, Inc.
All other conditions of the Exemptions would have to be satisfied in order for
PTCE 95-60 to be available. Before purchasing Class B Certificates, an insurance
company general account seeking to rely on Section III of PTCE 95-60 should
itself confirm that all applicable conditions and other requirements have been
satisfied.
S-33
<PAGE> 38
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement relating
to the Offered Certificates (the "Underwriting Agreement"), the Seller has
agreed to sell to each of the Underwriters named below, and each of the
Underwriters has severally agreed to purchase, the principal amount of Class A
Certificates and Class B Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
CLASS A CLASS B
UNDERWRITER CERTIFICATES CERTIFICATES
----------- ------------ ------------
<S> <C> <C>
Goldman, Sachs & Co......................... $281,167,500 $ 11,316,000
Lehman Brothers Inc......................... 281,167,500 11,316,000
CS First Boston Corporation................. 30,000,000 --
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................... 30,000,000 --
Salomon Brothers Inc........................ 30,000,000 --
Chase Securities Inc........................ 10,000,000 --
First Chicago Capital Markets, Inc.......... 10,000,000 --
J.P. Morgan & Co............................ 10,000,000 --
Morgan Stanley & Co. Incorporated........... 10,000,000 --
Nomura International plc.................... 10,000,000 --
SBC Warburg................................. 10,000,000 --
UBS Securities LLC.......................... 10,000,000 --
------------ ------------
Total..................................... $722,335,000 $ 22,632,000
============= ============
</TABLE>
In the Underwriting Agreement the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered
Certificates if any of the Offered Certificates are purchased. Such obligation
of the Underwriters is subject to certain conditions precedent set forth in the
Underwriting Agreement. The Seller has been advised by the Underwriters that
they propose to offer the Class A Certificates and the Class B Certificates to
the public at the respective public offering prices set forth on the cover page
of this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of 0.1500% of the Class A Certificate denominations and
0.2500% of the Class B Certificate denominations and that the Underwriters may
allow and such dealers may reallow a discount not in excess of 0.1000% of the
Class A Certificate denominations and 0.1250% of the Class B Certificate
denominations to certain other dealers. After the initial public offering, the
public offering prices and such concessions and discounts to dealers may be
changed by the Underwriters.
The Seller and TMCC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
The Certificates are new issues of securities with no established trading
markets. The Seller has been advised by the Underwriters that the Underwriters
intend to make a market in the Class A Certificates and the Class B
Certificates, as permitted by applicable laws and regulations. The Underwriters
are not obligated, however, to make a market in the Certificates of any Class
and such market-making may be discontinued at any time at the sole discretion of
the Underwriters without notice. Accordingly, no assurance can be given as to
the liquidity of or trading markets for, the Certificates of any Class.
The Trust may, from time to time, invest funds in the Accounts in Eligible
Investments acquired from the Underwriters.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain
legal matters relating to the Offered Certificates will be passed upon for the
Underwriters and certain federal income tax and other matters will be passed
upon for the Trust by Andrews & Kurth L.L.P.
S-34
<PAGE> 39
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Advances................................................................... S-9
Aggregate Net Losses....................................................... S-27
Agreement.................................................................. S-3
Available Interest......................................................... S-23
Available Principal........................................................ S-23
Benefit Plan............................................................... S-30
Business Day............................................................... S-5
Cedel Bank................................................................. S-4
Certificate Owners......................................................... S-4
Certificateholders......................................................... S-6
Certificates............................................................... S-1, S-3
Charge-off Rate............................................................ S-27
Class A Certificate Balance................................................ S-6,S-24
Class A Certificateholders................................................. S-6
Class A Certificates....................................................... S-1,S-3
Class A Distributable Amount............................................... S-24
Class A Interest Carryover Shortfall....................................... S-26
Class A Interest Distributable Amount...................................... S-24
Class A Pass Through Rate.................................................. S-5
Class A Percentage......................................................... S-4, S-21
Class A Pool Factor........................................................ S-20
Class A Principal Carryover Shortfall...................................... S-26
Class A Principal Distributable Amount..................................... S-24
Class B Certificate Balance................................................ S-6, S-24
Class B Certificateholders................................................. S-6
Class B Certificates....................................................... S-1, S-3
Class B Distributable Amount............................................... S-24
Class B Interest Carryover Shortfall....................................... S-26
Class B Interest Distributable Amount...................................... S-24
Class B Pass Through Rate.................................................. S-5
Class B Percentage......................................................... S-4, S-21
Class B Pool Factor........................................................ S-20
Class B Principal Carryover Shortfall...................................... S-26
Class B Principal Distributable Amount..................................... S-24
Class C Certificate Balance................................................ S-6, S-25
Class C Certificateholders................................................. S-6
Class C Certificates....................................................... S-1, S-3
Class C Distributable Amount............................................... S-24
Class C Interest Carryover Shortfall....................................... S-26
Class C Interest Distributable Amount...................................... S-24
Class C Pass Through Rate.................................................. S-5
Class C Percentage......................................................... S-4, S-21
Class C Pool Factor........................................................ S-20
Class C Principal Carryover Shortfall...................................... S-26
Class C Principal Distributable Amount..................................... S-24
Closing Date............................................................... S-4, S-15
</TABLE>
S-35
<PAGE> 40
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Code....................................................................... S-30
Collection Period.......................................................... S-7
Commission................................................................. S-2
Current Receivable......................................................... S-28
Cutoff Date................................................................ S-3
Dealer Recourse............................................................ S-14
Defaulted Receivable....................................................... S-24
Delinquency Percentage..................................................... S-28
Determination Date......................................................... S-23
Distribution Date.......................................................... S-2, S-5
DOL........................................................................ S-31
DTC........................................................................ S-4
Eligible Investments....................................................... S-22
ERISA...................................................................... S-10
Euroclear.................................................................. S-4
Excess Amounts............................................................. S-8, S-26
Excess Payment............................................................. S-22
Exemptions................................................................. S-31
Final Scheduled Maturity Date.............................................. S-4
Financed Vehicles.......................................................... S-2, S-3
Initial Paying Agent....................................................... S-3
Initial Pool Balance....................................................... S-7
Issuer..................................................................... S-3
Liquidated Receivable...................................................... S-28
Moody's.................................................................... S-11
Net Liquidation Proceeds................................................... S-23
Offered Certificates....................................................... S-1, S-3
Original Class A Certificate Balance....................................... S-6, S-24
Original Class B Certificate Balance....................................... S-6, S-24
Original Class C Certificate Balance....................................... S-7, S-25
Pool Balance............................................................... S-5
Precomputed Advance........................................................ S-9
Prepayment................................................................. S-22
Principal Balance.......................................................... S-5
Receivables................................................................ S-2, S-3, S-4
Receivables Pool........................................................... S-15
Receivables Purchase Agreement............................................. S-15
Record Date................................................................ S-5
Registration Statement..................................................... S-2
Reserve Fund............................................................... S-8
Reserve Fund Initial Deposit............................................... S-8
Restricted Group........................................................... S-31
Scheduled Payment.......................................................... S-7
Seller..................................................................... S-1, S-3
Servicer................................................................... S-1, S-3
Servicing Fee Rate......................................................... S-10, S-21
Simple Interest Advance.................................................... S-9
Specified Reserve Fund Balance............................................. S-8, S-27
</TABLE>
S-36
<PAGE> 41
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
S&P........................................................................ S-11
Tax Counsel................................................................ S-10
TMCC....................................................................... S-3
TMS........................................................................ S-3, S-13
Trust...................................................................... S-1, S-3
Trustee.................................................................... S-1, S-3
Underwriting Agreement..................................................... S-34
</TABLE>
S-37
<PAGE> 42
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through DTC, Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedure applicable to
U.S. corporate debt obligations and prior asset-backed securities issues.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding securities will be effected on a delivery-against-payment
basis through the Relevant Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their Relevant Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
DTC settlement practice. Investor securities custody accounts will be credited
with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
asset-backed securities issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the Procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC Seller and Cedel or Euroclear Participants. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear
A-1
<PAGE> 43
Participant, the purchaser will send instructions to Cedel or Euroclear through
a Cedel Participant or Euroclear Participant at least one business day prior to
settlement. Cedel or Euroclear will instruct the respective Depositary, as the
case may be, to receive the Global Securities against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by the respective Depositary to the DTC Participant's
account against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedel Participant's or Euroclear Participant's account. The securities
credit will appear the next day (European time) and the cash debt will be
back-valued to, and the interest on the Global Securities will accrue from, the
value date (which would be the preceding day when settlement occurred in New
York). If settlement is not completed on the intended value date (i.e., the
trade fails), the Cedel or Euroclear cash debt will be valued instead as of the
actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon to finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they clear the
overdraft when the Global Securities are credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participants or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the Relevant Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails),
A-2
<PAGE> 44
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are Non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (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 1001). 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 1001 (Ownership, Exemption or Reduced Rate
Certificate). If the treaty provides only for a reduced rate, withholding tax
will be imposed at that rate unless the filer alternatively files Form W-8. Form
1001 may be filed by the Certificate Owners or their agents.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, 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). Form W-8 and Form 1001 are effective for three calendar years,
and Form 4224 is effective for one calendar year.
A-3
<PAGE> 45
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
that is subject to United States federal income tax, regardless of the source of
its income. The term "Non-U.S. Person" means any person who is not a U.S.
Person. This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of Global Securities.
A-4
<PAGE> 46
PROSPECTUS
TOYOTA AUTO RECEIVABLES TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
The Asset Backed Notes (the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") described herein
may be sold from time to time in one or more series, in amounts, at prices and
on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement"). Each series of
Securities, which may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust to be formed with respect to
such series (each, a "Trust"). Each Trust will be formed pursuant to either a
Trust Agreement to be entered into among Toyota Motor Credit Receivables
Corporation, as Seller (the "Seller") and the Trustee specified in the related
Prospectus Supplement (the "Trustee") or a Pooling and Servicing Agreement to be
entered into among the Trustee, the Seller and Toyota Motor Credit Corporation,
as Servicer (the "Servicer"). If a series of Securities includes Notes, such
Notes of a series will be issued and secured pursuant to an Indenture between
the Trust and the Indenture Trustee specified in the related Prospectus
Supplement (the "Indenture Trustee") and will represent indebtedness of the
related Trust. If a series of Securities includes Certificates, such
Certificates of a series will represent undivided ownership interests in the
related Trust. The related Prospectus Supplement will specify which class or
classes of Notes, if any, and which class or classes of Certificates, if any, of
the related series are being offered thereby. The property of each Trust will
include a pool of retail installment sale contracts secured by new or used
automobiles and/or light duty trucks (the "Receivables"), certain monies due or
received thereunder on and after the applicable Cutoff Date set forth in the
related Prospectus Supplement, security interests in the vehicles financed
thereby and certain other property, all as described herein and in the related
Prospectus Supplement.
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive specified
payments in respect of collections of principal and interest on the related
Receivables, at the rates, on the dates and in the manner described herein and
in the related Prospectus Supplement. If a series includes multiple classes of
Securities, the rights of one or more classes of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. Distributions on Certificates of a series may be subordinated in
priority to payments due on any related Notes to the extent described herein and
in the related Prospectus Supplement. A series may include one or more classes
of Notes and/or Certificates which differ as to the timing and priority of
payment, interest rate or amount of distributions in respect of principal or
interest or both. A series may include one or more classes of Notes or
Certificates entitled to distributions in respect of principal with
disproportionate, nominal or no interest distributions, or to interest
distributions, with disproportionate, nominal or no distributions in respect of
principal. The rate of payment in respect of principal of any class of Notes and
distributions in respect of the Certificate Balance of the Certificates of any
class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, defaults, liquidations and
repurchases of Receivables) on the related Receivables. A rate of payment lower
or higher than that anticipated may affect the weighted average life of each
class of Securities in the manner described herein and in the related Prospectus
Supplement.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
COMMENCING ON PAGE 10 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, ANY NOTES
OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR
INSURED BY, TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION, TOYOTA MOTOR
CREDIT CORPORATION, TOYOTA MOTOR SALES, U.S.A., INC. OR ANY OF THEIR
RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Securities offered hereby unless accompanied by a
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS JULY 17, 1996
<PAGE> 47
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes and the Certificates offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, New
York, New York 10048. Copies of the Registration Statement may also be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Electronic filings made through the
Electronic Data Gathering Analysis and Retrieval System are publicly available
through the Commission's Web Site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Seller, as originator of any Trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, subsequent to the date of this Prospectus and prior to the termination
of the offering of the Securities shall be deemed to be incorporated by
reference in this Prospectus. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is delivered,
on the written or oral request of any such person, a copy of any or all of the
documents incorporated herein or in any related Prospectus Supplement by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Seller at 19001 South Western Avenue, Torrance,
California 90509 (Telephone: (310) 618-4000).
2
<PAGE> 48
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used herein are
defined elsewhere in this Prospectus on the pages indicated in the "Index of
Terms".
ISSUER...................... With respect to each series of Securities, the
Trust to be formed pursuant to either a Trust
Agreement (as amended and supplemented from time to
time, a "Trust Agreement") between the Seller and
the Trustee for such Trust (the "Trust" or the
"Issuer") or a Pooling and Servicing Agreement (as
amended and supplemented from time to time, the
"Pooling and Servicing Agreement") among the
Seller, the Servicer and the Trustee for such
Trust.
SELLER...................... Toyota Motor Credit Receivables Corporation (the
"Seller").
SERVICER.................... Toyota Motor Credit Corporation (the "Servicer" or
"TMCC").
TRUSTEE..................... With respect to each series of Securities, the
Trustee specified in the related Prospectus
Supplement.
INDENTURE TRUSTEE........... With respect to any applicable series of Securities
that includes one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement.
THE NOTES................... A series of Securities may include one or more
classes of Notes, which will be issued pursuant to
an Indenture between the Trust and the Indenture
Trustee (as amended and supplemented from time to
time, an "Indenture"). The related Prospectus
Supplement will specify which class or classes, if
any, of Notes of the related series are being
offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available for
purchase in denominations of $1,000 and integral
multiples thereof and will be available in
book-entry form only. Unless otherwise specified in
the related Prospectus Supplement, Noteholders will
be able to receive Definitive Notes only in the
limited circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities -- Definitive
Securities".
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes will
have a stated principal amount and will bear
interest at a specified rate or rates (with respect
to each class of Notes, the "Interest Rate"). Each
class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable
Interest Rate, or any combination of the foregoing.
The related Prospectus Supplement will specify the
Interest Rate for each class of Notes, or the
method for determining the Interest Rate.
With respect to a series that includes two or more
classes of Notes, each class may differ as to the
timing and priority of payments, seniority,
allocations of losses, Interest Rate or amount of
payments of principal or interest, or payments of
principal or interest in respect of any such class
or classes may or may not be made
3
<PAGE> 49
upon the occurrence of specified events or on the
basis of collections from designated portions of
the Receivables Pool.
In addition, a series may include one or more
classes of Notes ("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. If the Seller, the Servicer or a
successor thereto exercises its option to purchase
the Receivables of a Trust in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements -- Termination", the outstanding Notes
will be redeemed as set forth in the related
Prospectus Supplement.
THE CERTIFICATES............ A series may include one or more classes of
Certificates and may not include any Notes. The
related Prospectus Supplement will specify which
class or classes, if any, of the Certificates are
being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum denomination of
$1,000 and in integral multiples thereof and will
be available in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, Certificateholders will be able to
receive Definitive Certificates only in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities -- Definitive Securities".
Unless otherwise specified in the related
Prospectus Supplement, each class of Certificates
will have a stated Certificate Balance specified in
the related Prospectus Supplement (the "Certificate
Balance") and will accrue interest on such
Certificate Balance at a specified rate (with
respect to each class of Certificates, the "Pass
Through Rate"). Each class of Certificates may have
a different Pass Through Rate, which may be a
fixed, variable or adjustable Pass Through Rate, or
any combination of the foregoing. The related
Prospectus Supplement will specify the Pass Through
Rate for each class of Certificates or the method
for determining the Pass Through Rate.
With respect to a series that includes two or more
classes of Certificates, each class may differ as
to timing and priority of distributions, seniority,
allocations of losses, Pass Through Rate or amount
of distributions in respect of principal or
interest, or distributions in respect of principal
or interest in respect of any such class or classes
may or may not be made upon the occurrence of
specified events or on the basis of collections
from designated portions of the Receivables Pool.
In addition, a series may include one or more
classes of Certificates ("Strip Certificates")
entitled to (i) distributions in respect of
principal with disproportionate, nominal or no
interest distributions or (ii) interest
distributions with disproportionate, nominal or no
distributions in respect of principal.
If a series of securities includes classes of
Notes, distributions in respect of the Certificates
may be subordinated in priority of
4
<PAGE> 50
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Seller, the Servicer or a successor thereto
exercises its option to purchase the Receivables of
a Trust in the manner and on the respective terms
and conditions described under "Description of the
Transfer and Servicing Agreements -- Termination",
the outstanding Certificates will be redeemed as
set forth in the related Prospectus Supplement.
THE TRUST PROPERTY.......... The property of each Trust will include a pool of
retail installment sale contracts secured by new or
used automobiles and/or light duty trucks (the
"Receivables") between dealers (the "Dealers") and
retail purchasers (the "Obligors"), including
rights to receive certain payments made with
respect to such Receivables, security interests in
the vehicles financed thereby (the "Financed
Vehicles"), certain accounts and the proceeds
thereof and any proceeds from claims on certain
related insurance policies or from Dealer Recourse,
if any. The property of each Trust will also
include the rights of the Seller under the related
Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and the right
to realize upon any property (including the right
to receive future liquidation proceeds) that shall
have secured a receivable and have been repossessed
by or on behalf of the Trustee. The property of
each Trust will also include amounts on deposit in
certain trust accounts, including the related
Certificate Account and any Yield Maintenance
Account, Reserve Fund or other account identified
in the applicable Prospectus Supplement.
On or before the date of initial issuance of a
series of securities (the related "Closing Date")
as specified in the related Prospectus Supplement
with respect to a Trust, the Seller will sell or
transfer Receivables (the "Receivables") having an
aggregate principal balance specified in the
related Prospectus Supplement as of the dates
specified therein (the "Cutoff Date") to such Trust
pursuant to, if the trust is to be treated as an
owner trust for federal income tax purposes, 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") or, if the Trust is to be
treated as a grantor trust for federal income tax
purposes, the related Pooling and Servicing
Agreement among the Seller, the Servicer and the
Trustee (as amended from time to time, the "Pooling
and Servicing Agreement").
The Receivables will have been originated by
Dealers in accordance with TMCC's requirements and
subsequently purchased by TMCC. The Receivables
will evidence the indirect financing made available
by TMCC to the related Obligors. The Receivables to
be sold by TMCC to the Seller and resold by the
Seller to a Trust will be selected based on the
criteria specified in the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as
applicable, and described herein and in the related
Prospectus Supplement.
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<PAGE> 51
CREDIT AND CASH FLOW
ENHANCEMENT................. If and to the extent specified
in the related Prospectus Supplement, credit
enhancement with respect to a Trust or any class or
classes of Securities may include any one or more
of the following: subordination of one or more
other classes of Securities, a Reserve Fund, a
Yield Maintenance Account over-collateralization,
letters of credit, credit or liquidity facilities,
surety bonds, guaranteed investment contracts,
swaps or other interest rate protection agreements,
repurchase obligations, cash deposits or other
agreements or arrangements with respect to third
party payments or other support. Unless otherwise
specified in the related Prospectus Supplement, any
form of credit enhancement will have certain
limitations and exclusions from coverage
thereunder, which will be described in the related
Prospectus Supplement.
RESERVE FUND................ Unless otherwise specified in the related
Prospectus Supplement, a Reserve Fund will be
created for each Trust with an initial deposit by
the Seller or a third party named in the related
Prospectus Supplement of cash or certain
investments having a value equal to the amount
specified in the related Prospectus Supplement. To
the extent specified in the related Prospectus
Supplement, funds in the Reserve Fund will
thereafter be supplemented by the deposit of
amounts remaining on any Distribution Date after
making all other distributions required on such
date. Amounts in the Reserve Fund will be available
to cover shortfalls in amounts due to the holders
of those classes of Securities specified in the
related Prospectus Supplement in the manner and
under the circumstances specified therein. The
related Prospectus Supplement will also specify to
whom and the manner and circumstances under which
amounts on deposit in the Reserve Fund (after
giving effect to all other required distributions
to be made by the applicable Trust) in excess of
the Specified Reserve Fund Balance (as defined in
the related Prospectus Supplement) will be
distributed.
TRANSFER AND SERVICING
AGREEMENTS.................. With respect to each Trust, the Seller will sell
the related Receivables to such Trust pursuant to a
Sale and Servicing Agreement or a Pooling and
Servicing Agreement. The rights and benefits of any
Trust under a Sale and Servicing Agreement will be
assigned to the Indenture Trustee as collateral for
the Notes of the related series. The Servicer will
agree with such Trust to be responsible for
servicing, managing, maintaining custody of and
making collections on the Receivables. TMCC will
undertake certain administrative duties under an
Administration Agreement with respect to any Trust
that has issued Notes.
On the Business Day immediately preceding each
Distribution Date, the Servicer will advance to the
Trust, in respect of each (i) Precomputed
Receivable, that portion, if any, of the related
Scheduled Payment that was not timely made (each, a
"Precomputed Advance") and (ii) Simple Interest
Receivable, an amount equal to the product of the
principal balance of such Receivable as of the
first day of the related Collection Period and
one-twelfth of its annual percentage rate ("APR"),
minus the amount of interest actually received on
such Receivable during such Collection Period
6
<PAGE> 52
(each, a "Simple Interest Advance", and together
with the Precomputed Advances, the "Advances"). If
such calculation in respect of a Simple Interest
Receivable results in a negative number, an amount
equal to such negative amount shall be paid to the
Servicer out of interest collections in respect of
the Simple Interest Receivables during the related
Collection Period in reimbursement of outstanding
Simple Interest Advances. Outstanding Precomputed
Advances shall be reimbursable to the Servicer,
without interest, from payments (other than
Administrative Purchase Payments) subsequently
received in respect of the related Precomputed
Receivables. 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 Advances made in respect of such
Receivable, be withdrawn from the Collection Account
and paid to the Servicer in reimbursement of such
outstanding Advances. The Servicer will be required
to make an Advance only to the extent that it
determines such Advance will be recoverable from
future payments and collections on or in respect of
such Receivable. Upon the determination by the
Servicer that such reimbursement is unlikely, the
Servicer will be entitled to recover Advances from
payments and collections on or in respect of other
Receivables. See "Description of the Transfer and
Servicing Agreements -- Advances".
Unless otherwise provided in the related Prospectus
Supplement, the Seller will be obligated to
repurchase any Receivable if the interest of the
applicable Trust in such Receivable is materially
adversely affected by a breach of any representation
or warranty made by the Seller with respect to the
Receivable, if the breach has not been cured
following the discovery by or notice to the Seller
of the breach.
Unless otherwise provided in the related Prospectus
Supplement, the Servicer will be obligated to
purchase or make certain Advances with respect to
any Receivable if, among other things, it amends the
total number of Scheduled Payments, the Amount
Financed or the APR thereof, extends the date for
final payment by the Obligor of such Receivable
beyond the applicable Final Scheduled Maturity Date
(as defined in the related Prospectus Supplement,
the "Final Scheduled Maturity Date") or releases the
security interest in the related Financed Vehicle
granted in the Receivable. See "Description of the
Transfer and Servicing Agreements -- Servicing
Procedures" and "-- Advances".
Unless otherwise specified in the related Prospectus
Supplement, the Servicer will be entitled to receive
a fee for servicing the Receivables of each Trust
equal to a specified percentage of the aggregate
principal balance of the related Receivables Pool,
as set forth in the related Prospectus Supplement,
plus certain late fees, prepayment charges and other
administrative fees or similar charges. See
"Description of the Transfer and Servicing
Agreements -- Servicing Compensation and Payment of
Expenses" herein and in the related Prospectus
Supplement.
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<PAGE> 53
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES;
REPURCHASE OBLIGATIONS...... In connection with the sale of Receivables to a
Trust, security interests in the Financed Vehicles
securing such Receivables will be assigned by the
Seller to such Trust. Due to administrative burden
and expense, the certificates of title to the
Financed Vehicles will not be amended to reflect
the assignment to such Trust. In the absence of
such an amendment, such Trust may not have a
perfected security interest in the Financed
Vehicles securing the Receivables in some states.
Unless otherwise specified in the related
Prospectus Supplement, the Seller will be obligated
to repurchase any Receivable sold to a Trust as to
which the breach of any such representation or
warranty that materially adversely affect the
interest of the holders of the related Securities
in such Receivable (including the representations
as to the first priority perfected security
interest therein as of the date such Receivable is
purchased by such Trust) if such breach shall not
have been cured by the last day of the second (or,
if the Seller elects, the first) month following
the discovery by or notice to the Seller of such
breach. If such Trust does not have a perfected
security interest in a Financed Vehicle, its
ability to realize on such Financed Vehicle in the
event of a default may be adversely affected. To
the extent the security interest is a first
priority perfected security interest, such Trust
will have a prior claim over subsequent purchasers
of such Financed Vehicles and holders of
subsequently perfected security interests. However,
as against liens for repairs of Financed Vehicles
or for taxes unpaid by an Obligor under a
Receivable, or because of fraud or negligence, such
Trust could lose the priority of its security
interest or its security interest in Financed
Vehicles. Neither the Seller nor the Servicer will
have any obligation to repurchase a Receivable as
to which any of the aforementioned occurrences
result in a Trust's losing its security interest or
the priority of its security interest in such
Financed Vehicle after the Closing Date.
Pursuant to agreements between TMCC and the
Dealers, each Dealer is obligated, after purchase
by TMCC of retail installment sales contracts from
such Dealer, to repurchase from TMCC such contracts
which do not meet certain representations and
warranties made by such Dealer (such Dealer
repurchase obligations are referred to herein as
"Dealer Recourse"). Such representations and
warranties relate primarily to the origination of
the contracts and the perfection of the security
interests in the related financed vehicles, and do
not typically relate to the creditworthiness of the
related obligors or the collectability of such
contracts. Although the Dealer agreements with
respect to the Receivables will not be assigned to
the Trustee, the Agreement will require that any
recovery by TMCC in respect of any Receivable
pursuant to any Dealer Recourse be deposited in the
related Collection Account in satisfaction of
TMCC's repurchase obligations under the Agreement.
The sales by the Dealers of installment sales
contracts to TMCC do not generally provide for
recourse against the Dealers for unpaid amounts in
the event of a default by an obligor
8
<PAGE> 54
thereunder, other than in connection with the
breach of the foregoing representations and
warranties.
Federal and state consumer protection laws impose
requirements upon creditors in connection with
extensions of credit and collections of retail
installment loans, and certain of these laws make
an assignee of such a loan liable to the obligor
thereon for any violation by the lender. Unless
otherwise specified in the related Prospectus
Supplement, the Seller will be obligated to
repurchase any Receivable which fails to comply
with such requirements.
TAX STATUS.................. Unless the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust
and, except as otherwise provided in such
Prospectus Supplement, upon the issuance of the
related series of Securities, Tax Counsel to such
Trust will deliver an opinion to the effect that
(i) for federal income tax purposes (a) any Notes
of such series will be characterized as debt and
(b) such Trust will not be characterized as an
association (or a publicly traded partnership)
taxable as a corporation and (ii) the same
characterizations would apply for California income
and franchise tax purposes. In respect of any such
series, each Noteholder, if any, by the acceptance
of a Note of such series, will agree to treat such
Note as indebtedness, and each Certificateholder,
by the acceptance of a Certificate of such series,
will agree to treat such Trust as a partnership in
which such Certificateholder is a partner for
federal income and California income and franchise
tax purposes. Alternative characterizations of such
Trust and such Certificates are possible, but would
not result in materially adverse tax consequences
to Certificateholders.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust
and except as otherwise provided in such Prospectus
Supplement, upon the issuance of the related series
of Certificates, Tax Counsel to such Trust will
deliver an opinion to the effect that such Trust
will be treated as a grantor trust for federal
income tax purposes and will not be subject to
federal income tax.
See "Certain Federal Income Tax Consequences" and
"Certain State Tax Consequences" for additional
information concerning the application of federal
and California tax laws.
ERISA CONSIDERATIONS........ Subject to the considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified therein, any Notes of a series and any
Certificates that are issued by a Trust that is a
grantor trust and are not subordinated to any other
class of Certificates are eligible for purchase by
employee benefit plans. Unless otherwise specified
in the related Prospectus Supplement, the
Certificates of any series that are subordinated to
any other Security of that series may not be
acquired by any employee benefit plan subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or by any individual
retirement account. See "ERISA Considerations"
herein and in the related Prospectus Supplement.
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RISK FACTORS
Certain Legal Aspects -- Security Interests in Financed
Vehicles -- Consumer Protection Laws. In connection with the sale of Receivables
to a Trust, security interests in the Financed Vehicles securing such
Receivables will be assigned by the Seller to such Trust simultaneously with the
sale of such Receivables to such Trust. In order to minimize administrative
burden and expense, the certificates of title to the Financed Vehicles will not
be amended to reflect the assignment to the Trust. In the absence of such an
amendment, such Trust may not have a perfected security interest in the Financed
Vehicles securing the Receivables in some states. Unless otherwise provided in
the related Prospectus Supplement, the Seller will be obligated to repurchase
any Receivable sold to such Trust as to which a perfected security interest in
the name of the Seller in the Financed Vehicle securing such Receivable shall
not exist as of the date such Receivable is transferred to such Trust, if such
breach shall materially adversely affect the interest of such Trust in such
Receivable and if such failure or breach shall not have been cured by the last
day of the second (or, if the Seller elects, the first) month following the
discovery by or notice to the Seller of such breach. If such Trust does not have
a perfected security interest in a Financed Vehicle, its ability to realize on
such Financed Vehicle in the event of a default may be adversely affected. To
the extent the security interest is perfected, such Trust will have a prior
claim over subsequent purchasers of such Financed Vehicles and holders of
subsequently perfected security interests. However, as against liens for repairs
of Financed Vehicles or for taxes unpaid by an Obligor under a Receivable, or
through fraud or negligence, such Trust could lose the priority of its security
interest or its security interest in a Financed Vehicle. Neither the Seller nor
the Servicer will have any obligation to repurchase a Receivable as to which any
of the aforementioned occurrences result in such Trust's losing the priority of
its security interest or its security interest in such Financed Vehicle after
the date such security interest was conveyed to such Trust. Federal and state
consumer protection laws impose requirements upon creditors in connection with
extensions of credit and collections of retail installment loans and certain of
these laws make an assignee of such a loan (such as such Trust) liable to the
obligor thereon for any violation by the lender. Unless otherwise specified in
the related Prospectus Supplement, the Seller will be obligated to repurchase
any Receivable which fails to comply with such requirements. See "Certain Legal
Aspects of the Receivables -- Security Interests" and " -- Consumer Protection
Laws".
Certain Legal Aspects -- Bankruptcy Considerations. The Seller will warrant
to each Trust in the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, that the sale of the Receivables by the
Seller to such Trust is a valid sale of the Receivables to such Trust.
Notwithstanding the foregoing, if the Seller were to become a debtor in a
bankruptcy case and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the sale of Receivables to such
Trust should instead be treated as a pledge of such Receivables to secure a
borrowing of such debtor, delays in payments of collections of Receivables to
the related Securityholders could occur or (should the court rule in favor of
any such trustee, debtor or creditor) reductions in the amounts of such payments
could result. If the transfer of Receivables to a Trust is treated as a pledge
instead of a sale, a tax or government lien on the property of the Seller
arising before the transfer of a Receivable to such Trust may have priority over
such Trust's interest in such Receivable. If the transactions contemplated
herein are treated as a sale, the Receivables would not be part of the Seller's
bankruptcy estate and would not be available to the Seller's creditors.
In a case decided by the U.S. Court of Appeals for the Tenth Circuit,
Octagon Gas System, Inc. v. Rimmer, the court determined that "accounts," a
defined term under the Uniform Commercial Code, would be included in the
bankruptcy estate of a transferor regardless of whether the transfer is treated
as a sale or a secured loan. Although the Receivables are likely to be viewed as
"chattel paper," as defined under the Uniform Commercial Code, rather than as
accounts, the Octagon holding is equally applicable to chattel paper. The
circumstances under which the Octagon ruling would apply are not fully known and
the extent to which the Octagon decision will be followed in other courts or
outside of the Tenth Circuit is not certain. If the holding in the Octagon case
were applied in a bankruptcy of the Seller, however, even if the transfer of
Receivables to the Trust were treated as a sale, the Receivables could be
determined to be part of the Seller's bankruptcy estate and, if so, would be
subject to claims of certain creditors, and delays and reductions in payments to
the Securityholders could result.
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With respect to each Trust that is not a grantor trust, upon the occurrence
of an Insolvency Event with respect to the Seller, the Indenture Trustee or
Trustee for such Trust will promptly sell, dispose of or otherwise liquidate the
related Receivables in a commercially reasonable manner on commercially
reasonable terms, except under certain limited circumstances. The proceeds from
any such sale, disposition or liquidation of Receivables will be treated as
collections on the Receivables and deposited in the related Collection Account
of such Trust. If the proceeds from the liquidation of the Receivables and any
amounts on deposit in the Reserve Fund and the Collection Account with respect
to any such Trust and any amounts available from any credit enhancement are not
sufficient to pay any Notes and the Certificates of the related series in full,
the amount of principal returned to any Noteholders or the Certificateholders
will be reduced and such Noteholders and Certificateholders will incur a loss.
See "Description of the Transfer and Servicing Agreements -- Insolvency Event"
and "Certain Legal Aspects of the Receivables -- Certain Bankruptcy
Considerations".
Trust's Relationship to the Seller, TMCC and their Affiliates. None of the
Seller, TMCC or Toyota Motor Sales, U.S.A., Inc. ("TMS") or their respective
affiliates is generally obligated to make any payments in respect of any Notes,
the Certificates or the Receivables of a given Trust. However, in connection
with the sale of Receivables by the Seller to a given Trust, the Seller will
make representations and warranties with respect to the characteristics of such
Receivables and, in certain circumstances, the Seller may be required to
repurchase Receivables with respect to which such representations and warranties
have been breached. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables". In addition, under certain
circumstances, the Servicer may be required to purchase Receivables. See
"Description of the Transfer and Servicing Agreements -- Servicing Procedures".
Moreover, if TMCC were to cease acting as Servicer, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Securityholders.
The related Prospectus Supplement may set forth certain additional
information regarding the Seller, TMCC and TMS. In addition, TMCC is subject to
the information requirements of the Exchange Act and in accordance therewith
files reports and other information with the Commission. For further information
regarding TMCC, reference is made to such reports and other information, which
are available as described under "Available Information".
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one or more
classes of Certificates of a series may be subordinated in priority of payment
to interest and principal due on the Notes, if any, of such series or one or
more other classes of Certificates of such series. Moreover, each Trust will not
have, nor is it permitted or expected to have, any significant assets or sources
of funds other than the Receivables and, to the extent provided in the related
Prospectus Supplement, a Reserve Fund and any other credit enhancement. The
Notes of any series will represent obligations solely of, and the Certificates
of any series will represent interests solely in, the related Trust and neither
the Notes nor the Certificates of any series will be insured or guaranteed by
the Seller or the Servicer or any of their respective affiliates, the applicable
Trustee, any Indenture Trustee or any other person or entity. Consequently,
holders of the Securities of any series must rely for repayment upon payments on
the related Receivables and, if and to the extent available, amounts on deposit
in the Reserve Fund, if any, and any other credit enhancement, all as specified
in the related Prospectus Supplement.
Maturity and Prepayment Considerations. All the Receivables are prepayable
at any time. (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) and liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and disability
insurance policies and certain other Receivables repurchased for administrative
reasons.) The rate of prepayments on the Receivables may be influenced by a
variety of economic, social and other factors, including the fact that an
Obligor generally may not sell or transfer the Financed Vehicle securing a
Receivable without the consent of the Seller. The rate of prepayment on the
Receivables may also be influenced by the structure of the loan. In addition,
under certain circumstances, the Seller will be obligated to repurchase
Receivables pursuant to a Sale and Servicing Agreement or Pooling and Servicing
Agreement as a result of breaches of representations and warranties and, under
certain circumstances, the Servicer will be obligated to purchase Receivables
pursuant to such Sale and
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Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain covenants. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables". In addition, a Dealer may
have Dealer Recourse obligations to repurchase from TMCC contracts which do not
meet certain representations and warranties made by such Dealer. The applicable
Sale and Servicing Agreement or Pooling and Servicing Agreement will require
TMCC to deposit into the related Collection Account any recovery with respect to
the Receivables pursuant to Dealer Recourse. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of Receivables held by a given
Trust will be borne entirely by the Securityholders of the related series of
Securities. See also "Description of the Transfer and Servicing Agreements --
Termination" regarding the Servicer's option to purchase the Receivables of a
given Receivables Pool and " -- Insolvency Event" regarding the sale of the
Receivables owned by a Trust that is not a grantor trust if an Insolvency Event
with respect to the Seller occurs.
Indexed Securities. An investment in Securities indexed, as to principal,
premium and/or interest, to one or more values of currencies (including exchange
rates and swap indices between currencies), commodities, interest rates or other
indices entails significant risks that are not associated with similar
investments in a conventional fixed-rate debt security. If the interest rate of
such a Security is so indexed, it may result in an interest rate that is less
than that payable on a conventional fixed-rate debt security issued at the same
time, including the possibility that no interest will be paid, and, if the
principal amount of such a Security is so indexed, the principal amount payable
on the related final Distribution Date may be less than the original purchase
price of such Security if allowed pursuant to the terms of such Security,
including the possibility that no principal will be paid. The secondary market
for such Securities will be affected by a number of factors, independent of the
characteristics of the Receivables, structure of the cash flows and the value of
the applicable currency, commodity, interest rate or other index, including the
volatility of the applicable currency, commodity, interest rate or other index,
the time remaining to the maturity of such Securities, the amount outstanding of
such Securities and market interest rates. The value of the applicable currency,
commodity, interest rate or other index depends on a number of interrelated
factors, including economic, financial and political events. Additionally, if
the formula used to determine the principal amount, premium, if any, or interest
payable with respect to such Securities contains a multiple or leverage factor,
the effect of any change in the applicable currency, commodity, interest rate or
other index may be increased. The historical experience of the relevant
currencies, commodities, interest rates or other indices should not be taken as
an indication of future performance of such currencies, commodities, interest
rates or other indices during the term of any Security. The credit ratings
assigned to any series or class of Securities are in no way reflective of the
potential impact of the factors discussed above, or any other factors, on the
market value of the Securities. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in such Securities and the suitability of such Securities in light of
their particular circumstances.
Risk of Commingling. The Servicer may retain all payments on or in respect
of the Receivables received from Obligors and all proceeds of Receivables
collected during each Collection Period without segregation in its own accounts
until deposited in the Collection Account on the related Distribution 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 Prime-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 such Collection Account, collections on the related
Receivables may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from funds of the Servicer. If the Servicer
were unable to remit such funds, the applicable Securityholders might incur a
loss. To the extent set forth in the related Prospectus Supplement, the Servicer
may, in order to satisfy the requirements described above, obtain a letter of
credit or other security for the benefit of the related Trust to secure timely
remittances of collections on the related Receivables and payment of the
aggregate Administrative Purchase Amount with respect to Receivables purchased
by the Servicer.
Servicer Default. Unless otherwise provided in the related Prospectus
Supplement with respect to a series of Securities that includes Notes, in the
event a Servicer Default occurs, the Indenture Trustee or the
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Noteholders with respect to such series, as described under "Description of the
Transfer and Servicing Agreements -- Rights upon Servicer Default", may remove
the Servicer without the consent of the Trustee or any of the Certificateholders
with respect to such series. The Trustee or the Certificateholders with respect
to such series will not have the ability to remove the Servicer if a Servicer
Default occurs. In addition, the Noteholders of such series will have the
ability, with certain specified exceptions, to waive defaults by the Servicer,
including defaults that could materially adversely affect the Certificateholders
of such series. See "Description of the Transfer and Servicing
Agreements -- Waiver of Past Defaults".
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, persons acquiring beneficial ownership interests in the
Securities of any series or class will hold their Certificates through DTC, in
the United States, or Cedel or Euroclear in Europe. Transfers within DTC, Cedel
or Euroclear, as the case may be, will be in accordance with the usual rules and
operating procedures of the relevant system. So long as the Securities are
BookEntry Securities, such Securities will be evidenced by one or more
certificates registered in the name of Cede & Co., as the nominee of DTC, or
Citibank N.A. or Morgan Guaranty Trust Company of New York, the relevant
depositaries of Cedel and Euroclear, respectively, and each a participating
member of DTC. No Certificate Owner will be entitled to receive a definitive
certificate representing such person's interest, except in the event that
Definitive Certificates are issued under the limited circumstances described
herein. See "Book-Entry Registration". Unless and until Definitive Securities
for such series are issued, holders of such Securities will not be recognized by
the Trustee or any applicable Indenture Trustee as "Certificateholders",
"Noteholders" or "Securityholders", as the case may be (as such terms are used
herein or in the related Pooling and Servicing Agreement or related Indenture
and Trust Agreement, as applicable). Hence, until Definitive Securities are
issued, holders of such Securities will only be able to exercise the rights of
Securityholders indirectly through DTC (if in the United States) and its
participating organizations, or Cedel and Euroclear (in Europe) and their
respective participating organizations. See "Book-Entry Registration".
Since transactions in the Securities can be effected only through DTC,
Cedel, Euroclear, participating organizations, indirect participants and certain
banks, the ability of the beneficial owner thereof to pledge such Securities to
persons or entities that do not participate in the DTC, Cedel or Euroclear
system, or otherwise to take actions in respect of such Securities, may be
limited due to lack of a physical certificate representing such Securities.
Beneficial owners of Securities may experience some delay in their receipt
of distributions of interest of and principal since such distributions will be
forwarded by the Trustee or Indenture Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of the beneficial owners thereof either
directly or indirectly through indirect participants.
THE TRUSTS
With respect to each series of Securities, the Seller will establish a
separate Trust pursuant to the respective Trust Agreement or Pooling and
Servicing Agreement, as applicable, for the transactions described herein and in
the related Prospectus Supplement. The property of each Trust will include a
pool (a "Receivables Pool") of retail installment sales contracts between
dealers (the "Dealers") and purchasers (the "Obligors") of new and used
automobiles and/or light duty trucks and all payments due thereunder on and
after the applicable Cutoff Date (as such term is defined in the related
Prospectus Supplement, a "Cutoff Date"). The Receivables of each Receivables
Pool will have been originated by the Dealers and purchased by TMCC in the
ordinary course of business pursuant to agreements with Dealers ("Dealer
Agreements"). Such Receivables will continue to be serviced by the Servicer and
will evidence indirect financing made available by TMCC to the Obligors. On the
applicable Closing Date, the Seller will sell the Receivables comprising the
related Receivables Pool to the Trust as specified in the related Prospectus
Supplement. The property of each Trust will also include (i) such amounts as
from time to time may be held in separate trust accounts established and
maintained by the Servicer with the Trustee pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, as described herein and
in the related Prospectus Supplement; (ii) security interests in the Financed
Vehicles and any accessions thereto; (iii) the rights to
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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. To the extent
specified in the related Prospectus Supplement, a Yield Maintenance Account,
Reserve Fund or other form of credit enhancement may be a part of the property
of any given Trust or may be held by the Trustee or an Indenture Trustee for the
benefit of holders of the related Securities. Additionally, pursuant to
contracts between TMCC and the Dealers, the Dealers have an obligation after
origination to repurchase Receivables as to which Dealers have made certain
misrepresentations.
The Servicer will continue to service the Receivables held by each Trust
and will receive fees for such services. See "Description of the Transfer and
Servicing Agreements -- Servicing Compensation and Payment of Expenses" herein.
To facilitate the servicing of the Receivables, the Seller and each Trustee will
authorize the Servicer to retain physical possession of the Receivables held by
each Trust and other documents relating thereto as custodian for each such
Trust. In order to minimize administrative burden and expense, the certificates
of title to the Financed Vehicles will not be amended to reflect the sale and
assignment of the security interest in the Financed Vehicles to each Trust. In
the absence of such an amendment, any Trust may not have a perfected security
interest in the Financed Vehicles in all states. See "Certain Legal Aspects of
the Receivables -- Security Interests" and "Description of the Transfer and
Servicing Agreements -- Sale and Assignment of Receivables".
If the protection provided to any holders of Securities of any class by the
subordination of other Securities of such series, by the Reserve Fund, if any,
or by other credit enhancement for such series is insufficient, such Noteholders
or Certificateholders, as the case may be, would have to look principally to the
Obligors on the related Receivables, the proceeds from the repossession and sale
of Financed Vehicles which secure defaulted Receivables and the proceeds from
any recourse against Dealers with respect to such Receivables. In such event,
certain factors, such as the applicable Trust's not having perfected security
interests in the Financed Vehicles in all states, may affect the Servicer's
ability to repossess and sell the collateral securing the Receivables, and thus
may reduce the proceeds to be distributed to the holders of the Securities of
such series. See "Description of the Transfer and Servicing
Agreements -- Distributions", " -- Credit and Cash Flow Enhancement" and
"Certain Legal Aspects of the Receivables -- Security Interests".
The principal offices of each Trust that is not a grantor trust and the
related Trustee will be specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee or Indenture Trustee for each Trust 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 the Sale and Servicing Agreement, Indenture or the related 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
not a grantor trust and the Servicer in respect of a Trust that is a grantor
trust may also remove a Trustee or Indenture Trustee that ceases to be eligible
to continue in such capacity under the related Trust Agreement or Pooling and
Servicing Agreement, as applicable, or becomes insolvent. In such circumstances,
the Servicer or, in the case of a series that includes Notes, 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.
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THE RECEIVABLES POOLS
GENERAL
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 randomly selected from TMCC's portfolio of auto and/or light duty
truck retail installment sales contracts that meet several criteria, including
that, unless otherwise provided in the related Prospectus Supplement, 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 level monthly payments
(except for the first and last payments, which may be minimally different from
the level payments) that fully amortize the amount financed over its original
term to maturity, 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").
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 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.
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 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 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.
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 a stated 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 Sale and Servicing Agreement or Pooling 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.
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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"
add-on interest. 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. Distributions
to Certificateholders will not be affected by such rebates under the Rule of 78s
Receivables because pursuant to the Agreement such distributions 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 life of the Notes, if any, and the Certificates of any
series will generally be influenced by the rate at which the principal balances
of the related Receivables are paid, which payment may be in the form of
scheduled amortization or prepayments. For this purpose, the term "prepayments"
includes prepayments in full, partial prepayments (including those related to
rebates of extended warranty contract costs and insurance premiums),
liquidations due to default, as well as receipts of proceeds from physical
damage, credit life and disability insurance policies and repurchases or
purchases by the Seller or TMCC, as the case may be, of certain Receivables for
administrative reasons or for breaches of representations and warranties. The
term "weighted average life" means the average amount of time during which each
dollar of principal of a Receivable is outstanding.
All of the Receivables will be prepayable at any time without penalty to
the Obligor. However, partial prepayments on the Precomputed Receivables made be
Obligors will not be distributed on the Distribution Date following the
Collection Period in which they were received but will be retained and applied
towards payments due in one or more future 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
if calculated on the basis of the assumption that payments will be made as
scheduled and that no such prepayments will be made. 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.
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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. In addition, under certain circumstances, the Seller 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 representations and warranties and the Servicer will be obligated to
purchase Receivables from such Trust pursuant to such Sale and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of certain
covenants. See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables" and " -- Servicing Procedures". See also "Description
of the Transfer and Servicing Agreements -- Termination" regarding the
Servicer's and the Seller's option to purchase the Receivables from a given
Trust and " -- Insolvency Event" regarding the sale of the Receivables owned by
a Trust that is not a grantor trust if an Insolvency Event with respect to the
Seller occurs. Any reinvestment risk resulting from the rate of prepayments of
the Receivables and the distribution of such prepayments to Certificateholders
will be borne entirely by the Certificateholders. In addition, early retirement
of the Certificates may be effected by the exercise of the option of the Seller
or 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.
In addition, pursuant to agreements between TMCC and the Dealers, each
Dealer is obligated, after purchase by TMCC of retail installment sales
contracts from such Dealer, to repurchase from TMCC contracts which do not meet
certain representations and warranties made by such Dealer (such Dealer
repurchase obligations are referred to herein as "Dealer Recourse"). Such
representations and warranties relate primarily to the origination of the
contracts and the perfection of the security interests in the related financed
vehicles, and do not typically relate to the creditworthiness of the related
obligors or the collectability of such contracts. Although the Dealer agreements
with respect to the Receivables will not be assigned to the Trustee, the related
Sale and Servicing Agreement or Pooling and Servicing Agreement will require
that any recovery by TMCC in respect of any Receivable pursuant to any Dealer
Recourse be deposited in the related Collection Account in satisfaction of
TMCC's repurchase obligations under the Agreement. The sales by the Dealers of
installment sales contracts to TMCC do not generally provide for recourse
against the Dealers for unpaid amounts in the event of a default by an obligor
thereunder, other than in connection with the breach of the foregoing
representations and warranties. See "Description of the Transfer and Servicing
Agreements -- Sale and Assignment of Receivables" and " -- Servicing
Procedures". See also "Description of the Transfer and Servicing
Agreements -- Termination" regarding the Servicer's option to purchase the
Receivables from a given Trust and " -- Insolvency Event" regarding the sale of
the Receivables owned by a Trust that is not a grantor trust if an Insolvency
Event with respect to the Seller occurs.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution 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 Noteholders, if any, and the Certificateholders 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.
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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 distribution with respect
to such class of Notes indicating the remaining outstanding principal balance of
such class of Notes, as of the applicable Distribution Date (after giving effect
to payments to be made on such Distribution Date), as a fraction of the initial
outstanding principal balance of such 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 distribution with respect to such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution 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 Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of such Noteholder'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 Noteholders, if any, and the Certificateholders will receive
reports on or about each Distribution Date concerning (i) with respect to the
Collection Period immediately preceding such Distribution 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 Distribution
Date, as applicable, amounts allocated or distributed on the preceding
Distribution Date and any reconciliation of such amounts with information
provided by the Servicer prior to such current Distribution 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 net
proceeds from the sale of the Securities of a given series will be applied by
the applicable Trust (i) to the purchase of the Receivables from the Seller,
(ii) to make the initial deposit into the Reserve Fund, if any, and (iii) to
make the required initial deposit into the Yield Maintenance Account, if any.
Unless otherwise specified in the related Prospectus Supplement, the Seller will
use that portion of such net proceeds paid to it with respect to any such Trust
for general corporate purposes.
THE SELLER
The Seller was incorporated in the State of California on June 24, 1993, as
a wholly owned, limited purpose subsidiary of TMCC. The principal executive
offices of the Seller are located at 19001 South Western Avenue, Torrance,
California 90509 and its telephone number is (310) 618-4000.
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 certificates similar to the Certificates 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 Seller will warrant to each Trust in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement that the sale of the applicable
Receivables by the Seller to such Trust is a valid sale of such Receivables to
such Trust. In addition, the Seller and such Trust will treat the transactions
described herein and in the related Prospectus Supplement as a sale of such
Receivables to such Trust and the Seller will
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take all actions that are required to perfect the Trust's ownership interest in
such Receivables. Notwithstanding the foregoing, if the Seller were to become a
debtor in a bankruptcy case and a creditor or trustee in bankruptcy of such
debtor or such debtor itself were to take the position that the sale of
Receivables to a Trust should instead be treated as a pledge of such Receivables
to secure a borrowing of such debtor, then delays in payments of collections of
such Receivables could occur or (should the court rule in favor of any such
trustee, debtor or creditor) reductions in the amount of such payments could
result. If the transfer of Receivables to a Trust is treated as a pledge instead
of a sale, a tax or government lien on the property of the Seller arising before
the transfer of Receivables to such Trust may have priority over such Trust's
interest in such Receivables. If the transactions contemplated herein are
treated as a sale, the Receivables would not be part of the Seller's bankruptcy
estate and would not be available to the Seller's creditors.
THE SERVICER
Toyota Motor Credit Corporation ("TMCC") was incorporated in California on
October 4, 1982, and commenced operations in May 1983. At March 31, 1996, TMCC
had 34 branches in various locations in the United States. In addition to the
Seller, TMCC has four wholly owned subsidiaries engaged in the insurance
business. TMCC and its subsidiaries are collectively referred to as "TMCC".
TMCC's address is 19001 South Western Avenue, Torrance, California 90509.
TMCC's primary business is providing retail leasing, retail and wholesale
financing 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). TMCC is a wholly owned subsidiary of Toyota
Motor Sales, U.S.A., Inc. ("TMS"), which is primarily engaged in the wholesale
distribution of automobiles, light duty trucks, industrial equipment and related
replacement parts and accessories throughout the United States (excluding
Hawaii). Substantially all of TMS's products are either manufactured by its
affiliates or are purchased from Toyota Motor Corporation, the parent of TMS, or
its affiliates.
UNDERWRITING OF MOTOR VEHICLE LOANS
TMCC purchases automobile and/or light duty truck retail installment sales
contracts from approximately 1,300 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. The Receivables will be originated by Dealers in accordance with
TMCC's requirements under existing agreements with such Dealers and will be
purchased in accordance with TMCC's underwriting standards which emphasize,
among other factors, the applicant's willingness and ability to pay and the
value of the vehicle to be financed.
Applications received from Dealers must be signed by the applicant and must
contain, among other information, the applicant's name, address, residential
status, source and amount of monthly income and amount of monthly rent or
mortgage payment. Upon receipt of the above information, TMCC obtains a credit
report from an independent credit bureau.
The credit decision is influenced by the applicant's credit score as
obtained from a statistically derived credit scoring process and other
considerations. The credit scoring process considers credit bureau, application
and contract information. Other considerations include ratios such as car
payment to income and total debt payments to total income. The final credit
decision is made based upon the degree of credit risk perceived and the amount
of credit requested.
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.
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SERVICING OF MOTOR VEHICLE LOANS
Each branch services the loans it originates using the same servicing
system and procedures. TMCC considers an obligor to be past due if less than 90%
of a regularly scheduled payment is received by the due date. At 12 days past
due a notice is sent to the obligor and at 26 days past due TMCC attempts to
contact the obligor by telephone. TMCC utilizes an on-line collection system in
support of its collection efforts. TMCC generally begins repossession efforts no
later than 60 days past due. Repossessed vehicles are held in inventory to
comply with statutory requirements and then sold. 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.
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DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an 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.
Unless otherwise specified in the related Prospectus Supplement, the Notes will
be available for purchase in denominations of $1,000 and integral multiples
thereof in book-entry form only. 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 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 distributions,
notices, reports and statements to Noteholders refer to distributions, 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 timing and priority of payment, seniority, allocations of losses,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes of a given series will be described in the
related 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, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Notes of such series
will be made prior to payments of principal thereon. To the extent provided in
the related Prospectus Supplement, a series may include one or more classes of
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 under the circumstances specified in the related
Prospectus Supplement, including as a result of the Servicer's exercising its
option to purchase the related Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes
of Notes of a given series may have fixed principal payment schedules, as set
forth in such Prospectus Supplement; Noteholders of such Notes would be entitled
to receive as payments of principal on any given Distribution Date the
applicable amounts set forth on such schedule with respect to such Notes, in the
manner and to the extent set forth in the related Prospectus Supplement.
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, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Distribution Date"), in which case each class of Noteholders will receive its
ratable share (based upon the aggregate amount of interest due to
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such class of Noteholders) of the aggregate amount available to be distributed
in respect of interest on the Notes of such series. See "Description of the
Transfer and Servicing Agreements -- Distributions" and "-- Credit and Cash Flow
Enhancement".
In the case of a series of Notes which 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. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify (except
as provided below) in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with
respect to a series of Notes, without the consent of the holder of each such
outstanding Note affected thereby no supplemental indenture will: (i) change the
due date of any installment of principal of or interest on any such Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any such Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the related Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes of such series, the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the related Indenture or of certain defaults
thereunder and their consequences as provided for in such Indenture; (iv) modify
or alter the provisions of the related Indenture regarding the voting of Notes
held by the applicable Trust, any other obligor on such Notes, the Seller or an
affiliate of any of them; (v) reduce the percentage of the aggregate outstanding
amount of such Notes, the consent of the holders of which is required to direct
the related Indenture Trustee to sell or liquidate the Receivables if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes of such series; (vi)
decrease the percentage of the aggregate principal amount of such Notes required
to amend the sections of the related Indenture which specify the applicable
percentage of aggregate principal amount of the Notes of such series necessary
to amend such Indenture or certain other related agreements; or (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
related Indenture with respect to any of the collateral for such Notes or,
except as otherwise permitted or contemplated in such Indenture, terminate the
lien of such Indenture on any such collateral or deprive the holder of any such
Note of the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, the
Trust and the applicable Indenture Trustee may also enter into supplemental
indentures, without obtaining the consent of the Noteholders of the related
series, for the purpose of, among other things, adding any provisions to or
changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
Events of Default; Rights upon Event of Default. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of: (i)
a default for five days or more in the payment of any interest on any such Note;
(ii) a default in the payment of the principal of or any installment of the
principal of any such Note when the same becomes due and 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
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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 Distribution 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 may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in the
related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
such Notes then outstanding.
If the Notes of any series are due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on 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 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.
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 a
majority in principal amount of the outstanding Notes 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 then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
such Indenture that cannot be modified without the waiver or consent of all the
holders of such outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (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 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
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request has been given to such Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, 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 (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 Notes or
the Certificates of such series then in effect would not be reduced or withdrawn
by the Rating Agencies as a result of such merger or consolidation and (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) 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 under the
section of the related Prospectus Supplement entitled "The Trust". No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture, pursuant to any
Advances made to it by the Servicer or otherwise in accordance with the Related
Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
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.
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THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the 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, one or more classes 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 minimum denominations of $1,000
and integral multiples thereof in book-entry form only. 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 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 Issuer) will be entitled to
receive a physical certificate representing a Certificate. All references herein
and in the related Prospectus Supplement to actions by Certificateholders refer
to actions taken by DTC upon instructions from the Participants and all
references herein and in the related Prospectus Supplement to distributions,
notices, reports and statements to Certificateholders refer to distributions,
notices, reports and statements given, made or sent to DTC or its nominee, as
the case may be, as the registered holder of the Certificates, for distribution
to Certificateholders in accordance with DTC's procedures with respect thereto.
See "Certain Information Regarding the Securities -- Book-Entry Registration"
and " -- Definitive Securities". Any Certificates of a given series owned by the
Seller or its affiliates will be entitled to equal and proportionate benefits
under the applicable Trust Agreement, except that such Certificates will be
deemed not to be outstanding for the purpose of determining whether the
requisite percentage of Certificateholders have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents (other than the commencement by the related Trust of a voluntary
proceeding in bankruptcy as described under "Description of the Transfer and
Servicing Agreements -- Insolvency Event").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of losses,
Pass Through Rate and amount of or method of determining distributions with
respect to principal and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and will be made prior to distributions
with respect to principal of such Certificates. To the extent provided in the
related Prospectus Supplement, a series may include one or more classes of Strip
Certificates entitled to (i) distributions in respect of principal with
disproportionate, nominal or no interest distributions or
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(ii) interest distributions with disproportionate, nominal or no distributions
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, distributions in
respect of the Certificates of a given series that includes Notes may be
subordinate to payments in respect of the Notes of such series as more fully
described in the related Prospectus Supplement. Distributions 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
distributions 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 distributions
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 -- Distributions of Principal and
Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest during each
applicable Interest Period at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement.
The "Spread" is the number of basis points to be added to or subtracted
from the related Base Rate applicable to such Floating Rate Securities. The
"Spread Multiplier" is the percentage of the related Base Rate applicable to
such Floating Rate Securities by which such Base Rate will be multiplied to
determine the applicable interest rate on such floating Rate Securities. The
"Index Maturity" is the period to maturity of the instrument or obligation with
respect to which the Base Rate will be calculated.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
Security"), (ii) the Commercial Paper Rate (a "Commercial Paper Rate Security"),
(iii) the Treasury Rate (a "Treasury Rate Security"), (iv) the Federal Funds
Rate (a "Federal Funds Rate Security"), (v) the CD Rate (a "CD Rate Security")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite Quotations" means the
daily statistical release entitled "Composite 3:30 p.m. Quotations for U.S.
Government Securities" published by the Federal Reserve Bank of New York.
"Interest Reset Date" will be the first day of the applicable Interest Reset
Period,
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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
Pricing 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. "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York,
or Los Angeles, 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 European Currency Unit ("ECU"), on which
dealings in deposits in such Index Currency are transacted in the London
interbank market or (b) if the Index Currency is the ECU, that is not designated
as an ECU Non-Settlement Day by the ECU Banking Association in Paris or
otherwise generally regarded in the ECU interbank market as a day on which
payments on ECUs shall not be made.
Unless otherwise specified in the related Prospectus Supplement, if any
Distribution Date for any Floating Rate Security (other than the Final
Distribution Date) would otherwise be a day that is not a Business Day, such
Distribution 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 Distribution Date will be the immediately preceding Business Day. Unless
otherwise specified in the related Prospectus Supplement, if the final
Distribution 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 Distribution 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 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 Distribution Date including the
related Final Distribution 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 Distribution
Date. The
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"Interest Period" with respect to any class of Floating Rate Securities will be
set forth in the related Prospectus Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will
be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be the related
Trustee or Indenture Trustee with respect to such series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. Unless otherwise specified in the applicable
Prospectus Supplement, all percentages resulting from any calculation on
Floating Rate Securities will be rounded to the nearest one hundred-thousandth
of a percentage point, with five one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation on
Floating Rate Securities will be rounded to the nearest cent (with one-half cent
being rounded upward).
CD Rate Securities. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second business
day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Prospectus Supplement as published in
H.15(519) under the heading "CDs (Secondary Market)". 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 CD Rate Determination Date, then the
"CD Rate" for such Interest Reset Period will be the rate on such CD Rate
Determination Date for negotiable certificates of deposit of the Index Maturity
designated in the applicable Prospectus Supplement as published in Composite
Quotations under the heading "Certificates of Deposit". If by 3:00 p.m., New
York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "CD Rate" for such Interest
Reset Period will be calculated by the Calculation Agent for such CD Rate
Security and will be the arithmetic mean of the secondary market offered rates
as of 10:00 a.m., New York City time, on such CD Rate Determination Date, of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for such CD Rate
Security for negotiable certificates of deposit of major United States money
market banks with a remaining maturity closest to the Index Maturity designated
in the related Prospectus Supplement in an amount that is representative for a
single transaction in that market at that time; provided, however, that if the
dealers selected as aforesaid by such Calculation Agent are not quoting offered
rates as mentioned in this sentence, the "CD Rate" for such Interest Reset
Period will be the same as the CD Rate for the immediately preceding Interest
Reset Period.
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 Distribution 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.
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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 such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement, as published by the Board of Governors of the Federal
Reserve System in H.15(519) under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). 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 Commercial Paper Rate Determination Date,
then the "Commercial Paper Rate" for such Interest Reset Period shall be the
Money Market Yield on such Commercial Paper Rate Determination Date of the rate
for commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper". If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial Paper
Rate Security for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period.
"Money Market Yield" means a yield (expressed as a percentage rounded
upward to the nearest one hundredthousandth 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 Distribution 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
on the Interest Reset Date for such Interest Reset Period (a "Federal Funds Rate
Determination Date") for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)". 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 Federal Funds Rate Determination Date, the
"Federal Funds Rate" for such Interest Reset Period shall be the rate on such
Federal Funds Rate Determination Date as published in Composite Quotations under
the heading "Federal Funds/Effective Rate". If by 3:00 p.m., New York City time,
on such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Federal Funds Rate" for such Interest Reset
Period shall be calculated by the Calculation Agent for such Federal Funds Rate
Securities and will be the arithmetic mean of the rates for the last transaction
in overnight United States dollar federal funds arranged by three leading
brokers of federal funds transactions in The City of New York selected by the
Calculation Agent prior to 9:00 A.M., New York City time on such Federal Funds
Rate Interest Determination Date; provided, however
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<PAGE> 75
that if the brokers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate with respect to such Federal
Funds Rate Interest Determination Date will be the Federal Funds Rate in effect
for the preceding Interest Reset Period.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the next succeeding Business Day.
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:
(i) On the second London Banking Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Determination Date"), the
Calculation Agent for such LIBOR Security will determine the arithmetic
mean of the offered rates for deposits in U.S. dollars for the period of
the Index Maturity specified in the applicable Prospectus Supplement, as
either (a) if "LIBOR Reuters" is specified in the applicable Prospectus
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the Index Currency (as defined below) having the Index Maturity designated
in the applicable Prospectus Supplement, commencing on the second London
Business Day immediately following that LIBOR Determination Date, that
appear on the Designated LIBOR Page specified in the applicable Prospectus
Supplement as of 11:00 A.M. London time, on that LIBOR Determination Date,
if at least two such offered rates appear (unless, as aforesaid, only a
single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR
Telerate" is specified in the applicable Prospectus Supplement, the rate
for deposits in the Index Currency having the Index Maturity designated in
the applicable Prospectus Supplement commencing on the second London
Business Day immediately following that LIBOR Determination Date that
appears on the Designated LIBOR Page specified in the applicable Prospectus
Supplement as of 11:00 A.M. London time, on that LIBOR Determination Date.
If fewer than two offered rates appear, or no rate appears, as applicable,
LIBOR in respect of the related LIBOR Determination Date will be determined
as if the parties had specified the rate described in clause (ii) below.
(ii) With respect to a LIBOR 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 in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, 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 Business Day immediately following such LIBOR
Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Determination Date and
in a principal amount that is representative for a single transaction in
such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such LIBOR Determination Date
will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such LIBOR Determination Date
will be 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 (as defined
below), on such LIBOR Determination Date by three major banks in such
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 such Index
Currency in such market at such time; provided, however, that if the banks
so selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR determined on such LIBOR Determination Date will be LIBOR
in effect for the preceding Interest Reset Period.
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"Index Currency" means the currency (including composite currencies)
specified in the applicable Prospectus Supplement as the currency for which
LIBOR shall be calculated. If no such currency is specified in the applicable
Prospectus Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Services on the page designated in the applicable Prospectus Supplement
(or such other page as may replace such designated page on that service for the
purpose of displaying London interbank rates of major banks) for the applicable
Index Currency, or (b) if "LIBOR Telerate" is designated in the applicable
Prospectus Supplement, the display on the Dow Jones Telerate Service on the page
designated in the applicable Prospectus Supplement (or such other page as may
replace such designated page on that service or such other service or services
as may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for the related Index Currency) for
the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency. If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Prospectus Supplement, LIBOR for the applicable
Index Current will be determined as if LIBOR Telerate (and, if the U.S. dollar
is the Index Currency, page 3750) had been specified.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to U.S.
dollars, Deutsche marks, Italian lira, Swiss francs, Dutch guilders and ECUs,
the Principal Financial Center shall be The City of New York, Frankfurt, Milan,
Zurich, Amsterdam and Luxembourg, 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 most recent
auction of direct obligations of the United States ("Treasury bills") having the
Index Maturity specified in the applicable Prospectus Supplement, as such rate
shall be published in H.15(519) under the heading "U.S. Government
Securities -- Treasury bills -- auction average (investment)" or, in the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Treasury Rate
Determination Date, the auction average rate (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) as otherwise announced by the United States Department of the Treasury.
In the event that the results of the auction of Treasury bills having the
specified Index Maturity are not published or reported as provided above by 3:00
p.m., New York City time, on such Calculation Date, or if no such auction is
held in a particular week, then the "Treasury Rate" for such Interest Reset
Period will be the rate published in H.15(510) under the heading "U.S.
Government Securities -- Treasury Bills -- Secondary Market" (expressed as a
bond equivalent yield on the basis of a 365 or 366 day year, as applicable, on a
daily basis), or if not published by 3:00 P.M. New York City time on the related
Calculation Date, the Treasury Rate will be calculated by the Calculation Agent
for such Treasury Rate Security and shall be the yield to maturity (expressed as
a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time on such Treasury Rate
Determination Date, of three leading primary United States government securities
dealers selected by such Calculation Agent for the issue of Treasury bills with
a remaining maturity closest to the specified Index Maturity; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting bid rates as mentioned in this sentence, then the "Treasury Rate" for
such Interest Reset Period will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such Treasury
Rate Determination Date or, if such a day is not a business day, the next
succeeding business day or (b) the second business day preceding the date any
payment is required to be made for any period following the applicable Interest
Reset Date.
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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 Distribution Date for such class
(the "Indexed Principal Amount") and/or the interest payable on any Distribution
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 Distribution Date that is greater than or
less than the face amount of the Indexed Securities depending upon the relative
value on the related final Distribution Date of the specified indexed item.
Information as to the method for determining the principal amount payable on the
related final Distribution 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
holder of a Security indexed as to principal in respect of voting for or against
amendments to the related Trust Agreement or Indenture, 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 Distribution
Date will be the Face Amount of such Indexed Security, the Indexed Principal
Amount of such Indexed Security at the time of redemption or repayment or
another amount described in such Prospectus Supplement.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each class
of Securities offered hereby will be represented by one or more certificates
registered in the name of Cede, as nominee of DTC. Unless otherwise specified in
the related Prospectus Supplement, Securityholders may hold beneficial interests
in Securities through DTC (in the United States) or Cedel or Euroclear (in
Europe) 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
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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.
Cedel 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 Cedel 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 Cedel 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. Cedel Participants and Euroclear Participants may
not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in Cedel
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 Cedel participant on such business day. Cash received in Cedel or
Euroclear as a result of sales of Securities by or through a Cedel 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 Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its participating members ("DTC Participants") and to facilitate the
clearance and settlement of securities transactions between DTC Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations which may include
underwriters, agents or dealers with respect to the Securities of any class or
series. Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
(the "Indirect DTC Participants"). The rules applicable to DTC and DTC
Participants are on file with the Commission.
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.
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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 distributions 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 bookentry transfers and receive and transmit such payments on
behalf of their respective Securityholders.
DTC's practice is to credit DTC Participants' accounts on each Distribution
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 Distribution
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 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).
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Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 28 currencies, including United States dollars. Cedel
provides to Cedel Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depository, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel 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
Cedel is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic bookentry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 27
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include any
underwriters, agents or dealers with respect to any class or series of
Securities offered hereby. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Securities held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
withholding in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Considerations". Cedel 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 Cedel Participant or Euroclear Participant
only in accordance with
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its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Securities among participants of DTC, Cedel
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 a majority 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, 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.
Distributions of principal of, and interest on, such Definitive Securities
will thereafter be made by the applicable Trustee or Indenture Trustee in
accordance with the procedures set forth in the related Indenture or the related
Trust Agreement or Pooling and Servicing Agreement, as applicable, directly to
holders of Definitive Securities in whose names the Definitive Securities were
registered at the close of business on the applicable Record Date specified for
such Securities in the related Prospectus Supplement. Such distributions 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 distribution 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 distribution 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.
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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 Distribution Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on such
Distribution Date. With respect to each series of Securities that includes
Certificates, on or prior to each Distribution 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 Distribution Date or the period
since the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to the principal amount
of each class to such Notes and to the Certificate Balance of each class of
such Certificates;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the 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 Distribution 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 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 Distribution 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 Distribution 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. 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 the Seller and, to the extent specified in the
related Prospectus Supplement, to make the required initial deposit into the
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, among other things, that: (i) the
information provided in the related Schedule of Receivables is true and correct
in all material respects; (ii) at the time of origination of each Receivable,
the related Obligor was required 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 were or are free and clear of all security interests, liens, charges
and encumbrances and no offsets, defenses or counterclaims have been asserted or
threatened; (iv) as of the Closing Date, each of such Receivables was secured by
a first perfected security interest in favor of TMCC in the Financed Vehicle;
(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.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller so elects, the first) month following
the discovery by or notice to the Seller of a breach of any representation or
warranty of the Seller that materially and adversely affects the interests of
the related Trust in any Receivable, the Seller, unless the breach is cured,
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, (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, calculated on an actuarial basis, that would be
payable to the Obligor on
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a Precomputed Receivable were the Obligor to prepay such Precomputed Receivable
in full on such day 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 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, as such Trust's
agent, 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 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 Vehicles". 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 and Certificates, 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 amounts released from any Yield
Maintenance Account, Reserve Fund or other form of credit enhancement will be
deposited for distribution 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 Indenture Trustee or Trustee, into which,
to the extent required by the Sale and Servicing Agreement or Pooling and
Servicing Agreement, early payments by or on behalf of Obligors on Precomputed
Receivables will be deposited until such time as the related payment becomes
due. Until such time as payments ahead are transferred from the Payahead Account
to a Collection Account, they will not constitute collected interest or
collected principal and will not be available for distribution 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" are generally limited to investments acceptable to the Rating
Agencies rating such Securities as being consistent with the rating of
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such Securities and may include retail installment sale contracts secured by new
or used automobiles and/or light duty trucks. 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 Distribution 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 distribution 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 distributed 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 Seller on each Distribution
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, 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. 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, the Servicer will be obligated either
to purchase such Receivable as described in the next paragraph or make Advances
on each subsequent Distribution Date in amounts equal to the amount of any
reduction to the related Scheduled Payments to be paid by the related Obligors
during the subsequent Collection Periods.
In the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Servicer will covenant that except as otherwise contemplated
therein, (i) it will not release any Financed Vehicle from the security interest
granted in the related Receivable, (ii) it will do nothing to impair the rights
of the Securityholders in the Receivables and (iii) it will not amend any
Receivable such that the total number of Scheduled Payments, the Amount Financed
or the APR is altered or the maturity of a Receivable is extended beyond the
Final Scheduled Maturity Date unless it is making Advances corresponding to
reductions to Scheduled Payments as described above. As of the last day of the
second (or, if the Servicer so elects, the first) Collection Period following
the Collection Period in which the Seller, the Servicer or the Trustee discovers
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, 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
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(a) the sum of (i) all remaining Scheduled Payments, (ii) an amount equal to any
reimbursements of 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 in respect of such Precomputed Receivable held by the
Servicer or on deposit in the Payahead Account 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 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. TMCC
monitors the maintenance of such insurance. If the Obligor fails to maintain
such insurance, TMCC may, at its option place limited dual insurance coverage on
such Financed Vehicle and charge the Obligor for such coverage. In the event
that the failure of an Obligor to maintain any such required insurance results
in a shortfall in amounts to be distributed to Certificateholders, to the extent
such shortfall is not covered by amounts on deposit in the Reserve Fund or other
methods of credit enhancement, the Securityholders could suffer a loss on their
investment.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such Receivables
collected during each collection period specified in the related Prospectus
Supplement (each, a "Collection Period") into the related Collection Account.
The Servicer may retain all payments on or in respect of the Receivables
received from Obligors and all proceeds of Receivables collected during each
Collection Period without segregation in its own accounts until deposited in the
Collection Account on the Business Day immediately preceding the related
Distribution 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 Prime-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 in
Eligible Investments 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 from the time deposited until the related Distribution 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
Distribution Date. See "Description of the Transfer and Sale
Arrangements -- Collections".
If the Servicer were unable to remit such funds, Securityholders might
incur a loss. The Seller or TMCC, as the case may be, will remit the aggregate
Warranty Purchase Payments and Administrative Purchase Payments with respect to
any Receivables required to be purchased from the related Trust into the related
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Collection Account on or before the Business Day immediately preceding the
related Distribution Date. To the extent set forth in the related Prospectus
Supplement, the Servicer may, in order to satisfy the requirements described
above, obtain a letter of credit or other security for the benefit of the
related Trust to secure timely remittances of collections on the related
Receivables and payment of the aggregate Warranty Purchase Payments and
Administrative Purchase Payments with respect to Receivables required to be
repurchased by the Seller or the Servicer, as applicable.
Collections on or in respect of a Receivable made during a Collection
Period (including Warranty Purchase Payments and Administrative Purchase
Payments) which are not late fees, extension fees or certain other similar fees
or charges will be applied first to any outstanding Advances made by the
Servicer with respect to such Receivable, and then to the related Scheduled
Payment. Any collections on or in respect of a Receivable remaining after such
applications will be considered an "Excess Payment". Excess Payments
constituting a prepayment in full of Precomputed Receivables and any Excess
Payments relating to Simple Interest Receivables will be applied as a prepayment
in respect of such Receivable (each, a "Prepayment"). All other Excess Payments
in respect of Precomputed Receivables will be held by the Servicer (or if the
Servicer has not satisfied the conditions in clauses (i) through (iii) in the
second preceding paragraph, deposited in the Payahead Account), as a Payment
Ahead.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, if the
Scheduled Payment due on a Precomputed Receivable (other than an Administrative
Receivable or a Warranty Receivable) is not received in full by the end of the
month in which it is due, whether as the result of any extension granted to the
Obligor or otherwise, the amount of Payments Ahead, if any, not previously
applied with respect to such Precomputed Receivable, shall be applied by the
Servicer to the extent of the shortfall and the Payments Ahead shall be reduced
accordingly. If any shortfall remains, the Servicer will make an advance to the
Trust in an amount equal to the amount of such shortfall (each, a "Precomputed
Advance"). The Servicer will not be obligated to make a Precomputed Advance to
the extent that it determines, in its sole discretion, that such Precomputed
Advance will not be recovered from subsequent collections on or in respect of
the related Precomputed Receivable. All Precomputed Advances shall be
reimbursable to the Servicer, without interest, if and when a payment relating
to a Receivable with respect to which a Precomputed Advance has previously been
made is subsequently received (other than from Administrative Purchase
Payments). Upon the determination by the Servicer that reimbursement from the
preceding source is unlikely, it will be entitled to recover unreimbursed
Precomputed Advances from collections on or in respect of other Precomputed
Receivables.
In addition, if the Scheduled Payment on a Simple Interest Receivable
(other than an Administrative Receivable or a Warranty Receivable) is not
received in full by the end of the month in which it is due, the Servicer shall,
subject to the limitations set forth below, advance to the Trust an amount with
respect to such Simple Interest Receivable equal to the product of the Principal
Balance of such Simple Interest Receivable as of the first day of the related
Collection Period and one-twelfth of its APR minus the amount of interest
actually received on such Simple Interest Receivable during the related
Collection Period (each, a "Simple Interest Advance", and together with the
Precomputed Advances, the "Advances"). If such a calculation results in a
negative number, an amount equal to such negative amount shall be paid to the
Servicer in reimbursement of outstanding Simple Interest Advances. In addition,
in the event that a Simple Interest Receivable becomes a Liquidated Receivable,
the amount of accrued and unpaid interest thereon (but not including interest
for the current Collection Period) shall, up to the amount of all outstanding
Simple Interest Advances in respect thereof, be withdrawn from the related
Collection Account and paid to the Servicer in reimbursement of such outstanding
Simple Interest Advances. No advances of principal will be made with respect to
Simple Interest Receivables. The Servicer will not be obligated to make a Simple
Interest Advance 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.
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
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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 Distribution 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 Fee for each
Collection Period in an amount equal to 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
"Servicing Fee"). The Servicing Fee (together with any portion of the Servicing
Fee that remains unpaid from prior Distribution Dates) will be paid solely to
the extent of Available Interest. However, the Servicing Fee will be paid prior
to the distribution of any portion of Available Interest to the Noteholders or
the Certificateholders of the given series.
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 and will be entitled to
reimbursement from such 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 Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of motor vehicle receivables as an agent for their
beneficial owner, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, providing
payment information, paying costs of collections and policing the collateral.
The Servicing Fee also will compensate the Servicer for administering the
particular Receivables Pool, including making Advances, accounting for
collections and furnishing monthly and annual statements to the related Trustee
and Indenture Trustee with respect to distributions and generating federal
income tax information for such Trust and for the related Noteholders and
Certificateholders. The 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 original principal balance of such Receivable 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).
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions 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 distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
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With respect to each Trust, on each Distribution Date collections on the
related Receivables will be withdrawn from the related Collection Account and
will be distributed 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 distribution 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, distributions in
respect of principal of a class of Securities of a given series will be
subordinate to distributions in respect of interest on such class, and
distributions 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.
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
supplement agreements, other agreements with respect to third party payments or
other support, cash deposits or such other arrangements as may be described in
the related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit or cash
flow enhancement for a class of Securities may cover one or more other classes
of Securities of the same series, and credit or cash flow enhancement for a
series of Securities may cover one or more other series of Securities.
The presence of a Reserve Fund and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one class or series of Securities, Securityholders of any such
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. To the extent provided in the related Prospectus Supplement, the
amount on deposit in the Reserve Fund will be increased on each Distribution
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 Distribution Date
after the payment of all other required payments and distributions on such date.
The related Prospectus Supplement will describe the circumstances and manner
under which distributions 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. Each "Yield Maintenance Account" will be
designed to hold funds to be applied by the related Trustee or Indenture
Trustee, as the case may be, to provide payments to Securityholders in respect
of Receivables that have APRs less than the sum of the Pass Through Rate or
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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 Distribution 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 Distribution Date. Unless otherwise specified in
the related Prospectus Supplement, amounts on deposit on any Distribution 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 distributions to be made on such Distribution Date, will be released to the
Seller. Monies on deposit in the Yield Maintenance Account may be invested in
Eligible Investments under the circumstances and in the manner described in the
related Pooling and Servicing Agreement or Trust Agreement. Any monies remaining
on deposit in the Yield Maintenance Account upon the termination of the Trust
also will be released to the Seller.
Yield Maintenance Agreement. If a Yield Maintenance Account is established
with respect to any 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 Distribution 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 Distribution 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 Distribution Date.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily (see "-- Collections" above), the Servicer will be permitted
to make the deposit of collections, aggregate Advances and Purchase Amounts for
any Trust for or with respect to the related Collection Period net of
distributions 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, distributions and transfers were made individually. With respect
to any Trust that issues both Certificates and Notes, if the related
Distribution Dates are not the same for all classes of Securities, all
distributions, deposits or other remittances made on a Distribution Date will be
treated as having been distributed, deposited or remitted on the same
Distribution Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on a Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
On a Business Day in each month that precedes each Distribution 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 public accountants will
furnish to the related Trust and Indenture Trustee
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or Trustee, as applicable, annually a statement as to compliance by the Servicer
during the preceding twelve months (or, in the case of the first such
certificate, from the applicable Closing Date, 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) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. The Servicer
has agreed to give each Indenture Trustee and each Trustee notice of certain
Servicer Defaults under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that TMCC may not resign from its obligations and duties as Servicer
thereunder, except upon determination that TMCC's performance of such duties is
no longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee or Trustee, as applicable, or a
successor servicer has assumed TMCC's servicing obligations and duties under
such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties thereunder or by reason
of reckless disregard of its obligations and duties thereunder. In addition,
each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
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 (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, acting
together as a single class; (ii) any failure by the Servicer or the Seller, as
the case may be,
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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, acting together as a single
class; and (iii) the occurrence of an Insolvency Event with respect to the
Servicer (or the Seller, so long as TMCC is the Servicer). "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, 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 (but
excluding for purposes of such calculation and action all Certificates held by
the Seller, the Servicer or any of their affiliates), 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, however, a bankruptcy trustee or
similar official has been appointed for the Servicer, and no Servicer Default
other than such appointment has occurred, such trustee or official may have the
power to prevent 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 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 (but excluding for
purposes of such calculation and action all Certificates held by the Seller, the
Servicer or any of their affiliates), 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
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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 (but excluding for purposes of such
calculation and action all Certificates held by the Seller, the Servicer or any
of their affiliates), acting together as a single class, may, on behalf of all
such Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, except a Servicer Default in making any required deposits
to or payments from the related Trust Accounts in accordance with such Sale and
Servicing Agreement or Pooling and Servicing Agreement. 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 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. 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, 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 (but excluding for purposes of
such calculation and action all Certificates held by the Seller, the Servicer or
any of their affiliates), 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 may (i) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on the related
Receivables or distributions that are required to be made for the benefit of
such Noteholders or Certificateholders or (ii) reduce the aforesaid percentage
of the Notes or Certificates of such series which are required to consent to any
such amendment, without the consent of the holders of all the outstanding Notes
or Certificates, as the case may be, of such series.
INSOLVENCY EVENT
With respect to a Trust that is not a grantor trust, if an Insolvency Event
occurs with respect to the Seller, the related Receivables of such Trust will be
liquidated and the Trust will be terminated 90 days after the date of such
Insolvency Event, unless, before the end of such 90-day period, the related
Trustee shall have received written instructions from holders of each class of
the Securities with respect to such Trust representing more than 50% of the
aggregate unpaid principal amount of each such class (but excluding for purposes
of such calculation and action all Certificates held by the Seller, the Servicer
or any of their affiliates), to the effect that each such party disapproves of
the liquidation of such Receivables and termination of such Trust. Promptly
after the occurrence of an Insolvency Event with respect to the Seller, notice
thereof is required to be given to such Noteholders and Certificateholders;
provided that any failure to give such required notice will not prevent or delay
termination of such Trust. Upon termination of any Trust, the related Trustee
shall, or shall direct the related Indenture Trustee to, promptly sell the
assets of such Trust (other than the Trust Accounts) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the Receivables of such Trust will be
treated as collections on such Receivables and deposited in the related
Collection Account. With respect to any Trust, if the proceeds from the
liquidation of the related Receivables and any amounts on deposit in the related
Reserve Fund, if any, Yield Maintenance Account, if any, Payahead Account, if
any, and Collection Account are not sufficient to pay the Notes, if any, and the
Certificates of the related series in full, the amount of principal returned to
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Noteholders and Certificateholders thereof will be reduced and some or all of
such Noteholders and Certificateholders will incur a loss.
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 either event described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer and the Seller will each
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 Distribution Date on which such purchase is effected) plus
the appraised value of any other property held as part of the Trust (less
liquidation expenses). In the event that both the Seller and the Servicer, or
any successor to the Servicer, elect to purchase the corpus of the Trust as
described above, the party first notifying the Owner Trustee (based on the Owner
Trustee's receipt of such notice) shall be permitted to purchase the
Receivables. The Owner Trustee and Indenture Trustee will give written notice of
termination to each Securityholder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed 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
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Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture. Unless otherwise
specified in the related Prospectus Supplement 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.
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 the automobiles and/or light
duty trucks financed by the Seller is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In 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
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the assignor's rights as secured party. Although re-registration of the vehicle
is not necessary to convey a perfected security interest in the Financed
Vehicles to the Trust, because the Trust will not be listed as legal owner on
the certificates of title, the security interest of such Trust in the vehicle
could be defeated through fraud or negligence. In such states, in the absence of
fraud or forgery by the vehicle owner or the Servicer or administrative error by
state or local agencies, the notation of TMCC's lien on the certificates of
title will be sufficient to protect such Trust against the rights of subsequent
purchasers of a Financed Vehicle or subsequent lenders who take a security
interest in a Financed Vehicle. In each Receivables Purchase Agreement, TMCC
will represent and warrant, and in each Sale and Servicing Agreement or Pooling
and Servicing Agreement, the Seller will represent and warrant, that it has
taken all action necessary to obtain a perfected security interest in each
Financed Vehicle. If there are any Financed Vehicles as to which TMCC failed to
obtain and assign to the Seller a perfected security interest, the security
interest of the Seller would be subordinate to, among others, subsequent
purchasers of the Financed Vehicles and holders of perfected security interests
therein. Such a failure, however, 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
Administration 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 -- Certain
Legal Aspects -- Security Interests in Financed Vehicles".
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.
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
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by operation of law) upon and security interests in such Financed Vehicle.
However, liens for repairs or taxes could arise, or the confiscation of a
Financed Vehicle could occur, at any time during the term of a Receivable. No
notice will be given to the Trustee, any Indenture Trustee, any Noteholders or
the Certificateholders in respect of a given Trust if such a lien arises or
confiscation occurs which would not give rise to the Seller's repurchase
obligation under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement or TMCC's repurchase obligation under the related
Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an obligor, the holder of the related retail
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. Among the UCC remedies,
the secured party has the right to perform repossession by self-help means,
unless such means would constitute a breach of the peace or is otherwise limited
by applicable state law. Unless a financed vehicle is voluntarily surrendered,
self-help repossession is the method employed by TMCC in most states and is
accomplished simply by retaking possession of the financed vehicle. In cases
where the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the financed vehicle must then be recovered in
accordance with that order. In some jurisdictions, the secured party is required
to notify the obligor of the default and the intent to repossess the collateral
and to give the obligor a time period within which to cure the default prior to
repossession. In most states, under certain circumstances after the financed
vehicle has been repossessed, the 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 the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
most states, the obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding and preparing the collateral
for disposition and arranging for its sale, plus, in some jurisdictions,
reasonable attorneys' fees. In some states, the obligor has the right to redeem
the collateral prior to actual sale by payment of delinquent installments or the
unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. In addition to the notice requirement, the UCC
requires that every aspect of the sale or other disposition, including the
method, manner, time, place and terms, be "commercially reasonable". Generally,
courts have held that when a sale is not "commercially reasonable", the secured
party loses its right to a deficiency judgment. However, the deficiency judgment
would be a personal judgment against the obligor for the shortfall, and a
defaulting obligor can be expected to have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount or be uncollectible. In addition, the UCC permits the
debtor or other interested party to recover for any loss caused by noncompliance
with the provisions of the UCC. Also, prior to a sale, the UCC permits the
debtor or other interested person to prohibit the secured party from disposing
of the collateral if it is established that the secured party is not proceeding
in accordance with the "default" provisions under the UCC.
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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 Andrews & Kurth
L.L.P. 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 distributions on the Certificates (and
possible reductions in the amount of such distributions) could occur. In
addition, if the transfer of Receivables to the Seller is treated as a pledge
instead of a sale, a tax or government lien on the property of TMCC arising
before the transfer of a Receivable to the Seller may have priority over the
Seller's interest in such Receivable. In addition, while TMCC is the Servicer,
cash collections on the Receivables may be commingled with the funds of TMCC
and, in the event of the bankruptcy of TMCC, the Trust may not have a perfected
interest in such collections.
TMCC and the Seller will treat the transactions described herein as a sale
of the Receivables to the Seller, such that the automatic stay provisions of the
United States Bankruptcy Code should not apply to the Receivables in the event
that TMCC were to become a debtor in a bankruptcy case. A case decided by the
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United States Court of Appeals for the Tenth Circuit in 1993 contains language
to the effect that under the UCC accounts sold by a debtor would remain property
of the debtor's bankruptcy estate whether or not the sale of the accounts was
perfected. Although the Receivables constitute chattel paper under the UCC,
rather than accounts, Article 9 of the UCC applies to the sale of chattel paper
as well as the sale of accounts and perfection of a security interest in both
chattel paper and accounts may be accomplished by the filing of a UCC-1
financing statement. If, following a bankruptcy of TMCC, a court were to follow
the reasoning of the Tenth Circuit reflected in the above case, then the
Receivables could be included in the bankruptcy estate of TMCC and delays in
payments of collections on or in respect of the Receivables could occur.
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. If an Obligor were successful in
asserting any such claim or defense, such claim or defense would constitute a
breach of the Seller's warranties under the related Sale and Servicing Agreement
or Pooling and Servicing Agreement and a breach of TMCC's warranties under the
related Receivables Purchase Agreement and would create an obligation of the
Seller and TMCC, respectively, to repurchase the Receivable unless the breach is
cured. See "Description of the Transfer and Servicing Agreements -- Sale and
Assignment of Receivables".
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
From time to time, TMCC has been involved in litigation under consumer
protection laws. In addition, with respect to the Receivables originated in
California, a significant number may provide that such Receivables may be
rescinded by the related Dealer if such Dealer is unable to assign the
Receivable to a
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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, pursuant to the Military
Reservist Relief Act, under certain circumstances, California residents called
into active duty with the reserves can delay payments on retail installment
sales contracts, including the Receivables, for a period, not to exceed 180
days, beginning with the order to active duty and ending 30 days after release.
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 Relief Acts impose limitations that would impair
the ability of the Servicer to repossess an affected Receivable during the
Obligor's period of active duty status. Thus, in the event that such a
Receivable goes into default, there may be delays and losses occasioned by the
inability to exercise the Trust's rights with respect to the related Financed
Vehicle in a timely fashion.
Any such shortfall pursuant to either of the two preceding paragraphs, to
the extent not covered by amounts payable to the Securityholders from amounts on
deposit in the related Reserve Fund or from coverage provided under any other
credit enhancement mechanism, could result in losses to the Securityholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of any series, to the extent it relates to matters of law or legal
conclusions with respect thereto, represents the opinion of tax counsel to each
Trust with respect to the related series on the material matters associated with
such consequences, subject to the
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qualifications set forth herein. "Tax Counsel" with respect to each Trust will
be Andrews & Kurth L.L.P. 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 an election is made to treat the Trust as a partnership under the Code
or whether the Trust will be treated as a grantor trust. The Prospectus
Supplement for each Series of Certificates will specify whether a partnership
election will be made or the Trust will be treated as a grantor trust.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
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 for which a partnership election will be made, 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. In addition, Tax Counsel has prepared or
reviewed the statements in the Prospectus under the heading "Certain Federal
Income Tax Consequences -- Trusts for Which a Partnership Election is Made", 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, each investor is advised to consult its own tax advisors with
regard to the tax consequences to it of investing in Notes or Certificates.
Tax Counsel will deliver its opinion that a Trust for which a partnership
election is made will not be an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. This opinion will be
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on counsel's conclusions that (1) the Trust
will not have certain characteristics necessary for a business trust to be
classified as an association taxable as a corporation and (2) the nature of the
income of the Trust will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations.
If the 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
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
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TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Tax Counsel will, except as otherwise provided
in the related Prospectus Supplement, advise the Trust that the Notes will be
classified as debt for federal income tax purposes. The discussion below assumes
this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes. Moreover, the discussion assumes that the
interest formula for the Notes meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID regulations") relating to
original issue discount ("OID"), and that any OID on the Notes (i.e., any excess
of the principal amount of the Notes over their issue price) does not exceed a
de minimis amount (i.e., 1/4% of their principal amount multiplied by the
number of full years included in their term), all within the meaning of the OID
regulations. If these conditions are not satisfied with respect to any given
series of Notes, additional tax considerations with respect to such Notes will
be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. A purchaser who
buys a Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") 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 person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the
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Trust or the Seller (including a holder of 10% of the outstanding Certificates)
or a "controlled foreign corporation" with respect to which the Trust or the
Seller is a "related person" within the meaning of the Code and (ii) provides
the Owner 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-8 or a
similar form), signed under penalties of perjury, certifying that the beneficial
owner of the Note is a foreign person and providing the foreign person'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-8 or substitute
form provided by the foreign person that owns the Note. If such interest is not
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.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder 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 containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
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 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 holders. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust as a partnership for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders (including the Seller
in its capacity as recipient of distributions from the Reserve Fund), and the
Notes being debt of the partnership. However, the proper characterization of the
arrangement involving the Trust, the Certificates, the Notes, the Seller and the
Servicer is not clear because there is no authority on transactions closely
comparable to 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 Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to
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the consequences from treatment of the Certificates as equity in a partnership,
described below. The following discussion assumes that the Certificates
represent equity interests in a partnership.
Indexed Securities, etc. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Indexed Securities or Strip Certificates, and that a series of Securities
includes a single class of Certificates. If these conditions are not satisfied
with respect to any given series of Certificates, additional tax considerations
with respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Receivables (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Receivables. The Trust's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of
Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Receivables that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
of premium on Receivables that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust will be allocated to the Seller. Based on the economic arrangement of the
parties, this approach for allocating Trust income should be permissible under
applicable Treasury regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes. In
addition, because tax allocations and tax reporting will be done on a uniform
basis for all Certificateholders but Certificateholders may be purchasing
Certificates at different times and at different prices, Certificateholders may
be required to report on their tax returns taxable income that is greater or
less than the amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the Receivables may be
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greater or less than the remaining principal balance of the Receivables at the
time of purchase. If so, the Receivables will have been acquired at a premium or
discount, as the case may be. (As indicated above, the Trust will make this
calculation on an aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the 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 Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller is
authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative
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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, Certificateholders 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 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 and will report each Certificateholder's allocable
share of items of Trust income and expense to holders 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 beneficial owners
of the Certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the Trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and identification number of such person, (y)
whether such person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's withholding status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder
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must obtain a taxpayer identification number from the IRS and submit that number
to the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest." As a result, Certificateholders will 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 holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions 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 Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST AS A GRANTOR 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 for which a partnership election will not be made, 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. In addition, Tax Counsel has
prepared or reviewed the statements in the Prospectus under the heading "Certain
Federal Income Tax Consequences -- Trusts Treated as Grantor 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 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, each investor is advised
to consult its own tax advisors with regard to the tax consequences to it of
investing in Notes or Certificates.
If a partnership election is not made, Tax Counsel will deliver its opinion
that the 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, owners
of Certificates (referred to herein as "Grantor Trust Certificateholders") will
be treated for federal income tax purposes as owners of a portion of the Trust's
assets as described below. The Certificates issued by a Trust that is treated as
a grantor trust are referred to herein as "Grantor Trust Certificates".
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 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 and late payment charges received by the Servicer.
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
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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. 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
"coupon stripping" rules of the Code discussed below.
Premium. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such 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. 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 acquires during the year of
the election or thereafter.
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 by 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
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 Certificate, including the date of purchase but
excluding the date of disposition. In the case of an original
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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 Distribution 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 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 holder's undivided interest over
such holder'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
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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 holder 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 above applies. Any such deferred interest
expense would not exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later than the year in which
such market discount is includible in income. If such holder elects to include
market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium. To the extent a Grantor Trust Certificateholder is considered to
have purchased an undivided interest in a Receivable for an amount that is
greater than its stated redemption price at maturity of such Receivable, such
Grantor Trust Certificateholder will be considered to have purchased the
Receivable with "amortizable bond premium" equal in amount to such excess. A
Grantor Trust Certificateholder (who does not hold the Certificate for sale to
customers or in inventory) may elect under Section 171 of the Code to amortize
such premium. Under the Code, premium is allocated among the interest payments
on the Receivables to which it relates and is considered as an offset against
(and thus a reduction of) such interest payments. With certain exceptions, such
an election would apply to all debt instruments held or subsequently acquired by
the electing holder. Absent such an election, the premium will be deductible as
an ordinary loss only upon disposition of the Certificate or pro rata as
principal is paid on the Receivables.
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.
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 owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller'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.
Non-U.S. Persons. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 to (i) an owner that is not a U.S.
Person (as defined below) or (ii) a Grantor Trust Certificateholder holding on
behalf of an owner that is not a U.S. Person and accrued OID recognized by the
owner on the sale or exchange of such a Grantor Trust Certificate will not be
subject to withholding to the
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extent that a Grantor Trust Certificate evidences ownership in Receivables
issued after July 18, 1984 by natural persons if such Grantor Trust
Certificateholder complies with certain identification requirements (including
delivery of a statement, signed by the Grantor Trust Certificateholder under
penalties of perjury, certifying that such 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.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust, the
income of which 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.
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 beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
CERTAIN STATE TAX CONSEQUENCES WITH RESPECT TO TRUSTS FOR
WHICH A PARTNERSHIP ELECTION IS MADE
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 Trusts for which a partnership election is made, 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. Noteholders and Certificateholders are urged to consult
their own tax advisors with respect to state tax consequences arising out of the
purchase, ownership and disposition of Notes and Certificates.
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 for which a partnership
election is made and the Notes, Certificates and related terms, parties and
documents applicable to such Trust.
TAX CONSEQUENCES WITH RESPECT TO THE NOTES
It is expected that Tax Counsel will advise each such 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, Noteholders not otherwise subject to taxation in
California should not become subject to taxation in California solely because of
a holder's ownership of Notes. However, a Noteholder already subject to
California's income tax or franchise tax could be required to pay additional
California tax as a result of the holder's ownership or disposition of Notes.
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TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS A
PARTNERSHIP
Based on a regulation 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, if the arrangement
created by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, Tax Counsel will opine that the
same treatment should also apply 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 distributions to
Certificateholders). A Certificateholder also should not be subject to the
California franchise tax on income received through the partnership if such
Certificateholder is not otherwise subject to taxation in California.
Under current law, Certificateholders that are nonresidents of California
and are not otherwise subject to California income tax should not 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
distributions to Certificateholders). A Certificateholder not otherwise subject
to tax in California would not become subject to California tax as a result of
its mere ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of 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
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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. Due to the complexities of the
"prohibited transaction" rules and the penalties imposed upon persons involved
in prohibited transactions, it is important that the fiduciary of any Benefit
Plan considering the purchase of Securities consult with its tax and/or legal
advisors regarding whether the assets of the related Trust would be considered
plan assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to purchase, the principal amount of each
class of Notes and Certificates, as the case may be, of the related series set
forth therein and in the related Prospectus Supplement.
In each of the Underwriting Agreements with respect to any given series of
Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to 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 Andrews &
Kurth L.L.P. In addition, certain United States federal and California state tax
and other matters will be passed upon for the related Trust by Andrews & Kurth
L.L.P.
68
<PAGE> 114
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
Actuarial Receivables....................................................................... 15
Administration Agreement.................................................................... 49
Administration Fee.......................................................................... 50
Administrative Purchase Payment............................................................. 40
Administrative Receivable................................................................... 40
Administrator............................................................................... 49
Advances.................................................................................... 7, 42
APR......................................................................................... 6
Base Rate................................................................................... 26
Benefit Plan................................................................................ 67
Business Day................................................................................ 27
Calculation Agent........................................................................... 28
Calculation Date............................................................................ 28, 29, 30, 31
CD Rate..................................................................................... 28
CD Rate Determination Date.................................................................. 28
CD Rate Security............................................................................ 26
Cedel....................................................................................... 35
Cedel Participants.......................................................................... 35
Certificate Balance......................................................................... 4
Certificate Owners.......................................................................... 13
Certificate Pool Factor..................................................................... 18
Certificateholders.......................................................................... 13
Certificates................................................................................ -i-
Closing Date................................................................................ 5, 38
Code........................................................................................ 56
Collection Account.......................................................................... 39
Collection Period........................................................................... 41
Commercial Paper Rate....................................................................... 29
Commercial Paper Rate Determination Date.................................................... 29
Commercial Paper Rate Security.............................................................. 26
Commission.................................................................................. 2
Cooperative................................................................................. 35
Cutoff Date................................................................................. 5, 13
Dealer Agreements........................................................................... 13
Dealer Recourse............................................................................. 8, 17
Dealers..................................................................................... 5, 13
Definitive Certificates..................................................................... 36
Definitive Notes............................................................................ 36
Definitive Securities....................................................................... 32, 36
Depository.................................................................................. 21
Designated LIBOR Page....................................................................... 31
Determination Date.......................................................................... 45
Disqualified Persons........................................................................ 67
Distribution Date........................................................................... 21, 25
DTC Participants............................................................................ 21, 33
ECU......................................................................................... 27
Eligible Deposit Account.................................................................... 40
Eligible Institution........................................................................ 40
Eligible Investments........................................................................ 39
ERISA....................................................................................... 9
</TABLE>
69
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
Euroclear................................................................................... 35
Euroclear Operator.......................................................................... 35
Euroclear Participants...................................................................... 35
Events of Default........................................................................... 22
Excess Payment.............................................................................. 42
Federal Funds Rate.......................................................................... 29
Federal Funds Rate Determination Date....................................................... 29
Federal Funds Rate Security................................................................. 26
Final Scheduled Maturity Date............................................................... 7
Financed Vehicles........................................................................... 5
Fixed Rate Securities....................................................................... 26
Floating Rate Securities.................................................................... 26
Grantor Trust Certificateholders............................................................ 62
Grantor Trust Certificates.................................................................. 62
Indenture................................................................................... 3
Indenture Trustee........................................................................... -i-
Index....................................................................................... 32
Index Currencies............................................................................ 32
Index Currency.............................................................................. 31
Index Maturity.............................................................................. 26
Indexed Principal Amount.................................................................... 32
Indexed Securities.......................................................................... 32
Indirect DTC Participants................................................................... 33
Insolvency Event............................................................................ 47
Insolvency Laws............................................................................. 53
Interest Period............................................................................. 28
Interest Rate............................................................................... 3
Interest Reset Date......................................................................... 26, 27
Interest Reset Period....................................................................... 27
Investment Earnings......................................................................... 40
IRS......................................................................................... 56
Issuer...................................................................................... 3
LIBOR....................................................................................... 30
LIBOR Determination Date.................................................................... 30
LIBOR Security.............................................................................. 26
London Business Day......................................................................... 27
Money Market Yield.......................................................................... 29
Note Pool Factor............................................................................ 18
Noteholders................................................................................. 13
Notes....................................................................................... -i-
Obligors.................................................................................... 5, 13
Pass Through Rate........................................................................... 7
Payahead Account............................................................................ 39
Pool Balance................................................................................ 18, 43
Pooling and Servicing Agreement............................................................. 3, 5
Precomputed Advance......................................................................... 6, 42
Precomputed Receivables..................................................................... 15
Prepayment.................................................................................. 42
Prepayments................................................................................. 16
Principal Balance........................................................................... 43
Principal Financial Center.................................................................. 31
</TABLE>
70
<PAGE> 116
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
Prospectus Supplement....................................................................... -i-
Receivables................................................................................. -i-, 5
Receivables Pool............................................................................ 13
Receivables Purchase Agreement.............................................................. 38
Registration Statement...................................................................... 2
Related Documents........................................................................... 24
Required Rate............................................................................... 45
Required Yield Maintenance Amount........................................................... 45
Reserve Fund................................................................................ 44
Rule of 78s Receivables..................................................................... 15
Sale and Servicing Agreement................................................................ 5
Schedule of Receivables..................................................................... 38
Securities.................................................................................. -i-
Securities Act.............................................................................. 2-
Securityholders............................................................................. 13
Seller...................................................................................... -i-, 3
Servicer.................................................................................... -i-, 3
Servicer Default............................................................................ 46
Servicing Fee............................................................................... 43
Servicing Fee Rate.......................................................................... 43
Short-Term Note............................................................................. 57
Simple Interest Advance..................................................................... 7, 42
Simple Interest Receivables................................................................. 15
Spread...................................................................................... 26
Spread Multiplier........................................................................... 26
Strip Certificates.......................................................................... 4
Strip Notes................................................................................. 4
Tax Counsel................................................................................. 55
TMCC........................................................................................ 3, 19
TMS......................................................................................... 11, 19
Transfer and Servicing Agreements........................................................... 38
Treasury Rate............................................................................... 31
Treasury Rate Determination Date............................................................ 31
Treasury Rate Security...................................................................... 26
Trust....................................................................................... -i-, 3
Trust Accounts.............................................................................. 39
Trust Agreement............................................................................. 3
Trustee..................................................................................... -i-
Underwriting Agreements..................................................................... 68
Warranty Purchase Payment................................................................... 38
Warranty Receivable......................................................................... 38
Weighted Average Life....................................................................... 16
Yield Maintenance Account................................................................... 44
Yield Maintenance Agreement................................................................. 45
Yield Maintenance Deposit................................................................... 45
</TABLE>
71
<PAGE> 117
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, THE SELLER, THE SERVICER
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES OFFERED HEREBY, NOR AN OFFER OF THE SECURITIES IN ANY STATE OR
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER WOULD BE UNLAWFUL.
________________________
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........................... S-2
Reports to Certificateholders................... S-2
Summary of Terms................................ S-3
Risk Factors.................................... S-12
The Trust....................................... S-14
The Receivables Pool............................ S-15
Delinquencies, Repossessions and Net Losses..... S-18
The Seller and the Servicer..................... S-20
Use of Proceeds................................. S-20
Prepayment and Yield Considerations............. S-20
Pool Factors and Trading Information............ S-20
Description of the Certificates................. S-21
ERISA Considerations............................ S-30
Underwriting.................................... S-34
Legal Opinions.................................. S-34
Index of Terms.................................. S-35
ANNEX A: Global Clearance, Settlement and Tax
Documentation Procedures...................... A-1
PROSPECTUS
Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Summary of Terms................................ 3
Risk Factors.................................... 10
The Trusts...................................... 13
The Trustee..................................... 14
The Receivables Pools........................... 15
Delinquencies, Repossessions and Net Losses..... 16
Weighted Average Life of the Securities......... 16
Pool Factors and Trading Information............ 18
Use of Proceeds................................. 18
The Seller...................................... 18
The Servicer.................................... 19
Description of the Notes........................ 21
Description of the Certificates................. 25
Certain Information Regarding the Securities.... 26
Description of the Transfer and Servicing
Agreements.................................... 38
Certain Legal Aspects of the Receivables........ 50
Certain Federal Income Tax Consequences......... 55
ERISA Considerations............................ 67
Plan of Distribution............................ 68
Legal Opinions.................................. 68
Index of Terms.................................. 69
</TABLE>
UNTIL OCTOBER 22, 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
================================================================================
$744,967,000
TOYOTA AUTO RECEIVABLES
1996-A GRANTOR TRUST
$722,335,000 6.30% ASSET
BACKED CERTIFICATES, CLASS A
$22,632,000 6.50% ASSET
BACKED CERTIFICATES, CLASS B
TOYOTA MOTOR CREDIT
RECEIVABLES CORPORATION
SELLER
TOYOTA MOTOR CREDIT CORPORATION
SERVICER
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
JOINT GLOBAL COORDINATORS AND
JOINT BOOKRUNNERS
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
------------------------
CO-LEAD MANAGERS WITH RESPECT TO THE
CLASS A CERTIFICATES
CS FIRST BOSTON
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
------------------------
CO-MANAGERS WITH RESPECT TO THE
CLASS A CERTIFICATES
CHASE SECURITIES INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
NOMURA INTERNATIONAL PLC
SBC WARBURG
A DIVISION OF SWISS BANK CORPORATION
UBS SECURITIES
================================================================================
<PAGE> 118
PRINCIPAL OFFICES OF THE SELLER
Toyota Motor Credit Receivables Corporation
19001 South Western Avenue
Torrance, California 90509
United States
JOINT GLOBAL COORDINATORS AND JOINT BOOKRUNNERS
<TABLE>
<S> <C>
Goldman, Sachs & Co. Lehman Brothers Inc.
</TABLE>
CO-LEAD MANAGERS
CS First Boston
Merrill Lynch & Co.
Salomon Brothers Inc
CO-MANAGERS
<TABLE>
<S> <C>
Chase Securities Inc. Nomura International plc
First Chicago Capital Markets, Inc. SBC Warburg
J.P. Morgan & Co. A Division of Swiss Bank Corporation
Morgan Stanley & Co. UBS Securities
Incorporated
</TABLE>
TRUSTEE, REGISTRAR AND PAYING AGENT (U.S.)
Bankers Trust Company
Four Albany Street
New York, New York 10006
United States
ADDITIONAL PAYING AGENT
Bankers Trust Luxembourg S.A.
14 Boulevard F.D. Roosevelt
L-2450, Luxembourg
<TABLE>
<S> <C>
LUXEMBOURG LISTING AGENT HONG KONG LISTING AGENT
Bankers Trust Luxembourg S.A. Clifford Chance
14 Boulevard F.D. Roosevelt 30th Floor, Jardine House
L-2450, Luxembourg One Connaught Place
Hong Kong
LEGAL ADVISER INDEPENDENT PUBLIC ACCOUNTANTS
(as to United States law) Price Waterhouse LLP
Andrews & Kurth L.L.P. 400 South Hope Street, 22nd Floor
601 S. Figueroa, Suite 4200 Los Angeles, California 90071-2889
Los Angeles, California 90017 United States
United States
</TABLE>
