<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 16, 2000
$1,105,079,000
TOYOTA AUTO RECEIVABLES 2000-A OWNER TRUST
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
$305,000,000 7.12% ASSET BACKED NOTES, CLASS A-2
$523,000,000 7.18% ASSET BACKED NOTES, CLASS A-3
$277,079,000 7.21% ASSET BACKED NOTES, CLASS A-4
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE S-13 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 9 IN THE
ACCOMPANYING PROSPECTUS.
This prospectus supplement does not contain complete information about the
offering of the notes. No one may use this prospectus supplement to offer and
sell the notes unless it is accompanied by the prospectus. If any statements
in this prospectus supplement conflict with statements in the prospectus, the
statements in this prospectus supplement will control.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NOTES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes are asset backed securities issued by the trust. The notes are
not obligations of Toyota Motor Credit Corporation, Toyota Motor Credit
Receivables Corporation, Toyota Motor Sales, U.S.A., Inc. or any of their
respective affiliates. Neither the notes nor the receivables are insured or
guaranteed by any governmental agency.
The trust will issue the following notes:
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FINAL
INITIAL FIRST SCHEDULED
PRINCIPAL INTEREST ACCRUAL INTEREST PAYMENT
AMOUNT RATE(2) METHOD(2) PAYMENT DATE DATE
------------ ------- ---------- ------------- ----------
Class A-1 Notes(1).......................................... $374,106,000 6.83375% Actual/360 July 17, 2000 7/15/2001
Class A-2 Notes............................................. $305,000,000 7.12000% 30/360 July 17, 2000 12/15/2002
Class A-3 Notes............................................. $523,000,000 7.18000% 30/360 July 17, 2000 8/15/2004
Class A-4 Notes............................................. $277,079,000 7.21000% 30/360 July 17, 2000 4/15/2007
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(1) The Class A-1 Notes are not offered by this prospectus supplement.
(2) Interest generally will accrue on the Class A-1 Notes from payment date to payment date, and on the Class A-2, Class A-3
and Class A-4 Notes from the 15th day of each month to the 15th day of the succeeding month.
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The terms of the offering are as follows:
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT SELLER(2)
----------------- ------------ ---------------
<S> <C> <C> <C>
Per Class A-2 Note.......................................... 99.99711% 0.125% 99.87211%
Per Class A-3 Note.......................................... 99.98472% 0.175% 99.80972%
Per Class A-4 Note.......................................... 99.97541% 0.255% 99.72041%
Total....................................................... $1,104,922,137 $2,003,051 $1,102,919,086
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(1) Plus accrued interest, if any, from June 27, 2000.
(2) Before deducting expenses payable by Toyota Motor Credit Receivables Corporation, as the seller, estimated
to be $650,000.
The notes will be delivered in book-entry form only on or about June 27, 2000.
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the notes is provided in two separate documents that
progressively provide more detail:
- the accompanying prospectus, which provides general information, some of
which may not apply to a particular class of notes, including your notes;
and
- this prospectus supplement, which describes the specific terms of your
class of notes.
IF THE TERMS OF YOUR NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
Cross-references are included in this prospectus supplement and in the
prospectus which direct you to more detailed descriptions of a particular topic.
You can also find references to key topics in the table of contents on the back
cover of the prospectus.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "Index of Terms" beginning
on page S-43 in this prospectus supplement and under the caption "Index of
Terms" beginning on page 86 in the accompanying prospectus.
S-2
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SUMMARY OF TERMS
THE FOLLOWING INFORMATION HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT
AND PROVIDES A GENERAL OVERVIEW OF THE TERMS OF THE NOTES. TO UNDERSTAND ALL OF
THE TERMS OF THE OFFERING OF THESE NOTES, YOU SHOULD READ CAREFULLY THIS ENTIRE
DOCUMENT AND THE ACCOMPANYING PROSPECTUS. BOTH DOCUMENTS CONTAIN INFORMATION YOU
SHOULD CONSIDER WHEN MAKING YOUR INVESTMENT DECISION.
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RELEVANT PARTIES
ISSUER........................................ Toyota Auto Receivables 2000-A Owner Trust, a
Delaware business trust.
SELLER........................................ Toyota Motor Credit Receivables Corporation.
SERVICER...................................... Toyota Motor Credit Corporation.
INDENTURE TRUSTEE............................. U.S. Bank National Association.
OWNER TRUSTEE................................. U.S. Bank National Association.
RELEVANT AGREEMENTS
INDENTURE..................................... The indenture between the issuer and the indenture
trustee. The indenture provides for the terms
relating to the notes.
TRUST AGREEMENT............................... The trust agreement between the seller, the owner
trustee and the Delaware trustee. The trust
agreement governs the creation of the trust and
provides for the terms relating to the
certificates.
SALE AND SERVICING AGREEMENT.................. The sale and servicing agreement between the
servicer and the seller. The sale and servicing
agreement governs the transfer of the receivables
by the seller to the trust and the servicing of the
receivables by the servicer.
ADMINISTRATION AGREEMENT...................... The administration agreement between Toyota Motor
Credit Corporation as the administrator, the owner
trustee and the indenture trustee. The
administration agreement governs the provision of
reports by the administrator and the performance by
the administrator of other administrative duties
for the trust.
RECEIVABLES PURCHASE AGREEMENT................ The receivables purchase agreement between Toyota
Motor Credit Corporation and the seller. The
receivables purchase agreement governs the sale of
the receivables from Toyota Motor Credit
Corporation to the seller.
RELEVANT DATES
CLOSING DATE.................................. Expected to be June 27, 2000.
CUTOFF DATE................................... June 1, 2000
PAYMENT DATES................................. The trust will pay interest and principal on the
notes on the fifteenth day of each month. If the
fifteenth day of the month is not a business day,
payments on the notes will be made on the next
business day. The date that any payment is made is
called a payment date. The first payment date is
July 17, 2000.
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A "business day" is any day except:
- a Saturday or Sunday; or
- a day on which banks in New York, Chicago or San
Francisco are closed.
Interest will accrue on the Class A-1 Notes from
payment date to payment date, and on the
Class A-2, Class A-3 and Class A-4 Notes from the
fifteenth day of each calendar month to the
fifteenth day of the next calendar month, except
that for all classes of notes the first interest
accrual period will begin on the closing date. The
Seller's fractional undivided interest (described
below) will not bear interest.
FINAL SCHEDULED PAYMENT DATES................. The final principal payment for each class of notes
is scheduled to be made on the related final
scheduled payment date specified on the front cover
of this prospectus supplement.
RECORD DATE................................... So long as the notes are in book-entry form, the
trust will make payments on the notes to the
holders of record on the day immediately preceding
the related payment date. If the notes are issued
in definitive form, the record date will be the
last day of the month preceding the related payment
date.
COLLECTION PERIOD............................. The calendar month preceding the related payment
date.
DESCRIPTION OF THE NOTES........................ The trust is offering the classes of notes listed
below by way of this prospectus supplement. All of
the notes will be secured by the assets of the
trust pursuant to the indenture.
Class A-2 7.12% Asset Backed Notes in the aggregate
initial principal amount of $305,000,000. CUSIP
No. 89232R AB 9.
Class A-3 7.18% Asset Backed Notes in the aggregate
initial principal amount of $523,000,000. CUSIP
No. 89232R AC 7.
Class A-4 7.21% Asset Backed Notes in the aggregate
initial principal amount of $277,079,000. CUSIP
No. 89232R AD 5.
The trust will also issue Class A-1 6.83375% Asset
Backed Notes in the aggregate initial principal
amount of $374,106,000. The Class A-1 Notes are not
offered by this prospectus supplement. Instead, the
Class A-1 Notes will be sold in a separate
transaction to Toyota Motor Credit Corporation. Any
information relating to the Class A-1 Notes
contained in this prospectus supplement is included
only for informational purposes to facilitate a
better understanding of the Class A-2, Class A-3
and Class A-4 Notes.
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A description of how payments of interest on and
principal of the Class A Notes will be made on each
payment date is provided under "Description of the
Notes" and "Payments to Noteholders" in this
prospectus supplement.
SUBORDINATED SELLER'S INTEREST.................. The trust will issue to Toyota Motor Credit
Receivables Corporation, as the Seller, in
certificated form, a fractional undivided interest
in the trust that includes the right to payment of
certain available amounts in excess of those
necessary to make payments on the notes on each
payment date to the extent specified in this
prospectus supplement. This fractional undivided
interest will not bear interest and is not offered
by this prospectus supplement.
MINIMUM DENOMINATIONS........................... The notes will be issued only in denominations of
$1,000 or more.
REGISTRATION OF THE NOTES....................... You will generally hold your interests in the notes
through The Depository Trust Company in the United
States, or Clearstream Banking societe anonyme or
the Euroclear System in Europe or Asia. This is
referred to as book-entry form. You will not
receive a definitive note except under limited
circumstances.
We expect the notes to be delivered through The
Depository Trust Company, Clearstream Banking
societe anonyme and the Euroclear System against
payment in immediately available funds on or about
June 27, 2000.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO
"ANNEX A: GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES" IN THIS PROSPECTUS
SUPPLEMENT AND "CERTAIN INFORMATION REGARDING THE
SECURITIES--BOOK-ENTRY REGISTRATION" IN THE
ACCOMPANYING PROSPECTUS.
TAX STATUS...................................... Subject to important considerations described in
this prospectus supplement and the prospectus,
O'Melveny & Myers LLP, special tax counsel to the
trust, will deliver its opinion that:
- the Class A-2, Class A-3 and Class A-4 Notes
will be characterized as debt;
and
- the trust will not be characterized as an
association or a publicly traded partnership
taxable as a corporation for federal income and
California income and franchise tax purposes.
If you purchase the notes, you will agree to treat
the notes as debt.
YOU SHOULD REFER TO "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" IN THIS PROSPECTUS SUPPLEMENT AND IN
THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL
INFORMATION
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S-5
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CONCERNING THE APPLICATION OF FEDERAL INCOME AND
CALIFORNIA TAX LAWS TO THE TRUST AND THE NOTES.
ERISA CONSIDERATIONS............................ The notes are generally eligible for purchase by
employee benefit plans, subject to the
considerations discussed under "ERISA
Considerations" in this prospectus supplement and
in the accompanying prospectus.
YOU SHOULD REFER TO "ERISA CONSIDERATIONS" IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING
PROSPECTUS. IF YOU ARE A BENEFIT PLAN FIDUCIARY
CONSIDERING PURCHASE OF THE NOTES, YOU SHOULD,
AMONG OTHER THINGS, CONSULT WITH YOUR COUNSEL IN
DETERMINING WHETHER ALL REQUIRED CONDITIONS HAVE
BEEN SATISFIED.
RATINGS......................................... It is a condition to the issuance of the notes that
the Class A-2, Class A-3 and Class A-4 Notes be
rated "AAA" by Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc., and
"Aaa" by Moody's Investors Service, Inc.
A SECURITY RATING IS NOT A RECOMMENDATION TO BUY,
SELL OR HOLD NOTES. THE RATINGS OF THE NOTES
ADDRESS THE LIKELIHOOD OF THE PAYMENT OF PRINCIPAL
AND INTEREST ON THE NOTES IN ACCORDANCE WITH THEIR
TERMS. A RATING AGENCY MAY SUBSEQUENTLY LOWER OR
WITHDRAW ITS RATING OF ANY CLASS OF THE NOTES. IF
THIS HAPPENS, NO PERSON OR ENTITY WILL BE OBLIGATED
TO PROVIDE ANY ADDITIONAL CREDIT ENHANCEMENT FOR
THE NOTES.
THE TRUST WILL OBTAIN THE RATINGS MENTIONED ABOVE
FROM MOODY'S INVESTORS SERVICE, INC. AND STANDARD &
POOR'S RATINGS SERVICES, A DIVISION OF THE
MCGRAW-HILL COMPANIES, INC. HOWEVER, ANOTHER RATING
AGENCY MAY RATE THE NOTES AND, IF SO, THE RATING
MAY BE LOWER THAN THE RATINGS OBTAINED BY THE TRUST
STRUCTURAL SUMMARY
OVERVIEW........................................ TOYOTA AUTO RECEIVABLES 2000-A OWNER TRUST
STRUCTURAL DIAGRAM
[LOGO]
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S-6
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ASSETS OF THE TRUST............................. Purchasers of Toyota and Lexus cars and light duty
trucks often finance their purchases by entering
into retail installment sales contracts with Toyota
and Lexus dealers who then resell the contracts to
Toyota Motor Credit Corporation. The purchasers of
the vehicles are referred to as the "obligors"
under the contracts. Toyota Motor Credit
Receivables Corporation will purchase a specified
amount of these contracts from Toyota Motor Credit
Corporation and on the closing date will sell them
to the trust in exchange for the notes. These
contracts are referred to as the "receivables." The
receivables will have a total outstanding principal
balance of approximately $1,524,932,796 as of the
cutoff date.
Toyota Motor Credit Receivables Corporation will
sell the Class A-2, Class A-3 and Class A-4 Notes
to investors for cash and will use this cash to pay
part of the purchase price for its purchase of the
receivables from Toyota Motor Credit Corporation.
Toyota Motor Credit Receivables Corporation will
pay the remainder of the purchase price from the
net proceeds from the sale of the Class A-1 Notes
to Toyota Motor Credit Corporation and by issuing
to Toyota Motor Credit Corporation a subordinated
non-recourse promissory note. The chart above
represents the flow of funds provided by investors
for the notes and the receivables sold by Toyota
Motor Credit Corporation.
On the closing date, the trust will purchase
receivables having the following characteristics as
of the cutoff date:
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<S> <C> <C>
Total Cutoff Date Principal
Balance.......................... $1,524,932,796
Number of Receivables.............. 98,405
Average Cutoff Date Principal
Balance.......................... $15,496
Range of Cutoff Date Principal
Balances......................... $340 to $49,989
Average Original Amount Financed... $16,731
Range of Original Amount
Financed......................... $776 to $57,694
Weighted Average APR(1)............ 10.51%
Range of APRs...................... 8% to 15%
Weighted Average Original Number of
Scheduled Payments(1)............ 59.5
Range of Original Number of
Scheduled Payments............... 12 to 72
Weighted Average Remaining Number
of Scheduled Payments(1)......... 55.7
Range of Remaining Number of
Scheduled Payments............... 4 to 72
------------------------
(1) Weighted by principal balance as of the cutoff
date.
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The assets of the trust will also include:
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S-7
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- certain monies due or received under the
receivables on and after the cutoff date;
- security interests in the vehicles financed
under the receivables;
- certain bank accounts and the proceeds of those
accounts; and
- proceeds from claims under certain insurance
policies relating to the financed vehicles or
the obligors under the receivables and certain
rights of the seller under the receivables
purchase agreement.
FOR A MORE DETAILED DESCRIPTION OF THE ASSETS OF
THE TRUST, SEE "THE TRUST--GENERAL" IN THIS
PROSPECTUS SUPPLEMENT.
SERVICING....................................... Toyota Motor Credit Corporation will be appointed
to act as servicer for the receivables owned by the
trust. The servicer will handle all collections,
administer defaults and delinquencies and otherwise
service the contracts. On each payment date, the
trust will pay the servicer a monthly fee equal to
one-twelfth of 1.00% of the total principal balance
of the receivables as of the first day of the
related collection period. The servicer will also
receive additional servicing compensation in the
form of certain investment earnings, late fees and
other administrative fees and expenses or similar
charges received by the servicer during such month.
The servicer will be obligated to advance to the
trust interest on any receivable that is due but
unpaid by the obligor. In addition, the servicer
will be obligated to advance to the trust principal
that is due but unpaid by the obligor on any
precomputed receivable (but not on any simple
interest receivable). However, the servicer will
not be required to make an advance if it determines
that the advance will not ultimately be
recoverable. The trust will reimburse the servicer
from later collections on the related delinquent
receivable. If the servicer determines that the
advance will not ultimately be recoverable from
proceeds of the related receivable, the servicer
may be reimbursed from collections on other
receivables.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO
"TRANSFER AND SERVICING AGREEMENTS--ADVANCES" IN
THIS PROSPECTUS SUPPLEMENT AND TO "TRANSFER AND
SERVICING AGREEMENTS--SERVICING COMPENSATION AND
PAYMENT OF EXPENSES" IN THE ACCOMPANYING
PROSPECTUS.
INTEREST AND PRINCIPAL PAYMENTS................. In general, noteholders are entitled to receive
payments of interest and principal from the trust
only to the extent that collections on the
receivables, advances and amounts on deposit in the
reserve account (and available for
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those purposes) are sufficient to make the payments
described below in the order of priority described
below.
A. INTEREST RATES. The Class A Notes will bear
interest for each interest accrual period at the
fixed annual interest rates specified on the cover
of this prospectus supplement.
B. INTEREST ACCRUAL
The Class A-1 Notes will accrue interest on an
actual/360 basis from (and including) a payment
date to (but excluding) the next payment date,
except that the first interest accrual period will
be from (and including) the closing date to (but
excluding) July 17, 2000. This means that the
interest due on each payment date will be the
product of: (i) the outstanding principal balance,
(ii) the interest rate, and (iii) the actual
number of days since the previous payment date (or,
in the case of the first payment date, since the
closing date) divided by 360.
The Class A-2, Class A-3 and Class A-4 Notes will
accrue interest on a 30/360 basis from (and
including) the 15th day of each calendar month to
(but excluding) the 15th day of the succeeding
calendar month except that the first interest
accrual period will be from (and including) the
closing date to (but excluding) July 15, 2000. This
means that the interest due on each payment date
will be the product of: (i) the outstanding
principal balance, (ii) the interest rate, and
(iii) 30 (or, in the case of the first payment
date, 18) divided by 360.
If noteholders of any class do not receive all
interest owed on their notes on any payment date,
the trust will make payments of interest on later
payment dates to make up the shortfall (together
with interest on such amounts at the applicable
interest rate for such class, to the extent
permitted by law) to the extent funds are available
to do so pursuant to the payment priorities
described in this prospectus supplement.
FOR A MORE DETAILED DESCRIPTION OF THE PAYMENT OF
INTEREST ON THE NOTES YOU SHOULD REFER TO THE
SECTIONS OF THIS PROSPECTUS SUPPLEMENT ENTITLED
"DESCRIPTION OF THE NOTES--PAYMENTS OF INTEREST"
AND "PAYMENTS TO NOTEHOLDERS".
C. PAYMENT PRIORITIES
On each payment date, the trust will make payments
from collections on the receivables during the
related collection period and, if necessary, from
amounts withdrawn from the reserve account, to the
extent available for these purposes. Advances made
by the servicer will be included in collections,
and reimbursements of servicer advances will be
deducted from collections before any payments are
made. The
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trust generally will make payments in the following
order of priority:
1. SERVICING FEE--the servicing fee payable to the
servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis,
accrued and unpaid interest on the Class A-1,
Class A-2, Class A-3 and Class A-4 Notes,
together with any amounts that were to be paid
pursuant to this clause (2) on any prior
payment date but were not paid because
sufficient funds were not available to make the
payment (with interest accrued on any unpaid
amounts as described under "Payments to
Noteholders" in this prospectus supplement);
3. ALLOCATION OF PRINCIPAL--to the principal
distribution account, an amount equal to the
excess, if any, of (x) the principal balance of
the receivables as of the end of the collection
period preceding the related collection period
(or, in the case of the first collection
period, as of the cut-off date) over (y) the
principal balance of the receivables as of the
end of the related collection period, together
with any amounts that were to be paid pursuant
to this clause (3) on any prior payment date
but were not paid because sufficient funds were
not available to make the payment;
4. RESERVE ACCOUNT DEPOSIT--to the reserve
account, the amount, if any, necessary to cause the
balance of funds in the account to equal the
required balance described under "Reserve
Account" below; and
5. EXCESS AMOUNTS--any remaining amounts will be
distributed to Toyota Motor Credit Receivables
Corporation as payment on its fractional
undivided interest in the trust.
PAYMENTS OF PRINCIPAL--On each payment date, from
the amounts deposited into the principal
distribution account from the allocations of
principal described in clause (3) above, the trust
generally will pay principal of the securities in
the following priority:
1. to the Class A-1 Notes until they are paid in
full;
2. to the Class A-2 Notes until they are paid in
full;
3. to the Class A-3 Notes until they are paid in
full; and
4. to the Class A-4 Notes until they are paid in
full.
After the Class A Notes are paid in full, any
remaining funds will be paid to Toyota Motor Credit
Receivables
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Corporation as payment on its fractional undivided
interest in the trust.
However, if an event of default under the indenture
results in acceleration of the notes, the payment
priorities described above will change from pro
rata payments of interest followed by sequential
payments of principal, to pro rata payments of
interest followed by pro rata payments of principal
to all four classes of Class A Notes.
Under those circumstances, the amounts available to
make payments to any class of Class A Notes may be
reduced based on the sufficiency of proceeds from
the liquidation of the assets of the trust.
FOR INFORMATION CONCERNING SUCH CHANGES IN
PRIORITIES OF PAYMENTS AND AMOUNTS AVAILABLE, SEE
"PAYMENTS TO NOTEHOLDERS" IN THIS PROSPECTUS
SUPPLEMENT.
D. SUBORDINATION
As long as any Class A Notes remain outstanding,
all payments on each payment date in respect of
Toyota Motor Credit Receivables Corporation's
undivided beneficial interest in the trust will be
subordinated to payments of interest and principal
on the Class A Notes.
E. RESERVE ACCOUNT
On the closing date, the seller will deposit
$3,812,332 (0.25% of the outstanding principal
balance of the receivables as of the cutoff date)
into the reserve account for the trust.
On each payment date, if collections on the
receivables and advances by the servicer are
insufficient to pay the first three items listed
under "Interest and Principal Payments--Payment
Priorities" above, the indenture trustee will
withdraw funds (if available) from the reserve
account to pay those amounts.
If the principal balance of a class of notes is not
paid in full on the related final scheduled payment
date, the indenture trustee will withdraw amounts
from the reserve account (if available) to pay that
class in full.
The amount required to be on deposit in the reserve
account at the close of business on any payment
date will be the greater of (a) 0.75% of the
outstanding principal balance of the receivables as
of the end of the related collection period or
(b) $7,624,664 (0.50% of the outstanding principal
balance of the receivables as of the cutoff date),
except that if charge-offs or delinquencies exceed
specified levels, the required amount will be the
greatest of (i) 0.75% of the outstanding principal
balance of the receivables as of the end of the
related collection period, (ii) $7,624,664 (0.50%
of the outstanding
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principal balance of the receivables as of the
cutoff date), and (iii) 5.50% of the outstanding
principal balance of the notes as of that payment
date (after giving effect to payments of principal
made on that date). On each payment date, the trust
will deposit, to the extent available, the amount,
if any, necessary to cause the balance of funds on
deposit in the reserve account to equal the
required balance set forth above.
F. FINAL SCHEDULED PAYMENT DATES
The trust is required to pay the outstanding
principal amount of each class of notes in full on
or before the related final scheduled payment date
specified on the cover of this prospectus
supplement.
G. OPTIONAL REDEMPTION; CLEAN-UP CALL
The servicer may redeem the Class A Notes in whole,
but not in part, at a price equal to the unpaid
principal amount of those notes plus any accrued
and unpaid interest on the notes, on any payment
date when the outstanding principal balance of the
receivables has declined to 10% or less of the
principal balance of the receivables as of the
cutoff date.
FOR MORE DETAILED INFORMATION REGARDING THIS
OPTION, YOU SHOULD REFER TO "TRANSFER AND SERVICING
AGREEMENTS--OPTIONAL PURCHASE" IN THIS PROSPECTUS
SUPPLEMENT.
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS (AND THOSE SET FORTH UNDER
"RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS) IN DECIDING WHETHER TO PURCHASE
ANY CLASS A NOTES.
PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN
REINVESTMENT RISK TO YOU.
You may receive payment of principal on your notes earlier than you
expected. If that happens, you may not be able to reinvest the principal you
receive at a rate as high as the rate on your notes. Prepayments on the
receivables will shorten the life of the notes to an extent that cannot be
predicted. Prepayments may occur for a number of reasons. Some prepayments may
be caused by the obligors under the receivables. For example, obligors may:
make early payments, since receivables will generally be prepayable at
any time without penalty;
default, resulting in the repossession and sale of the financed vehicle;
or
damage the vehicle or become unable to pay due to death or disability,
resulting in payments to the trust under any existing physical damage,
credit life or other insurance.
Some prepayments may be caused by the seller or the servicer. For example,
the seller will make representations and warranties regarding the receivables,
and the servicer will agree to take or refrain from taking certain actions with
respect to the receivables. If the seller or the servicer breaches its
representation or agreement and the breach is material and cannot be remedied,
it will be required to purchase the affected receivables from the trust. This
will result, in effect, in the prepayment of the purchased receivables. In
addition, the servicer will have the option to purchase the receivables from the
trust when the total outstanding principal balance of the receivables is 10% or
less of the total outstanding principal balance of the receivables as of the
cutoff date. In addition, an event of default under the indenture could cause
your notes to be prepaid. See "BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS
ONLY LIMITED PROTECTION AGAINST POTENTIAL LOSSES" below.
The rate of prepayments on the receivables may be influenced by a variety of
economic, social and other factors. The seller has limited historical experience
with respect to prepayments and cannot predict the actual prepayment rates for
the receivables. The seller, however, believes that the actual rate of payments,
including prepayments, will result in the weighted average life of each class of
notes being shorter than the period from the closing date to the related final
scheduled maturity date.
PAYMENT PRIORITIES INCREASE RISK OF LOSS OR DELAY IN PAYMENT TO CERTAIN NOTES.
Based on the priorities described under "Payments to Noteholders", classes
of notes that receive payments, particularly principal payments, before other
classes will be repaid more rapidly than the other classes. In addition, because
principal of each class of notes will be paid sequentially, classes of notes
that have higher sequential numerical class designations will be outstanding
longer and therefore will be exposed to the risk of losses on the receivables
during periods after other classes have been receiving most or all amounts
payable on their notes, and after which a disproportionate amount of credit
enhancement may have been applied and not replenished.
As a result, the yields of the Class A-3 and A-4 Notes will be relatively
more sensitive to losses on the receivables and the timing of such losses. If
the actual rate and amount of losses exceed your expectations, and if amounts in
the reserve account are insufficient to cover the resulting shortfalls, the
yield to maturity on your notes may be lower than anticipated, and you could
suffer a loss.
Classes of notes that receive payments earlier than expected are exposed to
greater reinvestment risk, and classes of notes that receive principal later
than expected are exposed to greater risk of loss. In either case, the yields on
your notes could be materially and adversely affected.
S-13
<PAGE>
BECAUSE THE TRUST HAS LIMITED ASSETS, THERE IS ONLY LIMITED PROTECTION AGAINST
POTENTIAL LOSSES.
The only sources of funds for payments on the notes are collections on the
receivables (which include proceeds of the liquidation of repossessed vehicles
and of relevant insurance policies), advances by the servicer and the reserve
account. The notes are not obligations of, and will not be insured or guaranteed
by, any governmental agency or the seller, the servicer, Toyota Motor Sales,
U.S.A., Inc., any trustee or any of their affiliates. You must rely solely on
payments on the receivables, advances by the servicer and amounts available in
the reserve account for payments on the notes. Although funds in the reserve
account will be available to cover shortfalls in payments of interest and
principal on each payment date, the amounts deposited in the reserve account
will be limited. If the entire reserve account has been used, the trust will
depend solely on current collections on the receivables and advances by the
servicer to make payments on the notes. Any excess amounts released from the
reserve account to the seller will no longer be available to noteholders on any
later payment date. See "Subordination; Reserve Account" in this prospectus
supplement. If the assets of the trust are not sufficient to pay interest and
principal on the notes you hold, you will suffer a loss.
Certain events that are not entirely within the control of the trust or
Toyota Motor Credit Corporation may result in events of default under the
indenture and cause acceleration of all outstanding Class A Notes. Upon the
occurrence of an event of default under the indenture and the acceleration of
the notes, the trust may be required promptly to sell the receivables, liquidate
the other assets of the trust and apply the proceeds to the payment of the
notes. Liquidation would be likely to accelerate payment of all notes that are
then outstanding. If a liquidation occurs close to the date when any class
otherwise would have been paid in full, repayment of that class might be delayed
while liquidation of the assets is occurring. The trust cannot predict the
length of time that will be required for liquidation of the assets of the trust
to be completed. In addition, the amounts received from a sale in these
circumstances may not be sufficient to pay all amounts owed to the holders of
all classes of notes or any class of notes, and you may suffer a loss. Even if
liquidation proceeds are sufficient to repay the notes in full, any liquidation
that causes principal of a class of notes to be paid before the related final
scheduled payment date will involve the prepayment risks described under
"PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN
REINVESTMENT RISK TO YOU" above. Also, an event of default that results in the
acceleration of the notes will cause priority of payments of all Class A Notes
to change, from pro rata payments of interest followed by sequential payments of
principal, to pro rata payments of interest followed by pro rata payments of
principal. Therefore, all outstanding Class A Notes will be affected by any
shortfall in liquidation proceeds.
PERFORMANCE OF THE RECEIVABLES COULD BE AFFECTED BY ECONOMIC CONDITIONS IN THE
STATES WHERE THE RECEIVABLES WERE ORIGINATED.
If a large number of obligors are located in a particular state, economic
conditions or other factors that negatively affect that state could also
negatively affect the delinquency, credit loss or repossession experience of the
trust. The table entitled "Geographic Distribution of the Receivables by State"
on page S-21 of this prospectus supplement provides important information about
the number and principal amount of receivables located in each state (based on
the address of the related dealer). By cutoff date principal balance, based on
the address of the related dealer, 25.23%, 7.09%, 6.63% and 5.33% of the
receivables were located in California, Illinois, Virginia, and New York,
respectively. By cutoff date principal balance, based on the address of the
related dealer, not more than 5% of the receivables were located in any other
state.
CERTAIN NOTEHOLDERS MAY HAVE LITTLE OR NO CONTROL WITH RESPECT TO IMPORTANT
ACTIONS.
The trust will pledge the property of the trust to the indenture trustee as
collateral for the payment of the notes. As a result, the indenture trustee,
acting at the direction of the holders of a
S-14
<PAGE>
majority in outstanding principal amount of the notes (excluding for such
purposes the outstanding principal amount of any notes held of record or
beneficially owned by Toyota Motor Credit Corporation or any of its affiliates),
has the power to direct the trust to take certain actions in connection with the
property of the trust. The holders of at least 51% of the principal balance of
the outstanding notes (excluding for such purposes the outstanding principal
amount of any notes held of record or beneficially owned by Toyota Motor Credit
Corporation or any of its affiliates) or the indenture trustee acting on behalf
of the holders of such notes, will also have the right under certain
circumstances to terminate the servicer. In addition, those noteholders will
have the right to waive certain events of default or defaults involving the
servicer. See "Description of the Notes--The Indenture--EVENTS OF DEFAULT;
RIGHTS UPON EVENT OF DEFAULT" and "Description of the Transfer and Servicing
Agreements--Rights upon Servicer Default" and "--Waiver of Past Defaults" in the
accompanying prospectus.
PAID-AHEAD SIMPLE INTEREST CONTRACTS MAY AFFECT THE WEIGHTED AVERAGE LIFE OF THE
NOTES.
If an obligor on a simple interest contract makes a payment on the contract
ahead of schedule (for example, because the obligor intends to go on vacation),
the weighted average life of the notes could be affected. This is because the
additional scheduled payments will be treated as a principal prepayment and
applied to reduce the principal balance of the related contract and the obligor
will generally not be required to make any scheduled payments during the period
for which it was paid-ahead. During this paid-ahead period, interest will
continue to accrue on the principal balance of the contract, as reduced by the
application of the additional scheduled payments, but the obligor's contract
would not be considered delinquent during this period. While the servicer may be
required to make interest advances during this period, no principal advances
will be made. Furthermore, when the obligor resumes his required payments, the
payments so paid may be insufficient to cover the interest that has accrued
since the last payment by the obligor. This situation will continue until the
regularly scheduled payments are once again sufficient to cover all accrued
interest and to reduce the principal balance of the contract.
The payment by the trust of the paid-ahead principal amount on the notes
will generally shorten the weighted average life of the notes. However,
depending on the length of time during which a paid-ahead simple interest
contract is not amortizing as described above, the weighted average life of the
notes may be extended. In addition, to the extent the servicer makes advances on
a paid-ahead simple interest contract which subsequently goes into default, the
loss on this contract may be larger than would have been the case had advances
not been made because liquidation proceeds for the contract will be applied
first to reimburse the servicer its advances.
TMCC's portfolio of retail installment sale contracts has historically
included simple interest contracts which have been paid-ahead by one or more
scheduled monthly payments. There can be no assurance as to the number of
contracts in the trust which may become paid-ahead simple interest contracts as
described above or the number or the principal amount of the scheduled payments
which may be paid-ahead.
THE ABSENCE OF A SECONDARY MARKET FOR THE NOTES COULD LIMIT YOUR ABILITY TO
RESELL THE NOTES.
The notes are not expected to be listed on any securities exchange. There
have been times in the past when the absence of a liquid secondary market for
similar asset backed securities has caused the holders thereof to be unable to
sell their securities at all or other than at a significant loss. The absence of
a liquid secondary market for the notes could similarly limit your ability to
resell them. This means that if you want to sell your notes in the future, you
may have difficulty finding a buyer at all and, if you find a buyer, the selling
price may be less than it would have been if a liquid secondary market existed
for the notes. There is currently no secondary market for the notes. Although
the underwriters have stated that they intend to make a market in each class of
notes, they are not
S-15
<PAGE>
obligated to do so. A secondary market may not ever develop for the notes. Even
if such a market does develop, it may not provide sufficient liquidity or
continue for the life of your notes.
BECAUSE THE NOTES ARE IN BOOK-ENTRY FORM, YOUR RIGHTS CAN ONLY BE EXERCISED
INDIRECTLY.
Because the notes will be issued in book-entry form, you will be required to
hold your interest in the notes through The Depository Trust Company in the
United States, or Clearstream Banking societe anonyme or the Euroclear system in
Europe or Asia. Transfers of interests in the notes within The Depository Trust
Company, Clearstream Banking societe anonyme or the Euroclear system must be
made in accordance with the usual rules and operating procedures of those
systems. So long as the notes are in book-entry form, you will not be entitled
to receive a definitive note or certificate representing your interest. The
notes will remain in book-entry form except in the limited circumstances
described under the caption "Certain Information Regarding the
Securities--Book-Entry Registration" in the accompanying prospectus. Unless and
until the notes cease to be held in book-entry form, the indenture trustee will
not recognize you as a Noteholder and the owner trustee will not recognize you
as a "Securityholder", as that term is used in the trust agreement. As a result,
you will only be able to exercise the rights of noteholders indirectly through
The Depository Trust Company (if in the United States) and its participating
organizations, or Clearstream Banking societe anonyme and the Euroclear system
(in Europe or Asia) and their participating organizations. Holding the notes in
book-entry form could also limit your ability to pledge your notes to persons or
entities that do not participate in The Depository Trust Company, Clearstream
Banking societe anonyme or the Euroclear system and to take other actions that
require a physical certificate representing the notes.
Interest and principal on the notes will be paid by the trust to The
Depository Trust Company as the record holder of the notes while they are held
in book-entry form. The Depository Trust Company will credit payments received
from the trust to the accounts of its participants which, in turn, will credit
those amounts to noteholders either directly or indirectly through indirect
participants. This process may delay your receipt of principal and interest
payments from the trust.
THE TRUST
GENERAL
The Toyota Auto Receivables 2000-A Owner Trust (the "Trust") is a Delaware
business trust formed pursuant to the trust agreement (the "Trust Agreement")
between Toyota Motor Credit Receivables Corporation, as seller ("TMCRC", or the
"Seller"), the Owner Trustee and First Union Trust Company, National Association
as Delaware trustee (the "Delaware Trustee"). After its formation, the Trust
will not engage in any activity other than (i) acquiring, holding and managing
the receivables described below under "The Receivables Pool" (the "Receivables")
and the other assets of the Trust and proceeds therefrom, (ii) issuing the
Class A-1 Notes (the "Class A-1 Notes"), Class A-2 Notes (the "Class A-2
Notes"), Class A-3 Notes (the "Class A-3 Notes"), Class A-4 Notes (the
"Class A-4 Notes" and, together with the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes, the "Class A Notes" or the "Notes") and the
subordinated seller's interest (the "Subordinated Seller's Interest" and,
together with the Notes, the "Securities"), (iii) making payments on the Notes
and the Subordinated Seller's Interest and (iv) engaging in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The Trust will initially be capitalized with the Notes and the Subordinated
Seller's Interest. The Trust will use the Notes and the Subordinated Seller's
Interest as consideration for the Receivables transferred to the Trust by the
Seller pursuant to the Sale and Servicing Agreement described in the "Summary of
Terms" (the "Sale and Servicing Agreement"). The Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes are being offered hereby. TMCRC will sell the
Class A-1 Notes to Toyota
S-16
<PAGE>
Motor Credit Corporation ("TMCC") in a separate transaction. TMCRC will deliver
the net proceeds from the sale of the Notes and a subordinated non-recourse
promissory note, to TMCC as consideration for the Receivables transferred to
TMCRC by TMCC pursuant to the Receivables Purchase Agreement described in the
"Summary of Terms" (the "Receivables Purchase Agreement"). The Subordinated
Seller's Interest, evidencing an undivided beneficial interest in the Trust that
is fully subordinate to the interest of the holders of the Notes (i.e., an
equity interest in the Trust), will be retained by TMCRC.
TMCC will be appointed to act as the servicer of the Receivables (the
"Servicer"). TMCC, as Servicer, will service the Receivables pursuant to the
Sale and Servicing Agreement and the Trust Agreement and TMCC will perform
additional administrative services for the Trust, the Owner Trustee and the
Indenture Trustee pursuant to the Administration Agreement. TMCC (or any
successor servicer or successor administrator) will be compensated for such
services as described under "Transfer and Servicing Agreements--Servicing
Compensation" in this Prospectus Supplement and "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" in the
Prospectus.
Pursuant to agreements between TMCC and the Dealers, each Dealer will
repurchase from TMCC those contracts that do not meet certain representations
and warranties made by the Dealer when sold by the Dealer. These Dealer
repurchase obligations are referred to herein as "Dealer Recourse". These
representations and warranties relate primarily to the origination of the
contracts and the perfection of the security interests in the related financed
vehicles, and do not typically relate to the creditworthiness of the related
obligors or the collectability of the contracts. Although the Dealer agreements
with respect to the Receivables will not be assigned to the Trust, the Sale and
Servicing Agreement will require that any recovery by TMCC in respect of any
Receivable pursuant to any Dealer Recourse be deposited in the Collection
Account in satisfaction of TMCC's repurchase obligations under the Sale and
Servicing Agreement. The sales by the Dealers of installment sales contracts to
TMCC do not generally provide for recourse against the Dealers for unpaid
amounts in the event of a default by an obligor thereunder, other than in
connection with the breach of the foregoing representations and warranties.
The Notes will be secured by and payable from the property of the Trust. The
Trust property includes the Receivables, and certain monies due or received
thereunder on or after the Cutoff Date. The Trust property also includes
(i) such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Sale and Servicing
Agreement, as described below; (ii) security interests in the Financed Vehicles
and any accessions thereto; (iii) the rights to proceeds with respect to the
Receivables under physical damage, credit life and disability insurance policies
covering the Financed Vehicles or the Obligors, as the case may be; (iv) the
right to receive proceeds from any Dealer Recourse; (v) the rights of the Seller
under the Receivables Purchase Agreement; (vi) the right to realize upon any
property (including the right to receive future proceeds of liquidation of
Defaulted Receivables) that shall have secured a Receivable and that shall have
been acquired by the Owner Trustee; and (vii) any and all proceeds of the
foregoing.
The Trust's principal offices are in Chicago, Illinois, in care of U.S.
Bank, National Association, as Owner Trustee, at the address set forth below
under "--The Owner Trustee".
S-17
<PAGE>
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes and the Subordinated
Seller's Interest had taken place on such date:
<TABLE>
<S> <C>
Class A-1 Notes............................................. $ 374,106,000
Class A-2 Notes............................................. $ 305,000,000
Class A-3 Notes............................................. $ 523,000,000
Class A-4 Notes............................................. $ 277,079,000
Subordinated Seller's Interest.............................. $ 45,747,796
--------------
Total....................................................... $1,524,932,796
==============
</TABLE>
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
U.S. Bank National Association is the Owner Trustee (the "Owner Trustee")
under the Trust Agreement and the Indenture Trustee (the "Indenture Trustee")
under the Indenture. Its principal executive offices are located at 111 East
Wacker Drive, Chicago, Illinois 60601. The Seller and its affiliates may
maintain normal commercial banking relations with the U.S. Bank National
Association and its affiliates.
THE SELLER AND THE SERVICER
On April 18, 2000, Toyota Motor Corporation, the ultimate parent of TMCC,
announced its plans to establish Toyota Financial Services Corporation, a new
organization that will eventually oversee Toyota Motor Corporation's worldwide
financial service operations, including those in the United States. Toyota
Financial Services Corporation is scheduled to assume ownership of TMCC,
currently a subsidiary of Toyota Motor Sales, U.S.A., Inc., in October, 2000.
In April 2000, TMCC completed the national launch of an expanded tiered
pricing program for retail installment sales contracts. The objective of the
expanded program is to better match customer risk with contract rates charged to
allow profitable purchases of a wider range of risk levels. Implementation of
this expanded program is expected to result in both increased contract yields
and increased credit losses in connection with purchases of higher risk
contracts.
Additional information regarding the Seller and the Servicer is set forth
under the captions "The Seller" and "The Servicer" in the Prospectus.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include the
Receivables purchased as of June 1, 2000 (the "Cutoff Date"). The Receivables
were originated by Dealers in accordance with TMCC's requirements and
subsequently purchased by TMCC. The Receivables evidence the indirect financing
made available by TMCC to the related purchasers (the "Obligors") of the
vehicles financed by the Receivables (the "Financed Vehicles"). On or before the
date of initial issuance of the Notes (the "Closing Date"), TMCC will sell the
Receivables to the Seller pursuant to the receivables purchase agreement (the
"Receivables Purchase Agreement") between the Seller and TMCC. The Seller will,
in turn, sell the Receivables to the Trust pursuant to the Sale and Servicing
Agreement. During the term of the Sale and Servicing Agreement, neither the
Seller nor TMCC may substitute any other retail installment sales contract for
any Receivable sold to the Trust.
S-18
<PAGE>
The Receivables in the Receivables Pool are required to meet certain
selection criteria as of the Cutoff Date. Pursuant to such criteria, each
Receivable:
<TABLE>
<S> <C>
- falls within the range of:
remaining principal balance................. $250 to $50,000
APRs.............................................. 8% to 15%
original number of monthly ("Scheduled Payments")..... 12 to
72
remaining number of Scheduled Payments.............. 4 to 72
- has a maximum number of:
days past due for payment.......................... 30 days
Scheduled Payments paid ahead of schedule....... 6 Scheduled
Payments
- was, at the time of origination, secured by a new or used
automobile or light duty truck;
- was originated in the United States;
- provides for scheduled monthly payments that fully amortize
the amount financed by such Receivable over its original
term (except for minimally different payments in the first
or last month in the life of the Receivable);
- is being serviced by Toyota Motor Credit Corporation;
- to the best knowledge of the Seller, is not due from any
obligor who is presently the subject of a bankruptcy
proceeding or is bankrupt or insolvent;
- does not relate to a vehicle that has been repossessed
without reinstatement as of the Cutoff Date; and
- does not relate to a vehicle as to which insurance has been
force-placed as of the Cutoff Date.
</TABLE>
Toyota Motor Credit Corporation does not originate retail installment sales
contracts in Hawaii, and retail installment sales contracts originated in Texas
or by a TMCC subsidiary in Puerto Rico will not be included in the Trust. No
selection procedures believed by the Seller to be adverse to Noteholders have
been used in selecting the Receivables.
Based on the addresses of the originating Dealers, the Receivables have been
originated in 48 states. Except in the case of any breach of representations and
warranties by the related Dealer, the Receivables generally do not provide for
recourse against the originating Dealer. The following are additional
characteristics of the Receivables:
<TABLE>
<S> <C>
- as a percentage of the aggregate principal balance, as of
the Cutoff Date:
Precomputed Receivables............................... 3.52%
Simple interest Receivables.......................... 96.48%
New vehicles financed by TMCC........................ 60.81%
Used vehicles financed by TMCC....................... 39.19%
Receivables representing financing of vehicles manufactured
or distributed
by Toyota Motor Corporation or its affiliates.... 90.53%
- as a percentage of the number of Receivables, as of the
Cutoff Date:
New vehicles financed by TMCC........................ 50.80%
Used vehicles financed by TMCC....................... 49.20%
</TABLE>
S-19
<PAGE>
The composition, distribution by annual percentage rate and geographic
distribution of the Receivables as of the Cutoff Date are as set forth in the
following tables.
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Total Cutoff Date Principal Balance......................... $1,524,932,796
Number of Receivables....................................... 98,405
Average Cutoff Date Principal Balance....................... $15,496
Range of Cutoff Date Principal Balances................... $340 to $49,989
Average Original Amount Financed............................ $16,731
Range of Original Amount Financed......................... $776 to $57,694
Weighted Average APR(1)..................................... 10.51%
Range of APRs............................................. 8% to 15%
Weighted Average Original Number of Scheduled Payments(1)... 59.5
Range of Original Number of Scheduled Payments............ 12 to 72
Weighted Average Remaining Number of Scheduled
Payments(1)............................................... 55.7
Range of Remaining Number of Scheduled Payments........... 4 to 72
</TABLE>
------------------------
(1) Weighted by Principal Balance as of the Cutoff Date.
DISTRIBUTION OF THE RECEIVABLES BY APR
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER CUTOFF DATE CUTOFF DATE
RANGE OF APRS RECEIVABLES OF RECEIVABLES PRINCIPAL BALANCE POOL BALANCE
------------- ----------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
8.00 - 8.99.................... 23,461 23.84% $ 417,336,508.42 27.37%
9.00 - 9.99.................... 19,857 20.18 351,555,327.91 23.05
10.00 - 10.99................... 12,614 12.82 213,016,559.52 13.97
11.00 - 11.99................... 12,982 13.19 186,094,621.21 12.20
12.00 - 12.99................... 14,262 14.49 170,678,883.73 11.19
13.00 - 13.99................... 7,892 8.02 96,139,235.44 6.30
14.00 - 14.99................... 6,062 6.16 75,860,808.29 4.97
15.00........................... 1,275 1.30 14,250,851.00 0.93
------ ------ ----------------- ------
Total(1).................... 98,405 100.00% $1,524,932,795.52 100.00%
====== ====== ================= ======
</TABLE>
------------------------
(1) Percentages may not add to 100% due to rounding.
S-20
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES BY STATE(1)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF CUTOFF DATE CUTOFF DATE
STATE RECEIVABLES RECEIVABLES PRINCIPAL BALANCE POOL BALANCE
----- ----------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
Alabama............................... 111 0.11% $ 2,640,923.27 0.17%
Alaska................................ 52 0.05 885,970.81 0.06
Arizona............................... 2,556 2.60 41,374,290.11 2.71
Arkansas.............................. 2,088 2.12 36,640,147.57 2.40
California............................ 25,543 25.96 384,745,881.71 25.23
Colorado.............................. 1,375 1.40 22,776,551.05 1.49
Connecticut........................... 2,623 2.67 35,634,140.02 2.34
Delaware.............................. 243 0.25 4,187,323.21 0.27
Florida............................... 611 0.62 13,745,032.44 0.90
Georgia............................... 184 0.19 4,705,442.37 0.31
Idaho................................. 323 0.33 5,003,814.92 0.33
Illinois.............................. 6,637 6.74 108,083,584.43 7.09
Indiana............................... 997 1.01 14,074,711.04 0.92
Iowa.................................. 167 0.17 2,866,752.02 0.19
Kansas................................ 1,309 1.33 19,581,206.58 1.28
Kentucky.............................. 819 0.83 12,874,374.93 0.84
Louisiana............................. 2,683 2.73 42,406,759.64 2.78
Maine................................. 183 0.19 2,410,347.64 0.16
Maryland.............................. 2,338 2.38 37,207,323.11 2.44
Massachusetts......................... 4,139 4.21 58,401,337.86 3.83
Michigan.............................. 1,358 1.38 20,772,258.77 1.36
Minnesota............................. 1,128 1.15 18,613,012.04 1.22
Mississippi........................... 664 0.67 10,301,375.57 0.68
Missouri.............................. 1,951 1.98 29,424,892.16 1.93
Montana............................... 43 0.04 525,739.76 0.03
Nebraska.............................. 138 0.14 2,216,020.27 0.15
Nevada................................ 717 0.73 12,340,445.27 0.81
New Hampshire......................... 1,663 1.69 18,720,633.39 1.23
New Jersey............................ 4,338 4.41 71,106,285.58 4.66
New Mexico............................ 1,113 1.13 17,792,584.90 1.17
New York.............................. 5,256 5.34 81,352,664.88 5.33
North Carolina........................ 473 0.48 12,056,587.17 0.79
North Dakota.......................... 32 0.03 508,285.60 0.03
Ohio.................................. 3,001 3.05 47,427,207.67 3.11
Oklahoma.............................. 613 0.62 11,744,669.83 0.77
Oregon................................ 1,658 1.68 24,346,740.59 1.60
Pennsylvania.......................... 4,164 4.23 64,938,829.91 4.26
Rhode Island.......................... 627 0.64 8,598,976.04 0.56
South Carolina........................ 115 0.12 2,668,316.89 0.17
South Dakota.......................... 30 0.03 452,014.85 0.03
Tennessee............................. 2,415 2.45 36,292,104.43 2.38
Utah.................................. 748 0.76 12,622,531.71 0.83
Vermont............................... 348 0.35 4,212,960.71 0.28
Virginia.............................. 6,429 6.53 101,088,318.29 6.63
Washington............................ 2,800 2.85 41,287,682.00 2.71
West Virginia......................... 286 0.29 4,120,132.78 0.27
Wisconsin............................. 1,224 1.24 17,758,656.52 1.16
Wyoming............................... 92 0.09 1,396,953.21 0.09
------ ------ ----------------- ------
Total(2).......................... 98,405 100.00% $1,524,932,795.52 100.00%
====== ====== ================= ======
</TABLE>
------------------------
(1) Based solely on the addresses of the originating Dealers.
(2) Percentages may not add to 100% due to rounding.
S-21
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning Toyota Motor Credit
Corporation's experience with respect to its portfolio of new and used
automobile and light duty truck retail installment sales contracts which it has
funded and is servicing, including contracts that have been securitized. The
information set forth below does not include retail installment sales contracts
serviced by an independent finance company conducting business in five
southeastern states of the United States for the years 1996 and 1995.
The data presented in the following tables are for illustrative purposes
only. There is no assurance that Toyota Motor Credit Corporation's delinquency,
credit loss and repossession experience with respect to automobile and light
duty truck retail installment sales contracts in the future, or the experience
of the Trust with respect to the Receivables, will be similar to that set forth
below. The percentages in the tables below have not been adjusted to eliminate
the effect of the growth of TMCC's portfolio. Accordingly, the delinquency,
repossession and net loss percentages would be expected to be higher than those
shown if a group of receivables were isolated at a period in time and the
delinquency, repossession and net loss data showed the activity only for that
isolated group over the periods indicated.
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding contracts(1)............ 835,742 762,199 667,639 605,632 574,439 517,325
Delinquencies as a percentage of
contracts outstanding(2)
31-60 days........................ 1.24% 1.28% 1.34% 1.79% 1.46% 1.25%
61-90 days........................ 0.09% 0.09% 0.10% 0.16% 0.14% 0.11%
Over 90 days...................... 0.07% 0.06% 0.08% 0.10% 0.08% 0.06%
</TABLE>
------------------------
(1) Number of contracts outstanding at end of period.
(2) The period of delinquency is based on the number of days payments are
contractually past due. A payment is deemed to be past due if less than 90%
of such payment is made on the related due date.
S-22
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
MONTHS ENDED --------------------------------------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding(1).......... $10,634,010 $9,699,078 $8,075,636 $6,795,213 $5,930,100 $4,930,711
Average Principal Amount
Outstanding(2)......................... $10,166,544 $8,887,357 $7,435,425 $6,362,657 $5,430,406 $4,843,927
Number of Contracts Outstanding.......... 835,742 762,199 667,639 605,632 574,439 517,325
Average Number of Contracts
Outstanding(2)......................... 798,971 714,919 636,636 590,036 545,882 515,723
Number of Repossessions(3)............... 5,656 9,930 10,906 10,994 8,981 8,438
Number of Repossessions as a Percent of
the Number of Contracts Outstanding.... 1.35% 1.30% 1.63% 1.82% 1.56% 1.63%
Number of Repossessions as a Percent of
the Average Number of Contracts
Outstanding............................ 1.42% 1.39% 1.71% 1.86% 1.65% 1.64%
Gross Charge-Offs(4)..................... $ 27,128 $ 49,942 $ 56,956 $ 51,191 $ 33,017 $ 27,282
Recoveries(5)............................ $ 4,165 $ 8,060 $ 7,898 $ 6,864 $ 6,604 $ 5,957
Net Losses............................... $ 22,962 $ 41,882 $ 49,058 $ 44,327 $ 26,413 $ 21,325
Net Losses as a Percentage of Principal
Amount Outstanding..................... 0.43%(6) 0.43% 0.61% 0.65% 0.45% 0.43%
Net Losses as a Percentage of Average
Principal Amount Outstanding........... 0.45%(6) 0.47% 0.66% 0.70% 0.49% 0.44%
</TABLE>
------------------------------
(1) Principal Amount Outstanding includes payoff amount for simple interest
contracts and net principal amount for precomputed contracts and unamortized
dealer reserve for all contracts.
(2) Average of the principal amount or number of contracts outstanding as of the
beginning and end of the indicated periods.
(3) Includes bankrupt repossessions but excludes bankruptcies.
(4) Amount charged off is the net remaining principal balance, including earned
but not yet received finance charges, repossession expenses and unpaid
extension fees, less any proceeds from the liquidation of the related
vehicle. Also includes dealer reserve charge-offs.
(5) Includes all recoveries from post-disposition monies received on previously
charged-off contracts including any proceeds from the liquidation of the
related vehicle after the related charge-off. Also includes recoveries for
dealer reserve charge-offs and dealer reserve chargebacks.
(6) Annualized.
USE OF PROCEEDS
The Seller will use the net proceeds from the sale of the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes (approximately $1,102,269,086 in the
aggregate), together with the net proceeds from the sale of the Class A-1 Notes
to TMCC and a subordinated non-recourse promissory note issued to TMCC to
purchase the Receivables from TMCC pursuant to the Receivables Purchase
Agreement and to fund the Reserve Account.
S-23
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
Information regarding certain maturity and prepayment considerations with
respect to the Notes is set forth under "Risk Factors--PREPAYMENTS ON
RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN REINVESTMENT RISK
TO YOU", "Description of the Notes--Payments of Principal" and "Weighted Average
Lives of the Notes" in this Prospectus Supplement.
Because the rate of payment of principal of each class of Notes depends
primarily on the rate of payment (including prepayments) of the principal
balance of the Receivables, final payment of any class of Notes could occur
significantly earlier or later than their respective Final Scheduled Payment
Dates. Noteholders will bear the risk of being able to reinvest principal
payments on the Notes at yields at least equal to the yield on their respective
Notes. Such reinvestment risk includes the risk that interest rates may be lower
at the time such holders received payments from the Trust than interest rates
would otherwise have been had such prepayments not been made or had such
prepayments been made at a different time. No prediction can be made as to the
rate of prepayments on the Receivables in either stable or changing interest
rate environments.
Principal payments generally will not be made on the Class A-2 Notes until
the Class A-1 Notes have been paid in full. Principal payments generally will
not be made on the Class A-3 Notes until the Class A-2 Notes have been paid in
full, and principal payments generally will not be made on the Class A-4 Notes
until the Class A-3 Notes have been paid in full. However, upon the occurrence
and during the continuation of an Event of Default resulting in acceleration of
the Notes, the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4
Notes, will be paid principal on a pro rata basis. It is expected that final
payment of each class of Notes will occur on or prior to the respective Final
Scheduled Payment Dates.
Failure to make final payment of any class of Notes on or prior to the
respective Final Scheduled Payment Dates will constitute an Event of Default
under the Indenture, which may accelerate payments in respect of classes that
have not reached their respective Final Scheduled Payment Dates. However, as the
rate of payment of principal of each class of Notes depends on the rate of
payment (including prepayments) of the principal balance of the Receivables,
sufficient funds may not be available to pay each class of Notes in full on or
prior to the respective Final Scheduled Payment Dates. If sufficient funds are
not available, final payment of any class of Notes could occur later than such
dates, and the holders of such Notes could suffer a loss.
The rate of prepayments of the Receivables may be influenced by a variety of
economic, social and other factors, and under certain circumstances relating to
breaches of representations, warranties or covenants, the Seller and/or the
Servicer will be obligated to repurchase Receivables from the Trust. A higher
than anticipated rate of prepayments will reduce the aggregate principal balance
of the Receivables more quickly than expected and thereby reduce anticipated
aggregate interest payments on the Notes. See "Risk Factors--PREPAYMENTS ON
RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES, RESULTING IN REINVESTMENT RISK
TO YOU."
Noteholders should consider, in the case of Notes purchased at a discount,
the risk that a slower than anticipated rate of principal payments on the
Receivables could result in an actual yield that is less than the anticipated
yield and, in the case of Notes purchased at a premium, the risk that a faster
than anticipated rate of principal payments on the Receivables could result in
an actual yield that is less than the anticipated yield.
Certain events that are not entirely within the control of the Trust may
cause Events of Default under the Indenture. Certain Events of Default under the
Indenture will not result in acceleration of the Notes unless a majority of
holders of Notes (excluding for such purposes the outstanding principal amount
of any Notes held of record or beneficially owned by TMCC or any of its
affiliates), voting as a single class, instruct the Indenture Trustee to
accelerate the Notes. The holders of any class of Notes
S-24
<PAGE>
may not have sufficient voting interests to cause or to prevent an acceleration
of the Notes. If any Event of Default under the Indenture results in the
acceleration of the Notes, the Indenture Trustee may be required to liquidate
the assets of the Trust. Liquidation would be likely to accelerate payment of
all Notes that are then outstanding. If a liquidation occurs close to the date
when any class otherwise would have been paid in full, repayment of such class
might be delayed while liquidation of the assets is occurring. The Trust cannot
predict the length of time that will be required for liquidation of the assets
of the Trust to be completed. Even if liquidation proceeds are sufficient to
repay the Notes in full, any liquidation that causes principal of a class of
Notes to be paid before the related Final Scheduled Payment Date will involve
the prepayment risks described in this Prospectus Supplement under "Risk
Factors--PREPAYMENTS ON RECEIVABLES MAY CAUSE PREPAYMENTS ON THE NOTES,
RESULTING IN REINVESTMENT RISK TO YOU".
The proceeds of any liquidation of the assets of the Trust may be
insufficient to pay in full all accrued interest on and principal of each
outstanding class of Notes. Also, acceleration of the Notes as a result of any
Event of Default under the Indenture will cause the priority of payments of all
Class A Notes to change, from pro rata payments of interest followed by
sequential payments of principal, to pro rata payments of interest followed by
pro rata payments of principal to all outstanding classes of Class A Notes.
Therefore, all outstanding Class A Notes will be affected by any shortfall in
liquidation proceeds.
WEIGHTED AVERAGE LIVES OF THE NOTES
Prepayments on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables in question are the same size and
amortize at the same rate and that each receivable in each month of its life
will either be paid as scheduled or be prepaid in full. For example, in a pool
of receivables originally containing 10,000 receivables, a 1% ABS rate means
that 100 receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
As the rate of payment of principal of each class of Notes will depend on
the rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of Notes could occur significantly
earlier than the respective Final Scheduled Payment Dates. Reinvestment risk
associated with early payment of the Notes of any class will be borne
exclusively by the holders of such Notes.
The table captioned "Percent of Initial Note Principal Amount at Various ABS
Percentages" (the "ABS Table") has been prepared on the basis of the
characteristics of the Receivables described under "The Receivables Pool". The
ABS Table assumes that (i) the Receivables prepay in full at the specified
constant percentage of ABS monthly, with no defaults, losses or repurchases,
(ii) each scheduled monthly payment on each Receivable is scheduled to be made
and is made on the last day of each month commencing June 30, 2000 and each
month has 30 days, (iii) the Notes are issued on June 27, 2000 and payments are
made on the Notes on each Payment Date (and each such date is assumed to be the
fifteenth day of each applicable month), and (iv) except as otherwise indicated,
the Servicer exercises its option to purchase the Receivables on the earliest
Payment Date on which such option may be exercised. The hypothetical pools each
have an assumed Cutoff Date of June 1, 2000. The ABS Table indicates the
projected weighted average life of each class of Notes and sets forth the
percent of the initial principal amount of each class of Notes that is projected
to be outstanding after each of the Payment Dates shown at various constant ABS
percentages.
S-25
<PAGE>
The ABS Table also assumes that the Receivables have been aggregated into
hypothetical pools with all of the receivables within each such pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools (which is based on its aggregate principal balance, APR, original
term to maturity and remaining term to maturity as of the assumed cutoff date)
will be such that each pool will be fully amortized by the end of its remaining
term to maturity.
<TABLE>
<CAPTION>
REMAINING TERM ORIGINAL TERM
NUMBER OF AGGREGATE TO MATURITY TO MATURITY
POOL RECEIVABLES PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
---- ----------- ----------------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1............................. 429 $ 1,589,564.03 12.153 5 47
2............................. 1,613 7,467,052.10 12.094 9 45
3............................. 2,269 12,056,043.44 12.433 15 48
4............................. 3,314 22,777,574.09 11.713 21 44
5............................. 3,201 24,859,388.78 12.186 26 49
6............................. 5,205 59,479,598.98 10.319 33 41
7............................. 3,014 32,119,827.13 11.299 38 47
8............................. 8,004 112,765,566.07 10.429 45 48
9............................. 2,681 37,923,503.41 10.652 49 51
10............................ 45,026 748,848,553.32 10.264 57 60
11............................ 11,300 201,036,228.26 10.402 61 61
12............................ 10,378 221,086,906.57 10.727 69 72
13............................ 1,971 42,922,989.34 11.320 72 72
------- -----------------
98,405 $1,524,932,795.52
======= =================
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the Receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the Receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of Notes.
S-26
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-2 NOTES CLASS A-3 NOTES
----------------------------------------- -----------------------------------------
PAYMENT DATE 0.50% 1.00% 1.50% 1.80% 0.50% 1.00% 1.50% 1.80%
------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
7/15/00....................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
8/15/00....................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
9/15/00....................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
10/15/00...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
11/15/00...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
12/15/00...................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
1/15/01....................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2/15/01....................... 100.00 100.00 100.00 90.18 100.00 100.00 100.00 100.00
3/15/01....................... 100.00 100.00 88.27 75.02 100.00 100.00 100.00 100.00
4/15/01....................... 100.00 97.72 74.69 60.30 100.00 100.00 100.00 100.00
5/15/01....................... 100.00 86.11 61.33 45.86 100.00 100.00 100.00 100.00
6/15/01....................... 100.00 74.61 48.18 31.72 100.00 100.00 100.00 100.00
7/15/01....................... 90.13 63.22 35.26 17.87 100.00 100.00 100.00 100.00
8/15/01....................... 80.27 51.95 22.56 4.32 100.00 100.00 100.00 100.00
9/15/01....................... 70.43 40.80 10.09 0.00 100.00 100.00 100.00 94.79
10/15/01...................... 60.87 29.99 0.00 0.00 100.00 100.00 98.84 87.29
11/15/01...................... 51.33 19.29 0.00 0.00 100.00 100.00 91.92 79.96
12/15/01...................... 41.80 8.71 0.00 0.00 100.00 100.00 85.13 72.80
1/15/02....................... 32.30 0.00 0.00 0.00 100.00 98.98 78.47 65.81
2/15/02....................... 22.81 0.00 0.00 0.00 100.00 92.95 71.94 58.99
3/15/02....................... 13.35 0.00 0.00 0.00 100.00 86.99 65.55 52.35
4/15/02....................... 4.26 0.00 0.00 0.00 100.00 81.27 59.42 45.96
5/15/02....................... 0.00 0.00 0.00 0.00 97.19 75.62 53.41 39.75
6/15/02....................... 0.00 0.00 0.00 0.00 91.91 70.04 47.53 33.70
7/15/02....................... 0.00 0.00 0.00 0.00 86.64 64.53 41.79 27.82
8/15/02....................... 0.00 0.00 0.00 0.00 81.39 59.10 36.18 22.12
9/15/02....................... 0.00 0.00 0.00 0.00 76.33 53.87 30.79 16.64
10/15/02...................... 0.00 0.00 0.00 0.00 71.28 48.71 25.54 11.32
11/15/02...................... 0.00 0.00 0.00 0.00 66.24 43.63 20.41 6.17
12/15/02...................... 0.00 0.00 0.00 0.00 61.22 38.62 15.42 1.19
1/15/03....................... 0.00 0.00 0.00 0.00 56.21 33.68 10.56 0.00
2/15/03....................... 0.00 0.00 0.00 0.00 51.22 28.82 5.85 0.00
3/15/03....................... 0.00 0.00 0.00 0.00 46.24 24.04 1.27 0.00
4/15/03....................... 0.00 0.00 0.00 0.00 41.60 19.58 0.00 0.00
5/15/03....................... 0.00 0.00 0.00 0.00 36.98 15.20 0.00 0.00
6/15/03....................... 0.00 0.00 0.00 0.00 32.37 10.89 0.00 0.00
7/15/03....................... 0.00 0.00 0.00 0.00 27.78 6.65 0.00 0.00
8/15/03....................... 0.00 0.00 0.00 0.00 23.20 2.49 0.00 0.00
9/15/03....................... 0.00 0.00 0.00 0.00 18.80 0.00 0.00 0.00
10/15/03...................... 0.00 0.00 0.00 0.00 14.41 0.00 0.00 0.00
11/15/03...................... 0.00 0.00 0.00 0.00 10.03 0.00 0.00 0.00
12/15/03...................... 0.00 0.00 0.00 0.00 5.67 0.00 0.00 0.00
1/15/04....................... 0.00 0.00 0.00 0.00 1.33 0.00 0.00 0.00
2/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
5/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
8/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
9/15/04....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
10/15/04...................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1).................. 1.44 1.19 1.00 0.90 2.72 2.35 2.00 1.81
Weighted Average Life
(years)(1)(2)............... 1.44 1.19 1.00 0.90 2.72 2.35 2.00 1.81
<CAPTION>
CLASS A-4 NOTES
-----------------------------------------
PAYMENT DATE 0.50% 1.00% 1.50% 1.80%
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Closing Date.................. 100.00 100.00 100.00 100.00
7/15/00....................... 100.00 100.00 100.00 100.00
8/15/00....................... 100.00 100.00 100.00 100.00
9/15/00....................... 100.00 100.00 100.00 100.00
10/15/00...................... 100.00 100.00 100.00 100.00
11/15/00...................... 100.00 100.00 100.00 100.00
12/15/00...................... 100.00 100.00 100.00 100.00
1/15/01....................... 100.00 100.00 100.00 100.00
2/15/01....................... 100.00 100.00 100.00 100.00
3/15/01....................... 100.00 100.00 100.00 100.00
4/15/01....................... 100.00 100.00 100.00 100.00
5/15/01....................... 100.00 100.00 100.00 100.00
6/15/01....................... 100.00 100.00 100.00 100.00
7/15/01....................... 100.00 100.00 100.00 100.00
8/15/01....................... 100.00 100.00 100.00 100.00
9/15/01....................... 100.00 100.00 100.00 100.00
10/15/01...................... 100.00 100.00 100.00 100.00
11/15/01...................... 100.00 100.00 100.00 100.00
12/15/01...................... 100.00 100.00 100.00 100.00
1/15/02....................... 100.00 100.00 100.00 100.00
2/15/02....................... 100.00 100.00 100.00 100.00
3/15/02....................... 100.00 100.00 100.00 100.00
4/15/02....................... 100.00 100.00 100.00 100.00
5/15/02....................... 100.00 100.00 100.00 100.00
6/15/02....................... 100.00 100.00 100.00 100.00
7/15/02....................... 100.00 100.00 100.00 100.00
8/15/02....................... 100.00 100.00 100.00 100.00
9/15/02....................... 100.00 100.00 100.00 100.00
10/15/02...................... 100.00 100.00 100.00 100.00
11/15/02...................... 100.00 100.00 100.00 100.00
12/15/02...................... 100.00 100.00 100.00 100.00
1/15/03....................... 100.00 100.00 100.00 93.18
2/15/03....................... 100.00 100.00 100.00 84.45
3/15/03....................... 100.00 100.00 100.00 76.06
4/15/03....................... 100.00 100.00 94.34 68.22
5/15/03....................... 100.00 100.00 86.53 60.70
6/15/03....................... 100.00 100.00 78.97 53.50
7/15/03....................... 100.00 100.00 71.67 46.63
8/15/03....................... 100.00 100.00 64.62 40.09
9/15/03....................... 100.00 97.20 57.96 0.00
10/15/03...................... 100.00 89.84 51.55 0.00
11/15/03...................... 100.00 82.62 45.40 0.00
12/15/03...................... 100.00 75.54 39.51 0.00
1/15/04....................... 100.00 68.62 0.00 0.00
2/15/04....................... 94.34 61.84 0.00 0.00
3/15/04....................... 86.21 55.21 0.00 0.00
4/15/04....................... 78.95 49.31 0.00 0.00
5/15/04....................... 71.72 43.55 0.00 0.00
6/15/04....................... 64.52 0.00 0.00 0.00
7/15/04....................... 57.35 0.00 0.00 0.00
8/15/04....................... 50.48 0.00 0.00 0.00
9/15/04....................... 43.63 0.00 0.00 0.00
10/15/04...................... 0.00 0.00 0.00 0.00
Weighted Average Life
(years)(1).................. 4.09 3.74 3.29 2.99
Weighted Average Life
(years)(1)(2)............... 4.19 3.87 3.41 3.09
</TABLE>
------------------------------
(1) The weighted average life of a Note is determined by (x) multiplying the
amount of each principal payment on a Note by the number of years from the
date of issuance of the Note to the related Payment Date, (y) adding the
results and (z) dividing the sum by the original principal amount of the
Note.
(2) This calculation assumes that the Servicer does not exercise its option to
purchase the Receivables.
This table has been prepared based on the assumptions described above under
"Weighted Average Lives of the Notes" (including the assumptions regarding the
characteristics and performance of the Receivables, which will differ from the
actual characteristics and performance thereof) and should be read in
conjunction therewith.
S-27
<PAGE>
POOL FACTORS AND TRADING INFORMATION
The "Pool Factor" with respect to any class of Notes will be a seven-digit
decimal indicating the principal amount of such class of Notes as of the close
of business on the Payment Date in such month as a fraction of the respective
principal amount thereof as of the Closing Date. The Servicer will compute each
Pool Factor each month. Each Pool Factor will initially be 1.0000000 and
thereafter will decline to reflect reductions in the principal amount of each
class of Notes. Each such principal amount will be computed by allocating
payments in respect of the Receivables to principal and interest using the
actuarial method for the Precomputed Receivables and using the simple interest
method for the Simple Interest Receivables. The portion of the principal amount
of any class of Notes for a given month allocable to a Noteholder can be
determined by multiplying the original denomination of the holder's Note by the
related Pool Factor for that month.
Pursuant to the Indenture, the Noteholders will receive monthly reports
concerning the payments received on the Receivables, the Pool Balance, the
related Pool Factors and various other items of information pertaining to the
Trust. Noteholders during each calendar year will be furnished information for
tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities--Reports to Securityholders" in
the Prospectus.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Indenture will be filed with the Securities and Exchange Commission (the "SEC")
following the issuance of the Notes. The following summary describes certain
terms of the Notes and the Indenture. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Notes and the Indenture. Where particular provisions
or terms used in the Indenture are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary. The
following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Notes of
any given series and the related Indenture set forth in the Prospectus, to which
description reference is hereby made.
PAYMENTS OF INTEREST
The Class A Notes will constitute Fixed Rate Securities, as such term is
defined under "Certain Information Regarding the Securities--Fixed Rate
Securities" in the Prospectus. Interest on the principal balances of the
Class A Notes will accrue at the respective per annum interest rates set forth
on the front cover of this prospectus supplement (each, an "Interest Rate") and
will be payable to the related Noteholders monthly on the fifteenth of each
month (or, if such date is not a Business Day, on the next succeeding Business
Day) (each such date, a "Payment Date") commencing July 17, 2000. A "Business
Day" is any day except a Saturday or Sunday, or a day on which banks in New
York, San Francisco or Chicago are closed.
Interest will accrue for the period (i) with respect to the Class A-1 Notes,
from and including the Closing Date (in the case of the first Payment Date) or
from and including the most recent Payment Date on which interest has been paid
to but excluding the following Payment Date and (ii) with respect to the
Class A-2, Class A-3 and Class A-4 Notes, from and including the Closing Date
(in the case of the first Payment Date) or from and including the fifteenth day
of the most recent calendar month during which interest was paid preceding each
Payment Date to but excluding the fifteenth day of the following calendar month
(each an "Interest Period").
Interest on the Class A-1 Notes will be calculated on the basis of the
actual days elapsed during the Interest Period and a 360-day year. Interest on
the Class A-2, Class A-3 and Class A-4 Notes will
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be calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest accrued as of any Payment Date but not paid on such Payment Date will
be due on the next Payment Date, together with interest on such amount at the
applicable Interest Rate (to the extent lawful).
Interest payments on the Notes will generally be made from funds on deposit
in the Collection Account with respect to the Collection Period preceding the
related Payment Date (including any Advances made by the Servicer and any funds
deposited therein from the Reserve Account or Payments Ahead withdrawn for
application with respect to such Collection Period) remaining after
reimbursement of Advances made by the Servicer and payment of the Servicing Fee.
Interest payments on all classes of Class A Notes will have the same priority.
See "Payments to Noteholders" in this Prospectus Supplement.
Under certain circumstances, the amount available for interest payments
could be less than the amount of interest payable on the Class A Notes, in which
case each class of Class A Noteholders will receive their ratable share (based
upon the aggregate amount of such amounts due to such class of Noteholders) of
the aggregate amount available to be paid in respect of interest on the
Class A-1, Class A-2, Class A-3 and Class A-4 Notes on such Payment Date. See
"Payments to Noteholders" and "Subordination; Reserve Account" in this
Prospectus Supplement.
An Event of Default will occur if the full amount of interest due on any
class of Class A Notes is not paid within five days of the related Payment Date.
Upon such an Event of Default, the Indenture Trustee may accelerate the maturity
of the Notes and take actions to liquidate the assets of the Trust. See
"Description of Notes--The Indenture--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF
DEFAULT" in the Prospectus.
PAYMENTS OF PRINCIPAL
Principal payments generally will be made to the Noteholders on each Payment
Date commencing July 17, 2000, in an aggregate amount equal to the amount
deposited in the Principal Distribution Account on such Payment Date. See
"Payments to Noteholders" in this Prospectus Supplement. Principal payments
generally will be made to holders of each class of Class A Notes in sequential
order until the principal balance of each such class is reduced to zero.
Following and during the continuance of an Event of Default that results in
acceleration of the Notes, principal payments to holders of all classes of
Class A Notes will be made on a pro rata basis, based on their outstanding
principal balances.
The principal balance of each class of Notes will be due on the Final
Scheduled Payment Date indicated on the front cover of this Prospectus
Supplement (the "Class A-1 Final Scheduled Payment Date," the "Class A-2 Final
Scheduled Payment Date", the "Class A-3 Final Scheduled Payment Date" and the
"Class A-4 Final Scheduled Payment Date", respectively). The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Final Scheduled Payment Dates set forth above
based on a variety of factors, including those described under "Prepayment and
Yield Considerations" and "Weighted Average Lives of the Notes" in this
Prospectus Supplement and in the Prospectus.
INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Upon an "Event of Default"
(which term is defined in the Prospectus), the Noteholders will have the rights
set forth in the Prospectus under "Description of the Notes--The
Indenture--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT." The Indenture
Trustee may sell the Receivables subject to certain conditions set forth in the
Indenture following an Event of Default under the Indenture, including a default
in the payment of any unpaid principal of a class of Notes on its Final
Scheduled Payment Date or a default for five days or more in the payment of any
interest on any Note. In the case of an Event of Default not involving any such
default in payment, the Indenture Trustee is prohibited from selling the
Receivables unless one of the
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conditions set forth in the Prospectus under "Description of the Notes--The
Indenture--EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" has been satisfied.
In the event of a sale of the Receivables by the Indenture Trustee following an
Event of Default, the Noteholders will receive notice and an opportunity to
submit a bid in respect of such sale.
NOTICES
Noteholders of record will be notified in writing by the Indenture Trustee
of any Event of Default or termination of, or appointment of a successor to, the
Servicer promptly upon a Responsible Officer (as defined in the Sale and
Servicing Agreement) obtaining actual knowledge thereof. While Notes are held in
book-entry form, these notices will be delivered by the Indenture Trustee to
DTC. If Notes are issued in definitive form, these notices will mailed to the
addresses provided to the Indenture Trustee by the holders of record as of the
relevant record date. Such notices will be deemed to have been given as of the
date of delivery to DTC or mailing.
PRESCRIPTION
In the event that any Noteholder shall not surrender its Notes for
retirement within six months after the date specified in the written notice
given by the Indenture Trustee of the date for final payment thereof, the
Indenture Trustee shall give a second written notice to the remaining
Noteholders to surrender their Notes for retirement and receive the final
payment with respect thereto. If within one year after such second notice any
Notes shall not have been surrendered, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Noteholders concerning surrender of their Notes, and the cost thereof shall be
paid out of the funds and other assets that remain subject to the Indenture. Any
funds remaining unclaimed after exhaustion of such remedies shall be paid by the
Indenture Trustee to a charity specified in the Indenture.
GOVERNING LAW
The Indenture and Notes are governed by and shall be construed in accordance
with the laws of the State of New York applicable to agreements made in and to
be performed wholly within such jurisdiction.
PAYMENTS TO NOTEHOLDERS
On the second Business Day preceding each Payment Date (each, a
"Determination Date"), the Servicer will inform the Owner Trustee of, among
other things, the amount of funds collected on or in respect of the Receivables,
the amount of Advances to be made by and reimbursed to the Servicer and the
Servicing Fee and other servicing compensation payable to the Servicer, in each
case with respect to the immediately preceding Collection Period. On or prior to
each Determination Date, the Servicer shall also determine the Principal
Distribution Amount and, based on the available funds and other amounts
available for payment on the related Payment Date as described below, the amount
to be paid to the Noteholders.
On or before each Payment Date, the Indenture Trustee will cause Payments
Ahead previously deposited in the Payahead Account or held by the Servicer in
respect of the related Collection Period to be transferred to the Collection
Account.
The Owner Trustee will make payments to the Noteholders out of the amounts
on deposit in the Collection Account. The amounts to be distributed to the
Noteholders "Payments to Noteholders" will be determined in the manner described
below.
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CALCULATION OF AVAILABLE COLLECTIONS
The amount of funds available for payment on a Payment Date (without taking
account of amounts held in the Reserve Account) ("Available Collections") will
generally be the sum of the following amounts with respect to the Collection
Period preceding such Payment Date or, in the case of the first payment date,
the period from June 1, 2000 through the last day of the calendar month
preceding such payment date:
(i) all collections on or in respect of the Receivables other than Defaulted
Receivables (including Payments Ahead being applied in such Collection
Period but excluding Payments Ahead to be applied in one or more future
Collection Periods);
(ii) all proceeds of the liquidation of Defaulted Receivables, net of
expenses incurred by the Servicer in accordance with its customary
servicing procedures in connection with such liquidation, including
amounts received in subsequent Collection Periods ("Net Liquidation
Proceeds");
(iii) all Advances made by the Servicer; and
(iv) all Warranty Purchase Payments with respect to Warranty Receivables
repurchased by the Seller and Administrative Purchase Payments with
respect to Administrative Receivables purchased by the Servicer, in
each case in respect of such Collection Period.
Available Collections on any Payment Date will exclude (i) amounts received
on a particular Receivable (other than a Defaulted Receivable) to the extent
that the Servicer has previously made an unreimbursed Advance in respect of such
Receivable, (ii) Net Liquidation Proceeds with respect to a particular
Receivable to the extent of unreimbursed Advances in respect of such Receivable,
(iii) recoveries from collections with respect to Advances that the Servicer has
determined are unlikely to be repaid, (iv) late fees, extension fees and other
administrative fees and expenses or similar charges collected by the Servicer
and (v) any rebates of unearned interest charges with respect to Precomputed
Receivables.
A "Defaulted Receivable" will be a Receivable (other than an Administrative
Receivable or a Warranty Receivable) as to which (a) all or any part of a
Scheduled Payment is 150 or more days past due and the Servicer has not
repossessed the related Financed Vehicle or (b) the Servicer has, in accordance
with its customary servicing procedures, determined that eventual payment in
full is unlikely and has either repossessed and liquidated the related Financed
Vehicle or repossessed and held the related Financed Vehicle in its repossession
inventory for 90 days, whichever occurs first. The principal balance of any
Receivable that becomes a Defaulted Receivable will be deemed to be zero as of
the date it becomes a Defaulted Receivable.
CALCULATION OF PRINCIPAL DISTRIBUTION AMOUNT
"Principal Distribution Amount" means, with respect to any Payment Date, an
amount equal to the excess, if any, of (a) the Pool Balance as of the end of the
Collection Period preceding the related Collection Period, or as of the Cut-off
Date, in the case of the first Collection Period, over (b) the Pool Balance as
of the end of the related Collection Period, together with any portion of the
Principal Distribution Amount that was to be deposited into the Principal
Distribution Account on any prior Payment Date but was not because sufficient
funds were not available to make such deposit; provided, however, that the
Principal Distribution Amount shall not exceed the outstanding principal amount
of all the Notes on such Payment Date (prior to giving effect to any principal
payments made on such Payment Date); and provided, further, that (i) the
Principal Distribution Amount on the Class A-1 Final Scheduled Payment Date
shall not be less than the amount that is necessary to reduce the outstanding
principal amount of the Class A-1 Notes to zero; (ii) the Principal Distribution
Amount on the Class A-2 Final Scheduled Payment Date shall not be less than the
amount that is necessary to reduce the outstanding principal amount of the
Class A-2 Notes to zero; (iii), the Principal Distribution
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Amount on the Class A-3 Final Scheduled Payment Date shall not be less than the
amount that is necessary to reduce the outstanding principal amount of the
Class A-3 Notes to zero; and (iv) the Principal Distribution Amount on the
Class A-4 Final Scheduled Payment Date shall not be less than the amount that is
necessary to reduce the outstanding principal amount of the Class A-4 Notes to
zero.
PAYMENTS
On each Payment Date, from Available Collections for the related Collection
Period and amounts withdrawn from the Reserve Account, the Trust will make the
following payments in the following order of priority:
1. SERVICING FEE--the Servicing Fee payable to the Servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and unpaid interest
on the Class A-1, Class A-2, Class A-3 and Class A-4 Notes, together with
any amounts that were to be paid pursuant to this clause (2) on any prior
Payment Date but were not paid because sufficient funds were not
available to make such payment (with interest accrued on such unpaid
amounts at the rate or rates at which interest accrued on the related
Notes during the relevant accrual period or periods);
3. ALLOCATION OF PRINCIPAL--to the Principal Distribution Account, the
Principal Distribution Amount;
4. RESERVE ACCOUNT DEPOSIT--to the Reserve Account, the amount, if any,
necessary to cause the balance of funds therein to equal the required
balance described under "Reserve Account" below; and
5. EXCESS AMOUNTS--any remaining amounts in the Collection Account will be
distributed to the Seller as payment on the Subordinated Seller's
Interest.
On each Payment Date, from the amounts deposited into the Principal
Distribution Account from the allocations of principal described in clause (3)
above, the Trust will pay principal of the Notes in the following priority:
1. to the Class A-1 Notes until an amount equal to the principal balance
thereof has been paid;
2. to the Class A-2 Notes until an amount equal to the principal balance
thereof has been paid;
3. to the Class A-3 Notes until an amount equal to the principal balance
thereof has been paid;
4. to the Class A-4 Notes, until an amount equal to the principal balance
thereof has been paid;
5. after the Notes are paid in full, to the Subordinated Seller's Interest
any remaining funds.
PAYMENTS AFTER OCCURRENCE OF EVENT OF DEFAULT AND ACCELERATION
After an Event of Default that results in an acceleration of the Notes, the
Trust will make the following payments in the following order of priority from
Available Collections for the related Collection Period and amounts withdrawn
from the Reserve Account:
1. SERVICING FEE--the Servicing Fee payable to the Servicer;
2. CLASS A NOTE INTEREST--on a pro rata basis, accrued and unpaid interest
on the Class A-1, Class A-2, Class A-3 and Class A-4 Notes, together with
any amounts that were to be paid pursuant to this clause (2) on any prior
Payment Date but were not paid because sufficient funds were not
available to make such payment (with interest accrued on such unpaid
amounts at the rate or rates at which interest accrued on the related
Notes during the relevant accrual period or periods);
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3. ALLOCATION OF PRINCIPAL--to all Class A Noteholders on a pro rata basis,
until the outstanding principal balance of each such class of Notes has
been reduced to zero;
4. EXCESS AMOUNTS--any remaining amounts in the Collection Account will be
distributed to the Seller as payment on the Subordinated Seller's
Interest.
SUBORDINATION; RESERVE ACCOUNT
The rights of the Noteholders to receive payments with respect to the
Receivables will be subordinated to the rights of the Servicer to receive the
Servicing Fee, any additional servicing compensation as described under
"Transfer and Servicing Agreements--Servicing Compensation" in this Prospectus
Supplement and the reimbursement of Advances.
SUBORDINATION
As long as any Notes remain outstanding, payments on the Subordinated
Seller's Interest will be subordinated to payments of interest and principal on
the Notes.
RESERVE ACCOUNT
The Noteholders will have the benefit of the Reserve Account. The Reserve
Account will be a segregated trust account held by the Indenture Trustee. Any
amounts held on deposit in the Reserve Account will be owned by the Seller,
subject to the right of the Indenture Trustee to withdraw such amounts as
described below, and any investment earnings thereon will be taxable to the
Seller for federal income tax purposes. On the Closing Date, the Seller will
deposit $3,812,332 (0.25% of the outstanding principal balance of the
Receivables as of the Cutoff Date) into the Reserve Account for the Trust.
On each Payment Date, if Available Collections are insufficient to pay the
first three items listed under "Payments to Noteholders--Payments" above, the
Indenture Trustee will withdraw funds (if available) from the Reserve Account to
pay those amounts.
If the principal balance of a class of Notes is not paid in full on the
related Final Scheduled Payment Date, the Indenture Trustee will withdraw
amounts from the Reserve Account (if available) to pay that class in full.
The amount required to be on deposit in the Reserve Account at the close of
business on any Payment Date (the "Specified Reserve Account Balance") will be
the greater of 0.75% of the outstanding principal balance of the receivables as
of the end of the related Collection Period or (b) $7,624,664 (0.50% of the
outstanding principal balance of the Receivables as of the Cutoff Date);
provided however, that if, on any Payment Date (x) the average of the Charge-off
Rates for the three preceding Collection Periods exceeds 1.25% or (y) the
average of the Delinquency Percentages for the three preceding Collection
Periods exceeds 1.25%, the Specified Reserve Account Balance will be the
greatest of (a) 0.75% of the outstanding principal balance of the receivables as
of the end of the related Collection Period, (b) $7,624,664 (0.50% of the
outstanding principal balance of the Receivables as of the Cutoff Date) and
(c) 5.50% of the Class A Note Balance as of such Payment Date (after giving
effect to any principal payments made on the Notes on such Payment Date);
provided further, that the Specified Reserve Account Balance with respect to any
date shall not exceed the sum of the Class A Note Balance as of the preceding
Payment Date (after giving effect to any principal payments made on the Notes on
such preceding Payment Date).
As of any Payment Date, the amount of funds actually on deposit in the
Reserve Account may, in certain circumstances, be less than the Specified
Reserve Account Balance. On each Payment Date, the Trust will, to the extent
available, deposit the amount, if any, necessary to cause the balance of funds
on deposit in the Reserve Account to equal the Specified Reserve Account Balance
to the extent set forth above under "Payments to Noteholders".
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The "Charge-off Rate" with respect to a Collection Period will equal the
Aggregate Net Losses with respect to the Receivables that become Defaulted
Receivables during that Collection Period expressed, on an annualized basis, as
a percentage of the average of (i) the Pool Balance on the last day of the
immediately preceding Collection Period and (ii) the Pool Balance on the last
day of such Collection Period.
The "Aggregate Net Losses" with respect to a Collection Period will equal
the principal balance of all Receivables newly designated during such Collection
Period as Defaulted Receivables minus the sum of (x) Net Liquidations Proceeds
collected during such Collection Period with respect to all Defaulted
Receivables and (y) the portion of amounts subsequently received in respect of
Receivables liquidated in prior Collection Periods specified in the Sale and
Servicing Agreement.
The "Delinquency Percentage" with respect to a Collection Period will equal
(a) the number of all outstanding Receivables 61 days or more delinquent (after
taking into account permitted extensions) as of the last day of such Collection
Period (excluding Receivables as to which the Financed Vehicle has been
liquidated during that Collection Period), determined in accordance with the
Servicer's normal practices, plus (b) the number of repossessed Financed
Vehicles that have not been liquidated (to the extent the related Receivable is
not otherwise reflected in clause (a) above), expressed as a percentage of the
aggregate number of Current Receivables on the last day of such Collection
Period.
A "Current Receivable" will be a Receivable that is not a Defaulted
Receivable or a Liquidated Receivable. A "Liquidated Receivable" will be a
Receivable that has been the subject of a Prepayment in full or otherwise has
been paid in full or, in the case of a Defaulted Receivable, a Receivable as to
which the Servicer has determined that the final amounts in respect thereof have
been paid.
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each of Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. (each a
"Rating Agency") to approve a formula for determining the Specified Reserve
Account Balance that is different from those described above or make certain
changes with respect to the manner by which the Reserve Account is funded. If
each Rating Agency delivers a letter to the Owner Trustee to the effect that the
use of any such new formulation will not result in a qualification, reduction or
withdrawal of its then-current rating of any class of Notes, then the Specified
Reserve Account Balance will be determined in accordance with such new formula.
The Sale and Servicing Agreement will accordingly be amended, without the
consent of any Noteholder, to reflect such new calculation.
As of the close of business on any Payment Date on which the amount on
deposit in the Reserve Account is greater than the Specified Reserve Account
Balance for such Payment Date, subject to certain limitations, the Servicer will
instruct the Indenture Trustee to release and distribute such excess to the
Seller. Upon any distribution to the Seller of amounts from the Reserve Account,
the Noteholders will have no rights in, or claims to, such amounts.
Funds on deposit in the Reserve Account may be invested in Eligible
Investments. Investment income on monies on deposit in the Reserve Account will
not be available for payment to Noteholders or otherwise subject to any claims
or rights of the Noteholders and will be paid to the Seller. Any loss on such
investments will be charged to the Reserve Account.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Notes and (ii) the outstanding principal
balance of the Notes, any funds remaining on deposit in the Reserve Account,
subject to certain limitations, will be paid to the Seller.
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TRANSFER AND SERVICING AGREEMENTS
THE TRANSFER AND SERVICING AGREEMENTS
The description of the terms of the Indenture, Sale and Servicing Agreement,
the Administration Agreement and the Trust Agreement (collectively, the
"Transfer and Servicing Agreements") in this Prospectus Supplement does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Transfer and Servicing Agreements. Forms
of the Transfer and Servicing Agreements have been filed as exhibits to the
Registration Statement. Copies of the Transfer and Servicing Agreements will be
filed with the SEC following the issuance of the Notes. Any description of the
Transfer and Servicing Agreements herein supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Transfer and Servicing Agreements set forth in the Prospectus,
to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
Certain information with respect to the conveyance of the Receivables from
the Seller to the Trust on the Closing Date pursuant to the Sale and Servicing
Agreement is set forth under "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" in the Prospectus.
ACCOUNTS
In addition to the accounts referred to under "Description of the Transfer
and Servicing Agreements--Accounts" in the Prospectus, the Seller will also
establish and will maintain with the Indenture Trustee the Reserve Account for
the benefit of the Noteholders. The Reserve Account will not be an asset of the
Trust. The Servicer will establish the Payahead Account with the Indenture
Trustee for the benefit of the Noteholders and the Seller as holder of the
Subordinated Seller's Interest. The Payahead Account will not be an asset of the
Trust. The Indenture Trustee will establish an administrative subaccount within
the Collection Account entitled the Principal Distribution Account (the
"Principal Distribution Account"), for the benefit of the Noteholders.
SERVICING COMPENSATION
The Servicing Fee with respect to each Collection Period will be one-twelfth
of 1.00% (the "Servicing Fee Rate") of the outstanding principal balance of the
Receivables as of the first day of the related Collection Period or, in the case
of the first Payment Date, the outstanding principal balance of the Receivables
as of the Cutoff Date and will be paid from Available Collections as described
under "Payments to Noteholders" in this Prospectus Supplement. The Servicer will
be entitled to collect and retain as additional servicing compensation in
respect of each Collection Period any late fees, extension fees and any other
administrative fees and expenses or similar charges collected during such
Collection Period, plus any investment earnings or interest earned during such
Collection Period from the investment of monies on deposit in the Collection
Account or Payahead Account. See "--Collections" below and "Description of the
Transfer and Servicing Agreements--Servicing Compensation and Payment of
Expenses" in the Prospectus.
COLLECTIONS
The Servicer generally may retain all payments on or in respect of the
Receivables received from Obligors and all proceeds of Receivables collected
during each Collection Period without segregation in its own accounts until
deposited in the Collection Account on the related Payment Date. However, if
(i) TMCC ceases to be the Servicer, (ii) an Event of Default exists and is
continuing under the Indenture or (iii) the short-term unsecured debt of TMCC
ceases to be rated at least P-1 by Moody's Investors Service, Inc. and A-1 by
Standard & Poor's Ratings Services, and alternative arrangements acceptable to
the Rating Agencies are not made, the Servicer will deposit all such payments
and proceeds into the Collection Account not later than two Business Days after
receipt. Pending deposit
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into the Collection Account, the Servicer may invest collections at its own risk
and for its own benefit. Such amounts will not be segregated from its own funds.
The Servicer, at its own risk and for its own benefit, may instruct the Owner
Trustee to invest amounts held in the Collection Account or Payahead Account in
Eligible Investments from the time deposited until the related Payment Date. The
Seller, at its own risk and for its own benefit, may instruct the Indenture
Trustee to invest amounts held in the Reserve Fund in Eligible Investments from
each Payment Date (or the Closing Date) to the next Payment Date. The Seller or
the Servicer, as the case may be, will remit the aggregate Warranty Purchase
Payments and Administrative Purchase Payments of any Receivables to be purchased
from the Trust into the Collection Account on or before the Business Day
immediately preceding the related Payment Date. See "Description of the Transfer
and Servicing Agreements--Collections" in the Prospectus.
"Eligible Investments" will be specified in the Transfer and Servicing
Agreements and will be limited to investments which meet the criteria of each
Rating Agency from time to time as being consistent with its then-current
ratings of the Notes.
Collections on or in respect of a Receivable made during a Collection Period
(including Warranty Purchase Payments and Administrative Purchase Payments)
which are not late fees, extension fees or certain other similar fees or charges
will be applied first to any outstanding Advances made by the Servicer with
respect to such Receivable, and then to the related Scheduled Payment. Any
collections on or in respect of a Receivable remaining after such applications
will be considered an "Excess Payment". Excess Payments constituting a
prepayment in full of Precomputed Receivables and any Excess Payments relating
to Simple Interest Receivables will be applied as a prepayment in respect of
such Receivable (each, a "Prepayment"). All other Excess Payments in respect of
Precomputed Receivables will be held by the Servicer (or if any of the
conditions in clauses (i) through (iii) in the second preceding paragraph is not
satisfied, deposited in the Payahead Account), as a Payment Ahead. See
"Description of the Transfer and Servicing Agreements--Collections" in the
Prospectus.
ADVANCES
The Servicer will be required to make Advances in respect of Scheduled
Payments that are not received in full by the end of the month in which they are
due to the extent described under "Description of the Transfer and Servicing
Agreements--Advances" in the Prospectus, unless the Servicer determines, in its
sole discretion, that such Advances will not be recoverable from certain
collections available to reimburse such Advances. Under certain circumstances,
if the Servicer determines that reimbursement from such collections is unlikely,
the Servicer will be entitled to recover unreimbursed Advances from collections
on or in respect of other Receivables. See "Description of the Transfer and
Servicing Agreements--Advances" in the Prospectus.
The Servicer will make all Advances by depositing into the Collection
Account an amount equal to the aggregate of the Precomputed Advances and Simple
Interest Advances due in respect of a Collection Period on the Business Day
immediately preceding the related Payment Date.
NET DEPOSITS
As an administrative convenience, unless the Servicer is required to remit
collections daily as described in "--Collections" above, the Servicer will be
permitted to make the deposit of collections, aggregate Advances and amounts
deposited in respect of purchases of Receivables by the Seller or the Servicer
for or with respect to the related Collection Period net of payments to be made
to the Servicer with respect to such Collection Period. The Servicer, however,
will account to the Owner Trustee as if all of the foregoing deposits and
payments were made individually. See "Description of the Transfer and Servicing
Agreements--Net Deposits" in the Prospectus.
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<PAGE>
OPTIONAL PURCHASE
The Notes will be redeemed in whole, but not in part, on any Payment Date on
which the Servicer exercises its option to purchase the Receivables. The
Servicer, or any successor to the Servicer, may purchase the Receivables when
the outstanding principal balance of the Receivables shall have declined to 10%
or less of the outstanding principal balance of the Receivables as of the Cutoff
Date, as described in the Prospectus under "Description of The Transfer and
Servicing Agreements--Termination". The "Redemption Price" for the outstanding
Notes will be equal to the unpaid principal amount of the outstanding Notes plus
accrued and unpaid interest thereon.
REMOVAL OF SERVICER
The Indenture Trustee or the holders of at least 51% of the outstanding
principal amount of the Class A Notes (excluding for such purposes the
outstanding principal amount of any Notes held of record or beneficially owned
by TMCC or any of its affiliates), voting as a single class, may terminate the
rights and obligations of the Servicer under the Sale and Servicing Agreement,
or waive any Servicer Default without the consent of any holder of the
Subordinated Seller's Interest, if a Servicer Default occurs.
A "Servicer Default" will occur upon the (i) failure by the Servicer to
deliver to the Collection Account any required payment or to deliver the related
Servicer's Certificate, which failure continues unremedied for three Business
Days after discovery of the failure by an officer of the Servicer or receipt by
the Servicer of notice thereof from the Owner Trustee, Indenture Trustee or
Noteholders evidencing not less than 25% of the aggregate principal amount of
the Notes then entitled to terminate the rights and obligations of the Servicer
as described in the preceding paragraph (excluding for purposes of such
calculation and action all Notes held by the Seller, the Servicer or any of
their affiliates); (ii) failure by the Servicer to observe or to perform in any
material respect any other covenants or agreements set forth in the Sale and
Servicing Agreement, which failure materially and adversely affects the rights
of Noteholders and is not remedied within 90 days of written notice thereof to
the Servicer as provided in clause (i); or (iii) certain events of insolvency or
bankruptcy of the Servicer occur. Under such circumstances, authority and power
shall, without further action, pass to and be vested in the Indenture Trustee or
a successor servicer appointed under the Sale and Servicing Agreement. Upon
receipt of notice of the occurrence of a Servicer default, the Indenture Trustee
shall give notice thereof to the Rating Agencies. Notwithstanding the forgoing,
a delay in or a failure of performance referred to under clause (i) above for a
period of ten Business Days shall not constitute a Servicer Default if such
failure or delay is caused by an event of force majeure. Upon the occurrence of
any such event, the Servicer shall not be relieved from using all commercially
reasonable efforts to perform its obligations in a timely manner in accordance
with the terms of the Sale and Servicing Agreement, and the Servicer shall
provide to the Trustee, the Indenture Trustee, the Seller and the Noteholders
prompt notice of such failure or delay by it, together with a description of its
efforts to so perform its obligation.
For more information regarding the removal of the Servicer, see "Description
of the Transfer and Servicing Agreements--Rights Upon Servicer Default" in the
Prospectus.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
U.S. Bank National Association will be the Owner Trustee under the Trust
Agreement. As a matter of Delaware law, the Trust will be viewed as a separate
legal entity, distinct from the Owner Trustee, and the Trust will be viewed as
the issuer of the Subordinated Seller's Interest. U.S. Bank National Association
will also be the Indenture Trustee under the Indenture. The Owner Trustee, the
Indenture Trustee and any of their respective affiliates may hold the Notes in
their own names or as pledgees. For the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and
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<PAGE>
the Owner Trustee acting jointly (or in some instances, the Owner Trustee acting
alone) will have the power to appoint co-trustees or separate trustees of all or
any part of the Trust. In the event of such an appointment, all rights, powers,
duties and obligations conferred or imposed upon the Owner Trustee by the Sale
and Servicing Agreement and the Trust Agreement will be conferred or imposed
upon the Owner Trustee and each such separate trustee or co-trustee jointly, or,
in any jurisdiction in which the Owner Trustee will be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee who will exercise and perform such rights, powers, duties and
obligations solely at the direction of the Owner Trustee.
The Owner Trustee and the Indenture Trustee may resign at any time and,
under the Trust Agreement, U.S. Bank will be required to resign as Owner Trustee
if any Event of Default under the Indenture occurs. If the Owner Trustee or
Indenture Trustee resigns, the Servicer will be obligated to appoint a successor
thereto. TMCC as administrator under the Administration Agreement may also
remove the Owner Trustee or the Indenture Trustee if either ceases to be
eligible to continue as such under the Trust Agreement or the Indenture, as the
case may be, becomes legally unable to act (including, but not limited to,
pursuant to the provisions of the Trust Indenture Act in connection with the
occurrence of an Event of Default) or becomes insolvent. In such circumstances,
the Servicer will be obligated to appoint a successor Owner Trustee or Indenture
Trustee, as applicable. Any resignation or removal of the Owner Trustee or
Indenture Trustee and appointment of a successor thereto will not become
effective until acceptance of the appointment by such successor.
The Trust Agreement will provide that the Servicer will pay the fees and
expenses of the Owner Trustee and the Indenture Trustee in connection with their
duties under the Trust Agreement and Indenture, respectively. The Trust
Agreement and Indenture will further provide that the Owner Trustee and
Indenture Trustee will be entitled to indemnification by TMCC for, and will be
held harmless against, any loss, liability or expense incurred by the Owner
Trustee or Indenture Trustee not resulting from its own willful misfeasance, bad
faith or negligence (other than by reason of a breach of any of its
representations or warranties to be set forth in the Trust Agreement or
Indenture, as the case may be).
DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee will make no representations as to the validity or
sufficiency of the Trust Agreement, the Notes or of any Receivables or related
documents. The Owner Trustee will not be accountable for the use or application
by the Seller or the Servicer of any funds paid to the Seller or the Servicer in
respect of the Notes or the Receivables, or the investment of any monies by the
Servicer before such monies are deposited into the Collection Account or
Payahead Account. The Owner Trustee will not independently verify the
Receivables. If no Event of Default has occurred and is continuing, the Owner
Trustee will be required to perform only those duties specifically required of
it under the Trust Agreement. Generally, those duties will be limited to the
receipt of the various certificates, reports or other instruments required to be
furnished to the Owner Trustee under the Trust Agreement, in which case it will
only be required to examine them to determine whether they conform to the
requirements of the Trust Agreement. The Owner Trustee will not be charged with
knowledge of a failure by the Servicer to perform its duties under the Trust
Agreement or Sale and Servicing Agreement unless the Owner Trustee obtains
actual knowledge of such failure as will be specified in the Trust Agreement.
The Indenture Trustee will make no representations as to the validity or
sufficiency of the Indenture, the Notes (other than the execution and
authentication thereof) or of any Receivables or related documents, and will not
be accountable for the use or application by the Seller or the Servicer of any
funds paid to the Seller or the Servicer in respect of the Notes, or the
Receivables, or the investment of any monies by the Servicer before such monies
are deposited into the Collection Account or Payahead Account. If no Event of
Default has occurred and is continuing, the Indenture Trustee will
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<PAGE>
be required to perform only those duties specifically required of it under the
Indenture. Generally, those duties will be limited to the receipt of the various
certificates, reports or other instruments required to be furnished to the
Indenture Trustee under the Indenture, in which case it will only be required to
examine them to determine whether they conform to the requirements of the
Indenture. The Indenture Trustee will not be charged with knowledge of a failure
by the Servicer to perform its duties under the Trust Agreement or Sale and
Servicing Agreement or of TMCC to perform its duties under the Administration
Agreement, unless the Indenture Trustee obtains actual knowledge of such failure
as will be specified in the Indenture.
The Indenture Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Indenture or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any of
the Noteholders, unless such Noteholders have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Noteholder will have any right under
the Indenture to institute any proceeding with respect to the Indenture, unless
such holder previously has given to the Indenture Trustee written notice of the
occurrence of an Event of Default and (i) the Event of Default arises from the
Servicer's failure to remit payments when due or (ii) the holders of the Notes
(excluding for such purposes the outstanding principal amount of any Notes held
of record or beneficially owned by TMCC or any of its affiliates), evidencing
not less than 25% of the voting interests of such class of Notes, have made
written request upon the Indenture Trustee to institute such proceeding in its
own name as the Indenture Trustee thereunder and have offered to the Indenture
Trustee reasonable indemnity and the Indenture Trustee for 30 days has neglected
or refused to institute any such proceedings. See "Description of the Notes--
The Indenture" in this Prospectus Supplement.
ERISA CONSIDERATIONS
The Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes may be
purchased by an employee benefit plan or an individual retirement account (a
"Plan") subject to ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"). A fiduciary of a Plan must determine that the purchase
of a Note is consistent with its fiduciary duties under ERISA and does not
result in a nonexempt prohibited transaction as defined in Section 406 of ERISA
or Section 4975 of the Code. For additional information regarding treatment of
the Notes under ERISA and the risks associated with the Notes being treated as
"equity interests" under the Plan Assets Regulation, see "ERISA Considerations"
in the Prospectus.
Certain exemptions from the prohibited transaction rules could be applicable
to the purchase and holding of the Class A-2 Notes, the Class A-3 Notes or the
Class A-4 Notes by a Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire the Class A-2 Notes, the Class A-3
Notes or the Class A-4 Notes. Potentially available exemptions would include,
without limitation, Prohibited Transaction Class Exemption ("PTCE") 90-1, which
exempts certain transactions involving insurance company general accounts; PTCE
91-38, which exempts certain transactions involving bank collective investment
funds; PTCE 84-14, which exempts certain transactions effected on behalf of a
Plan by a "qualified professional asset manager"; and PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager." Insurance company general accounts should also discuss with their
legal counsel the availability of relief under Section 401(c) of ERISA. A
purchaser of the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes
should be aware, however, that even if the conditions specified in one or more
exemptions are met, the scope of the relief provided by the applicable exemption
or exemptions might not cover all acts that might be construed as prohibited
exemptions.
The Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes may not be
purchased with the assets of a Plan if the Seller, the Servicer, the Indenture
Trustee, the Owner Trustee or any of their
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<PAGE>
affiliates (a) has investment or administrative discretion with respect to such
Plan assets; (b) has authority or responsibility to give, or regularly gives,
investment advice with respect to such Plan assets, for a fee and pursuant to an
agreement or understanding that such advice (i) will serve as a primary basis
for investment decisions with respect to such Plan assets and (ii) will be based
on the particular investment needs for such Plan; or (c) is an employer
maintaining or contributing to such Plan. None of the Class A-2 Notes, the
Class A-3 Notes or the Class A-4 Notes may be purchased with the assets of a
Plan if the Seller as holder of the Subordinated Seller's Interest is a
fiduciary with respect to those Plan assets and participates in the decision to
purchase these Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of O'Melveny & Myers LLP, tax counsel to the trust ("Tax
Counsel"), under current law and subject to the discussion set forth below, the
Trust will not be classified as an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further, with respect
to the Notes, Tax Counsel will advise the Trust that the Class A-2, Class A-3
and Class A-4 Notes will be classified as debt for federal income tax purposes.
The Noteholders will be deemed to agree, by their purchase of the Notes, to
treat the Notes as debt for federal income tax purposes.
In addition, Tax Counsel has prepared or reviewed the statements under the
heading "Summary of Terms--Tax Status" as they relate to federal income tax
matters and under the heading "Certain Federal Income Tax Consequences" herein
and in the Prospectus and is of the opinion that such statements are correct in
all material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership for
federal income tax purposes on investors generally and of related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to the investor's specific tax
circumstances that would be provided by an investor's own tax adviser.
Accordingly, each investor is advised to consult its own tax advisor with regard
to the tax consequences to it of investing in Notes.
For additional information regarding the federal and state tax treatment of
the Trust, and the federal and state tax consequences of the purchase, ownership
and disposition of the Notes, prospective investors should refer to the
discussion in the accompanying Prospectus under the heading "Certain Federal
Income Tax Consequences--Tax Treatment of Owner Trusts--TAX CONSEQUENCES TO
HOLDERS OF THE NOTES."
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Seller has agreed to cause the Trust to sell to each of the Class A-2
Note/Class A-3 Note/Class A-4 Note Underwriters named below (collectively, the
"Class A-2 Note/Class A-3 Note/Class A-4 Note Underwriters"), and each of the
Class A-2 Note/Class A-3 Note/Class A-4 Note Underwriters has severally agreed
to purchase the initial principal amount of Class A-2 Notes, Class A-3 Notes and
Class A-4 Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A-2 NOTES CLASS A-3 NOTES CLASS A-4 NOTES
------------ ------------------- ------------------- -------------------
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................. $ 62,095,000 $106,475,000 $ 56,410,000
Morgan Stanley & Co Incorporated......... 62,095,000 106,475,000 56,409,000
Chase Securities Inc..................... 36,162,000 62,010,000 32,852,000
Deutsche Bank Securities Inc............. 36,162,000 62,010,000 32,852,000
Goldman, Sachs & Co...................... 36,162,000 62,010,000 32,852,000
Lehman Brothers Inc...................... 36,162,000 62,010,000 32,852,000
Salomon Smith Barney Inc................. 36,162,000 62,010,000 32,852,000
Total.................................... $305,000,000 $523,000,000 $277,079,000
</TABLE>
The Seller has been advised by the Class A-2 Note/Class A-3 Note/Class A-4
Note Underwriters that they propose initially to offer the Class A-2 Notes, the
Class A-3 Notes and the Class A-4 Notes to the public at the prices set forth
herein. After the initial public offering of the Class A-2 Notes, Class A-3
Notes and Class A-4 Notes, the public offering price may change.
The underwriting discounts and commissions, the selling concessions that the
Underwriters may allow to certain dealers, and the discounts that such dealers
may reallow to certain other dealers, each expressed as a percentage of the
principal amount of the related class of Notes and as an aggregate dollar
amount, shall be as follows:
<TABLE>
<CAPTION>
UNDERWRITING SELLING
DISCOUNT AND NET PROCEEDS TO THE CONCESSIONS NOT REALLOWANCE NOT
COMMISSIONS SELLER(1) TO EXCEED TO EXCEED
------------ ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Class A-2 Notes................... 0.125% 99.87211% 0.075% 0.038%
Class A-3 Notes................... 0.175% 99.80972% 0.105% 0.053%
Class A-4 Notes................... 0.255% 99.72041% 0.153% 0.077%
Total for the offered Notes..... $2,003,051 $1,102,919,086
</TABLE>
------------------------
(1) Before deducting expenses payable by the Seller, estimated to be $650,000.
Until the distribution of the Notes is completed, rules of the SEC may limit
the ability of the Underwriters and certain selling group members to bid for and
purchase the Notes. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions to stabilize the price of the Notes.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering, (i.e., they sell more Notes than are set forth on the cover page
of this Prospectus Supplement), the Underwriters may reduce that short position
by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Notes in the
open market to reduce the
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<PAGE>
Underwriters' short position or to stabilize the price of the Notes, they may
reclaim the amount of the selling concession from any Underwriter or selling
group member who sold those Notes as part of the offering.
In general, purchases of a security for the purposes of stabilization or to
reduce a short position could cause the price of the security to be higher that
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Seller nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that any of the
transactions described above may have on the price of the Notes. In addition,
neither the Seller nor any of the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Notes are new issues of securities and there currently is no secondary
market for the Notes. The Underwriters for the Notes expect to make a market in
such Notes but will not be obligated to do so. There is no assurance that a
secondary market for the Notes will develop. If a secondary market for the Notes
does develop, it might end at any time or it might not be sufficiently liquid to
enable you to resell any of your Notes.
The Indenture Trustee may, from time to time, invest the funds in the
Collection Account and the Reserve Account in investments acquired from or
issued by the Underwriters.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with the Servicer and its affiliates.
The Seller and TMCC have agreed to indemnify the Underwriters against
certain liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
It is expected that the delivery of the Notes will be made against payment
therefor on or about the Closing Date, which is expected to be the seventh
business day following the date hereof. Under Rule 15c-6 under the Exchange Act,
trades in the secondary market generally are required to settle within three
business days, unless the parties thereto expressly agree otherwise.
Accordingly, purchasers who wish to trade the Notes on the date hereof and for a
period of days hereafter will be required, by virtue of the fact that the Notes
initially will settle seven business days after the date hereof, to specify an
alternate settlement cycle at the time of any such trade to avoid a failed
settlement.
Each Underwriter will represent that (i) it has not offered or sold and will
not offer or sell, prior to the date six months after their date of issuance,
any Notes to persons in the United Kingdom, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted in and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Notes in, from or otherwise involving the
United Kingdom; and (iii) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with the
issuance of the Notes to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1997 or is a person to whom the document can otherwise lawfully be issued or
passed on.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain legal
matters relating to the Notes and certain federal income tax and California
state income tax and other matters will be passed upon for the Trust by
O'Melveny & Myers LLP. Certain legal matters relating to the Notes will be
passed upon for the Underwriters by Stroock & Stroock & Lavan LLP.
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<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
ABS................................... 25
ABS Table............................. 25
Aggregate Net Losses.................. 34
Available Collections................. 31
Business Day.......................... 28
Charge-off Rate....................... 34
Class A Notes......................... 16
Class A-1 Final Scheduled Payment
Date................................ 29
Class A-1 Notes....................... 16
Class A-2 Final Scheduled Payment
Date................................ 29
Class A-2 Notes....................... 16
Class A-3 Final Scheduled Payment
Date................................ 29
Class A-3 Notes....................... 16
Class A-4 Final Scheduled Payment
Date................................ 29
Class A-4 Notes....................... 16
Closing Date.......................... 18
Code.................................. 39
Current Receivable.................... 34
Cutoff Date........................... 18
Dealer Recourse....................... 17
Defaulted Receivable.................. 31
Delaware Trustee...................... 16
Delinquency Percentage................ 34
Determination Date.................... 30
Eligible Investments.................. 36
Event of Default...................... 29
Excess Payment........................ 36
Financed Vehicles..................... 18
Global Notes.......................... A-1
Indenture Trustee..................... 18
Interest Period....................... 30
Interest Rate......................... 28
Liquidated Receivable................. 34
Net Liquidation Proceeds.............. 31
Non-U.S. Person....................... A-4
Notes................................. 16
Obligors.............................. 18
Owner Trustee......................... 18
Payment Date.......................... 28
Payments to Noteholders............... 30
Plan.................................. 39
Pool Factor........................... 28
Prepayment............................ 36
Principal Distribution Account........ 35
Principal Distribution Amount......... 31
Rating Agency......................... 34
Receivables........................... 16
Receivables Pool...................... 18
Receivables Purchase Agreement........ 18
Redemption Price...................... 37
Sale and Servicing Agreement.......... 17
Scheduled Payments.................... 19
SEC................................... 28
Securities............................ 16
Securityholder........................ 16
Seller................................ 16
Servicer.............................. 17
Servicer Default...................... 37
Servicing Fee Rate.................... 35
Specified Reserve Account Balance..... 33
Subordinated Seller's Interest........ 16
Summary of Terms...................... 17
Tax Counsel........................... 40
TMCC.................................. 17
TMCRC................................. 16
Transfer and Servicing Agreements..... 35
Trust................................. 16
Trust Agreement....................... 16
U.S. Person........................... A-4
</TABLE>
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<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes (the
"Global Notes") will be available only in book-entry form. Investors in the
Global Notes may hold such Global Notes through DTC, Clearstream Banking societe
anonyme ("Clearstream Banking Luxembourg") or the Euroclear system. The Global
Notes will be tradable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Notes through
Clearstream Banking Luxembourg and the Euroclear system will be conducted in the
ordinary way in accordance with their normal rules and operating procedures and
in accordance with conventional eurobond practice (i.e., three calendar day
settlement).
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedure applicable to U.S.
corporate debt obligations and prior asset-backed notes issues.
Secondary cross-market trading between Clearstream Banking Luxembourg or the
Euroclear system and DTC Participants holding notes will be effected on a
delivery-against-payment basis through the depositaries of Clearstream Banking
Luxembourg and the Euroclear system (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Notes will be subject to
U.S. withholding taxes unless such holders meet certain requirements and deliver
appropriate U.S. tax documents to the notes clearing organizations or their
participants.
INITIAL SETTLEMENT
All Global Notes will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Clearstream Banking Luxembourg and
the Euroclear system will hold positions on behalf of their participants through
their depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Notes through DTC will follow DTC
settlement practice. Investor notes custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through Clearstream Banking
Luxembourg or the Euroclear system accounts will follow the settlement
procedures applicable to conventional eurobonds, except that there will be no
temporary global security and no "lock-up" or restricted period. Global Notes
will be credited to notes custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
asset-backed notes issues in same-day funds.
A-1
<PAGE>
TRADING BETWEEN CLEARSTREAM BANKING LUXEMBOURG AND/OR EUROCLEAR SYSTEM
PARTICIPANTS. Secondary market trading between Clearstream Banking Luxembourg
Participants or Euroclear system Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CLEARSTREAM BANKING LUXEMBOURG OR EUROCLEAR
SYSTEM PARTICIPANTS. When Global Notes are to be transferred from the account of
a DTC Participant to the account of a Clearstream Banking Luxembourg Participant
or a Euroclear system Participant, the purchaser will send instructions to
Clearstream Banking Luxembourg or the Euroclear system through a Clearstream
Banking Luxembourg Participant or Euroclear system Participant at least one
business day prior to settlement. Clearstream Banking Luxembourg or the
Euroclear system will instruct the respective depositary, as the case may be, to
receive the Global Notes against payment. Payment will include interest accrued
on the Global Notes from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Notes. After settlement has been completed, the Global Notes will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream Banking Luxembourg
Participant's or Euroclear system Participant's account. The notes credit will
appear the next day (European time) and the cash debt will be back-valued to,
and the interest on the Global Notes will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If settlement
is not completed on the intended value date (i.e., the trade fails), the
Clearstream Banking Luxembourg or Euroclear system cash debt will be valued
instead as of the actual settlement date.
Clearstream Banking Luxembourg Participants and Euroclear system
Participants will need to make available to the respective clearing systems the
funds necessary to process same-day funds settlement. The most direct means of
doing so is to preposition funds for settlement, either from cash on hand or
existing lines of credit, as they would for any settlement occurring within
Clearstream Banking Luxembourg or the Euroclear system. Under this approach,
they may take on credit exposure to Clearstream Banking Luxembourg or the
Euroclear system until the Global Notes are credited to their accounts one day
later.
As an alternative, if Clearstream Banking Luxembourg or the Euroclear system
has extended a line of credit to them, Clearstream Banking Luxembourg
Participants or Euroclear system Participants can elect not to preposition funds
and allow that credit line to be drawn upon to finance settlement. Under this
procedure, Clearstream Banking Luxembourg Participants or Euroclear system
Participants purchasing Global Notes would incur overdraft charges for one day,
assuming they clear the overdraft when the Global Notes are credited to their
accounts. However, interest on the Global Notes would accrue from the value
date. Therefore, in many cases the investment income on the Global Notes earned
during that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each Clearstream Banking
Luxembourg Participant's or Euroclear system Participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Notes to the
respective European Depositary for the benefit of Clearstream Banking Luxembourg
Participants or Euroclear system Participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
Participants a cross-market transaction will settle no differently than a trade
between two DTC Participants.
TRADING BETWEEN CLEARSTREAM BANKING LUXEMBOURG OR EUROCLEAR SYSTEM SELLER
AND DTC PURCHASER. Due to time zone differences in their favor, Clearstream
Banking Luxembourg Participants and Euroclear system Participants may employ
their customary procedures for transactions in which Global
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Notes are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Clearstream Banking Luxembourg or the Euroclear system through a Clearstream
Banking Luxembourg Participant or Euroclear system Participant at least one
business day prior to settlement. In these cases, Clearstream Banking Luxembourg
or the Euroclear system will instruct the Relevant Depositary, as appropriate,
to deliver the Global Notes to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Notes from and including the
last coupon payment to and excluding the settlement date on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
The payment will then be reflected in the account of the Clearstream Banking
Luxembourg Participant or Euroclear system Participant the following day, and
receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant's
or Euroclear system Participant's account would be back-valued to the value date
(which would be the preceding day, when settlement occurred in New York). Should
the Clearstream Banking Luxembourg Participant or Euroclear system Participant
have a line of credit with its respective clearing system and elect to be in
debt in anticipation of receipt of the sale proceeds in its account, the back
valuation will extinguish any overdraft incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade fails),
receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant's
or Euroclear system Participant's account would instead be valued as of the
actual settlement date.
Finally, day traders that use Clearstream Banking Luxembourg or the
Euroclear system and that purchase Global Notes from DTC Participants for
delivery to Clearstream Banking Luxembourg Participants or Euroclear system
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Clearstream Banking Luxembourg or the Euroclear
system for one day (until the purchase side of the day trade is reflected in
their Clearstream Banking Luxembourg or Euroclear system accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their Clearstream Banking Luxembourg or
Euroclear system account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Clearstream Banking
Luxembourg Participant or Euroclear system Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Notes holding notes through Clearstream Banking
Luxembourg or the Euroclear system (or through DTC if the holder has an address
outside the U.S.) will be subject to the 30% U.S. withholding tax that generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (i) each clearing system, bank or
other financial institution that holds customers' notes in the ordinary course
of its trade or business in the chain of intermediaries between such beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global
Notes that are Non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8
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(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.
As used in the foregoing discussion, the term "U.S. Person" means (i) a
citizen or resident of the United States who is a natural person, (ii) a
corporation or partnership (or an entity treated as a corporation or
partnership) organized in or under the laws of the United States or any state
thereof, including the District of Columbia (unless, in the case of a
partnership, Treasury Regulations are adopted that provide otherwise), (iii) an
estate, the income of which is subject to United States Federal income taxation,
regardless of its source or (iv) a trust, if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons (as such term is defined in the Code and
Treasury Regulations) have the authority to control all substantial decisions of
the trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury Regulations, certain trusts in existence prior to August 20, 1996 that
elected to be treated as United States persons prior to such date also shall be
U.S. Persons. The term "Non-U.S. Person" means any person who is not a U.S.
Person. This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of Global Notes. Investors
are advised to consult their tax advisors for specific tax advice concerning
their holding and disposing of Global Notes.
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PROSPECTUS
TOYOTA AUTO RECEIVABLES TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT CORPORATION,
SERVICER
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE 9 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
This prospectus does not contain complete information about the offering of
securities. You are urged to read both this prospectus and the related
prospectus supplement that will provide additional information about the
securities being offered to you. No one may use this prospectus to offer and
sell the securities unless it is accompanied by the related prospectus
supplement. If any statement in the prospectus supplement conflicts with
statements in this prospectus, the statements in the prospectus supplement will
control.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES OR DETERMINED THAT THIS PROSPECTUS OR THE PROSPECTUS
SUPPLEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Notes of a given series issued by a trust will be obligations of that trust
only. Certificates of a given series issued by a trust will represent beneficial
interests in that trust only. The securities will not be obligations of,
interests in, and are not guaranteed or insured by, Toyota Motor Credit
Corporation, Toyota Motor Credit Receivables Corporation, Toyota Motor Sales,
U.S.A., Inc. or any of their affiliates. Neither the securities nor the
receivables owned by the trust are insured or guaranteed by any governmental
agency.
THE TRUSTS-
- A new trust will be formed to issue each series of securities.
- The assets of each trust:
- will be described in a related prospectus supplement;
- will primarily be a pool of retail installment sales contracts
secured by new or used automobiles and light duty trucks;
- will include related assets such as:
- security interests in the financed vehicles;
- proceeds from claims on related insurance policies; and
- amounts deposited in specified bank accounts.
THE SECURITIES-
- will be asset-backed securities sold periodically in one or more series;
- will be paid only from the assets of the related trust;
- will be issued in one or more classes; and
- will consist of:
- notes (which will be treated as indebtedness of the trust) and/or
- certificates (which will represent an undivided ownership interest in
the trust).
The amounts, prices and terms of each offering of securities will be determined
at the time of sale and will be described in a prospectus supplement that will
be attached to this prospectus.
The date of this Prospectus is June 16, 2000.
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the securities is provided in two separate documents that
progressively provide more detail:
- this prospectus, which provides general information, some of which may not
apply to a particular series of securities including your series; and
- the accompanying prospectus supplement, which will describe the specific
terms of your series of securities including:
-- the timing of interest and principal payments;
-- the priority of interest and principal payments;
-- financial and other information about the receivables owned by the
trust;
-- information about the credit enhancement for each class;
-- the rating of each class; and
-- the method for selling the securities.
IF THE TERMS OF A PARTICULAR SERIES OF SECURITIES VARY BETWEEN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including any information incorporated by
reference. No one has been authorized to provide you with different information.
The securities are not being offered in any state where their offer is not
permitted.
Cross-references in this prospectus and in the prospectus supplement have
been provided to captions in these materials where you can find further related
discussions. Cross-references are contained in the introductory summary which
will direct you elsewhere in this prospectus to more detailed descriptions of a
particular topic. The Table of Contents on the back cover page of this
prospectus provides the pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms" beginning on page 86
in this prospectus.
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SUMMARY OF TERMS
. THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT
AND PROVIDES A GENERAL OVERVIEW OF RELEVANT TERMS OF THE SECURITIES. TO
UNDERSTAND ALL OF THE TERMS OF THE OFFERING, YOU SHOULD READ CAREFULLY THIS
ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
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ISSUER............................ The trust to be formed for each series of securities. If
the trust issues notes and certificates, it will be
formed by a trust agreement between the seller and the
trustee of the trust. If the trust issues only
certificates, it will be formed by a pooling and
servicing agreement among the seller, the servicer and
the trustee of the trust.
SELLER............................ Toyota Motor Credit Receivables Corporation. The
principal executive offices of Toyota Motor Credit
Receivables Corporation are located at 19300 Gramercy
Place, North Building, Torrance, California 90509,
Attn: President and its telephone number is (310)
468-7332.
SERVICER.......................... Toyota Motor Credit Corporation. The principal executive
offices of Toyota Motor Credit Corporation are located
at 19001 South Western Avenue, Torrance, California
90509, its telephone number is (310) 787-1310 and its
facsimile number is (310) 468-6194.
TRUSTEE........................... The trustee for each series of securities will be named
in the prospectus supplement for that series.
INDENTURE TRUSTEE................. If the trust issues notes, the trustee for the indenture
will be named in the prospectus supplement for that
series.
SECURITIES........................ NOTES--series of securities may include one or more
classes of notes. Notes of a series will be issued
pursuant to an indenture.
CERTIFICATES--Each series of securities will include one
or more classes of certificates, whether or not a class
of notes is issued as part of the series. If a series of
securities includes classes of notes, holders of notes
may have the right to receive their payments before
holders of certificates are paid. In addition, classes
of notes may have the right to receive their payments
before holders of other classes of notes are paid, and
classes of certificates may have the right to receive
their payments before holders of other classes of
certificates are paid. This is referred to as
"subordination". The prospectus supplement will describe
the terms of any subordination provisions that apply to
a class of notes or certificates.
TERMS--The terms of each class of notes and certificates
in a series will be described in the prospectus
supplement including:
- stated principal amount (notes) and stated
certificate balance (certificates); and
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- interest rate (which may be fixed, variable,
adjustable or some combination of these rates) or method
of determining the interest rate.
A class of notes may differ from other classes of notes
and a class of Certificates may differ from other
classes of certificates in certain respects including:
- timing and priority of payments;
- seniority;
- allocations of losses;
- interest rate or formula;
- amount of principal or interest payments;
- whether interest or principal will be payable to
holders of the class if certain events occur; and
- the right to receive collections from designated
portions of the receivables owned by the trust.
FORM--If you acquire a beneficial ownership interest in
the securities you will generally hold them through The
Depository Trust Company in the United States, or
Clearstream Banking societe anonyme ("Clearstream
Banking Luxembourg") or the Euroclear System in Europe
or Asia. This is referred to as "book-entry" form. As
long as the securities are held in book-entry form, you
will not receive a definitive certificate representing
the securities.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO
"CERTAIN INFORMATION REGARDING THE
SECURITIES--BOOK-ENTRY REGISTRATION" IN THIS PROSPECTUS
DENOMINATION--Securities will be issued in the
denominations specified in the related prospectus
supplement.
THE TRUST PROPERTY................ The assets of each trust:
- will be described in the prospectus supplement;
- will primarily be a pool of retail installment sales
contracts (the "receivables") secured by new or used
automobiles and light duty trucks ("financed
vehicles") and amounts due or collected under the
contracts on or after a specified cutoff date; and
- will include related assets such as:
-- security interests in the financed vehicles,
-- proceeds from claims on related insurance policies,
and
-- amounts deposited in specified bank accounts.
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Purchasers of Toyota and Lexus cars and light duty
trucks often finance their purchases by entering into
retail installment sales contracts with Toyota and Lexus
dealers who then resell the contracts to Toyota Motor
Credit Corporation. The purchasers of the financed
vehicles are referred to as the "obligors" under the
receivables. The terms of the contracts must meet
specified Toyota Motor Credit Corporation requirements.
On or before the date the securities of a series are
issued, Toyota Motor Credit Corporation will sell a
specified amount of receivables to Toyota Motor Credit
Receivables Corporation, the seller. The seller will, in
turn, sell them to the trust. The sale by the seller to
the trust will be documented under:
- a pooling and servicing agreement among the seller,
the servicer and the trustee (if the trust will be
treated as a grantor trust for federal income tax
purposes).
- a sale and servicing agreement among the seller, the
servicer and the trust (if the trust will not be
treated as a grantor trust for federal income tax
purposes); or
The receivables to be sold by Toyota Motor Credit
Corporation to the seller and resold to the trust will
be selected based on criteria specified in the sale and
servicing agreement or the pooling and servicing
agreement, whichever is applicable. These criteria will
be described in the applicable prospectus supplement.
The trust will use collections on the receivables to pay
interest and principal to holders of each class of
securities. The prospectus supplement will describe
whether:
- collections received each month will be passed
through to holders of securities on a monthly basis; or
- whether payments will instead be made on a quarterly,
semi-annual, annual or other basis.
If payments are made other than monthly, the trust will
need to invest the collections until the relevant
payment date. These investments will be highly rated.
The prospectus supplement will describe these
investments in more detail. Because of the
administrative difficulties involved in obtaining
investments that will provide payments to the trust on
the day before payments are to be made to holders of
securities and that earn a sufficient amount of
interest, in many cases the investments will be demand
notes issued by Toyota Motor Credit Corporation. These
demand notes will be unsecured general obligations of
Toyota Motor Credit Corporation and will rank equally
with all other outstanding unsecured and unsubordinated
debt of Toyota Motor Credit Corporation.
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YOU SHOULD REFER TO THE APPLICABLE PROSPECTUS SUPPLEMENT
FOR MORE INFORMATION ABOUT THE TERMS AND CONDITIONS OF
ANY TMCC DEMAND NOTES. IN ADDITION, YOU SHOULD REFER TO
"TMCC DEMAND NOTES" IN THIS PROSPECTUS.
CREDIT AND CASH FLOW ENHANCEMENT.. The trusts may include certain features designed to
provide protection to one or more classes of securities.
These features are referred to as "credit enhancement".
Credit enhancement may include any one or more of the
following:
- subordination of one or more other classes of
securities;
- reserve fund;
- over-collateralization;
- letters of credit or other credit facilities;
- surety bonds;
- guaranteed investment contracts;
- repurchase obligations;
- cash deposits; or
- other agreements or arrangements providing for other
third party payments or other support.
In addition, the trusts may include certain features
designed to ensure the timely payment of amounts owed to
securityholders. These features may include any one or
more of the following:
- yield maintenance agreements;
- swap transactions;
- liquidity facilities;
- cash deposits; or
- other agreements or arrangements providing for other
third party payments or other support.
The specific terms of any credit or cash flow
enhancement applicable to a trust or to the securities
issued by a trust will be described in detail in the
applicable prospectus supplement, including any
limitations or exclusions from coverage.
SERVICING......................... Toyota Motor Credit Corporation will be appointed to act
as servicer for the receivables. In that capacity, the
servicer will handle all collections, administer
defaults and delinquencies and otherwise service the
contracts. The trust will pay the servicer a monthly fee
equal to 1/12 of 1.00% of the total principal balance of
the receivables as of the first day of the preceding
month. The servicer will also receive additional
servicing compensation in the form of investment
earnings, late fees and other administrative fees and
expenses or similar charges received by the servicer
during such month.
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The servicer will also be obligated to advance to the
trust interest on the receivables that is due but unpaid
by the obligor. In addition, the servicer will be
obligated to advance to the trust principal of any
receivables that are classified as precomputed
receivables rather than as simple interest receivables.
The servicer will not be required to make any advance if
it determines that it will not be able to recover an
advance from an obligor. The trust will reimburse the
servicer from later collections on the receivables for
which it has made advances, or from collections
generally if the servicer determines that an advance
will not be recoverable with respect to such receivable.
FOR MORE DETAILED INFORMATION ON ADVANCES AND
REIMBURSEMENT OF ADVANCES, SEE "DESCRIPTION OF THE
TRANSFER AND SERVICING AGREEMENT--ADVANCES" IN THIS
PROSPECTUS.
OPTIONAL REDEMPTION............... The servicer or the seller may redeem any outstanding
certificates when the outstanding aggregate principal
balance of the receivables declines to 10% or less of
the original total principal balance of the receivables
as of the cutoff date.
FOR MORE DETAILED INFORMATION, YOU SHOULD REFER TO
"DESCRIPTION OF THE TRANSFER AND SERVICING
AGREEMENT--SERVICING COMPENSATION AND PAYMENT OF
EXPENSES" IN THIS PROSPECTUS.
TAX STATUS........................ GRANTOR TRUSTS--The applicable prospectus supplement
will specify whether a trust will be treated as a
grantor trust for federal income tax purposes. If a
trust is nominally referred to as a "grantor trust" in
the applicable prospectus supplement, special tax
counsel to the trust will be required to deliver an
opinion that:
1. the trust will be treated as a grantor trust for
federal income tax purposes; and
2. the trust will not be subject to federal income tax.
OWNER TRUSTS--If the trust is nominally referred to as
an "owner trust" in the applicable prospectus
supplement, special tax counsel to the trust will be
required to deliver an opinion for federal income tax
purposes and California income and franchise tax
purposes:
1. as to the characterization as debt of the notes
issued by the trust; and
2. that the trust will not be characterized as an
association (or a publicly traded partnership) taxable
as a corporation.
If a trust is nominally referred to as an "owner trust"
in the applicable prospectus supplement:
1. by purchasing a note you will be agreeing to treat
the note as indebtedness for tax purposes; and
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2. by purchasing a certificate, you will be agreeing to
treat the trust as a partnership in which you are a
partner for federal income tax purposes and
California income and franchise tax purposes.
Applicable taxing authorities could impose alternative
tax characterizations of the trust and the certificates.
However, these characterizations generally will not
result in material adverse tax consequences to
certificateholders.
FOR ADDITIONAL INFORMATION CONCERNING THE FEDERAL AND
CALIFORNIA TAX LAWS, YOU SHOULD REFER TO "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" AND "CERTAIN STATE TAX
CONSEQUENCES" IN THIS PROSPECTUS.
ERISA CONSIDERATIONS.............. NOTES--Notes will generally be eligible for purchase by
employee benefit plans.
UNSUBORDINATED GRANTOR TRUST CERTIFICATES--Certificates
of a class issued by a grantor trust that are not
subordinated to any other class will generally be
eligible for purchase by employee benefit plans.
OTHER CERTIFICATES--Subordinated classes of certificates
issued by a grantor trust and certificates issued by
trusts that are not grantor trusts will not be eligible
for purchase by an employee benefit plan or individual
retirement account unless the prospectus supplement
states otherwise.
FOR MORE DETAILED INFORMATION REGARDING THE ERISA
ELIGIBILITY OF ANY CLASS OF SECURITIES, YOU SHOULD REFER
TO "ERISA CONSIDERATIONS" IN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT.
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS IN DECIDING WHETHER TO
PURCHASE SECURITIES OF ANY CLASS. IN ADDITION, YOU SHOULD REFER TO THE SECTION
CAPTIONED "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT FOR A
DESCRIPTION OF FURTHER MATERIAL RISKS TO YOUR INVESTMENT IN THE SECURITIES.
THE TRUST'S SECURITY INTERESTS IN FINANCED VEHICLES MAY BE UNENFORCEABLE OR
DEFEATED.
The certificates of title for vehicles financed by Toyota Motor Credit
Corporation name Toyota Motor Credit Corporation as the secured party. The
certificates of title for financed vehicles under contracts assigned to the
trust will not be amended to identify the trust as the new secured party because
it would be administratively burdensome to do so. However, financing statements
showing the transfer to the trust of Toyota Motor Credit Corporation's and the
seller's interest in the receivables will be filed with the appropriate
governmental authorities. Toyota Motor Credit Corporation, as servicer, will
retain the documentation for the receivables and the certificates of title.
Because of these arrangements, another person could acquire an interest in
the receivables and the financed vehicles that is judged by a court of law to be
superior to the trust's interest. Examples of these persons are other creditors
of the obligors, a subsequent purchaser of a financed vehicle or another lender
who finances the vehicle. Some of the ways this could happen are described in
this prospectus under the caption "Certain Legal Aspects of the Receivables". In
some circumstances, either the seller or the servicer will be required to
purchase receivables if a security interest superior to the claims of others has
not been properly established and maintained. The details of this obligation are
described in this prospectus under the caption "Certain Legal Aspects of the
Receivables".
BANKRUPTCY OF TOYOTA MOTOR CREDIT CORPORATION COULD RESULT IN LOSSES OR
DELAYS IN PAYMENTS ON THE SECURITIES.
If Toyota Motor Credit Corporation becomes subject to bankruptcy
proceedings, you could experience losses or delays in the payments on your
securities. Toyota Motor Credit Corporation will sell the receivables to the
seller, and the seller will in turn transfer the receivables to the trust.
However, if Toyota Motor Credit Corporation becomes subject to a bankruptcy
proceeding, the court in the bankruptcy proceeding could conclude that Toyota
Motor Credit Corporation effectively still owns the receivables by concluding
that the sale to the seller was not a "true sale" or that the seller should be
consolidated with Toyota Motor Credit Corporation for bankruptcy purposes. If a
court were to reach this conclusion, you could experience losses or delays in
payments on the securities as a result of, among other things:
- the "automatic stay" which prevents secured creditors from exercising
remedies against a debtor in bankruptcy without permission from the court
and provisions of the U.S. Bankruptcy Code that permit substitution for
collateral in certain circumstances;
- certain tax or government liens on Toyota Motor Credit Corporation
property (that arose prior to the transfer of a receivable to the trust)
having a prior claim on collections before the collections are used to
make payments on your securities; and
- the trust not having a perfected security interest in (a) one or more of
the vehicles securing the receivables or (b) any cash collections held by
Toyota Motor Credit Corporation at the time Toyota Motor Credit
Corporation becomes the subject of a bankruptcy proceeding.
The seller will take steps in structuring each transaction described in this
prospectus to minimize the risk that a court would consolidate the seller with
Toyota Motor Credit Corporation for bankruptcy purposes or conclude that the
sale of receivables to the seller was not a "true sale." See "Certain Legal
Aspects of the Receivables--Certain Bankruptcy Considerations" in this
prospectus.
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RECEIVABLES THAT FAIL TO COMPLY WITH CONSUMER PROTECTION LAWS MAY BE
UNENFORCEABLE, RESULTING IN DELAYS IN RECEIPT OF COLLECTIONS.
Numerous federal and state consumer protection laws regulate consumer
contracts such as the receivables. If any of the receivables do not comply with
one or more of these laws, the servicer may be prevented from or delayed in
collecting the receivables. If that happens, payments on the certificates could
be delayed or reduced. The seller will make representations and warranties
relating to the receivables' compliance with law and the trust's ability to
enforce the contracts. If the seller breaches any of these representations or
warranties, the trust's sole remedy will be to require the seller to repurchase
the affected receivables. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws" in this prospectus.
FUNDS HELD BY THE SERVICER THAT ARE INTENDED TO BE USED TO MAKE PAYMENTS ON
THE SECURITIES MAY BE EXPOSED TO A RISK OF LOSS.
The servicer generally may retain all payments and proceeds collected on the
receivables during each collection period. The servicer is generally not
required to segregate those funds from its own accounts until the funds are
deposited in the collection account on each distribution date. Until any
collections or proceeds are deposited into the collection account, the servicer
will be able to invest those amounts for its own benefit at its own risk. The
trust and securityholders are not entitled to any amount earned on the funds
held by the servicer. If the servicer does not deposit the funds in the
collection account as required on any distribution date, the trust may be unable
to make the payments owed on your securities.
IF THE TRUST ENTERS INTO A CURRENCY OR AN INTEREST RATE SWAP, PAYMENTS ON
THE SECURITIES WILL BE DEPENDENT ON PAYMENTS MADE UNDER THE SWAP AGREEMENT.
If the trust enters into a currency swap, interest rate swap or a combined
currency and interest rate swap, its ability to protect itself from shortfalls
in cash flow caused by currency or interest rate changes will depend to a large
extent on the terms of the swap agreement and whether the swap counterparty
performs its obligations under the swap. If the trust does not receive the
payments it expects from the swap, the trust may not have adequate funds to make
all payments to securityholders when due, if ever.
If the trust issues securities denominated in a currency other than U.S.
dollars, the trust will need to make payments on the securities in a currency
other than U.S. dollars, as described in the related prospectus supplement.
Payments collected on the receivables, however, will be in U.S. dollars. In this
circumstance, the trust may enter into a currency swap to reduce its exposure to
changes in currency exchange rates. A currency swap requires one party to
provide a specified amount of a currency to the other party at specified times
in exchange for the other party providing a different currency at a
predetermined exchange ratio. For example, if the trust issues securities
denominated in swiss francs, it might enter into a swap agreement with another
party, the "swap counterparty", under which the trust would use the collections
on the receivables to pay U.S. dollars to the swap counterparty in exchange for
receiving swiss francs at a predetermined exchange rate to make the payments
owed on the securities.
If the trust issues securities with adjustable interest rates, interest will
be due on the securities at adjustable rates, while interest will be earned on
the receivables at fixed rates. In this circumstance, the trust may enter into
an interest rate swap to reduce its exposure to changes in interest rates. An
interest rate swap requires one party to make payments to the other party in an
amount calculated by applying an interest rate (for example a floating rate) to
a specified notional amount in exchange for the other party making a payment
calculated by applying a different interest rate (for example a fixed rate) to
the same notional amount. For example, if the trust issues $100 million of
securities bearing interest at a floating LIBOR rate, it might enter into a swap
agreement under which the trust would
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pay interest to the swap counterparty in an amount equal to an agreed upon fixed
rate on $100 million in exchange for receiving interest on $100 million at the
floating LIBOR rate. The $100 million would be the "notional" amount because it
is used simply to make the calculation. In an interest rate swap, no principal
payments are exchanged.
In some cases, a trust may enter into a swap with Toyota Motor Credit
Corporation as the swap counterparty. The terms of any swap will be described in
more detail in the applicable prospectus supplement.
TERMINATION OF A SWAP AGREEMENT WILL CAUSE TERMINATION OF THE TRUST.
A swap agreement may be terminated if certain events occur. Most of these
events are generally beyond the control of the trust or the swap counterparty.
If a termination occurs, the trustee will sell the assets of the trust and the
trust will terminate. In this type of situation, it is impossible to predict how
long it would take to sell the assets of the trust. Some of the possible adverse
consequences of such a sale are:
- The proceeds from the sale of assets under such circumstances may not be
sufficient to pay all amounts owed to you.
- Amounts available to pay you will be further reduced if the trust is
required to make a termination payment to the swap counterparty.
- The termination of the swap agreement may expose the trust to currency or
interest rate risk, further reducing amounts available to pay you.
- The sale may result in payments to you significantly earlier than
expected.
- Conversely, a significant delay in arranging a sale could result in a
delay in principal payments. This would, in turn, increase the weighted
average life of the securities and could reduce the yield to maturity.
See "The Swap Agreement--Early Termination of Swap Agreement" for more
information concerning the termination of a swap agreement and the sale of trust
assets. Additional information about this subject, including a description of
how the proceeds of a sale would be distributed, will be included in the
applicable prospectus supplement.
THE RATING OF A SWAP COUNTERPARTY AND THE ISSUER OF DEMAND NOTES MAY AFFECT
THE RATINGS OF THE SECURITIES.
If a trust enters into a swap or invests in Toyota Motor Credit Corporation
demand notes, the rating agencies that rate the trust's securities will consider
the provisions of the swap agreement and the demand notes and the rating of the
swap counterparty and Toyota Motor Credit Corporation, as issuer of the demand
notes in rating the securities. Toyota Motor Credit Corporation may also be the
swap counterparty. If a rating agency downgrades the debt rating of the swap
counterparty or Toyota Motor Credit Corporation, it is also likely to downgrade
the rating of the securities. Any downgrade in the rating of the securities
could have severe adverse consequences on their liquidity or market value.
As of the date of this prospectus, Toyota Motor Credit Corporation's
long-term debt is rated Aa1 by Moody's and AAA by Standard & Poor's. During 1998
and early 1999, the long-term debt rating of Toyota Motor Corporation and its
affiliates (including Toyota Motor Credit Corporation) was under review by
Moody's and Standard & Poor's and was downgraded by Moody's to Aa1 from Aaa.
Standard & Poor's reaffirmed the AAA long-term debt rating but continues to
maintain a negative outlook on the rating. If the rating agencies lower the
rating of Toyota Motor Corporation, they will likely lower Toyota Motor Credit
Corporation's rating to the same extent.
The credit rating of Japan has also been under review by the rating
agencies. As of the date of this prospectus, Moody's is maintaining a negative
outlook on certain borrowings by Japan. As a result,
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Moody's is also maintaining a negative outlook on certain borrowings by Toyota
Motor Corporation and its subsidiaries (including Toyota Motor Credit
Corporation). If Japan's credit rating is lowered below that of Toyota Motor
Corporation, the credit rating of Toyota Motor Corporation and its subsidiaries
(including Toyota Motor Credit Corporation) will likely be lowered to the same
extent.
To provide some protection against the adverse consequences of a downgrade,
the swap counterparty may be permitted, but not required, to take the following
actions if the rating agencies reduce its debt ratings below certain levels:
- assign the swap agreement to another party;
- obtain a replacement swap agreement on substantially the same terms as the
swap agreement; or
- establish any other arrangement satisfactory to the rating agencies.
If Toyota Motor Credit Corporation is the swap counterparty, it may be able
to cure the effects of a downgrade by taking the actions described above.
However, if Toyota Motor Credit Corporation is both the demand note issuer and
the swap counterparty, these actions may not be sufficient to prevent a
downgrade.
Any swap or demand notes involve a high degree of risk. A trust will be
exposed to this risk should it use either of these mechanisms. For this reason,
only investors capable of understanding these risks should invest in the
securities. You are strongly urged to consult with your financial advisors
before deciding to invest in the securities if a swap or demand notes are
involved.
THE CALCULATIONS FOR THE PAYMENTS OF PRINCIPAL OR INTEREST MAY BE BASED ON
AN INDEX WHICH MAY RESULT IN PAYMENTS TO YOU OF LESS PRINCIPAL OR INTEREST THAN
A NON-INDEXED SECURITY.
The calculation of interest or principal on a series of securities may be
based on a currency, commodity, interest rate or other index. In this situation,
the amount of principal or interest payable on the securities may be less than
that payable on a conventional debt security issued at the same time, including
the possibility that no interest or principal will be paid. In addition, if the
formula for calculating the payments on the securities includes a feature that
multiplies the effect of any change in the index, changes to the index could
result in even greater changes in the value of the securities or the payments to
be made on the securities.
You may not be able to easily trade these types of securities after you
purchase them. This is referred to as a "secondary market." It cannot be
predicted whether there will be a secondary market for these types of securities
or if one develops, how liquid it would be. The secondary market for these types
of securities will be affected by a number of factors that are not dependent on
the performance of the trust and its assets. These factors include the
complexity and volatility of the index, the method of calculating the principal
and interest payments on the securities, the time remaining to the maturity of
the securities, the outstanding amount of the securities and market interest
rates. The value of the index will depend on a number of interrelated factors
which cannot be controlled by the trust, including economic, financial and
political events. For these reasons, you may not be able to readily sell your
securities or receive the price you expected for their sale.
In recent years, many indices have been highly volatile, and the volatility
may continue in the future. You should review carefully the historical
experience of any index to which a series of securities are pegged, but should
not take that historical experience as a predictor of future performance of the
index during the term of any security. The credit ratings assigned to the
securities do not reflect the potential impact of the factors discussed above,
or what the impact may be on your securities' market value at any time. For this
reason, only investors capable of understanding the risks involved should invest
in indexed securities. In addition, investors whose investment activities are
restricted by law or subject to regulation may not be able to purchase these
types of securities. Investors are responsible for determining whether they may
purchase indexed securities. You are strongly urged to consult with your
financial advisors before deciding to invest in indexed securities.
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THE TRUSTS
The Seller will establish each trust (each, a "Trust") pursuant to a Trust
Agreement (as amended and supplemented from time to time the "Trust Agreement")
or Pooling and Servicing Agreement (as amended from time to time, the "Pooling
and Servicing Agreement"), as applicable. The property of each Trust will
include a pool (a "Receivables Pool") of retail installment sales contracts (the
"Receivables") between Toyota and Lexus dealers (the "Dealers") and the obligors
(the "Obligors") of new and used automobiles and/or light duty trucks and all
payments due thereunder on and after the applicable cutoff date (the "Cutoff
Date"), as specified in the related Prospectus Supplement. The Dealers will
originate, and TMCC will purchase, the Receivables of each Receivables Pool in
the ordinary course of business pursuant to agreements with Dealers (the "Dealer
Agreements"). On the applicable Closing Date, the Seller will sell the
Receivables comprising the related Receivables Pool to the Trust pursuant to, if
the trust is to be treated other than as a grantor 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.
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; (ii) security interests in the vehicles
financed by the Receivables (the "Financed Vehicles") and any accessions
thereto; (iii) the rights to proceeds from claims on certain physical damage,
credit life and disability insurance policies covering the Financed Vehicles or
the Obligors, as the case may be; (iv) the right of the Seller to receive any
proceeds from Dealer Recourse, if any, on Receivables or Financed Vehicles; (v)
the rights of the Seller under the Sale and Servicing Agreement or the Pooling
and Servicing Agreement, as applicable; (vi) the right to realize upon any
property (including the right to receive future Liquidation Proceeds) that shall
have secured a Receivable and that shall have been repossessed by or on behalf
of the applicable Trust; and (vii) any and all proceeds of the foregoing.
Various forms of credit enhancement may be used to provide credit enhancement
for the benefit of holders of the related Securities, including a Yield
Maintenance Account or a Reserve Fund. Additionally, pursuant to contracts
between TMCC and the Dealers, the Dealers will be required to repurchase
Receivables as to which Dealers have made certain misrepresentations.
The terms of each series of notes (the "Notes") or certificates (the
"Certificates" and, together with the Notes, the "Securities") issued by each
Trust (the "Issuer"), and additional information concerning the assets of each
Trust and any applicable credit enhancement will be set forth in a supplement to
this Prospectus (a "Prospectus Supplement").
THE TRUSTEE
The trustee for each Trust (the "Trustee") or the trustee under any
Indenture pursuant to which Notes are issued (the "Indenture Trustee") will be
specified in the related Prospectus Supplement. The Trustee's liability in
connection with the issuance and sale of the related Securities is limited
solely to the express obligations of such Trustee or Indenture Trustee set forth
in the related Trust Agreement and 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
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Indenture Trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by such successor.
THE SELLER
Toyota Motor Credit Receivables Corporation (the "Seller") was incorporated
in the State of California on June 24, 1993, as a wholly-owned, limited purpose
subsidiary of Toyota Motor Credit Corporation. The principal executive offices
of the Seller are located at 19300 Gramercy Place, North Building, Torrance,
California 90509 Attn: President and its telephone number is (310) 468-7332.
The Seller was organized primarily for the purpose of acquiring installment
sales contracts similar to the Receivables and associated rights from TMCC,
causing the issuance of 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 SERVICER
Toyota Motor Credit Corporation ("TMCC" or the "Servicer") was incorporated
in California on October 4, 1982, and commenced operations in May 1983. At March
31, 1999, TMCC had three regional offices and 33 branches in various locations
in the United States, a branch in Puerto Rico and a centralized customer service
center in Iowa. The address of TMCC's principal executive offices is 19001 South
Western Avenue, Torrance, California 90509. TMCC has one wholly owned subsidiary
engaged through subsidiaries organized in various jurisdictions in the insurance
business, a wholly-owned subsidiary that provides retail and wholesale financing
and other financial services to authorized Toyota and Lexus vehicle dealers and
their customers in Puerto Rico, a wholly-owned limited purpose subsidiary formed
to acquire and securitize retail finance receivables and a wholly-owned limited
purpose subsidiary formed to acquire and securitize lease receivables. TMCC and
its subsidiaries are collectively referred to as "TMCC".
TMCC provides retail and wholesale financing, retail leasing and certain
other financial services to authorized Toyota and Lexus vehicle and Toyota
industrial equipment dealers and their customers in the United States (excluding
Hawaii) and the Commonwealth of Puerto Rico. In addition, each of TMCC's
branches provides underwriting and loan servicing support to dealers and
customers for most financial services offered by TMCC. TMCC's primary business
is providing vehicle retail and wholesale financing and retail leasing. TMCC is
a wholly-owned subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS"), which is
primarily engaged in the wholesale distribution of automobiles, light-duty
trucks, industrial equipment and related replacement parts and accessories
throughout the United States (excluding Hawaii). Substantially all of TMS's
products are purchased from Toyota Motor Corporation, the parent of TMS, or its
affiliates.
UNDERWRITING OF MOTOR VEHICLE LOANS
TMCC purchases automobile and/or light truck retail installment sales
contracts from approximately 1,200 Toyota and Lexus dealers located throughout
the United States, excluding Hawaii. Underwriting of such retail installment
sales contracts is performed by each branch using similar underwriting
standards. Dealers originate these receivables in accordance with TMCC's
requirements as specified in existing agreements between TMCC and such dealers.
The receivables are purchased in accordance with TMCC's underwriting standards
which emphasize, among other factors, the applicant's willingness and ability to
pay and the value of the vehicle to be financed.
Applications received from Dealers must be signed by the applicant and must
contain, among other information, the applicant's name, address, residential
status, source and amount of monthly income and amount of monthly rent or
mortgage payment. Dealers then send completed customer applications via
facsimile or data transmission to one of TMCC's retail branches where they are
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entered into TMCC's internally-developed Application Processing System ("APS").
The APS then automatically generates and transmits credit bureau requests to one
of the major credit bureaus which provides a credit report to TMCC. Key data
from the bureaus are combined with data from the customer applications,
including ratios such as car payment to income and total debt payments to total
income, and weighted by a statistically validated credit scoring process to
provide objective evaluations of customer repayment probabilities. The branches
receive credit scores, bureau data (both summarized and in raw form) and
applicant information and TMCC credit investigators then perform income and
employment verification on non-"A" rated risks. Once income and employment have
been verified, all data is passed on-line to TMCC credit analysts for decisions.
The final credit decision is made based upon the degree of credit risk perceived
and the amount of credit requested. If an application is conditionally approved
or rejected, the dealer is notified of the conditions required for the approval
or reasons for rejection. Additionally, an Equal Credit Opportunity Act adverse
action notice is sent to the customer specifying the reasons for modification or
rejection of the application for credit.
TMCC's retail installment sales contracts require obligors to maintain
specific levels of physical damage insurance during the term of the contract. At
the time of purchase, an obligor signs a statement indicating he has or will
have in effect the levels of insurance required by TMCC and provides the name
and address of his insurance company and agent. Obligors are generally required
to provide TMCC with evidence of compliance with the foregoing insurance
requirements.
In April 2000, TMCC completed the national launch of an expanded tiered
pricing program for retail installment sales contracts. The objective of the
expanded program is to better match customer risk with contract rates charged to
allow profitable purchases of a wider range of risk levels. Implementation of
this expanded program is expected to result in both increased contract yields
and increased credit losses in connection with purchases of higher risk
contracts.
SERVICING OF MOTOR VEHICLE LOANS
Each branch services the loans it originates using the same servicing system
and procedures, except that centralized tracking units monitor the maintenance
of insurance and bankruptcy administration and recovery. The collection
department of each branch manages the liquidation of each receivable. TMCC
considers an obligor to be past due if less than 90% of a regularly scheduled
payment is received by the due date. TMCC uses an on-line collection system that
prioritizes loans for collections efforts, including the generation of past-due
notices and signaling TMCC collections personnel to attempt to make telephone
contact with delinquent obligors based on a behavioral scoring method (which
analyzes borrowers' past performance to predict future payment behavior). TMCC
generally determines whether to commence repossession efforts before a
receivable is 60 days past due. Repossessed vehicles are held in inventory to
comply with statutory requirements and then sold at public auctions. Any
deficiencies remaining after sale or after full charge-off are pursued by TMCC
to the extent practical and legally permitted. See "Certain Legal Aspects of the
Receivables--Deficiency Judgments and Excess Proceeds". Collections of
deficiencies are administered at a centralized facility. TMCC's policy is to
charge-off an auto loan as soon as disposition of the vehicle has been effected
and sales proceeds have been received. When repossession and disposition of the
collateral has not been effected, the charge-off occurs as soon as TMCC
determines that the vehicle cannot be recovered.
WHERE YOU CAN FIND MORE INFORMATION ABOUT YOUR SECURITIES
THE TRUST--The Trustee, will provide to securityholders ("Securityholders")
(which shall be Cede & Co. as the nominee of DTC unless definitive Securities
are issued under the limited circumstances described herein) unaudited monthly
and annual reports concerning the Receivables and certain other matters. See
"Certain Information Regarding the Securities--Reports to Securityholders" and
"Description of the Transfer and Servicing Agreements--Evidence as to
Compliance" in the Prospectus. If and for so long as any Securities listed on an
exchange and the rules of such exchange so require, each such report (including
a statement of the outstanding principal balance of each class of Securities)
also shall
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be delivered to such exchange on the related Distribution Date or date for
delivery of such reports. Copies of such reports may be obtained at no charge at
the offices specified in the applicable Prospectus Supplement.
THE SELLER--Toyota Motor Credit Receivables Corporation, as Seller of the
Receivables, has filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933 (the "Securities Act") of which this Prospectus forms a
part. The Registration Statement is available for inspection without charge at
the public reference facilities maintained at the principal office of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New
York, New York 10048. You may obtain information on the operation of the SEC's
reference room by calling the SEC at (800) SEC-0330. You may obtain copies of
such materials at prescribed rates by writing to the Public Reference Section of
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
SEC also maintains a website (http://www.sec.gov) that contains reports,
registration statements, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
TMCC--If the trust invests in demand notes issued by TMCC, TMCC, in its
capacity as issuer of demand notes, will be a registrant under the Registration
Statement. In that capacity, TMCC will be subject to the informational
requirements of the United States Securities Exchange Act. In accordance with
that law, TMCC will file annual, quarterly and special reports and other
information with the SEC. If you want more information about TMCC, you may
review the Registration Statement and TMCC's periodic filings, obtain copies of
such documents at prescribed rates or access the SEC's website. The relevant
contact information for the SEC is set forth in the paragraph captioned "The
Seller" above.
TMCC's filed periodic reports contain important information regarding TMCC.
Any information contained in reports filed with the SEC subsequent to the date
of this Prospectus will automatically update this Prospectus. TMCC, as swap
counterparty or issuer of demand notes, incorporates by reference the reports
listed below and any filings made by it with the SEC under Sections 13(a) or
15(d) of the United States Securities Exchange Act after the initial filing of
the registration statement.
- Annual Report on Form 10-K for the year ended September 30, 1999; and
- Quarterly Reports on Form 10-Q for the quarters ended December 31, 1999
and March 31, 2000.
If and for so long as Securities are listed on an exchange and the rules of
such exchange so require, the applicable Prospectus Supplement will include the
address of an office in the jurisdictions specified by the rules of such
exchange at which copies of the Registration Statement filed by TMCRC and TMCC
(including all documents incorporated therein) and TMCC's periodic SEC reports
can be obtained for so long as those Securities are outstanding. If so required
by the rules of such exchange, copies of those documents will also be filed with
such exchange for so long as those Securities are outstanding. Copies of the
operative agreements relating to the Securities will also be filed with the SEC
and with any such exchange that so requires.
THE RECEIVABLES POOLS
The Receivables Pools will include the Receivables purchased as of the
Cutoff Date. The Receivables were originated by Dealers in accordance with
TMCC's requirements and subsequently purchased by TMCC. The Receivables evidence
the indirect financing made available by TMCC to the related obligors (the
"Obligors") in connection with the purchase by such Obligors of the vehicles
financed thereby (the "Financed Vehicles"). On or before the date of initial
issuance of the Securities (the "Closing Date"), TMCC will sell the Receivables
to the Seller pursuant to the receivables purchase agreement (the "Receivables
Purchase Agreement") between the Seller and TMCC. The Seller will, in
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turn, sell the Receivables to the Trust pursuant to the related Transfer and
Servicing Agreement. During the term of the related Transfer and Servicing
Agreement, neither the Seller nor TMCC may substitute any other retail
installment sales contract for any Receivable sold to the Trust.
The Receivables in each Receivables Pool will have been purchased by the
Servicer from Dealers in the ordinary course of business through its branches
located in the United States. The Receivables are purchased from Dealers
pursuant to Dealer Agreements. TMCC purchases Receivables originated in
accordance with its credit standards which are based upon the vehicle buyer's
ability and willingness to repay the obligation as well as the value of the
vehicle being financed.
The Receivables to be held by each Trust for inclusion in a Receivables Pool
will be randomly selected from TMCC's portfolio of auto and/or light duty truck
retail installment sales contracts that meet several criteria. Unless otherwise
provided in the related Prospectus Supplement, these criteria require that each
Receivable (i) is secured by a new or used vehicle, (ii) was originated in the
United States or a particular state, (iii) provides for monthly payments that
fully amortize the amount financed over its original term to maturity, and (iv)
satisfies the other criteria, if any, set forth in the related Prospectus
Supplement. No selection procedures believed by the Seller to be adverse to the
Securityholders of any series will be used in selecting the related Receivables.
Each Receivable will provide for the allocation of payments according to (i)
the simple interest method ("Simple Interest Receivables"), (ii) the "actuarial"
method ("Actuarial Receivables") or (iii) the "sum of periodic balances" or "sum
of monthly payments" method ("Rule of 78s Receivables" and, together with the
Actuarial Receivables, the "Precomputed Receivables").
SIMPLE INTEREST RECEIVABLES. Payments on Simple Interest Receivables will
be applied first to interest accrued through the date immediately preceding the
date of payment and then to unpaid principal. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the payment period will be less than if the payment had been made
on the due date, the portion of the payment applied to reduce the principal
balance will be correspondingly greater, and the principal balance will be
amortized more rapidly than scheduled. Conversely, if an Obligor pays an
installment after its due date, the portion of the payment allocable to interest
for the payment period will be greater than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly less, and the principal balance will be amortized more
slowly than scheduled, in which case a larger portion of the principal balance
may be due on the final scheduled payment date. No adjustment to the scheduled
monthly payments is made in the event of early or late payments, although in the
case of late payments the Obligor may be subject to a late charge.
ACTUARIAL RECEIVABLES. An Actuarial Receivable provides for amortization of
the loan over a series of fixed level monthly installments. Each Scheduled
Payment is deemed to consist of an amount of interest equal to 1/12 of the
stated annual percentage rate ("APR") of the Receivable multiplied by the
scheduled principal balance of the Receivable and an amount of principal equal
to the remainder of the Scheduled Payment. No adjustment to the scheduled
monthly payments is made in the event of early or late payments, although in the
case of late payments the Obligor may be subject to a late charge.
RULE OF 78S RECEIVABLES. A Rule of 78s Receivable provides for the payment
by the Obligor of a specified total amount of payments, payable in monthly
installments on the related due date, which total represents the principal
amount financed and finance charges in an amount calculated on the basis of the
related APR for the term of such Receivable. The rate at which such amount of
finance charges is earned and, correspondingly, the amount of each Scheduled
Payment allocated to reduction of the outstanding principal balance of a Rule of
78s Receivable are calculated in accordance with the Rule of 78s. Under the Rule
of 78s, the portion of each payment allocable to interest is higher during the
early months of the term of a Rule of 78s Receivable and lower during later
months than that under a constant yield method for allocating payments between
interest and principal. Notwithstanding
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the foregoing, all payments received by the Servicer on or in respect of the
Rule of 78s Receivables will be allocated pursuant to the related Transfer and
Servicing Agreement, as the case may be, on an actuarial basis. No adjustment is
made in the event of early or late payments, although in the case of late
payments the Obligor may be subject to a late charge.
In the event of a prepayment in full (voluntarily or by acceleration) of a
Precomputed Receivable, a "rebate" will be made to the Obligor of that portion
of the total amount of payments under the Receivable allocable to "unearned"
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. Payments to
Securityholders will not be affected by such rebates under the Rule of 78s
Receivables because pursuant to the related Transfer and Servicing Agreement
such payments will be determined using the actuarial method.
Unless otherwise provided in the related Prospectus Supplement, each Trust
will account for the Rule of 78s Receivables as if such Receivables were
Actuarial Receivables. Amounts received upon prepayment in full of a Rule of 78s
Receivable in excess of the then outstanding principal balance of such
Receivable and accrued interest thereon (calculated pursuant to the actuarial
method) will not be paid to the Noteholders or passed through to the
Certificateholders of the applicable series but will be deemed to be an Excess
Amount and released to the Seller or otherwise applied as set forth in the
related Prospectus Supplement.
Additional information with respect to each Receivables Pool will be set
forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition, the distribution by APR and by the states of
origination, the portion of such Receivables Pool consisting of Precomputed
Receivables and of Simple Interest Receivables and the portion of such
Receivables Pool secured by new vehicles and by used vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning TMCC's experience pertaining to
delinquencies, repossessions and net losses with respect to its portfolio of new
and used retail automobile and/or light duty truck receivables (including
receivables previously sold which TMCC continues to service) will be set forth
in each Prospectus Supplement. There can be no assurance that the delinquency,
repossession and net loss experience on any Receivables Pool will be comparable
to prior experience or to such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average lives of the Securities of any series will generally be
influenced by the rate at which the principal balances of the related
Receivables are paid, which payment may be in the form of scheduled amortization
or prepayments. For this purpose, the term "prepayments" includes prepayments in
full, partial prepayments (including those related to rebates of extended
warranty contract costs and insurance premiums), liquidations due to default, as
well as receipts of proceeds from physical damage, credit life and disability
insurance policies and repurchases or purchases by the Seller or TMCC, as the
case may be, of certain Receivables for administrative reasons or for breaches
of representations and warranties. The term "weighted average life" means the
average amount of time during which each dollar of principal of a Receivable is
outstanding.
All of the Receivables will be prepayable at any time without penalty to the
Obligor. However, partial prepayments on the Precomputed Receivables made by
Obligors will not be paid on the Distribution Date following the Collection
Period in which they were received but will be retained and applied towards
payments due in later Collection Periods. If prepayments in full are received on
the Precomputed Receivables or if full or partial prepayments are received on
the Simple Interest Receivables, the actual weighted average life of the
Receivables may be shorter than the scheduled weighted
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average life of the Receivables set forth in the related Prospectus Supplement.
The rate of prepayment of automotive receivables is influenced by a variety of
economic, social and other factors, including the fact that an Obligor generally
may not sell or transfer the Financed Vehicle securing a Receivable without the
consent of the Seller.
No prediction can be made as to the rate of prepayment on the Receivables in
either stable or changing interest rate environments. TMCC maintains limited
records of the historical prepayment experience of the automobile retail
installment sales contracts included in its portfolio and is not aware of any
publicly available industry statistics for the entire industry on an aggregate
basis that set forth principal prepayment experience for retail installment
sales contracts similar to the Receivables over an extended period of time. TMCC
believes that its prepayment experience is consistent with that generally found
in the industry. However, no assurance can be given that prepayments on the
Receivables will conform to historical experience and no prediction can be made
as to the actual prepayment experience on the Receivables. The rate of
prepayment on the Receivables may also be influenced by the structure of the
related loan. In addition, under certain circumstances, the Seller or Servicer
will be obligated to repurchase Receivables from a given Trust pursuant to the
related Sale and Servicing Agreement or Pooling and Servicing Agreement as a
result of breaches of certain representations and warranties or covenants. See
"Description of the Transfer and Servicing Agreements--Sale and Assignment of
Receivables" and "--Servicing Procedures". 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 and "The Swap
Agreement--Termination Events" regarding events that would result in a
termination of a swap. Any reinvestment risk resulting from the rate of
prepayments of the Receivables and the payment of such prepayments to
Securityholders will be borne entirely by the Securityholders. In addition,
early retirement of the Securities 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 to repurchase from TMCC contracts which do not meet certain
representations and warranties made by such Dealer (such Dealer repurchase
obligations are referred to herein as "Dealer Recourse"). Such representations
and warranties relate primarily to the origination of the contracts and the
perfection of the security interests in the related Financed Vehicles, and do
not typically relate to the creditworthiness of the related Obligors or the
collectability of such contracts. Although the Dealer Agreements with respect to
the Receivables will not be assigned to the Trustee, the related Sale and
Servicing Agreement or Pooling and Servicing Agreement will require that TMCC
deposit any recovery in respect of any Receivable pursuant to any Dealer
Recourse in the related Collection Account. The sales by the Dealers of
installment sales contracts to TMCC do not generally provide for recourse
against the Dealers for unpaid amounts in the event of a default by an Obligor
thereunder, other than in connection with the breach of the foregoing
representations and warranties. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables" and "--Servicing Procedures".
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the Securities of a given series on
each 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 Securityholders of a given series.
The related Prospectus Supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to the particular Receivables Pool and the related series of
Securities.
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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 payment with respect to such class
of Notes. The Note Pool Factor represents the remaining outstanding principal
balance of such class of Notes, as of the close of business on the applicable
Distribution Date, as a fraction of the initial outstanding principal balance of
such class of Notes. The "Certificate Balance" for each class will initially
equal the principal balance as of the relevant Closing Date (the "Original
Certificate Balance") and, on each Distribution Date thereafter, will be reduced
by all amounts allocable to principal paid on or prior to the Distribution Date
in respect of each class of Notes. The "Certificate Pool Factor" for each class
of Certificates will be a seven-digit decimal which the Servicer will compute
prior to each payment with respect to such class of Certificates indicating the
remaining Certificate Balance of such class of Certificates, as of the close of
business on the applicable 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 Securityholders 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 paid 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 Trust
will use the net proceeds from the sale of the Securities of a given series to
purchase Receivables from the Seller and to make the initial deposit into any
Reserve Fund or Yield Maintenance Account, if applicable. Unless otherwise
specified in the related Prospectus Supplement, the Seller will use the net
proceeds so paid to it by any such Trust to purchase Receivables from TMCC and
for general corporate purposes.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes (each, a
"class") of Notes of the related series will be issued pursuant to the terms of
an indenture (the "Indenture"), a form of which has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by one or more Notes, in each case
registered in the name of the nominee of DTC
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(together with any successor depository selected by the Trust, the "Depository")
except as set forth below. Notes will be available for purchase in the
denominations specified in the related Prospectus Supplement in book-entry form
only (unless otherwise specified in the related Prospectus Supplement). The
Seller has been informed by DTC that DTC's nominee will be Cede, unless another
nominee is specified in the related Prospectus Supplement. Accordingly, such
nominee is expected to be the holder of record of the Notes (a "Noteholder") of
each class. Unless and until Definitive Notes are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Noteholder will be entitled to receive a physical certificate representing a
Note. All references herein and in the related Prospectus Supplement to actions
by Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "DTC Participants") and all references herein
and in the related Prospectus Supplement to payments, notices, reports and
statements to Noteholders refer to payments, notices, reports and statements to
DTC or its nominee, as the registered holder of the Notes, for distribution to
Noteholders in accordance with DTC's procedures with respect thereto. See
"Certain Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities".
PRINCIPAL AND INTEREST ON THE NOTES
The related Prospectus Supplement will describe the timing and priority of
payment, seniority, allocations of losses, interest rate (the "Interest Rate")
and amount of or method of determining payments of principal and interest on
each class of Notes of a given series. The right of holders of any class of
Notes to receive payments of principal and interest may be senior or subordinate
to the rights of holders of any other class or classes of Notes of such series.
Payments of interest on the Notes will generally be made prior to payments of
principal. A series may include one or more classes of Notes (the "Strip Notes")
entitled to (i) principal payments with disproportionate, nominal or no interest
payments or (ii) interest payments with disproportionate, nominal or no
principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate. See
also "Certain Information Regarding the Securities--Fixed Rate Securities" and
"--Floating Rate Securities". One or more classes of Notes of a series may be
redeemable in whole or in part, including as a result of the Servicer or the
Seller exercising its option to purchase the related Receivables Pool or other
early termination of the related trust.
One or more classes of Notes of a given series may have fixed principal
payment schedules, in the manner and to the extent set forth in the related
Prospectus Supplement. Noteholders of such Notes would be entitled to receive as
payments of principal on any given Distribution Date the amounts set forth on
such schedule with respect to such Notes.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders of all classes within a series in respect of interest will have the
same priority. Under certain circumstances, on any Distribution Date the amount
available for such payments could be less than the amount of interest payable on
the Notes. If this is the case, each class of Noteholders will receive its
ratable share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount of interest available for payment on the
Notes. See "Description of the Transfer and Servicing Agreements--Payments" and
"--Credit and Cash Flow Enhancement".
If a series of Notes includes two or more classes of Notes, the sequential
order and priority of payment in respect of principal and interest, and any
schedule or formula or other provisions applicable to the determination thereof,
of each such class will be set forth in the related Prospectus Supplement.
Payments in respect of principal and interest of any class of Notes will be made
on a pro rata basis among all the Noteholders of such class.
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THE INDENTURE
MODIFICATION OF INDENTURE. If a Trust has issued Notes pursuant to an
Indenture, the Trust and the Indenture Trustee may, with the consent of the
holders of not less than 51% of the outstanding Notes of the related series,
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 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
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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 (or relevant
classes of 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 all
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 the outstanding 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 all Notes (or relevant classes of 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 not less
than 51% of the 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 deposit
of collections or other required amounts, any required payment from amounts held
in any trust account in respect of amounts due on the Notes, payment of
principal or interest or a default in respect of a covenant or provision of such
Indenture that cannot be modified without the waiver or consent of all the
holders of such outstanding Notes.
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
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direction inconsistent with such written request has been given to such
Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the 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, among other things,
(i) the entity formed by or surviving such consolidation or merger is organized
under the laws of the United States, any state or the District of Columbia, (ii)
such entity expressly assumes such Trust's obligation to make due and punctual
payments upon the Notes of the related series and the performance or observance
of every agreement and covenant of such Trust under the Indenture, (iii) no
Event of Default shall have occurred and be continuing immediately after such
merger or consolidation, (iv) such Trust has been advised that the rating of the
Securities of such series then in effect would not be reduced or withdrawn by
the Rating Agencies as a result of such merger or consolidation and (v) such
Trust has received an opinion of counsel to the effect that such consolidation
or merger would have no material adverse tax consequence to the Trust or to any
related Noteholder or Certificateholder.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements or
certain related documents with respect to such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of such Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes of the related series (other than
amounts withheld under the Code or applicable state law) or assert any claim
against any present or former holder of such Notes because of the payment of
taxes levied or assessed upon such Trust, (iii) except as expressly permitted by
the Related Documents, dissolve or liquidate in whole or in part, (iv) permit
the validity or effectiveness of the related Indenture to be impaired or permit
any person to be released from any covenants or obligations with respect to such
Notes under such Indenture except as may be expressly permitted thereby or (v)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
assets of such Trust or any part thereof, or any interest therein or the
proceeds thereof.
No Trust may engage in any activity other than as specified in this
Prospectus or in the related Prospectus Supplement. No Trust will incur, assume
or guarantee any indebtedness other than indebtedness incurred pursuant to the
related Notes and the related Indenture, pursuant to any Advances made to it by
the Servicer or otherwise in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Trust
will be required to mail each year to all related Noteholders a brief report
relating to its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by such
Trust to the applicable Indenture Trustee in its individual capacity, the
property and funds physically held by such Indenture
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Trustee as such and any action taken by it that materially affects the related
Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee for any series 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 that issues Certificates, one or more classes
(each, a "class") of Certificates of the related series will be issued pursuant
to the terms of a Trust Agreement or a Pooling and Servicing Agreement, a form
of each of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Certificates and the Trust Agreement or Pooling and
Servicing Agreement, as applicable.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the Seller, each
class of Certificates will initially be represented by one or more Certificates
registered in the name of the nominee for DTC, except as set forth below. Unless
otherwise specified in the related Prospectus Supplement and except for the
Certificates, if any, of a given series purchased by the Seller, the
Certificates will be available for purchase in the denominations specified in
the related Prospectus Supplement in book-entry form only (unless otherwise
specified in the related Prospectus Supplement). The Seller has been informed by
DTC that DTC's nominee will be Cede, unless another nominee is specified in the
related Prospectus Supplement. Accordingly, such nominee is expected to be the
holder of record of the Certificates (a "Certificateholder") of any series that
are not purchased by the Seller. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the 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
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commencement by the related Trust of a voluntary proceeding in bankruptcy as
described under "Description of the Transfer and Servicing
Agreements--Insolvency Event").
PAYMENTS OF PRINCIPAL AND INTEREST
The timing and priority of payments, seniority, allocations of losses, pass
through rate (the "Pass Through Rate") and amount of or method of determining
payments with respect to principal and interest of each class of Certificates
will be described in the related Prospectus Supplement. Payments of interest on
such Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date"). To the extent provided in the related
Prospectus Supplement, a series may include one or more classes of Certificates
(the "Strip Certificates") entitled to (i) payments in respect of principal with
disproportionate, nominal or no interest payments or (ii) interest payments with
disproportionate, nominal or no payments in respect of principal. Each class of
Certificates may have a different Pass Through Rate, which may be a fixed,
variable or adjustable Pass Through Rate (and which may be zero for certain
classes of Strip Certificates) or any combination of the foregoing. The related
Prospectus Supplement will specify the Pass Through Rate for each class of
Certificates of a given series or the method for determining such Pass Through
Rate. See also "Certain Information Regarding the Securities--Fixed Rate
Securities" and "--Floating Rate Securities". Unless otherwise provided in the
related Prospectus Supplement, payments in respect of the Certificates of a
given series that includes Notes may be subordinate to payments in respect of
the Notes of such series as more fully described in the related Prospectus
Supplement. The rights of holders of any class of Certificates to receive
payments of principal and interest may also be senior or subordinate to the
rights of holders of any other class or classes of Certificates of such series
as more fully described in the related Prospectus Supplement. Payments in
respect of interest on and principal of any class of Certificates will be made
on a pro rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
payments in respect of interest and principal, and any schedule or formula or
other provisions applicable to the determination thereof, of each such class
shall be as set forth in the related Prospectus Supplement.
If and as provided in the related Prospectus Supplement, certain amounts
remaining on deposit in the Collection Account after all required payments to
the related Securityholders have been made may be released to the Seller, TMCC
or one or more third party credit or liquidity enhancement providers.
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Any class of Securities (other than certain classes of Strip Notes or Strip
Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Securities") or at a variable or adjustable rate per annum ("Floating Rate
Securities"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth in
the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "Description of the Notes--Principal and Interest on the Notes" and
"Description of the Certificates--Payments of Principal and Interest".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest during each
applicable Interest Period at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the
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<PAGE>
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, or such other day as may be specified in the related Prospectus
Supplement with respect to a class of Floating Rate Securities.
Each applicable Prospectus Supplement will specify whether the rate of
interest on the related Floating Rate Securities will be reset daily, weekly,
monthly, quarterly, semiannually, annually or such other specified period (each,
an "Interest Reset Period") and the dates on which such Interest Rate will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Prospectus Supplement, the Interest Reset Date will be, in the case
of Floating Rate Securities which reset: (i) daily, each Business Day;
(ii) weekly, the Wednesday of each week (with the exception of weekly reset
Treasury Rate Securities which will reset the Tuesday of each week, except as
specified below); (iii) monthly, the third Wednesday of each month;
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Prospectus Supplement; and (vi) annually, the third Wednesday of
the month specified in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, if any
Interest Reset Date for any Floating Rate Security would otherwise be a day that
is not a Business Day, such Interest Reset Date will be postponed to the next
succeeding day that is a Business Day, except that in the case of a Floating
Rate Security as to which LIBOR is an applicable Base Rate, if such Business Day
falls in the next succeeding calendar month, such Interest Reset Date will be
the immediately preceding Business Day. Unless specified otherwise in the
applicable Prospectus Supplement, "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York,
or San Francisco, California are authorized or obligated by law, regulation,
executive order or decree to be closed. Unless otherwise specified in the
applicable Prospectus Supplement, with respect to Notes as to which LIBOR is an
applicable Base Rate, the definition of Business Day will include all London
Business Days. "London Business Day" means any day (a) if the Index Currency (as
defined below) is other than the Euro, on which dealings in deposits in such
Index Currency are transacted in the London interbank market or (b) if the Index
Currency is the Euro a day on which the Trans-European Automated Real-time Gross
Settlement Express Transfer System ("TARGET system") is open and on which
commercial banks and foreign exchange markets settle payments in London and New
York.
Unless otherwise specified in the related Prospectus Supplement, if any
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
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<PAGE>
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 number of days in that portion of such Interest Period falling in a leap
year divided by 366 and (Y) the actual number of days in that portion of such
Interest Period falling in a non-leap year divided by 365). For Floating Rate
Securities calculated on a 30/360 basis, accrued interest for an Interest Period
will be computed on the basis of a 360-day year of twelve 30-day months,
irrespective of how many days are actually in such Interest Period. Unless
otherwise specified in the related Prospectus Supplement, with respect to any
Floating Rate Security that accrues interest on a 30/360 basis, if any
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 "Interest Period" with respect to any
class of Floating Rate Securities will be set forth in the related Prospectus
Supplement.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Securities will be
issued will appoint, and enter into agreements with, a calculation agent (each,
a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be the related
Trustee or Indenture Trustee with respect to such series. All determinations of
interest by the Calculation Agent shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of Floating Rate
Securities of a given class. Unless otherwise specified in the applicable
Prospectus Supplement, all percentages resulting from any calculation on
Floating Rate Securities will be rounded to the nearest one hundred-thousandth
of a percentage point, with five one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation on
Floating Rate Securities will be rounded to the nearest cent (with one-half cent
being rounded upward).
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security and
in the applicable Prospectus Supplement.
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Unless otherwise specified in the applicable Prospectus Supplement, the "CD
Rate" for each Interest Reset Period shall be the rate as of the second business
day prior to the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable 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.
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--Nonfinancial"
(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--Nonfinancial". 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
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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:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield - X 100
360 - (D X M)
</TABLE>
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 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.
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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 Business 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.
"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
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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 Currency 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, Canadian dollars, Australian dollars, Italian lira,
Swiss francs, Dutch guilders and Euros, the Principal Financial Center shall be
The City of New York, Frankfurt, Toronto, Sydney, Rome, Zurich, Amsterdam and
London, 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, Indenture, or other related
agreements as the case may be, and modifications and the waiver of rights
thereunder, the principal amount of such Indexed Security shall be deemed to be
the face amount thereof upon issuance.
If the determination of the Indexed Principal Amount of an Indexed Security
is based on an Index calculated or announced by a third party and such third
party either suspends the calculation or announcement of such Index or changes
the basis upon which such Index is calculated (other than changes consistent
with policies in effect at the time such Indexed Security was issued and
permitted changes described in the applicable Prospectus Supplement), then such
Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such Index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall, in
the absence of manifest error, be binding on all parties.
The applicable Prospectus Supplement will describe whether the principal
amount of the related Indexed Security, if any, that would be payable upon
redemption or repayment prior to the applicable final scheduled 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 the Depository Trust Company
("DTC"). Unless otherwise specified in the related Prospectus Supplement,
Securityholders may hold beneficial interests in Securities through the DTC (in
the United States) or Clearstream Banking Luxembourg or the Euroclear System
("Euroclear") (in Europe or Asia) directly if they are participants of such
systems, or indirectly through organizations which are participants in such
systems.
No Securityholder will be entitled to receive a certificate representing
such person's interest in the Securities, except as set forth below. Unless and
until Securities of a class are issued in fully registered
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<PAGE>
certificated form ("Definitive Securities") under the limited circumstances
described below, all references herein to actions by Noteholders,
Certificateholders or Securityholders shall refer to actions taken by DTC upon
instructions from DTC Participants, and all references herein to distributions,
notices, reports and statements to Noteholders, Certificateholders or
Securityholders shall refer to distributions, notices, reports and statements to
Cede, as the registered holder of the Securities, for distribution to
Securityholders in accordance with DTC procedures. As such, it is anticipated
that the only Noteholder, Certificateholder or Securityholder will be Cede, as
nominee of DTC. Securityholders will not be recognized by the related Trustee as
Noteholders, Certificateholders or Securityholders as such terms will be used in
the relevant agreements, and Securityholders will only be permitted to exercise
the rights of holders of Securities of the related class indirectly through DTC
and DTC Participants, as further described below.
Clearstream Banking Luxembourg and Euroclear will hold omnibus positions on
behalf of their participants through customers' securities accounts in their
respective names on the books of their respective Depositaries which in turn
will hold such positions in customers' securities accounts in the Depositaries'
names on the books of DTC.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Clearstream Banking Luxembourg Participants and Euroclear
Participants will occur in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Banking Luxembourg or Euroclear participants, on the other, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary. However, each such cross-market
transaction will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines. The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream Banking Luxembourg
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits of securities received in
Clearstream Banking Luxembourg or Euroclear as a result of a transaction with a
DTC Participant will be made during subsequent securities settlement processing
and dated the business day following the DTC settlement date. Such credits or
any transactions in such securities settled during such processing will be
reported to the relevant Euroclear or Clearstream Banking Luxembourg participant
on such business day. Cash received in Clearstream Banking Luxembourg or
Euroclear as a result of sales of Securities by or through a Clearstream Banking
Luxembourg Participant or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant Clearstream Banking Luxembourg 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
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with respect to the Securities of any class or series. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the "Indirect DTC Participants").
The rules applicable to DTC and DTC Participants are on file with the SEC.
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not DTC Participants or Indirect DTC Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Securities may do so only through DTC Participants and Indirect DTC
Participants. DTC Participants will receive a credit for the Securities on DTC's
records. The ownership interest of each Securityholder will in turn be recorded
on respective records of the DTC Participants and Indirect DTC Participants.
Securityholders will not receive written confirmation from DTC of their
purchase, but Securityholders are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect DTC Participant through which the
Securityholder entered into the transaction. Transfers of ownership interests in
the Securities of any class will be accomplished by entries made on the books of
DTC Participants acting on behalf of Securityholders.
To facilitate subsequent transfers, all Securities deposited by DTC
Participants with DTC will be registered in the name of Cede, a nominee of DTC.
The deposit of Securities with DTC and their registration in the name of Cede
will effect no change in beneficial ownership. DTC will have no knowledge of the
actual Securityholders and its records will reflect only the identity of the DTC
Participants to whose accounts such Securities are credited, which may or may
not be the Securityholders. DTC Participants and Indirect DTC Participants will
remain responsible for keeping account of their holdings on behalf of their
customers. While the Securities of a Series are held in book-entry form,
Securityholders will not have access to the list of Securityholders of such
Series, which may impede the ability of Securityholders to communicate with each
other.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect DTC Participants and by DTC Participants and
Indirect DTC Participants to Securityholders will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit payments of principal of and interest on the
Securities. DTC Participants and Indirect DTC Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders.
DTC's practice is to credit DTC Participants' accounts on each 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
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its DTC Participants which thereafter will forward them to Indirect DTC
Participants or Securityholders.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect DTC Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or otherwise take actions with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Seller that it will take any action permitted to be
taken by a Securityholder only at the direction of one or more DTC Participants
to whose account with DTC the Securities are credited. Additionally, DTC has
advised the Seller that it will take such actions with respect to specified
percentages of the Securityholders' interest only at the direction of and on
behalf of DTC Participants whose holdings include undivided interests that
satisfy such specified percentages. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of DTC Participants whose holdings include such undivided interests.
Neither DTC nor Cede will consent or vote with respect to the Securities.
Under its usual procedures, DTC will mail an "Omnibus Proxy" to the related
Indenture Trustee or Trustee as soon as possible after any applicable Record
Date for such a consent or vote. The Omnibus Proxy will assign Cede's consenting
or voting rights to those DTC Participants to whose accounts the related
Securities are credited on that record date (which record date will be
identified in a listing attached to the Omnibus Proxy).
Clearstream Banking Luxembourg is incorporated under the laws of Luxembourg
as a professional depository. Clearstream Banking Luxembourg holds securities
for its participating organizations ("Clearstream Banking Luxembourg
Participants") and facilitates the clearance and settlement of securities
transactions between Clearstream Banking Luxembourg Participants through
electronic book entry changes in accounts of Clearstream Banking Luxembourg
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Clearstream Banking Luxembourg in
any of 28 currencies, including United States dollars. Clearstream Banking
Luxembourg provides to Clearstream Banking Luxembourg Participants, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream Banking Luxembourg interfaces with domestic markets in several
countries. As a professional depository, Clearstream Banking Luxembourg is
subject to regulation by the Luxembourg Monetary Institute. Clearstream Banking
Luxembourg Participants are recognized financial institutions around the world
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include any
underwriters, agents or dealers with respect to any class or series of
Securities offered hereby. Indirect access to Clearstream Banking Luxembourg is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Clearstream
Banking Luxembourg Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C.,
a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and
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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.
Payments with respect to Securities held through Clearstream Banking
Luxembourg or Euroclear will be credited to the cash accounts of Clearstream
Banking Luxembourg Participants or Euroclear Participants in accordance with the
relevant system's rules and procedures, to the extent received by its
Depositary. Such payments will be subject to tax withholding in accordance with
relevant United States tax laws and regulations. See "Certain Federal Income Tax
Consequences". Clearstream Banking Luxembourg or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
Securityholder on behalf of a Clearstream Banking Luxembourg Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Clearstream Banking Luxembourg and Euroclear have agreed to
the foregoing procedures in order to facilitate transfers of Securities among
participants of DTC, Clearstream Banking Luxembourg and Euroclear, they are
under no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the Notes,
if any, and the Certificates of a given series will be issued in fully
registered, certificated form ("Definitive Notes" and "Definitive Certificates",
respectively, and collectively referred to herein as "Definitive Securities") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, only if (i) DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to such Securities and
such Administrator or Trustee is unable to locate a qualified successor (and if
it is an Administrator that has made such determination, such Administrator so
notifies the applicable Trustee in writing), (ii) the Seller or the
Administrator or Trustee, as applicable, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of an Event of
Default or a Servicer Default with respect to such Securities, holders
representing at least 51% of the outstanding principal amount of the Notes or
the Certificates, as the case may be, of such series,
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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.
Payments of principal of, and interest on, such Definitive Securities will
thereafter be made by the applicable Trustee or Indenture Trustee in accordance
with the procedures set forth in the related Indenture or the related Trust
Agreement or Pooling and Servicing Agreement, as applicable, directly to holders
of Definitive Securities in whose names the Definitive Securities were
registered at the close of business on the applicable Record Date specified for
such Securities in the related Prospectus Supplement. Such payments will be made
by check mailed to the address of such holder as it appears on the register
maintained by the applicable Trustee or Indenture Trustee. The final payment on
any such Definitive Security, however, will be made only upon presentation and
surrender of such Definitive Security at the office or agency specified in the
notice of final payment to the applicable Securityholders. The applicable
Trustee or the Indenture Trustee will provide such notice to the applicable
Securityholders not less than 15 nor more than 30 days prior to the date on
which such final payment is expected to occur.
Definitive Securities will be transferable and exchangeable at the offices
of the applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with respect
to the Notes of any series, three or more holders of the Notes of such series or
one or more holders of such Notes evidencing not less than 25% of the aggregate
outstanding principal balance of such Notes may, by written request to the
related Indenture Trustee, obtain access to the list of all Noteholders
maintained by such Indenture Trustee for the purpose of communicating with other
Noteholders with respect to their rights under the related Indenture or under
such Notes. Such Indenture Trustee may elect not to afford the requesting
Noteholders access to the list of Noteholders if it agrees to mail the desired
communication or proxy, on behalf of and at the expense of the requesting
Noteholders, to all Noteholders of such series.
Unless otherwise specified in the related Prospectus Supplement with respect
to the Certificates of any series, three or more holders of the Certificates of
such series or one or more holders of such Certificates evidencing not less than
25% of the Certificate Balance of such Certificates may, by written request to
the related Trustee, obtain access to the list of all Certificateholders
maintained by such Trustee for the purpose of communicating with other
Certificateholders with respect to their rights under the related Trust
Agreement or Pooling and Servicing Agreement or under such Certificates.
The Pooling and Servicing Agreement, Trust Agreement and Indenture will not
provide for the holding of annual or other meetings of Securityholders.
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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 payment allocable to the principal amount of each
class of such Notes and to the Certificate Balance of each class of such
Certificates;
(ii) the amount of the payment allocable to interest on or with respect
to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;
(iv) the aggregate outstanding principal balance and the Note Pool
Factor for each class of such Notes, and the Certificate Balance and the
Certificate Pool Factor for each class of such Certificates, each after
giving effect to all payments reported under clause (i) above on such date;
(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 monthly payments (or portions thereof)
determined by the Servicer to be due in one or more future Collections
Periods ("Payments Ahead") on deposit in the related Payahead Account or
held by the Servicer with respect to the related Receivables and the change
in such amount from the immediately preceding 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. The provisions
of any of the Transfer and Servicing Agreements may differ from those described
in this Prospectus and, if so, will be described in the related Prospectus
Supplement. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date specified with respect to any given Trust in
the related Prospectus Supplement (the "Closing Date"), TMCC will sell and
assign to the Seller, without recourse, pursuant to a Receivables Purchase
Agreement (the "Receivables Purchase Agreement"), its entire interest in the
Receivables comprising the related Receivables Pool, including the security
interests in the Financed Vehicles. On the Closing Date, the Seller will
transfer and assign to the applicable Trustee on behalf of the Trust, without
recourse, pursuant to a Sale and Servicing Agreement or a Pooling and Servicing
Agreement, as applicable, its entire interest in the Receivables comprising the
related Receivables Pool, including its security interests in the related
Financed Vehicles. Each such Receivable will be identified in a schedule
appearing as an exhibit to such Sale and Servicing Agreement or such Pooling and
Servicing Agreement (a "Schedule of Receivables"). The applicable Trustee will,
concurrently with such transfer and assignment, on behalf of the Trust, execute
and deliver the related Notes and/or Certificates. Unless otherwise provided in
the related Prospectus Supplement, the net proceeds received from the sale of
the Certificates and the Notes of a given series will be applied to the purchase
of the related Receivables from the Seller and, to the extent specified in the
related Prospectus Supplement, to make any required initial deposit into the
Reserve Fund.
TMCC, pursuant to a Receivables Purchase Agreement, and the Seller, pursuant
to each Sale and Servicing Agreement or Pooling and Servicing Agreement, will
represent and warrant, with respect to whether, among other things: (i) the
information provided in the related Schedule of Receivables is true and correct
in all material respects; (ii) the terms of each Receivable require the related
Obligor to maintain physical damage insurance covering the Financed Vehicle in
accordance with the Seller's normal requirements; (iii) as of the applicable
Closing Date, to the best of its knowledge, the related Receivables are free and
clear of all security interests, liens, charges and encumbrances and no offsets,
defenses or counterclaims have been asserted or threatened; (iv) as of the
Closing Date, each of such Receivables is secured by a first perfected security
interest in favor of TMCC in the Financed Vehicle; (v) each related Receivable,
at the time it was originated, complied and, as of the Closing Date, complies in
all material respects with applicable federal and state laws, including, without
limitation, consumer credit, truth-in-lending, equal credit opportunity and
disclosure laws; and (vi) any other representations and warranties that may be
set forth in the related Prospectus Supplement are true and correct in all
material respects.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Seller so elects, the first) month following
the discovery by or notice to the Seller of a breach of any representation or
warranty of the Seller that materially and adversely affects the interests of
the related Trust in any Receivable, the Seller, unless the breach is cured,
will repurchase such Receivable (a "Warranty Receivable") from such Trust and,
pursuant to the Receivables Purchase Agreement,
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TMCC will purchase such Warranty Receivable from the Seller, at a price equal to
the Warranty Purchase Payment for such Receivable. The "Warranty Purchase
Payment" (1) for a Precomputed Receivable, will be equal to (a) the sum of (i)
all remaining Scheduled Payments (and any applicable Yield Maintenance Amounts),
(ii) all past due Scheduled Payments for which an Advance has not been made,
(iii) all outstanding Advances made by the Servicer in respect of such
Precomputed Receivable and (iv) an amount equal to any reimbursements of
outstanding Advances made by the Servicer with respect to such Precomputed
Receivable from collections made on or in respect of other Receivables, minus
(b) the sum of (i) the rebate, calculated on an actuarial basis, that would be
payable to the Obligor on 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 (directly, or
through an agent), on behalf of such Trust, of the related installment sale
contracts and any other documents relating to the Receivables. The Receivables
will not be physically segregated from other automobile and/or light duty truck
installment sales contracts of the Servicer, or those which the Servicer
services for others, to reflect the transfer to the related Trust. However, UCC
financing statements reflecting the sale and assignment of the Receivables by
TMCC to the Seller and by the Seller to the applicable Trust will be filed, and
the respective accounting records and computer files of TMCC and the Seller will
reflect such sale and assignment. Because the Receivables will remain in the
possession of the Servicer or its agent and will not be stamped or otherwise
marked to reflect the assignment to the Trustee, if a subsequent purchaser were
able to take physical possession of the Receivables without knowledge of the
assignment, the Trustee's interest in the Receivables could be defeated. See
"Certain Legal Aspects of the Receivables--Security Interests". In addition,
under certain circumstances the Trustee's security interest in collections that
have been received by the Servicer but not yet remitted to the related
Collection Account could be defeated.
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts (each, a
"Collection Account"), in the name of the Indenture Trustee on behalf of the
related Securityholders, into which payments made on or with respect to the
related Receivables and amounts released from any Yield Maintenance Account,
Reserve Fund or other form of credit enhancement will be deposited for payment
to the related Securityholders. With respect to each Trust that does not issue
Notes, the Servicer will also establish and maintain a Collection Account and
any other Trust Account in the name of the related Trustee on behalf of the
related Certificateholders.
If so provided in the related Prospectus Supplement, the Servicer will
establish for each series of Securities an additional account (the "Payahead
Account"), in the name of the related Trustee or, if such Trust issues Notes,
the Indenture Trustee, into which, to the extent required by the Sale and
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Servicing Agreement or Pooling and Servicing Agreement, early payments by or on
behalf of Obligors on Precomputed Receivables will be deposited until such time
as the related payment becomes due. Until such time as payments ahead are
transferred from the Payahead Account to a Collection Account, they will not
constitute collected interest or collected principal and will not be available
for payment to the applicable Noteholders or Certificateholders. The Payahead
Account will initially be maintained with the applicable Indenture Trustee or
Trustee.
Any other accounts to be established with respect to a Trust, including any
Yield Maintenance Account or any Reserve Fund will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the related Collection Account, any
Yield Maintenance Account, the Reserve Fund and such other accounts as may be
identified in the related Prospectus Supplement (collectively, the "Trust
Accounts") will be invested as provided in the related Sale and Servicing
Agreement or Pooling and Servicing Agreement in Eligible Investments. "Eligible
Investments" are generally limited to investments acceptable to the Rating
Agencies rating such Securities as being consistent with the rating of 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 payment with respect to such Certificates or Notes and will not
be sold to meet any shortfalls. Thus, the amount of cash in any Reserve Fund at
any time may be less than the balance of the Reserve Fund. If the amount
required to be withdrawn from any Reserve Fund to cover shortfalls in
collections on the related Receivables (as provided in the related Prospectus
Supplement) exceeds the amount of cash in the Reserve Fund, a temporary
shortfall in the amounts paid to the related Noteholders or Certificateholders
could result, which could, in turn, increase the average life of the Notes or
the Certificates of such series. Except as otherwise specified in the related
Prospectus Supplement, investment earnings on funds deposited in the Trust
Accounts, net of losses and investment expenses (collectively, "Investment
Earnings"), shall be released to the Servicer on each 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 (if it is the
Paying Agent under the Trust Agreement), as applicable, or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), (i) which has either (A) a long-term unsecured debt rating
acceptable to the Rating Agencies or (B) a short-term unsecured debt rating or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable retail
installment sale contracts it services for itself or others. Consistent with its
normal procedures, the Servicer will be authorized to grant certain rebates,
adjustments or extensions with respect to the
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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 set forth
in the applicable Prospectus Supplement (the "Final Maturity Scheduled Date"),
the Servicer will be obligated either to purchase such Receivable as described
in the next paragraph or make Advances on each subsequent 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 (a) the sum of (i) all remaining Scheduled Payments
(plus any applicable Yield Maintenance 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. The
terms of each Receivable allow, but do not require TMCC to (and TMCC, in
accordance with its current normal servicing procedures, does not) obtain any
such coverage on behalf of the Obligor. TMCC currently does not monitor ongoing
insurance compliance in connection with its customary servicing procedures. In
the event that the failure of an Obligor to maintain any such required insurance
results in a shortfall in amounts to be paid to Certificateholders, to the
extent such shortfall is not covered by amounts on
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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 P-1 by Moody's and A-1 by Standard & Poor's,
and alternative arrangements acceptable to the Rating Agencies are not made.
Thereafter, the Servicer will deposit all such payments and proceeds into the
Collection Account not later than two Business Days after receipt. However,
pending deposit into the Collection Account, collections may be invested 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.
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
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
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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 (other than
in respect of an interest shortfall arising from the prepayment of a Simple
Interest Receivable) to the extent that it determines, in its sole discretion,
that such Simple Interest Advance will not be recovered from subsequent
collections on or in respect of the related Simple Interest Receivable.
The Servicer will also be required to make Advances with respect to each
Receivable that it does not purchase as described above under "--Servicing
Procedures" as to which it has made any modification that reduces the amount of
Scheduled Payments to be paid by the related Obligor during subsequent
Collection Periods.
The Servicer will make all Advances by depositing into the related
Collection Account an amount equal to the aggregate of the Precomputed Advances
and Simple Interest Advances due in respect of a Collection Period on the
Business Day immediately preceding the related 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 a specified percentage per annum (as set
forth in the related Prospectus Supplement, the "Servicing Fee Rate") of the
Pool Balance as of the first day of the related Collection Period (the
"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 payment 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
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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 payments 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).
PAYMENTS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, payments of principal and
interest (or, where applicable, of principal or interest only) on each class of
such Securities entitled thereto will be made by the applicable Indenture
Trustee to the Noteholders and by the applicable Trustee to the
Certificateholders of such series. The timing, calculation, allocation, order,
source, priorities of and requirements for all payments to each class of
Noteholders and all payments to each class of Certificateholders of such series
will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date collections on the
related Receivables will be withdrawn from the related Collection Account and
will be paid to the Noteholders and/or Certificateholders to the extent provided
in the related Prospectus Supplement. Credit enhancement, such as a Reserve
Fund, will be available to cover any shortfalls in the amount available for
payment to the Securityholders on such date to the extent specified in the
related Prospectus Supplement. As more fully described in the related Prospectus
Supplement, and unless otherwise specified therein, (i) payments in respect of
principal of a class of Securities of a given series will be subordinate to
payments in respect of interest on such class; (ii) payments in respect of one
or more classes of Certificates of such series may be subordinate to payments in
respect of Notes, if any, of such series or other classes of Certificates of
such series; and (iii) payments in respect of one or more classes of Notes of
such series may be subordinated to payments in respect of other classes of Notes
of such series.
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CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities of
a given series, if any, will be set forth in the related Prospectus Supplement.
If and to the extent provided in the related Prospectus Supplement, credit and
cash flow enhancement may be in the form of subordination of one or more classes
of Securities, Reserve Funds, over-collateralization, letters of credit, credit
or liquidity facilities, surety bonds, guaranteed investment contracts, swaps or
other interest rate protection agreements, repurchase obligations, yield
maintenance agreements, other agreements with respect to third party payments or
other support, cash deposits or such other arrangements as may be described in
the related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit or cash
flow enhancement for a class of Securities may cover one or more other classes
of Securities of the same series, and credit or cash flow enhancement for a
series of Securities may cover one or more other series of Securities.
The presence of a Reserve Fund and other forms of credit enhancement for the
benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. Unless otherwise specified in the
related Prospectus Supplement, the credit enhancement for a class or series of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders of any class or
series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of credit enhancement
covers more than one class or series of Securities, Securityholders of any such
class or series will be subject to the risk that such credit enhancement will be
exhausted by the claims of Securityholders of other classes or series.
RESERVE FUND. If so provided in the related Prospectus Supplement, pursuant
to the related Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Seller or a third party will establish for a series or class of Securities
an account, as specified in the related Prospectus Supplement (the "Reserve
Fund"), which will be maintained with the related Trustee or Indenture Trustee,
as applicable. Unless otherwise provided in the related Prospectus Supplement,
the Reserve Fund will be funded by an initial deposit by the Seller or a third
party on the Closing Date in the amount set forth in the related Prospectus
Supplement (the "Reserve Fund Initial Deposit"). To the extent provided in the
related Prospectus Supplement, the amount on deposit in the Reserve Fund will be
increased on each 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 payments
on such date. The related Prospectus Supplement will describe the circumstances
and manner under which payments may be made out of the Reserve Fund, either to
holders of the Securities covered thereby or to the Seller or a third party.
YIELD MAINTENANCE ACCOUNT; YIELD MAINTENANCE AGREEMENT
YIELD MAINTENANCE ACCOUNT. A "Yield Maintenance Account" may be established
with respect to any class or series of Securities. The terms relating to any
such account will be set forth in the related Prospectus Supplement. Each Yield
Maintenance Account will be designed to hold funds to be applied by the related
Trustee or, if such Trust issues Notes, the Indenture Trustee, to provide
payments to Securityholders in respect of Receivables that have APRs less than
the sum of the Pass Through Rate or Interest Rate specified in the related
Prospectus Supplement plus the Servicing Fee Rate specified in the related
Prospectus Supplement (the "Required Rate"). Unless otherwise specified in the
related Prospectus Supplement, each Yield Maintenance Account will be maintained
with the same entity with
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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 payments 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 class or series of Securities which allows or requires any
party to make deposits therein after the Closing Date, TMCC, the Seller, any
third party responsible for such deposits and the related Trustee or Indenture
Trustee, as the case may be, will enter into a "Yield Maintenance Agreement"
pursuant to which, on each 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 (as described in "--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 payments to be made to the Servicer for such Trust with respect to such
Collection Period. The Servicer may cause to be made a single, net transfer from
the Collection Account to the Payahead Account, if any, or vice versa. The
Servicer, however, will account to the Trustee, any Indenture Trustee, the
Noteholders, if any, and the Certificateholders with respect to each Trust as if
all deposits, payments and transfers were made individually. With respect to any
Trust that issues both Certificates and Notes, if the related 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".
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EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that a firm of nationally recognized independent accountants will
furnish to the related Trust and Indenture Trustee or Trustee, as applicable,
annually a statement as to compliance in all material respects by the Servicer
during the preceding twelve months (or, in the case of the first such
certificate, from the applicable Closing Date, which may be a longer or shorter
period) with certain standards relating to the servicing of the applicable
Receivables.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
also provide for delivery to the related Trust and Indenture Trustee or Trustee,
as applicable, substantially simultaneously with the delivery of such
accountants' statement referred to above, of a certificate signed by an officer
of the Servicer stating that the Servicer has fulfilled its obligations under
the Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable, throughout the preceding twelve months (or, in the case of the first
such certificate, from the Closing Date) in all material respects or, if there
has been a default in the fulfillment of any such obligation, describing each
such default. The Servicer has agreed to give each Indenture Trustee and each
Trustee notice of certain Servicer Defaults under the related Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that TMCC may not resign from its obligations and duties as Servicer
thereunder, except upon determination that TMCC's performance of such duties is
no longer permissible under applicable law. No such resignation will become
effective until the related Indenture Trustee or Trustee, as applicable, or a
successor servicer has assumed TMCC's servicing obligations and duties under
such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will be under any liability to the related Trust or the
related Noteholders or Certificateholders for taking any action or for
refraining from taking any action pursuant to such Sale and Servicing Agreement
or Pooling and Servicing Agreement or for errors in judgment; except that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the Servicer's duties thereunder or by reason
of reckless disregard of its obligations and duties thereunder. In addition,
each Sale and Servicing Agreement and Pooling and Servicing Agreement will
provide that the Servicer is under no obligation to appear in, prosecute or
defend any legal action that is not incidental to the Servicer's servicing
responsibilities under such Sale and Servicing Agreement or Pooling and
Servicing Agreement and that, in its opinion, may cause it to incur any expense
or liability.
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
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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, 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. Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of ten Business Days shall not
constitute a Servicer Default if such failure or delay is caused by an event of
force majeure. Upon the occurrence of any such event, the Servicer shall not be
relieved from using all commercially reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Servicing
Agreement, and the Servicer shall provide to the Trustee, the Indenture Trustee,
the Seller and the Securityholders prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
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
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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 (or relevant class or classes of Notes of such 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 (or relevant class or classes of
Notes 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 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.
Each Transfer and Servicing Agreement may also be amended by the parties
thereto without the consent of any Noteholder or Certificateholder for the
purpose of changing the formula for determining the Specified Reserve Fund
Balance, the manner in which a Reserve Fund is funded, changing the remittance
schedule for deposit of collections in accounts or changing the definition of
Eligible Investments if (a) the relevant trustee has been provided a letter from
each Rating Agency to the effect that such amendment will not result in the
qualification, reduction or withdrawal of any rating it currently assigns to any
class of Notes or Certificates or (b) the relevant trustee has received the
consent of the holders of at least 51% of the outstanding principal amount of
each class of Notes and Certificates (or
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the relevant class or classes of Notes or Certificates) of such series, voting
together as a single class; provided that no such amendment shall increase or
reduce in any manner or accelerate or delay the timing of collections on the
related contracts or payments required to be made to the holders of any Notes or
Certificates of such series without the consent of the holders of all of the
affected Notes or Certificates.
Unless otherwise specified in the related Prospectus Supplement, the
Transfer and Servicing Agreements may also be amended by the Seller, the
Servicer, the related Trustee and any related Indenture Trustee with the consent
of (i) the holders of Notes evidencing not less than 51% of the principal amount
of then outstanding Notes, if any, of the related series (or relevant class or
classes of Notes of such 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 shall (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Receivables or distributions that are
required to be made for the benefit of such Noteholders or Certificateholders or
(ii) reduce the aforesaid percentage of the Notes or Certificates of such series
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates of each class affected
thereby.
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 (or of the relevant class or class of
Notes of such Trust) representing not less than 51% 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
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
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Trustee by each such Certificateholder (including the Seller) of a certificate
certifying that such Certificateholder reasonably believes that such Trust is
insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and the
satisfaction and discharge of the related Indenture, the related Trustee will
succeed to all the rights of the Indenture Trustee, and the Certificateholders
of such series will succeed to all the rights of the Noteholders of such series,
under the related Sale and Servicing Agreement, except as otherwise provided
therein.
SELLER LIABILITY
Under each Trust Agreement, the Seller will agree to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Certificateholder in
the capacity of an investor with respect to such Trust) arising out of or based
on the arrangement created by such Trust Agreement as though such arrangement
created a partnership under the Delaware Revised Uniform Limited Partnership Act
in which the Seller was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller, the
related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the disposition
of any amounts received upon liquidation of any property remaining in the Trust,
(ii) the payment to Noteholders, if any, and Certificateholders of the related
series of all amounts required to be paid to them pursuant to the Transfer and
Servicing Agreements and (iii) the occurrence of any event described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer 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 related Trustee (based on such
Trustee's receipt of such notice) shall be permitted to purchase the
Receivables. The related Trustee and related Indenture Trustee, if any, will
give written notice of termination to each Securityholder.
As described above under "--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 the
holders of sufficient Securities of each class direct the Trustee not to
terminate such trust. Upon termination of any Trust, the assets of such Trust
will be liquidated and the proceeds therefrom (and amounts held in related
accounts) will be applied to pay the Notes and Certificates of the related
series in full, to the extent of amounts available therefor.
As described below under "The Swap Agreement", if a Swap Termination occurs,
the principal of each class of Certificates will become immediately payable and
the Trustee will be obligated to liquidate the assets of the Trust and the
proceeds therefrom (and amounts held in related accounts) will be
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applied to pay the Notes and Certificates of the related series in full, to the
extent of amounts available therefor.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with any
of the events specified above and the subsequent payment to the related
Certificateholders of all amounts required to be paid to them pursuant to the
applicable Trust Agreement or Pooling and Servicing Agreement will effect early
retirement of the Certificates of such series.
ADMINISTRATION AGREEMENT
TMCC, in its capacity as administrator (the "Administrator"), will enter
into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each Trust that issues Notes and the related
Indenture Trustee pursuant to which the Administrator will agree, to the extent
provided in such Administration Agreement, to provide the notices and to perform
other administrative obligations required by the related Indenture. 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.
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TMCC DEMAND NOTES
The following summary describes certain terms of demand notes that may be
issued from time to time by TMCC (the "TMCC Demand Notes"). TMCC Demand Notes
will be issued under a Demand Notes Indenture (the "Demand Notes Indenture"),
between TMCC and the trustee thereunder (in such capacity, the "Demand Notes
Indenture Trustee"). The characteristics of any particular series of TMCC Demand
Notes and the provisions of any particular Demand Notes Indenture may differ
from those described in this section and will be more fully described in the
related Prospectus Supplement. In addition, this summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of any Demand Notes Indenture that is entered into by the related
trust.
GENERAL
Collections in respect of the receivables will be applied to make payments
of interest and principal of each class of Securities. If so specified in the
related Prospectus Supplement, payments of interest and/or principal of one or
more classes of Securities may be made on a quarterly, semi-annual or annual
basis, and not simply as a pass-through of collections received during a
particular month. In order to make distributions of principal and/or interest on
a basis other than monthly, the Trustee will be required to invest amounts
otherwise payable as principal or interest of the specified classes of
Securities in highly rated investments maturing on or just prior to specified
distribution dates and bearing interest at rates specified in the related
Prospectus Supplement as directed by the Servicer. The Trustee may invest some
or all such funds in TMCC Demand Notes, due to the administrative difficulties
associated with regularly obtaining highly rated investments in variable amounts
with the necessary maturities and demand features that earn a sufficient amount
of interest. Any such TMCC Demand Notes will be unsecured general obligations of
TMCC and will rank equally with all other outstanding unsecured and
unsubordinated indebtedness of TMCC.
The principal amount of the TMCC Demand Notes outstanding will change from
time to time, depending on the amount of collections invested. The aggregate
principal amount of TMCC Demand Notes that may be issued under any Demand Notes
Indenture will be set forth in the related Prospectus Supplement. Interest on
the TMCC Demand Notes will be paid at rates and on terms set forth in the
related Prospectus Supplement. Different forms of TMCC Demand Notes will be used
to represent investments of Collections relating to interest and investments of
Collections relating to principal. Interest related demand notes will generally
mature on the dates on which interest is to be paid to Securityholders.
Principal related demand notes will generally mature on the dates on which
principal is to be paid to Securityholders. In addition, the Trustee will
generally have the right to demand payment of the TMCC Demand Notes in
connection with the reduction of TMCC's rating to a level below that specified
in the related Prospectus Supplement or upon the occurrence of other events
specified in the related Prospectus Supplement. See "Risk Factors--The swap and
the demand notes may affect the ratings of the securities." The payment terms
relating to the TMCC Demand Notes will be set forth in detail in the related
Prospectus Supplement.
TMCC Demand Notes will be unsecured general obligations of TMCC and will
rank PARI PASSU with all other unsecured and unsubordinated indebtedness of TMCC
from time to time outstanding. TMCC Demand Notes will be obligations solely of
TMCC and will not be obligations of, or guaranteed by, TMS or any affiliate of
TMCC or TMS, directly or indirectly. TMCC Demand Notes will not be subject to
redemption by TMCC and will not have the benefit of any sinking fund.
Any TMCC Demand Notes will be issued only in fully registered form without
interest coupons, and payment of principal of and interest on TMCC Demand Notes
will be made by the Demand Notes Indenture Trustee as paying agent by wire
transfer to an account maintained by the Trustee, as the holder of the TMCC
Demand Notes.
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No Securityholder will have a direct interest in any TMCC Demand Notes or
have any direct rights under the TMCC Demand Notes or the Demand Notes
Indenture. The Trustee, on behalf of the Trust, will be the only holder of the
TMCC Demand Notes, which it will hold for the benefit of the Securityholders. In
the event any vote or other action, including action upon the occurrence of an
Event of Default under the Demand Notes Indenture, is required or permitted by
the holders of the TMCC Demand Notes under the Demand Notes Indenture, the
Trustee as such holder will be permitted to vote or take such other action as it
shall deem fit. However, the Trustee, on behalf of the Trust, shall be permitted
to seek the direction of the Securityholders before taking any such action, all
as further described in the related Prospectus Supplement. References under this
caption to "holders of the TMCC Demand Notes" and phrases of similar import
shall be to the Trustee as the holder of the TMCC Demand Notes.
REMOVAL OF DEMAND NOTES INDENTURE TRUSTEE; SUCCESSOR DEMAND NOTES INDENTURE
TRUSTEE
The Demand Notes Indenture Trustee may resign by providing written notice to
TMCC and the Trust, as holder of the TMCC Demand Notes. The Trust, as holder of
the TMCC Demand Notes, may remove the Demand Notes Indenture Trustee by written
notice thereto and to TMCC, and may appoint a successor Demand Notes Indenture
Trustee. TMCC may remove the Demand Notes Indenture Trustee in the event that:
(a) the Demand Notes Indenture Trustee fails to continue to satisfy the criteria
for eligibility to act as Demand Notes Indenture Trustee; (b) the Demand Notes
Indenture Trustee is adjudged a bankrupt or insolvent; (c) a receiver or other
public officer takes charge of the Demand Notes Indenture Trustee or its
property; or (d) the Demand Notes Indenture Trustee otherwise becomes incapable
of acting in such capacity.
If the Demand Notes Indenture Trustee resigns, is removed or is unable to
act as Demand Notes Indenture Trustee for any reason, TMCC shall promptly
appoint a successor Demand Notes Indenture Trustee, unless the Trust shall
already have done so. Within one year after a successor Demand Notes Indenture
Trustee takes office, the Trust may appoint a successor Demand Notes Indenture
Trustee to replace any successor Demand Notes Indenture Trustee appointed by
TMCC. Any resignation or removal of the Demand Notes Indenture Trustee and
appointment of a successor Demand Notes Indenture Trustee shall become effective
only upon such successor's acceptance of such appointment and the payment of
outstanding fees and expenses due to the prior Demand Notes Indenture Trustee as
set forth in the Demand Notes Indenture.
SUCCESSOR CORPORATION
The Demand Notes Indenture provides that TMCC may consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other corporation, provided, that in any such case: (i) either TMCC
shall be the continuing corporation, or the successor corporation shall be a
corporation organized and existing under the laws of the United States or any
state thereof and shall expressly assume, by execution and delivery to the
Demand Notes Indenture Trustee of a supplemental Demand Notes Indenture in form
satisfactory thereto, all of the obligations of TMCC under the TMCC Demand Notes
and the Demand Notes Indenture; and (ii) TMCC or such successor corporation, as
the case may be, shall not, immediately after such merger or consolidation, or
such sale, lease or conveyance, be in default in the performance of any such
obligation. Subject to certain limitations in the Demand Notes Indenture, the
Demand Notes Indenture Trustee may receive from TMCC an officer's certificate
and an opinion of counsel as conclusive evidence that any such consolidation,
merger, sale, lease or conveyance, and any such assumption, complies with the
provisions of the Demand Notes Indenture.
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SUPPLEMENTAL DEMAND NOTES INDENTURES
Supplemental Demand Notes Indentures may be entered into by TMCC and the
Demand Notes Indenture Trustee without the consent of the holder of the TMCC
Demand Notes (a) to cure any ambiguity, to correct or supplement any provisions
thereof that may be inconsistent with any other provision thereof or to add any
other provision with respect to matters or questions arising under the Demand
Notes Indenture which are not inconsistent with the provisions thereof, provided
that any such action will not, in the good faith judgment of the parties,
materially and adversely affect the interest of any holder of TMCC Demand Notes
or any Securityholder and the Demand Notes Indenture Trustee shall be furnished
an opinion of counsel to the effect that such amendment will not materially and
adversely affect the interest of any Securityholder, and (b) for purposes of
appointing a successor trustee hereunder or in connection with any merger or
consolidation of TMCC or the transfer or lease of the assets of TMCC in their
entirety, in each case in accordance with the provisions of the Demand Notes
Indenture. In addition, supplemental Demand Notes Indentures may be entered into
by TMCC and the Demand Notes Indenture Trustee with the consent of the holder of
the TMCC Demand Notes (which consent will not be given except at the written
direction of Holders of at least 25% in aggregate principal amount of the Notes
issued by a Trust, or, with respect to a Trust that has not issued Notes, at
least 25% in aggregate principal amount of the outstanding Certificates (but
excluding for purposes of such calculation and action all Certificates held by
the Seller, the Servicer or any of their affiliates), for the purpose of adding
any provisions to or changing in any manner or eliminating any other provisions
of the Demand Notes Indenture or of modifying in any manner the rights with
respect to the TMCC Demand Notes, provided that no supplemental Demand Notes
Indenture may, among other things, reduce the principal amount of or interest on
any TMCC Demand Notes, change the maturity date for the payment of the
principal, the date on which interest will be payable or other terms of payment
or reduce the percentage of holders of TMCC Demand Notes necessary to modify or
alter the Demand Notes Indenture, without the consent of each Holder of
Certificates affected thereby.
EVENTS OF DEFAULT UNDER THE DEMAND NOTES INDENTURE
The Demand Notes Indenture defines an Event of Default with respect to the
TMCC Demand Notes as being any one of the following events: (i) default in
payment of principal on the TMCC Demand Notes and continuance of such default
for a period of 10 days; (ii) default in payment of any interest on the TMCC
Demand Notes and continuance of such default for a period of 30 days;
(iii) default in the performance, or breach, of any other covenant or warranty
of TMCC in the Demand Notes Indenture continued for 60 days after appropriate
notice; and (iv) certain events of bankruptcy, insolvency or reorganization. If
an Event of Default occurs and is continuing, the Demand Notes Indenture Trustee
or the holders of at least 25% in aggregate principal amount of TMCC Demand
Notes may declare the TMCC Demand Notes to be due and payable. Any past default
with respect to the TMCC Demand Notes may be waived by the holders of a majority
in aggregate principal amount of the outstanding TMCC Demand Notes, except in a
case of failure to pay principal of or interest on the TMCC Demand Notes for
which payment has not been subsequently made or a default in respect of a
covenant or provision of the Demand Notes Indenture which cannot be modified or
amended without the consent of the holder of each outstanding TMCC Demand Note.
TMCC will be required to file with the Demand Notes Indenture Trustee annually
an officer's certificate as to the absence of certain defaults. The Demand Notes
Indenture Trustee may withhold notice to holders of the TMCC Demand Notes of any
default with respect to such series (except in payment of principal or interest)
if it in good faith determines that it is in the interest of such holders to do
so.
Subject to the provisions of the Demand Notes Indenture relating to the
duties of the Demand Notes Indenture Trustee in case an Event of Default shall
occur and be continuing, the Demand Notes Indenture Trustee will be under no
obligation to exercise any of its rights or powers under the Demand Notes
Indenture at the request or direction of any of the holders of TMCC Demand
Notes, unless such
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holders have offered to the Demand Notes Indenture Trustee indemnity or security
satisfactory to it against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction. Subject to
provisions in the Demand Notes Indenture for the indemnification of the Demand
Notes Indenture Trustee and to certain other limitations, the holders of a
majority in principal amount of the outstanding TMCC Demand Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Demand Notes Indenture Trustee, or exercising any trust
or power conferred on the Demand Notes Indenture Trustee with respect to the
TMCC Demand Notes.
ABSENCE OF COVENANTS
The provisions of the Demand Notes Indenture do not contain any covenants
that limit the ability of TMCC to subject its properties to liens, to enter into
any type of transaction or business or to secure any of its other indebtedness
without providing security for the TMCC Demand Notes. The provisions of the
Demand Notes Indenture do not afford the holders of the TMCC Demand Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, change in control, merger or similar transaction or other event.
DEFEASANCE AND DISCHARGE OF DEMAND NOTES INDENTURE
TMCC may satisfy and discharge its obligations under the Demand Notes
Indenture by delivering to the Demand Notes Indenture Trustee for cancellation
all outstanding TMCC Demand Notes, or depositing with the Demand Notes Indenture
Trustee money sufficient to pay the principal of and interest on the outstanding
TMCC Demand Notes on the date on which any such payments are due and payable in
accordance with the terms of the Demand Notes Indenture and the TMCC Demand
Notes, and in each case by satisfying certain additional conditions in the
Demand Notes Indenture. However, in the case of any such deposit, certain of
TMCC's obligations under the Demand Notes Indenture (including the obligation to
pay the principal and interest on the outstanding TMCC Demand Notes) will
continue until all of the TMCC Demand Notes are paid in full.
REGARDING THE DEMAND NOTES INDENTURE TRUSTEE
The Demand Notes Indenture Trustee may be the applicable Trustee and/or
Indenture Trustee. The Demand Notes Indenture contains certain limitations on
the right of the Demand Notes Indenture Trustee, should it become a creditor of
TMCC, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Demand Notes Indenture Trustee is permitted to engage in other transactions with
TMCC; provided, however, that if the Demand Notes Indenture Trustee acquires any
conflicting interest it must eliminate such conflict or resign.
The Demand Notes Indenture provides that, in case an Event of Default has
occurred and is continuing, the Demand Notes Indenture Trustee is required to
use the degree of care and skill of a prudent person in the conduct of his or
her own affairs in the exercise of its powers.
GOVERNING LAW
The Demand Notes Indenture and the TMCC Demand Notes will be governed by and
construed in accordance with the laws of the State of California.
THE SWAP AGREEMENT
The following summary describes certain terms of a swap agreement that a
Trust may enter into in order to reduce its exposure to currency and/or interest
rate risks. The provisions of any particular swap agreement may differ from
those described in this section and will be more fully described in the
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related Prospectus Supplement. In addition, this summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of any swap agreement that is entered into by the related trust.
PAYMENTS UNDER THE SWAP AGREEMENT
As specified in the related Prospectus Supplement, on the Closing Date a
Trust may enter into a 1992 International Swaps and Derivatives Association,
Inc. ("ISDA") Master Agreement (Multi Currency-Cross Border) (such agreement,
the "1992 Master Agreement") with TMCC or an unaffiliated third party (the "Swap
Counterparty"), as modified to reflect the transactions described below (the
1992 Master Agreement, as so modified, the "Swap Agreement"). The Swap Agreement
will incorporate certain relevant standard definitions published by ISDA.
Under the Swap Agreement, the Trust will generally pay to the Swap
Counterparty amounts in respect of interest and principal, as applicable, due on
each Distribution Date under the Swap Agreement and the Swap Counterparty will
generally pay to the Trust amounts equal to the interest or principal payable on
the relevant Securities. If the Trust is unable to make any payment due to be
made by it to the Swap Counterparty under the Swap Agreement, the Swap
Counterparty will not be obligated to make its corresponding payment to the
Trust under the Swap Agreement.
More specifically, if on any specified payment date under the Swap Agreement
the amount of funds from collections and other sources available to the Trust to
make any payment owed to the Swap Counterparty is less than the amount due to
the Swap Counterparty, the obligation of the Swap Counterparty to pay an amount
equal to the interest or principal otherwise due on the relevant Securities on
that date will be reduced in the same proportion as the proportion that the
shortfall in the amount owed to the Swap Counterparty represents of the total
amount due. If on a subsequent specified payment date, amounts are available and
are paid by the Trust to the Swap Counterparty to reimburse all or any part of
the shortfall, then the obligation of the Swap Counterparty to pay an amount
equal to the interest or principal otherwise due on the Securities on that date
will be increased in the same proportion as the proportion that the amount of
the reimbursement represents of the amount otherwise owed by the Swap
Counterparty on that date.
The Trust will not be obligated to pay interest to the Swap Counterparty on
any shortfalls in payments, and, correspondingly, Certificateholders will not be
entitled to receive interest on any amounts not paid as a result of the
proportional reduction described above.
Unless the Swap Agreement is terminated early as described under "--EARLY
TERMINATION OF SWAP AGREEMENT", the Swap Agreement will terminate on the earlier
of (i) the scheduled maturity date of the Securities and (ii) the date on which
all amounts due in respect of the Swap Agreement have been paid.
CONDITIONS PRECEDENT
The respective obligations of the Swap Counterparty and the Trust to pay
certain amounts due under the Swap Agreement will be subject to the following
conditions precedent: (i) no Event of Default (as defined below under
"--DEFAULTS UNDER SWAP AGREEMENT") or event that with the giving of notice or
lapse of time or both would become an Event of Default shall have occurred and
be continuing and (ii) no Early Termination Date (as defined below under
"--EARLY TERMINATION OF SWAP AGREEMENT") shall have occurred or been effectively
designated.
DEFAULTS UNDER SWAP AGREEMENT
"Events of Default" under the Swap Agreement (each, an "Event of Default")
will be limited to: (i) the failure of the Trust or the Swap Counterparty to pay
any amount when due under the Swap
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Agreement after giving effect to the applicable grace period, if any; (ii) the
occurrence of certain events of insolvency or bankruptcy of the Trust or the
Swap Counterparty and (iii) certain other standard events of default under the
1992 Master Agreement including "Breach of Agreement" (not applicable to the
Trust), "Misrepresentation" (not applicable to the Trust) and "Merger without
Assumption", as described in Sections 5(a)(ii), 5(a)(iv) and 5(a)(viii) of the
1992 Master Agreement.
TERMINATION EVENTS
"Termination Events" under the Swap Agreement will consist of the following:
(i) certain events of insolvency or bankruptcy of the Transferor; (ii) the Trust
or the Transferor becomes subject to registration as an "investment company"
under the Investment Company Act of 1940; and (iii) certain standard termination
events under the 1992 Master Agreement including "Illegality" (which generally
relates to changes in law causing it to become unlawful for either of the
parties to perform its obligations under the Swap Agreement), "Tax Event" (which
generally relates to either party to the Swap Agreement receiving payments
thereunder from which an amount has been deducted or withheld for or on account
of certain taxes) and "Tax Event Upon Merger" (which generally relates to a
party to the Swap Agreement receiving a payment under the Swap Agreement from
which an amount has been deducted or withheld for or on account of certain taxes
as a result of a party merging with another entity), each as more fully
described in Sections 5(b)(i), 5(b)(ii) and 5(b)(iii) of the 1992 Master
Agreement; provided, however, that the occurrence of a "Tax Event" or "Tax Event
Upon Merger" will only constitute a Termination Event if the requisite
percentage of Securityholders specified in the related Prospectus Supplement
directs the Trustee to terminate the Swap Agreement and liquidate the assets of
the Trust.
EARLY TERMINATION OF SWAP AGREEMENT
Upon the occurrence of any Event of Default under the Swap Agreement, the
non-defaulting party will have the right to designate an Early Termination Date
(as defined in the Swap Agreement) upon the occurrence and continuance of such
Event of Default. A Swap Agreement will terminate on an Early Termination Date.
With respect to Termination Events, an Early Termination Date may be designated
by one or both of the parties (as specified in the Swap Agreement with respect
to each Termination Event) and will occur only upon notice and, in certain
cases, after the party causing the Termination Event has used reasonable efforts
to transfer its rights and obligations under such Swap Agreement to a related
entity within a limited period after notice has been given of the Termination
Event, all as set forth in the Swap Agreement. The occurrence of an Early
Termination Date under the Swap Agreement will constitute a "Swap Termination".
Upon any Swap Termination, the Trust or the Swap Counterparty may be liable
to make a termination payment to the other (regardless, if applicable, of which
of such parties may have caused such termination). Such termination payment will
be calculated on the basis that the Trust is the Affected Party (as defined in
the Swap Agreement), subject to certain exceptions. The amount of any such
termination payment will be based on the market value of the Swap Agreement
computed on the basis of market quotations of the cost of entering into swap
transactions with the same terms and conditions that would have the effect of
preserving the respective full payment obligations of the parties, in accordance
with the procedures set forth in the Swap Agreement (assuming, for purposes of
such calculation, that all outstanding amounts previously due but unpaid to the
Swap Counterparty are due and payable on the first Distribution Date that would
have occurred after the Early Termination Date). Any such termination payment
could, if interest or currency exchange rates have changed significantly, be
substantial.
If a Swap Agreement is terminated as a result of (i) certain events of
insolvency or bankruptcy of the Swap Counterparty or (ii) the Swap
Counterparty's failure to pay amounts due under the Swap
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Agreement, the Swap Counterparty will not be entitled to any portion of the
termination payment related to the market value of the Swap Agreement.
If a Swap Termination occurs, the principal of each class of Securities will
become immediately payable and the Trustee will be obligated to liquidate the
assets of the Trust. In any such event, the ability of the Trust to pay interest
and/or principal on each class of Securities will depend on (a) the price at
which the assets of the Trust are liquidated, (b) the amount of the swap
termination payment, if any, which may be due to the Swap Counterparty from the
Trust under the Swap Agreement and (c) the amount of the swap termination
payment, if any, which may be due to the Trust from the Swap Counterparty under
the Swap Agreement. In the event that the net proceeds of the liquidation of the
assets of the Trust are not sufficient to make all payments due in respect of
the Securities and for the Trust to meet its obligations, if any, in respect of
the termination of the Swap Agreement, then such amounts will be allocated and
applied in accordance with the priority of payments described in the related
Prospectus Supplement and the claims of the Swap Counterparty in respect of such
net proceeds will rank higher in priority than the claims of the relevant
Securities.
The applicable Pooling and Servicing Agreement or Sale and Servicing
Agreement will provide that upon the occurrence of (i) any Event of Default
arising from any action taken, or failure to act, by the Swap Counterparty, or
(ii) a Termination Event (except as described in the following sentence) with
respect to which the Swap Counterparty is an Affected Party, the Trustee may and
will, at the direction of the requisite percentage of the Securityholders
specified in such agreement, by notice to the Swap Counterparty, designate an
Early Termination Date with respect to the Swap Agreement. If a Termination
Event occurs (i) as a result of the insolvency or bankruptcy of the seller or
(ii) because the Trust or the Seller becomes subject to registration as an
"investment company" under the Investment Company Act of 1940, the Trustee will
be required by the terms of such agreement to terminate the Swap Agreement.
TAXATION
Neither the Trust nor the Swap Counterparty will be obligated under the Swap
Agreement to gross up if withholding taxes are imposed on payments made under
the Swap Agreement.
In the event that any withholding or similar tax is imposed on payments by
the Trust to the Swap Counterparty under the Swap Agreement, the Swap
Counterparty will be entitled to deduct amounts in the same proportion (as
calculated in accordance with the Swap Agreement) from subsequent payments due
from it. In the event that the Swap Counterparty is required to withhold amounts
from payments by the Swap Counterparty under the Swap Agreement, the payment
obligations of the Swap Counterparty will be reduced by such amounts and the
payment obligations of the Trust under the Swap Agreement will remain the same.
In either such event, payments on the Certificates will be subject to reduction
in proportion to the amount so deducted or withheld. In either such event, a
specified percentage of the Securityholders may direct the Trustee to terminate
the Swap Agreement and liquidate the assets of the Trust, as described above
under "--Termination Events".
ASSIGNMENT
Except as provided below, neither the Trust nor the Swap Counterparty will
be permitted to assign, novate or transfer as a whole or in part any of its
rights, obligations or interests under the Swap Agreement. The Swap Counterparty
may transfer the Swap Agreement to another party on ten Business Days' prior
written notice, provided that (i) such notice will be accompanied by a guarantee
of the Swap Counterparty of such transferee's obligations in form and substance
reasonably satisfactory to the Trustee, (ii) the Swap Counterparty delivers an
opinion of independent counsel of recognized standing in form and substance
reasonably satisfactory to the Trustee confirming that as of the date of such
transfer the transferee will not, as a result of such transfer, be required to
withhold or deduct on
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account of tax under the Swap Agreement, (iii) a Termination Event or Event of
Default does not occur under the Swap Agreement as a result of such transfer and
(iv) the Trustee has received written confirmation of the applicable ratings
agency that the then current ratings of the Securities are not adversely
affected as a result of such transfer. In addition, in the event the debt rating
of the Swap Counterparty is reduced to a level below that specified in the
related Prospectus Supplement, the Swap Counterparty may assign the Swap
Agreement to another party (or otherwise obtain a replacement swap agreement on
substantially the same terms as the Swap Agreement) and thereby be released from
its obligations under the Swap Agreement; provided that (i) the new swap
counterparty, by a written instrument, accepts all of the obligations of the
Swap Counterparty under the Swap Agreement to the reasonable satisfaction of the
Trustee, (ii) the Swap Counterparty delivers an opinion of independent counsel
of recognized standing in form and substance reasonably satisfactory to the
Trustee confirming that as at the date of such transfer the new swap
counterparty will not, as a result of such transfer or replacement, be required
to withhold or deduct on account of tax under the Swap Agreement, (iii) a
Termination Event or Event of Default does not occur under the Swap Agreement as
a result of such transfer and (iv) the ratings assigned to the Securities after
such assignment and release will be at least equal to the ratings assigned by
any applicable Rating Agency to the Securities at the time of such reduction of
the rating of the Swap Counterparty's long-term debt. Any cost of such transfer
or replacement will be borne by the Swap Counterparty or the new swap
counterparty and not by the Trust; provided, however that the Swap Counterparty
shall not be required to make any payment to the new swap counterparty to obtain
an assignment or replacement swap. The Swap Counterparty shall have no
obligation to assign the Swap Agreement or obtain a replacement swap agreement
in the event of a ratings downgrade and neither the Trust nor the
Securityholders will have any remedy against the Swap Counterparty if the Swap
Counterparty fails to make such an assignment or obtain a replacement swap
agreement. In the event that the Swap Counterparty does not elect to assign the
Swap Agreement or obtain a replacement swap agreement the Swap Counterparty may
(but shall not be obligated to) establish any other arrangement satisfactory to
the applicable Rating Agency, in each case such that the ratings of the
Securities by the applicable Rating Agency will not be withdrawn or reduced.
MODIFICATION AND AMENDMENT OF SWAP AGREEMENT
The applicable Pooling and Servicing Agreement or Sale and Servicing
Agreement will contain provisions permitting the Trustee to enter into any
amendment of the Swap Agreement (i) to cure any ambiguity or mistake, (ii) to
correct any defective provisions or to correct or supplement any provision
therein which may be inconsistent with any other provision therein or with the
Agreement or (iii) to add any other provisions with respect to matters or
questions arising under the Swap Agreement; provided, in the case of clause
(iii) that such amendment will not adversely affect in any material respect the
interest of any specified Securityholder. Any such amendment shall be deemed not
to adversely affect in any material respect the interests of any specified
Securityholder if the Trustee receives written confirmation from each rating
agency rating the Securities that such amendment will not cause such Rating
Agency to reduce the then current rating thereof.
THE SWAP COUNTERPARTY
TMCC may act as the Swap Counterparty. A description of TMCC is provided
under "The Servicer" herein. Information regarding TMCC is publicly available as
described under "Where You Can Find More Information About Your
Securities--TMCC" herein. Where indicated by the context, as used herein "Swap
Counterparty" includes any party that replaces the initial Swap Counterparty as
described above under "--Assignment".
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GOVERNING LAW
The Swap Agreement will be governed by and construed in accordance with the
laws of the State of New York.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of the Receivables to the applicable Trustee, the perfection of
the security interests in the Receivables and the enforcement of rights to
realize on the Financed Vehicles as collateral for the Receivables are subject
to a number of federal and state laws, including the UCC as in effect in various
states. The Servicer and the Seller will take the action described below to
perfect the rights of the applicable Trustee in the Receivables. If, through
inadvertence or otherwise, another party purchases (including the taking of a
security interest in) the Receivables for new value in the ordinary course of
its business, without actual knowledge of the Trust's interest, and takes
possession of the Receivables, such purchaser would acquire an interest in the
Receivables superior to the interest of the Trust.
SECURITY INTERESTS
GENERAL. In states in which retail installment sale contracts such as the
Receivables evidence the credit sale of automobiles and/or light duty trucks by
dealers to obligors, the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
applicable UCC. Perfection of security interests in financed automobiles and/or
light duty trucks is generally governed by the motor vehicle registration laws
of the state in which the vehicle is located. In most states, a security
interest in automobiles and/or light duty trucks is perfected by obtaining the
certificate of title to the Financed Vehicle or notation of the secured party's
lien on the vehicles' certificate of title.
All retail installment sales contracts acquired by TMCC from Dealers name
TMCC as obligee or assignee and as the secured party. TMCC also takes all
actions necessary under the laws of the state in which the related Financed
Vehicle is located to perfect its security interest in such Financed Vehicle,
including, where applicable, having a notation of its lien recorded on the
related certificate of title and obtaining possession of such certificate of
title. Because TMCC continues to service the contracts as Servicer under the
Sale and Servicing Agreement or the Pooling and Servicing Agreement, as
applicable, the Obligors on the contracts will not be notified of the sale from
TMCC to the Seller or the sale from the Seller to the Trust, and no action will
be taken to record the transfer of the security interest from TMCC to the Seller
or from the Seller to the Trust by amendment of the certificates of title for
the Financed Vehicles or otherwise.
PERFECTION. Pursuant to the related Receivables Purchase Agreement, TMCC
will sell and assign its security interest in the Financed Vehicles to the
Seller and, with respect to each Trust, pursuant to the related Sale and
Servicing Agreement or Pooling and Servicing Agreement, the Seller will assign
its security interest in the Financed Vehicles to such Trust. However, because
of the administrative burden and expense, none of TMCC, the Seller or the
related Trustee will amend any certificate of title to identify such Trust as
the new secured party on such certificate of title relating to a Financed
Vehicle. However, UCC financing statements with respect to the transfer to the
Seller of TMCC's security interest in the Financed Vehicles and the transfer to
the Trustee of the Seller's security interest in the Financed Vehicles will be
filed. In addition, the Servicer will continue to hold any certificates of title
relating to the vehicles in its possession as custodian for the Seller and such
Trust pursuant to the related Sale and Servicing Agreement or Pooling and
Servicing Agreement. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
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In most states, an assignment such as that under each Receivables Purchase
Agreement or each Sale and Servicing Agreement or Pooling and Servicing
Agreement is an effective conveyance of a security interest without amendment of
any lien noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. Although re-registration of
the vehicle is not necessary to convey a perfected security interest in the
Financed Vehicles to the Trust, because the Trust will not be listed as legal
owner on the certificates of title, the security interest of such Trust in the
vehicle could be defeated through fraud or negligence. In such states, in the
absence of fraud or forgery by the vehicle owner or the Servicer or
administrative error by state or local agencies, the notation of TMCC's lien on
the certificates of title will be sufficient to protect such Trust against the
rights of subsequent purchasers of a Financed Vehicle or subsequent lenders who
take a security interest in a Financed Vehicle. In each Receivables Purchase
Agreement, TMCC will represent and warrant, and in each Sale and Servicing
Agreement or Pooling and Servicing Agreement, the Seller will represent and
warrant, that it has taken all action necessary to obtain a perfected security
interest in each Financed Vehicle. If there are any Financed Vehicles as to
which TMCC failed to obtain and assign to the Seller a perfected security
interest, the security interest of the Seller would be subordinate to, among
others, subsequent purchasers of the Financed Vehicles and holders of perfected
security interests therein. To the extent such failure has a material and
adverse effect on the Trust's interest in the related Receivables, however, it
would constitute a breach of the warranties of TMCC under the related
Receivables Purchase Agreement or the Seller under the related Sale and
Servicing Agreement or Pooling and Servicing Agreement. Accordingly, pursuant to
the related Sale and Servicing Agreement or Pooling and Servicing Agreement, the
Seller would be required to repurchase the related Receivable from the Trust
and, pursuant to the related Receivables Purchase Agreement, TMCC would be
required to purchase such Receivable from the Seller, in each case unless the
breach was cured. Pursuant to each Sale and Servicing Agreement and Pooling and
Servicing Agreement, the Seller will assign such rights to the related Trust.
See "Description of the Transfer and Servicing Agreements--Sale and Assignment
of Receivables" and "Risk Factors--Certain Legal Aspects--Security Interests".
CONTINUITY OF PERFECTION. Under the laws of most states, the perfected
security interest in a vehicle would continue for four months after the vehicle
is moved to a state that is different from the one in which it is initially
registered and thereafter until the owner thereof re-registers the vehicle in
the new state. A majority of states generally require surrender of a certificate
of title to re-register a vehicle. In those states (such as California) that
require a secured party to hold possession of the certificate of title to
maintain perfection of the security interest, the secured party would learn of
the re-registration through the request from the obligor under the related
installment sales contract to surrender possession of the certificate of title.
In the case of vehicles registered in states providing for the notation of a
lien on the certificate of title but not possession by the secured party (such
as Texas), the secured party would receive notice of surrender from the state of
re-registration if the security interest is noted on the certificate of title.
Thus, the secured party would have the opportunity to re-perfect its security
interest in the vehicle in the state of relocation. However, these procedural
safeguards will not protect the secured party if through fraud, forgery or
administrative error, the debtor somehow procures a new certificate of title
that does not list the secured party's lien. Additionally, in states that do not
require a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing the
Receivables, TMCC will take steps to effect re-perfection upon receipt of notice
of re-registration or information from the obligor as to relocation. Similarly,
when an Obligor sells a Financed Vehicle, TMCC must surrender possession of the
certificate of title or will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related Receivable before release of the lien. Under each Sale and Servicing
Agreement and Pooling and Servicing Agreement, the Servicer will be obligated to
take appropriate steps, at the Servicer's expense, to maintain perfection of
security interests in the Financed Vehicles and will be obligated to purchase
the related Receivable if it fails to do so and such failure has a material and
adverse effect on the Trust's interest in the Receivable.
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PRIORITY OF LIENS ARISING BY OPERATION OF LAW. Under the laws of most
states (including California), liens for repairs performed on a motor vehicle
and liens for unpaid taxes take priority over even a perfected security interest
in a financed vehicle. The Code also grants priority to certain federal tax
liens over the lien of a secured party. The laws of certain states and federal
law permit the confiscation of vehicles by governmental authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
vehicle. TMCC will represent and warrant to the Seller in each Receivables
Purchase Agreement, and the Seller will represent and warrant to the Trust in
each Sale and Servicing Agreement and Pooling and Servicing Agreement, that, as
of related Closing Date, each security interest in a Financed Vehicle is prior
to all other present liens (other than tax liens and other liens that arise by
operation of law) upon and security interests in such Financed Vehicle. However,
liens for repairs or taxes could arise, or the confiscation of a Financed
Vehicle could occur, at any time during the term of a Receivable. No notice will
be given to the Trustee, any Indenture Trustee, any Noteholders or the
Certificateholders in respect of a given Trust if such a lien arises or
confiscation occurs which would not give rise to the Seller's repurchase
obligation under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement or TMCC's repurchase obligation under the related
Receivables Purchase Agreement.
REPOSSESSION
In the event of default by an obligor, the holder of the related retail
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. Among the UCC remedies,
the secured party has the right to perform repossession by self-help means,
unless such means would constitute a breach of the peace or is otherwise limited
by applicable state law. Unless a vehicle financed by TMCC is voluntarily
surrendered, self-help repossession is the method employed by TMCC in most
states and is accomplished simply by retaking possession thereof. In cases where
an obligor objects or raises a defense to repossession, or if otherwise required
by applicable state law, a court order must be obtained from the appropriate
state court, and such vehicle must then be recovered in accordance with that
order. In some jurisdictions, the secured party is required to notify such
obligor of the default and the intent to repossess the collateral and to give
such obligor a time period within which to cure the default prior to
repossession. In most states, under certain circumstances after any such
financed vehicle has been repossessed, the related obligor may reinstate the
related contract by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by an obligor under a retail installment sales
contract, some jurisdictions require that the obligor be notified of the default
and be given a time period within which to cure the default prior to
repossession. Generally, this right of cure may only be exercised on a limited
number of occasions during the term of the related contract.
The UCC and other state laws require the secured party to provide an obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. In most states,
an obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation and accrued
interest thereon plus reasonable expenses for repossessing, holding and
preparing the collateral for disposition and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees. In some states, an obligor has
the right to redeem the collateral prior to actual sale by payment of delinquent
installments or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or
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limitations on deficiency judgments if the net proceeds from resale do not cover
the full amount of the indebtedness, a deficiency judgment can be sought in
those states that do not prohibit or limit such judgments. In addition to the
notice requirement, the UCC requires that every aspect of the sale or other
disposition, including the method, manner, time, place and terms, be
"commercially reasonable". Generally, courts have held that when a sale is not
"commercially reasonable", the secured party loses its right to a deficiency
judgment. However, the deficiency judgment would be a personal judgment against
the obligor for the shortfall, and a defaulting obligor can be expected to have
very little capital or sources of income available following repossession.
Therefore, in many cases, it may not be useful to seek a deficiency judgment or,
if one is obtained, it may be settled at a significant discount or be
uncollectible. In addition, the UCC permits the debtor or other interested party
to recover for any loss caused by noncompliance with the provisions of the UCC.
Also, prior to a sale, the UCC permits the debtor or other interested person to
prohibit the secured party from disposing of the collateral if it is established
that the secured party is not proceeding in accordance with the "default"
provisions under the UCC.
Occasionally, after resale of a repossessed vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or if no such lienholder exists, the UCC requires
the creditor to remit the surplus to the obligor.
CERTAIN BANKRUPTCY CONSIDERATIONS
The Seller, in structuring the transactions contemplated hereby, has taken
steps that are intended to make it unlikely that the voluntary or involuntary
application for relief by TMCC under the United States Bankruptcy Code or
similar applicable state laws (collectively, "Insolvency Laws") will result in
consolidation of the assets and liabilities of the Seller with those of TMCC.
These steps include the creation of the Seller as a wholly-owned, limited
purpose subsidiary pursuant to articles of incorporation and bylaws containing
certain limitations (including requiring that the Seller must at all times have
at least one "Independent Director" and restrictions on the nature of the
Seller's business and on its ability to commence a voluntary case or proceeding
under any Insolvency Law without the affirmative vote of a majority of its
directors, including each Independent Director). In addition, to the extent that
the Seller granted a security interest in the Receivables to the Trust, and that
interest was validly perfected before the bankruptcy or insolvency of TMCC and
was not taken or granted in contemplation of insolvency or with the intent to
hinder, delay or defraud TMCC or its creditors, that security interest should
not be subject to avoidance, and payments to the Trust with respect to the
Receivables should not be subject to recovery by a creditor or trustee in
bankruptcy of TMCC. If, notwithstanding the foregoing, (i) a court concluded
that the assets and liabilities of the Seller should be consolidated with those
of TMCC in the event of the application of applicable Insolvency Laws to TMCC or
following the bankruptcy or insolvency of TMCC the security interest in the
Receivables granted by the Seller to the Trust should be avoided, (ii) a filing
were made under any Insolvency Law by or against the Seller or (iii) an attempt
were made to litigate any of the foregoing issues, delays in payments on the
Certificates and possible reductions in the amount of such payments could occur.
On the Closing Date, the Seller will receive the opinion of O'Melveny &
Myers LLP to the effect that, based on a reasoned analysis of analogous case law
(although there is no precedent based on directly similar facts), 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,
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and refraining from holding itself out as having agreed to pay, or being liable
for, the debts of TMCC. The Seller intends to follow these and other procedures
related to maintaining its separate corporate identity. However, there can be no
assurance that a court would not conclude that the assets and liabilities of the
Seller should be consolidated with those of TMCC.
TMCC will warrant in the Receivables Purchase Agreement that the sale of the
Receivables by it to the Seller is a valid sale. Notwithstanding the foregoing,
if TMCC were to become a debtor in a bankruptcy case a court could take the
position that the sale of Receivables to the Seller should instead be treated as
a pledge of such Receivables to secure a borrowing of such debtor. If a court
were to reach such conclusions, or a filing were made under any Insolvency Law
by or against the Seller, or if an attempt were made to litigate any of the
foregoing issues, delays in payments on the Certificates (and possible
reductions in the amount of such payments) could occur. In addition, if the
transfer of Receivables to the Seller is treated as a pledge instead of a sale,
a tax or government lien on the property of TMCC arising before the transfer of
a Receivable to the Seller may have priority over the Seller's interest in such
Receivable. In addition, while TMCC is the Servicer, cash collections on the
Receivables may be commingled with the funds of TMCC and, in the event of the
bankruptcy of TMCC, the Trust may not have a perfected interest in such
collections.
TMCC and the Seller will treat the transactions described herein as a sale
of the Receivables to the Seller, such that the automatic stay provisions of the
United States Bankruptcy Code should not apply to the Receivables in the event
that TMCC were to become a debtor in a bankruptcy case.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act of 1940, the Texas Consumer Credit Code,
state adoptions of the National Consumer Act and of the Uniform Consumer Credit
Code and state motor vehicle retail installment sales acts and other similar
laws. Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect an assignee's ability to enforce consumer
finance contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting a seller (and certain related creditors and their assignees) in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, each Trust, as holder of the related Receivables, will be subject
to any claims or defenses that the purchaser of the applicable Financed Vehicle
may assert against the seller of the Financed Vehicle. As to each Obligor, such
claims are limited to a maximum liability equal to the amounts paid by the
Obligor on the related Receivable. Under most state motor vehicle dealer
licensing laws, sellers of motor vehicles are required to be licensed to sell
motor vehicles at retail sale. Furthermore, federal odometer regulations
promulgated under the Motor Vehicle Information and Cost Savings Act require
that all sellers of
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new and used vehicles furnish a written statement signed by the seller
certifying the accuracy of the odometer reading. If a seller is not properly
licensed or if a written odometer disclosure statement was not provided to the
purchaser of the related financed vehicle, an obligor may be able to assert a
defense against the seller of the vehicle. If an Obligor were successful in
asserting any such claim or defense, such claim or defense would constitute a
breach of the Seller's warranties under the related Sale and Servicing Agreement
or Pooling and Servicing Agreement and a breach of TMCC's warranties under the
related Receivables Purchase Agreement and would create an obligation of the
Seller and TMCC, respectively, to repurchase the Receivable unless the breach is
cured. See "Description of the Transfer and Servicing Agreements--Sale and
Assignment of Receivables".
Courts have applied general equitable principles to secured parties pursuing
repossession and litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
From time to time, TMCC has been involved in litigation under consumer
protection laws. In addition, with respect to the Receivables originated in
California, a significant number may provide that such Receivables may be
rescinded by the related Dealer if such Dealer is unable to assign the
Receivable to a lender within ten days of the date of such Receivable. Although
there is authority, which is not binding on any court, providing that a
conditional sale contract containing such a provision would be unenforceable
under California law, to the knowledge of TMCC and the Seller, this
enforceability issue has not been presented before any California court.
TMCC and the Seller will represent and warrant under each Receivables
Purchase Agreement and each Sale and Servicing Agreement and Pooling and
Servicing Agreement, as applicable, that each Receivable complies with all
requirements of law in all material respects. In addition, with respect to any
Trust as to which 10% or more of the Receivables were originated in California,
on the applicable Closing Date, the Seller will receive an opinion of counsel to
the effect that all of the California Receivables are enforceable under
California law and applicable federal laws, subject to customary exceptions.
Accordingly, if an Obligor has a claim against such Trust for violation of any
law and such claim materially and adversely affects such Trust's interest in a
Receivable, such violation would constitute a breach of the representations and
warranties of TMCC under the Receivables Purchase Agreement and the Seller under
such Sale and Servicing Agreement or Pooling and Servicing Agreement and would
create an obligation of TMCC and the Seller to repurchase the Receivable unless
the breach is cured. See "Description of the Transfer and Servicing
Agreements--Sale and Assignment of Receivables".
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the vehicle
at the time of bankruptcy (as determined by the court), leaving the creditor as
a general unsecured creditor for the remainder of the indebtedness. A bankruptcy
court may also reduce the monthly payments due under a contract or change the
rate of interest and time of repayment of the indebtedness.
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Under the terms of the Soldiers' and Sailors' Relief Act of 1940, an Obligor
who enters the military service after the origination of such Obligor's
Receivable (including an Obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the Obligor's Receivable and is
later called to active duty) may not be charged interest above an annual rate of
6% during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, some states, including
California, allow members of its national guard to extend payments on any
contract obligation if called into active service by the Governor for a period
exceeding 7 days. It is possible that the foregoing could have an effect on the
ability of the Servicer to collect the full amount of interest owing on certain
of the Receivables. In addition, both the Soldiers' and Sailors' Relief Act of
1940 and the laws of some states, including California, New York and New Jersey,
impose limitations that would impair the ability of the Servicer to repossess an
affected Receivable during the Obligor's period of active duty status. Thus, in
the event that such a Receivable goes into default, there may be delays and
losses occasioned by the inability to exercise the Trust's rights with respect
to the related Financed Vehicle in a timely fashion.
Any such shortfall pursuant to either of the two preceding paragraphs, to
the extent not covered by amounts payable to the Securityholders from amounts on
deposit in the related Reserve Fund or from coverage provided under any other
credit enhancement mechanism, could result in losses to the Securityholders.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates of any series, to the extent it relates to matters of law or legal
conclusions with respect thereto, represents the opinion of tax counsel to each
Trust with respect to the related series on the material matters associated with
such consequences, subject to the qualifications set forth herein. "Tax Counsel"
with respect to each Trust will be O'Melveny & Myers LLP. The summary does not
purport to deal with federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules. For
example, it does not discuss the tax treatment of Noteholders or
Certificateholders that are insurance companies, regulated investment companies
or dealers in securities. Moreover, there are no cases or Internal Revenue
Service ("IRS") rulings on similar transactions involving both debt and equity
interests issued by a trust with terms similar to those of the Notes and the
Certificates. As a result, the IRS may disagree with all or a part of the
discussion below. Prospective investors are urged to consult their own tax
advisors in determining the federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. Each Trust will be provided
with an opinion of Tax Counsel regarding certain federal income tax matters
discussed below. An opinion of Tax Counsel, however, is not binding on the IRS
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the Trust,
the Notes, the Certificates and related terms, parties and documents shall be
deemed to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary depending on
whether the Trust will be treated as a partnership (or a "disregarded entity,"
in the event that there is a single beneficial owner of the Certificates) or a
grantor trust under the Code. The Prospectus Supplement for each Series of
Certificates will specify whether the Trust will be treated as a partnership (or
disregarded entity) or as a grantor trust.
TAX TREATMENT OF OWNER TRUSTS
TAX CHARACTERIZATION OF THE TRUST
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates of a Trust nominally referred to as an "owner trust" in the
applicable prospectus supplement (an "Owner Trust"), to the extent it relates to
matters of law or legal conclusions with respect thereto, represents the opinion
of Tax Counsel to each Owner Trust with respect to the related series on the
material matters associated with those consequences, subject to the
qualifications set forth in this Prospectus. In addition, Tax Counsel has
prepared or reviewed the statements in this Prospectus under the heading
"Certain Federal Income Tax Consequences--Tax Treatment of Owner Trusts," and is
of the opinion that those statements are correct in all material respects. Those
statements are intended as an explanatory discussion of the related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to an investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, it is suggested that each investor consult its own tax advisor with
regard to the tax consequences to it of investing in Notes or Certificates.
Tax Counsel will deliver its opinion that an Owner Trust will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Related Documents will be complied with, and on Tax Counsel's
conclusions that (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.
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If the Owner Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Receivables, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes and the Certificates, and Certificateholders could be liable for any
such tax that is not paid by the Owner Trust.
TAX CONSEQUENCES TO 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 Owner 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 or under a constant yield method 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 that is not required
to report interest income as it accrues under Section 1281 may elect to accrue
interest income on all nongovernment debt obligations with a term of one year or
less, in which case the taxpayer 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 in income by such Noteholder 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
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such Noteholder with respect to such Note. Any such gain or loss, and any gain
or loss recognized on a prepayment of the Notes, will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
FOREIGN HOLDERS. Interest paid (or accrued) to a Noteholder who is not a
U.S. 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 (i) the Foreign Person is not actually or constructively a "10 percent
shareholder" of the 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 (ii) the Foreign Person is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code, (iii) the interest is not contingent interest
described in Section 871(h)(4) of the Code, and (iv) the Foreign Person does not
bear certain relationships to any Certificateholder. To qualify for the
exemption from taxation, the Foreign Person must provide the applicable Trustee
or other person who is otherwise required to withhold U.S. tax with respect to
the Notes with an appropriate statement (on Form W-8BEN or a similar form),
signed under penalties of perjury, certifying that the 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-8BEN or substitute form provided by
the Foreign Person that owns the Note and the Foreign Person that owns the Note
must notify the financial institution acting on its behalf of any changes to the
information on the Form W-8BEN (or substitute form) within 30 days of any such
change. If interest paid to a Foreign Person is not considered portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.
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 during the taxable year of disposition.
As used herein, a "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation or a partnership organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate,
the income of which from sources outside the United States is includible in
gross income for federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States or (iv) a trust if a
court within the U.S. is able to exercise primary supervision over the
administration of the trust and one or more United States fiduciaries have
authority to control all substantial decisions of the trust.
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 (on Form W-9) providing 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 Owner 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 Noteholder'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 Owner Trust. If so treated, the Trust
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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 holders that are Foreign Persons may 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 Owner Trust as a partnership (or as an entity disregarded as
separate from the Certificateholder in the event that there is a single
beneficial owner of the Certificates) for purposes of federal and state income
tax, franchise tax and any other tax measured in whole or in part by income. If
the trust is treated as a partnership, the assets of the partnership would be
the assets held by the Trust, the partners of the partnership would be the
Certificateholders (including the Seller in its capacity as recipient of
payments from the Reserve Fund), and the Notes would be debt of the partnership.
However, the proper characterization of the arrangement involving the Owner
Trust, the Certificates, the Notes, the Seller and the Servicer is not clear
because there is no authority on transactions closely comparable to that
contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Owner Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
INDEXED SECURITIES, ETC. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Indexed Securities or Strip Certificates, and that a series of Securities
includes a single class of Certificates. If these conditions are not satisfied
with respect to any given series of Certificates, additional tax considerations
with respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
PARTNERSHIP TAXATION. As a partnership, the Owner Trust will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Owner Trust. The Trust's income will
consist primarily of interest and finance charges earned on the Receivables
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of Receivables. The Trust's
deductions will consist primarily of interest accruing with respect to the
Notes, servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). In the Trust Agreement, the
Certificateholders will agree that the yield on a Certificate is intended to
qualify as a "guaranteed payment" and not as a distributive share of partnership
income. A guaranteed payment would be treated by a Certificateholder as ordinary
income, but may well not be treated as interest income. The Trust Agreement will
provide that, to the extent that such treatment is not respected, the
Certificateholders of each class of Certificates will be allocated taxable
income of the Owner Trust for each month equal to the sum of (i) the interest
that accrues on the Certificates in accordance with their terms for such month,
including interest accruing at the Pass Through Rate for such month and interest
on amounts previously due on the Certificates but not yet paid; (ii) any Trust
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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 Owner
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 Owner Trust will be allocated to the Seller. Except as provided below,
losses and deductions generally will be allocated to the Certificateholders only
to the extent the Certificateholders are reasonably expected to bear the
economic burden of such losses or deductions. Any losses allocated to
Certificateholders could be characterized as capital losses, and the
Certificateholders generally would only be able to deduct such losses against
capital gain income, and deductions would be subject to the limitations set
forth below. Accordingly, a Certificateholder's taxable income from the Trust
could exceed the cash it is entitled to receive from the Trust.
Based on the economic arrangement of the parties, this approach for
allocating Trust income and loss should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to 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
payments 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.
For each taxable year of the Certificateholder, the Certificateholder will
be required to report items of income, loss and deduction allocated to them by
the Trust for the Trust's taxable year that ends on or before the last day of
such taxable year of the Certificateholder. The Code prescribes certain rules
for determining the taxable year of the Owner Trust. It is likely that, under
these rules, the taxable year of the Owner Trust will be the calendar year.
However, in the event that all of the Certificateholders possessing a 5 percent
or greater interest in the equity or profits of the Trust share a taxable year
that is other than the calendar year, the Trust would be required to use that
year as its taxable year.
A significant portion of the taxable income allocated to a 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 Owner Trust (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually paid to such holder over the life of the
Trust.
The Owner 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 Owner Trust should not have OID income. However,
the purchase price paid by the Trust for the Receivables may be greater or less
than the remaining principal balance of the Receivables at the time of purchase.
If so, the Receivables will have been acquired at a premium or discount, as the
case
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may be. (As indicated above, the Owner Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Owner Trust acquires the Receivables at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on the Receivables. As indicated above, a portion of such market
discount income or premium deduction may be allocated to Certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Owner Trust
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
transfer all of it assets and liabilities to a new partnership in exchange for
an interest in the new partnership, after which the Trust would be deemed to
distribute interests in the new partnership to Certificateholders (including the
purchasing partner who caused the termination) in liquidation of the terminated
partnership. The Trust will not comply with certain technical requirements that
might apply when such a constructive termination occurs. As a result, the Owner
Trust may be subject to certain tax penalties and may incur additional expenses
if it is required to comply with those requirements. Furthermore, the Trust
might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A 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 payments received with respect to such Certificate.
In addition, both the tax basis in the Certificates and the amount realized on a
sale of a Certificate would include the 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 Owner 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 payments with respect thereto, such excess will generally give rise to a
capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the Owner
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the 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 Owner 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.
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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 Owner Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, 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 Owner Trust. Such books will be maintained
for financial reporting and tax purposes on an accrual basis and the fiscal year
of the Trust will be set forth in the related Prospectus Supplement. The Trustee
will file a partnership information return (IRS Form 1065) with the IRS for each
taxable year of the Trust 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 Owner
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, is designated to receive notice on behalf of, and
to provide notice to those Certificateholders not receiving notice from, the
IRS, and to represent 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
Owner Trust. As the tax matters partner, the Seller may enter into a binding
settlement on behalf of all Certificateholders with a less than 1 percent
interest in the Trust (except for any group of such Certificateholders with an
aggregate interest of 5 percent or more in Trust profits that elects to form a
notice group or Certificateholders who otherwise notify the IRS that the Seller
is not authorized to settle on their behalf). In the absence of a proceeding at
the Trust level, a Certificateholder under certain circumstances may pursue a
claim for credit or refund on his own behalf by filing a request for
administrative adjustment of a Trust item. Each Certificateholder is advised to
consult its own tax
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advisor with respect to the impact of these procedures on its particular case.
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
Owner Trust would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to Foreign
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 Certificateholders that are Foreign Persons ("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 Certificateholders that are taxable as corporations and 39.6% for all
other Foreign Certificateholders. Subsequent adoption of Treasury regulations or
the issuance of other administrative pronouncements may require the Trust to
change its withholding procedures. In determining a Certificateholder's
withholding status, the Trust may rely on IRS Form W-8BEN or successor form, IRS
Form W-9 or the Certificateholder's certification of nonforeign status signed
under penalties of perjury.
Each Foreign Certificateholder might be required to file a U.S. individual
or corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Owner Trust's income. Each Foreign
Certificateholder must obtain a taxpayer identification number from the IRS and
submit that number to the Trust on Form W-8BEN in order to assure appropriate
crediting of the taxes withheld. A Foreign Certificateholder generally would be
entitled to file with the IRS a claim for refund with respect to taxes withheld
by the Trust, taking the position that no taxes were due because the Trust was
not engaged in a U.S. trade or business. However, interest payments made (or
accrued) to a Foreign Certificateholder generally will be considered guaranteed
payments to the extent such payments are determined without regard to the income
of the Trust. If these interest payments are properly characterized as
guaranteed payments, then the interest will not be considered "portfolio
interest", in which case Foreign Certificateholders would be subject to United
States federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a Foreign
Certificateholder would only be entitled to claim a refund for that portion of
the taxes in excess of the taxes that should be withheld with respect to the
guaranteed payments.
BACKUP WITHHOLDING. Payments made on the Certificates and proceeds from the
sale of the Certificates will be subject to a "backup" withholding tax of 31%
if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. See "Tax Consequences to Holders of the
Notes--Backup Withholdings."
TAX TREATMENT OF GRANTOR TRUSTS
TAX CHARACTERIZATION OF THE TRUST
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of the Certificates of a
Trust nominally referred to as a "grantor trust" in the applicable prospectus
supplement (a "Grantor Trust"), to the extent it relates to matters of law or
legal conclusions with respect thereto, represents the opinion of Tax Counsel to
each Grantor Trust with respect to the related series on the material matters
associated with those consequences, subject to the qualifications set forth in
this Prospectus. In addition, Tax Counsel has prepared or reviewed the
statements in this Prospectus under the heading "Certain Federal Income Tax
Consequences--Tax Treatment of Grantor Trusts," and is of the opinion that those
statements are correct in all material respects. Those statements are intended
as an explanatory discussion of the possible effects of the classification of
any Trust as a grantor trust for federal income tax purposes on investors
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generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
an investor's specific tax circumstances that would be provided by an investor's
own tax advisor. Accordingly, it is suggested that each investor consult its own
tax advisor with regard to the tax consequences to it of investing in
Certificates of a Grantor Trust ("Grantor Trust Certificates").
If a partnership election is not made, Tax Counsel will deliver its opinion
that the Grantor Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code. In
this case, owners of Grantor Trust Certificates (referred to herein as "Grantor
Trust Certificateholders") could be considered to own either (i) an undivided
interest in a single debt obligation held by the Grantor Trust and having a
principal amount equal to the total stated principal amount of the Receivables
and an interest rate equal to the relevant Pass Through Rate or (ii) an interest
in each of the Receivables and any other Trust property.
The determination of whether the economic substance of a property transfer
is a sale or a loan secured by the transferred property has been made by the IRS
and the courts on the basis of numerous factors designed to determine whether
the transferor has relinquished (and the transferee has obtained) substantial
incidents of ownership in the property. Among those factors, the primary factors
examined are whether the transferee has the opportunity to gain if the property
increases in value, and has the risk of loss if the property decreases in value.
The relevant pooling and servicing agreement will express the intent of the
Seller to sell, and the Grantor Trust Certificateholders to purchase, the
Receivables, and the Seller and each Grantor Trust Certificateholder, by
accepting a beneficial interest in a Grantor Trust Certificate, will agree to
treat the Grantor Trust Certificates as ownership interests in the Receivables
and any other Trust property.
TREATMENT AS DEBT OBLIGATION. If a Grantor Trust Certificateholder was
considered to own an undivided interest in a single debt obligation, the
principles described under "Tax Treatment of Owner Trusts--Tax Consequences to
Holders of the Notes" would apply. Each Grantor Trust Certificateholder, rather
than reporting its share of the interest accrued on each Receivable, would, in
general, be required to include in income interest accrued or received on the
principal amount of the Grantor Trust Certificates at the relevant Pass Through
Rate in accordance with its usual method of accounting.
The Grantor Trust Certificates would be subject to the original issue
discount ("OID") rules, described below under "Stripped Bonds and Stripped
Coupons--Original Issue Discount." In determining whether such OID is de
minimus, the weighted average life of the Grantor Trust Certificates would be
determined using a reasonable assumption regarding anticipated prepayments (a
"Prepayment Assumption"). OID includible in income for any accrual period
(generally, the period between payment dates) would generally be calculated
using a Prepayment Assumption and an anticipated yield established as of the
date of initial sale of the Grantor Trust Certificates, and would increase or
decrease to reflect prepayments at a faster or slower rate than anticipated. The
Grantor Trust Certificates would also be subject to the market discount
provisions of the Code to the extent that a Grantor Trust Certificateholder
purchased such Certificates at a discount from the initial issue price (as
adjusted to reflect prior accruals of OID).
The remainder of the discussion herein assumes that a Grantor Trust
Certificateholder will be treated as owning an interest in each Receivable (and
the proceeds therefrom) and any other Trust property, although the Servicer will
report information on an aggregate basis.
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Grantor Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
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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 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 holds 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 from the IRS, each
purchaser of a Grantor Trust Certificate will be treated as the purchaser of a
stripped bond which generally should be treated as a single debt instrument
issued on the day it is purchased for purposes of calculating any original issue
discount. Generally, under applicable Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a de
minimis amount (as calculated for purposes of the OID rules of the Code), such
stripped bond will be considered to have been issued with OID. See "Original
Issue Discount." Based on the preamble to the Section 1286 Treasury Regulations,
Tax Counsel is of the opinion that, although the matter is not entirely clear,
the interest income on the Certificates at the sum of the Pass Through Rate and
the portion of the Servicing Fee Rate that does not constitute
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excess servicing will be treated as "qualified stated interest" within the
meaning of the Section 1286 Treasury Regulations and such income will be so
treated in the Trustee's tax information reporting.
ORIGINAL ISSUE DISCOUNT. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently Sections 1271 through 1273 and
1275) will be applicable to a Grantor Trust Certificateholder's interest in
those Receivables meeting the conditions necessary for these sections to apply.
Generally, a Grantor Trust Certificateholder that acquires an undivided interest
in a Receivable issued or acquired with OID must include in gross income the sum
of the "daily portions," as defined below, of the OID on such Receivable for
each day on which it owns a Grantor Trust Certificate, including the date of
purchase but excluding the date of disposition. In the case of an original
Grantor Trust Certificateholder, the daily portions of OID with respect to a
Receivable generally would be determined as follows. A calculation will be made
of the portion of OID that accrues on the Receivable during each successive
monthly accrual period (or shorter period in respect of the date of original
issue or the final 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
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accrued market discount for purposes of determining the tax treatment of
subsequent principal payments or dispositions of the market discount bond is to
be reduced by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
Grantor Trust Certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For Grantor Trust Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Grantor Trust Certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate
purchased at a discount or premium in the secondary market.
A 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 to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the 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 the 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 Grantor Trust 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
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election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder owns or
acquires. See " --Premium" herein. The election to accrue interest, discount and
premium on a constant yield method with respect to a Grantor Trust Certificate
is irrevocable except with the approval of the IRS.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the 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.
FOREIGN PERSONS. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 to (i) an owner that is a Foreign Person
(as defined herein) or (ii) a Grantor Trust Certificateholder holding on behalf
of an owner that is a Foreign Person, as well as 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 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.
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 payment to a recipient would be allowed as a credit
against such recipient's federal income tax liability.
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in California. The State of California imposes a
state individual income tax and a corporate franchise tax on corporations,
partnerships and other entities doing business in the State of California. This
discussion relates only to Owner Trusts, and is based upon present provisions of
California statutes and the regulations promulgated thereunder, and applicable
judicial or ruling authority, all of which are subject to change, which change
may be retroactive.
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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 Owner Trust 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 Owner Trust that issues
Notes that, assuming the Notes will be treated as debt for federal income tax
purposes, the Notes will be treated as debt for California income and franchise
tax purposes. Accordingly, 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.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY AN OWNER TRUST
TREATED AS A PARTNERSHIP
Based on regulations issued by the Franchise Tax Board with respect to the
California tax characterization of an Owner Trust as a partnership and not as an
association taxable as a corporation or other taxable entity, Tax Counsel will
opine that an Owner Trust will not be an association (or publicly traded
partnership) treated as a corporation for California tax purposes. In such case,
the resulting constructive partnership should not be treated as doing business
in California but rather should be viewed as a passive holder of investments
and, as a result, should not be subject to the California franchise tax (which,
if applicable, could possibly result in reduced payments to Certificateholders).
Under current law, Certificateholders that are nonresidents of California
and are not otherwise subject to California income tax may be subject to
California income tax on the income from the constructive partnership. In any
event, classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in California to pay
California tax on income beyond that derived from the Certificates.
If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership" taxable
as a corporation, then the hypothetical entity should not be subject to the
California franchise tax (which, if applicable, could result in reduced payments
to Certificateholders). A Certificateholder not otherwise subject to tax in
California would not become subject to California tax as a result of its mere
ownership of such an interest.
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON YOUR
PARTICULAR TAX SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES
AND CERTIFICATES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to such Benefit Plan. ERISA also imposes certain duties on persons who are
fiduciaries of Benefit Plans subject to ERISA and prohibits certain
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transactions between a Benefit Plan and parties in interest with respect to such
Benefit Plans. Under ERISA, any person who exercises any authority or control
with respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit Plan (subject to certain exceptions
not here relevant). A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Notes or Certificates if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust would
be treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment in this
context of Notes and Certificates of a given series will be discussed in the
related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements nor to Section 4975 of the Code. However,
governmental plans may be subject to state or local laws that impose similar
requirements. In addition, governmental plans and church plans that are
"qualified" under Section 401(a) of the Code are subject to restrictions with
respect to prohibited transactions under Section 503(a)(1)(B) of the Code, the
sanction for violation being loss of "qualified" status.
Due to the complexities of the "prohibited transaction" rules and the
penalties imposed upon persons involved in prohibited transactions, it is
important that the fiduciary of any Benefit Plan considering the purchase of
Securities consult with its tax and/or legal advisors regarding whether the
assets of the related Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "Underwriting
Agreements"), the Seller will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to 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.
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Each Trust may, from time to time, invest the funds in its Trust Accounts in
Eligible Investments acquired from such underwriters or from the Seller.
Pursuant to each Underwriting Agreement with respect to a given series of
Securities, the closing of the sale of any class of Securities subject to such
Underwriting Agreement will be conditioned on the closing of the sale of all
other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Seller and the Servicer by O'Melveny &
Myers LLP. In addition, certain United States federal and California state tax
and other matters will be passed upon for the related Trust by O'Melveny & Myers
LLP.
EXPERTS
If the Trust invests in demand notes issued by TMCC, the financial
statements of TMCC included in TMCC's Annual Report on Form 10-K for the year
ended September 30, 1998 will be incorporated by reference herein. These
financial statements will be so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of TMCC for
the three-month periods ended December 31, 1998 and 1997, which will be
incorporated by reference in this Prospectus if the Trust invests in demand
notes issued by TMCC, PricewaterhouseCoopers LLP reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate report dated February 12, 1999, which
will be incorporated by reference in this Prospectus if the Trust invests in
demand notes issued by TMCC, states that they did not audit and they do not
express an opinion on that unaudited consolidated financial information.
PricewaterhouseCoopers LLP has not carried out any significant additional audit
tests beyond those which would have been necessary if their reports were not
included. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. PricewaterhouseCoopers LLP is not subject to the liability
provisions of section 11 of the Securities Act for their reports on the
unaudited consolidated financial information because those reports are not a
"report" or a "part" of the registration statement prepared or certified by
PricewaterhouseCoopers LLP within the meaning of section 7 and 11 of the
Securities Act.
If the Trust does not invest in demand notes issued by TMCC, the financial
statements and unaudited financial information of TMCC will not be incorporated
by reference in this Prospectus. In such an event, neither
PricewaterhouseCoopers LLP nor TMCC will be subject to the liability provisions
of section 11 of the Securities Act for the financial statements appearing in
TMCC's Annual Report on Form 10-K for the year ended September 30, 1998 or for
PricewaterhouseCoopers' reports on the unaudited consolidated financial
information of TMCC because those financial statements and reports are not a
"report" or a "part" of the registration statement.
85
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INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
30/360 basis........................................................................................... 28
1992 Master Agreement.................................................................................. 59
Actual/360 basis....................................................................................... 28
Actual/Actual basis.................................................................................... 28
Actuarial Receivables.................................................................................. 17
Administration Agreement............................................................................... 40
Administration Fee..................................................................................... 54
Administrative Purchase Payment........................................................................ 43
Administrative Receivable.............................................................................. 43
Administrator.......................................................................................... 54
Advances............................................................................................... 45
APR.................................................................................................... 17
APS.................................................................................................... 15
Base Rate.............................................................................................. 26
Benefit Plan........................................................................................... 83
Book-entry form........................................................................................ 4
Business Day........................................................................................... 27
Calculation Agent...................................................................................... 28
Calculation Date....................................................................................... 29
CD Rate................................................................................................ 29
CD Rate Determination Date............................................................................. 29
CD Rate Security....................................................................................... 27
Clearstream Banking Luxembourg......................................................................... 4
Clearstream Banking Luxembourg Participants............................................................ 36
Certificate Balance.................................................................................... 20
Certificate Pool Factor................................................................................ 20
Certificateholder...................................................................................... 25
Certificates........................................................................................... 13
class.................................................................................................. 20
Closing Date........................................................................................... 16
Code................................................................................................... 70
Collection Account..................................................................................... 41
Collection Period...................................................................................... 44
Commercial Paper Rate.................................................................................. 29
Commercial Paper Rate Determination Date............................................................... 29
Commercial Paper Rate Security......................................................................... 27
Cooperative............................................................................................ 36
Cutoff Date............................................................................................ 13
Dealer Agreements...................................................................................... 13
Dealer Recourse........................................................................................ 19
Dealers................................................................................................ 13
Definitive Certificates................................................................................ 37
Definitive Notes....................................................................................... 37
Definitive Securities.................................................................................. 37
Demand Notes Indenture................................................................................. 55
Demand Notes Indenture Trustee......................................................................... 55
Depository............................................................................................. 21
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Designated LIBOR Page.................................................................................. 31
Determination Date..................................................................................... 48
Disregarded Entity..................................................................................... 70
Distribution Date...................................................................................... 26
DTC.................................................................................................... 33
DTC Participants....................................................................................... 21
Eligible Deposit Account............................................................................... 42
Eligible Institution................................................................................... 42
Eligible Investments................................................................................... 42
ERISA.................................................................................................. 83
Euroclear.............................................................................................. 33
Euroclear Operator..................................................................................... 36
Euroclear Participants................................................................................. 36
Event of Default....................................................................................... 22
Excess Payment......................................................................................... 44
Federal Funds Rate..................................................................................... 30
Federal Funds Rate Determination Date.................................................................. 30
Federal Funds Rate Security............................................................................ 27
Final Scheduled Maturity Date.......................................................................... 43
Financed Vehicles...................................................................................... 13
Fixed Rate Securities.................................................................................. 26
Floating Rate Securities............................................................................... 26
Foreign Certificateholders............................................................................. 77
Foreign Person......................................................................................... 72
Grantor Trust.......................................................................................... 77
Grantor Trust Certificateholders....................................................................... 78
Grantor Trust Certificates............................................................................. 78
Indenture.............................................................................................. 20
Indenture Trustee...................................................................................... 13
Index.................................................................................................. 33
Index Currencies....................................................................................... 33
Index Currency......................................................................................... 31
Index Maturity......................................................................................... 27
Indexed Principal Amount............................................................................... 33
Indexed Securities..................................................................................... 33
Indirect DTC Participants.............................................................................. 35
Insolvency Event....................................................................................... 50
Insolvency Laws........................................................................................ 66
Interest Period........................................................................................ 28
Interest Rate.......................................................................................... 21
Interest Reset Date.................................................................................... 27
Interest Reset Period.................................................................................. 27
Investment Earnings.................................................................................... 42
IRS.................................................................................................... 70
ISDA................................................................................................... 59
Issuer................................................................................................. 13
LIBOR.................................................................................................. 27
LIBOR Determination Date............................................................................... 31
LIBOR Reuters.......................................................................................... 31
</TABLE>
87
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
LIBOR Security......................................................................................... 27
LIBOR Telerate......................................................................................... 31
London Business Day.................................................................................... 27
Money Market Yield..................................................................................... 30
Note Pool Factor....................................................................................... 20
Noteholder............................................................................................. 21
Notes.................................................................................................. 13
Obligors............................................................................................... 13
OID Regulations........................................................................................ 71
Original Certificate Balance........................................................................... 20
Owner Trust............................................................................................ 70
Pass Through Rate...................................................................................... 26
Payahead Account....................................................................................... 41
Payments Ahead......................................................................................... 39
Pool Balance........................................................................................... 20
Pooling and Servicing Agreement........................................................................ 13
Precomputed Advance.................................................................................... 44
Precomputed Receivables................................................................................ 17
Prepayment............................................................................................. 44
Prepayments............................................................................................ 18
Principal Balance...................................................................................... 46
Principal Financial Center............................................................................. 32
Prospectus Supplement.................................................................................. 13
Receivables............................................................................................ 13
Receivables Pool....................................................................................... 13
Receivables Purchase Agreement......................................................................... 16
Registration Statement................................................................................. 16
Related Documents...................................................................................... 24
Required Rate.......................................................................................... 47
Required Yield Maintenance Amount...................................................................... 48
Reserve Fund........................................................................................... 47
Reserve Fund Initial Deposit........................................................................... 47
Rule of 78s Receivables................................................................................ 17
Sale and Servicing Agreement........................................................................... 13
Schedule of Receivables................................................................................ 40
SEC.................................................................................................... 16
Section 1286 Treasury Regulations...................................................................... 79
Securities............................................................................................. 13
Securities Act......................................................................................... 16
Securityholders........................................................................................ 15
Seller................................................................................................. 14
Servicer............................................................................................... 14
Servicer Default....................................................................................... 49
Short-Term Note........................................................................................ 71
Simple Interest Advance................................................................................ 45
Simple Interest Receivables............................................................................ 17
Spread................................................................................................. 27
Spread Multiplier...................................................................................... 27
Strip Certificates..................................................................................... 26
Strip Notes............................................................................................ 21
</TABLE>
88
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Swap Agreement......................................................................................... 53
Swap Counterparty...................................................................................... 59
Swap Termination....................................................................................... 60
Target System.......................................................................................... 27
Tax Event.............................................................................................. 60
Tax Event Upon Merger.................................................................................. 60
Tax Counsel............................................................................................ 70
Termination Events..................................................................................... 60
TMCC................................................................................................... 14
TMCC Demand Notes...................................................................................... 55
TMS.................................................................................................... 14
Transfer and Servicing Agreements...................................................................... 40
Treasury Bills......................................................................................... 32
Treasury Rate.......................................................................................... 32
Treasury Rate Determination Date....................................................................... 32
Treasury Rate Security................................................................................. 27
Trust.................................................................................................. 13
Trust Accounts......................................................................................... 42
Trust Agreement........................................................................................ 13
Trustee................................................................................................ 13
Underwriting Agreements................................................................................ 84
US Person.............................................................................................. 72
Warranty Purchase Payment.............................................................................. 41
Warranty Receivable.................................................................................... 40
Weighted Average Life.................................................................................. 18
Yield Maintenance Account.............................................................................. 47
Yield Maintenance Agreement............................................................................ 48
Yield Maintenance Deposit.............................................................................. 48
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT CLAIM THE
ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AS
OF ANY DATE OTHER THAN THE DATE STATED ON THE COVER PAGE. WE ARE NOT OFFERING
THE NOTES IN ANY JURISDICTION WHERE IT IS NOT PERMITTED.
------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary of Terms............................... S-3
Risk Factors................................... S-13
The Trust...................................... S-16
Capitalization of the Trust.................... S-18
The Owner Trustee and Indenture Trustee........ S-18
The Seller and the Servicer.................... S-18
The Receivables Pool........................... S-18
Delinquencies, Repossessions and Net Losses.... S-22
Use Of Proceeds................................ S-23
Prepayment and Yield Considerations............ S-24
Weighted Average Lives of the Notes............ S-25
Pool Factors and Trading Information........... S-28
Description of the Notes....................... S-28
Payments to Noteholders........................ S-30
Subordination; Reserve Account................. S-33
Transfer and Servicing Agreements.............. S-35
The Owner Trustee and Indenture Trustee........ S-37
ERISA Considerations........................... S-39
Certain Federal Income Tax Consequences........ S-40
Underwriting................................... S-41
Legal Opinions................................. S-42
Index of Terms................................. S-43
ANNEX A: Global Clearance, Settlement and Tax
Documentation Procedures..................... A-1
PROSPECTUS
Summary of Terms............................... 3
Risk Factors................................... 9
The Trusts..................................... 13
The Trustee.................................... 13
The Seller..................................... 14
The Servicer................................... 14
Where you can Find More Information About Your
Securities................................... 15
The Receivables Pools.......................... 16
Delinquencies, Repossessions and Net Losses.... 18
Weighted Average Life of the Securities........ 18
Pool Factors and Trading Information........... 20
Use of Proceeds................................ 20
Description of the Notes....................... 20
Description of the Certificates................ 25
Certain Information Regarding the Securities... 26
Description of the Transfer and Servicing
Agreement.................................... 40
TMCC Demand Notes.............................. 55
The Swap Agreement............................. 58
Certain Legal Aspects of the Receivables....... 63
Certain Federal Income Tax Consequences........ 70
ERISA Considerations........................... 83
Plan of Distribution........................... 84
Legal Opinions................................. 85
Experts........................................ 85
Index of Terms................................. 86
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATION. UNTIL SEPTEMBER 14, 2000 ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE NOTES, WHETHER OR NOT PARTICIPATING IN THE
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$1,105,079,000
TOYOTA AUTO RECEIVABLES
2000-A OWNER TRUST
$305,000,000 7.12% ASSET
BACKED NOTES, CLASS A-2
$523,000,000 7.18% ASSET
BACKED NOTES, CLASS A-3
$277,079,000 7.21% ASSET
BACKED NOTES, CLASS A-4
TOYOTA MOTOR CREDIT RECEIVABLES CORPORATION,
SELLER
TOYOTA MOTOR CREDIT
CORPORATION,
SERVICER
--------------------------
PROSPECTUS SUPPLEMENT
---------------------
JOINT GLOBAL COORDINATORS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
CO-MANAGERS
CHASE SECURITIES INC.
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
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