-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VOa4FA/1BesBqvPFop4F54gCt96FPR9JhdagnIGN3vWumxRMC+829rVrFo1qvud/ HegVSkSomT8lRcub3rT3vA== 0000834071-99-000091.txt : 19991221 0000834071-99-000091.hdr.sgml : 19991221 ACCESSION NUMBER: 0000834071-99-000091 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYOTA MOTOR CREDIT CORP CENTRAL INDEX KEY: 0000834071 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 953775816 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09961 FILM NUMBER: 99777480 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVE STREET 2: PO BOX 2958 FN12 CITY: TORRANCE STATE: CA ZIP: 90509-2958 BUSINESS PHONE: 3107871310 MAIL ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended September 30, 1999 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to -------- -------- Commission file number 1-9961 ---------- TOYOTA MOTOR CREDIT CORPORATION - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-3775816 - ---------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19001 S. Western Avenue Torrance, California 90509 - ---------------------------------------- ----------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 787-1310 ----------------------- Securities registered pursuant to section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ----------------------- 5.25% Fixed Rate Medium-Term Notes due January 19, 2001 New York Stock Exchange - ---------------------------------------- ----------------------- Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of November 30, 1999, the number of outstanding shares of capital stock, par value $10,000 per share, of the registrant was 91,500, all of which shares were held by Toyota Motor Sales, U.S.A., Inc. -1- PART I ITEM 1. BUSINESS. General Toyota Motor Credit Corporation ("TMCC") is a wholly-owned subsidiary of Toyota Motor Sales, USA, Inc. ("TMS") and was incorporated in California in 1982 and commenced operations in 1983. TMCC provides retail leasing, retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle and Toyota industrial equipment dealers and their customers in the United States (excluding Hawaii)and the Commonwealth of Puerto Rico. TMCC has four wholly-owned subsidiaries, one of which is engaged in the insurance business, one limited purpose subsidiary formed primarily to acquire and securitize retail finance receivables, one limited purpose subsidiary formed primarily to acquire and securitize lease finance receivables and one subsidiary which provides retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle dealers and their customers in the Commonwealth of Puerto Rico. TMCC does business as Toyota Motor Credit Corporation and Lexus Financial Services and markets products under the service mark "Toyota Financial Services". TMCC and its wholly-owned subsidiaries are collectively referred to as the "Company". Toyota Credit Argentina S.A. ("TCA") provides retail and wholesale financing to authorized Toyota vehicle dealers and their customers in Argentina. As of December 13, 1999, TMCC owns a 33% interest in TCA. Banco Toyota do Brasil ("BTB") provides retail and lease financing to authorized Toyota vehicle dealers and their customers in Brazil. BTB is owned 15% by TMCC. The remaining interests in TCA and BTB are owned by Toyota Motor Corporation ("TMC"), the ultimate parent of TMCC and TMS. The Company's earnings are primarily impacted by the level of average earning assets, comprised primarily of investments in finance receivables and operating leases, and asset yields as well as outstanding borrowings and the cost of funds. The Company's business is substantially dependent upon the sale of Toyota and Lexus vehicles in the United States. Changes in the volume of sales of such vehicles resulting from governmental action, changes in consumer demand, changes in pricing of imported units due to currency fluctuations, or other events, could impact the level of finance and insurance operations of the Company. To date, the level of the Company's operations has not been restricted by the level of sales of Toyota and Lexus vehicles. An operating agreement between TMCC, TMS and Toyota Motor Manufacturing North America, Inc. ("TMMNA") (the "Operating Agreement"), provides that TMCC will establish its own financing rates and is under no obligation to TMS to finance wholesale obligations from any dealers or retail obligations of any customers. In addition, pursuant to the Operating Agreement, TMS will arrange for the repurchase of new Toyota and Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed in the event of dealer default. The Operating Agreement also specifies that TMS will retain 100% ownership of TMCC as long as TMCC has any funded debt outstanding and that TMS and TMMNA will make necessary equity contributions or provide other financial assistance deemed appropriate to ensure that TMCC maintains a minimum coverage on fixed charges of 1.10 times such fixed charges in any fiscal quarter. Under the Operating Agreement, all loans by TMS and TMMNA to TMCC must be subordinated to all other indebtedness of TMCC. The Operating Agreement does not constitute a guarantee by TMS or TMMNA of any obligations of TMCC. The fixed charge coverage provision of the Operating Agreement is solely for the benefit of the holders of TMCC's commercial paper and extendible commercial notes, and the Operating Agreement may be amended or terminated at any time without notice to, or the consent of, holders of other TMCC obligations. -2- Retail Leasing TMCC purchases primarily new vehicle lease contracts originated by Toyota and Lexus dealers. Lease contracts purchased must first meet TMCC's credit standards after which TMCC assumes ownership of the leased vehicles and is generally permitted to take possession of vehicles upon lessee default. TMCC is responsible for contract collection and administration during the lease period and for the value of the vehicle at lease maturity if the vehicle is not purchased by the lessee or dealer. Off-lease vehicles returned to TMCC are sold through a network of auction sites located throughout the United States as well as through the internet. TMCC requires lessees to carry fire, theft, collision and liability insurance on leased vehicles covering the interests of both TMCC and the lessee. Leasing revenues contributed 76%, 80% and 83% to total financing revenues for the fiscal years ended September 30, 1999, 1998 and 1997, respectively. In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), to act as lessor and to hold title to leased vehicles in specified states in connection with a lease securitization program. TMCC acts as the servicer for lease contracts purchased by the Titling Trust from Toyota and Lexus dealers and services such lease contracts in the same manner as contracts owned directly by TMCC. TMCC holds an undivided trust interest in lease contracts owned by the Titling Trust, and such lease contracts are included in TMCC's lease assets, until such time as the beneficial interests in such contracts are transferred in connection with a securitization transaction. Retail Financing TMCC purchases primarily new and used vehicle installment contracts from Toyota and Lexus dealers. Certain of the used vehicle contracts purchased by TMCC are "Certified" Toyota and Lexus used vehicle contracts which relate to vehicles purchased by dealers, reconditioned and certified to meet certain Toyota and Lexus standards, and sold or leased with an extended warranty from the manufacturer. Installment contracts purchased must first meet TMCC's credit standards and thereafter TMCC retains responsibility for contract collection and administration. TMCC acquires security interests in the vehicles financed and generally can repossess vehicles if customers fail to meet contract obligations. Substantially all of TMCC's retail financings are non-recourse which relieves the dealers from financial responsibility in the event of repossession. TMCC requires retail financing customers to carry fire, theft and collision insurance on financed vehicles covering the interests of both TMCC and the customer. Retail financing revenues contributed 21%, 17% and 14% to total financing revenues for the fiscal years ended September 30, 1999, 1998 and 1997, respectively. TMS has historically and continues to sponsor special lease and retail programs by subsidizing below market lease and retail contract rates. -3- A summary of vehicle retail leasing and financing activity follows:
Years Ended September 30, ------------------------------------------------ 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Contract volume: Lease................ 249,000 312,000 262,000 276,000 179,000 Retail............... 333,000 282,000 247,000 229,000 170,000 ------- ------- ------- ------- ------- Total............. 582,000 594,000 509,000 505,000 349,000 ======= ======= ======= ======= ======= Average amount financed: Lease................ $24,700 $24,600 $24,200 $23,300 $24,800 Retail............... $17,600 $17,100 $16,500 $16,200 $15,100 Outstanding portfolio at period end ($Millions): Lease............. $11,605 $11,872 $11,622 $11,917 $9,305 Retail............ $8,916 $7,834 $5,866 $5,105 $4,489 Number of accounts 1,234,188 1,193,000 1,061,000 1,069,000 946,000
Retail receivables and interests in lease finance receivables sold, totaling $4.1 billion as of September 30, 1999 and $3.3 billion as of September 30, 1998, which TMCC continues to service, are excluded from the outstanding portfolio amounts in the above table. Wholesale Financing TMCC provides wholesale financing primarily to qualified Toyota and Lexus vehicle dealers to finance inventories of new Toyota and Lexus vehicles and used Toyota, Lexus and other vehicles. TMCC acquires security interests in vehicles financed at wholesale, and substantially all such financings are backed by corporate or individual guarantees from or on behalf of participating dealers. In the event of dealer default, TMCC has the right to liquidate any assets acquired and seek legal remedies pursuant to the guarantees. Pursuant to the Operating Agreement, TMS will arrange for the repurchase of new Toyota and Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed in the event of dealer default. A summary of vehicle wholesale financing activity follows:
Years Ended September 30, ------------------------------------------------ 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Dealer loans ($Millions)..... $11,093 $9,802 $8,573 $8,017 $7,626 Dealer repayments ($Millions) $10,983 $9,600 $8,684 $8,221 $7,444 Outstanding portfolio at period end ($Millions).... $855 $746 $563 $668 $886 Average amount financed per vehicle............... $22,120 $21,562 $20,695 $19,926 $18,999
TMCC also makes term loans to dealers for business acquisitions, facilities refurbishment, real estate purchases and working capital requirements. These loans are typically secured with liens on real estate, other dealership assets and/or personal guarantees of the dealers. Wholesale and other dealer financing revenues contributed 3% to total financing revenues for each of the fiscal years ended September 30, 1999, 1998 and 1997. -4- Insurance The principal activities of TMCC's insurance subsidiary, Toyota Motor Insurance Services, Inc. ("TMIS"), include marketing, underwriting, claims administration and providing certain coverages related to vehicle service agreements and contractual liability agreements sold by or through Toyota and Lexus vehicle dealers and affiliates to customers. In addition, TMIS insures and reinsures certain TMS and TMCC risks. Income before income taxes from insurance operations contributed 13%, 16% and 12% to total income before income taxes for the fiscal years ended September 30, 1999, 1998 and 1997, respectively. Servicing TMCC remains as servicer on accounts included in its asset-backed securitization transactions and is paid a servicing fee. Funding Funding to support the Company's level of earning assets is provided by access to the capital markets as well as earning asset liquidations and funds provided by operating activities. Capital market funding has generally been in the form of commercial paper, extendible commercial notes, domestic and euro medium-term notes and bonds and transactions through the Company's asset-backed securitization programs. The Company uses a variety of derivative financial instruments to manage interest rate and currency exchange exposures. The derivative instruments used include cross currency and interest rate swap agreements, indexed note swap agreements and option-based products. The Company does not use any of these instruments for trading purposes. Competition and Government Regulations TMCC's primary competitors for retail leasing and financing are commercial banks, savings and loan associations, credit unions, finance companies and other captive automobile finance companies. Commercial banks and other captive automobile finance companies also provide wholesale financing for Toyota and Lexus dealers. Competition for the principal products and services provided through the insurance operations is primarily from national and regional independent service contract providers. TMCC's strategy is to supplement, with competitive financing and insurance programs, the overall commitment of TMS to offer a complete package of services to authorized Toyota and Lexus dealers and their customers. -5- The finance and insurance operations of the Company are regulated under both federal and state law. A majority of states have enacted legislation establishing licensing requirements to conduct retail and other finance and insurance activities. Most states also impose limits on the maximum rate of finance charges. In certain states, the margin between the present statutory maximum interest rates and borrowing costs is sufficiently narrow that, in periods of rapidly increasing or high interest rates, there could be an adverse effect on the Company's operations in these states if the Company were unable to pass on increased interest costs to its customers. In addition, state laws differ as to whether anyone suffering injury to person or property involving a leased vehicle may bring an action against the owner of the vehicle merely by virtue of that ownership. To the extent that applicable state law permits such an action, TMCC may be subject to liability to such an injured party. However, the laws of most states either do not permit such suits or limit the lessor's liability to the amount of any liability insurance that the lessee was required under applicable law to maintain (or, in some states, the lessor was permitted to maintain), but failed to maintain. TMCC's lease contracts contain provisions requiring the lessees to maintain levels of insurance satisfying applicable state law and TMCC maintains certain levels of contingent liability insurance for protection from catastrophic claims. The Company's operations are also subject to regulation under federal and state consumer protection statutes. The Company continually reviews its operations for compliance with applicable laws. Future administrative rulings, judicial decisions and legislation may require modification of the Company's business practices and documentation. Employee Relations At November 30, 1999, the Company had approximately 2,873 full-time employees. The Company considers its employee relations to be good. Segment Information Financial information regarding industry segments is set forth in Note 17 of the Notes to Consolidated Financial Statements. -6- Toyota Motor Sales, U.S.A., Inc. TMS is primarily engaged in the wholesale distribution of automobiles, light trucks, industrial equipment and related replacement parts and accessories throughout the United States (excluding Hawaii). Additionally, TMS exports automobiles and related replacement parts and accessories to Europe, Asia and United States territories. TMS' corporate headquarters is located in Torrance, California. TMS has port facilities, regional sales offices and parts distribution centers located throughout the United States. Toyota vehicles are distributed in the United States in twelve regional sales areas, ten of which are operated by or through TMS and two which are serviced by private distributors who purchase vehicles directly from TMS and distribute to Toyota dealers within their respective regions. For the year ended September 30, 1999, these private distributors, Gulf States Toyota, Inc. of Houston, Texas and Southeast Toyota Distributors, Inc. of Deerfield Beach, Florida, accounted for approximately 30% of the Toyota vehicles sold in the United States (excluding Hawaii). Lexus vehicles are directly distributed by TMS to Lexus dealers throughout the United States (excluding Hawaii). For the year ended September 30, 1999, TMS sold approximately 1,465,000 automobiles and light trucks in the United States (excluding Hawaii), of which approximately 980,500 were manufactured in the United States; TMS exported approximately 34,800 automobiles. TMS' sales represented approximately 31% of TMC's worldwide sales volume for the year ended March 31, 1999. For the years ended September 30, 1999 and 1998, Toyota and Lexus vehicles accounted for approximately 8.7% and 8.4%, respectively, of all retail automobile and light truck unit sales volume in the United States. Total revenues for TMS for the fiscal years ended September 30, 1999, 1998 and 1997, aggregated approximately $36.5 billion, $32.6 billion and $28.8 billion, respectively, of which approximately $33.1 billion, $29.2 billion, and $25.3 billion, respectively, were attributable to revenues other than those associated with financial services. At September 30, 1999, 1998 and 1997, TMS had total assets of approximately $29 billion, $27.4 billion, and $23.6 billion, respectively. TMS had net worth in excess of $4.1 billion and net income in excess of $225 million for each of the fiscal years ended September 30, 1999, 1998 and 1997. TMS and TMMNA are wholly-owned subsidiaries of Toyota Motor North America, Inc. ("TMA"), a holding company owned 100% by TMC. TMMNA is the holding company for all manufacturing operations in the United States and coordinates and supports numerous manufacturing related administrative functions. Total revenues for TMMNA for the fiscal years ended September 30, 1999 and 1998, aggregated approximately $13.7 billion and $11.9 billion, respectively, all of which was attributable to revenues other than those associated with financial services. At September 30, 1999 and 1998, TMMNA had total assets of approximately $4.7 billion and $4.2 billion respectively. TMMNA had net worth in excess of $2.4 billion and net income in excess of $100 million for the fiscal years ended September 30, 1999 and 1998. -7- ITEM 2. PROPERTIES. The headquarters of the Company for both finance and insurance operations is located in Torrance, California. In addition, as of November 30, 1999, the finance operation has four regional offices and 33 branch offices in cities throughout the United States and one branch office in the Commonwealth of Puerto Rico. The insurance operation has six regional sales offices; five of these premises are shared with the finance operation's branch offices. A finance and insurance service center is located in Cedar Rapids, Iowa. All premises are occupied under lease. ITEM 3. LEGAL PROCEEDINGS. Various legal actions, governmental proceedings and other claims are pending or may be instituted or asserted in the future against TMCC and its subsidiaries with respect to matters arising from the ordinary course of business. Certain of these actions are or purport to be class action suits, seeking sizeable damages. Certain of these actions are similar to suits which have been filed against other financial institutions and captive finance companies. Management and internal and external counsel perform periodic reviews of pending claims and actions to determine the probability of adverse verdicts and resulting amounts of liability. The amounts of liability on pending claims and actions as of September 30, 1999 were not determinable; however, in the opinion of management, the ultimate liability resulting therefrom should not have a material adverse effect on TMCC's consolidated financial position or results of operations. The foregoing is a forward looking statement within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, which represents the Company's expectations and beliefs concerning future events. The Company cautions that its discussion of Legal Proceedings is further qualified by important factors that could cause actual results to differ materially from those in the forward looking statement, including but not limited to the discovery of facts not presently known to the Company or determinations by judges, juries or other finders of fact which do not accord with the Company's evaluation of the possible liability from existing litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. TMCC is a wholly-owned subsidiary of TMS and, accordingly, all shares of the Company's stock are owned by TMS. There is no market for TMCC's stock. No dividends have been declared or paid to date. -8- ITEM 6. SELECTED FINANCIAL DATA.
Years Ended September 30, ------------------------------------------- 1999 1998 1997 1996 1995 ------- ------- ------- ------- ------- (Dollars in Millions) INCOME STATEMENT DATA Financing Revenues: Leasing.......................... $ 2,397 $ 2,595 $ 2,730 $ 2,448 $ 1,904 Retail financing................. 665 547 446 415 431 Wholesale and other dealer financing.............. 103 98 89 109 121 ------- ------- ------- ------- ------- Total financing revenues......... 3,165 3,240 3,265 2,972 2,456 Depreciation on leases........... 1,664 1,681 1,781 1,620 1,232 Interest expense................. 940 994 918 820 716 ------- ------- ------- ------- ------- Net financing revenues........... 561 565 566 532 508 Insurance premiums earned and contract revenues............. 122 112 97 86 76 Investment and other income...... 69 79 66 41 30 ------- ------- ------- ------- ------- Net financing revenues and other revenues............ 752 756 729 659 614 ------- ------- ------- ------- ------- Expenses: Operating and administrative..... 376 323 259 235 207 Provision for credit losses...... 83 127 136 115 66 Insurance losses and loss adjustment expenses........... 63 55 51 49 41 ------- ------- ------- ------- ------- Total expenses................... 522 505 446 399 314 ------- ------- ------- ------- ------- Income before income taxes....... 230 251 283 260 300 Provision for income taxes....... 98 107 121 108 117 ------- ------- ------- ------- ------- Net Income....................... $ 132 $ 144 $ 162 $ 152 $ 183 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges................. 1.24 1.25 1.31 1.32 1.42 BALANCE SHEET DATA Finance receivables, net......... $13,856 $11,521 $8,452 $7,474 $7,227 Investments in operating leases, net.................... $ 8,605 $ 9,765 $10,257 $10,831 $8,148 Total assets..................... $24,578 $23,225 $19,830 $19,309 $16,225 Notes and loans payable.......... $18,565 $17,597 $14,745 $15,014 $12,696 Capital stock.................... $915 $915 $915 $915 $865 Retained earnings................ $1,435 $1,303 $1,159 $997 $844
Certain prior period amounts have been reclassified to conform with the current period presentation. -9- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Income - ---------- The following table summarizes TMCC's net income by business segment for the fiscal years ended September 30, 1999, 1998 and 1997:
Years Ended September 30, ------------------------- 1999 1998 1997 ---- ---- ---- (Dollars in Millions) Net income: Financing operations................ $113 $119 $142 Insurance operations................ 19 25 20 ---- ---- ---- Total net income................. $132 $144 $162 ==== ==== ====
Net income from financing operations decreased 5% in fiscal 1999, primarily due to lower financing revenues and higher operating and administrative expenses, substantially offset by lower interest expense, lower provision for credit losses and lower depreciation on leases. The decrease in fiscal 1998 financing operations net income from fiscal 1997 reflects increased provision for residual value losses as well as higher operating and administrative expenses, partially offset by increased investment and other income and lower provision for credit losses. Net income from insurance operations decreased 24% in fiscal 1999, primarily due to higher operating and administrative expenses and lower investment income. The increase in fiscal 1998 net income reflects increased underwriting profit from providing coverage under various agreements as well as higher investment income. -10- Earning Assets - -------------- The composition of TMCC's net earning assets (which excludes retail receivables and interests in lease finance receivables sold through securitization transactions), as of the balance sheet dates reported herein and TMCC's vehicle lease and retail contract volume and finance penetration for the years ended September 30, 1999, 1998, and 1997 are summarized below:
September 30, --------------------------- 1999 1998 1997 ------- ------- ------- (Dollars in Millions) Vehicle lease Investment in operating leases, net........ $ 8,290 $ 9,559 $10,124 Finance leases, net........................ 3,315 2,313 1,498 ------- ------- ------- Total vehicle leases......................... 11,605 11,872 11,622 Vehicle retail finance receivables, net...... 8,916 7,834 5,866 Vehicle wholesale and other receivables...... 2,142 1,800 1,434 Allowance for credit losses.................. (202) (220) (213) ------- ------- ------- Total net earning assets..................... $22,461 $21,286 $18,709 ======= ======= =======
Years Ended September 30, --------------------------- 1999 1998 1997 ------- ------- ------- Total contract volume: Vehicle lease............................. 249,000 312,000 262,000 Vehicle retail............................ 333,000 282,000 247,000 ------- ------- ------- Total........................................ 582,000 594,000 509,000 ======= ======= ======= TMS sponsored contract volume: Vehicle lease............................. 96,000 170,000 72,000 Vehicle retail............................ 46,000 80,000 17,000 ------- ------- ------- Total........................................ 142,000 250,000 89,000 ======= ======= ======= Used contract volume: Vehicle lease............................. 6,000 7,000 6,000 Vehicle retail............................ 112,000 94,000 103,000 ------- ------- ------- Total........................................ 118,000 101,000 109,000 ======= ======= ======= Finance penetration (excluding fleet): Vehicle lease............................. 17.7% 25.3% 23.2% Vehicle retail............................ 16.0% 15.7% 13.0% ------- ------- ------- Total........................................ 33.7% 41.0% 36.2% ======= ======= =======
-11- TMCC's net earning assets as of September 30, 1999 increased from September 30, 1998 due to growth in retail and wholesale earning assets, partially offset by a decline in lease earning assets. The increase in retail earning assets was primarily due to higher retail contract volume, partially offset by the sale of $989 million of retail finance receivables. Wholesale earning assets increased from September 30, 1998 primarily due to higher dealer inventories. The decrease in lease earning assets was primarily due to lower lease contract volume and the sale of $780 million of interests in lease finance receivables. The decrease in allowance for credit losses reflects improved loss experience and is deemed adequate to cover expected losses based on current and historical loss experience, portfolio composition and other factors. TMCC's net earning assets as of September 30, 1998 increased from September 30, 1997 primarily due to growth in lease, retail and wholesale earning assets attributable to higher volume, partially offset by the sale of $1.6 billion of interests in lease finance receivables. In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), to act as a lessor and to hold title to leased vehicles in specified states. The value of the lease contracts purchased by the Titling Trust in fiscal 1999 and 1998 represented approximately 41% and 40%, respectively, of all lease contracts purchased by both TMCC and the Titling Trust. TMCC holds an undivided trust interest in lease contracts owned by the Titling Trust, and such lease contracts are included in TMCC's lease assets, until such time as the beneficial interests in such contracts are transferred in connection with a securitization transaction. Substantially all leases owned by the Titling Trust are classified as finance receivables due to certain residual value insurance arrangements in place with respect to such leases, while leases of similar nature originated outside of the Titling Trust are classified as operating leases. The continued acquisition of leases by the Titling Trust has changed the composition of earning assets resulting in an increasing mix of finance receivables relative to operating lease assets due to the classification differences described above. TMS sponsors special lease and retail programs which subsidize reduced monthly payments on certain Toyota and Lexus new vehicles and Toyota industrial equipment to qualified lease and retail customers. Support amounts received from TMS in connection with these programs approximate the balances required by TMCC to maintain revenues at standard program levels and are earned over the expected lease and retail installment contract terms. The level of sponsored program activity varies based on TMS marketing strategies, and revenues earned vary based on the mix of Toyota and Lexus vehicles, timing of programs and the level of support provided. TMCC's revenues earned from TMS sponsored special lease and retail contracts outstanding totaled $126 million, $142 million and $174 million for fiscal years 1999, 1998 and 1997, respectively. TMCC's lease contract volume for the year ended September 30, 1999 declined from 1998 reflecting lower finance penetration due to changes in lease programs and the residual value setting policy, as well as lower levels of programs sponsored by TMS. TMCC's retail contract volume for the year ended September 30, 1999 increased from 1998 levels despite reduced TMS sponsored programs due to competitive pricing and the strong sales of Toyota and Lexus vehicles. Higher contract volume in 1998 compared to 1997 was primarily due to strong sales of Toyota and Lexus vehicles as well as higher levels of programs sponsored by TMS. -12- Net Financing Revenue and Other Revenues - ---------------------------------------- TMCC's net financing revenues decreased slightly in fiscal 1999 primarily due to lower leasing revenues, offset by lower interest expense and increased retail and wholesale revenues. TMCC's continued use of the Titling Trust to purchase leases has caused a shift in the composition of earning assets from operating leases to finance receivables, as discussed earlier, and resulted in increased revenues from finance leases (until such interests in leases were sold in a securitization transaction) and reduced operating lease revenues and depreciation on operating leases. The decrease in fiscal 1998 net financing revenues reflects increased provision for residual value losses as well as increased interest expense, partially offset by increased retail and wholesale revenues. Insurance premiums earned and contract revenues increased 9% and 15% in fiscal 1999 and 1998, respectively, due to higher underwriting revenues associated with in-force agreements. The following table summarizes TMCC's investment and other income for the fiscal years ended September 30, 1999, 1998 and 1997:
Years Ended September 30, -------------------------- 1999 1998 1997 ---- ---- ---- (Dollars in Millions) Investment income................................... $ 34 $ 32 $ 30 Servicing fee income................................ 39 26 13 Gains on assets sold................................ 15 21 23 Asset impairment.................................... (19) - - ---- ---- ---- Investment and other income...................... $ 69 $ 79 $ 66 ==== ==== ====
The decrease in investment and other income from fiscal 1998 to fiscal 1999 is primarily due to the impairment of an asset retained in the fiscal 1997 sale of interests in lease finance receivables, as well as lower gains on assets sold, partially offset by higher servicing income. The increase in investment and other income from fiscal 1997 to fiscal 1998 reflects primarily higher levels of servicing fee income from accounts included in the Company's asset- backed securitization programs. Servicing fee income increased 50% and 100% in fiscal 1999 and 1998, respectively, due to growth in the combined balance of sold interests in lease finance and sold retail receivables. Gains recognized on asset-backed securitization transactions generally accelerate the recognition of income on lease and retail contracts, net of servicing fees and other related deferrals, into the period the assets are sold. Numerous factors can affect the timing and amounts of these gains, such as the type and amount of assets sold, the structure of the sale, key assumptions used and current financial market conditions. -13- Depreciation on Leases - ---------------------- The following table sets forth the items included in TMCC's depreciation on leases for the years ended September 30, 1999, 1998 and 1997:
September 30, --------------------------- 1999 1998 1997 ------ ------ ------ (Dollars in Millions) Straight-line depreciation on operating leases.... $1,378 $1,501 $1,649 Provision for residual value losses............... 286 260 132 Parent support for certain vehicle disposition losses........................................ - (80) - ------ ------ ------ Total depreciation on leases...................... $1,664 $1,681 $1,781 ====== ====== ======
Straight-line depreciation expense decreased 8% and 9% for fiscal 1999 and 1998, respectively, corresponding with a decline in average operating lease assets. As discussed earlier, the acquisition of leases by the Titling Trust has increased the ratio of lease finance receivables relative to operating lease assets, which results in reduced operating lease revenues and depreciation on operating leases. TMCC is subject to residual value risk in connection with its lease portfolio. TMCC's residual value exposure is a function of the number of off-lease vehicles returned for disposition and any shortfall between the net disposition proceeds and the estimated unguaranteed residual values on returned vehicles. If the market value of a leased vehicle at contract termination is less than its contract residual value, the vehicle is more likely to be returned to TMCC. A higher rate of vehicle returns exposes TMCC to a risk of higher aggregate losses. Total unguaranteed residual values related to TMCC's vehicle lease portfolio declined from approximately $7.6 billion at September 30, 1998 to $6.5 billion at September 30, 1999 reflecting the acquisition of residual value insurance on an increasing number of leases in connection with the lease securitization program as well as sales of interests in lease finance receivables. TMCC maintains an allowance for estimated losses on lease vehicles returned to the Company for disposition at lease termination. The level of allowance required to cover future vehicle disposition losses is based upon projected vehicle return rates and projected residual value losses derived from market information on used vehicle sales, historical factors, including lease return trends, and general economic factors. -14- The increase in the provision for residual value losses in fiscal 1999 reflects higher off-lease vehicle return rates and a larger supply of vehicles coming off-lease resulting in higher total losses although the loss per vehicle has declined during the same period. The number of returned leased vehicles sold by TMCC during a specified period as a percentage of the number of lease contracts that as of their origination dates were scheduled to terminate ("full term return ratio") was 47% for fiscal 1999 as compared to 40% and 18% for fiscal 1998 and 1997, respectively. Losses at vehicle disposition increased $42 million and $118 million during fiscal 1999 and fiscal 1998, respectively, although per unit residual value loss rates have improved for fiscal 1999 as compared with fiscal 1998. TMCC believes that industry-wide record levels of incentives on new vehicles and a large supply of late model off-lease vehicles have put downward pressure on used car prices. In addition, TMCC's increased vehicle return rates and losses reflect the impact of competitive new vehicle pricing for core Toyota and Lexus models. Return rates and losses may also be affected by the amount and types of accessories or installed optional equipment included in leased vehicles. Although vehicle loss rates are typically the result of a combination of factors, to the extent certain types of optional equipment depreciate more quickly than the value of the base vehicle, leased vehicles having a greater portion of their manufacturer's suggested retail price attributable to such optional equipment will experience relatively higher levels of loss. TMCC expects the large supply of vehicles coming off-lease to continue through fiscal 2000 and that the full term return ratio and losses will remain at or near current levels. The Company has taken action to reduce vehicle disposition losses by developing strategies to increase dealer and lessee purchases of off-lease vehicles, expanding marketing of off-lease vehicles through the internet and maximizing proceeds on vehicles sold through auction. In addition, TMCC implemented a new residual value setting policy for new model year 1999 Toyota vehicles that separately calculates the residual value applicable to the base vehicle and the residual value applicable to certain specified optional accessories and optional equipment. Under an arrangement with TMS, TMCC received Parent support for vehicle disposition losses in the last three quarters of fiscal 1998. During fiscal 1999, the Company did not receive any Parent support for vehicle disposition losses and there are currently no plans for such support in fiscal 2000. TMCC's lease portfolio includes contracts with original terms ranging from 12 to 60 months; the average original contract term in TMCC's lease portfolio was 38 months and 40 months at September 30, 1999 and 1998, respectively. -15- Interest Expense - ---------------- Interest expense decreased 5% in fiscal 1999 compared with fiscal 1998 primarily due to lower average cost of borrowings, partially offset by an increase in average debt outstanding. Interest expense increased 8% in fiscal 1998 reflecting higher average debt outstanding, slightly offset by a decline in the average cost of borrowings. The weighted average cost of borrowings was 5.34%, 5.85% and 5.87% for the years ended September 30, 1999, 1998 and 1997, respectively. Operating and Administrative Expenses - ------------------------------------- Operating and administrative expenses increased 16% and 25% in fiscal 1999 and 1998, respectively. The increases reflect primarily additional personnel and operating costs required to support TMCC's growing customer base, growth in the Company's insurance operations, as well as costs in connection with technology upgrades and software modifications to address year 2000 issues. TMCC anticipates continued growth in operating and administrative expenses reflecting costs associated with portfolio growth and technology initiatives. Provision for Credit Losses - --------------------------- TMCC's provision for credit losses decreased 35% and 7% during fiscal 1999 and 1998, respectively, reflecting management's estimate that current reserve levels are adequate based on improved credit loss experience, portfolio composition and other factors. Allowances for credit losses are evaluated periodically, considering historical loss experience and other factors, and are considered adequate to cover expected credit losses as of September 30, 1999. In fiscal 1999, TMCC pilot tested an expanded tiered pricing program for retail vehicle 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. A national roll-out of the expanded tiered pricing program for both retail and lease vehicle contracts is planned for fiscal 2000. Implementation of this expanded program may result in both increased contract yields and increased credit losses in connection with purchases of higher risk contracts. -16- An analysis of credit losses and the related allowance follows, excluding net losses on receivables sold subject to limited recourse provisions:
Years ended September 30, ------------------------------------ 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- (Dollars in Millions) Allowance for credit losses at beginning of period......... $220 $213 $203 $171 $164 Provision for credit losses....... 83 127 136 115 66 Charge-offs....................... (104) (120) (116) (81) (63) Recoveries........................ 17 17 12 12 12 Other Adjustments................. (14) (17) (22) (14) (8) ---- ---- ---- ---- ---- Allowance for credit losses at end of period............... $202 $220 $213 $203 $171 ==== ==== ==== ==== ==== Allowance for credit losses as a percent of gross earning assets................. 0.89% 1.02% 1.13% 1.10% 1.10% Net credit losses as a percent of average earning assets...... .40% .51% .55% .41% .34% Aggregate balances at end of period for lease rentals and installments 60 or more days past due.......... $35 $30 $30 $29 $20 Aggregate balances at end of period for lease rentals and installments 60 or more days past due as a percent of net investments in operating leases and gross receivables outstanding.................... .15% .14% .15% .15% .12%
-17- LIQUIDITY AND CAPITAL RESOURCES The Company requires, in the normal course of business, substantial funding to support the level of its earning assets. Significant reliance is placed on the Company's ability to obtain debt funding in the capital markets in addition to funding provided by earning asset liquidations and cash provided by operating activities as well as transactions through the Company's asset-backed securitization programs. Debt issuances have generally been in the form of commercial paper, and domestic and euro medium-term notes ("MTNs") and bonds. On occasion, this funding has been supplemented by loans and equity contributions from TMS. During FY 1999, TMCC began issuing extendible commercial notes ("ECNs") which have an initial maturity period of up to ninety days, subject to an extension for up to a maximum term of three hundred and ninety days at the option of the Company. Commercial paper and ECN issuances are used to meet short-term funding needs. Commercial paper outstanding under TMCC's commercial paper program ranged from approximately $1.1 billion to $2.9 billion during fiscal 1999, with an average outstanding balance of $1.7 billion. The outstanding balance of ECNs at September 30, 1999 totaled $146 million. For additional liquidity purposes, TMCC maintains syndicated bank credit facilities with certain banks, which aggregated $2.7 billion at September 30, 1999. No loans were outstanding under any of these bank credit facilities during fiscal 1999. TMCC also maintains, along with TMS, uncommitted, unsecured lines of credit with banks totaling $175 million. At September 30, 1999, TMCC had issued approximately $13 million in letters of credit. Long-term funding requirements are met through the issuance of a variety of debt securities underwritten in both the United States and international capital markets. Domestic and euro MTNs and bonds have provided TMCC with significant sources of funding. During fiscal 1999, TMCC issued approximately $4.0 billion of domestic and euro MTNs and bonds all of which had original maturities of one year or more. The original maturities of all MTNs and bonds outstanding at September 30, 1999 ranged from one to eleven years. As of September 30, 1999, TMCC had total MTNs and bonds outstanding of $16.9 billion, of which $7.6 billion was denominated in foreign currencies. TMCC anticipates continued use of MTNs and bonds in both the United States and international capital markets. The Company maintains a shelf registration with the SEC providing for the issuance of MTNs and other debt securities. At November 30, 1999, approximately $0.6 billion was available for issuance under this registration statement. The maximum aggregate principal amount authorized to be outstanding at any time under TMCC's euro MTN program is $16.0 billion. Approximately $6.0 billion was available for issuance under the euro MTN program as of November 30, 1999. The United States and euro MTN programs may be expanded from time to time to allow for the continued use of these sources of funding. The Company has filed a new shelf registration statement with the SEC covering debt securities in a principal amount equal to $1.0 billion to be used for both MTN issuances and underwritten offerings. The Company expects to increase the amount registered to $4.5 billion prior to effectiveness. In addition, TMCC may issue bonds in the domestic and international capital markets that are not issued under its MTN programs. -18- Additionally, TMCC uses its asset-backed securitization programs to generate funds for investment in earning assets as described in Note 7 to the Consolidated Financial Statements. During the year ended September 30, 1999, TMCC sold interests in lease finance receivables totaling $780 million. During fiscal 1999, the number and principal amount of leases purchased by the Toyota Lease Trust in connection with TMCC's lease securitization program comprised a significant and increasing percentage of what otherwise would have been TMCC's lease portfolio. However, until leases are included in a securitization transaction, they continue to be classified as finance receivables on TMCC's balance sheet. In addition, TMCC maintains a shelf registration statement with the SEC relating to the issuance of asset-backed notes secured by, and certificates representing interests, in retail receivables. During the year ended September 30, 1999, TMCC sold retail receivables totaling $989 million in connection with securities issued under the shelf registration statement. As of November 30, 1999, $1.5 billion remained available for issuance under the registration statement. TMCC's ratio of earnings to fixed charges was 1.24, 1.25 and 1.31 in the years ended September 30, 1999, 1998, and 1997, respectively. TMCC believes that the decline in the ratio has not affected its ability to maintain liquidity or access to outside funding sources. Cash flows provided by operating, investing and financing activities have been used primarily to support earning asset growth. Cash provided by the liquidation and sale of earning assets, totaling $21.0 billion and $19.1 billion during fiscal 1999 and 1998, respectively, was used to purchase additional investments in operating leases and finance receivables, totaling $23.9 billion and $23.6 billion during fiscal 1999 and 1998, respectively. Investing activities resulted in a net use of cash of $2.9 billion and $4.5 billion in fiscal 1999 and 1998, respectively, as the purchase of additional earning assets exceeded cash provided by the liquidation of earning assets. Net cash provided by operating activities totaled $1.9 billion and $2.0 billion in fiscal 1999 and 1998, and net cash provided by financing activities totaled $1.1 billion and $2.5 billion, during fiscal 1999 and 1998, respectively. The Company believes that cash provided by operating and investing activities as well as access to domestic and international capital markets, the issuance of commercial paper and ECNs, and asset-backed securitization transactions will provide sufficient liquidity to meet its future funding requirements. -19- Year 2000 Date Conversion - ------------------------- The year 2000 issue concerns the inability of computer systems and related applications to function properly in the year 2000 and beyond. As a wholly- owned subsidiary of TMS, TMCC is participating in TMS' comprehensive action plan to identify and address year 2000 issues. As part of the year 2000 action plan, TMCC is identifying and evaluating potential year 2000 problems and is implementing changes designed to yield year 2000 compliance in its information technology systems, including mainframe, distributed and desktop computer systems, networks and telecommunications (collectively, "IT systems") and its non-information technology systems, including security and HVAC systems, automated access readers and other machinery and equipment (collectively, "embedded systems"). An additional component of the year 2000 action plan involves TMCC's communications with its external business partners for the purpose of assessing and reducing the risk that TMCC's operations could be adversely affected by such third parties' noncompliance with year 2000 issues. Phases The year 2000 action plan consists of four phases, some of which are being conducted concurrently: Inventory and Assessment: During this phase an inventory is taken of all software and/or hardware components of significant applications or systems. Software and hardware that is no longer in use or is planned to be replaced before the year 2000, is identified and removed from the scope of the project. Once the inventory is completed and verified, a preliminary determination of whether the software or hardware is likely to have year 2000 date issues is made either by manual review, vendor inquiry or by use of software tools designed to search for date impacts. Once the assessment is completed, a business critical prioritized plan is developed for remediation, testing, and implementing the remediated hardware or software in the remaining phases. Remediation: During this phase, software for which TMS or TMCC owns the source code will be scanned and corrected. In most instances, TMCC will use the "windowing" approach to fix source code which uses program logic to correct year 2000 date issues. In some cases, it will be necessary to expand the year field from two to four digits where the year 2000 date issue can not be solved with the "windowing" method. Software for which TMS or TMCC does not own the source code will be remediated by obtaining the year 2000 ready version of the software from the vendor. For hardware and operating system software, the year 2000 ready component will also be obtained from the vendor. Testing: The testing phase focuses mainly on remediated hardware and software that supports business critical functions. Test plans and test cases are expected to be developed and performed for each application. For software modified by TMCC, tests will be designed to demonstrate that application functionality has not changed as a result of the remediation. Implementation: During this phase, the remediated hardware and software components will be implemented in the production environment. At this time, policies and procedures will be implemented to ensure that additional modifications to remediated and tested hardware and/or software are year 2000 compliant. -20- State of Readiness The Company has identified the following six areas for specific review and remediation in connection with its year 2000 compliance efforts: Critical Business Systems Applications: Includes distributed and mainframe applications used in operations such as retail and lease financing, customer account processing, collections, insurance operations and accounting systems. TMCC has completed the inventory and remediation of these systems. All business critical applications have been tested and implemented back into production. Desktop Systems: Includes commercial off-the-shelf software as well as custom developed applications. TMCC has completed the inventory and assessment of these systems and related software applications. Remediation and testing of business critical custom developed systems is completed. Replacement of non- compliant off-the-shelf software applications is expected by the end of fourth quarter of calendar year 1999. Technical Infrastructure: Includes mainframe, distributed and PC systems, networks, and telecommunications. TMCC has completed the inventory and assessment phases of its technical infrastructure. Testing and implementation of business critical components has been completed. Embedded Systems: Includes non-information technology systems described above. TMCC has completed the inventory, assessment and implementation phases for embedded systems at its owned facilities. With respect to embedded systems located at facilities leased by TMCC, TMCC has completed the assessment phase of contacting the property managers and/or owners regarding the year 2000 status of the facilities. TMCC is establishing contingency plans for coping with problems that may arise from embedded systems in leased facilities that are not year 2000 compliant. External Compliance: Includes financial institutions, dealers, suppliers, trustees, underwriters and affiliates ("business partners"). Critical business partners have been identified and prioritized. Letters and surveys have been sent to business partners to assess the risk associated with those business partners' failure to remediate their own year 2000 issues. TMCC has completed the assessment phase of critical business partners. Testing of business critical systems with external business partners will continue through the end of calendar year 1999. Non-Critical Systems: Includes systems and applications from the above-listed areas which have been prioritized as non-critical. Such systems and applications are being reviewed on an ongoing basis and will continue to be assessed for year 2000 compliance through the end of calendar year 1999. -21- TMS has contacted its affiliates and others involved in the manufacture of Toyota and Lexus vehicles and equipment to determine the status of year 2000 product compliance, and based on information received to date, TMCC is not aware of any year 2000 problems that would affect the operational safety of these products. Year 2000 Costs Costs associated with the year 2000 systems and software modifications are generally expensed as incurred. TMS is allocating a portion of its year 2000 costs to TMCC. TMCC's total costs incurred through fiscal year 1999 were $16.5 million. TMCC's total costs (including allocated costs from TMS) for the year 2000 issue are estimated not to exceed $20 million. The costs to be incurred by TMCC in connection with its year 2000 compliance efforts are not expected to have a material adverse effect on the Company's results of operations, liquidity or capital resources. As a result of the application of resources to year 2000 compliance efforts, certain information technology projects previously scheduled to be initiated or implemented in fiscal 1999 were deferred. Such deferral is not expected to have a material adverse effect on the Company's results of operations, liquidity or capital resources. Year 2000 Risks The most reasonably likely worst case scenario with respect to the year 2000 issue is the failure of a business partner, particularly another financial institution, to be year 2000 compliant. Although TMCC does not currently anticipate that it will experience significant business disruptions as a result of year 2000 problems, there remains uncertainty in this area. The failure to achieve year 2000 compliance by energy and water utilities, governmental agencies or other private or public suppliers of general infrastructure could present substantial difficulties to TMCC's business operations in the affected geographic areas. The inability of TMCC, its external business partners or the public and private suppliers of general infrastructure to identify and timely resolve year 2000 problems could result in a significant adverse effect on the Company's operations and financial results, including an inability to collect receivables, pay obligations, process new business, raise capital and occupy facilities. Year 2000 Contingency Plan The Company is currently developing a contingency plan to address problems resulting from year 2000 noncompliance. TMCC's contingency planning focuses on identifying systems of TMCC and its business partners that TMCC believes will be the most likely to experience year 2000 problems. The contingency plan includes arrangements with back-up vendors, suppliers and other resources to permit operations to be conducted temporarily on a manual basis. TMCC's contingency plan is substantially completed, although revisions will be made on an ongoing basis through the end of the calendar year as circumstances change and additional information becomes available. -22- Euro Conversion - --------------- On January 1, 1999, eleven of the fifteen member countries of the European Union (the "participating countries") established fixed conversion rates between their existing sovereign currencies (the "legacy currencies") and the euro. The participating countries agreed to adopt the euro as their common legal currency on the date that the euro began trading on currency exchanges and was available for non-cash transactions. The legacy currencies are scheduled to remain legal tender in the participating countries as denominations of the euro until January 1, 2002 (the "transition period"). During the transition period, public and private parties may pay for goods and services using either the euro or the participating country's legacy currency. Beginning January 1, 2002, the participating countries will issue new euro- denominated bills and coins for use in cash transactions and legacy currencies will be withdrawn from circulation, signifying the completion of the euro conversion process. As TMCC does not currently support Toyota finance operations in Europe, the impact of the euro conversion is limited to issues in connection with raising funds in the European capital markets. TMCC generally hedges all foreign exchange exposure associated with its funding activities which limits its exposure to movements in foreign exchange rates. In addition, payments in foreign currencies owed by TMCC are made by its counterparties under International Swaps and Derivatives Association, Inc. ("ISDA") master agreements governing swap transactions. Accordingly, TMCC did not need to make any material changes to its systems to accommodate these types of payments. TMCC has provided changes to its standard settlement instructions to the extent necessary to reflect changes in account information and payment instructions occurring as a result of the introduction of the euro. TMCC does not believe that it will experience significant issues relating to the continuity of TMCC's contracts arising from the introduction of the euro. The ISDA Master Agreements entered into by TMCC are generally governed by New York law. New York has adopted legislation which prevents a party to a contract from unilaterally breaking or changing its contractual obligations as a result of the euro conversion. In addition, TMCC is a party to the EMU Protocol published by ISDA designed to clarify the effects of certain issues surrounding the introduction of the euro including continuity of contracts, price source changes, payment netting and certain definitions. The introduction of the euro has not had a material adverse effect on the Company's operations or financial results. The Company plans to continue to consider the euro in future funding strategies and will continue to fund in all markets which are cost-effective. -23- Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 The foregoing Business description and Management's Discussion and Analysis contain various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events, including the following: that the Company considers its employee relations to be good; that TMCC believes that industry- wide record levels of incentives on new vehicles and large supply of late model off-lease vehicles have put downward pressure on used car prices; that TMCC anticipates continued growth in operating and administrative expenses reflecting costs associated with portfolio growth and technology initiatives; that the implementation of the expanded tiered pricing program may result in increased contract yields and increased credit losses in connection with purchases of higher risk contracts; that TMCC expects the large supply of vehicles coming off-lease to continue through fiscal 2000 and that the full term return ratio and losses will remain at or near current levels; that allowances for credit losses are considered adequate to cover expected credit losses; that TMCC anticipates continued use of MTNs and bonds in the United States and the international capital markets; that the Company expects to increase the amount registered with the SEC covering debt securities to $4.5 billion prior to effectiveness; that TMCC may issue bonds in the domestic and international capital markets that are not issued under its MTN programs; that the decline in the ratio of earnings to fixed charges has not affected its ability to maintain liquidity or access to outside funding sources; that cash provided by operating and investing activities as well as access to domestic and international capital markets, the issuance of commercial paper and ECNs, and asset-backed securitization transactions will provide sufficient liquidity to meet the its future funding requirements; that the Company's action plan for year 2000 compliance efforts will be carried out as described under Item 7 - "Year 2000 Date Conversion - Phases and - State of Readiness"; that the deferral of certain technology projects is not expected to have a material adverse effect on the Company's results of operations, liquidity or capital resources; that the total estimated cost in connection with the year 2000 issue is not expected to have a material impact on the Company's results of operations, liquidity or capital resources; that the risk to the Company with respect to year 2000 issues is as described under Item 7 - "Year 2000 Date Conversion - Year 2000 Risks"; that the Company's contingency plan to address year 2000 issues will be as described under Item 7 - "Year 2000 Date Conversion - Year 2000 Contingency Plan"; that TMCC does not believe that it will experience significant issues relating to the continuity of TMCC's contracts arising from the introduction of the euro; that the Company does not currently anticipate non-performance by any of its counterparties; that TMCC believes that the new methodology will result in a more accurate measurement of the interest rate risk in the portfolio. -24- The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, the following: decline in demand for Toyota and Lexus products; the effect of economic conditions; a decline in the market acceptability of leasing; the effect of competitive pricing on interest margins; increases in prevailing interest rates; changes in pricing due to the appreciation of the Japanese yen against the United States dollar; the effect of governmental actions; the effect of competitive pressures on the used car market and residual values and the continuation of the other factors causing an increase in vehicle returns and disposition losses; the continuation of, and if continued, the level and type of special programs offered by TMS; the ability of the Company to successfully access the United States and international capital markets; the effects of any rating agency actions; the monetary policies exercised by the European Central Bank and other monetary authorities; unanticipated problems or delays in the completion by the Company of its year 2000 action plan; failure of TMCC's business partners to timely resolve their year 2000 issues ; the failure of the Company to develop and implement an adequate contingency plan relating to year 2000 issues; increased costs associated with the Company's debt funding efforts; with respect to the effects of litigation matters, the discovery of facts not presently known to the Company or determination by judges, juries or other finders of fact which do not accord with the Company's evaluation of the possible liability from existing litigation; and the ability of the Company's counterparties to perform under interest rate and cross currency swap agreements. Results actually achieved thus may differ materially from expected results included in these statements. New Accounting Standards In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP provides guidance on accounting for certain costs in connection with obtaining or developing computer software for internal use and requires that entities capitalize such costs once certain criteria are met. The Company adopted SOP 98-1 as of October 1, 1998. The effect on the Company's financial statements was not material. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", effective for fiscal years beginning after June 15, 1999. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains and losses resulting from changes in the values of those derivatives would be accounted for as components of comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133", which defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. The Company has not determined the impact that adoption of this standard will have on its consolidated financial statements. The Company plans to adopt SFAS No. 133 by October 1, 2000, as required. -25- ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK TMCC uses a variety of interest rate and currency derivative financial instruments to manage interest rate and currency exchange exposures. The derivative instruments used include cross currency and interest rate swaps, indexed note swaps and option-based products. TMCC does not use any of these instruments for trading purposes. The total notional amounts of TMCC's derivative financial instruments at September 30, 1999 and 1998 were $26.0 billion and $23.4 billion, respectively. The notional amounts of interest rate and indexed note swap agreements and option-based products do not represent amounts exchanged by the parties and, thus, are not a measure of the Company's exposure through its use of derivatives. The only market rate risk related to TMCC's portfolio is interest rate risk as foreign currency risks are entirely hedged through cross currency interest rate swap agreements. TMCC uses interest rate swap agreements in managing its exposure to interest rate fluctuations. Interest rate swap agreements are executed as an integral part of specific debt transactions or on a portfolio basis. TMCC's interest rate swap agreements involve agreements to pay fixed and receive a floating rate, or receive fixed and pay a floating rate, at specified intervals, calculated on an agreed-upon notional amount. Interest rate swap agreements may also involve basis swap contracts which are agreements to exchange the difference between certain floating interest amounts, such as the net payment based on the commercial paper rate and the London Interbank Offered Rate ("LIBOR"), calculated on an agreed-upon notional amount. TMCC also uses option-based products in managing its exposure to interest rate fluctuations. Option-based products are executed on a portfolio basis and consist primarily of purchased interest rate cap agreements and to a lesser extent corridor agreements. Option-based products are agreements, which either grant TMCC the right to receive or require TMCC to make payments at specified interest rate levels. TMCC uses indexed note swap agreements in managing its exposure in connection with debt instruments whose interest rate and/or principal redemption amounts are derived from other underlying instruments. Indexed note swap agreements involve agreements to receive interest and/or principal amounts associated with the indexed notes, denominated in either U.S. dollars or a foreign currency, and to pay fixed or floating rates on fixed U.S. dollar liabilities. TMCC uses cross currency interest rate swap agreements to entirely hedge exposure to exchange rate fluctuations on principal and interest payments for borrowings denominated in foreign currencies. Notes and loans payable issued in foreign currencies are hedged by concurrently executed cross currency interest rate swap agreements which involve the exchange of foreign currency principal and interest obligations for U.S. dollar obligations at agreed-upon currency exchange and interest rates. Derivative financial instruments used by TMCC involve, to varying degrees, elements of credit risk in the event a counterparty should default and market risk as the instruments are subject to rate and price fluctuations. Credit risk is managed through the use of credit standard guidelines, counterparty diversification, monitoring of counterparty financial condition and master netting agreements in place with all derivative counterparties. Credit exposure of derivative financial instruments is represented by the fair value of contracts with a positive fair value at September 30, 1999 reduced by the effects of master netting agreements. The credit exposure of TMCC's derivative financial instruments at September 30, 1999 was $88 million on an aggregate notional amount of $26.0 billion. Additionally, at September 30, 1999, approximately 89% of TMCC's derivative financial instruments, based on notional amounts, were with commercial banks and investment banking firms assigned investment grade ratings of "AA" or better by national rating agencies. TMCC does not currently anticipate non-performance by any of its counterparties and has no reserves related to non-performance as of September 30, 1999; TMCC has not experienced any counterparty default during the three years ended September 30, 1999. -26- Changes in interest rates may impact TMCC's future weighted average interest rate on outstanding debt as a result of floating rate liabilities. As of September 30, 1999, an interest rate increase of 1% (100 basis points) would raise TMCC's weighted average interest rate, including the effects of interest rate swap agreements and option-based products, by .29%, from 5.44% to an estimated 5.73%. Conversely, an interest rate decrease of 1% (100 basis points) would lower TMCC's weighted average interest rate, including the effects of interest rate swap agreements and option-based products, by .49%, from 5.44% to an estimated 4.95% at September 30, 1999. TMCC's interest rate exposure primarily results from changes in U.S. commercial paper rates and U.S. LIBOR. TMCC uses a value-at-risk methodology, in connection with other management tools, to assess and manage the interest rate risk of aggregated loan and lease assets and financial liabilities, including interest rate derivatives and option-based products. Value-at-risk represents the potential losses in fair value for a portfolio from adverse changes in market factors for a specified period of time and likelihood of occurrence (i.e. level of confidence). TMCC's value-at-risk methodology incorporates the impact from adverse changes in market interest rates but does not incorporate any impact from other market changes, such as foreign currency exchange rates or commodity prices, which do not affect the value of TMCC's portfolio. The value-at-risk methodology excludes changes in fair values related to investments in marketable securities as these amounts are not significant. During the quarter ended March 31, 1999, TMCC changed its value-at-risk methodology. The new methodology makes no assumptions about the distribution of interest rates; instead it relies on actual interest rate data. Four years of historical interest rate data is used to build a database of prediction errors in forward rates for a one month holding period. These prediction errors are then applied randomly to current forward rates through a Monte Carlo process to simulate 500 potential future yield curves. The portfolio is then re-priced with these curves to develop a distribution of future portfolio values. Options in the portfolio are priced with current market implied volatilities and the simulated yield curves using the Black Scholes method. The lowest portfolio value at the 95% confidence interval is compared with the current portfolio value to derive the value-at-risk number. The previous method used two years of historical interest rate volatilities, simulated only 100 potential future yield curves using a stratified random sampling methodology and assumed that changes in interest rates are lognormally distributed. Since the new model makes no assumptions about the distribution of interest rates but instead uses the actual historical distribution of interest rates along with an increased number of simulations, TMCC believes that the new methodology will result in a more accurate measurement of the interest rate risk in the portfolio. -27- The value-at-risk and the average value-at-risk of TMCC's portfolio as of and for the fiscal years ended September 30, 1999 and 1998, measured as the potential 30 day loss in fair value from assumed adverse changes in interest rates are as follows:
Average for the As of Fiscal Year Ending New Method: September 30, 1999 September 30, 1999 ------------------ ------------------- Mean portfolio value..................... $3,300.0 million $3,600.0 million Value-at-risk............................ $86.3 million $71.6 million Percentage of the mean portfolio value... 2.6% 2.0% Confidence level......................... 95.0% 95.0% Average for the As of Fiscal Year Ending Old Method: September 30, 1999 September 30, 1999 ----------------- ------------------- Mean portfolio value..................... $3,300.0 million $3,600.0 million Value-at-risk............................ $75.9 million $57.3 million Percentage of the mean portfolio value... 2.3% 1.6% Confidence level......................... 95.0% 95.0% Average for the As of Fiscal Year Ending Old Method: September 30, 1998 September 30, 1998 ----------------- ------------------- Mean portfolio value..................... $3,500.0 million $3,270.0 million Value-at-risk............................ $32.5 million $29.8 million Percentage of the mean portfolio value... 0.9% 0.9% Confidence level......................... 95.0% 95.0%
TMCC's calculated value-at-risk exposure represents an estimate of reasonably possible net losses that would be recognized on its portfolio of financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results which may occur. It does not represent the maximum possible loss nor any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in the composition of TMCC's portfolio of financial instruments during the year. The increase in the value-at-risk levels from fiscal 1998 was primarily due to the increase in interest rate volatility. -28- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL STATEMENTS Page ------- Report of Independent Accountants................................ 30 Consolidated Balance Sheet at September 30, 1999 and 1998........ 31 Consolidated Statement of Income for the years ended September 30, 1999, 1998 and 1997................. 32 Consolidated Statement of Shareholder's Equity for the years ended September 30, 1999, 1998 and 1997............. 33 Consolidated Statement of Cash Flows for the years ended September 30, 1999, 1998 and 1997................. 34 Notes to Consolidated Financial Statements....................... 35-62 All schedules have been omitted because they are not required, not applicable, or the information has been included elsewhere. -29- REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Board of Directors and Shareholder of Toyota Motor Credit Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of shareholder's equity and of cash flows present fairly, in all material respects, the financial position of Toyota Motor Credit Corporation (a wholly-owned subsidiary of Toyota Motor Sales, U.S.A., Inc.) and its subsidiaries at September 30, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1999, in conformity with generally accepted accounting principles in the United States. These financial statements are the responsibility of Toyota Motor Credit Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /S/ PRICEWATERHOUSECOOPERS LLP Los Angeles, California October 29, 1999 -30- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in Millions)
September 30, ----------------------- 1999 1998 -------- -------- ASSETS ------ Cash and cash equivalents.................. $ 180 $ 156 Investments in marketable securities....... 450 435 Finance receivables, net................... 13,856 11,521 Investments in operating leases, net....... 8,605 9,765 Receivable from Parent and Affiliate....... 717 512 Other receivables.......................... 366 304 Deferred charges........................... 131 167 Other assets............................... 242 266 Income taxes receivable.................... 31 99 ------- ------- Total Assets...................... $24,578 $23,225 ======= ======= LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Notes and loans payable.................... $18,565 $17,597 Accrued interest........................... 161 176 Accounts payable and accrued expenses...... 1,096 995 Deposits................................... 201 240 Deferred income............................ 636 607 Deferred income taxes...................... 1,554 1,379 ------- ------- Total Liabilities.................... 22,213 20,994 ------- ------- Commitments and Contingencies Shareholder's Equity: Capital stock, $l0,000 par value (100,000 shares authorized; issued and outstanding 91,500 in 1999 and 1998)................................ 915 915 Retained earnings....................... 1,435 1,303 Accumulated other comprehensive income.. 15 13 ------- ------- Total Shareholder's Equity........... 2,365 2,231 ------- ------- Total Liabilities and Shareholder's Equity.............. $24,578 $23,225 ======= =======
See Accompanying Notes to Consolidated Financial Statements. -31- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in Millions)
Years ended September 30, ---------------------------- 1999 1998 1997 ------ ------ ------ Financing Revenues: Leasing................................. $2,397 $2,595 2,730 Retail financing........................ 665 547 446 Wholesale and other dealer financing.... 103 98 89 ------ ------ ------ Total financing revenues................... 3,165 3,240 3,265 Depreciation on leases.................. 1,664 1,681 1,781 Interest expense........................ 940 994 918 ------ ------ ------ Net financing revenues..................... 561 565 566 Insurance premiums earned and contract revenues................................ 122 112 97 Investment and other income................ 69 79 66 ------ ------ ------ Net financing revenues and other revenues.. 752 756 729 ------ ------ ------ Expenses: Operating and administrative............ 376 323 259 Provision for credit losses............. 83 127 136 Insurance losses and loss adjustment expenses............................. 63 55 51 ------ ------ ------ Total expenses............................. 522 505 446 ------ ------ ------ Income before income taxes................. 230 251 283 Provision for income taxes................. 98 107 121 ------ ------ ------ Net Income................................. $ 132 $ 144 $ 162 ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements. -32- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (Dollars in Millions)
Accumulated Other Capital Retained Comprehensive Stock Earnings Income Total ------- -------- ------------- ------- Balance at September 30, l996.... $ 915 $ 997 $ 2 $ 1,914 ------ ------- ---------- ------ Net income in 1997............... - 162 - 162 Change in net unrealized gains on available-for-sale marketable securities......... - - 5 5 ------ -------- ---------- ------ Total Comprehensive Income - 162 5 167 ------ -------- ---------- ------ Balance at September 30, 1997.... 915 1,159 7 2,081 ------ -------- ---------- ------ Net income in 1998............... - 144 - 144 Change in net unrealized gains on available-for-sale marketable securities......... - - 6 6 ------ ------- ---------- ------ Total Comprehensive Income - 144 6 150 ------ -------- ---------- ------ Balance at September 30, 1998.... 915 1,303 13 2,231 ------ -------- ---------- ------ Net income in 1999............... - 132 - 132 Change in net unrealized gains on available-for-sale marketable securities......... - - 2 2 ------ ------- ---------- ------ Total Comprehensive Income - 132 2 134 ------ -------- ---------- ------ Balance at September 30, 1999.... $ 915 $ 1,435 $ 15 $2,365 ====== ======= ========== ======
See Accompanying Notes to Consolidated Financial Statements. -33- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Millions)
Years ended September 30, ------------------------------ 1999 1998 1997 ------ ------ ------ Cash flows from operating activities: Net income............................................. $ 132 $ 144 $ 162 ------ ------ ------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................... 1,711 1,826 1,822 Provision for credit losses....................... 83 127 136 Gain from sale of finance receivables, net........ (15) (21) (23) Realized loss on asset impairment................. 19 - - Decrease in accrued interest...................... (15) (37) (13) Increase in deferred income taxes................. 173 420 149 Increase in other assets.......................... (271) (614) (198) Increase (decrease) in other liabilities.......... 42 139 (74) ------ ------ ------ Total adjustments...................................... 1,727 1,840 1,799 ------ ------ ------ Net cash provided by operating activities................. 1,859 1,984 1,961 ------ ------ ------ Cash flows from investing activities: Addition to investments in marketable securities.......................................... (705) (996) (581) Disposition of investments in marketable securities.......................................... 693 901 638 Purchase of finance receivables........................ (20,309) (19,034) (15,595) Liquidation of finance receivables..................... 15,802 14,003 12,553 Proceeds from sale of finance receivables.............. 2,042 1,830 1,956 Addition to investments in operating leases............ (3,577) (4,552) (4,269) Disposition of investments in operating leases......... 3,137 3,303 3,057 ------ ------ ------ Net cash used in investing activities..................... (2,917) (4,545) (2,241) ------ ------ ------ Cash flows from financing activities: Proceeds from issuance of notes and loans payable...... 6,634 6,039 5,482 Payments on notes and loans payable.................... (4,985) (4,250) (4,510) Net (decrease) increase in commercial paper, with original maturities less than 90 days.......... (567) 751 (685) ------ ------ ------ Net cash provided by financing activities................. 1,082 2,540 287 ------ ------ ------ Net increase (decrease) in cash and cash equivalents...... 24 (21) 7 Cash and cash equivalents at the beginning of the period.......................................... 156 177 170 ------ ------ ------ Cash and cash equivalents at the end of the period................................................. $ 180 $ 156 $ 177 ====== ====== ====== Supplemental disclosures: Interest paid.......................................... $979 $995 $906 Income taxes paid...................................... $17 $6 $5
See Accompanying Notes to Consolidated Financial Statements. -34- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Nature of Operations - ----------------------------- Toyota Motor Credit Corporation ("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 Puerto Rico. TMCC is a wholly-owned subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS" or the "Parent"). TMS is primarily engaged in the wholesale distribution of automobiles, 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 ("TMC") or its affiliates. TMCC has four wholly-owned subsidiaries, Toyota Motor Insurance Services, Inc. ("TMIS"), Toyota Motor Credit Receivables Corporation ("TMCRC"), Toyota Leasing, Inc. ("TLI") and Toyota Credit de Puerto Rico Corporation ("TCPR"). TMCC and its wholly-owned subsidiaries are collectively referred to as the "Company". Effective July 1, 1998, Toyota Motor Insurance Company, Toyota Motor Insurance Corporation of Vermont and Toyota Motor Life Insurance Company which had been wholly-owned subsidiaries of TMCC became wholly-owned subsidiaries of TMIS. The insurance subsidiaries provide certain insurance services along with certain insurance and contractual coverages in connection with the sale and lease of vehicles. In addition, the insurance subsidiaries insure and reinsure certain TMS and TMCC risks. TMCRC, a limited purpose subsidiary, operates primarily to acquire retail finance receivables from TMCC for the purpose of securitizing such receivables. TLI, a limited purpose subsidiary, operates primarily to acquire lease finance receivables from TMCC for the purpose of securitizing such leases. TCPR provides retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle dealers and their customers in Puerto Rico. Toyota Credit Argentina S.A. ("TCA") was incorporated in September 1998 and commenced business operations in December 1998. TCA provides retail and wholesale financing to authorized Toyota vehicle dealers and their customers in Argentina. TCA is owned 85% by TMC and 15% by TMCC. As of September 30, 1999 TMCC's investment in TCA totaled $2 million and is accounted for using the cost method. Banco Toyota do Brasil ("BTB") was incorporated in January 1999 and commenced business operations in June 1999. BTB provides retail and lease financing to authorized Toyota vehicle dealers and their customers in Brazil. BTB is owned 85% by TMC and 15% by TMCC. As of September 30, 1999 TMCC's investment in BTB totaled $4 million and is accounted for using the cost method. The Company's business is substantially dependent upon the sale of Toyota and Lexus vehicles in the United States. Changes in the volume of sales of such vehicles resulting from governmental action, changes in consumer demand, changes in pricing of imported units due to currency fluctuations, or other events could impact the level of finance and insurance operations of the Company. -35- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies - --------------------------------------------------- Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of TMCC and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Cash and Cash Equivalents ------------------------- Cash equivalents, consisting primarily of money market instruments and debt securities, represent highly liquid investments with original maturities of three months or less. Investments in Marketable Securities ------------------------------------ Investments in marketable securities consist of debt and equity securities. Debt securities designated as held-to-maturity are carried at amortized cost and are reduced to net realizable value for other than temporary declines in market value. Debt and equity securities designated as available-for-sale are carried at fair value with unrealized gains or losses included in accumulated other comprehensive income, net of applicable taxes. Realized investment gains and losses, which are determined on the specific identification method, are reflected in income. Investments in Operating Leases ------------------------------- Investments in operating leases are recorded at cost and depreciated on a straight-line basis, over the lease terms to the estimated residual value. Revenue from operating leases is recognized on a straight-line basis over the lease terms. Finance Receivables ------------------- Finance receivables are recorded at the present value of the related future cash flows. Revenue associated with finance receivables is recognized on a level-yield basis over the contract terms. -36- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (Continued) - --------------------------------------------------- Allowance for Credit Losses --------------------------- Allowances for credit losses are evaluated periodically, considering historical loss experience and other factors, and are maintained in amounts considered by management to be appropriate in relation to receivables outstanding and expected future loss experience. Losses are charged to the allowance for credit losses when it has been determined that collateral cannot be recovered and any shortfall between proceeds received and the carrying cost of repossessed collateral is charged to the allowance. Recoveries are credited to the allowance for credit losses. Allowance for Residual Value Losses ----------------------------------- Allowances for estimated losses on lease vehicles returned to TMCC for disposition at lease termination are established based upon projected vehicle return rates and projected residual value losses derived from historical and market information as well as general economic factors. The provision for residual value losses is included in lease depreciation expense. Deferred Charges ---------------- Deferred charges consist primarily of premiums paid for option-based products, underwriters' commissions and other debt issuance costs which are amortized to interest expense over the life of the related instruments on a straight-line basis, which is not materially different from the effective interest method. Derivative Financial Instruments -------------------------------- TMCC uses a variety of derivative financial instruments to manage funding costs and risks associated with changes in interest and foreign currency exchange rates. The derivative instruments used include interest rate, cross currency interest rate and indexed note swap agreements and option-based products. TMCC does not use any of these instruments for trading purposes. The derivative financial instruments are specifically designated to the underlying debt obligations or to portfolio level risks. Cash flows related to these instruments are classified in the same categories as cash flows from related borrowing activities. Interest Rate Swap Agreements ----------------------------- Interest rate swap agreements are executed as an integral part of specific debt transactions or on a portfolio basis. The differential paid or received on interest rate swap agreements is recorded on an accrual basis as an adjustment to interest expense over the term of the agreements. Cross Currency Interest Rate Swap Agreements -------------------------------------------- Cross currency interest rate swap agreements are executed as an integral part of foreign currency debt transactions. The differential between the contract rates and the foreign currency spot exchange rates as of the reporting dates is classified in other receivables or accounts payable and accrued expenses; the differential paid or received on the interest rate swap portion of the agreements is recorded on an accrual basis as an adjustment to interest expense over the term of the agreements. -37- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (Continued) - --------------------------------------------------- Indexed Note Swap Agreements ---------------------------- Indexed note swap agreements are executed as an integral part of indexed note transactions. Any differential between contract rates and foreign currency spot exchange rates as of the reporting dates is classified in other receivables or accounts payable and accrued expenses; the interest differential paid or received on indexed note swap agreements is recorded on an accrual basis as an adjustment to interest expense over the term of the agreements. Option-Based Products --------------------- Option-based products are executed on a portfolio basis. Premiums paid for option-based products are included in deferred charges and are amortized to interest expense over the life of the instruments on a straight-line basis. Amounts receivable under option-based products are recorded on an accrual basis as a reduction to interest expense. Insurance Operations -------------------- Revenues from insurance premiums and from providing coverage under various contractual agreements are earned over the terms of the respective policies and agreements in proportion to estimated claims activity. Certain costs of acquiring new business, consisting primarily of commissions and premium taxes, are deferred and amortized over the terms of the related policies on the same basis as revenues are earned. The liability for reported losses and the estimate of unreported losses are recorded in accounts payable and accrued expenses. Commission and fee income are recognized in relation to the level of services performed. Income Taxes ------------ TMCC uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are adjusted to reflect changes in tax rates and laws in the period such changes are enacted resulting in adjustments to the current period's provision for income taxes. The Company joins with TMS in filing consolidated federal income tax returns and combined or consolidated income tax returns in certain states. Federal and state income tax expense is generally recognized as if the Company filed its tax returns on a stand alone basis. In those states where TMCC joins in the filing of consolidated or combined income tax returns, TMCC is allocated its share of the total income tax expense based on the Company's income or loss which would be allocable to such states if the Company filed separate returns. Based on an informal tax sharing agreement with TMS and other members of the TMS group, the Company pays TMS for its share of the consolidated federal and consolidated or combined state income tax expense and is reimbursed for the benefit of any of its tax basis losses utilized in the consolidated federal and consolidated or combined state income tax returns. -38- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (Continued) - --------------------------------------------------- Asset-Backed Securitization Transactions ---------------------------------------- TMCC periodically sells retail receivables and interests in lease finance receivables through limited purpose subsidiaries TMCRC and TLI, respectively. TMCC retains servicing rights for sold assets and receives a servicing fee which is recognized over the remaining term of the related sold retail receivables or interests in lease finance receivables. TMCRC and TLI retain subordinated interests in the excess cash flows of these transactions, certain cash deposits and other related amounts which are held as restricted assets subject to limited recourse provisions. The Company's retained interests in such receivables are included in investments in marketable securities and are classified as available for sale. Pre-tax gains on sold retail receivables and interests in lease finance receivables are recognized in the period in which the sale occurs and are included in other income. In determining such gains, the investment in the sold retail receivable and interests in lease finance receivable pool is allocated between the portion sold and the portion retained based on their relative fair values on the date sold. New Accounting Standards ------------------------ In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP provides guidance on accounting for certain costs in connection with obtaining or developing computer software for internal use and requires that entities capitalize such costs once certain criteria are met. The Company adopted SOP 98-1 as of October 1, 1998. The effect on the Company's financial statements was not material. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", effective for fiscal years beginning after June 15, 1999. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains and losses resulting from changes in the values of those derivatives would be accounted for as components of comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133", which defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. The Company has not determined the impact that adoption of this standard will have on its consolidated financial statements. The Company plans to adopt SFAS No. 133 by October 1, 2000, as required. Reclassifications ----------------- Certain 1998 and 1997 amounts have been reclassified to conform with the 1999 presentation. -39- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Investments in Marketable Securities - --------------------------------------------- TMCC records its investments in marketable securities which are designated as available-for-sale at fair value estimated using quoted market prices or discounted cash flow analysis. Unrealized gains, net of income taxes, related to available-for-sale securities are included in comprehensive income. Securities designated as held-to-maturity are recorded at amortized cost. The estimated fair value and amortized cost of investments in marketable securities are as follows:
September 30, 1999 ---------------------------------------- Gross Gross Fair Unrealized Unrealized Cost Value Gains Losses ---- ----- ---------- ---------- (Dollars in Millions) Available-for-sale securities: Asset-backed securities............. $220 $229 $ 17 $ (8) Corporate debt securities........... 90 87 - (3) Equity securities................... 68 87 20 (1) U.S. debt securities................ 33 33 - - ---- ---- ---- ---- Total available-for-sale securities.... $411 $436 $ 37 $(12) ==== ==== Held-to-maturity securities: U.S. debt securities................ 14 14 ---- ---- Total marketable securities............ $425 $450 ==== ====
September 30, 1998 ---------------------------------------- Gross Gross Fair Unrealized Unrealized Cost Value Gains Losses ---- ----- ---------- ---------- (Dollars in Millions) Available-for-sale securities: Asset-backed securities............. $201 $211 $ 10 $ - Corporate debt securities........... 77 76 1 (2) Equity securities................... 62 73 11 - U.S. debt securities................ 61 63 2 - ---- ---- ---- ---- Total available-for-sale securities.... $401 $423 $ 24 $ (2) ==== ==== Held-to-maturity securities: U.S. debt securities................ 12 12 ---- ---- Total marketable securities............ $413 $435 ==== ====
-40- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Investments in Marketable Securities (Continued) - --------------------------------------------- The contractual maturities of investments in marketable securities at September 30, 1999 are as follows:
Available-for-Sale Held-to-Maturity Securities Securities ------------------ ---------------- Fair Fair Cost Value Cost Value ---- ----- ---- ----- (Dollars in Millions) Within one year...................... $ 7 $ 7 $ 11 $ 11 After one year through five years.... 59 58 3 3 After five years through ten years... 22 22 - - After ten years...................... 35 33 - - Equity securities.................... 68 87 - - Asset-backed securities.............. 220 229 - - ---- ---- ---- ---- Total............................. $411 $436 $ 14 $ 14 ==== ==== ==== ====
The proceeds from sales of available-for-sale securities were $562 million and $659 million for the years ended September 30, 1999 and 1998, respectively. Realized gains on sales of available-for-sale securities were $ 6 million, $6 million and $5 million for the year ended September 30, 1999, 1998 and 1997, respectively. Realized losses on sales of available-for-sale securities were $5 million, $1 million and $2 million for the years ended September 30, 1999, 1998 and 1997, respectively. -41- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Finance Receivables - ---------------------------- Finance receivables, net consisted of the following:
September 30, ---------------------- 1999 1998 ------- ------- (Dollars in Millions) Retail............................... $ 9,524 $ 8,395 Finance leases....................... 4,065 2,856 Wholesale and other dealer loans..... 1,292 1,099 ------- ------- 14,881 12,350 Unearned income...................... (888) (709) Allowance for credit losses.......... (137) (120) ------- ------- Finance receivables, net.......... $13,856 $11,521 ======= =======
Contractual maturities are as follows:
Due in the Wholesale Years Ending and Other September 30, Retail Dealer Loans ------------- ------ ------------ (Dollars in Millions) 2000.................. $3,018 $ 988 2001.................. 2,528 68 2002.................. 1,981 58 2003.................. 1,335 56 2004.................. 596 64 Thereafter............ 66 58 ------ ------ Total.............. $9,524 $1,292 ====== ======
Finance leases, net consisted of the following:
September 30, --------------------- 1999 1998 ------ ------ (Dollars in Millions) Minimum lease payments.................. $3,242 $2,339 Estimated unguaranteed residual values.. 823 517 ------ ------ Finance leases....................... 4,065 2,856 Unearned income......................... (627) (434) Allowance for credit losses............. (46) (20) ------ ------ Finance leases, net.................. $3,392 $2,402 ====== ======
-42- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Finance Receivables (Continued) - ---------------------------- The aggregate balances related to finance receivables 60 or more days past due totaled $17 million and $16 million at September 30, 1999 and 1998, respectively. Future minimum finance lease payments for each of the five succeeding years ending September 30, are: 2000 - $789 million; 2001 - $842 million; 2002 - $959 million; 2003 - $447 million and 2004 - $205 million. A substantial portion of TMCC's finance receivables have historically been repaid prior to contractual maturity dates; contractual maturities and future minimum lease payments as shown above should not be considered as necessarily indicative of future cash collections. The majority of retail and finance lease receivables do not involve recourse to the dealer in the event of customer default. Note 5 - Investments in Operating Leases - ---------------------------------------- Investments in operating leases, net consisted of the following:
September 30, ---------------------- 1999 1998 ------- ------- (Dollars in Millions) Vehicles................................. $10,246 $11,809 Equipment and other...................... 548 442 ------- ------- 10,794 12,251 Accumulated depreciation................. (2,124) (2,386) Allowance for credit losses.............. (65) (100) ------- ------- Investments in operating leases, net.. $ 8,605 $ 9,765 ======= =======
Rental income from operating leases was $2,185 million, $2,372 million and $2,568 million for the years ended September 30, 1999, 1998 and 1997, respectively. Future minimum rentals on operating leases for each of the five succeeding years ending September 30, are: 2000 - $1,646 million; 2001 - $1,024 million; 2002 - $402 million; 2003 - $88 million; 2004 - $6 million and thereafter - $2 million. A substantial portion of TMCC's operating lease contracts have historically been terminated prior to maturity; future minimum rentals as shown above should not be considered as necessarily indicative of future cash collections. -43- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 - Allowance for Credit Losses - ------------------------------------ An analysis of the allowance for credit losses follows:
Years ended September 30, -------------------------- 1999 1998 1997 ---- ---- ---- (Dollars in Millions) Allowance for credit losses at beginning of period........... $220 $213 $203 Provision for credit losses......... 83 127 136 Charge-offs......................... (104) (120) (116) Recoveries.......................... 17 17 12 Other adjustments................... (14) (17) (22) ---- ---- ---- Allowance for credit losses at end of period................. $202 $220 $213 ==== ==== ====
Note 7 - Sale of Retail Receivables and Interests in Lease Finance Receivables - ------------------------------------------------------------------------------ TMCC maintains programs to sell retail receivables and interests in lease finance receivables through limited purpose subsidiaries TMCRC and TLI, respectively. During fiscal year 1999, TMCC sold interests in lease finance receivables totaling $780 million and retail finance receivables totaling $989 million, as described below. TMCC holds an Undivided Trust Interest ("UTI") in leases held in a titling trust established by TMCC. In December 1998, TMCC identified certain leases included in the UTI to be allocated to a separate portfolio represented by a Special Unit of Beneficial Interest ("SUBI") totaling $780 million. TMCC then sold the SUBI to TLI which in turn contributed substantially all of the SUBI to a trust; TMCC continues to act as servicer for all assets represented by the UTI and the SUBI and is paid a servicing fee. TLI retains subordinated interests in the excess cash flows of these transactions, certain cash deposits and other related amounts which are held as restricted assets subject to limited recourse provisions. None of the lease assets represented by the SUBI or the restricted assets are available to satisfy any obligations of TMCC. -44- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7 - Sale of Retail Receivables and Interests in Lease Finance Receivables - ------------------------------------------------------------------------------ (Continued) Following is a summary of amounts included in investment in marketable securities and other receivables:
September 30, --------------------- 1999 1998 ---- ---- (Dollars in Millions) Investment in marketable securities Interest only strips................ $130 $114 Allowance for estimated credit and residual value losses on sold receivables....................... (76) (62) Undivided interest in trust......... 54 53 ---- ---- Total........................... $108 $105 ==== ==== Other Receivables................... $108 $ 78 ==== ====
The pretax gain resulting from the sale of interests in lease finance receivables and retail receivables totaled approximately $8 million, $15 million and $23 million in fiscal 1999, 1998 and 1997, respectively, after providing an allowance for estimated credit and residual value losses. Principal collections related to the lease receivables sold in December 1998 were used to purchase additional vehicle lease contracts resulting in gains of approximately $7 million for fiscal 1999. During fiscal 1999, TMCC recorded an adjustment to other receivables totaling $19 million to recognize the impairment of an asset retained in the fiscal 1997 sale of interests in lease finance receivables. The impairment was recognized when the future undiscounted cash flows of the asset was estimated to be insufficient to recover its related carrying value. The impairment adjustment is included in investment and other income. The outstanding balance of the lease finance receivables represented by the sold SUBI which TMCC continues to service totaled $3.1 billion and $2.8 billion at September 30, 1999 and 1998, respectively. The outstanding balance of sold retail finance receivables which TMCC continues to service totaled $1.0 billion and $493 million at September 30, 1999 and 1998, respectively. -45- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8 - Notes and Loans Payable - -------------------------------- Notes and loans payable at September 30, 1999 and 1998, which consisted of senior debt, included the following:
September 30, ---------------------- 1999 1998 ------- ------- (Dollars in Millions) Commercial paper, net................... $ 1,427 $ 2,546 Extendible commercial notes, net.......... 146 - ------- ------- Other senior debt, due in the years ending September 30,: 1999.............................. - 1,943 2000.............................. 4,077 2,521 2001.............................. 3,213 2,678 2002.............................. 2,718 2,689 2003.............................. 2,095 1,884 2004.............................. 2,466 899 Thereafter........................ 2,336 2,324 ------- ------- 16,905 14,938 Unamortized premium..................... 87 113 ------- ------- Total other senior debt........... 16,992 15,051 ------- ------- Notes and loans payable........ $18,565 $17,597 ======= =======
Short-term borrowings include commercial paper, extendible commercial notes and certain medium-term notes ("MTNs"). The weighted average remaining term of commercial paper was 21 days and 15 days at September 30, 1999 and 1998, respectively. The weighted average interest rate on commercial paper was 5.33% and 5.57% at September 30, 1999 and 1998, respectively. The weighted average remaining term and weighted average interest rate on extendible commercial notes at September 30, 1999 was 18 days and 5.39%, respectively. Short-term MTNs with original terms of one year or less, included in other senior debt, were $1,358 million and $488 million at September 30, 1999 and 1998, respectively. The weighted average interest rate on these short-term MTNs was 5.57% and 5.52% at September 30, 1999 and 1998, respectively, including the effect of interest rate swap agreements. The weighted average interest rate on other senior debt was 5.45% and 5.65% at September 30, 1999 and 1998, respectively, including the effect of interest rate swap agreements and option-based products. The rates have been calculated using rates in effect at September 30, 1999 and 1998, some of which are floating rates that reset daily. Less than one percent of other senior debt at September 30, 1999 had interest rates, including the effect of interest rate swap agreements, that were fixed for a period of more than one year. The weighted average of these fixed interest rates was 5.28% at September 30, 1999. Approximately 41% of other senior debt at September 30, 1999 had floating interest rates that were covered by option-based products. The weighted average strike rate on these option-based products was 5.83% at September 30, 1999. TMCC manages interest rate risk through continuous adjustment of the mix of fixed and floating rate debt using interest rate swap agreements and option- based products. -46- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8 - Notes and Loans Payable (Continued) - -------------------------------- Included in notes and loans payable at September 30, 1999 and 1998 were unsecured notes denominated in various foreign currencies as follows:
September 30, ------------------------------ 1999 1998 ----------- ----------- (Amounts in Millions) British pound sterling.............. 675 564 Danish kroner....................... 400 400 Dutch guilder....................... 250 250 French franc........................ 1,545 1,545 German deutsche mark................ 3,342 3,442 Greek drachma....................... 5,000 5,000 Hong Kong dollar.................... 618 - Italian lire........................ 477,300 927,300 Japanese yen........................ 140,268 134,240 Luxembourg franc.................... 2,000 2,000 New Zealand dollar.................. 200 200 Singapore dollar.................... 200 - South African rand.................. 250 250 Swedish kronor...................... 1,060 1,060 Swiss franc......................... 3,110 3,385
Concurrent with the issuance of these unsecured notes, TMCC entered into cross currency interest rate swap agreements to convert these obligations at maturity into U.S. dollar obligations which in aggregate total a principal amount of $8.2 billion at September 30, 1999. TMCC's foreign currency debt was translated into U.S. dollars in the financial statements at the various foreign currency spot exchange rates in effect at September 30, 1999. The receivables or payables arising as a result of the differences between the September 30, 1999 foreign currency spot exchange rates and the contract rates applicable to the cross currency interest rate swap agreements are classified in other receivables or accounts payable and accrued expenses, respectively, and would in aggregate total a net payable position of $621 million at September 30, 1999. -47- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Fair Value of Financial Instruments - -------------------------------------------- The fair value of financial instruments at September 30, 1999 and 1998, was estimated using the valuation methodologies described below. Considerable judgement was employed in interpreting market data to develop estimates of fair value; accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts. The carrying amounts and estimated fair values of the Company's financial instruments at September 30, 1999 and 1998 are as follows:
September 30, --------------------------------------------------- 1999 1998 ------------------------ ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ----------- ---------- ----------- ---------- (Dollars in Millions) Balance sheet financial instruments: Assets: Cash and cash equivalents........... $180 $180 $156 $156 Investments in marketable securities....................... $450 $450 $435 $435 Retail finance receivables, net..... $10,464 $10,279 $9,120 $9,164 Other receivables................... $271 $271 $157 $157 Receivables from cross currency interest rate swap agreements.... $95 $117 $147 $292 Liabilities: Notes and loans payable............. $18,565 $19,401 $17,597 $18,376 Payables from cross currency interest rate swap agreements.... $716 $466 $667 $401 Other payables...................... $380 $380 $328 $328
-48- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Fair Value of Financial Instruments (Continued) - --------------------------------------------
September 30, ------------------------------------------------- 1999 1998 ----------------------- ------------------------ Contract or Unrealized Contract or Unrealized Notional Gains/ Notional Gains/ Amount (Losses) Amount (Losses) ----------- ---------- ----------- ---------- (Dollars in Millions) Off-balance sheet financial instruments: Cross currency interest rate swap agreements.... $8,764 $(453) $8,969 $(92) Interest rate swap agreements.............. $8,980 $24 $7,284 $346 Option-based products...... $6,850 $41 $6,300 $5 Indexed note swap agreements.............. $1,318 $2 $755 $(30)
The fair value estimates presented herein are based on information available to management as of September 30, 1999 and 1998. The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Cash and Cash Equivalents ------------------------- The carrying amount of cash and cash equivalents approximates market value due to the short maturity of these investments. Investments in Marketable Securities ------------------------------------ The fair value of marketable securities was estimated using quoted market prices or discounted cash flow analysis. Retail Finance Receivables -------------------------- The carrying amounts of $1.1 billion and 1.0 billion of variable rate finance receivables at September 30, 1999 and 1998,respectably, were assumed to approximate fair value as these receivables reprice at prevailing market rates. The fair value of fixed rate finance receivables was estimated by discounting expected cash flows using the rates at which loans of similar credit quality and maturity would be originated as of September 30, 1999 and 1998. -49- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Fair Value of Financial Instruments (Continued) - -------------------------------------------- Other Receivables and Other Payables ------------------------------------ The carrying amount and fair value of other receivables and other payables are presented separately from the receivables and payables arising from cross currency interest rate swap agreements. The carrying amount of the remaining other receivables and payables approximate market value due to the short maturity of these instruments. Notes and Loans Payable ----------------------- The fair value of notes and loans payable was estimated by discounting expected cash flows using the interest rates at which debt of similar credit quality and maturity would be issued as of September 30, 1999 and 1998. The carrying amount of commercial paper and extendible commercial notes were assumed to approximate fair value due to the short maturity of these instruments. Cross Currency Interest Rate Swap Agreements -------------------------------------------- The estimated fair value of TMCC's outstanding cross currency interest rate swap agreements was derived by discounting expected cash flows using quoted market exchange rates and quoted market interest rates as of September 30, 1999 and 1998. Interest Rate Swap Agreements ----------------------------- The estimated fair value of TMCC's outstanding interest rate swap agreements was derived by discounting expected cash flows using quoted market interest rates as of September 30, 1999 and 1998. Option-based Products --------------------- The estimated fair value of TMCC's outstanding option-based products was derived by discounting expected cash flows using market exchange rates and market interest rates as of September 30, 1999 and 1998. Indexed Note Swap Agreements ---------------------------- The estimated fair value of TMCC's outstanding indexed note swap agreements was derived using quoted market prices as of September 30, 1999 and 1998. -50- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Financial Instruments with Off-Balance Sheet Risk - ----------------------------------------------------------- Inventory Lines of Credit - ------------------------- TMCC has extended inventory floorplan lines of credit to dealers, the unused portion of which amounted to $1.5 billion and $1.0 billion at September 30, 1999 and 1998, respectively. Security interests are acquired in vehicles and equipment financed and substantially all such financings are backed by corporate or individual guarantees from or on behalf of the participating dealers. Derivative Financial Instruments - -------------------------------- TMCC utilizes a variety of derivative financial instruments to manage its currency exchange rate risk arising as a result of borrowings denominated in foreign currencies and its interest rate risk as explained in this note. TMCC does not enter into these arrangements for trading purposes. A reconciliation of the activity of TMCC's derivative financial instruments for the years ended September 30, 1999 and 1998 is as follows:
September 30, ---------------------------------------------------------------- Cross Currency Interest Interest Indexed Rate Swap Rate Swap Option-based Note Swap Agreements Agreements Products Agreements ------------ ------------ ------------- ------------ 1999 1998 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- (Dollars in Billions) Beginning Notional Amount... $9.0 $6.5 $7.3 $6.3 $6.3 $5.6 $0.8 $2.4 Add: New agreements........... 0.5 3.6 4.7 3.1 2.7 2.6 0.8 0.3 Less: Expired agreements....... 0.7 1.1 3.0 2.1 2.1 1.9 0.3 1.9 ---- ---- ---- ---- ---- ---- ---- ---- Ending Notional Amount...... $8.8 $9.0 $9.0 $7.3 $6.9 $6.3 $1.3 $0.8 ==== ==== ==== ==== ==== ==== ==== ====
-51- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Interest Rate Risk Management - ----------------------------- TMCC utilizes interest rate swap agreements in managing its exposure to interest rate fluctuations. Interest rate swap agreements are executed as an integral part of specific debt transactions or on a portfolio basis. TMCC's interest rate swap agreements involve agreements to pay fixed and receive a floating rate, or receive fixed and pay a floating rate, at specified intervals, calculated on an agreed-upon notional amount. Interest rate swap agreements may also involve basis swap contracts which are agreements to exchange the difference between certain floating interest amounts, such as the net payment based on the commercial paper rate and the London Interbank Offered Rate ("LIBOR"), calculated on an agreed-upon notional amount. The original maturities of interest rate swap agreements ranged from one to five years at September 30, 1999. TMCC also utilizes option-based products in managing its exposure to interest rate fluctuations. Option-based products are executed on a portfolio basis and consist primarily of purchased interest rate cap agreements and to a lesser extent corridor agreements. Option-based products are agreements which either grant TMCC the right to receive or require TMCC to make payments at specified interest rate levels. Approximately 41% of TMCC's other senior debt at September 30, 1999 had floating interest rates that were covered by option- based products which had an average strike rate of 5.83%. The premiums paid for option-based products are included in deferred charges and are amortized to interest expense over the life of the instruments on a straight-line basis. Amounts receivable under option-based products are recorded as a reduction to interest expense. The original maturities of option-based products ranged from one to four years at September 30, 1999. The aggregate notional amounts of interest rate swap agreements and option- based products outstanding at September 30, 1999 and 1998 were as follows:
September 30, --------------------- 1999 1998 ---- ---- (Dollars in Billions) Floating rate swaps............................ $8.3 $5.2 Basis swaps.................................... 0.6 1.0 Fixed rate swaps............................... 0.1 1.1 ---- ---- Total interest rate swap agreements........ $9.0 $7.3 ==== ==== Option-based products.......................... $6.9 $6.3 ==== ====
-52- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Interest Rate Risk Management (Continued) - ----------------------------- TMCC utilizes indexed note swap agreements in managing its exposure in connection with debt instruments whose interest rate and/or principal redemption amounts are derived from other underlying instruments. Indexed note swap agreements involve agreements to receive interest and/or principal amounts associated with the indexed notes, denominated in either U.S. dollars or a foreign currency, and to pay fixed or floating rates on fixed U.S. dollar liabilities. At September 30, 1999, TMCC was the counterparty to $1.3 billion of indexed note swap agreements, of which $0.4 billion was denominated in foreign currencies and $0.9 billion was denominated in U.S. dollars. At September 30, 1998, TMCC was the counterparty to $0.8 billion of indexed note swap agreements, of which $0.3 billion was denominated in foreign currencies and $0.5 billion was denominated in U.S. dollars. The original maturities of indexed note swap agreements ranged from one to ten years at September 30, 1999. The notional amounts of interest rate and indexed note swap agreements and option-based products do not represent amounts exchanged by the parties and, thus, are not a measure of the Company's exposure through its use of derivatives. The amounts exchanged are calculated based on the notional amounts and other terms of the derivatives which relate to interest rates or financial or other indexes. Foreign Exchange Risk Management - -------------------------------- TMCC utilizes cross currency interest rate swap agreements to manage exposure to exchange rate fluctuations on principal and interest payments for borrowings denominated in foreign currencies. Notes and loans payable issued in foreign currencies are hedged by concurrently executed cross currency interest rate swap agreements which involve the exchange of foreign currency principal and interest obligations for U.S. dollar obligations at agreed-upon currency exchange and interest rates. The aggregate notional amounts of cross currency interest rate swap agreements at September 30, 1999 and 1998 were $8.8 billion and $9.0 billion, respectively. The original maturities of cross currency interest rate swap agreements ranged from one to ten years at September 30, 1999. -53- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Credit Risk Management - ---------------------- TMCC manages the risk of counterparty default through the use of credit standard guidelines, counterparty diversification and monitoring of counterparty financial condition. At September 30, 1999, approximately 89% of TMCC's derivative financial instruments, based on notional amounts, were with commercial banks and investment banking firms assigned investment grade ratings of "AA" or better by national rating agencies. TMCC does not anticipate non- performance by any of its counterparties and has no reserves related to non- performance as of September 30, 1999; TMCC has not experienced any counterparty default during the three years ended September 30, 1999. Additionally, TMCC's loss in the event of counterparty default is partially mitigated as a result of master netting agreements in place with all derivative counterparties which allow the net difference between TMCC and each counterparty to be exchanged in the event of default. Credit exposure of derivative financial instruments is represented by the fair value of contracts with a positive fair value at September 30, 1999 reduced by the effects of master netting agreements. The credit exposure of TMCC's derivative financial instruments at September 30, 1999 was $88 million on an aggregate notional amount of $26 billion. Note 11 - Pension and Other Benefit Plans - ----------------------------------------- All full-time employees of the Company are eligible to participate in the TMS pension plan commencing on the first day of the month following hire. Benefits payable under this non-contributory defined benefit pension plan are based upon the employees' years of credited service and the highest sixty consecutive months' compensation, reduced by a percentage of social security benefits. The Company's pension expense was $6 million for the year ended September 30, 1999, and $4 million for each of the years ended September 30, 1998 and 1997. At September 30, 1999, 1998 and 1997, the accumulated benefit obligation and plan net assets for employees of the Company were not determined separately from TMS; however, the plan's net assets available for benefits exceeded the accumulated benefit obligation. TMS funding policy is to contribute annually the maximum amount deductible for federal income tax purposes. -54- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 12 - Provision for Income Taxes - ------------------------------------ The provision for income taxes consisted of the following:
Years ended September 30, -------------------------- 1999 1998 1997 ---- ---- ---- (Dollars in Millions) Current Federal........................... $(130) $(317) $(14) State............................. 17 (16) (14) ---- ---- ---- Total current ................. (113) (333) (28) ---- ---- ---- Deferred Federal........................... 202 399 109 State............................. 9 41 40 ---- ---- ---- Total deferred................. 211 440 149 ---- ---- ---- Provision for income taxes.. $ 98 $107 $121 ==== ==== ====
A reconciliation between the provision for income taxes computed by applying the federal statutory tax rate to income before income taxes and actual income taxes provided is as follows:
Years ended September 30, ------------------------- 1999 1998 1997 ---- ---- ---- (Dollars in Millions) Provision for income taxes at federal statutory tax rate......... $ 81 $ 88 $ 99 State and local taxes (net of federal tax benefit)............... 17 17 17 Other, including changes in applicable state tax rates......... - 2 5 ---- ---- ---- Provision for income taxes......... $ 98 $107 $121 ==== ==== ==== Effective tax rate.................... 42.53% 42.81% 42.69%
-55- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 12 - Provision for Income Taxes (Continued) - ------------------------------------ The deferred federal and state income tax liabilities are as follows:
September 30, --------------------- 1999 1998 ---- ---- (Dollars in Millions) Federal........................................ $1,403 $1,235 State.......................................... 151 144 ------ ------ Net deferred income tax liability........... $1,554 $1,379 ====== ======
The Company's deferred tax assets and liabilities consisted of the following:
September 30, --------------------- 1999 1998 ---- ---- (Dollars in Millions) Assets: Alternative minimum tax..................... $ 137 $ 304 Provision for losses........................ 59 65 Deferred administrative fees................ 82 71 NOL carryforwards........................... 34 42 Deferred acquisition costs.................. 21 8 Unearned insurance premiums................. 4 4 Revenue recognition......................... 1 1 Other....................................... 2 2 ------ ------ Deferred tax assets...................... 340 497 ------ ------ Liabilities: Lease transactions.......................... 1,696 1,679 State taxes................................. 188 189 Other....................................... 10 8 ------ ------ Deferred tax liabilities................. 1,894 1,876 ------ ------ Valuation allowance...................... - - ------ ------ Net deferred income tax liability..... $1,554 $1,379 ====== ======
TMCC has state tax net operating loss carryforwards of $496 million which expire beginning in fiscal 2000 through 2015. -56- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13 - Comprehensive Income - ------------------------------ The Company's total comprehensive earnings were as follows:
Years Ended September 30, ------------------------------- 1999 1998 1997 ------ ------ ------ (Dollars in Millions) Net income.................................... $ 132 $ 144 $ 162 Other comprehensive income: Net unrealized gains arising during period (net of tax of $2, $4 and $3 in 1999, 1998 and 1997).............. 4 9 7 Less: reclassification adjustment for gains included in net income (net of tax of $1, $2 and $1 in 1999, 1998 and 1997)........... (2) (3) (2) ------ ------ ------ Net unrealized gain on available-for-sale marketable securities................... 2 6 5 ------ ------ ------ Total Comprehensive Income................. $ 134 $ 150 $ 167 ====== ====== ======
-57- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 14 - Related Party Transactions - ------------------------------------ An operating agreement with TMS and Toyota Motor Manufacturing North America Inc. ("TMMNA") (the "Operating Agreement") provides that 100% ownership of TMCC will be retained by TMS as long as TMCC has any funded debt outstanding and that TMS and TMMNA will provide necessary equity contributions or other financial assistance it deems appropriate to ensure that TMCC maintains a minimum coverage on fixed charges of 1.10 times such charges in any fiscal quarter. The coverage provision of the Operating Agreement is solely for the benefit of the holders of TMCC's commercial paper and extendible commercial notes. The Operating Agreement may be amended or terminated at any time without notice to, or the consent of, holders of other TMCC obligations. The Operating Agreement does not constitute a guarantee by TMS of any obligations of TMCC. TMCC has an arrangement to borrow and invest funds with TMS at short term market rates. For the years ended September 30, 1999, 1998 and 1997, TMCC had no borrowings from TMS. The Operating Agreement provides that borrowings from TMS are subordinated to all other indebtedness of TMCC. For the years ended September 30, 1999, 1998 and 1997, the highest amounts of funds invested with TMS were $2 billion, $567 million and $817 million, respectively; interest earned on these investments totaled $41 million, $3 million and $5 million for the years ended September 30, 1999, 1998 and 1997, respectively. Under an arrangement with the Parent, TMS provided support to TMCC for certain vehicle disposition losses incurred during fiscal 1998. TMS support amounts included in the Consolidated Statement of Income related to this arrangement totaled $80 million for the year ended September 30, 1998. TMCC did not receive any Parent support for vehicle disposition losses during fiscal 1999. TMS provides certain technical and administrative services and incurs certain expenses on the Company's behalf and, accordingly, allocates these charges to the Company. The charges, reimbursed by TMCC to TMS, totaled $25 million, $13 million and $12 million for the years ended September 30, 1999, 1998 and 1997, respectively. In addition, TMS sponsors special retail and lease programs offered by TMCC; for the years ended September 30, 1999, 1998 and 1997, TMCC recognized revenue of $126 million, $142 million and $174 million, respectively, related to TMS sponsored programs. The Company leases its headquarters facility and Iowa Service Center from TMS; rent expense paid to TMS for these facilities totaled $4 million, $3 million and $3 million for the years ended September 30, 1999, 1998 and 1997, respectively. TMCC leases a corporate aircraft to TMS and provides wholesale financing for TMS affiliates; TMCC recognized revenue related to these arrangements of $6 million, $7 million and $5 million for the years ended September 30, 1999, 1998 and 1997, respectively. TMIS provides certain insurance services, and insurance and reinsurance coverages, respectively, to TMS. Premiums, commissions and fees earned on these services for the years ended September 30, 1999, 1998 and 1997 totaled $24 million, $18 million and $12 million, respectively. In April 1999, Toyota Credit Canada Inc., an affiliate of the Company, paid off $201 million in intercompany loans. Interest charged on these loans reflected market rates and totaled $8 million for the year ended September 30, 1999. -58- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15 - Lines of Credit/Standby Letters of Credit - --------------------------------------------------- To support its commercial paper program, TMCC maintains syndicated bank credit facilities with certain banks which aggregated $2.7 billion and $3.0 billion at September 30, 1999 and 1998, respectively. No loans were outstanding under any of these bank credit facilities as of September 30, 1999 or 1998. To facilitate and maintain letters of credit, TMCC maintains, along with TMS, uncommitted, unsecured lines of credit with banks totaling $175 million as of September 30, 1999 and 1998. Approximately $13 million and $12 million in letters of credit had been issued as of September 30, 1999, and 1998, respectively. Note 16 - Commitments and Contingent Liabilities - ------------------------------------------------ At September 30, 1999, the Company was a lessee under lease agreements for facilities with minimum future commitments as follows: years ending September 30, 2000 - $14 million; 2001 - $12 million; 2002 - $10 million; 2003 - $7 million; 2004 - $4 million and thereafter - $4 million. TMCC has guaranteed payments of principal and interest on $58 million principal amount of flexible rate demand pollution control revenue bonds maturing in 2006, issued in connection with the Kentucky manufacturing facility of an affiliate. Effective August 1999, TMCC has guaranteed payments of principal, interest and premiums, if any, on $67.5 million principal amount of flexible rate demand solid waste disposal revenue bonds issued by Putnam County, West Virginia, of which $40 million matures in June 2028, and $27.5 million matures in August 2029. The bonds were issued in connection with the West Virginia manufacturing facility of an affiliate. Effective February 1999, TMCC has guaranteed payments of principal, interest and premiums, if any, on $30 million principal amount of flexible rate demand pollution control revenue bonds issued by Gibson County, Indiana, of which $10 million matures in October 2027, January 2028 and January 2029. The bonds were issued in connection with the Indiana manufacturing facility of an affiliate. Effective July 1999, TMCC has authorized a guarantee of up to $50 million of the debt of TCA, of which $40 million has been guaranteed as of September 30, 1999. TMCC has guaranteed the obligations of TMIS relating to vehicle service insurance agreements issued in several states. These guarantees have been given without regard to any security and without any limitation as to duration or amount. An operating agreement between TMCC and TCPR (the "Agreement"), provides that TMCC will make necessary equity contributions or provide other financial assistance TMCC deems appropriate to ensure that TCPR maintains a minimum coverage on fixed charges of 1.10 times such fixed charges in any fiscal quarter. The Agreement does not constitute a guarantee by TMCC of any obligations of TCPR. The fixed charge coverage provision of the Agreement is solely for the benefit of the holders of TCPR's commercial paper, and the Agreement may be amended or terminated at any time without notice to, or the consent of, holders of other TCPR obligations. -59- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 16 - Commitments and Contingent Liabilities (Continued) - ------------------------------------------------ Various legal actions, governmental proceedings and other claims are pending or may be instituted or asserted in the future against TMCC and its subsidiaries with respect to matters arising from the ordinary course of business. Certain of these actions are or purport to be class action suits, seeking sizeable damages. Certain of these actions are similar to suits which have been filed against other financial institutions and captive finance companies. Management and internal and external counsel perform periodic reviews of pending claims and actions to determine the probability of adverse verdicts and resulting amounts of liability. The amounts of liability on pending claims and actions as of September 30, 1999 were not determinable; however, in the opinion of management, the ultimate liability resulting therefrom should not have a material adverse effect on TMCC's consolidated financial position or results of operations. Note 17 - Segment Information - ----------------------------- The Company's operating segments include finance and insurance operations. Finance operations include retail leasing, retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle and Toyota industrial equipment dealers and their customers in the United States (excluding Hawaii) and Puerto Rico. Insurance operations are performed by TMIS and subsidiaries. The principal activities of TMIS include marketing, underwriting, claims administration and providing certain coverages related to vehicle service agreements and contractual liability agreements sold by or through Toyota and Lexus vehicle dealers and affiliates to customers in the United States (excluding Hawaii). In addition, the insurance subsidiaries insure and reinsure certain TMS and TMCC risks. The accounting policies of the operating segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements. The Company reports consolidated financial information for both external and internal purposes. Currently, TMCC's finance and insurance segments operate only in the United States and Puerto Rico. -60- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 17 - Segment Information (Continued) - ----------------------------- Financial results for the Company's operating segments are summarized below:
September 30, --------------------------------------- 1999 1998 1997 --------- --------- --------- (Dollars in Millions) Assets: Financing operations.................... $ 24,156 $ 22,858 $ 19,519 Insurance operations.................... 732 630 447 Eliminations/reclassifications.......... (310) (263) (136) --------- --------- --------- Total assets.......................... $ 24,578 $ 23,225 $ 19,830 ========= ========= ========= Gross revenues: Financing operations.................... $ 3,215 $ 3,295 $ 3,311 Insurance operations.................... 141 136 125 Eliminations............................ - - (8) --------- --------- --------- Total gross revenues.................. $ 3,356 $ 3,431 $ 3,428 ========= ========= ========= Depreciation and amortization: Financing operations.................... $ 1,710 $ 1,825 $ 1,821 Insurance operations.................... 1 1 1 --------- --------- --------- Total depreciation and amortization... $ 1,711 $ 1,826 $ 1,822 ========= ========= ========= Interest Expense: Financing operations.................... $ 940 $ 994 $ 918 Insurance operations.................... - - - --------- --------- --------- Total interest expense $ 940 $ 994 $ 918 ========= ========= ========= Interest Income: Financing operations.................... $ 9 $ 1 $ - Insurance operations.................... 20 19 15 --------- --------- --------- Total interest income $ 29 $ 20 $ 15 ========= ========= ========= Income tax expense: Financing operations.................... $ 87 $ 92 $ 108 Insurance operations.................... 11 15 13 --------- --------- --------- Total income tax expense.............. $ 98 $ 107 $ 121 ========= ========= ========= Net Income: Financing operations.................... $ 113 $ 119 $ 142 Insurance operations.................... 19 25 20 --------- --------- --------- Net Income............................ $ 132 $ 144 $ 162 ========= ========= ========= Capital expenditures: Financing operations.................... $ 33 $ 32 $ 14 Insurance operations.................... 4 1 1 --------- --------- --------- Total capital expenditures............ $ 37 $ 33 $ 15 ========= ========= =========
-61- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 18 - Selected Quarterly Financial Data (Unaudited) - -------------------------------------------------------
Total Financing Interest Depreciation Net Revenues Expense on Leases Income ---------- -------- ------------ -------- (Dollars in Millions) Year Ended September 30, 1999: First quarter.............. $ 805 $243 $ 431 $ 35 Second quarter............. 786 220 427 28 Third quarter.............. 788 230 410 39 Fourth quarter............. 786 247 396 30 ------ ---- ------ ---- Total................... $3,165 $940 $1,664 $132 ====== ==== ====== ==== Year Ended September 30, 1998: First quarter.............. $ 796 $234 $ 422 $ 37 Second quarter............. 800 239 414 30 Third quarter.............. 812 249 423 32 Fourth quarter............. 832 272 422 45 ------ ---- ------ ---- Total................... $3,240 $994 $1,681 $144 ====== ==== ====== ==== Year Ended September 30, 1997: First quarter.............. $ 830 $227 $ 471 $ 38 Second quarter............. 829 225 446 47 Third quarter.............. 812 228 438 44 Fourth quarter............. 794 238 426 33 ------ ---- ------ ---- Total................... $3,265 $918 $1,781 $162 ====== ==== ====== ====
Note 19 - Subsequent Events - --------------------------- In December 1999, TMCC increased its investment in TCA from 15% to 33%. Accordingly, the Company will change its method of carrying the investment from cost to equity method in fiscal 2000 as required by generally accepted accounting principles. -62- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There is nothing to report with regard to this item. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth certain information regarding the directors and executive officers of TMCC as of November 30, 1999. Name Age Position ---- --- -------- Yoshimi Inaba............. 53 Director and President, TMCC; Director and President, TMS; Director, TMC George Borst ............. 51 Director, Senior Vice President and General Manager, TMCC; Senior Vice President, TMS Nobukazu Tsurumi.......... 51 Director, Group Vice President and Treasurer, TMCC Robert Pitts.............. 51 Director and Secretary, TMCC; Group Vice President, TMS James Press............... 53 Director, TMCC; Director and Executive Vice President, TMS Chiaki Yamaguchi.......... 49 Director, TMCC; Senior Vice President and Treasurer, TMS Douglas West.............. 54 Director, TMCC; Senior Vice President and Secretary, TMS Ryuji Araki............... 59 Director, TMCC; Senior Managing Director, TMC Michael Deaderick......... 53 Group Vice President - Operations and Assistant Secretary, TMCC; Group Vice President, TMS All directors of TMCC are elected annually and hold office until their successors are elected and qualified. Officers are elected annually and serve at the pleasure of the Board of Directors. Mr. Inaba was named Director and President of TMCC and TMS in June 1999. From June 1997 to June 1999, Mr. Inaba was the General Manager of the Europe, Africa and United Kingdom Division of TMC. In addition, Mr. Inaba became a member of TMC's Board of Directors in 1997. From June 1996 to May 1997, Mr. Inaba was Senior Vice President of TMS. From August 1995 to May 1996, Mr. Inaba was Group Vice President of TMS. Mr. Inaba has been employed with TMC, in various positions worldwide, since 1968. Mr. Borst was named Director and Senior Vice President and General Manager of TMCC in April 1997 and Senior Vice President of TMS in June 1997. From January 1993 to May 1997, Mr. Borst was Group Vice President of TMS. From April 1989 to December 1992, Mr. Borst was a Vice President of TMS. Mr. Borst has been employed with TMS, in various positions, since 1985. -63- Mr. Tsurumi was named Director, Group Vice President and Treasurer of TMCC and Vice President of TMS in January 1999. From January 1996 to December 1998, Mr. Tsurumi was Managing Director for Toyota Finance Australia. From January 1994 to December 1995, Mr. Tsurumi was Deputy General Manager of the Accounting Division of TMC. Mr. Tsurumi has been employed with TMC, in various positions worldwide, since 1971. Mr. Pitts was named Director of TMCC and Group Vice President of TMS in April 1993 and Secretary of TMCC in April 1997. From January 1984 to March 1993, he was an executive with TMCC having been named General Manager in January 1984 and Vice President in April 1989. Mr. Pitts has been employed with TMS and TMCC, in various positions, since 1971. Mr. Press was named Director of TMCC in July 1999. He is also a Director and Executive Vice President of TMS, positions he has held since June, 1996 and July 1999, respectively. From March 1998 to July 1999, he was a Senior Vice President of TMS. From April 1995 to March 1998, Mr. Press was Senior Vice President and General Manager of Lexus. Mr. Press has been employed with TMS, in various positions, since 1970. Mr. Yamaguchi was named Director of TMCC and Senior Vice President and Treasurer of TMS in May 1998. Mr. Yamaguchi became the General Manager of the Financial Planning and Insurance Department of TMC in January 1997 and became the General Manager of Funds and Foreign Exchange Management Department in January 1998. From February 1990 to December 1996, Mr. Yamaguchi worked for Chairman Shoichiro Toyoda as an Executive Assistant in the Toyota head office. Mr. Yamaguchi has been employed with TMC, in various positions worldwide, since 1972. Mr. West was named Director of TMCC and Senior Vice President and Secretary of TMS in June 1996. From June 1996 to March 1997, Mr. West was also a Senior Vice President and Secretary of TMCC. From April 1993 to May 1996, Mr. West was a Group Vice President of TMS. Mr. West has been employed with TMS, in various positions, since 1982. Mr. Araki was named Director of TMCC in September 1995. He was named Managing Director of TMC's Board of Directors in June 1997 and has served on TMC's Board of Directors since September 1992. Mr. Araki has been employed with TMC, in various positions, since 1962. Mr. Deaderick was named Group Vice President - Operations of TMCC in April 1998 and Assistant Secretary in April 1997. From April 1995 to April 1998, Mr. Deaderick was Vice President - Marketing and Operations of TMCC. From February 1990 to April 1995, Mr. Deaderick was Vice President and General Manager of TMIS. Mr. Deaderick has been employed with TMCC and TMS, in various positions, since 1971. -64- ITEM 11. EXECUTIVE COMPENSATION. Summary Compensation Table The following table sets forth all compensation awarded to, earned by, or paid to the Company's Principal Executive Officer and the most highly compensated executive officers whose salary and bonus for the latest fiscal year exceeded $100,000, for services rendered in all capacities to the Company for the fiscal years ended September 30, 1999, 1998 and 1997.
Annual Compensation -------------------------------------------- Other Annual All Name and Fiscal Compensation Other Principal Position Year Salary ($) Bonus ($) ($) ($) - --------------------- ------ ---------- --------- ------------ ------- George Borst 1999 $273,400 $162,300 - $8,700 Principal Executive 1998 $237,700 $150,300 - $3,300 Officer 1997 $115,500 $56,700 - $3,300 Nobukazu Tsurumi 1999 $117,700 $25,300 $23,800 - Group Vice President 1998 N/A N/A N/A N/A 1997 N/A N/A N/A N/A Michael Deaderick 1999 $215,300 $120,000 - $7,900 Group Vice President 1998 $193,200 $94,400 - $7,000 1997 $176,600 $81,600 - $6,400 - ------------ The amounts in this column represent housing allowances and relocation costs. The amounts in this column represent the Company's allocated contribution under the TMS Savings Plan (the "Plan"), a tax-qualified 401(k) Plan. Participants in the Plan may elect, subject to applicable law, to contribute up to 15% of their base compensation on a pre-tax basis to which the Company adds an amount equal to two-thirds of the first 6% of the employee's contribution. Participants are vested 25% each year with respect to the Company's contribution and are fully vested after four years. Subject to the limitations of the Plan, employee and Company contributions are invested in various investment options at the discretion of the employee. TMS also maintains a 401(k) Excess Plan, a non-qualified deferred compensation plan which has similar provisions to the Saving Plan. Effective April 1, 1997, Mr. Borst was appointed as Principal Executive Officer. The compensation presented for Mr. Borst in fiscal year 1997 reflects amounts earned for services to the Company during the partial period of the fiscal year Mr. Borst served as Principal Executive Officer. Effective January 1, 1999, Mr. Tsurumi was appointed as Group Vice President and Treasurer. The compensation presented for Mr. Tsurumi for fiscal year 1999 reflects amounts earned for services to the Company during the partial period of the fiscal year served.
-65- Employee Benefit Plan The following pension plan table presents typical annual retirement benefits under the TMS Pension Plan for various combinations of compensation and years of credited service for participants who retire at age 62, assuming no final average bonus and excluding Social Security offset amounts. The amounts are subject to Federal statutory limitations governing pension calculations and benefits.
Annual Benefits for Final Average Years of Credited Service Annual ------------------------------------ Compensation 15 20 25 ------------- -------- -------- -------- $50,000 $15,000 $20,000 $25,000 $100,000 $30,000 $40,000 $50,000 $150,000 $45,000 $60,000 $75,000 $200,000 $60,000 $80,000 $100,000 $250,000 $75,000 $100,000 $125,000 $300,000 $90,000 $120,000 $150,000 $350,000 $105,000 $140,000 $175,000 $400,000 $120,000 $160,000 $200,000 $450,000 $135,000 $180,000 $225,000 $500,000 $150,000 $200,000 $250,000
All full-time employees of the Company are eligible to participate in the TMS Pension Plan commencing on the first day of the month following hire. Benefits payable under this non-contributory defined benefit pension plan are based upon final average compensation, final average bonus and years of credited service. Final average compensation is defined as the average of the participant's base rate of pay, plus overtime, during the highest-paid 60 consecutive months prior to the earlier of termination or normal retirement. Final average bonus is defined as the highest average of the participant's fiscal year bonus, and basic seniority-based cash bonus for non-managerial personnel, over a period of 60 consecutive months prior to the earlier of termination or normal retirement. A participant generally becomes eligible for the normal retirement benefit at age 62, and may be eligible for early retirement benefits starting at age 55. The annual normal retirement benefit under the Pension Plan, payable monthly, is an amount equal to the number of years of credited service (up to 25 years) multiplied by the sum of (i) 2% of the participant's final average compensation less 2% of the estimated annual Social Security benefit payable to the participant at normal retirement and (ii) 1% of the participant's final average bonus. The normal retirement benefit is subject to reduction for certain benefits under any union-sponsored retirement plan and benefits attributable to employer contributions under any defined-contribution retirement plan maintained by TMS and its subsidiaries or any affiliate that has been merged into the TMS Pension Plan. -66- The TMS Supplemental Executive Retirement Plan (TMS SERP), a non-qualified non- contributing benefit plan, authorizes a benefit to be paid to eligible executives, including Mr. Borst and Mr. Deaderick. Benefits under the TMS SERP, expressed as an annuity payable monthly, are based on 2% of the executive's compensation recognized under the plan multiplied by the years of service credited under the plan (up to a maximum of 30), offset by benefits payable under the TMS Pension Plan and the executive's primary Social Security benefit. A covered participant's compensation may include base pay and a percentage (not in excess of 100%) of bonus pay, depending on the executive's length of service in certain executive positions. Similarly, years of service credited under the plan are determined by reference, in part, to the executive's length of service in certain executive positions. No benefit is payable under the TMS SERP to an executive unless the executive's termination of employment occurs on a date, after the executive reaches age 55, that is agreed in writing by the President of TMS and the executive; and the executive is vested in benefits under the TMS Pension Plan, or unless the executive accepts an invitation to retire extended by the President of TMS. Mr. Borst is a participant in the TMS Pension Plan and the TMS SERP, and had 14 years of total credited service as of September 30, 1999. Based upon years of credited service allocable to TMCC, Mr. Borst may be entitled to receive approximately $22,000 in annual pension plan benefits when Mr. Borst reaches age 62. Mr. Borst also may be entitled to receive pension benefits from TMS based upon services to and compensation by TMS. Mr. Deaderick is a participant in the TMS Pension Plan and the TMS SERP, and had 25 years of total credited service as of September 30, 1999. Based upon years of credited service allocable to TMCC, Mr. Deaderick may be entitled to receive approximately $74,000 in annual pension plan benefits when Mr. Deaderick reaches age 62. Mr. Deaderick also may be entitled to receive pension benefits from TMS based upon services to and compensation by TMS. Compensation of Directors No amounts are paid to members of the TMCC Board of Directors for their services as directors. Compensation Committee Interlocks and Insider Participation Members of the Executive Committee of the Board of Directors, which consists of the directors of TMCC other than Mr. Araki, participate in decisions regarding the compensation of the executive officers of the Company. Certain of the members of the Executive Committee are current or former executive officers of the Company. Certain of the members of the Executive Committee are also current executive officers and directors of TMS and its affiliates and participate in compensation decisions for those entities. -67- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. As of the date hereof, all of TMCC's capital stock is owned by TMS. ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS. Transactions between the Company, TMS and TMMNA are included in Note 2, Note 11, Note 14, Note 15 and Note 16 of the Notes to the Consolidated Financial Statements as well as Item 1 and Item 7. Certain directors and executive officers of TMCC are also directors and executive officers of TMS as described in Item 10. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1)Financial Statements Included in Part II, Item 8 of this Form 10-K. See Index to Financial Statements on page 29. (2)Exhibits The exhibits listed on the accompanying Exhibit Index, starting on page 70, are filed as part of, or incorporated by reference into, this Report. (b)Reports on Form 8-K There were no reports on Form 8-K filed by the registrant during the quarter ended September 30, 1999. -68- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Torrance, State of California, on the 20th day of December, 1999. TOYOTA MOTOR CREDIT CORPORATION By /S/ GEORGE E. BORST ------------------------------ George E. Borst Senior Vice President and General Manager Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on the 20th day of December, 1999. Signature Title --------- ----- Senior Vice President and General Manager and Director /S/ GEORGE E. BORST (Principal Executive Officer) - ------------------------------------ George E. Borst Group Vice President/ Treasurer and Director /S/ NOBUKAZU TSURUMI (Principal Financial Officer) - ------------------------------------ Nobukazu Tsurumi Vice President - Finance and Administration /S/ GREGORY WILLIS (Principal Accounting Officer) - ------------------------------------ Gregory Willis /S/ JAMES PRESS Director - ------------------------------------ James Press /S/ DOUGLAS WEST Director - ------------------------------------ Douglas West /S/ ROBERT PITTS Director - ------------------------------------ Robert Pitts -69- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- -------- 3.1(a) Articles of Incorporation filed with the California Secretary of State on October 4, 1982. (1) 3.1(b) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on January 24, 1984. (1) 3.1(c) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on January 25, 1985. (1) 3.1(d) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on September 6, 1985. (1) 3.1(e) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on February 28, 1986. (1) 3.1(f) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on December 3, 1986. (1) 3.1(g) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on March 9, 1987. (1) 3.1(h) Certificate of Amendment of Articles of Incorporation filed with the California Secretary of State on December 20, 1989. (2) 3.2 Bylaws as amended through January 16, 1993. (6) 4.1 Issuing and Paying Agency Agreement dated August 1, 1990 between TMCC and Bankers Trust Company. (3) 4.2(a) Indenture dated as of August 1, 1991 between TMCC and The Chase Manhattan Bank, N.A. (4) - ----------------- (1) Incorporated herein by reference to the same numbered Exhibit filed with TMCC's Registration Statement on Form S-1, File No. 33-22440. (2) Incorporated herein by reference to the same numbered Exhibit filed with TMCC's Report on Form 10-K for the year ended September 30, 1989, Commission File number 1-9961. (3) Incorporated herein by reference to Exhibit 4.2 filed with TMCC's Report on Form 10-K for the year ended September 30, 1990, Commission File number 1-9961. (4) Incorporated herein by reference to Exhibit 4.1(a), filed with TMCC's Registration Statement on Form S-3, File No. 33-52359. (6) Incorporated herein by reference to the same numbered Exhibit filed with TMCC's Report on Form 10-K for the year ended September 30, 1993, Commission File number 1-9961. -70- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- ------ 4.2(b) First Supplemental Indenture dated as of October 1, 1991 among TMCC, Bankers Trust Company and The Chase Manhattan Bank, N.A. (5) 4.3(a) Second Amended and Restated Agency Agreement dated July 24, 1997 among TMCC, The Chase Manhattan Bank and Chase Manhattan Bank Luxembourg S.A. (19) 4.3(b) Amendment No.1 to Second Amended and Restated Agency Agreement dated July 24, 1998 among TMCC, The Chase Manhattan Bank and Chase Manhattan Bank Luxembourg S.A. (21) 4.3(c) Amendment No.2 to Second Amended and Restated Agency Filed Agreement dated July 23, 1999 among TMCC, The Chase Herewith Manhattan Bank and Chase Manhattan Bank Luxembourg S.A. 4.4 TMCC has outstanding certain long-term debt as set forth in Note 8 of the Notes to Consolidated Financial Statements. Not filed herein as an exhibit, pursuant to Item 601(b) (4)(iii)(A) of Regulation S-K under the Securities Act of 1933, is any instrument which defines the rights of holders of such long-term debt, where the total amount of securities authorized thereunder does not exceed 10% of the total assets of TMCC and its subsidiaries on a consolidated basis. TMCC agrees to furnish copies of all such instruments to the Securities and Exchange Commission upon request. 10.1(a) Operating Agreement dated January 16, 1984 between TMCC and TMS. (15) 10.1(b) Amendment No. 1 to Operating Agreement dated May 14, 1996 between TMCC and TMS. (11) 10.1(c) Amendment No. 2 to Operating Agreement dated December 1, 1997 between TMCC, TMS and TMMNA (20) - ----------------- (5) Incorporated herein by reference to Exhibit 4.1 filed with TMCC's Current Report on Form 8-K dated October 16, 1991, Commission File No. 1-9961. (11) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Report on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 1-9961. (15) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Registration Statement on Form S-1, File No. 33-22440. (19) Incorporated herein by reference to Exhibit 4.3(a) filed with TMCC's Current Report on Form 10-K for the year ended September 30, 1997, Commission File No. 1-9961. (20) Incorporated herein by reference to Exhibit 10.1(c) filed with TMCC's Current Report on Form 10-K for the year ended September 30, 1997, Commission File No. 1-9961. (21) Incorporated herein by reference to Exhibit 4.3(b) filed with TMCC's Current Report on Form 10-K for the year ended September 30, 1998, Commission File No. 1-9961. -71- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- ------ 10.1(d) Amendment No. 3 to Operating Agreement dated June 1, 1999 between TMCC, TMS and TMMNA (22) 10.4 Form of Indemnification Agreement between TMCC and its directors and officers. (12) 10.5(a) Three-year Credit Agreement (the "Three-year Agreement") dated as of September 29, 1994 among TMCC, Morgan Guaranty Trust Company of New York, as agent, and Bank of America National Trust and Savings Association, The Bank of Tokyo, Ltd., The Chase Manhattan Bank, N.A., Citicorp USA, Inc. and Credit Suisse, as Co-Agents. (13) 10.5(b) Amendment No. 1 dated September 28, 1995 to the Three-year Agreement. (14) 10.5(c) Amended and Restated Credit Agreement dated September 24, 1996 to the Three-year Agreement. (16) 10.5(d) Amended and Restated Credit Agreement dated September 23, 1997 to the Three-year Agreement. (17) 10.5 (e) Amendment dated March 19, 1999 to the Filed Three-year Agreement Herewith 10.5(f) Amended and Restated Credit Agreement dated Filed September 17, 1999 to the Three-year Agreement. Herewith 10.5(g) Fourth Amended and Restated 364-Day Credit Agreement dated September 17, 1999 among TMCC, Bank of America N.A. as Administrative Agent, The Chase Manhattan Bank as Syndication Agent, The Bank of Tokyo-Mitsubishi Ltd., and Citicorp USA, Inc. as Documentation Agents, Banc of America Securities LLC as Sole Lead Arranger Filed and Sole Book Manager and the other Banks named therein. Herewith - ---------------- (12) Incorporated herein by reference to Exhibit 10.6 filed with TMCC's Registration Statement on Form S-1, Commission File No. 33-22440. (13) Incorporated herein by reference to Exhibit 10.10 filed with TMCC's Report on Form 10-K for the year ended September 30, 1994, Commission File No. 1-9961. (14) Incorporated herein by reference to Exhibit 10.10(a) filed with TMCC's Report on Form 10-K for the year ended September 30, 1995, Commission File No. 1-9961. (16) Incorporated herein by reference to Exhibit 10.9(d) filed with TMCC's Report on Form 10-K for the year ended September 30, 1996, Commission File No. 1-9961. (17) Incorporated herein by reference to Exhibit 10.5(f) filed with TMCC's Report on Form 10-K for the year ended September 30, 1997, Commission File No. 1-9961. (22) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Report on Form 10-Q for the quarter ended June 30, 1999, Commission File No. 1-9961. -72- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- ------ 10.6 Toyota Motor Sales, U.S.A., Inc. Supplemental Executive Retirement Plan. * (9) 10.7 Toyota Motor Sales, U.S.A., Inc. 401(k) Excess Plan. * (10) 10.8 Amended and Restated Trust and Servicing Agreement dated as of October 1, 1996 by and among TMCC, TMTT, Inc., as titling trustee and U.S. Bank National Association, as trust agent. (18) 12.1 Calculation of ratio of earnings to fixed charges. Filed Herewith 21.1 TMCC's list of subsidiaries. Filed Herewith 23.1 Consent of Independent Accountants. Filed Herewith 27.1 Financial Data Schedule. Filed Herewith - ---------------- (9) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Report on Form 10-Q for the quarter ended December 31, 1995, Commission File No. 1-9961. (10) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's Report on Form 10-Q for the quarter ended December 31, 1995, Commission File No. 1-9961. (18) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto Lease Trust 1997-A's Report on Form 8-A dated December 23, 1997, Commission File No. 333-26717 *- Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to applicable rules of the Securities and Exchange Commission. -73- EX-4 2 Exhibit 4.3(c) Final AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED AGENCY AGREEMENT in respect of TOYOTA MOTOR CREDIT CORPORATION'S EURO MEDIUM-TERM NOTE PROGRAM This Amendment No. 2, dated as of July 23, 1999 ("Amendment No. 2"), is made to the Second Amended and Restated Agency Agreement, dated as of July 24, 1997, as amended by Amendment No. 1, dated as of July 24, 1998 (as amended, the "Agreement"), among Toyota Motor Credit Corporation, as Issuer (the "Company"), The Chase Manhattan Bank, as Agent (the "Agent"), and Chase Manhattan Bank Luxembourg S.A., as paying agent (the "Paying Agent") in respect of the Company's Euro Medium-Term Note Program. Except as otherwise defined herein, capitalized terms used herein shall have the same meanings ascribed to them in the Agreement. WHEREAS, the Company, the Agent and the Paying Agent desire to amend the Agreement to make certain changes to the Agreement. NOW, THEREFORE, in consideration of the foregoing and for, other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to amend the Agreement as follows: A. Clause 1 (Definitions and Interpretation) is amended as follows: 1. The definition of "Cedel Bank" is amended in its entirety as follows: "Cedel Bank" or "Cedelbank" means Cedelbank. 2. The definition of "Dealer" is amended in its entirety as follows: "Dealer" means each of Merrill Lynch International, Credit Suisse First Boston (Europe) Limited, Goldman Sachs International, Lehman Brothers International (Europe), J.P. Morgan Securities Ltd., Morgan Stanley & Co. International Limited, Nomura International plc, Paribas and UBS AG, acting through its division Warburg Dillon Read, and any other entities appointed as dealers from time to time pursuant to the Program Agreement;. 3. The definition of "Euro" is amended in its entirety as follows: "Euro" or "euro" means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty. 4. The definition of "French francs" is amended in its entirety as follows: 1 "French francs" or "FRF" means the lawful currency for the time being of France, in addition to the euro. (Pursuant to the Treaty, French francs will cease to exist on January 1, 2002.) 5. The definition of "ISDA Definitions" is amended in its entirety as follows: "ISDA Definitions" means the 1991 ISDA Definitions, as supplemented by the 1998 Supplement and the 1998 ISDA Euro Definitions, each as published by the International Swaps and Derivatives Association, Inc., as amended, supplemented or updated from time to time. 6. The definition of "Listing Agent" is amended in its entirety as follows: "Listing Agent" means Merrill Lynch International of Ropemaker Place, 25 Ropemaker Street, London EC2Y 9LY (in the case of Notes Listed on the London Stock Exchange) or such other listing agent as the Company may from time to time appoint for purposes of liaising with any Stock Exchange. 7. The definition of "Noteholders" is amended in its entirety as follows. "Noteholders" means the several persons who are for the time being holders of outstanding Notes save that for so long as any of the Notes are represented by a Global Note, each person who is for the time being shown in the records of Euroclear, Cedelbank or such other applicable clearing agency as the holder of a particular principal amount of such Notes (other than a clearing agency (including Cedelbank and Euroclear) that is itself an account holder of Cedelbank, Euroclear or any other applicable clearing agency for a Series of Notes) (in which regard any certificate or other document issued by Euroclear, Cedelbank or such other applicable clearing agency as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Company, the Agent and any other Paying Agent as a holder of such nominal amount of such Notes for all purposes other than for the payment of principal (including premium (if any)) or interest on such Notes, the right to which shall be vested, as against the Company, the Agent and any other Paying Agent, solely in the bearer of the Global Note in accordance with and subject to its terms (and the expressions "Noteholder", "holder of Notes" and related expressions shall be construed accordingly). 8. The definition of "Outstanding" is amended in its entirety as follows: "Outstanding" means, in relation to the Notes, all the Notes issued other than (a) those which have been redeemed in full in accordance with this Agreement or the Conditions, (b) those in respect of which the date for redemption in accordance with the Conditions has occurred and the redemption moneys therefor (including all interest (if any) accrued thereon to the date for such redemption and any interest (if any) payable under the Conditions after such date) have been duly paid 2 to the Agent as provided herein (and, where appropriate, notice has been given to the Noteholders in accordance with Condition 16) and remain available for payment against presentation of Notes, (c) those which have become void under Condition 15, (d) those which have been purchased or otherwise acquired and cancelled as provided in Condition 5 and those which have been purchased or otherwise acquired and are being held by the Company for subsequent resale or reissuance as provided in Condition 5 during the time so held, (e) those mutilated or defaced Notes which have been surrendered in exchange for replacement Notes pursuant to Condition 14, (f) (for the purposes only of determining how many Notes are outstanding and without prejudice to their status for any other purpose) those Notes alleged to have been lost, stolen or destroyed and in respect of which replacement Notes have been issued pursuant to Condition 14 and (g)temporary Global Notes to the extent that they shall have been duly exchanged in whole for Permanent Global Notes or Definitive Notes and Permanent Global Notes to the extent that they shall have been duly exchanged in whole for Definitive Notes, in each case pursuant to their respective provisions. 9. The definition of "Series" is amended to add the words "Interest Basis, Redemption/Payment Basis" after "Maturity Date" in the second line of the definition and delete the words "and Interest/Payment Basis" from the second line of the definition. 10. The definition of "Tranche" is amended in its entirety as follows: "Tranche" means all Notes of the same Series with the same Issue Date and Interest Commencement Date. 11. The following definition is added to the Agreement: "Treaty" means the Treaty establishing the European Community, as amended by the Treaty on Economic Union. B. Clause 3, subclause (1)(c) is amended in its entirety as follows: to deliver such Temporary Global Note(s) (i) to the specified common depositary of Euroclear, Cedelbank and/or such other applicable clearing agency as is specified in the related Pricing Supplement against receipt from such common depositary of confirmation that such common depositary is holding the Temporary Global Note(s) in safe custody for the account of Euroclear, Cedelbank or such other applicable clearing agency and to instruct Euroclear, Cedelbank and/or such other applicable clearing agency (as the case may be) to credit the Notes represented by such Temporary Global Notes(s), unless otherwise agreed in writing between the Agent and the Company, to the Agent's distribution account (or in the case of a syndicated bond issue, the lead manager's account), or (ii) as otherwise agreed in writing between the Company and the Agent. C. Clause 4, subclause (1)(c) is amended in its entirety as follows: (i) where the Temporary Global Note is being held by a common depository as aforesaid, to deliver such Permanent Global Note to the 3 specified common depositary that is holding the Temporary Global Note for the time being on behalf of Euroclear, Cedelbank and/or such other applicable clearing agency as is specified in the related Pricing Supplement in exchange for such Temporary Global Note or, in the case of a partial exchange, after noting the details of such exchange in the appropriate spaces on both the Temporary Global Note and the Permanent Global Note, and in either case against receipt from the common depositary of confirmation that such common depositary is holding the Permanent Global Note in safe custody for the account of Euroclear, Cedelbank and/or such other applicable clearing agency (as the case may be); or (ii) where the Temporary Global Note is not being held by a common depository, as otherwise agreed in writing between the Company and the Agent. D. Clause (7), subclauses (5) and (6) are amended to add the word "Unless otherwise agreed in writing between the Company and the Agent," to the beginning of those subclauses. E. Clause 8, subclause (2)(a) is amended in its entirety as follows: (a) a day (other than a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London. F. Clause 8, subclause (2)(b) is amended in its entirety as follows: (b) either (i) in relation to a payment to be made in a Specified Currency other than ECU or euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in the principal financial center of the country of the relevant Specified Currency (if other than London), (ii) in relation to a payment to made in ECU, an ECU Settlement Day, or (iii) in relation to a payment to be made in euro, a day on which the TARGET system is open; and G. Clause 9, subclauses (9)(a) and (9)(b) are amended to add the word "Linked" after "Indexed". H. Clause 13, subclause (1) is amended in its entirety as follows: All Notes which are purchased or otherwise acquired pursuant to the Conditions by the Company, together (in the case of Definitive Notes) with all unmatured Receipts, Coupons or Talons (if any) attached thereto or purchased therewith, may, at the option of the Company, either be (i) resold or reissued, or held by the Company for subsequent resale or reissuance, or (ii) cancelled in which event such Notes, Receipts and Coupons may not be resold or reissued. Where any Notes, Receipts, Coupons or Talons are purchased and cancelled, resold or reissued, or held by the Company for subsequent resale or reissuance, as aforesaid, the Company shall procure that all relevant details are promptly given to the Agent and that all Notes, Receipts, Coupons or Talons so cancelled are delivered to the Agent. 4 I. Clause 14, subclause (4)(b) is amended in its entirety as follows: (b) furnished it with such evidence (including evidence as to the serial number of such Note, Receipt, Coupon or Talon) and indemnity or other security (which may include a bank guarantee and/or security) or otherwise as the Company and the Agent may reasonably require; and J. Clause 19, subclause (3) is amended in its entirety as follows: The Agent and the Paying Agents hereby undertake to the Company to perform such obligations and duties, and shall be obliged to perform such duties and only such duties, as are herein, in the Conditions and in the Procedures Memorandum specifically set forth, or are otherwise agreed to in writing by the Company, the Agent and the Paying Agents as applicable, and no implied duties or obligations shall be read into this Agreement or the Notes against the Agent and the Paying Agents. K. Clause 25, subclauses (a) and (b) are amended in their entirety as follows: (a) if delivered in person to the relevant address specified on the signature pages of Amendment No 2 (or to such other address as is specified in writing and delivered to all parties to this Agreement) and, if so delivered, shall be deemed to have been delivered at time of receipt; (b) if sent by facsimile or telex to the relevant number specified on the signature pages of Amendment No. 2 (or to such other facsimile or telex numbers as are specified in writing and delivered to all parties to this Agreement) and, if so sent, shall be deemed to have been delivered upon transmission provided such transmission is confirmed by the answer back of the recipient (in the case of telex) or when an acknowledgment of receipt is received (in the case of facsimile). L. The paragraph in Clause 28 appearing before subclause (1) is amended in its entirety as follows: For purposes of this Clause 28, the term "outstanding" excludes those Notes which have been purchased or otherwise acquired and are being held by the Company for subsequent resale or reissuance as provided in Condition 5 during the time so held. M. Clause 33, subclause (1)(a) is amended to add the word "in" after the word "specified" and before the words "Condition 17(a)(i)" in line 12 of the subclause. N. Clause 33, subclauses (1)(e), (f) and (g) are amended in their entirety as follows: (e) After the Redenomination Date, "Business Day" in relation to any sum payable in euro shall mean a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London and New York and a day on which the TARGET system is open. 5 After the Redenomination Date, "Payment Business Day" shall mean (A) a "Business Day" as defined herein and (B) a day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in the relevant place of presentation. (f) If definitive Notes have been issued, after the Redenomination Date, the amount of interest due in respect of Notes will be calculated by reference to the aggregate nominal amount of Notes presented (or, as the case may be, in respect of which Receipts or Coupons are presented) for payment by the relevant holder and the amount of such payment shall be rounded down to the nearest euro 0.01. If the Notes are in global form, after the Redenomination Date, the amount of interest due in respect of Notes represented by the Global Note will be calculated by reference to the aggregate nominal amount of such Notes and the amount of such payment shall be rounded down to the nearest euro 0.01. (g) The applicable Pricing Supplement will specify any relevant changes to the provisions relating to interest, including without limitation, any change to the applicable Day Count Fraction and Business Day Convention. O. Clause 33, subclause (2) is amended in its entirety as follows: Where exchange ("Exchange") is specified in the applicable Pricing Supplement as being applicable, and unless otherwise specified in the applicable Pricing Supplement, the Company may, without the consent of any Noteholder, Receiptholder or Couponholder, on giving prior notice to Euroclear, Cedelbank and the Agent and at least 30 days' prior notice to the Noteholders as provided in Condition 16, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be exchangeable for Notes expressed to be denominated in euro in accordance with such arrangements as the Company may decide, after consultation with the Agent, and as may be specified in the notice, including arrangements under which Receipts and Coupons (which expression shall for this purpose include Coupons to be issued on an exchange of matured Talons) unmatured at the date so specified become void. P. Appendix A (Terms and Conditions of the Notes) is amended in its Entirety in the form of Appendix A attached hereto. Q. Appendix B (Forms of Global and Definitive Notes, Coupons, Receipts and Talons) is amended in its entirety in the form attached hereto. R. Appendix C (Form of Calculation Agency Agreement) is amended as follows: 1. The first sentence of Clause A of the form of Calculation Agency Agreement is amended in its entirety as follows: The Company has entered into the Second Amended and Restated Program Agreement with Merrill Lynch International, Credit Suisse First Boston (Europe) Limited, Goldman Sachs International, Lehman Brothers International (Europe), J.P. Morgan Securities Ltd., Morgan Stanley & Co. International Limited, Nomura International plc, Paribas and UBS AG, acting through its division Warburg Dillon Read, 6 dated July 24, 1997, as amended by Amendment No. 1 to the Second Amended and Restated Program Agreement, dated July 24, 1998, and Amendment No. 2 to the Second Amended and Restated Program Agreement, dated July 23, 1999 (as amended, the "Program Agreement"), under which $16,000,000,000 (or its equivalent in other currencies) in aggregate principal amount of Notes ("Notes") may be outstanding. 2. The first sentence of Clause B of the form of Calculation Agency Agreement is amended in its entirety as follows: The Notes will be issued subject to and with the benefit of the Second Amended and Restated Agency Agreement, dated as of July 24, 1997, as amended by Amendment No. 1 to the Second Amended and Restated Agency Agreement, dated as of July 24, 1998, and Amendment No. 2 to the Second Amended and Restated Agency Agreement, dated as of July 23, 1999 (as amended, the "Agency Agreement") among the Company, The Chase Manhattan Bank (the "Agent," which expression shall include its successor or successors for the time being under the Agency Agreement) and Chase Manhattan Bank Luxembourg S.A. (the "Paying Agent," which expression shall include its successor or successors for the time being under the Agency Agreement). 3. The notice provisions of Section (7) of the form of Calculation Agency Agreement relating to the Company are amended as follows: The Company: TOYOTA MOTOR CREDIT CORPORATION 19001 South Western Avenue FN 17 Torrance, California 90509 Telephone No: (310) 618-4001 Fax No. (310) 787-6194 Attention: Vice President, Treasury S. The first paragraph of Section 4 of Appendix D (Form of Operating & Administrative Procedures Memorandum) is amended to add the word "Linked" after the word "Indexed" in the third line of that paragraph. T. Annex A (Settlement Procedures) to Appendix D (Form of Operating & Administrative Procedures Memorandum) is amended as follows: 1. Page D-4 under "Issue Date minus 2 days" is amended by the addition of the words "or Index Linked Interest Notes" after "Floating Rate Notes" in the first sentence of the first paragraph. 2. The second paragraph on page D-5 under "Issue Date" is amended in its entirety as follows: The Agent pays to the Company the aggregate subscription moneys received by it to such account as the Company shall notify to the Agent. 3. On page D-5 under Explanatory Notes to Settlement Procedures, clause (a) is amended in its entirety as follows: 7 (a) Each "Day" is a day on which banks and foreign exchange markets are open for general business in London (including dealings in foreign exchange and foreign currency deposits), counted in reverse order from the proposed Issue Date. 4. On page D-5 under Explanatory Notes to Settlement Procedures, clause (b) is amended in its entirety as follows: The "Issue Date" must be a Business Day. For the purposes of this Memorandum, "Business Day" means a day which is both: a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London; and (i) in relation to Notes denominated in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in the principal financial center of the country of the relevant Specified Currency (if other than London), or (ii) in relation to Notes denominated in euro, a day on which the TARGET system is open. Unless provided otherwise in the applicable Pricing Supplement, the principal financial center of any country shall be as provided in the ISDA Definitions (except in the case of New Zealand and Australia, where the principal financial center will be as specified in the Pricing Supplement). 5. On page D-6 under Explanatory Notes to Settlement Procedures, clause (d) is amended by replacing "Sponsor" with "Company". U. Annex B (Form of Pricing Supplement) to Appendix D (Form of Operating & Administrative Procedures Memorandum) is amended in its entirety in the form of Annex B to Appendix D attached hereto. V. Annex D (Trading Desk Information) to Appendix D (Form of Operating & Administrative Procedures Memorandum) is amended in its entirety in the form of Annex D to Appendix D attached hereto. W. Appendix E (Form of Notes) is amended in its entirety to the form of Appendix E attached hereto. The form of the Pricing Supplement referred to in the Form of Notes is set out in full in Annex B to Appendix D (Form of Operating & Administrative Procedures Memorandum). 8 IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 to the Second Amended and Restated Agency Agreement as of the date above first written. The Company - ----------- TOYOTA MOTOR CREDIT CORPORATION 19001 South Western Avenue, FN 17 Torrance, California 90509 Telephone: (310) 618-4001 Telefax: (310) 787-6194Attention: Vice President, Treasury By: ------------------------------- Name: George E. Borst Title: Senior Vice President and General Manager The Agent - ---------- The Chase Manhattan Bank Trinity Tower 9 Thomas More Street London E1 9YT Telephone: 01202 347430 Fax: 01202 347438 Telex: 8954681 CMB G Attention: Manager, Global Trust Services, Operations By: ------------------------------- The Paying Agent - ---------------- Chase Manhattan Bank Luxembourg S.A. 5 Rue Plaetis L-2338 Luxembourg Telephone: 00 352 4626 85236 Fax: 00 352 4626 85380 Telex: 1233 CHASE LU Attention: Manager, Global Trust Services, Operations By: ------------------------------- S-1 APPENDIX A ---------- TERMS AND CONDITIONS OF THE NOTES --------------------------------- The following are the Terms and Conditions (the "Terms and Conditions" or the "Conditions") of the Notes issued on or after the date of this Offering Circular which (subject to completion and amendment and to the extent applicable) will be attached to or incorporated by reference into each global Note and which will be incorporated by reference or endorsed upon each definitive Note. The applicable Pricing Supplement in relation to any Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Pricing Supplement will be endorsed upon, or attached to, each temporary global Note, permanent global Note and definitive Note. Reference should be made to "Form of the Notes" in the Offering Circular dated July 23, 1999 (the "Offering Circular") for the form of Pricing Supplement which will include the definitions of certain terms used in the following Terms and Conditions. This Note is one of a Series (as defined below) of Notes (the "Notes," which expression shall mean (i) in relation to any Notes represented by a global Note, units of the lowest Specified Denomination in the Specified Currency of the relevant Notes, (ii) definitive Notes issued in exchange (or partial exchange) for a temporary or permanent global Note, and (iii) any global Note) issued subject to, and with the benefit of, a Second Amended and Restated Agency Agreement dated as of July 24, 1997, as amended (the "Agency Agreement"), and made between Toyota Motor Credit Corporation ("TMCC", which reference does not include the subsidiaries of TMCC) and The Chase Manhattan Bank, London Office, as issuing agent and (unless specified otherwise in the applicable Pricing Supplement) principal paying agent and (unless specified otherwise in the applicable Pricing Supplement) as calculation agent (the "Agent", which expression shall include any successor agent or any other Calculation Agent specified in the applicable Pricing Supplement) and the other paying agents named therein (together with the Agent, the "Paying Agents", which expression shall include any additional or successor paying agents). Interest-bearing definitive Notes will (unless otherwise indicated in the applicable Pricing Supplement) have interest coupons ("Coupons") and, if indicated in the applicable Pricing Supplement, talons for further Coupons ("Talons") attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Notes repayable in installments will have receipts ("Receipts") for the payment of the installments of principal (other than the final installment) attached on issue. A-1 As used herein, "Series" means all Notes which are denominated in the same currency and which have the same Maturity Date, Interest Basis, Redemption/Payment Basis and Interest Payment Dates (if any) (all as indicated in the applicable Pricing Supplement) and the terms of which (except for the Issue Date or the Interest Commencement Date (as the case may be) and/or the Issue Price (as indicated as aforesaid)) are otherwise identical (including whether or not the Notes are listed) and the expressions "Notes of the relevant Series" and "holders of Notes of the relevant Series" and related expressions shall be construed accordingly. As used herein, "Tranche" means all Notes of the same Series with the same Issue Date and Interest Commencement Date (if applicable). The Pricing Supplement applicable to any particular Note or Notes is attached hereto or endorsed hereon and supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of such Note or Notes. References herein to the "applicable Pricing Supplement" shall mean the Pricing Supplement attached hereto or endorsed hereon. Copies of the Agency Agreement (which contains the form of Pricing Supplement) and the Pricing Supplement applicable to any particular Note or Notes (if listed) are available for inspection at the specified offices of the Agent and each of the other Paying Agents. The holders of the Notes (the "Noteholders"), which expression shall, in relation to any Notes represented by a global Note, be construed as provided in Condition 1, the holders of the Coupons (the "Couponholders") and the holders of Receipts (the "Receiptholders") are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement and the applicable Pricing Supplement, which are binding on them. A temporary or permanent global Note will be exchangeable in whole, but not in part, for security printed definitive Notes with, where applicable, Receipts, Coupons and Talons attached not earlier than the date (the "Exchange Date") which is 40 days after completion of the distribution of the relevant Tranche, provided that certification of non-U.S. beneficial ownership has been received: (i) at the option of TMCC; (ii) unless stated otherwise in the applicable Pricing Supplement, at the option of holders of an interest in the temporary or permanent global Note upon such notice as is specified in the applicable Pricing Supplement from Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") or Cedelbank (as the case may be) acting on instructions of the holders of interest in the temporary or permanent global Note and/or subject to the payment of costs in connection with the printing and distribution of the definitive Notes, if specified in the applicable Pricing Supplement; (iii) if, after the occurrence of an Event of Default, holders representing at least a majority of the outstanding principal amount of the Notes of a Series, acting together as a single class, advise the Agent through Euroclear and Cedelbank that they wish to receive definitive Notes; or (iv) Euroclear, Cedelbank and any other relevant clearance system for the temporary or permanent global Note are all no longer willing or able to discharge properly their responsibilities with respect to such Notes and the Agent and TMCC are unable to locate a qualified successor. A-2 Words and expressions defined in the Agency Agreement, defined elsewhere in the Offering Circular or used in the applicable Pricing Supplement shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail. A. Form, Denomination and Title ---------------------------- The Notes in this Series are in bearer form and, in the case of definitive Notes, serially numbered in the Specified Currency (or Currencies in the case of Dual Currency Notes) and in the Specified Denomination(s) specified in the applicable Pricing Supplement. This Note may be a Note bearing interest on a fixed rate basis ("Fixed Rate Note"), a Note bearing interest on a floating rate basis ("Floating Rate Note"), a Note issued on a non-interest bearing basis ("Zero Coupon Note"), a Note with respect to which interest is calculated by reference to an index and/or a formula ("Indexed Linked Interest Note) or any combination of the foregoing, depending upon the Interest Basis specified in the applicable Pricing Supplement. This Note may be a Note with respect to which principal is calculated by reference to an index and/or a formula ("Index Linked Redemption Note"), a Note redeemable in installments ("Installment Note"), a Note with respect to which principal and/or interest is payable in one or more Specified Currencies other than the Specified Currency in which it is denominated ("Dual Currency Note"), a Note which is issued on a partly paid basis ("Partly Paid Note") or a combination of any of the foregoing, depending on the Redemption/Payment Basis shown in the applicable Pricing Supplement. (Where appropriate in the context, "Index Linked Interest Notes" and "Index Linked Redemption Notes" are referred to collectively as "Index Linked Notes".) The appropriate provisions of these Terms and Conditions will apply accordingly. Notes in definitive form are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to interest (other than interest due after the Maturity Date), Coupons and Couponholders in these Terms and Conditions are not applicable. Wherever Dual Currency Notes or Index Linked Notes are issued to bear interest on a fixed or floating rate basis or on a non-interest bearing basis, the provisions in these Terms and Conditions relating to Fixed Rate Notes, Floating Rate Notes and Zero Coupon Notes, respectively, shall, where the context so admits, apply to such Dual Currency Notes or Index Linked Notes. Except as set out below, title to the Notes, Receipts and Coupons will pass by delivery. The holder of each Coupon or Receipt, whether or not such Coupon or Receipt is attached to a Note, in his capacity as such, shall be subject to and bound by all the provisions contained in the relevant Note. TMCC and any Paying Agent may deem and treat the bearer of any Note, Receipt or Coupon as the absolute owner thereof (whether or not overdue and notwithstanding any notice to the contrary, including any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any global Note, without prejudice to the provisions set out in the next succeeding paragraph. A-3 For so long as any of the Notes are represented by a global Note, each person who is for the time being shown in the records of Euroclear or of Cedelbank as the holder of a particular principal amount of Notes other than a clearing agency (including Cedelbank and Euroclear) that is itself an account holder of Cedelbank or Euroclear (in which regard any certificate or other document issued by Euroclear or Cedelbank as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes except in the case of manifest error) shall be treated by TMCC, the Agent and any other Paying Agent as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal (including premium (if any)) or interest on the Notes, the right to which shall be vested, as against TMCC, the Agent and any other Paying Agent solely in the bearer of the relevant global Note in accordance with and subject to its terms (and the expressions "Noteholder" and "holder of Notes" and related expressions shall be construed accordingly). Notes which are represented by a global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear or of Cedelbank, as the case may be. Any reference herein to Euroclear and/or Cedelbank shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearance system approved by TMCC and the Agent. If the Specified Currency of this Note is a currency of one of the member states participating in European economic and monetary union, and if specified in the applicable Pricing Supplement, this Note shall permit Redenomination, Exchange and Consolidation (as defined, and in the manner set forth, in Condition 17 below or in such other manner as set forth in the applicable Pricing Supplement) at the option of TMCC. B. Status of Notes --------------- The Notes will be unsecured general obligations of TMCC and will rank pari passu with all other unsecured and unsubordinated indebtedness for borrowed money of TMCC from time to time outstanding. C. Further Issues -------------- If indicated in the applicable Pricing Supplement, TMCC may from time to time, without the consent of the holders of Notes, Receipts or Coupons of a Series, create and issue further Notes of the same Series having the same terms and conditions (or the same terms and conditions save for the first payment of interest thereon and the Issue Date thereof) with the outstanding Notes and so that the same shall be consolidated and form a single Series with the outstanding Notes and references in the Conditions to "Notes" shall be construed accordingly. D. Interest -------- 1. Interest on Fixed Rate Notes and Business Day Convention for Notes other than Floating Rate Notes and Index Linked Interest Notes A-4 Each Fixed Rate Note bears interest on its outstanding nominal amount (or if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date which is specified in the applicable Pricing Supplement to but excluding the Maturity Date specified in the applicable Pricing Supplement at the rate(s) per annum equal to the Fixed Rate(s) of Interest specified in the applicable Pricing Supplement payable in arrears on the Interest Payment Date(s) in each year and on the Maturity Date so specified if it does not fall on a Interest Payment Date. Except as provided in the applicable Pricing Supplement, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on such date will amount to the Fixed Coupon Amount as specified in the applicable Pricing Supplement. Payments of interest on any Interest Payment Date will, if so specified in the applicable Pricing Supplement, amount to the Broken Amount(s) so specified. As used in these Conditions, "Fixed Interest Period" means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date or Maturity Date. Unless specified otherwise in the applicable Pricing Supplement, the "Following Business Day Convention" will apply to the payment of all Notes other than Floating Rate Notes or Indexed Linked Interest Notes, meaning that if the Interest Payment Date or Maturity Date would otherwise fall on a day which is not a Business Day (as defined in Condition 4(b)(i) below), 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. If the "Modified Following Business Day Convention" is specified in the applicable Pricing Supplement for any Note (other than a Floating Rate Note or an Index Linked Interest Note), it shall mean that if the Interest Payment Date or Maturity Date would otherwise fall on a day which is not a Business Day (as defined in Condition 4(b)(i) below), 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 unless it would thereby fall into the next calendar month in which event the full amount of payment shall be made on the immediately preceding Business Day as if made on the day such payment was due. Unless specified otherwise in the applicable Pricing Supplement, the amount of interest due shall not be changed if payment is made on other than an Interest Payment Date or the Maturity Date as a result of the application of a Business Day Convention specified above or other Business Day Convention specified in the applicable Pricing Supplement. If interest is required to be calculated for a period ending other than on an Interest Payment Date (which for this purpose shall not include a period where a payment is made on a day other than an Interest Payment Date or the Maturity Date as a result of the application of a Business Day Convention as provided in the immediately preceding paragraph, unless specified otherwise in the applicable Pricing Supplement), such interest shall be calculated by applying the Fixed Rate of Interest to each Specified Denomination, multiplying such sum by the applicable Fixed Day Count Fraction or other Day Count Fraction specified in the Pricing Supplement, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. A-5 In these Conditions, "Fixed Day Count Fraction" means: (a) if "Actual/Actual (ISMA)" is specified in the applicable Pricing Supplement, the number of days in the relevant period from and including the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to but excluding the relevant payment date divided by (x) in the case of Notes where interest is scheduled to be paid only by means of regular annual payments, the number of days in the period from and including the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to but excluding the next scheduled Interest Payment Date or (y) in the case of Notes where interest is scheduled to be paid other than only by means of regular annual payments, the product of the number of days in the period from and including the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to but excluding the next scheduled Interest Payment Date and the number of Interest Payment Dates that would occur in one calendar year assuming interest was to be payable in respect of the whole of that year; (b) if "Actual/Actual (ISDA)" is specified in the applicable Pricing Supplement, the actual number of days in the relevant period divided by 365 (or, if any portion of that period falls in a leap year, the sum of (x) the actual number of days in that portion of the period falling in a leap year divided by 366; and (y) the actual number of days in that portion of the period falling in a non-leap year divided by 365); and (c) if "30/360" is specified in the applicable Pricing Supplement, the number of days in the period from and including the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to but excluding the relevant payment date (such number of days being calculated on the basis of 12 30-day months) divided by 360 and, in the case of an incomplete month, the number of days elapsed; and (d) "sub-unit" means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent. 2. Interest on Floating Rate Notes and Index Linked Interest Notes --------------------------------------------------------------- (a) Interest Payment Dates ---------------------- Each Floating Rate Note and Index Linked Interest Note bears interest on its outstanding nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date specified in the applicable Pricing Supplement and, unless specified otherwise in the applicable Pricing Supplement, such interest will be payable in arrears on the Maturity Date and on either: (1) the Specified Interest Payment Date(s) (each, together with the Maturity date, an "Interest Payment Date") in each year specified in the applicable Pricing Supplement; or A-6 (2) if no Specified Interest Payment Date(s) is/are specified in the applicable Pricing Supplement, each date (each, together with the Maturity Date, an "Interest Payment Date") which falls the number of months or other period specified as the Specified Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. Such interest will be payable in respect of each Interest Period (which expression shall, in these Terms and Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date). If a Business Day Convention is specified in the applicable Pricing Supplement and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day (as defined below), then, if the Business Day Convention specified is: (1) in any case where Specified Periods are specified in accordance with Condition 4(b)(i)(B) above, the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below in this subparagraph (1) shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or (2) the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or (3) the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or (4) the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day. If the accrual periods for calculating the amount of interest due on any Interest Payment Date are not to be changed even though an Interest Payment Date is changed because the originally scheduled Interest Payment Date falls on a day which is not a Business Day (as defined below), this will be specified in the Pricing Supplement by the notation "no adjustment for period end dates." In these Conditions, "Business Day" means (unless otherwise stated in the applicable Pricing Supplement) a day which is both: (1) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London and any other Applicable Business Center specified in the applicable Pricing Supplement; and A-7 (2) either (1) in relation to Notes denominated in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in the principal financial center of the country of the relevant Specified Currency (if other than London and any other Applicable Business Center specified in the applicable Pricing Supplement), or (2) in relation to Notes denominated in euro, a day on which the TARGET system (as defined in Condition 17) is open. Unless otherwise provided in the applicable Pricing Supplement, the principal financial center of any country for the purpose of these Terms and Conditions shall be as provided in the 1991 ISDA Definitions, as supplemented by the 1998 Supplement and the 1998 ISDA Euro Definitions (each as published by the International Swaps and Derivatives Association, Inc.), as amended and updated as of the Issue Date of the Note (the "ISDA Definitions") (except in the case of New Zealand and Australia, where the principal financial center will be as specified in the Pricing Supplement). (b) Rate of Interest ---------------- The Rate of Interest payable from time to time in respect of each Series of Floating Rate Notes and Index Linked Interest Notes shall be determined in the manner specified in the applicable Pricing Supplement. (c) ISDA Determination ------------------ (1) Where ISDA Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any) as determined by the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement). For the purposes of this sub-paragraph (A), "ISDA Rate" for an Interest Period means a rate equal to the Floating Rate that would be determined under an interest rate swap transaction for that swap transaction governed by an agreement (regardless of any event of default or termination event thereunder) in the form of the 1992 ISDA Master Agreement (Multicurrency-Cross Border)(the "ISDA Agreement")(copyright 1992) and evidenced by a Confirmation (as defined in the ISDA Agreement) incorporating the ISDA Definitions with the holder of the relevant Note and under which: (2) the manner in which the Rate of Interest is to be determined is the "Floating Rate Option" as specified in the applicable Pricing Supplement; (3) TMCC is the "Floating Rate Payer"; (4) the Agent or other person specified in the applicable Pricing Supplement is the "Calculation Agent"; (5) the Interest Commencement Date is the "Effective Date"; (6) the aggregate principal amount of the Series is the "Notional Amount"; A-8 (7) the relevant Interest Period is the "Designated Maturity" as specified in the applicable Pricing Supplement; (8) the Interest Payment Dates are the "Floating Rate Payer Payment Dates"; (9) the Margin is the "Spread"; and (10) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate ("LIBOR") or on the Euro-zone inter-bank offered rate ("EURIBOR") for a currency, the first day of that Interest Period or (ii) in any other case, as specified in the applicable Pricing Supplement; and (11) all other terms are as specified in the applicable Pricing Supplement. When Condition 4(b)(iii)(A) applies, with respect to each relevant Interest Payment Date: (1) the amount of interest determined for such Interest Payment Date shall be the Interest Amount for the relevant Interest Period for the purposes of these Terms and Conditions as though calculated under Condition 4(b)(vi) below; and (2) (i) Floating Rate", "Floating Rate Option", "Floating Rate Payer", "Effective Date", "Notional Amount", "Floating Rate Payer Payment Dates", "Spread", "Calculation Agent", "Designated Maturity" and "Reset Date" have the meanings given to those terms in the ISDA Definitions, (ii) the definition of "Banking Day" in the ISDA Definitions shall be amended to insert after the words "are open for" in the second line the word "general" and (iii) "Euro-zone" means the region comprised of Member States of the European Union that adopt the single currency in accordance with the Treaty establishing the European Communities, as amended by the Treaty on European Union (the "Treaty"). (d) Screen Determination -------------------- Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either: (x) the offered quotation; or (y) the arithmetic mean (rounded, if necessary, to the fifth decimal place with 0.000005 being rounded upwards) of the offered quotations, (expressed as a percentage rate per annum), for the Reference Rate (as specified in the applicable Pricing Supplement) which appears or appear, as the case may be, on the Relevant Screen Page (as set forth in the applicable Pricing Supplement) as at 11:00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date (as A-9 defined below) in question plus or minus (as specified in the applicable Pricing Supplement) the Margin (if any), all as determined by the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement). Unless specified otherwise in the applicable Pricing Supplement, if five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations. In addition: (1) if, in the case of (x) above, no such rate appears or, in the case of (y) above, fewer than two of such offered rates appear at such time or if the offered rate or rates which appears or appear, as the case may be, as at such time do not apply to a period of a duration equal to the relevant Interest Period, the Rate of Interest for such Interest Period shall, subject as provided below and except as otherwise indicated in the applicable Pricing Supplement, be the arithmetic mean (rounded, if necessary, to the fifth decimal place with 0.000005 being rounded upwards) of the offered quotations (expressed as a percentage rate per annum), of which the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) is advised by all Reference Banks (as defined below) as at 11:00 a.m. (London time) on the Interest Determination Date plus or minus (as specified in the applicable Pricing Supplement) the Margin (if any), all as determined by the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement); (2) except as otherwise indicated in the applicable Pricing Supplement, if on any Interest Determination Date to which Condition 4(b)(iv)(A) applies two or three only of the Reference Banks advise the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) of such offered quotations, the Rate of Interest for the next Interest Period shall, subject as provided below, be determined as in Condition 4(b)(iv)(A) on the basis of the rates of those Reference Banks advising such offered quotations; (3) except as otherwise indicated in the applicable Pricing Supplement, if on any Interest Determination Date to which Condition 4(b)(iv)(A) applies one only or none of the Reference Banks advises the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) of such rates, the Rate of Interest for the next Interest Period shall, subject as provided below and except as otherwise indicated in the applicable Pricing Supplement, be whichever is the higher of: (i) the Rate of Interest in effect for the last preceding Interest Period to which Condition 4(b)(iv)(A) shall have applied (plus or minus (as specified in the applicable Pricing Supplement), where a different Margin is to be applied to the next Interest Period than that which applied to the last preceding Interest Period, the Margin relating to the next Interest Period in place of the Margin relating to the last preceding Interest Period); or (ii) the reserve interest rate (the "Reserve Interest Rate") which shall be the rate per annum which the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) determines to be either (x) the arithmetic mean (rounded, if necessary, to the fifth decimal place with 0.000005 being rounded upwards) of the lending rates for the Specified A-10 Currency which banks selected by the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) in the principal financial center of the country of the Specified Currency (which, if Australian dollars, shall be Sydney, if New Zealand dollars, shall be Auckland and if euro, shall be London, unless specified otherwise in the applicable Pricing Supplement) are quoting on the relevant Interest Determination Date for the next Interest Period to the Reference Banks or those of them (being at least two in number) to which such quotations are, in the opinion of the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement), being so made plus or minus (as specified in the applicable Pricing Supplement) the Margin (if any), or (y) in the event that the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) can determine no such arithmetic mean, the lowest lending rate for the Specified Currency which banks selected by the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) in the principal financial center of the country of the Specified Currency (which, if Australian dollars, shall be Sydney, if New Zealand dollars, shall be Auckland and if euro, shall be London, unless specified otherwise in the applicable Pricing Supplement) are quoting on such Interest Determination Date to leading European banks for the next Interest Period plus or minus (as specified in the applicable Pricing Supplement) the Margin (if any), provided that if the banks selected as aforesaid by the Agent (or such other Calculation Agent specified in the applicable Pricing Supplement) are not quoting as mentioned above, the Rate of Interest shall be the Rate of Interest specified in (1) above; (4) the expression "Reference Screen Page" means such page, whatever its designation, on which the Reference Rate that is for the time being displayed on the Reuters Monitor Money Rates Service or Dow Jones Markets Limited or other such service, as specified in the applicable Pricing Supplement; (5) unless otherwise specified in the applicable Pricing Supplement, the Reference Banks will be the principal London offices of The Chase Manhattan Bank, National Westminster Bank PLC, UBS AG and The Bank of Tokyo-Mitsubishi International PLC. TMCC shall procure that, so long as any Floating Rate Note or Index Linked Interest Note to which Condition 4(b)(iv)(A) is applicable remains outstanding, in the case of any bank being unable or unwilling to continue to act as a Reference Bank, TMCC shall specify the London office of some other leading bank engaged in the eurodollar market to act as such in its place; (6) the expression "Interest Determination Date" means, unless otherwise specified in the applicable Pricing Supplement, (x) other than in the case of Condition 4(b)(iv)(A), with respect to Notes denominated in any Specified Currency other than Sterling or euro, the second Banking Day in London prior to the commencement of the relevant Interest Period and, in the case of Condition 4(b)(iv)(A), the second Banking Day in the principal financial center of the country of the Specified Currency (which, if Australian dollars, shall be Sydney, if New Zealand dollars, shall be Auckland and if euro, shall be London) prior to the commencement of the relevant Interest Period; (y) with respect to Notes denominated in Sterling, the first Banking Day in London of the relevant Interest Period; and (z) with respect to Notes A-11 denominated in euro, the second day on which the TARGET system (as defined in Condition 17(e)) is open prior to the commencement of the relevant Interest Period. (7) the expression "Banking Day" means, in respect of any place, any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in that place or, as the case may be, as indicated in the applicable Pricing Supplement; and (8) if the Reference Rate from time to time in respect of Floating Rate Notes or Index Linked Interest Notes is specified in the applicable Pricing Supplement as being other than LIBOR or EURIBOR, any additional provisions relevant in determining the Rate of Interest in respect of such Notes will be set forth in the applicable Pricing Supplement. (e) Minimum and/or Maximum Rate of Interest --------------------------------------- If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then in no event shall the Rate of Interest for such Interest Period be less than such Minimum Rate of Interest. If the applicable Pricing Supplement specifies a Maximum Rate of Interest for any Interest Period, then in no event shall the Rate of Interest for such Interest Period be greater than such Maximum Rate of Interest. (f) Determination of Rate of Interest and Calculation of Interest Amount -------------------------------------------------------------------- The Agent (or, if the Agent is not the Calculation Agent, the Calculation Agent specified in the applicable Pricing Supplement) will, at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest (subject to any Minimum or Maximum Rate of Interest specified in the applicable Pricing Supplement) and calculate the amount of interest (the "Interest Amount") payable on the Floating Rate Notes or Index Linked Interest Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to each Specified Denomination, multiplying such product by the applicable Day Count Fraction, as specified in the applicable Pricing Supplement, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any sub-unit being rounded upwards or otherwise in accordance with applicable market convention or as specified in the applicable Pricing Supplement. "Day Count Fraction" means, in respect of the calculation of an amount of interest for any Interest Period: (1) if "Actual/365" or "Actual/Actual" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365); A-12 (2) if "Actual/365 (Fixed)" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365; (3) if "actual/360" is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 360; (4) if "30/360", "360/360" or "Bond Basis" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360 The number of days to be calculated on the basis of a year of 360 days with 12 30-day months (unless (a) the last day in the Interest Period is the 31st day of a month but the first day of the Interest Period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (b) the last day of the Interest Period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month); (5) if "30E/360" or "Eurobond Basis" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30-day months, without regard to the date of the first day or last day of the Interest Period unless, in the case of an Interest Period ending on the Maturity Date, the Maturity Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month); and (6) if "Sterling/FRN" is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366. (g) Notification of Rate of Interest and Interest Amount ---------------------------------------------------- The Agent will notify or cause to be notified TMCC and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are listed of the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date and will cause the same to be published in accordance with Condition 16 as soon as possible after their determination but in no event later than the fourth London Business Day after their determination. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without publication as aforesaid or prior notice in the event of an extension or shortening of the Interest Period in accordance with the provisions hereof. Each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed will be promptly notified of any such amendment. For the purposes of this subparagraph (vii), the expression "London Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London. (h) Certificates to be final ------------------------ All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes A-13 of the provisions of this paragraph (b), whether by the Agent or other Calculation Agent, shall (in the absence of willful default, bad faith or manifest error) be binding on TMCC, the Agent, the Calculation Agent the other Paying Agents and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to TMCC, the Noteholders, the Receiptholders or the Couponholders shall attach to the Agent or the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions. (i) Limitations on Interest ----------------------- In addition to any Maximum Rate of Interest which may be applicable to any Floating Rate Note or Index Linked Interest Notes pursuant to Condition 4(b)(v) above, the interest rate on Floating Rate Notes or Index Linked Interest Notes shall in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application. (j) Index Linked Notes and Dual Currency Notes ------------------------------------------ In the case of Index Linked Notes or Dual Currency Notes, if the Rate of Interest or Interest Amount cannot be determined by reference to an index and/or a formula or, as the case may be, an exchange rate, such Rate of Interest or Interest Amount payable shall be determined in the manner specified in the applicable Pricing Supplement. (k) Zero Coupon Notes ----------------- When a Zero Coupon Note becomes due and repayable prior to the Maturity Date and is not paid when due, the amount due and repayable shall be the Amortized Face Amount of such Note as determined in accordance with Condition 5(f)(iii). As from the Maturity Date, any overdue principal of such Note shall bear interest at a rate per annum equal to the Accrual Yield set forth in the applicable Pricing Supplement. (l) Partly Paid Notes ----------------- In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid up nominal amount of such Notes and otherwise as specified in the applicable Pricing Supplement. (m) Accrual of Interest ------------------- Each Note (or in the case of the redemption in part only of a Note, such part to be redeemed) will cease to bear interest (if any) from the due date for its redemption unless, upon due presentation thereof, payment of principal is A-14 improperly withheld or refused. In such event, interest will continue to accrue (as well after as before judgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the holder of such Note; and (ii) the day on which the Agent has notified the holder thereof (either in accordance with Condition 16 or individually) of receipt of all sums due in respect thereof up to that date. E. Redemption and Purchase ----------------------- 1. At Maturity ----------- Unless otherwise indicated in the applicable Pricing Supplement and unless previously redeemed or purchased and cancelled as specified below, Notes will be redeemed by TMCC at their Final Redemption Amount specified in, or determined in the manner specified in, the applicable Pricing Supplement in the relevant Specified Currency on the Maturity Date specified in the applicable Pricing Supplement. 2. Redemption for Tax Reasons -------------------------- TMCC may redeem the Notes of this Series as a whole but not in part at any time at their Early Redemption Amount, together, if appropriate, with accrued interest to but excluding the date fixed for redemption, if TMCC shall determine that as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States of America or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in application or official interpretation of such laws, regulations or rulings, which amendment or change is effective on or after the latest Issue Date of the Notes of this Series, TMCC would be required to pay Additional Amounts, as provided in Condition 9, on the occasion of the next payment due in respect of the Notes of this Series. The Notes of this Series are also subject to redemption as a whole but not in part in the other circumstances described in Condition 9. Notice of intention to redeem Notes will be given at least once in accordance with Condition 16 not less than 30 days nor more than 60 days prior to the date fixed for redemption, provided that no such notice of redemption shall be given earlier than 90 days prior to the effective date of such change or amendment and that at the time notice of such redemption is given, such obligation to pay such Additional Amounts remains in effect. From and after any redemption date, if monies for the redemption of Notes shall have been made available for redemption on such redemption date, such Notes shall cease to bear interest, if applicable, and the only right of the holders of such Notes and any Receipts or Coupons appertaining thereto shall be to receive payment of the Early Redemption Amount and, if appropriate, all unpaid interest accrued to such redemption date. A-15 3. Pricing Supplement ------------------ The Pricing Supplement applicable to the Notes of this Series shall indicate either: that the Notes of this Series cannot be redeemed prior to their Maturity Date (except as otherwise provided in paragraph (b) above and in Condition 13); orthat such Notes will be redeemable at the option of TMCC and/or the holders of the Notes prior to such Maturity Date in accordance with the provisions of paragraphs (d) and/or (e) below on the date or dates and at the amount or amounts indicated in the applicable Pricing Supplement. 4. Redemption at the Option of TMCC -------------------------------- If so specified in the applicable Pricing Supplement, TMCC may, having given: (a) not more than 60 nor less than 30 days notice to the holders of the Notes of this Series in accordance with Condition 16, or such other notice as is specified in the applicable Pricing Supplement; and (b) not less than 15 days before the date the notice referred to in (i) is required to be given (or such other notice as is specified in the applicable Pricing Supplement), notice to the Agent; (which notice shall be irrevocable), repay all or some only of the Notes of this Series then outstanding on the Optional Redemption Date(s) and at the Optional Redemption Amount(s) indicated in the applicable Pricing Supplement together, if appropriate, with accrued interest. In the event of a redemption of some only of such Notes of this Series, such redemption must be for an amount being the Minimum Redemption Amount or a Higher Redemption Amount, as indicated in the applicable Pricing Supplement. In the case of a partial redemption of definitive Notes of this Series, the Notes of this Series to be repaid will be selected individually by lot not more than 60 days prior to the date fixed for redemption and a list of the Notes of this Series called for redemption will be published in accordance with Condition 16 not less than 30 days prior to such date, or such other period as is specified in the applicable Pricing Supplement. In the case of a partial redemption of Notes which are represented by a global Note, the relevant Notes will be redeemed in accordance with the rules of Euroclear and/or Cedelbank. Unless specified otherwise in the applicable Pricing Supplement, if an Optional Redemption Date would otherwise fall on a day which is not a Business Day (as defined in Condition 4(b)(i)), it shall be subject to adjustment in accordance with the Business Day Convention applicable to the Notes or such other Business Day Convention specified in the applicable Pricing Supplement. 5. Redemption at the Option of the Noteholders ------------------------------------------- Unless otherwise specified in the applicable Pricing Supplement, the Notes will not be subject to repayment at the option of the Noteholders. The term of any such option shall be set forth in the applicable Pricing Supplement. A-16 6. Early Redemption Amounts ------------------------ For the purposes of paragraph (b) above and Condition 13, Notes will be redeemed at an amount (the "Early Redemption Amount") calculated as follows: (a) in the case of Notes with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof; or (b) in the case of Notes (other than Zero Coupon Notes) with a Final Redemption Amount which is or may be greater or less than the Issue Price or which is payable in a Specified Currency other than that in which the Notes are denominated, at the amount set out in, or determined in the manner set out in, the applicable Pricing Supplement or, if no such amount or manner is set out in the applicable Pricing Supplement, at their nominal amount; or (c) in the case of Zero Coupon Notes, at an amount (the "Amortized Face Amount") equal to: (1) the sum of (x) the Reference Price specified in the applicable Pricing Supplement and (y) the product of the Accrual Yield specified in the applicable Pricing Supplement (compounded annually) being applied to the Reference Price from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable; or (2) if the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (b) above or upon its becoming due and repayable as provided in Condition 13 is not paid or available for payment when due, the amount due and repayable in respect of such Zero Coupon Note shall be the Amortized Face Amount of such Zero Coupon Note calculated as provided above as though the references in sub-paragraph (A) to the date fixed for redemption or the date upon which the Zero Coupon Note becomes due and repayable were replaced by references to the date (the "Reference Date") which is the earlier of: (i) the date on which all amounts due in respect of the Note have been paid; and (ii) the date on which the full amount of the moneys repayable has been received by the Agent and notice to that effect has been given in accordance with Condition 16. The calculation of the Amortized Face Amount in accordance with this sub-paragraph (B) will continue to be made, after as well as before judgment, until the Reference Date unless the Reference Date falls on or after the Maturity Date, in which case the amount due and repayable shall be the nominal amount of such Note together with interest at a rate per annum equal to the Accrual Yield. Unless specified otherwise in the applicable Pricing Supplement, where any such calculation is to be made for a period which is not a whole number of years, it shall be made (I) in the case of a Zero Coupon Note other than a A-17 Zero Coupon Note payable in euro, on the basis of a 360-day year consisting of 12 months of 30 days each (or 365/366 days in the case of Notes denominated in Sterling) and, in the case of an incomplete month, the number of days elapsed or (II) in the case of a Zero Coupon Note payable in euro, on the basis of the actual number of days elapsed divided by 365 (or, if any of the days elapsed falls in a leap year, the sum of (x) the number of those days falling in a leap year divided by 366 and (y) the number of those days falling in a non-leap year divided by 365) or (in either case) on such other calculation basis as may be specified in the applicable Pricing Supplement. 7. Installments ------------ Any Note which is repayable in installments will be redeemed in the Installment Amounts and on the Installment Dates specified in the applicable Pricing Supplement. 8. Partly Paid Notes ----------------- If the Notes are Partly Paid Notes, they will be redeemed, whether at maturity, early redemption or otherwise in accordance with the provisions of this Condition 5 as amended or varied by the applicable Pricing Supplement. 9. Purchases --------- TMCC may at any time purchase or otherwise acquire Notes in the open market or otherwise at any price. If purchases are made by tender, tenders must be available to all holders of Notes of a Series alike. 10. Cancellation, Resale or Reissuance at the Option of TMCC -------------------------------------------------------- All Notes redeemed shall be, and all Notes purchased or otherwise acquired as aforesaid (together, in the case of definitive Notes, with all unmatured Coupons or Receipts attached thereto or purchased or acquired therewith) may, at the option of TMCC, either be (i) resold or reissued, or held by TMCC for subsequent resale or reissuance, or (ii) cancelled, in which event such Notes, Receipts and Coupons may not be resold or reissued. F. Payments -------- 1. Method of Payment ----------------- Subject as provided below, payments in a currency other than euro will be made by transfer to an account in the Specified Currency (which, in the case of a payment in Yen to a non-resident of Japan, shall be a non-resident account) maintained by the payee with, or by a check in the Specified Currency drawn on, a bank (which, in the case of a payment in Yen to a non- resident of Japan, shall be an authorized foreign exchange bank) in the A-18 principal financial center of the country of such Specified Currency (which, if Australian dollars, shall be Sydney and if New Zealand dollars, shall be Auckland).Payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or by euro check. Notwithstanding the above provisions of this Condition 6(a), a check may not be delivered to an address in, and an amount may not be transferred to an account at a bank located in, the United States of America or its possessions by any office or agency of TMCC, the Agent or any Paying Agent, except as provided in Condition 6(b). Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 9. 2. Presentation of Notes, Receipts, Coupons and Talons --------------------------------------------------- Payments of principal in respect of definitive Notes will (subject as provided below) be made in the Specified Currency in the manner provided in paragraph (a) against presentation and surrender (or, in the case of part payment of a sum due only, endorsement) of definitive Notes and payments of interest in respect of the definitive Notes will (subject as provided below) be made in the Specified Currency against presentation and surrender (or, in the case of part payment of a sum due only, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States of America and its possessions. In the case of definitive Notes, payments of principal with respect to installments (if any), other than the final installment, will (subject as provided below) be made in the manner provided in paragraph (a) against presentation and surrender (or, in the case of part payment of a sum due only, endorsement) of the relevant Receipt. Each Receipt must be presented for payment of the relevant installment together with the relevant definitive Note against which the amount will be payable with respect to that installment. If any definitive Note is redeemed or becomes repayable prior to the stated Maturity Date, principal will be payable in the manner provided in paragraph (a) on presentation and surrender of such definitive Note together with all unmatured Receipts appertaining thereto. Receipts presented without the definitive Note to which they appertain and unmatured Receipts do not constitute valid obligations of TMCC. Upon the date on which any definitive Note becomes due and repayable, unmatured Receipts (if any) appertaining thereto (whether or not attached) shall become void and no payment shall be made in respect thereof. Upon the date on which any Fixed Rate Notes in definitive form (other than Dual Currency Notes or Index Linked Notes) become due and repayable, such Notes should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons to be issued on exchange of matured Talons) failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the aggregate amount of such missing unmatured Coupon A-19 as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Unless otherwise specified in the applicable Pricing Supplement, each amount of principal so deducted will be paid in the manner mentioned above against surrender of the related missing Coupon at any time before the expiry of five years after the Relevant Date (as defined in Condition 15) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 15). Upon any Fixed Rate Note becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof. Upon the date on which any Floating Rate Note, Dual Currency Note or Index Linked Note in definitive form becomes due and repayable, all unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons, shall be made in respect thereof. If the due date for redemption of any Note in definitive form is not an Interest Payment Date, interest (if any) accrued with respect to such Note from and including the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Note. Payments of principal and interest (if any) in respect of Notes of this Series represented by any global Note will (subject as provided below) be made in the manner specified above and otherwise in the manner specified in the relevant global Note against presentation or surrender, as the case may be, of such global Note at the specified office of any Paying Agent located outside the United States except as provided below. A record of each payment made against presentation or surrender of such global Note, distinguishing between any payment of principal and any payment of interest, will be made on such global Note by the Agent and such record shall be prima facie evidence that the payment in question has been made. The holder of the relevant global Note shall be the only person entitled to receive payments in respect of Notes represented by such global Note and TMCC will be discharged by payment to, or to the order of, the holder of such global Note with respect to each amount so paid. Each of the persons shown in the records of Euroclear or Cedelbank as the beneficial holder of a particular nominal amount of Notes must look solely to Euroclear and/or Cedelbank, as the case may be, for his share of each payment so made by TMCC to, or to the order of, the holder of the relevant global Note. No person other than the holder of the relevant global Note shall have any claim against TMCC in respect of payments due on that global Note. Notwithstanding the foregoing, payments in respect of the Notes denominated in U.S. dollars will only be made at the specified office of a Paying Agent in the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction) if: (a) TMCC has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would A-20 be able to make payment at such specified offices outside the United States of the full amount owing in respect of the Notes in the manner provided above when due; (b) payment of the full amount owing in respect of the Notes at such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions; and (c) such payment is then permitted under United States law without involving, in the opinion of TMCC, adverse tax consequences to TMCC. 3. Payment Business Day -------------------- Unless specified otherwise in the applicable Pricing Supplement, if the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Business Day in a place of presentation, the holder thereof shall not be entitled to payment until the next following Payment Business Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, unless otherwise specified in the applicable Pricing Supplement, "Payment Business Day" means any day which is: (a) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in: (1) the relevant place of presentation; (2) London; (3) any other Applicable Financial Center specified in the applicable Pricing Supplement; and (b) either (A) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in the principal financial center of the country of the relevant Specified Currency (if other than the place of presentation, London and any other Applicable Financial Center and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney or Auckland, respectively, unless specified otherwise in the applicable Pricing Supplement) or (B) in relation to any sum payable in euro, a day on which the TARGET System is open. 4. Interpretation of Principal and Interest ---------------------------------------- Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable: (a) any Additional Amounts which may be payable under Condition 9 in respect of principal; A-21 (b) the Final Redemption Amount of the Notes; (c) the Early Redemption Amount of the Notes; (d) in relation to Notes redeemable in installments, the Installment Amounts; (e) any premium and any other amounts which may be payable under or in respect of the Notes; (f) in relation to Zero Coupon Notes, the Amortized Face Amount; and (g) the Optional Redemption Amount(s) (if any) of the Notes. Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any Additional Amounts which may be payable under Condition 9, except as provided in clause (i) above. G. Agent and Paying Agents ----------------------- The names of the initial Agent and the other initial Paying Agents and their initial specified offices are set out on the inside back cover page of the Offering Circular. In acting under the Agency Agreement, the Agent and the Paying Agents will act solely as agents of TMCC and do not assume any obligations or relationships of agency or trust to or with the Noteholders, Receiptholders or Couponholders, except that (without affecting the obligations of TMCC to the Noteholders, Receiptholders and Couponholders to repay Notes and pay interest thereon) funds received by the Agent for the payment of the principal of or interest on the Notes shall be held in trust by it for the Noteholders and/or Receiptholders and/or Couponholders until the expiration of the relevant period of prescription under Condition 15. TMCC agrees to perform and observe the obligations imposed upon it under the Agency Agreement and to use its best efforts to cause the Agent and the Paying Agents to perform and observe the obligations imposed upon them under the Agency Agreement. The Agency Agreement contains provisions for the indemnification of the Agent and the Paying Agents and for relief from responsibility in certain circumstances, and entitles any of them to enter into business transactions with TMCC without being liable to account to the Noteholders, Receiptholders or the Couponholders for any resulting profit. TMCC is entitled to vary or terminate the appointment of any Paying Agent or any other paying agent appointed under the terms of the Agency Agreement and/or appoint additional or other paying agents and/or approve any change in the specified office through which any paying agent acts, provided that: (a) so long as the Notes of this Series are listed on any stock exchange, there will at all times be a Paying Agent with a specified office in each location required by the rules and regulations of the relevant stock exchange; (b) there will at all times be a Paying Agent with a specified office in a city approved by the Agent in continental Europe; and (c) there will at all times be an Agent. A-22 In addition, with respect to Notes denominated in U.S. dollars, TMCC shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in the final paragraph of Condition 6(b). Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days prior notice thereof shall have been given to the Agent and the Noteholders in accordance with Condition 16. H. Exchange of Talons ------------------ On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to, and including, the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 15. Each Talon shall, for the purposes of these Terms and Conditions, be deemed to mature on the Interest Payment Date on which the final Coupon comprised in the relative Coupon sheet matures. I. Payment of Additional Amounts ----------------------------- TMCC will, subject to certain limitations and exceptions (set forth below), pay to a Noteholder, Receiptholder or Couponholder who is a United States Alien (as defined below) such amounts ("Additional Amounts") as may be necessary so that every net payment of principal or interest in respect of the Notes, Receipts or Coupons, after deduction or withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon such Noteholder, Receiptholder or Couponholder, or by reason of the making of such payment, by the United States or any political subdivision or taxing authority thereof or therein, will not be less than the amount provided for in the Notes, Receipts or Coupons. However, TMCC shall not be required to make any payment of Additional Amounts for or on account of: (a) any tax, assessment or other governmental charge which would not have been imposed but for (i) the existence of any present or former connection between such Noteholder, Receiptholder or Couponholder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such Noteholder, Receiptholder or Couponholder, if such Noteholder, Receiptholder or Couponholder is an estate, trust, partnership or corporation) and the United States, including, without limitation, such Noteholder, Receiptholder or Couponholder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein, or (ii) such Noteholder's, Receiptholder's or Couponholder's past or present status as a personal holding company, foreign personal holding company or controlled foreign corporation or a private foundation (as those terms are defined for United States tax purposes) or as a corporation which accumulates earnings to avoid United States federal income tax; A-23 (b) any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge; (c) any tax, assessment or other governmental charge that would not have been so imposed but for the presentation of a Note, Receipt or Coupon for payment on a date more than 15 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later; (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments of principal or interest in respect of the Notes, Receipts or Coupons; (e) any tax, assessment or other governmental charge imposed on interest received by (i) a 10% shareholder of TMCC within the meaning of Internal Revenue Code Section 871(h)(3)(b) or Section 881(c)(3)(b) or (ii) a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business; (f) any tax, assessment or other governmental charge required to be withheld or deducted by any Paying Agent from any payment of principal or interest in respect of any Note, Receipt or Coupon, if such payment can be made without such withholding or deduction by any other Paying Agent with respect to the Notes in a Western European city; (g) any tax, assessment or other governmental charge which would not have been imposed but for the failure to comply with certification, information, documentation, or other reporting requirements concerning the nationality, residence, identity or connection with the United States of the Noteholder, Receiptholder or Couponholder or of the beneficial owner of such Note, Receipt or Coupon, if such compliance is required by statute or by regulation of the United States Treasury Department as a precondition to relief or exemption from such tax, assessment or other governmental charge; or (h) any combination of items (a), (b), (c), (d), (e), (f) and (g); nor shall Additional Amounts be paid to any Noteholder, Receiptholder or Couponholder who is a fiduciary or partnership or other than the sole beneficial owner of the Note, Receipt or Coupon to the extent a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner of the Note, Receipt or Coupon would not have been entitled to payment of the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of the Note, Receipt or Coupon. The term "United States Alien" means any corporation, individual, fiduciary or partnership that for United States federal income tax purposes is a foreign corporation, nonresident alien individual, nonresident alien fiduciary of a foreign estate or trust, or foreign partnership one or more members of which is a foreign corporation, nonresident alien individual or nonresident alien fiduciary of a foreign estate or trust. If TMCC shall determine that any payment made outside the United States by TMCC or any of its Paying Agents of the full amount of the next scheduled A-24 payment of either principal or interest due in respect of any Note, Receipt or Coupon of this Series would, under any present or future laws or regulations of the United States affecting taxation or otherwise, be subject to any certification, information or other reporting requirements of any kind, the effect of which requirements is the disclosure to TMCC, any of its Paying Agents or any governmental authority of the nationality, residence or identity (as distinguished from status as a United States Alien) of a beneficial owner of such Note, Receipt or Coupon who is a United States Alien (other than such requirements which (i) would not be applicable to a payment made to a custodian, nominee or other agent of the beneficial owner, or which can be satisfied by such a custodian, nominee or other agent certifying to the effect that such beneficial owner is a United States Alien; provided, however, in each case that payment by such custodian, nominee or agent to such beneficial owner is not otherwise subject to any requirements referred to in this sentence, (ii) are applicable only to payment by a custodian, nominee or other agent of the beneficial owner to or on behalf of such beneficial owner, or (iii) would not be applicable to a payment made by any other paying agent of TMCC), TMCC shall redeem the Notes of this Series as a whole but not in part at a redemption price equal to the Early Redemption Amount together, if appropriate, with accrued interest to, but excluding, the date fixed for redemption, such redemption to take place on such date not later than one year after the publication of notice of such determination. If TMCC becomes aware of an event that might give rise to such certification, information or other reporting requirements, TMCC shall, as soon as practicable, solicit advice of independent counsel selected by TMCC to establish whether such certification, information or other reporting requirements will apply and, if such requirements will apply, TMCC shall give prompt notice of such determination (a "Tax Notice") in accordance with Condition 16 stating in such notice the effective date of such certification, information or other reporting requirements and, if applicable, the date by which the redemption shall take place. Notwithstanding the foregoing, TMCC shall not redeem Notes if TMCC shall subsequently determine not less than 30 days prior to the date fixed for redemption that subsequent payments would not be subject to any such requirements, in which case TMCC shall give prompt notice of such determination in accordance with Condition 16 and any earlier redemption notice shall thereby be revoked and of no further effect. Notwithstanding the foregoing, if and so long as the certification, information or other reporting requirements referred to in the preceding paragraph would be fully satisfied by payment of a backup withholding tax or similar charge, TMCC may elect prior to publication of the Tax Notice to have the provisions described in this paragraph apply in lieu of the provisions described in the preceding paragraph, in which case the Tax Notice shall state the effective date of such certification, information or reporting requirements and that TMCC has elected to pay Additional Amounts rather than redeem the Notes. In such event, TMCC will pay as Additional Amounts such amounts as may be necessary so that every net payment made following the effective date of such certification, information or reporting requirements outside the United States by TMCC or any of its Paying Agents of principal or interest due in respect of a Note, Receipt or Coupon to a holder who certifies to the effect that the beneficial owner of such Note, Receipt or Coupon is a United States Alien (provided that such certification shall not A-25 have the effect of communicating to TMCC or any of its Paying Agents or any governmental authority the nationality, residence or identity of such beneficial owner) after deduction or withholding for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge which (i) is imposed as a result of certification, information or other reporting requirements referred to in the second parenthetical clause of the first sentence of the preceding paragraph, or (ii) is imposed as a result of the fact that TMCC or any of its Paying Agents has actual knowledge that the holder or beneficial owner of such Note, Receipt or Coupon is not a United States Alien but is within the category of persons, corporations or other entities described in clause (a)(i) of the third preceding paragraph, or (iii) is imposed as a result of presentation of such Note, Receipt or Coupon for payment more than 15 days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever occurs later), will not be less than the amount provided for in such Note, such Receipt or such Coupon to be then due and payable. In the event TMCC elects to pay such Additional Amounts, TMCC will have the right, at its sole option, at any time, to redeem the Notes of this Series, as a whole but not in part at a redemption price equal to their Early Redemption Amount, together, if appropriate, with accrued interest to the date fixed for redemption including any Additional Amounts required to be paid under this paragraph. If TMCC has made the determination described in the preceding paragraph with respect to certification, information or other reporting requirements applicable to interest only and subsequently makes a determination in the manner and of the nature referred to in such preceding paragraph with respect to such requirements applicable to principal, TMCC will redeem the Notes of this Series in the manner and on the terms described in the preceding paragraph (except as provided below), unless TMCC elects to have the provisions of this paragraph apply rather than the provisions of the immediately preceding paragraph. If in such circumstances the Notes are to be redeemed, TMCC will be obligated to pay Additional Amounts with respect to interest, if any, accrued to the date of redemption. If TMCC has made the determination described in the preceding paragraph and subsequently makes a determination in the manner and of the nature referred to in such preceding paragraph that the level of withholding applicable to principal or interest has been increased, TMCC will redeem the Notes of this Series in the manner and on the terms described in the preceding paragraph (except as provided below), unless TMCC elects to have the provisions of this paragraph apply rather than the provisions of the immediately preceding paragraph. If in such circumstances the Notes are to be redeemed, TMCC will be obligated to pay Additional Amounts with respect to the original level of withholding on principal and interest, if any, accrued to the date of redemption. J. Negative Pledge --------------- The Notes will not be secured by any mortgage, pledge or other lien. TMCC shall not pledge or otherwise subject to any lien any property or assets of TMCC unless the Notes are secured by such pledge or lien equally and ratably with all other obligations secured thereby so long as such obligations shall be so secured; provided, however, that such covenant will not apply to liens securing obligations which do not in the aggregate at any one time outstanding exceed 5% of Consolidated Net Tangible Assets (as defined below) of TMCC and its consolidated subsidiaries and also will not apply to: A-26 (a) the pledge of any assets of TMCC to secure any financing by TMCC of the exporting of goods to or between, or the marketing thereof in, countries other than the United States in connection with which TMCC reserves the right, in accordance with customary and established banking practice, to deposit, or otherwise subject to a lien, cash, securities or receivables, for the purpose of securing banking accommodations or as the basis for the issuance of bankers' acceptances or in aid of other similar borrowing arrangements; (b) the pledge of receivables payable in currencies other than United States dollars to secure borrowings in countries other than the United States; (c) any deposit of assets of TMCC with any surety company or clerk of any court, or in escrow, as collateral in connection with, or in lieu of, any bond on appeal by TMCC from any judgment or decree against it, or in connection with other proceedings in actions at law or in equity by or against TMCC or in favor of any governmental bodies to secure progress, advance or other payments in the ordinary course of TMCC's business; (d) any lien or charge on any property of TMCC, tangible or intangible, real or personal, existing at the time of acquisition or construction of such property (including acquisition through merger or consolidation) or given to secure the payment of all or any part of the purchase or construction price thereof or to secure any indebtedness incurred prior to, at the time of, or within one year after, the acquisition or completion of construction thereof for the purpose of financing all or any part of the purchase or construction price thereof; (e) any lien in favor of the United States of America or any state thereof or the District of Columbia, or any agency, department or other instrumentality thereof, to secure progress, advance or other payments pursuant to any contract or provisions of any statute; (f) any lien securing the performance of any contract or undertaking not directly or indirectly in connection with the borrowing of money, obtaining of advances or credit or the securing of debt, if made and continuing in the ordinary course of business; (g) any lien to secure non-recourse obligations in connection with TMCC's engaging in leveraged or single-investor lease transactions; and (h) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any lien, charge or pledge referred to in clauses (a) through (g) above; provided, however, that the amount of any and all obligations and indebtedness secured thereby will not exceed the amount thereof so secured immediately prior to the time of such extension, renewal or replacement, and that such extension, renewal or replacement will be limited to all or a part of the property which secured the charge or lien so extended, renewed or replaced (plus improvements on such property). A-27 "Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (i) all current liabilities and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of TMCC and its consolidated subsidiaries, all as set forth on the most recent balance sheet of TMCC and its consolidated subsidiaries prepared in accordance with generally accepted accounting principles as practiced in the United States. K. Consolidation or Merger ----------------------- TMCC may consolidate with, or sell, lease or convey all or substantially all of its assets as an entirety 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 of America or any state thereof and such successor corporation shall expressly assume the due and punctual payment of the principal of and interest (including Additional Amounts as provided in Condition 9) on all the Notes, Receipts and Coupons, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Note to be performed by TMCC by an amendment to the Agency Agreement executed by such successor corporation, TMCC and the Agent, and (ii) immediately after giving effect to such transaction, no Event of Default under Condition 13, and no event which, with notice or lapse of time or both, would become such an Event of Default shall have happened and be continuing. In case of any such consolidation, merger, sale, lease or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for TMCC, with the same effect as if it had been named herein as TMCC, and the predecessor corporation, except in the event of a conveyance by way of lease, shall be relieved of any further obligation under this Note and the Agency Agreement. L. Meetings, Modifications and Waivers ----------------------------------- The Agency Agreement contains provisions which, unless otherwise provided in the Pricing Supplement, are binding on TMCC, the Noteholders, the Receiptholders and the Couponholders, for convening meetings of holders of Notes, Receipts and Coupons to consider matters affecting their interests, including the modification or waiver of the Terms and Conditions applicable to the Notes. The Agency Agreement, the Notes and any Receipts and Coupons attached to the Notes may be amended by TMCC (and, in the case of the Agency Agreement, the Agent) (i) for the purpose of curing any ambiguity, or for curing, correcting or supplementing any defective provision contained therein, or to evidence the succession of another corporation to TMCC as provided in Condition 11, (ii) to make any further modifications of the terms of the Agency Agreement necessary or desirable to allow for the issuance of any additional Notes (which modifications shall not be materially adverse to holders of outstanding Notes) or (iii) in any manner which TMCC (and, in the case of the Agency Agreement, the Agent) may deem necessary or desirable and which shall A-28 not materially adversely affect the interests of the holders of the Notes, Receipts and Coupons, to all of which each holder of Notes, Receipts and Coupons shall, by acceptance thereof, consent. In addition, with the written consent of the holders of not less than a majority in aggregate principal amount of the Notes then outstanding affected thereby, or by a resolution adopted by a majority in aggregate principal amount of such outstanding Notes affected thereby present or represented at a meeting of such holders at which a quorum is present, as provided in the Agency Agreement (provided that such resolution shall be approved by the holders of not less than 25 percent of the aggregate principal amount of Notes affected thereby then outstanding), TMCC and the Agent may from time to time and at any time enter into agreements modifying or amending the Agency Agreement or the terms and conditions of the Notes, Receipts and Coupons for the purpose of adding any provisions to or changing in any manner or eliminating any provisions of the Agency Agreement or of modifying in any manner the rights of the holders of Notes, Receipts and Coupons; provided, however, that no such agreement shall, without the consent or the affirmative vote of the holder of each Note affected thereby, (i) change the stated maturity of the principal of or any installment of interest on any Note, (ii) reduce the principal amount of or interest on any Note, (iii) change the obligation of TMCC to pay Additional Amounts as provided in Condition 9, (iv) reduce the percentage in principal amount of outstanding Notes the consent of the holders of which is necessary to modify or amend the Agency Agreement or the terms and conditions of the Notes or to waive any future compliance or past default, or (v) reduce the percentage in principal amount of outstanding Notes the consent of the holders of which is required at any meeting of holders of Notes at which a resolution is adopted. The quorum at any meeting called to adopt a resolution will be persons holding or representing a majority in aggregate principal amount of the Notes at the time outstanding affected thereby and at any adjourned meeting will be one or more persons holding or representing 25 percent in aggregate principal amount of such Notes at the time outstanding affected thereby. Any instrument given by or on behalf of any holder of a Note in connection with any consent to any such modification, amendment or waiver will be irrevocable once given and will be conclusive and binding on all subsequent holders of such Note. Any modifications, amendments or waivers to the Agency Agreement or to the terms and conditions of the Notes, Receipts and Coupons will be conclusive and binding on all holders of Notes, Receipts and Coupons, whether or not they have given such consent or were present at any meeting, and whether or not notation of such modifications, amendments or waivers is made upon the Notes, Receipts and Coupons. It shall not be necessary for the consent of the holders of Notes under this Condition 12 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. Notes authenticated and delivered after the execution of any amendment to the Agency Agreement, Notes, Receipts or Coupons may bear a notation in form approved by the Agent as to any matter provided for in such amendment to the Agency Agreement. New Notes so modified as to conform, in the opinion of the Agent and TMCC, to any modification contained in any such amendment may be prepared by TMCC, authenticated by the Agent and delivered in exchange for the Notes then outstanding. A-29 For the purposes of this Condition 12 and Condition 13 below, the term "outstanding" means, in relation to the Notes, all Notes issued under the Agency Agreement other than (i) those which have been redeemed in full in accordance with the Agency Agreement or these Terms and Conditions, (ii) those in respect of which the date for redemption in accordance with these Terms and Conditions has occurred and the redemption moneys therefor (including all interest (if any) accrued thereon to the date for such redemption and any interest (if any) payable under these Terms and Conditions after such date) have been duly paid to the Agent as provided in the Agency Agreement (and, where appropriate, notice has been given to the Noteholders in accordance with Condition 16) and remain available for payment against presentation of the Notes, (iii) those which have become void under Condition 15, (iv) those which have been purchased or otherwise acquired and cancelled as provided in Condition 5, and those which have been purchased or otherwise acquired and are being held by TMCC for subsequent resale or reissuance as provided in Condition 5 during the time so held, (v) those mutilated or defaced Notes which have been surrendered in exchange for replacement Notes pursuant to Condition 14, (vi) (for the purposes only of determining how many Notes are outstanding and without prejudice to their status for any other purpose) those Notes alleged to have been lost, stolen or destroyed and in respect of which replacement Notes have been issued pursuant to Condition 14 and (vii) temporary global Notes to the extent that they shall have been duly exchanged in whole for permanent global Notes or definitive Notes and permanent global Notes to the extent that they shall have been duly exchanged in whole for definitive Notes, in each case pursuant to their respective provisions. M. Default and Acceleration ------------------------ 1. In the event that (each an "Event of Default"): (a) default shall be made in the payment when due of any installment of interest or any Additional Amounts on any of the Notes continued for a period of 30 days after the date when due; or (b) default shall be made for more than three days in the payment when due of the principal of any Note (whether at maturity or upon redemption or otherwise);or (c) default in the deposit of any sinking fund payment with respect to any Note when and as due; (d) or (e) TMCC shall fail to perform or observe any other term, covenant or agreement contained in the Terms and Conditions applicable to any of the Notes orin the Agency Agreement for a period of 60 days after the date on which written notice of such failure, requiring TMCC to remedy the same, first shall have been given to the Agent and TMCC by the holders of at least 25 percent in aggregate principal amount of the Notes then outstanding; or (f) there is an acceleration of, or failure to pay when due and payable, any indebtedness for money borrowed of TMCC exceeding $10,000,000 and such A-30 acceleration is not rescinded or annulled, or such indebtedness is not discharged, within 10 days after written notice thereof has first been given to TMCC and the Agent by the holders of not less than 10 percent in aggregate principal amount of Notes then outstanding; or (g) the entry by a court having competent jurisdiction of (a) a decree or order granting relief in respect of TMCC in an involuntary proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) a decree or order adjudging TMCC to be insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of TMCC and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (c) a final and nonappealable order appointing a custodian, receiver, liquidator, assignee, trustee or other similar official of TMCC or of any substantial part of the property of TMCC, or ordering up the winding up or liquidation of the offices of TMCC; or (h) the commencement by TMCC of a voluntary proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or of a voluntary proceeding seeking to be adjudicated insolvent or the consent of TMCC to the entry of a decree or order for relief in an involuntary proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any insolvency proceedings against it, or the filing by TMCC of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by TMCC to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or similar official of TMCC or any substantial part of the property of TMCC or the making by TMCC of an assignment for the benefit of creditors, or the taking of corporate action by TMCC in furtherance of any such action; then the holder of any Note may, at its option, declare the principal of such Note and the interest, if any, accrued thereon to be due and payable immediately by written notice to TMCC and the Agent at its main office in London, and unless all such defaults shall have been cured by TMCC prior to receipt of such written notice, the principal of such Note and the interest, if any, accrued thereon shall become and be immediately due and payable. At any time after such a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due with respect to any Note has been obtained by any Noteholder, such declaration and its consequences may be rescinded and annulled upon the written consent of holders of a majority in aggregate principal amount of the Notes then outstanding, or by resolution adopted by a majority in aggregate principal amount of the Notes present or represented at a meeting of holders of the Notes at which a quorum is present, as provided in the Agency Agreement, if: (i) TMCC has paid or deposited with the Agent a sum sufficient to pay (1) all overdue installments of interest on the Notes, and (2) the principal of Notes which has become due otherwise than by such declaration of acceleration; and A-31 (3) all Events of Default with respect to the Notes, other than the non-payment of the principal of such Notes which has become due solely by such declaration of acceleration, have been cured or waived as provided in paragraph (b) below. No such rescission shall affect any subsequent default or impair any right consequent thereon. (b) Any Events of Default by TMCC, other than the events described in paragraph (a)(i) or (a)(ii) above or in respect of a covenant or provision which cannot be modified and amended without the written consent of the holders of all outstanding Notes, may be waived by the written consent of holders of a majority in aggregate principal amount of the Notes then outstanding affected thereby, or by resolution adopted by the holders of a majority in aggregate principal amount of such Notes then outstanding present or represented at a meeting of holders of the Notes affected thereby at which a quorum is present, as provided in the Agency Agreement. N. Replacement of Notes, Receipts, Coupons and Talons -------------------------------------------------- Should any Note, Receipt, Coupon or Talon be mutilated, defaced or destroyed or be lost or stolen, it may be replaced at the specified office of the Agent in London (or such other place outside the United States as may be notified to the Noteholders), in accordance with all applicable laws and regulations, upon payment by the claimant of the expenses incurred by TMCC and the Agent in connection therewith and on such terms as to evidence, indemnity, security or otherwise as TMCC and the Agent may require. Mutilated or defaced Notes, Receipts, Coupons or Talons must be surrendered before replacements will be issued. O. Prescription ------------ Unless provided otherwise in the applicable Pricing Supplement, the Notes, Receipts and Coupons will become void unless presented for payment within a period of five years from the Relevant Date (as defined below) relating thereto. Any moneys paid by TMCC to the Agent for the payment of principal or interest in respect of the Notes and remaining unclaimed for a period of one year shall forthwith be repaid to TMCC and holders shall thereafter look only to TMCC for payment thereof. All liability with respect thereto shall cease when the Notes, Receipts and Coupons become void. As used herein, the "Relevant Date" means: 1. the date on which such payment first becomes due; or 2. if the full amount of the moneys payable has not been received by the Agent on or prior to such due date, the date on which the full amount of such moneys having been so received, notice to that effect shall have been given to the Noteholders in accordance with Condition 16. A-32 P. Notices ------- All notices regarding the Notes shall be published in one leading English language daily newspaper with circulation in London (which is expected to be the Financial Times in London) or, if this is not practicable, one other such English language newspaper as TMCC, in consultation with the Agent, shall decide. TMCC shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange on which the Notes are for the time being listed. Any such notice shall be deemed to have been given on the date of the first publication. Any notice published as aforesaid shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication. Receiptholders and Couponholders will be deemed for all purposes to have notice of the contents of any notice given to the holders of the Notes in accordance with this Condition. Until such time as any definitive Notes are issued, there may, so long as the global Notes for this Series are held in their entirety on behalf of Euroclear and Cedelbank, be substituted for such publication in such newspaper the delivery of the relevant notice to Euroclear and Cedelbank for communication by them to the holders of the Notes of this Series. Any such notice shall be deemed to have been given to the holders of the Notes of this Series on the seventh day after the day on which the said notice was given to Euroclear and Cedelbank, or on such other day as is specified in the applicable Pricing Supplement. Notices to be given by any holder of the Notes of this Series shall be in writing and given by lodging the same, together with the relevant Note or Notes, with the Agent. While any of the Notes of this Series are represented by a global Note, such notice may be given by any holder of a Note of this Series to the Agent via Euroclear and/or Cedelbank, as the case may be, in such manner as the Agent and Euroclear and/or Cedelbank, as the case may be, may approve for this purpose. Q. Redenomination, Exchange and Consolidation ------------------------------------------ 1. Redenomination -------------- Where redenomination ("Redenomination") is specified in the applicable Pricing Supplement as being applicable, and unless otherwise specified in the applicable Pricing Supplement, TMCC may, without the consent of any Noteholder, Receiptholder or Couponholder, on giving prior notice to Euroclear, Cedelbank and the Agent and at least 30 days' prior notice to Noteholders as provided in Condition 16 above, designate a Redenomination Date. With effect from the Redenomination Date, notwithstanding the other provisions of these Terms and Conditions: (a) The Notes and Receipts shall (unless already so provided by mandatory provisions of applicable law) be deemed to be redenominated in euro in the denomination of euro 0.01 with a principal amount for each Note and Receipt equal to the principal amount of the Note or Receipt in the original A-33 Specified Currency, converted into euro at the Established Rate, and the Specified Currency shall be deemed to be euro; provided that, if TMCC determines, after consultation with the Agent, that the then market practice in respect of the redenomination into euro of internationally offered securities is different from the provisions specified above in this Condition 17(a)(i), such provisions shall be deemed to be amended so as to comply with such market practice and TMCC shall promptly notify the Noteholders, the stock exchange (if any) on which the Notes may be listed and the Agent and Paying Agents of such deemed amendments. (b) If definitive Notes are required to be issued after the Redenomination Date, they shall be issued at the expense of TMCC in the denominations of euro 1,000, euro 10,000 and euro 100,000 and (but only to the extent of any remaining amounts less than euro 1,000 or such smaller denominations as the Agent may approve) euro 0.01 and such other denominations as TMCC, after consultation with the Agent, shall determine and notify to Noteholders. (c) If definitive Notes have been issued, all unmatured Coupons and Receipts denominated in the original Specified Currency (whether or not attached to the Notes) will become void and no payments will be made in respect of them with effect from the date on which TMCC gives notice (the "Exchange Notice") that euro-denominated Notes, Receipts and Coupons are available for exchange (provided that such securities are so available). New certificates in respect of euro-denominated Notes, Receipts and Coupons will be issued in exchange for Notes, Receipts and Coupons in the original Specified Currency in such manner as TMCC, after consultation with the Agent, may specify and shall be notified to Noteholders in the Exchange Notice. No Exchange Notice may be given less than 15 days prior to any date for payment of principal or interest on the Notes. (d) After the Redenomination Date, all payments in respect of the Notes, the Receipts and the Coupons (other than, unless the Redenomination Date is on or after such date as the original Specified Currency ceases to be a subdivision of the euro, payments of interest in respect of periods commencing before the Redenomination Date) will be made solely in euro as though references in the Notes, the Receipts and the Coupons to the Specified Currency were to euro. Such payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or by euro check; provided, however, that a check may not be delivered to an address in, and an amount may not be transferred to an account at a bank located in, the United States of America or its possessions except as provided in Condition 6(b) above. (e) after the Redenomination Date, "Business Day" in relation to any sum payable in euro shall mean a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London and New York and a day on which the TARGET system is open. After the Redenomination Date, "Payment Business Day" shall mean (A) a "Business Day" as defined in this Condition 17(a)(v) and (B) a day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency deposits) in the relevant place of presentation. (f) If definitive Notes have been issued, after the Redenomination Date, A-34 the amount of interest due in respect of Notes will be calculated by reference to the aggregate nominal amount of Notes presented (or, as the case may be, in respect of which Receipts or Coupons are presented) for payment by the relevant holder and the amount of such payment shall be rounded down to the nearest euro 0.01. If the Notes are in global form, after the Redenomination Date, the amount of interest due in respect of Notes represented by the global Note will be calculated by reference to the aggregate nominal amount of such Notes and the amount of such payment shall be rounded down to the nearest euro 0.01. (g) The applicable Pricing Supplement will specify any relevant changes to the provisions relating to interest, including without limitation, any changes to the applicable Day Count Fraction and Business Day Convention. 2. Exchange -------- Where exchange ("Exchange") is specified in the applicable Pricing Supplement as being applicable, and unless otherwise specified in the applicable Pricing Supplement, TMCC may, without the consent of any Noteholder, Receiptholder or Couponholder, on giving prior notice to Euroclear, Cedelbank and the Agent and at least 30 days' prior notice to the Noteholders as provided in Condition 16 above, elect that, with effect from the Redenomination Date specified in the notice, the Notes shall be exchangeable for Notes expressed to be denominated in euro in accordance with such arrangements as TMCC may decide, after consultation with the Agent, and as may be specified in the notice, including arrangements under which Receipts and Coupons (which expression shall for this purpose include Coupons to be issued on an exchange of matured Talons) unmatured at the date so specified become void. 3. Consolidation ------------- Where consolidation ("Consolidation") is specified in the applicable Pricing Supplement as being applicable, and unless otherwise specified in the applicable Pricing Supplement, TMCC may from time to time, without the consent of any Noteholder, Receiptholder or Couponholder, on giving not less than 30 days' prior notice to Noteholders (which notice shall set forth the manner in which Consolidation shall be effected), consolidate the Notes with one or more issues of other Notes ("Other Notes") issued by it, whether or not originally issued in the Specified Currency of the Notes, in euro or in another currency that has been replaced by euro, provided that the Notes and such Other Notes have been redenominated into euro (if not originally denominated in euro or ECU) and otherwise have, in respect of all periods subsequent to such Consolidation, the same Terms and Conditions and Agent. TMCC may exercise its rights referred to above in this Condition 17(c) if it determines, after consultation with the Agent, that the Notes and Other Notes which it proposes to consolidate will, with effect from their Consolidation, be cleared and settled on an interchangeable basis with the same International Securities Identification Number through each Relevant Clearing System through which the Notes or the relevant Other Notes were cleared and settled immediately prior to such Consolidation. A-35 Subject to the provisions of this Condition 17(c), TMCC may consolidate Notes and Other Notes, which are listed on different stock exchanges and/or cleared through different clearing systems, into a single Series of Notes listed on only one or more of the stock exchanges on which either the Notes or any of the Other Notes were listed immediately prior to Consolidation, and/or cleared through only one or more of the clearing systems through which either the Notes or any of the Other Notes were cleared immediately prior to Consolidation. 4. Amendments and Modifications ---------------------------- The applicable Pricing Supplement in relation to any Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the provisions of this Condition 17, replace or modify the provisions of this Condition 17 for the purpose of such Notes. In addition, TMCC and the Agent may make any changes, without the consent of, but with notification to (in accordance with Condition 16 above and this Condition 17), any Noteholder, Receiptholder or Couponholder, to the Agency Agreement necessary to implement the provisions of this Condition 17. Notwithstanding anything to the contrary contained in this Condition 17, if TMCC determines, after consultation with the Agent, that the then market practice in respect of the redenomination into euro of internationally offered securities or euro-denominated internationally offered securities is different from that specified in this Condition 17, TMCC may (but shall not be required to) amend the provisions of this Condition 17 and any other provision of these Terms and Conditions, as applicable, so as to comply with such market practice, and TMCC shall promptly notify Noteholders, the stock exchange (if any) on which the Notes may be listed, the Paying Agents and the Agent of such deemed amendments. Such changes will not take effect until after they have been notified to Noteholders in accordance with Condition 16 above and this Condition 17. 5. Definitions ----------- In this Condition 17, the following expressions have the following meanings: "Established Rate" means the rate for the conversion of the Specified Currency (including compliance with rules relating to roundings in accordance with applicable European Community regulations) into euro established by the Council of the European Union pursuant to Article 1091(4) of the Treaty. "euro" means the currency to be introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty. "Redenomination Date" means in the case of interest bearing Notes any date for payment of interest under the Notes or in the case of Zero Coupon Notes any date, in each case specified by TMCC in the notice given to the Noteholders pursuant to paragraph (a), (b), (c) or (d) of this Condition 17 and which falls on or after the start of the third stage of European economic and monetary union pursuant to the Treaty or, if the country of the Specified Currency is not one of the countries then participating in such third stage, A-36 which falls on or after such later date as it does so participate and which falls before the date on which the Specified Currency ceases to be a sub- division of the Euro. "Relevant Clearing System" means: (A) Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System and Cedelbank; (B) any clearing system which is a central securities depositary for the Notes or relevant Other Notes; or (C) the principal clearing system (if any) in the country of the original Specified Currency of the Notes or the relevant Other Notes if the Notes or the relevant Other Notes were clearing and settling in such clearing system immediately prior to Consolidation. "TARGET system" means the Trans-European Automated Real-time Gross Settlement Express Transfer System. R. Governing Law ------------- The Agency Agreement and the Notes, the Receipts and the Coupons are governed by, and shall be construed in accordance with, the laws of the State of New York, United States of America, applicable to agreements made and to be performed wholly within such jurisdiction. A-37 APPENDIX B-1 ------------ FORMS OF GLOBAL AND DEFINITIVE NOTES, ------------------------------------- COUPONS, RECEIPTS AND TALONS ----------------------------- [THE ISSUER IS NOT AN INSTITUTION AUTHORIZED UNDER THE BANKING ACT 1987 (EXEMPT TRANSACTIONS) REGULATIONS 1997 (THE "BANKING ACT OF 1987") AND THIS IS A [SHORTER TERM DEBT SECURITY/LONGER TERM DEBT SECURITY] 1 ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST IN CONNECTION WITH THIS [SHORTER TERM DEBT SECURITY/LONGER TERM DEBT SECURITY] 1 1 HAVE NOT BEEN GUARANTEED.] 2 ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.3 TOYOTA MOTOR CREDIT CORPORATION (Incorporated under the laws of the State of California, U.S.A.) TEMPORARY GLOBAL NOTE Representing [Specified Currency and Principal Amount of Series] EURO MEDIUM-TERM NOTES DUE [Year of Maturity] Series No. [ ] Serial No. [ ] The Notes represented by this Temporary Global Note are listed on The London Stock Exchange Limited (the "London Stock Exchange") 4 - ----------------------------------------------------------------------------- 1 Use the term "Shorter Term Debt Security" in the case of Notes with a maturity of one year to two years and 364 days and use the term "Longer Term Debt Security" in the case of Notes with a maturity of three years or more. 2 Delete entire paragraph in the case of all Notes other than Notes denominated in Sterling and Notes of which the issue proceeds are accepted by the Company in the United Kingdom. 3 Use this legend in the case of Notes with a maturity of more than 183 days. In the case of Notes with a maturity of 183 days or less, the following legend should be used: By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder). 4 Delete in the case of all Notes other than Notes listed on the London Stock Exchange, or add reference to any other Stock Exchange, if applicable. B 1-1 This Note is a Temporary Global Note in respect of a duly authorized issue of [Specified Currency and Principal Amount of Series] Euro Medium-Term Notes Dues [Year of Maturity] (the "Notes") of [Specified Currency and Specified Denomination] each of Toyota Motor Credit Corporation (the "Company"). References herein to the Conditions shall be to the Terms and Conditions of the Notes (the "Conditions") as set out in Appendix A to the Agency Agreement (as defined below) as modified and supplemented by the information set out in the Pricing Supplement (the "Pricing Supplement") (which is attached hereto), provided that, in the event of any conflict between the provisions of the Conditions and the information set out in the Pricing Supplement, the latter shall prevail. Words and expressions defined in the Conditions and the Pricing Supplement and not otherwise defined herein shall have the same meanings when used herein. This Temporary Global Note is issued subject to, and with the benefit of, the Conditions and the Second Amended and Restated Agency Agreement (the "Agency Agreement," which expression shall be construed as a reference to that agreement as the same may be amended or supplemented from time to time) dated as of July 24, 1997, between the Company and The Chase Manhattan Bank (the "Agent") and the other agents named therein; provided, however, that the reference to the Conditions shall mean the Conditions in effect on the date of this Temporary Global Note and shall not be affected by any amendments to the Conditions which occur thereafter. This Temporary Global Note is to be held by a common depositary for Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), Cedelbank and/or such other relevant clearing agency as is specified in the related Pricing Supplement on behalf of account holders which have the Notes represented by this Temporary Global Note credited to their respective securities accounts therewith from time to time. For value received, the Company, subject to and in accordance with the Conditions, promises to pay to the bearer hereof on [each Installment Date the relevant Installment Amount] the [Maturity Date], or on such earlier date as the Notes may become due and repayable in accordance with the Conditions, the amount payable under the Conditions on redemption of the Notes then represented by this Temporary Global Note and to pay interest (if any) on the principal amount of the Notes from time to time represented by this Temporary Global Note calculated and payable as provided in the Conditions together with any other sums payable under the Conditions, upon presentation and, at maturity, surrender of this Temporary Global Note at the principal office of the Agent in London, England, or at the offices of any of the other paying agents located outside the United States (as defined below) (except as provided in the Conditions) from time to time appointed by the Company in respect of the Notes, but in each case subject to the requirements as to certification provided herein. Any monies paid by the Company to the Agent for the payment of or interest on any Notes and remaining unclaimed at the end of one year after such principal or interest shall have become due and payable (whether at maturity, upon call for redemption or otherwise) shall then be repaid to the Company and upon such repayment all liability of the Agent with respect thereto shall thereupon cease, without, however, limiting in any way any obligation the Company may have to pay the principal of or B 1-2 interest on this Note as the same shall become due. On any payment of an installment or interest being made, details of such payment shall be entered by or on behalf of the Company in Schedule One hereto and the relevant space in Schedule One hereto recording any such payment shall be signed by or on behalf of the Company. On any redemption or purchase and cancellation of any of the Notes represented by this Temporary Global Note, details of such redemption or purchase and cancellation shall be entered by or on behalf of the Company in Schedule Two hereto and the relevant space in Schedule Two hereto recording any such redemption or purchase and cancellation shall be signed by or on behalf of the Company. Upon any such redemption or purchase and cancellation, the principal amount of this Temporary Global Note and the Notes represented by this Temporary Global Note shall be reduced by the principal amount so redeemed or purchased and canceled. Prior to the Exchange Date (as defined below), all payments (if any) on this Temporary Global Note will only be made to the bearer hereof to the extent that there is presented to the Agent by Euroclear, Cedelbank and/or such other relevant clearing agency, a certificate, substantially in the form set out in Schedule Three hereto, to the effect that it has received from or in respect of a person entitled to a particular principal amount of the Notes (as shown by its records) a certificate from such person in or substantially in the form of Certificate "A" as set out in Schedule Three hereto. After the Exchange Date the holder of this Temporary Global Note will not be entitled to receive any payment of interest hereon. On or after the date which is 40 days after the Issue Date (the "Exchange Date"), this Temporary Global Note may, under the circumstances set forth in the Conditions and the Pricing Supplement (including, without limitation, certification that the distribution of the Notes of this Series has been completed), be exchanged, in whole or in part for either Definitive Notes and (if applicable) Receipts, Coupons and Talons in or substantially in the forms set out in Appendices B-3, B-4, B-5 and B-6, respectively, to the Agency Agreement (on the basis that all appropriate details have been included on the face of such Definitive Notes and (if applicable) Receipts, Coupons and Talons and the Pricing Supplement (or the relevant provisions of the Pricing Supplement) have either been endorsed on or attached to such Definitive Notes) and/or, a Permanent Global Note in the form set out in Appendix B-2 to the Agency Agreement (together with the Pricing Supplement attached thereto) upon presentation of this Temporary Global Note by the bearer hereof at the offices of the Agent in London, England (or at such other place outside the United States of America, its territories and possessions, any State of the United States and the District of Columbia (the "United States") as the Agent may agree). As specified in the Pricing Supplement, the exchange of this Temporary Global Note for Definitive Notes may also require written notice being given to the Agent by Euroclear, Cedel Bank or other relevant clearing agency on behalf of holders of Notes and/or the payment of certain costs each of which shall be specified in the Pricing Supplement. Definitive Notes or the Permanent Global Note shall be so issued and delivered in exchange for only that portion of this Temporary Global Note in respect of which there shall have been presented to the Agent by Euroclear, Cedel Bank and/or such B 1-3 other relevant clearing agency, a certificate, substantially in the form set out in Schedule Three hereto, to the effect that it has received from or in respect of a person entitled to a particular principal amount of the Notes (as shown by its records) a certificate from such person in or substantially in the form of Certificate "A" as set out in Schedule Three hereto and, in the case of Definitive Notes, subject to such notice period and payment of costs as may be specified in the Pricing Supplement. If Definitive Notes and (if applicable) Receipts, Coupons and Talons have already been issued in exchange for all the Notes represented for the time being by the Permanent Global Note, then this Temporary Global Note may only thereafter be exchanged for Definitive Notes and (if applicable) Receipts, Coupons and Talons pursuant to the terms hereof. On an exchange of the whole of this Temporary Global Note, this Temporary Global Note shall be surrendered to the Agent. On an exchange of part only of this Temporary Global Note, details of such exchange shall be entered by or on behalf of the Company in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Company. If, following the issue of a Permanent Global Note in exchange for some of the Notes represented by this Temporary Global Note, further Notes represented by this Temporary Global Note are to be exchanged pursuant to this paragraph, such exchange may be effected, without the issue of a new Permanent Global Note, by the Company or its agent endorsing Schedule Two of the Permanent Global Note previously issued to reflect an increase in the aggregate principal amount of the Permanent Global Note which would otherwise have been issued on such exchange. Until the exchange of the whole of this Temporary Global Note as aforesaid, the bearer hereof shall in all respects (except as otherwise provided herein) be entitled to the same benefits as if it were bearer of Definitive Notes, Coupons and Receipts in the form set out in Appendices B-3, B-4, and B-5 to the Agency Agreement. [The Company has complied with its obligations under the relevant rules (as defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997 (the "Regulations") and under rules made under Section 142(6) of the Financial Services Act 1986 in respect of its debt securities listed on the London Stock Exchange. Since information was last provided in compliance with those obligations, the Company, having made all reasonable enquiries, has not become aware of any change in circumstances which could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect hereof as they fall due.] 5 This Temporary Global Note is governed by, and shall be construed in accordance with, the laws of the State of New York, United States of America, applicable to agreements made and to be performed wholly within such jurisdiction. This Temporary Global Note shall not be valid unless authenticated by the Agent. This Temporary Global Note may be duly executed on behalf of the Company by manual or facsimile signature. - ----------------------------------------------------------------------------- 5 Delete in the case of all Notes other than Notes denominated in Sterling and Notes in respect of which the issue proceeds are accepted by the Company in the United Kingdom. B 1-4 IN WITNESS WHEREOF, the Company has caused this Temporary Global Note to be duly executed on its behalf. Dated: TOYOTA MOTOR CREDIT CORPORATION By: ------------------------------- George Borst Senior Vice President and General Manager FISCAL AGENT'S CERTIFICATE ATTEST: AUTHENTICATION This is one of the Temporary -------------------------------- Global Notes described in the Robert Pitts within mentioned Agency Agreement Secretary By or on behalf of THE CHASE MANHATTAN BANK as Fiscal Agent By: ----------------------- Authorized Signatory) B 1-5 SCHEDULE ONE ------------ PART I ------ INTEREST PAYMENTS -----------------
Confirmation of Total Amount payment by or Interest Date of of Interest Amount of on behalf of Payment Date Payment Payable Interest Paid the Company - ------------ ------- ------------- ------------- --------------- First ------- ------------- ------------- --------------- Second ------- ------------- ------------- ---------------
B 1-6 SCHEDULE ONE ------------ PART II ------- INSTALLMENT PAYMENTS --------------------
Confirmation of Total Amount Amount of payment by or Interest Date of of Installments Installments on behalf of Payment Date Payment Payable Paid the Company - ------------ ------- --------------- ------------- --------------- First ------- --------------- ------------- --------------- Second ------- --------------- ------------- ---------------
B 1-7 SCHEDULE TWO ------------ SCHEDULE OF EXCHANGES --------------------- FOR NOTES REPRESENTED BY A PERMANENT GLOBAL NOTE OR --------------------------------------------------- DEFINITIVE NOTES, OR REDEMPTIONS OR PURCHASES AND CANCELLATIONS --------------------------------------------------------------- The following exchanges of a part of this Temporary Global Note for Notes represented by a Permanent Global Note or Definitive Notes or redemptions or purchases and cancellation of this Temporary Global Note have been made:
Part of principal amount of this Temporary Globe Note exchanged for Remaining Remaining Notes principal amount payable represented by amount of this under this a Permanent Temporary Temporary Global Note or Global Note Global Note Date of Definitive following such following such exchange, or Notes or exchange, or exchange, or Notation made redemption or redeemed or redemption or redemption or by or on purchase and purchase and purchase and purchase and behalf of the cancellation canceled cancellation cancellation Company - ------------- ------------- -------------- -------------- ------------- - ------------- ------------- -------------- -------------- ------------- - ------------- ------------- -------------- -------------- ------------- - ------------- ------------- -------------- -------------- -------------
B 1-8 SCHEDULE THREE -------------- FORM OF CERTIFICATE TO BE PRESENTED BY -------------------------------------- APPROPRIATE CLEARING SYSTEM --------------------------- TOYOTA MOTOR CREDIT CORPORATION ------------------------------- (the "Securities") This is to certify that, based solely on certifications we have received in writing, by telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in the Agency Agreement, as of the date hereof, [ ] principal amount of above-captioned Securities (i) is owned by persons that are not citizens or residents of the United States, partnerships, corporations or other entities created or organized under the laws of the United States or any estate or trust the income of which is subject to United States federal income taxation regardless of its source ("United States persons"), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and hold the securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, or its own behalf, or through its agent, that we may advise the Company or the Company's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the U.S. Treasury Regulations thereunder), or (iii) is owned by the United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or foreign financial institutions described inn clause (iii) (whether or not also described in clauses (i) or (ii)) have certified that they have not acquire the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify (i) that we are not making available herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) any portion of the temporary global Security excepted in such Member Organization certifications and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, exercise of any rights or collection of any interest) are no longer true and cannot be relied upon at the date hereof. B 1-9 We will retain all certificates received from Member Organizations for the period specified in U.S. Treasury Regulation Section 1.163- 5(c)(2)(i)(D)(3)(i)(C). We understand that this certification is required in connection with certain tax laws of the United States. In connection therewith, if administrative and legal proceeds are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: Yours faithfully, [APPROPRIATE CLEARING SYSTEM] By: -------------------------- * This certificate is not to be dated earlier than five days prior to the Exchange Date or relevant payment date, as applicable. B 1-10 CERTIFICATE "A" --------------- FORM OF CERTIFICATE TO BE PRESENTED TO -------------------------------------- APPROPRIATE CLEARING SYSTEM --------------------------- TOYOTA MOTOR CREDIT CORPORATION ------------------------------- (the "Securities") This is to certify that as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) that are not citizens or residents of the United states, partnerships, corporations or other entities created or organized in the United States or under the law of the United States or of any State thereof, or any estate or trust the income of which is subject to United States federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Securities through foreign branches of United States financial institutions and hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Company or the Company's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the U.S. Treasury Regulations thereunder), or (iii) are owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163- 5(c)(2)(i)(D)(7)), and in addition if the owner of the Securities is a United States or foreign financial institution described in clause (iii) (whether or not also described in clauses (i) or (ii)) this is further to certify that such financial institution has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia); and its "possessions" include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex or facsimile on or prior to the date on which you intend to submit your certification relating to the Securities held by you for our account in accordance with your documented procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to [ ] of such interest in the above Securities in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Securities and/or an interest in a Permanent Global Note (or, if relevant, exercise of any right or collection of any interest) cannot be made until we do so certify. B 1-11 We understand that this certification is required in connection with certain tax laws of the United States. In connection therewith, if administrative and legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: Yours faithfully, [Name of Person Making Certification] By: ---------------------------------- * This certificate is not to be dated earlier than fifteen days prior to the Exchange Date or relevant payment date, as applicable. B 1-12 APPENDIX B-2 ------------ FORM OF PERMANENT GLOBAL NOTE OF -------------------------------- TOYOTA MOTOR CREDIT CORPORATION ------------------------------- [THE ISSUER IS NOT AN INSTITUTION AUTHORIZED UNDER THE BANKING ACT 1987 (EXEMPT TRANSACTIONS) REGULATIONS 1997 (THE "BANKING ACT OF 1987") AND THIS IS A [SHORTER TERM DEBT SECURITY/LONGER TERM DEBT SECURITY]6 ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST IN CONNECTION WITH THIS [SHORTER TERM DEBT SECURITY/LONGER TERM DEBT SECURITY]61 HAVE NOT BEEN GUARANTEED.]7 ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNATIONAL REVENUE CODE.8 TOYOTA MOTOR CREDIT CORPORATION (Incorporated under the laws of the State of California, U.S.A.) PERMANENT GLOBAL NOTE representing [Specified Currency and Principal Amount of Series] [EURO MEDIUM-TERM NOTES DUE [Year of Maturity] Series No. [ ] Series No. [ ] The Notes represented by this Permanent Global Note are listed on The London Stock Exchange Limited (the "London Stock Exchange")9 - ------------------------------------------------------------------------ 6 Use the term "Shorter Term Debt Security" in the case of Notes with a maturity of one year to two years and 364 days and use the term "Longer Term Debt Security" in the case of Notes with a maturity of three years or more. 7 Delete entire paragraph in the case of all Notes other than Notes denominated in Sterling and Notes in respect of which the issue proceeds are accepted by the Company in the United Kingdom. 8 Use this legend in the case of Notes with a maturity of more than 183 days. In the case of Notes with a maturity of 183 days or less, the following legend should be used: By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder). 9 Delete in the case of all Notes other than Notes listed on the London Stock Exchange, or add reference to other Stock Exchange, if applicable. B 2-1 This Note is a Permanent Global Note in respect of a duly authorized issue of [Specified Currency and Principal Amount of Series] Euro Medium-Term Note Due [Year of Maturity] (the "Notes") of [Specified Currency and Specified Denomination] each of Toyota Motor Credit Corporation (the "Company"). References herein to the Conditions shall be to the Terms and Conditions of the Notes (the "Conditions") as set forth out in Appendix A to the Agency Agreement (as defined below) as modified and supplemented by the information set out in the Pricing Supplement (the "Pricing Supplement") (which is attached hereto) and, in the event of any conflict between the provisions of the Conditions and the information set out in the Pricing Supplement, the latter shall prevail. Words and expressions defined in the Conditions and the Pricing Supplement and not otherwise defined herein shall have the same meanings when used herein. This Permanent Global Note is issued subject to, and with the benefit of, the Conditions and the Second Amended and Restated Agency Agreement (the "Agency Agreement," which expression shall be construed as a reference to that agreement as the same may be amended or supplemented from time to time) dated as of July 24, 1997, between the Company and The Chase Manhattan Bank (the "Agent") and the other agents named herein; provided, however, that the reference to the Conditions shall mean the Conditions in effect on the date of issue of the Temporary Global Note that originally represented this Note and shall not be affected by any amendments to the Conditions which occur thereafter. This Permanent Global Note is to be held by a common depositary for Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), Cedelbank and/or such other relevant clearing agency as is specified in the related Pricing Supplement on behalf of account holders which have the Notes represented by this Permanent Global Note credited to their respective securities accounts therewith from time to time. For value received, the Company, subject to and in accordance with the Conditions, promises to pay to the bearer hereof on [each Installment Date the relevant Installment Amount] the [Maturity Date], or on such earlier date as the Notes may become due and repayable in accordance with the Conditions, the amount payable under the Condition on redemption of the Notes then represented by this Permanent Global Note and to pay interest (if any) on the principal amount of the Notes from time to time represented by this Permanent Global Note calculated and payable as provided in the Conditions together with any other sums payable under the Conditions, upon presentation and, at maturity, surrender of this Permanent Global Note at the principal office of the Agent in London, England, or at the offices of any of the other paying agents located outside of the United States (as defined below) (except as provided in the Condition) from time to time appointed by the Company in respect of the Notes. Any monies paid by the Company to the Agent for the payment of or interest on any Notes and remaining unclaimed at the end of one year after such principal or interest shall have become due and payable (whether at maturity, upon call for redemption or otherwise) shall then be repaid to the Company and upon such repayment all liability of the Agent with respect thereto shall thereupon cease, without, limiting in any way any obligation the Company may have to pay the principal of or interest on this Note as the same shall become due. On any payment of an installment or interest being made details of such payment shall be entered by or on behalf of the Company in Schedule One hereto and the relevant space in Schedule One hereto recording any such payment shall be signed by or on behalf of the Company. B 2-2 On any redemption or purchase and cancellation of any of the Notes represented by this Permanent Global Note, details of such redemption or purchase and cancellation shall be entered by or on behalf of the Company in Schedule Two hereto and the relevant space in Schedule Two hereto recording any such redemption or purchase and cancellation shall be signed by or on behalf of the Company. Upon any such redemption or purchase and cancellation, the principal amount of this Permanent Global Note and the Notes represented by this Permanent Global Note shall be reduced by the principal amount so redeemed or purchased and canceled. The Notes represented by this Permanent Global Note were originally represented by a Temporary Global Note. Unless such Temporary Global Note was exchanged in whole on the issue hereof, such Temporary Global Note may be further exchanged, on the terms and conditions set out therein, for this Permanent Global Note. If any such exchange occurs following the issue hereof, the Company or its agent shall endorse Schedule Two hereto to reflect the increase in the aggregate principal amount of this Permanent Global Note due to each such exchange, whereupon the principal amount hereof shall be increased for all purposes by the amount so exchanged and endorsed. This Permanent Global Note may (under the circumstances set forth in the Conditions and the Pricing Supplement, be exchanged, in whole, but not in part, for security-printed Definitive Notes and (if applicable) Receipts, Coupons and Talons in or substantially in the forms set out in Appendices B- 3, B-4, B-5 and B-6, respectively, of the Agency Agreement (on the basis that all appropriate details have been included on the face of such Definitive Notes and (if applicable) Receipts, Coupons and Talons and the Pricing Supplement (or the relevant provisions of the Pricing Supplement) have been either endorsed on or attached to such Definitive Notes) in denominations of [Specified Currency and Specified Denomination] each. As specified in the Pricing Supplement, such exchange may also require written notice being given to the Agent by Euroclear, Cedelbank or such other relevant clearing agency on behalf of the holders of the Notes and/or the payment of certain costs, each of which shall be specified in the pricing Supplement. Such exchange, if any, will be made upon presentation of this Permanent Global Note by the bearer hereof on any day (other than a Saturday or a Sunday) on which banks are open for business in London at the principal office of the Agent in London, England; provided, however, the first notice given tot he Agent by Euroclear, Cedelbank and/or such other relevant clearing agency shall give rise to the issue of Definitive Notes for the total amount of Notes represented by this Global Note. The aggregate principal amount of Definitive Notes issued upon an exchange of this Permanent Global Note will be equal to the aggregate principal amount of this Permanent Global Note submitted by the bearer hereof for exchange (to the extent that such principal amount does not exceed the aggregate principal amount of this Permanent Global Note, as adjusted, as shown in Schedule Two hereto). On an exchange of the whole of this Permanent Global Note, this Permanent Global Note shall be surrendered to the Agent. Until the exchange of the whole of this Permanent Global Note as aforesaid, the bearer hereof shall in all respects be entitled to the same benefits as if it were the bearer of Definitive Notes, Coupons, Receipts and Talons in the form set out in Appendices B-3, B-4, B-5 and B-6, respectively, to the Agency Agreement. B 2-3 [The Company has complied with its obligations under the relevant rules (as defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997 (the "Regulations") and under rules made under Section 142(6) of the Financial Services Act 1986 in respect of its debt securities listed on the London Stock Exchange. Since information was last provided in compliance with those obligations, the Company, having made all reasonable enquiries, has not become aware of any change in circumstances which could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect hereof as they fall due.]10 This Permanent Global Note is governed by, and shall be construed in accordance with, the laws of the State of New York, United States of America, applicable to agreements made and to be performed wholly within such jurisdiction. This Permanent Global Note shall not be valid unless authenticated by the Agent. This Permanent Global Note may be duly executed on behalf of the Company by manual or facsimile signature. - ----------------------------------------------------------------------------- 10 Delete in the case of all Notes other than Notes denominated in Sterling and Notes in respect of which the proceeds are accepted by the Company in the United Kingdom. B 2-4 IN WITNESS WHEREOF, the Company has caused this Permanent Global Note to be duly executed on its behalf. Dated: TOYOTA MOTOR CREDIT CORPORATION By: ---------------------------- George Borst Senior Vice President and General Manager FISCAL AGENT'S CERTIFICATE ATTEST: AUTHENTICATION This is one of the Permanent -------------------------------- Global Notes described in the Robert Pitts within mentioned Agency Agreement Secretary By or on behalf of THE CHASE MANHATTAN BANK as Fiscal Agent By: ------------------------- (Authorized Signatory) B 2-5 SCHEDULE ONE ------------ PART I ------ INTEREST PAYMENTS -----------------
Confirmation of Total Amount payment by or Interest Date of of Interest Amount of on behalf of Payment Date Payment Payable Interest Paid the Company - ------------ ------- ------------- ------------- --------------- First ------- ------------- ------------- --------------- Second ------- ------------- ------------- ---------------
B 2-6 SCHEDULE ONE ------------ PART II ------- INSTALLMENT PAYMENTS --------------------
Confirmation of Total Amount Amount of payment by or Interest Date of of Installments Installments on behalf of Payment Date Payment Payable Paid the Company - ------------ ------- --------------- ------------- --------------- First ------- --------------- ------------- --------------- Second ------- --------------- ------------- ---------------
B 2-7 SCHEDULE TWO ------------ SCHEDULE OF EXCHANGES OF A TEMPORARY ------------------------------------ GLOBAL NOTE AND FOR DEFINITIVE NOTES ------------------------------------ OR REDEMPTIONS OR PURCHASES AND CANCELLATIONS --------------------------------------------- The following increases of this Permanent Global Note, exchanges of this Permanent Global Note for Definitive Notes or redemptions or purchases and cancellations of this Permanent Global Note have been made:
Remaining Increase in Part of principal amount payable principal amount amount of this under this of this Permanent Permanent Permanent Global Note due Global Note Global Note Date of to exchange of a exchanged for following such Notation exchange, or Temporary Definitive Notes exchange, or made by or redemption or Global Note for or redeemed or redemption or on behalf purchase and this Permanent purchased and purchased and of the cancellation Global Note canceled cancellation Company - ------------- ---------------- ----------------- -------------- --------- - ------------- ---------------- ----------------- -------------- --------- - ------------- ---------------- ----------------- -------------- --------- - ------------- ---------------- ----------------- -------------- --------- - ------------- ---------------- ----------------- -------------- ---------
B 2-8 APPENDIX B-3 ------------ DEFINITIVE NOTE OF ------------------ TOYOTA MOTOR CREDIT CORPORATION ------------------------------- [THE ISSUER IS NOT AN INSTITUTION AUTHORIZED UNDER THE BANKING ACT 1987 (EXEMPT TRANSACTIONS) REGULATIONS 1997 (THE "BANKING ACT OF 1987") AND THIS IS A [SHORTER TERM DEBT SECURITY/LONGER TERM DEBT SECURITY]11 ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST IN CONNECTION WITH THIS [SHORTER TERM DEBT SECURITY/LONGER TERM DEBT SECURITY]11 HAVE NOT BEEN GUARANTEED.]12 ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. 13 TOYOTA MOTOR CREDIT CORPORATION (Incorporated under the laws of the State of California, U.S.A.) representing [Specified Currency and Principal Amount of Series] [EURO MEDIUM-TERM NOTES DUE [Year of Maturity] Series No. [ ] Series No. [ ] The Notes represented by this Definitive Note are listed on The London Stock Exchange Limited (the "London Stock Exchange")14 - ----------------------------------------------------------------------------- 11 Use the term "Shorter Term Debt Securities" in the case of Notes with a maturity of one year to two years and 364 days and use the term "Longer Term Debt Security" in the case of Notes with a maturity of three years or more. 12 Delete entire paragraph in the case of all Notes other than Notes denominated in Sterling and Notes of which the issue proceeds are accepted by the Company in the United Kingdom. 13 Use this legend in the case of Notes with a maturity of more than 183 days. In the case of Notes with a maturity of 183 days or less, the following legend should be used: By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder. 14 Delete in the case of all Notes other than Notes listed on the London Stock Exchange, or add reference to other Stock Exchange, if applicable. B 3-1 This Note is one of the series of notes of [Specified Currency and Principal Amount of Series] ("Notes") each of Toyota Motor Credit Corporation (the "Company"). References herein to the Conditions shall be to the Terms and Conditions of the Notes (the "Conditions") as set out in Appendix A to the Agency Agreement (as defined below) as modified and supplemented by the information set out in the Pricing Supplement (the "Pricing Supplement") (which is reproduced on the reverse hereof) and, in the event of any conflict between the provisions of the Conditions and the information set out in the Pricing Supplement, the latter shall prevail. Words and expressions defined in the Conditions and the Pricing Supplement and not otherwise defined herein shall have the same meanings when used herein. This Note is issued subject to, and with the benefit of, the Conditions and the Second Amended and Restated Agency Agreement (the "Agency Agreement." which expression shall be construed as a reference to that agreement as the same may be amended or supplemented from time to time) dated as of July 24, 1997, between the Company and The Chase Manhattan Bank (the "Agent") and the other agents named therein; provided, however, that the reference to the Conditions shall mean the Conditions in effect on the date of issue of the Temporary Global Note that originally represented this Note and shall not be affected by any amendments to the Conditions which occur thereafter. For value received, the Company, subject to and in accordance with the Conditions, promises to pay to the bearer hereof on [each Installment Date the relevant Installment Amount] the [Maturity Date], or on such earlier date as the Notes may become due and repayable in accordance with the Conditions, the amount payable on redemption of this Note and to pay interest (if any) on the principal amount of this Note calculated and payable as provided in the Conditions. Title to this Note and to any Coupon, Talon or Receipt appertaining, hereto shall pass by delivery. The Company may treat the bearer hereof as the absolute owner of this Note for all purposes (whether or not this Note shall be overdue and notwithstanding any notation of ownership or writing hereof or notice of any previous loss or theft thereof). [The Company has complied with its obligations under the relevant rules (as defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997 (the "Regulations") and under rules made under Section 142(6) of the Financial Services Act 1986 in respect of its debt securities listed on the London Stock Exchange Limited. Since information was last provided in compliance with those obligations, the Company, having made all reasonable inquiries, has not become aware of any change in circumstances which could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect hereof as they fall due.] 15 This Note is governed by, and shall be construed in accordance with, the laws of the State of New York, United States of America, applicable to agreements made and to be performed wholly within such jurisdiction. This Note may be duly executed on behalf of the Company by manual or facsimile signature. - ----------------------------------------------------------------------------- 15 Delete in the case of all Notes other than Notes denominated in Sterling and Notes in respect of which the issue proceeds are accepted by the Company in the United Kingdom. B 3-2 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on its behalf. Dated: TOYOTA MOTOR CREDIT CORPORATION By: ---------------------------- George Borst Senior Vice President and General Manager FISCAL AGENT'S CERTIFICATE ATTEST: AUTHENTICATION This is one of the Notes ------------------------------- described in the within Robert Pitts mentioned Agency Agreement Secretary By or on behalf of THE CHASE MANHATTAN BANK as Fiscal Agent By: ------------------------ (Authorized Signatory) [Reverse Of Note - Terms And Conditions Of The Notes] B 3-3 APPENDIX B-4 ------------ FORM OF COUPON -------------- PART A ------ (Face of Coupon) TOYOTA MOTOR CREDIT CORPORATION (Incorporated under the laws of the State of California, U.S.A.) [Specified Currency and Principal Amount of Series] EURO MEDIUM-TERM NOTES DUE [Year of Maturity] Series No. [ ] Series No. [ ] Part A - ------ (Revenue of Coupon) For Fixed Rate Notes:
This Coupon is payable to bearer, Coupon No. F separately negotiable and subject to Coupon for [ ] the Terms and Conditions of the Note due on [ ] to which it appertains [19[ ]/2-[ ]] - ------------------------------------ ------------------------------------ [SEAL] [ATTEST] TOYOTA MOTOR CREDIT CORPORATION By: By: -------------------------- ----------------------------- Authorized Officer Authorized Officer
ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. 16 - ----------------------------------------------------------------------------- 16 Use this legend in the case of Notes with a maturity of more than 183 days. In the case of Notes with a maturity of 183 days or less, the following legend should be used: By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder). B 4-1 APPENDIX B-4 ------------ FORM OF COUPON -------------- PART B ------ (Face of Coupon) ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.1 1 For Floating Rate, Dual Currency and Indexed Notes:
Coupon for the amount due in accordance Coupon No. F with the Terms and Conditions of the Coupon due in said Notes. This Coupon is payable to [ ] bearer, separately negotiable and [19[ ]/20[ ]] subject to such Terms and Conditions of the Note to which it appertains, under which it may become void before its due date. - --------------------------------------- --------------------------- [SEAL] ATTEST TOYOTA MOTOR CREDIT CORPORATION By: By: ---------------------- ------------------------ Authorized Officer Authorized Officer
- ----------------------------------------------------------------------------- 1 Use this legend in the case of Notes with a maturity of more than 183 days. In the case of Notes with a maturity of 183 days or less, the following legend should be used: By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder). B 4-2 (Reverse of Coupon) ISSUING AND PRINCIPAL PAYING AGENT ---------------------------------- The Chase Manhattan Bank Trinity Tower 9 Thomas More Street London E1 9YT ENGLAND PAYING AGENT ------------ Chase Manhattan Bank Luxembourg S.A. 5 Rue Plaetis L-2338 Luxembourg and/or such other or further Agent and other or further Paying Agents and/or specified offices as may from time to time be duly appointed by the Company and notice of which has been given to the Noteholders. B 4-3 APPENDIX B-5 ------------ FORM OF RECEIPT --------------- (On the front) ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. 17 TOYOTA MOTOR CREDIT CORPORATION (Incorporated under the laws of the State of California, U.S.A.) [Specified Currency and Principal Amount of Series] EURO MEDIUM-TERM NOTES DUE [Year of Maturity] Series No. [ ] Series No. [ ] Receipt for the sum of [ ] being the installment of principal payable in accordance with the Terms and Conditions endorsed on the Note to which this Receipt appertains (the "Conditions") on [ ]. This Receipt is issued subject to and in accordance with the Conditions which shall be binding upon the holder of this Receipt (whether or not it is for the time being attached to such Note) and is payable at the specified office of any of the Paying Agents set out on the reverse of the Note to which this Receipt appertains (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed and notified to the Noteholders). - ----------------------------------------------------------------------------- 17 Use this legend in the case of Notes with a maturity of more than 183 days. In the case of Notes with a maturity of 183 days or less, the following legend should be used: By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder). B 5-1 This Receipt must be presented for payment together with the Note to which it appertains. The Company shall have no obligation in respect of any Receipt presented without the Note to which it appertains or any unmatured Receipts. [SEAL] ATTEST TOYOTA MOTOR CREDIT CORPORATION By: By: ---------------------- ------------------------ Authorized Officer Authorized Officer B 5-2 APPENDIX B-6 ------------ FORM OF TALON ------------- (On the front) ANY UNITED STATES PERSON (AS DEFINED IN THE INTERNAL REVENUE CODE OF THE UNITED STATES) WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES TAX LAWS INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. TOYOTA MOTOR CREDIT CORPORATION (Incorporated under the laws of the State of California, U.S.A.) [Specified Currency and Principal Amount of Series] EURO MEDIUM-TERM NOTES DUE [Year of Maturity] Series No. [ ] Series No. [ ] On and after [ ] further Coupons [and a further Talon] appertaining to the Note to which this Talon appertains will be issued at the specified office of any of the Paying Agents set out on the reverse hereof (and/or any other or further Paying Agents and/or specified offices as may from time to time be duly appointed notified to the Noteholders) upon production and surrender of this Talon. This Talon may, in certain circumstances, become void under the Terms and Conditions endorsed on the Notes to which this Talon appertains. [SEAL] ATTEST TOYOTA MOTOR CREDIT CORPORATION By: By: ---------------------- ------------------------ Authorized Officer Authorized Officer B 6-1 (Reverse of Talon) ISSUING AND PRINCIPAL PAYING AGENT The Chase Manhattan Bank Trinity Tower 9 Thomas More Street London E1 9YT ENGLAND PAYING AGENT Chase Manhattan Bank Luxembourg S.A. 5 Rue Plaetis L-2338 Luxembourg and/or such other or further Agent and other or further Paying Agents and/or specified offices as may from time to time be duly appointed by the Company and notice of which has been given to the Noteholders. B 6-2 ANNEX B ------- FORM OF PRICING SUPPLEMENT -------------------------- (to be completed by the head Manager/ ------------------------------------- Dealer and executed by the Company) ----------------------------------- PRICING SUPPLEMENT TOYOTA MOTOR CREDIT CORPORATION (Incorporated as a California corporation) U.S. $16,000,000,000 Euro Medium-Term Note Program for the issue of Notes with maturities of 1 month or longer Series No. [aggregate nominal amount of issue] [title and due date of Notes] Issue price: [ ] per cent [Dealer name] The date of this Pricing Supplement is [ ] A B-1 Toyota Motor Credit Corporation Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the U.S. $16,000,000,000 Euro Medium-Term Note Program [The Notes constitute [commercial paper/shorter term debt securities/longer term debt securities]* issued in accordance with regulations made under section 4 of the Banking Act 1987. The Issuer of the Notes is not an authorized institution or a European authorized institution (as such terms are defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997). Repayment of the principal and payment of any interest or premium in connection with the Notes has not been guaranteed].** This document constitutes the Pricing Supplement relating to the issue of Notes described herein. Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions set forth in the Offering Circular dated July 23, 1999. This Pricing Supplement must be read in conjunction with such Offering Circular, including all documents incorporated by reference therein. - ----------------------------------------------------------------------- * Include "commercial paper" if Notes must be redeemed before their first anniversary. Include "shorter term debt securities" if Notes may not be redeemed before their first anniversary but must be redeemed before their third anniversary. Include "longer term debt securities" if Notes may not be redeemed before their third anniversary. ** Unless otherwise permitted, text to be included for all Notes (including Notes denominated in Sterling) in respect of which the issue proceeds are accepted by TMCC in the United Kingdom. A B-2 [Include whichever of the following apply or specify as "Not Applicable" (N/A). Note that the numbering should remain as set out below, even if "Not Applicable" is indicated for individual paragraphs or sub-paragraphs. Italics denote directions for completing the Pricing Supplement.] 1. [(i)] Series Number: [ ] [(ii)] Tranche Number: [Delete if not applicable] (If fungible with an existing Series, details of that Series, including the date on which the Notes become fungible) 2. Specified Currency (or Currencies in the case of Dual Currency Notes): [ ] 3. Aggregate Nominal Amount [i] Series: [ ] [ii] Tranche: [Delete if not applicable] 4. Issue Price of Tranche: [ ] per cent. 5. Specific Denominations: [ ] 6. [(i)] Issue Date: [ ] [(ii)] Interest Commencement Date (if different from Issue Date): [ ] 7. Maturity Date: [ ] 8. Interest Basis: [Fixed Rate] [Floating Rate] [Zero Coupon] [Index Linked Interest] [specify other] (further particulars specified below) 9. Redemption/Payment Basis: [Redemption at par] [Index Linked Redemption] [Dual Currency] [Partly Paid] [Installment] [specify other] 10. Change of Interest Basis or [Specify details of any provision Redemption/Payment Basis: for change of Notes into another Interest Basis or Redemption/Payment Basis]
A B-3 11. Listing: [London/specify other/None] 12. Method of distribution: [Syndicated/Non-syndicated] PROVISIONS RELATING TO INTEREST (IF ANY)PAYABLE 13. Fixed Rate Note Provisions (and, to the extent applicable, Dual Currency [Applicable/Not Applicable] Notes, Index Linked Redemption (If not applicable, delete the Notes, Partly Paid Notes and remaining sub-paragraphs of this Installment Notes): paragraph) (i) Fixed Rate[(s)] of Interest: [ ] per cent. per annum [payable annually/semi-annually/ quarterly] in arrear] (ii) Interest Payment Date(s): [ ] in each year (iii) Fixed Coupon Amount (s): [ ] per [ ] in nominal amount (iv) Broken Amount (s): [Insert particulars of anyinitial or final broken interest amounts which do not correspond with the Fixed Coupon Amount] (v) Fixed Day Count Fraction: [30/360 or Actual/Actual (ISMA) or Actual/Actual (ISDA) or specify other] (vi) Business Day Convention: [Following Business Day Convention/Modified Following Business Day Convention/specify other] (vii) Applicable Business Centers for purposes of "Business Day" Definition: [London/specify others] (viii) Other terms relating to the method of calculating interest for Fixed Rate Notes: [None/Give details] 14. Floating Rate Note Provisions (and, to the extent applicable, Dual [Applicable/Not Applicable] Currency Notes, Index Linked (If not applicable, delete the Redemption Notes, Partly Paid Notes remaining sub-paragraphs of this and Installment Notes): paragraph) (i) Specified Period(s)/Specified Interest Payment Dates: [ ]
A B-4 (ii) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/ [specify other]] (iii) Applicable Business Centers for purposes of "Business Day" Definition: [London/specify others] (iv) Manner in which the Rate of Interest and Interest Amount [Screen Rate Determination/ISDA is to be determined: Determination/[specify others]] (v) Calculation Agent responsible for calculating the Rate of Interest and Interest Amount (if not the Agent): [ ] (vi) Screen Rate Determination - Reference Rate [ ] (Either LIBOR, EURIBOR or other, although additional information may be required if other - including any amendment to fallback provisions in the Conditions) - Relevant Screen Page: [ ] (In the case of EURIBOR, if not Telerate 248 ensure it is a page which shows a composite rate) - Applicable "Reference Banks" definition (if different from that in Condition [Same as Condition 4(b)(iv)(E): 4(b)(iv)(E)/specify other] - Applicable "Interest Determination Date" definition (if different from that in Condition [Same as Condition 4(b)(iv)(F)): 4(b)(iv)(F))/specify other] (vii) ISDA Determination - Floating Rate Option: [ ] - Designated Maturity: [ ] - Reset Date: [ ]
A B-5 (viii) Margin(s): [+/-][ ] per cent. per annum (ix) Minimum Rate of Interest: [ ] per cent. per annum (x) Maximum Rate of Interest: [ ] per cent. per annum (xi) Day Count Fraction: [Actual/365, Actual/Actual, Actual/365(Fixed), Actual/360, 30/360, 360/360, Bond Basis, 30E/360 or Eurobond Basis or specify other] (xii) Rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: [ ] 15. Zero Coupon Note Provisions: [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph) (i) Accrual Yield: [ ] per cent. per annum (ii) Reference Price: [ ] (iii) Any other formula/basis of determining amount payable: [ ] (iv) Business Day Convention: [Following Business Day Convention/Modified Following Business Day Convention/specify other] (v) Applicable Business Centers for purposes of "Business Day" Definition: [London/specify others] (vi) Calculation Agent responsible for calculating the amount due (if not the Agent): [ ]
A B-6 16. Index Linked Interest [Applicable/Not Applicable] Note Provisions: (If not applicable, delete the remaining sub-paragraphs of this paragraph) (i) Index/Formula: [give or annex details] (ii) Calculation Agent responsible for calculating the principal and/or interest due (if not the Agent): [ ] (iii) Provisions for determining Coupon where calculation by reference to Index and/or Formula is Impossible or impracticable: [ ] (iv) Specified Period(s)/Specified Interest Payment Dates: [ ] (v) Business Day Convention: [Floating Rate Convention/ Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/specify other] (vi) Applicable Business Centers for purposes of "Business Day" definition: [London/specify other] (vii) Minimum Rate of Interest: [ ] per cent. per annum (x) Maximum Rate of Interest: [ ] per cent. per annum (xi) Day Count Fraction: [ ] 17. Index Linked Redemption Note [Applicable/Not Applicable] Provisions: (If not applicable, delete the remaining sub-paragraphs of this paragraph) (i) Index/Formula: [give or annex details] (ii) Calculation Agent responsible for calculating the principal and/or interest due (if not the Agent): [ ]
A B-7 (iii) Provisions for determining payments where calculation by reference to Index and/or Formula is impossible or impractical: [ ] 18. Dual Currency Note Provisions: [Applicable/Not Applicable] (If not applicable, delete the remaining sub-paragraphs of this paragraph) (i) Rate of Exchange/method of calculating Rate of Exchange: [give details] (ii) Calculation Agent, if any, responsible for calculating the principal and/or interest payable (if not the Agent): [ ] (iii) Provisions applicable where calculation by reference to Rate(s) of Exchange impossible or impractical: [ ] (iv) Person at whose option Specified Currency(ies) is/are payable: [ ] PROVISIONS RELATING TO REDEMPTION 19. TMCC's Optional Redemption: [Yes/No] (If not applicable, delete the remaining sub-paragraphs of this paragraph) (i) Optional Redemption Date(s): [ ] (ii) Optional Redemption Amount(s) and method, if any, of calculation of such amount(s): [ ] (iii) If redeemable in part: (a) Minimum Redemption Amount: [ ] (b) Higher Redemption Amount: [ ] (iv) The applicable period for notice to Noteholders (if different from [Same as Condition 5(d)/specify that set out in Condition 5(d)): other] (v) The applicable period for notice to the Agent (if different from [Same as Condition 5(d)/specify that set out in Condition 5(d)): other]
A B-8 20. Redemption at the option of the [Yes/No] Noteholders: (If not applicable, delete the remaining sub-paragraphs of this paragraph) (i) Optional Redemption Date(s): [ ] (ii) Optional Redemption Amount(s) and method, if any, of calculation of such amount(s): [ ] (iii) Other details: [ ] 21. Final Redemption Amount: [Par/specify other/see Appendix] 22. Early Redemption Amount(s) payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if required or if different from that set out in Condition 5(f)): [ ] GENERAL PROVISIONS APPLICABLE TO THE NOTES 23. Form of Notes: [Temporary global Note exchangeable for a permanent global Note which is exchangeable for definitive Notes [only if (as described more fully in the Conditions) (a) there should be an Event of Default; (b) Euroclear, Cedelbank and any other relevant clearance system are all no longer willing or able to properly discharge their responsibilities and the Agent and TMCC are unable to locate a qualified successor; (c) upon the election of TMCC; or (d) upon 90 days written notice of any Noteholder, all as set forth more fully in the Conditions/specify other] [Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date.] 24. Other special provisions relating to Payment Dates: [Not Applicable/give details]
A B-9 25. Talons for future Coupons to be attached to definitive Notes (and dates on which such Talons mature): [Yes/No. If yes, give details] 26. Details relating to Partly Paid Notes: including, without limitation, amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences (if any) of failure to pay, including any right of TMCC to forfeit the Notes and interest due on late payment: [Not Applicable/give details] 27. Details relating to Installment Notes: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (i) Installment Amounts: [ ] (ii) Installment Dates: [ ] (iii) Other details: [ ] 28. Whether the Notes will be subject to [Yes/No](If yes, specify Redenomination, Consolidation or particular provision(s) Exchange into euro: applicable and provide details if different from that set out in Condition 17) 29. Whether Notes are convertible at option of TMCC/Holder into Notes of another Interest/Payment Basis, Date of Conversion or Option Exercise/Interest Payment Basis/other relevant terms: [ ] 30. Further Issues and Consolidation: [TMCC may from time to time, without the consent of the holders of Notes, Receipts or Coupons of this Series, create and issue further Notes of this Series having the same terms and conditions as the Notes (or the same terms and conditions save for the first payment of interest thereon and the Issue Date thereof) with the outstanding Notes and so that the same shall be consolidated
A B-10 and form a single Series with the outstanding Notes and references in the Conditions to "Notes" shall be construed accordingly.] 31. Cost, if any, to be borne by Noteholders in connection with exchanges for security printed definitive Notes: [ ] 32. Other terms or special conditions: [Not Applicable/give details] DISTRIBUTION 33. (i) If syndicated, names of Managers: [Not Applicable/give names] (ii) Stabilizing Manager (if any): [Not Applicable/give names] 34. If non-syndicated, name of relevant Dealer: [ ] 35. Additional selling restrictions: Selling restrictions, including those applicable to the United States and United Kingdom are set out in the Offering Circular and Appendix B to the Second Amended and Restated Program Agreement dated July 24, 1997, as amended [and the Syndicate Purchase Agreement dated [ ], among the Dealers and the Company]. OPERATIONAL INFORMATION 36. Any clearing system(s) other than Euroclear and Cedelbank and the [Not Applicable/give name(s) relevant identification numbers(s): and number(s)] 37. Delivery: Delivery [against/free of] payment 38. Additional Paying Agent(s) (if any): [ ] 39. Purchaser's account number with [Euroclear/Cedelbank] to which the Notes are to be credited: [ ]
A B-11 40. The text set out below is required only for Notes in respect of which the issue proceeds are accepted by TMCC in the United Kingdom and which are to be listed on the London Stock Exchange. The text set out below may be deleted if TMCC is relying on any of Regulation 13(4)(c) to (g) of the Banking Act 1987 (Exempt Transactions) Regulations 1997. TMCC confirms that: a) as of the date hereof, it has complied with its obligations under the relevant rules (as defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997) in relation to the admission to and continuing listing of the Program and of any previous issues made under it and listed on the same exchange as the Program; b) it will have complied with its obligations under the relevant rules in relation to the admission to listing of the Notes by the time when the Notes are so admitted; and c) as of the date hereof, it has not, since the last publication, if any, in compliance with the relevant rules of information about the Program, any previous issues made under it and listed on the same exchange as the Program, or the Notes, having made all reasonable enquires, become aware of any change in circumstances which could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations as issuer in respect of the Notes as they fall due. ISIN: [ ] Common Code: [ ] A B-12 Acceptance on behalf of TMCC of the terms of the Pricing Supplement as of the date above first written: TOYOTA MOTOR CREDIT CORPORATION By: -------------------------- The following information is to be included only in the version of the Pricing Supplement which is submitted to the London Stock Exchange in the case of Notes to be listed on the London Stock Exchange: Application is hereby made to list this issue of Notes pursuant to the listing of the U.S. $16,000,000,000 Euro Medium-Term Note Program of Toyota Motor Credit Corporation (as from [insert date of or prior to Settlement date for the issuance of the Notes]). THE CHASE MANHATTAN BANK (As Agent) By: -------------------------- cc: The Chase Manhattan Bank A B-13 ANNEX D ------- TRADING DESK INFORMATION ------------------------ The Company TOYOTA MOTOR CREDIT CORPORATION 19001 South Western Avenue FN17 Torrance, California 90509 Telephone No: (310) 618-4001; Fax No: (310) 787-6194 Attention: Vice President, Treasury The Dealers - ----------- PARIBAS GOLDEN SACHS LEHMAN BROTHERS 10 Harewood Avenue INTERNATIONAL INTERNATIONAL (EUROPE) London NW1 6AA Peterborough Court One Broadgate Telephone: 0171 595 133 Fleet Street London EC2M 7HA 2000 London EC4A 2BB Telephone: 0171 256 8256 Telefax: 0171 595 Telephone: 0171 744 Telefax: 0171 260 2778 2555 1000 Attn: MTN Trading Desk Attn: Euro Medium Term Note Desk MERRILL LYNCH NOMURA INTERNATIONAL UBS AG INTERNATIONAL PLC 1 Finsbury Avenue Ropemaker Place Nomura House London EC2M 2PP 25 Ropemaker Street 1 St. Martin'sle-Grand Telephone: 0171 711 2479 London EC2Y 9LY London EC1A 4NP Telefax: 0171 711 2411 Telephone: 0171 867 Telephone: 0171 236 Attn: MTN Group 3995 8056 TeleFax: 0171 867 Telefax: 0171 521 2616 4327 Attn: MTN Trading Attn: EMTN Trading and Distribution Desk CREDIT SUISSE FIRST J.P. MORGAN MORGAN STANLEY & CO. BOSTON SECURITIES LTD INTERNATIONAL LIMITED (EUROPE) LIMITED 60 Victoria Embarkment 25 Cabot Square One Cabot Square London EC4Y 0JP Canary Wharf Canary Wharf Telephone: 0171 779 London E14 4QA London E14 4QJ 3469 Telefax: 0171 425 4397 Telephone: 0171 888 Attn: Euro Medium Term Attn: Head of 4021 Note Desk Transaction Management Telefax: 0171 888 Group 3719
A D-1 APPENDIX E ---------- FORM OF THE NOTES ----------------- Each Tranche of Notes will initially be represented by one or more temporary global Notes, without receipts, interest coupons or talons, which will be delivered to a common depositary for Euroclear and Cedelbank. While any Note is represented by a temporary global Note, payments of principal and interest (if any) due prior to the Exchange Date (as defined below) will be made against presentation of the temporary global Note only to the extent that certification of non-U.S. beneficial ownership (in the form set out in the temporary global Note) has been received by Euroclear or Cedelbank. Interests in the temporary global Note will be exchangeable for interests in a permanent global Note and/or for security printed definitive Notes (as specified under "Terms and Conditions of the Notes" and in the applicable Pricing Supplement) not earlier than the date (the "Exchange Date") which is 40 days after completion of the distribution of the relevant Tranche, provided that certification of non-U.S. beneficial ownership has been received. No interest or principal payments will be made on a temporary global Note after the Exchange Date. Payments of principal or interest (if any) in respect of a permanent global Note will be made through Euroclear and Cedelbank against presentation or surrender, as the case may be, of the permanent global Note without any requirement for further certification. A permanent global Note will be exchangeable in whole, but not in part, for security printed definitive Notes with, where applicable, receipts, interest coupons and talons attached not earlier than the Exchange Date (i) at the option of TMCC; (ii) at the option of Noteholders, unless specified otherwise in the applicable Pricing Supplement and (iii) under certain other limited circumstances set forth under "Terms and Conditions of the Notes". If a portion of the Notes continue to be represented by the temporary global Note after the issuance of definitive Notes, the temporary global Note shall thereafter be exchangeable only for definitive Notes, subject to certification of non-U.S. beneficial ownership. Unless specified in the applicable Pricing Supplement, investors shall have the right to require the delivery of definitive Notes; provided, however, that such delivery may be conditioned on written notice, as specified in the applicable Pricing Supplement, from Euroclear or Cedelbank (as the case may be) acting on instructions of the holders of interest in the temporary or permanent global Note and/or on the payment of costs in connection with the printing and distribution of the definitive Notes. No definitive Note delivered in exchange for a permanent or temporary global Note shall be mailed or otherwise delivered to any locations in the United States of America in connection with such exchange. Temporary and permanent global Notes and definitive Notes will be issued by The Chase Manhattan Bank, London Office, as issuing and (unless specified otherwise in the applicable Pricing Supplement) principal paying agent and, unless specified otherwise in the applicable Pricing Supplement, as calculation agent (the "Agent", which expression includes any successor agents or any other Calculation Agent E-1 specified in the applicable Pricing Supplement) pursuant to a Second Amended and Restated Agency Agreement dated as of July 24, 1997, as amended (the "Agency Agreement"), and made between TMCC, the Agent and the other paying agents named therein (together with the Agent, the "Paying Agents", which expression includes any additional or successor paying agents). If specified in the applicable Pricing Supplement, other clearance systems capable of complying with the certification requirements set forth in the temporary global Note may be used in addition to or in lieu of Euroclear and Cedelbank, and any reference herein to Euroclear and/or Cedelbank shall, whenever the context so permits, be deemed to include such other additional or alternative clearing system. The Pricing Supplement will contain such information (if any) as is necessary to comply with the Banking Act 1987 (Exempt Transactions) Regulations 1997. Temporary and permanent global Notes and definitive Notes will be issued in bearer form only. The following legend will appear on all global Notes, definitive Notes, receipts and interest coupons for Notes with a maturity of more than 183 days: "Any United States person (as defined in the Internal Revenue Code of the United States) who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in sections 165(j) and 1287(a) of the Internal Revenue Code." The following legend will appear on all global Notes, definitive Notes, receipts and interest coupons for Notes with maturities at issuance of 183 days or less: "By accepting this obligation, the holder represents and warrants that it is not a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder) and that it is not acting for or on behalf of a United States person (other than an exempt recipient described in Section 6049(b)(4) of the Internal Revenue Code and the regulations thereunder)." The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition or payment of principal in respect of Notes, receipts or interest coupons. Applicable Pricing Supplement Set out below is the form of Pricing Supplement which will be completed for each Tranche of Notes issued under the Program. [See Annex B to Appendix D (Form of Operating & Administrative Procedures Memorandum) for the form of Pricing Supplement] E-2 EX-10 3 EXHIBIT 10.5 (e) CONFORMED COPY AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AMENDMENT dated as of March 19, 1999 among TOYOTA MOTOR CREDIT CORPORATION (the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into a Three- Year Credit Agreement dated as of September 29, 1994, as amended as of September 28, 1995, as amended and restated as of September 24, 1996 and as amended and restated as of September 23, 1997 (collectively the "Agreement"); and WHEREAS, the parties hereto desire to make an amendment to terminate the Commitment of The Long-Term Credit Bank of Japan, Limited, Los Angeles Agency ("LTCB") and as a result of the termination, reduce the aggregate principal amount of the total Commitments by the amount of LTCB's Commitment; NOW, THEREFORE, the parties hereto agree as follows: Section 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the agreement shall from and after the date hereof refer to the Agreement as amended hereby. Section 2. Termination of Commitment and Withdrawal of Bank. With effect from and including the date this Amendment becomes effective: (a) LTCB shall cease to be a Bank under the Agreement and LTCB's Commitment under the Agreement shall therefore terminate; provided that the provisions of Sections 8.03 and 9.03 of the Agreement shall continue to inure to the benefit of LTCB; and (b) All accrued fees and other amounts payable under the Agreement for the account of LTCB shall be due and payable on such date. Section 3. Representations and Warranties. The Borrower hereby represents and warrants that as of the date hereof and after giving effect hereto: (a) no Default has occurred and is continuing; and (b) each representation and warranty of the Borrower set forth in the Agreement after giving effect to this Amendment is true and correct as though made on and as of such date. Section 4. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. Section 5. Counterparts; Effectiveness. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective as of the date hereof when the Agent shall have received duly executed counterparts hereof signed by the Borrower and each of the Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. TOYOTA MOTOR CREDIT CORPORATION By: /s/ George E. Borst ------------------------------- Title: Senior Vice President & General Manager MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert Bottamedi -------------------------- Title: Vice President BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By: /s/ David A. Rosso -------------------------- Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD. LOS ANGELES BRANCH By: /s/ Masato Sekino -------------------------- Title: Deputy General Manager THE CHASE MANHATTAN BANK By: /s/ Frances L. Bonham -------------------------- Title: Managing Director CITICORP USA, INC. By: /s/ Brian Ike ------------------------- Title: Attorney-in-fact CREDIT SUISSE FIRST BOSTON By: /s/ Jeffrey Ulmer ------------------------- Title: Vice President By: /s/ Robert N. Finney ------------------------- Title: Managing Director ABN AMRO BANK N.V. By: /s/ John A. Miller ------------------------- Title: Group Vice President By: /s/ Paul K. Stimpfl -------------------------- Title: Group Vice President PARIBAS By: /s/ Nicholas C. Mast ------------------------- Title: Regional General Manager By: /s/ Brian F. Hewett ------------------------- Title: Vice President BARCLAYS BANK PLC By: /s/ L. Peter Yetman -------------------------- Title: Associate Director DEUTSCHE BANK AG, NEW YORK BRANCH / CAYMAN ISLANDS BRANCH By: /s/ Wolf A. Kluge ------------------------------- Title: Vice President By: /s/ Oliver Schwarz ------------------------------ Title: Assistant Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY By: /s/ Yoshiaki Kozano ------------------------------- Title: Deputy General Manager THE SAKURA BANK, LIMITED By: /s/ Tadashi Kawai ------------------------------ Title: Senior Vice President & Assistant General Manager THE SANWA BANK, LIMITED, LOS ANGELES BRANCH By: /s/ Zenichi Muramoto ------------------------------ Title: Senior Vice President & Deputy General Manager THE TOKAI BANK, LIMITED By: /s/ Satoru Kojima ------------------------------ Title: Senior Vice President and Assistant General Manager UBS AG, STAMFORD BRANCH By: /s/ Gregory Raue ------------------------------ Title: Director By: /s/ Robert Mendeles ------------------------------ Title: Director MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By: /s/ Robert Bottamedi ------------------------------ Title: Vice President EX-10 4 EXHIBIT 10.5 (f) CONFORMED COPY THIRD AMENDED AND RESTATED THREE-YEAR CREDIT AGREEMENT THIRD AMENDED AND RESTATED THREE-YEAR CREDIT AGREEMENT dated as of September 17, 1999 (this "Agreement") among TOYOTA MOTOR CREDIT CORPORATION, the BANKS listed on the signature pages hereof and BANK OF AMERICA, N.A., as Agent. W I T N E S S E T H: WHEREAS, the parties hereto have heretofore entered into a Three-Year Credit Agreement dated as of September 29, 1994, as amended as of September 28, 1995, amended and restated as of September 24, 1996 and September 23, 1997 and amended as of March 19, 1999 (collectively the "Existing Agreement"); and WHEREAS, Morgan Guaranty Trust Company of New York desires to resign as Agent under the Existing Agreement and the Banks desire to appoint Bank of America, N.A. (and Bank of America N.A. desires to accept such appointment) to succeed to and become vested with all the rights and duties of the retiring Agent under the Existing Agreement effective upon the Effective Date (as defined below); and WHEREAS, no Loans are outstanding under the Existing Agreement at the date hereof; and WHEREAS, the parties hereto desire to amend the Existing Agreement as set forth herein and to restate the Existing Agreement in its entirety to read as set forth in the Existing Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: Section 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Existing Agreement shall have the meaning assigned to such term in the Existing Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Existing Agreement shall from and after the date hereof refer to the Existing Agreement as amended hereby. Section 2. Replacement of the Agent. By executing this Agreement, effective on the Effective Date, Morgan Guaranty Trust Company of New York shall resign as Agent under the Existing Agreement, each of the Banks shall appoint Bank of America, N.A., as Agent, and Bank of America, N.A. shall thereupon succeed to and become vested with all the rights and duties of Morgan Guaranty Trust Company of New York as Agent under the Existing Agreement, and Morgan Guaranty Trust Company of New York shall be discharged from its duties and obligations as Agent thereunder. Morgan Guaranty Trust Company of New York shall continue as a Bank party to the Agreement after its resignation as Agent Section 3. Amendment of the Existing Agreement (a) The name "Morgan Guaranty Trust Company of New York" appearing in the definitions of "Agent", "CD Reference Banks", "Euro-Dollar Reference Banks" and "Federal Funds Rate" is changed to "Bank of America, N.A.". (b) The definition of "Domestic Business Day" is amended to read in its entirety as follows: "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized by law to close. (c) The definition of "Prime Rate" is amended to read in its entirety as follows: "Prime Rate" means the rate of interest in effect for such day as publicly announced from time to time by Bank of America, N.A. as its "prime rate." Such rate is a rate set by Bank of America, N.A. based upon various factors including Bank of America, N.A.'s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America, N.A. shall take effect at the opening of business on the day specified in the public announcement of such change. (d) Sections 7.1, 7.2, 7.3, 7.6, 7.7 and 7.8 are amended in their entirety to read as follows: Section 7.1 Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement, the Agent shall not have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Section 7.2 Agent and Affiliates. Bank of America, N.A. shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Bank of America, N.A. and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent hereunder. The Banks acknowledge that, pursuant to such activities, Bank of America, N.A. or its affiliates may receive information regarding the Borrower or its affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such affiliate) and acknowledge that the Agent shall be under no obligation to provide such information to them. Section 7.3 Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or under the Notes unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Required Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 7.6 Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct provided, however, that no action taken in accordance with the directions of the Required Banks shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section) that such indemnitees may suffer or incur in connection with this Agreement, the Existing Agreement, the Commitments, the use or contemplated use of the proceeds of any Loan, the relationship of the Borrower, the Agent and the Banks under this Agreement or any action taken or omitted by such indemnitees hereunder. Section 7.7 Credit Decision; Disclosure of Information by Agent. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent herein, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Agent. Section 7.8 Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent with the written consent of the Borrower, which shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Required Banks with the consent of the Borrower, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. (e) The following provisions are added to Article 7 of the Existing Agreement as Sections 7.10 and 7.11: Section 7.10 Delegation of Duties. The Agent may execute any of its duties under this Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. Section 7.11 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless Agent shall have received written notice from a Bank or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Agent will notify the Banks and the Borrower of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Banks in accordance with Article 6; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Agent or the Banks. Section 4. Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Section 5 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective on the date (the "Effective Date") when the Agent shall have received (i) duly executed counterparts hereof signed by the Borrower and the Banks (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party) and (ii) an opinion of the General Counsel of the Borrower (or such other counsel for the Borrower as may be acceptable to the Agent) substantially in the form of Exhibit E to the Existing Agreement with reference to this Agreement and the Existing Agreement as amended and restated hereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. TOYOTA MOTOR CREDIT CORPORATION By: /s/ George E. Borst --------------------------- Title: Senior Vice President and General Manager Commitments - ----------- $100,000,000 BANK OF AMERICA, N.A. By: /s/ Alan H. Roche --------------------------- Title: Vice President $100,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert Bottamedi --------------------------- Title: Vice President $100,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD. LOS ANGELES BRANCH By: /s/ Masato Sekino --------------------------- Title: Deputy General Manager $100,000,000 THE CHASE MANHATTAN BANK By: /s/ Frances L. Bonham --------------------------- Title: Managing Director $100,000,000 CITICORP USA, INC. By: /s/ Candi M. Halbert --------------------------- Title: $100,000,000 CREDIT SUISSE FIRST BOSTON By: /s/ Robert N. Finney --------------------------- Title: Managing Director By: /s/ Jeffrey B. Ulmer --------------------------- Title: Vice President $40,000,000 ABN AMRO BANK N.V. By: /s/ John A. Miller --------------------------- Title: Group Vice President By: /s/ Ellen M. Coleman --------------------------- Title: Vice President $40,000,000 PARIBAS By: /s/ Carol Simon --------------------------- Title: Head, NY Credit Risk Financial Markets By: /s/ Jean Wehner --------------------------- Title: Senior Credit Officer $40,000,000 BARCLAYS BANK PLC By: /s/ L. Peter Yetman --------------------------- Title: Director $40,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH /CAYMAN ISLAND BRANCH By: /s/ Oliver Schwarz -------------------------- Title: Assistant Vice President By: /s/ Stefan Hafke --------------------------- Title: Vice President $40,000,000 THE SAKURA BANK, LIMITED By: /s/ Sumio Tanaka --------------------------- Title: Joint General Manager $40,000,000 THE SANWA BANK, LIMITED, LOS ANGELES BRANCH By: /s/ Zenichi Muramoto --------------------------- Title: Senior Vice President & Deputy General Manager $40,000,000 THE TOKAI BANK, LIMITED By: /s/ Kosuke Furukawa --------------------------- Title: Joint General Manager $80,000,000 UBS AG, STAMFORD BRANCH By: /s/ Gregory Raue --------------------------- Title: Director By: /s/ Wilfred Saint --------------------------- Title: Associate Director Loan Portfolio Support, US - ----------------- Total Commitments $960,000,000 ================= BANK OF AMERICA, N.A., as Agent By: /s/ David Price --------------------------- Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as retiring Agent By: /s/ Robert Bottamedi --------------------------- Title: Vice President EX-10 5 Exhibit 10.5(g) CONFORMED COPY FOURTH AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT dated as of September 17, 1999 among Toyota Motor Credit Corporation The Banks Listed Herein and Bank of America, N.A., as Administrative Agent ------------------------- The Chase Manhattan Bank, as Syndication Agent The Bank of Tokyo-Mitsubishi, Ltd. and Citicorp USA, Inc., as Documentation Agents Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager FOURTH AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT FOURTH AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT (this "Agreement") dated as of September 17, 1999 among TOYOTA MOTOR CREDIT CORPORATION, the BANKS listed on the signature pages hereof and BANK OF AMERICA, N.A., as Administrative Agent. WHEREAS, the parties hereto have heretofore entered into a 364-Day Credit Agreement dated as of September 29, 1994, as amended as of September 28, 1995 and as amended and restated as of September 24, 1996, September 23, 1997 and September 22, 1998 (collectively the "Existing Agreement"); and WHEREAS, no Loans are outstanding under the Existing Agreement on the date hereof; and WHEREAS, certain Persons listed on the signature pages hereof which are not parties to the Existing Agreement desire to become Banks party to this Agreement; WHEREAS, certain Persons which are party to the Existing Agreement as "Banks" thereunder do not desire to be Banks party to this Agreement; WHEREAS, Morgan Guaranty Trust Company of New York desires to resign as agent under the Existing Agreement and the Banks desire to appoint Bank of America, N.A. (and Bank of America, N.A. desires to accept such appointment) to succeed to and become vested with all the rights and duties of the retiring agent under the Existing Agreement effective upon the Effective Date (as defined below); WHEREAS, the parties hereto desire to further amend the Existing Agreement as set forth herein and to restate the Existing Agreement in its entirety to read as set forth below; NOW, THEREFORE, the parties hereto agree to amend and restate the Existing Agreement as follows: ARTICLE 1 DEFINITIONS Section 1.1 Definitions. The following terms, as used herein, have the ----------------------- following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3. "Adjusted CD Rate" has the meaning set forth in Section 2.7(b). 1 "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.7(c). "Administrative Agent" means Bank of America, N.A. in its capacity as Administrative Agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Arranger" means Banc of America Securities LLC, in its capacity as sole lead arranger and sole book manager. "Assessment Rate" has the meaning set forth in Section 2.7(b). "Assignee" has the meaning set forth in Section 9.6(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing or pursuant to Article 8. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Toyota Motor Credit Corporation, a California corporation, and its successors. "Borrower's 1998 Form 10-K" means the Borrower's annual report on Form 10-K for 1998, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrower's Latest Form 10-Q" means the Borrower's quarterly report on Form 10-Q for the quarter ended June 30, 1999, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" has the meaning set forth in Section 1.3. 2 "CD Base Rate" has the meaning set forth in Section 2.7(b). "CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in accordance with the applicable Notice of Committed Borrowing. "CD Margin" has the meaning set forth in Section 2.7(b). "CD Reference Banks" means Credit Suisse First Boston, Deutsche Bank AG and Bank of America, N.A. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof or, if the Commitments are increased pursuant to Section 2.16, such amount for such Bank set forth on the most recent schedule distributed by the Administrative Agent pursuant to Section 2.16(g), as such amount may be reduced from time to time pursuant to Section 2.9. "Committed Loan" means a loan made by a Bank pursuant to Section 2.1. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Continuation" and "Continue" mean, with respect to any Committed Loan, the continuation of such Committed Loan as a Base Rate Loan, CD Loan or Euro- Dollar Loan, as the case may be. "Conversion" and "Convert" mean (i) with respect to any Committed Loan, the conversion of such Committed Loan from or into another Type of Committed Loan and (ii) with respect to any Money Market Loan, the conversion of such Money Market Loan into a Committed Loan of any Type. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. 3 "Domestic Reserve Percentage" has the meaning set forth in Section 2.7(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.1. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro- Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed Borrowing. "Euro-Dollar Margin" has the meaning set forth in Section 2.7(c). "Euro-Dollar Reference Banks" means the principal London offices of Credit Suisse First Boston, Deutsche Bank AG and Bank of America, N.A. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.7(c). "Event of Default" has the meaning set forth in Section 6.1. "Extended Maturity Date" means the date that is one calendar year from the Termination Date. 4 "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Bank of America, N.A. on such day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent. "Fee Letter" has the meaning set forth in Section 7.11. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.1(b)) or any combination of the foregoing. "Indemnitee" has the meaning set forth in Section 9.3(b). "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing or Continuation of or Conversion to a Euro-Dollar Loan, the period commencing on the date of such Borrowing or on the last day of the preceding Interest Period applicable thereto, as the case may be, and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Notice of Continuation/Conversion; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro- Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Maturity Date shall end on the Maturity Date. (2) with respect to each CD Borrowing or Continuation of or Conversion to a CD Loan, the period commencing on the date of such Borrowing or on the last day of the preceding Interest Period applicable thereto, as the case may be, and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Notice of Continuation/Conversion; provided that: 5 (a) any Interest Period which would otherwise end on a day which is not a Domestic Business Day shall, subject to clause (b) below, be extended to the next succeeding Domestic Business Day; and (b) any Interest Period which would otherwise end after the Maturity Date shall end on the Maturity Date. (3) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.3; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than 14 days) as the Borrower may elect in accordance with Section 2.3; provided that: (a) any Interest Period which would otherwise end on a day which is not a Domestic Business Day shall, subject to clause (b) below, be extended to the next succeeding Domestic Business Day; and (b)any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. Notwithstanding the foregoing, the Borrower may select an Interest Period for a CD Loan or a Euro-Dollar Loan which would end after the Termination Date only if it has previously delivered, or delivers concurrently with the applicable Notice of Borrowing or Notice of Continuation/Conversion, a request for an extension of the Termination Date pursuant to Section 2.15. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.3. 6 "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.7(c). "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000. "Maturity Date" means the Termination Date or, if extended pursuant to Section 2.15, the Extended Maturity Date. "Money Market Absolute Rate" has the meaning set forth in Section 2.3(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.1). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.3(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.3. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "New Banks" has the meaning set forth in Section 2.16(d). "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. 7 "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.2) or a Notice of Money Market Borrowing (as defined in Section 2.3(f)). "Notice of Continuation/Conversion" means a Notice of Continuation/Conversion (as defined in Section 2.4). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.6(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Prime Rate" means the rate of interest in effect for such day as publicly announced from time to time by Bank of America, N.A. as its "prime rate." Such rate is a rate set by Bank of America, N.A. based upon various factors including Bank of America, N.A.'s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America, N.A. shall take effect at the opening of business on the day specified in the public announcement of such change. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Regulatory Change" has the meaning set forth in Section 8.3(a). "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid principal amount of the Loans. "Significant Subsidiary" means any Subsidiary which would meet the definition of "Significant Subsidiary" contained in Regulation S-X (or similar successor provision) of the Securities and Exchange Commission. 8 "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Termination Date" means September 15, 2000 or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "TMC Consolidated Subsidiary" means at any date a Subsidiary or other entity the accounts of which would be consolidated with those of Toyota Motor Corporation in its consolidated financial statements if such statements were prepared as of such date. "Type" refers to whether a Committed Loan is a Base Rate Loan, CD Loan or Euro-Dollar Loan, each of which constitutes a Type. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. Section 1.2 Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. Section 1.3 Types of Borrowings . The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and, in the case of a Fixed Rate Loan, for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.1 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.3 in which the Bank participants are determined on the basis of their bids in accordance therewith). 9 ARTICLE 2 THE CREDITS Section 2.1 Commitments to Lend; Changes in Commitments. (a) From time to time prior to the Termination Date, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time in amounts such that (i) the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment and (ii) the aggregate principal amount of all Committed Loans and Money Market Loans at any one time outstanding shall not exceed the aggregate Commitments of all the Banks at such time. Each Borrowing under this Section shall be in an aggregate principal amount of $50,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.2(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time prior to the Termination Date under this Section. (b) From and after the Effective Date, (i) each Person listed on the signature pages hereof which is not a party to the Existing Agreement shall become a Bank party to this Agreement, (ii) the Commitment of each Bank party hereto shall be the amount set forth opposite the name of such Bank on the signature pages hereof and (iii) each Person which is a party to the Existing Agreement as a "Bank" thereunder whose name is not set forth on the signature pages hereof shall not be a Bank party hereto and all accrued but unpaid fees and other amounts payable to such Person under the Existing Agreement shall be due and payable on the Effective Date, provided that the provisions of Section 9.03 of the Existing Agreement shall continue to inure to the benefit of each such Person. Section 2.2 Notice of Committed Borrowing. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 9:00 A.M. (Pacific time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. 10 Section 2.3 Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.1, the Borrower may, as set forth in this Section, request the Banks prior to the Termination Date to make offers to make Money Market Loans in United States Dollars to the Borrower; provided that the aggregate principal amount of all Committed Loans and Money Market Loans at any one time outstanding shall not exceed the aggregate Commitments of all the Banks at such time. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 9:00 A.M. (Pacific time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro- Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $50,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Administrative Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. 11 (d) Submission and Contents of Money Market Quotes. Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.1 not later than (x) 1:00 P.M. (Pacific time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:00 A.M. (Pacific time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than 15 minutes prior to the deadline for the other Banks. Subject to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: 12 (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Administrative Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 9:00 A.M. (Pacific time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non- acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $50,000,000 or a larger multiple of $5,000,000, and (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the 13 related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. Section 2.4 Continuation and Conversion Elections. The Borrower may elect by giving the Administrative Agent notice (a "Notice of Continuation/Conversion") on or before 9:00 A.M. Pacific time, on (x) the date of each Conversion of a Loan to a Base Rate Loan, (y) the second Domestic Business Day before each Continuation of a CD Loan or Conversion of a Loan to a CD Loan and (z) the third Euro-Dollar Business Day before each Continuation of a Euro-Dollar Loan or Conversion of a Loan to a Euro-Dollar Loan, to Convert all or any portion of any Committed Loan of one Type into a Committed Loan of another Type, to Convert all or any portion of any Money Market Loan into a Committed Loan of any Type or to Continue all or any portion of any Committed Loan of one Type as a Committed Loan of the same Type; provided, however, that (i) each such Conversion or Continuation shall be pro rated among the applicable outstanding Loans of all Banks, (ii) each such Conversion or Continuation shall be in a minimum principal amount not less than the minimum amount specified in Section 2.1(a), (iii) no portion of the outstanding principal amount of any Loan may be Continued or Converted when any Default or Event of Default has occurred and is continuing and (iv) in the absence of delivery of a timely Notice of Continuation/Conversion with respect to any Loan as set forth above, such Loan shall automatically Convert to, or Continue as, a Base Rate Loan on the last day of the then current Interest Period in the case of Fixed Rate Loans. Each Base Rate Loan shall automatically Continue without any action on the part of any Person until the earliest of (x) the Maturity Date, (y) the date such Base Rate Loan is prepaid and (z) the date such Base Rate Loan is Converted into a Loan of another Type. Such Notice of Continuation/Conversion shall specify: (a) the date of such Continuation or Conversion, which shall be (i) in the case of Fixed Rate Loans, the last day of the then current Interest Period of the Loans to be Continued or Converted and (ii) in the case of Base Rate Loans, the date specified in such Notice of Continuation/Conversion, (b) the aggregate amount of the Loans to be Continued or Converted, (c) whether the Loans to be Continued or Converted are to remain or become CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Continuation or Conversion to a Fixed Rate Loan, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. Section 2.5 Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing or a Notice of Continuation/Conversion, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such 14 Bank's share (if any) of such Borrowing, Continuation or Conversion and such Notice of Borrowing or Notice of Continuation/Conversion shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (Pacific time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.1. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Administrative Agent as provided in subsection (b), or remitted by the Borrower to the Administrative Agent as provided in Section 2.12, as the case may be. (d) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing or a Money Market Absolute Rate Borrowing, prior to 9:00 A.M. (Pacific time) on the date of such Borrowing) that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.5 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. Section 2.6 Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Administrative Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. 15 (c) Upon receipt of each Bank's Note pursuant to Section 3.1(b), the Administrative Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. (d) The Administrative Agent will upon request of the Borrower from time to time furnish information to the Borrower as to the types and amounts of Loans outstanding hereunder. Section 2.7 Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable on the last Domestic Business Day of each calendar quarter. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such CD Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin plus the Adjusted CD Rate applicable to the Interest Period for such Loan and (ii) the rate applicable to Base Rate Loans for such day. "CD Margin" means 0.235% per annum. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: ACDR = [CDBR]* + AR ----------- [1.00-DRP] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate 16 ---------------- * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1%. The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 8:00 A.M. (Pacific time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. "Euro-Dollar Margin" means 0.11% per annum. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per 17 annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to the Interest Period for such Loan and (ii) the sum of 2% plus the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Administrative Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.1 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day). (e) Subject to Section 8.1(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.7(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.3. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.3. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. 18 (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.1 shall apply. Section 2.8 Facility Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks (including each New Bank from and after the date it becomes a Bank under this Agreement pursuant to Section 2.16) ratably a facility fee at the rate of 0.04% per annum. Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date (or such earlier date of termination) to but excluding the Maturity Date or any earlier date on which the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans. Accrued fees under this Section shall be payable on the last Domestic Business Day of each calendar quarter and on the Maturity Date (and, if later, the date the Loans shall be repaid in their entirety). Section 2.9 Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. Section 2.10 Scheduled Termination of Commitments; Maturity of Loans. The Commitments shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on the Termination Date or, if extended pursuant to Section 2.15, the Extended Maturity Date. Section 2.11 Optional Prepayments. The Borrower may, upon at least one Domestic Business Day's notice to the Administrative Agent, prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.1(a)), in whole at any time, or from time to time in part in amounts aggregating $50,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid. The interest accrued on such Borrowing to the date of prepayment shall be payable as set forth in Section 2.7(a). Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Except as provided in Section 2.11(a), the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. 19 (c) Subject to Section 2.13, the Borrower may, upon at least three Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Euro-Dollar Borrowing, or upon at least three Domestic Business Days' notice to the Administrative Agent, prepay any CD Borrowing, in each case in whole at any time, or from time to time in part in amounts aggregating $50,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (d) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. Section 2.12 General Provisions as to Payments. The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (Pacific time) on the date when due, in Federal or other funds immediately available in San Francisco, to the Administrative Agent at its address referred to in Section 9.1. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro- Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. Section 2.13 Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Article 2, 6 or 8 or otherwise, except pursuant to Section 8.2) on any day other than the last day of the Interest Period applicable thereto, or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any 20 Bank in accordance with Section 2.5(a) or 2.11(c), or if the Borrower fails to continue or convert any Loan into a CD Loan or a Euro-Dollar Loan after notice has been given to any Bank in accordance with Section 2.5(a), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or, in the case of a Money Market Loan, prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow or prepay, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, setting forth in reasonable detail the calculation of such amount, which certificate shall be conclusive if prepared reasonably and in good faith. Section 2.14 Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and all facility fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Section 2.15 Extension of Maturity Date. At least 30 days prior to the Termination Date, the Borrower, by written notice to the Administrative Agent, may elect to extend the maturity of the Loans by one calendar year from the Termination Date; provided that for such extension to be effective, no Default shall have occurred and then be continuing on the date of such notice and on the Termination Date. In addition, if the Borrower delivers a Notice of Borrowing or Notice of Continuation/Conversion pursuant to which it selects an Interest Period for a Fixed Rate Loan which would end after the Termination Date, as required by the definition of "Interest Period", concurrently with such Notice of Borrowing or Notice of Continuation/Conversion, the Borrower, by written notice to the Administrative Agent, shall elect to extend the maturity of the Loans by one calendar year from the Termination Date, subject to the proviso in the preceding sentence. The Administrative Agent shall promptly notify each of the Banks of any extension of the maturity of the Loans made pursuant to this Section. Section 2.16 Increases in Commitments. (a) Provided that no Default shall have occurred and be continuing, the Borrower may at any time prior to the Termination Date request in writing that the then existing Commitments be increased by an amount which is not greater than $300,000,000 in the aggregate since the Effective Date in accordance with the provisions of this Section. Any request under this Section shall be submitted by the Borrower to the Banks through the Administrative Agent not less than 45 days prior to the proposed increase and shall specify the proposed effective date and amount of such increase and be accompanied by a certificate of an authorized officer of the Borrower, stating that no Default exists as of the date of the request or will result from the requested increase. The consent of the Banks shall not be required for an increase in the amount of the Commitments pursuant to this Section, except that each Bank shall have the right to consent to an increase in the amount of its Commitment as set forth in this Section 2.16. (b) Each Bank may approve or reject the Borrower's request in its sole and absolute discretion and, absent an affirmative written response within 30 days after receipt of the 21 Borrower's request, shall be deemed to have rejected the Borrower's request. The rejection of the Borrower's request by any number of Banks shall not affect the Borrower's right to increase the Commitments pursuant to this Section. No Bank which rejects the Borrower's request for an increase in the Commitments shall be subject to removal as a Bank under Section 8.6. (c) In responding to the Borrower's request, each Bank that is willing to increase the amount of its Commitment shall specify the amount of the proposed increase to which it is willing to commit. (d) If the aggregate principal amount offered to be committed to by the consenting Banks is less than the amount requested by the Borrower, the Borrower may (i) reject the proposed increase in its entirety, (ii) accept the offered amounts or (iii) designate new lenders who are reasonably acceptable to the Administrative Agent as additional Banks hereunder in accordance with clause (f) of this Section (each, a "New Bank"), which New Banks may commit to the amount of the increase in the Commitments that has not been committed to by the increasing Banks; provided that the amount of the increase in the Commitments committed to by the increasing Banks and the New Banks shall not be greater than $300,000,000 in the aggregate since the Effective Date and provided further that the minimum Commitment of each New Bank shall be not less than the lowest Commitment of an existing Bank prior to the proposed increase in Commitments. (e) If the aggregate principal amount offered to be committed to by the consenting Banks is more than the amount requested by the Borrower, the Administrative Agent, in consultation with the Borrower, shall allocate the increase in Commitments among the consenting Banks. (f) Each New Bank designated by the Borrower and reasonably acceptable to the Administrative Agent shall become an additional party hereto as a New Bank concurrently with the effectiveness of the proposed increase in the Commitments upon its execution of an instrument of joinder to this Agreement which is in form and substance reasonably acceptable to the Administrative Agent and which, in any event, contains the representations, warranties, indemnities and other protections afforded to the Administrative Agent and the other Banks by an Assignment and Acceptance Agreement. (g) Subject to the foregoing, any increase requested by the Borrower shall be effective as of the date agreed to by the Borrower, the Administrative Agent, the increasing Banks and the New Banks (if any) and shall be in the principal amount equal to (i) the amount which the consenting Banks are willing to commit to as increases to the amount of their Commitments plus (ii) the amount offered by any New Banks. Upon the effectiveness of any such increase, the Borrower shall issue replacement Notes to each affected Bank and new Notes to each New Bank, and the Commitments of each Bank will be adjusted to give effect to the increase in the Commitments and set forth in a new schedule issued by the Administrative Agent. 22 ARTICLE 3 CONDITIONS Section 3.1 Effectiveness. The amendment and restatement of the Existing Agreement shall become effective on the date that each of the following conditions shall have been satisfied: (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of a duly executed Note for the account of each Bank dated on or before the Effective Date complying with the provisions of Section 2.6; (c) receipt by the Administrative Agent of an opinion of the General Counsel of the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Administrative Agent of an opinion of Orrick, Herrington & Sutcliffe LLP, special counsel for the Administrative Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or the Required Banks may reasonably request; (e) receipt by the Administrative Agent of all documents the Administrative Agent may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; (f) receipt and review by the Administrative Agent and the Banks, with results reasonably satisfactory to the Administrative Agent and the Banks, of information confirming that (i) the Borrower and its Subsidiaries are taking all necessary and appropriate steps to ascertain the extent of, and to quantify and successfully address, business and financial risks facing the Borrower and its Subsidiaries as a result of the "Year 2000 Problem" (i.e., the inability of certain computer applications to recognize correctly and perform date-sensitive functions involving certain dates prior to and after December 31, 1999), including risks resulting from the failure of key vendors and customers of the Borrower and its Subsidiaries to successfully address the "Year 2000 Problem", (ii) the Borrower's and its Subsidiaries' material computer applications will, on a timely basis, adequately address the "Year 2000 Problem" in all material respects and (iii) the material computer applications of the key vendors and customers of Borrower and its Subsidiaries will on a timely basis adequately address the "Year 2000 Problem" in all material respects or the Borrower and its Subsidiaries will develop contingency plans to adequately address such failure of any such vendors and customers in all material respects; (g) there shall have been no material disruption of or a material adverse change in the financial, banking or capital markets which the Administrative Agent or the Arranger deem material in their sole discretion; 23 (h) all accrued but unpaid fees under the Existing Agreement shall have been paid in full; and (i) receipt by the Administrative Agent of evidence satisfactory to it of the effectiveness of the Fourth Amended and Restated 364-Day Credit Agreement of even date herewith among Toyota Motor Sales, U.S.A., Inc., the banks listed therein and Bank of America, N.A., as Administrative Agent for such banks; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied or waived by all the Banks not later than September 21, 1999. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. Section 3.2 Borrowings; Continuations; Conversions. The obligation of any Bank to make, Continue or Convert a Loan on the occasion of any Borrowing, Continuation or Conversion is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing or a Notice of Continuation/Conversion as required by Section 2.2, 2.3 or 2.4, as the case may be; (b) the fact that, immediately after such Borrowing, Continuation or Conversion, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately before and after such Borrowing, Continuation or Conversion, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except, in the case of a Continuation or Conversion of a Committed Loan, the representations and warranties set forth in Sections 4.4(c), 4.5 and 4.12 as to any matter which has theretofore been disclosed in writing by the Borrower to the Banks) shall be true on and as of the date of such Borrowing, Continuation or Conversion. Each Borrowing, Continuation or Conversion hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing, Continuation or Conversion, as to the facts specified in clauses (b), (c) and (d) of this Section. ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: Section 4.1 Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of California, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 24 Section 4.2 Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or bylaws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries. Section 4.3 Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms. Section 4.4 Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of September 30, 1998 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by independent public accountants and set forth in the Borrower's 1998 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 1999 and the related unaudited consolidated statements of income and cash flows for the nine months then ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, except as stated therein, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such nine-month period (subject to normal year- end adjustments). (c) Since September 30, 1998, there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. Section 4.5 Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or the Notes. 25 Section 4.6 Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Section 4.7 Environmental Matters. In the ordinary course of its business, the Borrower conducts a review of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries. On the basis of this review, the Borrower has reasonably concluded that the costs of compliance with Environmental Laws, including associated liabilities, are unlikely to have a material adverse effect on the business, financial condition, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. Section 4.8 Taxes. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. Section 4.9 Subsidiaries. Each of the Borrower's corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Section 4.10 Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 4.11 Full Disclosure. All information heretofore furnished by the Borrower to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Bank will be, true, accurate and complete in all material respects on the date as of which such information is stated or certified. Section 4.12 Year 2000. The Borrower has (a) initiated a review and assessment of its and each of its Subsidiaries' critical business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by the Borrower or any of its Subsidiaries (or their respective customers and vendors) may be unable to 26 recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) to date, implemented that plan in accordance with that timetable as it may be modified from time to time as appropriate to complete implementation prior to January 1, 2000. Based on the foregoing, the Borrower believes that all of the Borrower's and its Subsidiaries' computer applications and devices containing imbedded computer chips ("Y2K Applications") that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, to be "Year 2000 Compliant"), except to the extent that a failure to do so is not reasonably expected to have a material adverse effect on the business, financial condition, results of operations or prospects of the Borrower and its Consolidated Subsidiaries considered as a whole (a "Material Adverse Affect"). In addition, the Borrower has surveyed the material customers and vendors of it and its Subsidiaries (the "Material Third Parties") and, based solely on the information provided by the Material Third Parties , either (i) Borrower believes that all Y2K Applications that are material to the Material Third Parties' business and operations are reasonably expected on a timely basis to be Year 2000 Compliant except to the extent that a failure to do so is not reasonably expected to have a Material Adverse Effect; or (ii) to the extent Borrower does not so believe, Borrower is or will develop contingency plans to respond to any such failure of a Material Third Party to be Year 2000 Compliant so that no Material Adverse Effect will occur. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: Section 5.1 Information. The Borrower will deliver to the Administrative Agent and each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year; 27 (c) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a certificate of the chief financial officer or the chief accounting officer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof, copies of all registration statements (other than exhibits thereto, pricing supplements and any registration statements (x) on Form S-8 or its equivalent or (y) in connection with asset securitization transactions) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) within five days after any officer of the Borrower at any time obtains knowledge that any representation or warranty set forth in Section 4.6 would not be true if made at such time, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. Section 5.2 Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each Significant Subsidiary to keep, all material property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, and will cause each Significant Subsidiary to maintain with financially sound and reputable insurance companies, insurance in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against by companies of established repute engaged in the same or similar business as the Borrower or such Significant Subsidiary, and the Borrower will promptly furnish to the Administrative Agent and the Banks such information as to insurance carried as may be reasonably requested in writing by the Administrative Agent. Section 5.3 Conduct of Business and Maintenance of Existence. The Borrower will continue, and will cause each Significant Subsidiary to continue, to engage in business of the same general type as now conducted by the Borrower and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Significant Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.3 shall prohibit (i) any merger or consolidation involving 28 the Borrower which is permitted by Section 5.6, (ii) the merger of a Significant Subsidiary into the Borrower or the merger or consolidation of a Significant Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Significant Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (iii) the termination of the corporate existence of any Significant Subsidiary if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. Section 5.4 Compliance with Laws. The Borrower will comply, and cause each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. Section 5.5 Negative Pledge. The Borrower will not pledge or otherwise subject to any lien any property or assets of the Borrower unless the Notes and the obligations of the Borrower under this Agreement are secured by such pledge or lien equally and ratably with all other obligations secured thereby so long as such other obligations shall be so secured; provided, however, that such covenant will not apply to liens securing obligations which do not in the aggregate at any one time outstanding exceed 5% of Consolidated Net Tangible Assets (as defined below) of the Borrower and its Consolidated Subsidiaries and also will not apply to: (a) the pledge of any assets of the Borrower to secure any financing by the Borrower of the exporting of goods to or between, or the marketing thereof in, countries other than the United States in connection with which the Borrower reserves the right, in accordance with customary and established banking practice, to deposit, or otherwise subject to a lien, cash, securities or receivables, for the purpose of securing banking accommodations or as the basis for the issuance of bankers' acceptances or in aid of other similar borrowing arrangements; (b) the pledge of receivables of the Borrower payable in currencies other than United States dollars to secure borrowings in countries other than the United States; (c) any deposit of assets of the Borrower with any surety company or clerk of any court, or in escrow, as collateral in connection with, or in lieu of, any bond on appeal by the Borrower from any judgment or decree against it, or in connection with other proceedings in actions at law or in equity by or against the Borrower or in favor of any governmental bodies to secure progress, advance or other payments in the ordinary course of the Borrower's business; (d) any lien or charge on any property of the Borrower, tangible or intangible, real or personal, existing at the time of acquisition or construction of such property (including acquisition through merger or consolidation) or given to secure the payment of all or any part of the purchase or construction price thereof or to secure any indebtedness incurred prior to, at the time of, or within one year after, the acquisition or completion of construction thereof for the purpose of financing all or any part of the purchase or construction price thereof; 29 (e) any lien in favor of the United States of America or any State thereof or the District of Columbia, or any agency, department or other instrumentality thereof, to secure progress, advance or other payments pursuant to any contract or provision of any statute; (f) any lien securing the performance of any contract or undertaking not directly or indirectly in connection with the borrowing of money, obtaining of advances or credit or the securing of debt, if made and continuing in the ordinary course of business; (g) any lien to secure nonrecourse obligations in connection with the Borrower's engaging in leveraged or single-investor lease transactions; and (h) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any lien, charge or pledge referred to in the foregoing clauses (a) to (g), inclusive, of this Section 5.5; provided, however, that the amount of any and all obligations and indebtedness secured thereby shall not exceed the amount thereof so secured immediately prior to the time of such extension, renewal or replacement and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the charge or lien so extended, renewed or replaced (plus improvements on such property). "Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (i) all current liabilities and (ii) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of the Borrower and its Consolidated Subsidiaries all as set forth on the most recent balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles as practiced in the United States. Section 5.6 Consolidations, Mergers and Sales of Assets. The Borrower shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless: (i) the corporation formed by such consolidation or into which the Borrower is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Borrower substantially as an entirety shall be a corporation or entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia (the "Successor Corporation") and shall expressly assume, by an amendment or supplement to this Agreement, signed by the Borrower and such Successor Corporation and delivered to the Administrative Agent, the Borrower's obligation with respect to the due and punctual payment of the principal of and interest on all the Notes and the due and punctual payment of all other amounts payable by the Borrower hereunder and the performance or observance of every covenant herein on the part of the Borrower to be performed or observed; (ii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Borrower as a result of such transaction as having been incurred by the Borrower at the time of such transaction, no Default shall have happened and be continuing; 30 (iii) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Borrower would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by Section 5.5 hereof, the Borrower or the Successor Corporation, as the case may be, take such steps as shall be necessary effectively to secure the Notes and the obligations of the Borrower under this Agreement equally and ratably with (or prior to) all indebtedness secured thereby; and (iv) the Borrower has delivered to the Administrative Agent a certificate signed by an executive officer and a written opinion or opinions of counsel satisfactory to the Administrative Agent (who may be counsel to the Borrower), each stating that such amendment or supplement to this Agreement complies with this Section 5.6 and that all conditions precedent herein provided for relating to such transaction have been complied with. (b) Upon any consolidation or merger or any conveyance, transfer or lease of the properties and assets of the Borrower substantially as an entirety in accordance with Section 5.6(a), the Successor Corporation shall succeed to, and be substituted for, and may exercise every right and power of, the Borrower under this Agreement and the Notes with the same effect as if the Successor Corporation had been named as the Borrower therein and herein, and thereafter, the Borrower, except in the case of a lease of the Borrower's properties and assets, shall be released from its liability as obligor on any of the Notes and under this Agreement. Section 5.7 Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes including, without limitation, the refunding of its maturing commercial paper. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. ARTICLE 6 DEFAULTS Section 6.1 Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay within five days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Section 5.5, 5.6 or 5.7; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; 31 (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Borrower or any Subsidiary or under any mortgage, indenture, fiscal agency agreement or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Borrower or any Subsidiary and owing to a Person other than the Borrower or a Subsidiary, whether such indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay any portion of the indebtedness when due and payable after the expiration of the greater of five days or any applicable grace period with respect thereto or shall have resulted in indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, and the amount of such indebtedness in the aggregate exceeds $10,000,000; (f) the Borrower or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (g) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (h) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $10,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $25,000,000; 32 (i) judgments or orders for the payment of money in excess of $10,000,000 in the aggregate shall be rendered against the Borrower or any Significant Subsidiary and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; or (j) the Borrower shall cease to be a TMC Consolidated Subsidiary; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (f) or (g) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Section 6.2 Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.1(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 THE ADMINISTRATIVE AGENT Section 7.1 Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as Administrative Agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement, the Administrative Agent shall not have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Section 7.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 33 Section 7.3 Agent and Affiliates. Bank of America, N.A. shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and Bank of America, N.A. and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. The Banks acknowledge that, pursuant to such activities, Bank of America, N.A. or its affiliates may receive information regarding the Borrower or its affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. Section 7.4 Action by Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or under the Notes unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Required Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 7.5 Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 7.6 Liability of Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) vis-a-vis any Bank, with the consent or at the request of the Required Banks or (ii) vis-a-vis any Person, in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Section 7.7 Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct provided, however, that no action taken in accordance with the directions of the Required Banks shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section) that 34 such indemnitees may suffer or incur in connection with this Agreement, the Existing Agreement, the Commitments, the use or contemplated use of the proceeds of any Loan, the relationship of the Borrower, the Administrative Agent and the Banks under this Agreement or any action taken or omitted by such indemnitees hereunder. Section 7.8 Credit Decision; Disclosure of Information by Administrative Agent. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent. Section 7.9 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Banks, unless the Administrative Agent shall have received written notice from a Bank or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Administrative Agent will notify the Banks and the Borrower of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Banks in accordance with Article 6; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Administrative Agent or the Banks. Section 7.10 Successor Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent with the written consent of the Borrower, which shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Required Banks with the consent of the Borrower, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Administrative Agent, the provisions of this Article 35 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. Section 7.11 Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account all fees referred to in the letter agreement (the "Fee Letter") among the Borrower, the Administrative Agent and the Arranger dated August 13, 1999 and as otherwise may be agreed to in writing between the Borrower and the Administrative Agent, in each case at the times and in the amounts set forth in the Fee Letter or such other agreement. Section 7.12 Syndication Agents; Documentation Agents; Sole Lead Managers and Sole Book Managers. None of the Banks identified on the facing page or signature pages of this Agreement as a "documentation agent", "syndication agent" or "sole lead manager and sole book manager" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all the Banks as such. Without limiting the foregoing, none of the Banks so identified as a "documentation agent", "syndication agent" or "sole lead manager and sole book manager" shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE 8 CHANGE IN CIRCUMSTANCES Section 8.1 Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing: (a) the Administrative Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Administrative Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro- Dollar Loans, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist (which notice the Administrative Agent shall promptly give at such time), the obligations of the Banks to make or continue CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall Bear 36 interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. Section 8.2 Illegality. If, on or after the date of this Agreement, any Regulatory Change shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro- Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist (which notice such Bank shall promptly give at such time), the obligation of such Bank to make or continue Euro-Dollar Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. Section 8.3 Increased Cost and Reduced Return. If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (a "Regulatory Change") shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such 37 Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (including any determination by any such authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less, which shall be deemed a change in the interpretation and administration of such requirements), has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's Commitment hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder and the calculation thereof in reasonable detail shall be conclusive if prepared reasonably and in good faith. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing subsections (a) and (b) of this Section 8.3, the Borrower shall only be obligated to compensate any Bank for any amount arising or accruing during (i) subject to clause (ii) below, any time or period commencing not more than 180 days prior to the date on which such Bank notifies the Administrative Agent and the Borrower that it proposes to demand such compensation and identifies to the Administrative Agent and the Borrower the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such statute, regulation or other basis, such Bank did not know that such amount would arise or accrue. Section 8.4 Taxes. For purposes of this Section 8.4, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Administrative Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Administrative 38 Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax (x) as to amounts payable in respect of any Money Market Loan, at the date of the related Money Market Quote and (y) as to any other amounts payable hereunder or under the Notes, at the time such Bank first becomes a party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note; provided that any such taxes applicable to a Money Market Loan shall constitute Other Taxes only to the extent attributable to a Regulatory Change on or after the date of the related Money Market Quote. (b) Any and all payments by the Borrower to or for the account of any Bank or the Administrative Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.4) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.1, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.4) paid by such Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank (including each New Bank) organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank remains lawfully able to do so), shall provide the Administrative Agent and the Borrower with Internal Revenue Service Form W-8BEN, W-8ECI, 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying in 39 conformity with applicable legal requirements that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.4(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.4(b) or 8.4(c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request (at the expense of such Bank) to assist such Bank to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.4, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. Section 8.5 Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation under Section 8.3 or 8.4 with respect to its CD Loans or Euro- Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. Section 8.6 Substitution of Bank. If any Bank (i) has demanded compensation or other payment pursuant to Section 8.3 or 8.4 or (ii) has determined that the making, maintenance or funding of any Euro- Dollar Loan has become unlawful or impermissible pursuant to Section 8.2 and, in the case of clause (i), similar demand for compensation or payment has not been made by all of the Banks, the Borrower shall have the right to designate an Assignee to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, the outstanding Loans and Commitment of such Bank and to assume all of such Bank's other rights and obligations hereunder without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans plus any accrued but unpaid interest thereon and the accrued but unpaid facility fees in respect of such Bank's Commitment hereunder plus such amount, if any, as would be payable pursuant to 40 Section 2.13 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment. Section 8.7 Consultation. Prior to giving notice pursuant to Section 8.2 or to demanding compensation or other payment pursuant to Section 8.3 or 8.4, each Bank shall consult with the Borrower and the Administrative Agent with reference to the circumstances giving rise thereto; provided that nothing in this Section 8.7 shall limit the right of any Bank to require full performance by the Borrower of its obligations under such Sections. ARTICLE 9 MISCELLANEOUS Section 9.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address, facsimile number or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received. Section 9.2 No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 9.3 Expenses; Indemnification. The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent, including fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Administrative Agent and each Bank, including (without duplication, but subject to Section 9.3(c)) the fees and disbursements of outside counsel or the allocated cost of internal counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) Subject to Section 9.3(c), the Borrower agrees to indemnify the Administrative Agent, the Arranger and each Bank, their respective affiliates and the respective directors, 41 officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of outside counsel (or the allocated cost of internal counsel) and settlement costs, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans or Commitments hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. (c) The Borrower shall not, in connection with any single proceeding or series of related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm or internal legal department (in addition to any local counsel) for all Indemnitees, such firm or internal legal department to be selected by the Administrative Agent; provided that if the an Indemnitee shall have reasonably concluded that (i) there may be legal defenses available to it which are different from or additional to those available to other Indemnitees and may conflict therewith or (ii) the representation of such Indemnitee and the other Indemnitees by the same counsel would otherwise be inappropriate under applicable principles of professional responsibility, such Indemnitee shall have the right to select and retain separate counsel to represent such Indemnitee in connection with such proceeding(s) at the expense of the Borrower. Section 9.4 Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set- off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. Section 9.5 Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks or an assignment made in accordance with Section 9.6(c)) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for 42 any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes or the number of Banks which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. Notwithstanding the foregoing, increases in the Commitments in accordance with Section 2.16 shall not require the consent of any Bank other than the right of each Bank to consent to an increase in the amount of its Commitment as set forth in Section 2.16. Section 9.6 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks and any attempted or purported assignment or transfer by the Borrower without the prior written consent of all Banks shall be null and void. (b) Subject to any limitations imposed by applicable law, any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section 9.5 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest; provided that no Participant shall be entitled to receive any greater payment under Section 8.3 or 8.4 than the grantor Bank would have been entitled to receive. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part (which proportionate part shall be in an amount at least equal to $25,000,000) of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower, which shall not be unreasonably withheld, and the Administrative Agent; provided that if an Assignee is an affiliate of such transferor Bank or was a Bank immediately prior to such assignment, no such consent shall be required; and provided further that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. Upon execution and delivery of such instrument and payment by such Assignee to such 43 transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.4. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.3 or 8.4 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent (with disclosure to the Borrower at the time of the transfer of any greater payment which the transferee would then be entitled to demand under either Section 8.3 or 8.4) or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such Bank to designate a different Applicable Lending Office under certain circumstances. Section 9.7 Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. Section 9.8 Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 9.9 Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. 44 Section 9.10 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 45 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. TOYOTA MOTOR CREDIT CORPORATION By: /s/ George E. Borst ---------------------- Title: Senior Vice President and General Manager 19001 South Western Avenue P.O. Box 2991 Torrance, California 90509-2991 Telex number: 37719707 Facsimile number: 310-787-6194 Commitment Bank - ---------- ---- $190,000,000 BANK OF AMERICA, N.A. By: /s/ Alan H. Roche ------------------- Title: Vice President $180,000,000 THE CHASE MANHATTAN BANK By: /s/ Frances L. Bonham ----------------------- Title: Managing Director $180,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ Masato Sekino ------------------ Title: Deputy General Manager $180,000,000 CITICORP USA, INC. By: /s/ Candi M. Halbert -------------------- Title: Vice President $140,000,000 CREDIT SUISSE FIRST BOSTON By: /s/ Robert N. Finney --------------------- Title: Managing Director By: /s/ Jeffrey B. Ulmer --------------------- Title: Vice President $80,000,000 UBS AG, STAMFORD BRANCH By: /s/ Gregory Raue ----------------- Title: Director By: /s/ Wilfred Saint ------------------ Title: Associate Director Loan Portfolio Support, US $80,000,000 ABN AMRO BANK N.V. By: /s/ John A. Miller ------------------- Title: Group Vice President By: /s/ Ellen M. Coleman --------------------- Title: Vice President $80,000,000 PARIBAS By: /s/ Carol Simon ----------------- Title: Head, NY Credit Risk Financial Markets By: /s/ Jean Wehner ----------------- Title: Senior Credit Officer $80,000,000 BARCLAYS BANK PLC By: /s/ L. Peter Yetman -------------------- Title: Director $80,000,000 BBL INTERNATIONAL (U.K.) LIMITED By: /s/ M-C Swinnen ---------------- Title: Authorised Signatory $80,000,000 MELLON BANK, N.A. By: /s/ John N. Cate ----------------- Title: Vice President $70,000,000 DEUTSCHE BANK AG, NEW YORK BRANCH/CAYMAN ISLANDS BRANCH By: /s/ Oliver Schwarz ------------------- Title: Assistant Vice President By: /s/ Stefan Hafke ----------------- Title: Vice President $40,000,000 THE SAKURA BANK, LIMITED, LOS ANGELES AGENCY By: /s/ Sumio Tanaka ----------------- Title: Joint General Manager $40,000,000 THE SANWA BANK, LIMITED, LOS ANGELES BRANCH By: /s/ Zenichi Muramoto -------------------- Title: Senior Vice President & Deputy General Manager $40,000,000 THE TOKAI BANK, LIMITED, LOS ANGELES AGENCY By: /s/ Kosuke Furukawa ------------------- Title: Joint General Manager $40,000,000 THE BANK OF NEW YORK By: /s/ Jonathan Rollins --------------------- Title: Vice President $40,000,000 WELLS FARGO BANK, N.A. By: /s/ Donald A Hartman --------------------- Title: Senior Vice President By: /s/ Catherine M. Wallace ------------------------- Title: Vice President $40,000,000 HSBC BANK USA By: /s/ John Rynne --------------- Title: Assistant Vice President $40,000,000 BANK ONE, NA By: /s/ Noburo Hashimoto --------------------- Title: First Vice President Total Commitments $1,700,000,000 - -------------- - -------------- BANK OF AMERICA, N.A., as Administrative Agent By:/s/ David Price ---------------- Title: Vice President Attention: David Price 1455 Market Street, 12th Floor Mail Code CA5-701-12-09 San Francisco, California 94103 Phone number: (415) 436-3496 Facsimile number: (415) 503-5011 Email: david.price@bankofamerica.com The undersigned hereby agrees that, effective on the Effective Date, the undersigned shall resign as agent under the Existing Agreement and Bank of America, N.A. shall thereupon succeed to and become vested with all the rights and duties of the undersigned as agent under the Existing Agreement, and the undersigned shall be discharged from its duties and obligations thereunder. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent under the Existing Agreement By: /s/ Robert Bottamedi --------------------- Title: Vice President EXHIBIT A NOTE Los Angeles, California 19 ------------------, -- For value received, Toyota Motor Credit Corporation, a California corporation (the "Borrower"), promises to pay to the order of ----------- (the "Bank"), for the account of its Applicable Lending Office, on the Maturity Date (as defined in the Credit Agreement referred to below) the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Bank of America, N.A., Agency Administrative Services 5596, 1850 Gateway Blvd., Mail Code CA4-706-05-09, Concord, California 94520-3282. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Fourth Amended and Restated 364-Day Credit Agreement dated as of September 17, 1999 among the Borrower, the banks listed on the signature pages thereof and Bank of America, N.A., as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. TOYOTA MOTOR CREDIT CORPORATION By: ---------------------------- Title: A-1 Note (cont'd) SCHEDULE OF LOANS Amount Paid, Date Made, Prepaid, Continued Principal Duration Continued Unpaid Notation or Amount Type of Interest of Interest or Principal Made Converted of Loan Loan Rate Period Converted Amount By - --------- ------- ------- ------ ------ --------- ------ --- A-2 EXHIBIT B Form of Money Market Quote Request [Date] To: Bank of America, N.A., as Administrative Agent (the "Administrative Agent") From: Toyota Motor Credit Corporation Re: Fourth Amended and Restated 364-Day Credit Agreement (the "Credit Agreement") dated as of September 17, 1999 among the Borrower, the Banks listed on the signature pages thereof and the Administrative Agent We hereby give notice pursuant to Section 2.3 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: ------------------ Principal Amount1 Interest Period2 $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. TOYOTA MOTOR CREDIT CORPORATION By: ---------------------------- Title: - --------------------------- 1 Amount must be $50,000,000 or a larger multiple of $5,000,000. 2 Not less than one month (LIBOR Auction)or not less than 14 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. B-1 EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to Toyota Motor Credit Corporation (the "Borrower") Pursuant to Section 2.3 of the Fourth Amended and Restated 364-Day Credit Agreement dated as of September 17, 1999 among the Borrower, the Banks parties thereto and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: ------------------ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [1:00 P.M.] [9:00 A.M.] (Pacific time) on [date]. BANK OF AMERICA, N.A., as Administrative Agent By: -------------------------- Authorized Officer C-1 EXHIBIT D Form of Money Market Quote To: Bank of America, N.A., as Administrative Agent Re: Money Market Quote to Toyota Motor Credit Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated 19 , we hereby make the following Money Market Quote on the - ------------, --- following terms: 1. Quoting Bank: -------------------------------- 2. Person to contact at Quoting Bank: - --------------------------- 3. Date of Borrowing: * -------------------- 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount** Period [Margin****] [Absolute Rate*****] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $ .]** ------------ - ---------------- *As specified in the related Invitation. **Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offer exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. ***Not less than one month or less than 14 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. ****Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/100,000 of 1%) and specify whether "PLUS" or "MINUS". *****Specify rate of interest per annum (to the nearest 1/10,000th of 1%). D-1 We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Fourth Amended and Restated 364-Day Credit Agreement dated as of September 17, 1999 among the Borrower, the Banks listed on the signature pages thereof and yourselves, as Administrative Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated: By: --------------- -------------------------- Authorized Officer D-2 EXHIBIT E OPINION OF COUNSEL FOR THE BORROWER To the Banks and the Administrative Agent Referred to Below c/o Bank of America, N.A., as Administrative Agent Attention: David Price 1455 Market Street, 12th Floor Mail Code CA5-701-12-09 San Francisco, California 94103 Re: Credit Agreement Ladies and Gentlemen: I and my staff have acted as counsel for Toyota Motor Credit Corporation (the "Borrower") in connection with the Fourth Amended and Restated 364-Day Credit Agreement (the "Credit Agreement") dated as of September 17, 1999 among the Borrower, the banks listed on the signature pages thereof and Bank of America, N.A., as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you pursuant to Section 3.1(c) of the Credit Agreement. I am General Counsel of the Borrower and as such I, or members of my staff, have participated in the negotiation of the Credit Agreement. I, or members of my staff, have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public official and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing and in reliance thereon, I am of the opinion, subject to the assumptions and limitations set forth herein, that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of California, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or bylaws of the Borrower or of any debt instrument or any other material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries. E-1 3. The Credit Agreement and the Notes are governed, by their terms, by New York law. I express no opinion on the enforceability of the Loan Documents under New York law. If California law were to apply, the Credit Agreement would constitute a valid and binding agreement of the Borrower and each Note would constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms. 4. There is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Credit Agreement or the Notes. 5. Each of the Borrower's corporate Subsidiaries is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. The opinion set forth in paragraph 3 is subject to: (i) the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar laws of general application relating to or affecting the enforcement of creditors' rights generally, (ii) limitations on the remedy of specific performance and injunctive and other forms of equitable relief due to the possible existence of equitable defenses or due to the discretion of the court before which any proceeding therefor may be brought, (iii) the unenforceability under certain circumstances of provisions to the effect that failure to exercise, or delay in exercising, rights or remedies will not operate as a waiver of any such right or remedy, (iv) limitations based upon statutes or upon public policy limiting a person's right to waive the benefits of statutory provisions or of a common law right, (v) limitations on the right of a lender to exercise remedies or impose penalties for late payments or other defaults by a borrower, if it is determined that (a) either the defaults are not material, such penalties bear no reasonable relation to the damage suffered by the lender as a result of such delinquencies or defaults, or it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (b) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing, (vi) the unenforceability under certain circumstances, under California or federal law or court decisions, of provisions releasing a party from, or indemnifying a party against, liability for its own wrongful or negligent acts or where such release or indemnification is contrary to public policy, (vii) the effect of California law, which provides that a court may refuse to enforce, or may limit the application of, a contract or any clause of a contract which the court finds to have been unconscionable at the time it was made, or an unfair portion of an adhesion contract, (viii) the effect of California law, which provides that when a contract permits one party to a contract to recover attorneys' fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys' fees, (ix) compliance with, and limitations imposed by, procedural requirements of state law, including California Commercial Code Sections 951 et seq., relating to the exercise of remedies by a lender; and (x) limitations under California law as to the right to retain or collect unearned interest. The foregoing E-2 limitations, however, do not render the Credit Agreement and the Notes invalid as a whole, and there exists, in the Credit Agreement and the Notes or pursuant to applicable law, legally adequate remedies for the realization of the principal benefits intended to be provided by the Credit Agreement and the Notes. I am a member of the Bar of the State of California and the foregoing opinion is limited to the laws of the State of California and the federal laws of the United States of America. In giving the foregoing opinion, (i) I express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of California) in which any Bank is located which limits the rate of interest that such Bank may charge or collect; (ii) I have assumed, without independent investigation, that the execution, delivery and performance by the Banks of the Credit Agreement and the Notes are within the Bank's corporate powers and have been duly authorized by all necessary corporate action; and (iii) I have assumed, without independent investigation, that each of the Banks is a "bank" within the meaning of Article XV, Section 1 of the Constitution of the State of California. The references in this opinion to facts based on the "best of my knowledge" refer only to my own actual, present knowledge and the knowledge of the members of my staff who have given substantive consideration to the matters referred to herein. This opinion is furnished by me as General Counsel for the Borrower to you in connection with the Credit Agreement, is solely for your benefit and may not be relied upon by any other person without my prior written consent. Respectfully submitted, Alan Cohen General Counsel E-3 EXHIBIT F OPINION OF ORRICK, HERRINGTON & SUTCLIFFE LLP, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT To the Banks and the Administrative Agent Referred to Below c/o Bank of America, N.A., as Administrative Agent Attention: David Price 1455 Market Street, 12th Floor Mail Code CA5-701-12-09 San Francisco, California 94103 Dear Sirs: We have participated in the preparation of the Fourth Amended and Restated 364-Day Credit Agreement (the "Credit Agreement") dated as of September 17, 1999 among Toyota Motor Credit Corporation, a California corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks") and Bank of America, N.A., as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.1(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that the Credit Agreement constitutes a valid and binding agreement of the Borrower and each Note constitutes a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. In giving the foregoing opinion, (i) we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect and (ii) we have assumed, without independent investigation, that the execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. F-1 This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, F-2 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of 19 among [ASSIGNOR] (the ---------, -- "Assignor"), [ASSIGNEE] (the "Assignee"), TOYOTA MOTOR CREDIT CORPORATION (the "Borrower") and BANK OF AMERICA, N.A., as Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Fourth Amended and Restated 364-Day Credit Agreement dated as of September 17, 1999 among the Borrower, the Assignor and the other Banks party thereto, as Banks, and the Administrative Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $ ; ---------- WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $ are ---------- outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned ---------- Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee[, the Borrower and the Administrative Agent] and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be G-1 reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them1. It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent pursuant to Section 9.6(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Administrative Agent is evidence of this consent. Pursuant to Section 9.6(c) the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.] SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. - ----------- 1 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. G-2 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By ---------------------- Title: [ASSIGNEE] By ---------------------- Title: TOYOTA MOTOR CREDIT CORPORATION By ---------------------- Title: BANK OF AMERICA, N.A., as Administrative Agent By ---------------------- Title: G-3 TABLE OF CONTENTS Page ARTICLE 1 Definitions 1 Section 1.1 Definitions 1 Section 1.2 Accounting Terms and Determinations 9 Section 1.3 Types of Borrowings 9 ARTICLE 2 THE CREDITS 10 Section 2.1 Commitments to Lend; Changes in Commitments 10 Section 2.2 Notice of Committed Borrowing 10 Section 2.3 Money Market Borrowings 10 Section 2.4 Continuation and Conversion Elections 13 Section 2.5 Notice to Banks: Funding of Loans 14 Section 2.6 Notes 15 Section 2.7 Interest Rates 16 Section 2.8 Facility Fee 18 Section 2.9 Optional Termination or Reduction of Commitments 19 Section 2.10 Scheduled Termination of Commitments; Maturity of Loans19 Section 2.11 Optional Prepayments 19 Section 2.12 General Provisions as to Payments 20 Section 2.13 Funding Losses 20 Section 2.14 Computation of Interest and Fees 20 Section 2.15 Extension of Maturity Date 21 Section 2.16 Increases in Commitments 21 ARTICLE 3 CONDITIONS 22 Section 3.1 Effectiveness 22 Section 3.2 Borrowings; Continuations; Conversions 23 ARTICLE 4 REPRESENTATIONS AND WARRANTIES 24 Section 4.1 Corporate Existence and Power 24 Section 4.2 Corporate and Governmental Authorization; No Contravention 24 Section 4.3 Binding Effect 24 Section 4.4 Financial Information 25 Section 4.5 Litigation 25 -i- TABLE OF CONTENTS (continued) Page Section 4.6 Compliance with ERISA 25 Section 4.7 Environmental Matters 25 Section 4.8 Taxes 26 Section 4.9 Subsidiaries 26 Section 4.10 Not an Investment Company 26 Section 4.11 Full Disclosure 26 Section 4.12 Year 2000 26 ARTICLE 5 COVENANTS 27 Section 5.1 Information 27 Section 5.2 Maintenance of Property; Insurance 28 Section 5.3 Conduct of Business and Maintenance of Existence 28 Section 5.4 Compliance with Laws 28 Section 5.5 Negative Pledge 28 Section 5.6 Consolidations, Mergers and Sales of Assets 30 Section 5.7 Use of Proceeds 31 ARTICLE 6 DEFAULTS 31 Section 6.1 Events of Default 31 Section 6.2 Notice of Default 33 ARTICLE 7 THE ADMINISTRATIVE AGENT 33 Section 7.1 Appointment and Authorization 33 Section 7.2 Delegation of Duties 33 Section 7.3 Agent and Affiliates 33 Section 7.4 Action by Agent 33 Section 7.5 Consultation with Experts 34 Section 7.6 Liability of Agent 34 Section 7.7 Indemnification 34 Section 7.8 Credit Decision; Disclosure of Information by Administrative Agent 34 Section 7.9 Notice of Default 35 Section 7.10 Successor Agent 35 Section 7.11 Agent's Fee 35 -ii- TABLE OF CONTENTS (continued) Page Section 7.12 Syndication Agents; Documentation Agents; Sole Lead Managers and Sole Book Managers 35 ARTICLE 8 CHANGE IN CIRCUMSTANCES 36 Section 8.1 Basis for Determining Interest Rate Inadequate or Unfair 36 Section 8.2 Illegality 36 Section 8.3 Increased Cost and Reduced Return 37 Section 8.4 Taxes 38 Section 8.5 Base Rate Loans Substituted for Affected Fixed Rate Loans 40 Section 8.6 Substitution of Bank 40 Section 8.7 Consultation 40 ARTICLE 9 MISCELLANEOUS 40 Section 9.1 Notices 40 Section 9.2 No Waivers 41 Section 9.3 Expenses; Indemnification 41 Section 9.4 Sharing of Set-offs 42 Section 9.5 Amendments and Waivers 42 Section 9.6 Successors and Assigns 42 Section 9.7 Collateral 44 Section 9.8 Governing Law; Submission to Jurisdiction 44 Section 9.9 Counterparts; Integration 44 Section 9.10 WAIVER OF JURY TRIAL 44 Schedule I - Designated Credit Facilities 1 Exhibit A - Note A-1 Exhibit B - Money Market Quote Request B-1 Exhibit C - Invitation for Money Market Quotes C-1 Exhibit D - Money Market Quote D-1 Exhibit E - Opinion of Counsel for the Borrower E-1 Exhibit F - Opinion of Special Counsel for the Administrative Agent F-1 Exhibit G - Assignment and Assumption Agreement G-1 -iii- EX-12 6 EXHIBIT 12.1 TOYOTA MOTOR CREDIT CORPORATION CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years Ended September 30, ------------------------------------------ 1999 1998 1997 1996 1995 ------ ------ ------ ------ ------ (Dollars in Millions) Consolidated income before income taxes...... $ 230 $ 251 $ 283 $ 260 $ 300 ------ ------ ------ ------ ------ Fixed Charges Interest................. 940 994 918 820 716 Portion of rent expense representative of the interest factor (deemed to be one-third)....... 6 5 4 4 2 ------ ------ ------ ------ ------ Total fixed charges......... 946 999 922 824 718 ------ ------ ------ ------ ------ Earnings available for fixed charges........ $1,176 $1,250 $1,205 $1,084 $1,018 ====== ====== ====== ====== ====== Ratio of earnings to fixed charges........ 1.24 1.25 1.31 1.32 1.42 ==== ==== ==== ==== ==== - ----------------- TMCC has guaranteed certain obligations of affiliates and subsidiaries as discussed in Note 16 of the Consolidated Financial Statements. As of September 30, 1999, TMCC has not incurred any fixed charges in connection with such guarantees and no amount is included in any ratio of earnings to fixed charges. The ratio of earnings to fixed charges for TMS and subsidiaries was 1.89, 1.99, 1.92, 1.49 and 1.74 for the years ended September 30, 1999, 1998, 1997, 1996 and 1995, respectively. The ratio of earnings to fixed charges for TMMNA and subsidiaries was 22.37 and 78.19 for the years ended September 30, 1999 and 1998, respectively.
EX-21 7 EXHIBIT 21.1 TOYOTA MOTOR CREDIT CORPORATION LIST OF SUBSIDIARIES State of Subsidiary Incorporation - ---------- ------------- Toyota Motor Insurance Services, Inc. California Toyota Motor Insurance Company Iowa Toyota Motor Life Insurance Company (1) Iowa Toyota Motor Insurance Corporation of Vermont Vermont Toyota Motor Insurance Agency of Ohio, Inc. Ohio Toyota Motor Insurance Services of Kentucky, Inc. Kentucky Toyota Motor Insurance Agency of Massachusetts, Inc. Massachusetts Toyota Motor Insurance Services of Rhode Island, Inc. Rhode Island Toyota Motor Insurance Services of Wyoming, Inc. Wyoming Toyota Motor Credit Receivables Corporation California Toyota Credit De Puerto Rico Corp. California Toyota Leasing, Inc. California (1) On October 4, 1999, Toyota Motor Insurance Services entered into an agreement for the sale of Toyota Motor Life Insurance Company which will be effective on December 31, 1999. EX-23 8 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Nos. 333-60913, 333-76505 and 333-89659) of Toyota Motor Credit Corporation of our report dated October 29, 1999 appearing on page 30 of this Form 10-K. /S/ PRICEWATERHOUSECOOPERS LLP Los Angeles, California December 20, 1999 EX-27 9
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOYOTA MOTOR CREDIT CORPORATION'S SEPTEMBER 30, 1999 FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR SEP-30-1999 SEP-30-1999 180 450 22,663 202 0 0 0 0 24,578 0 18,565 0 0 915 1,450 24,578 0 3,356 0 2,604 439 83 0 230 98 132 0 0 0 132 0 0 Receivables include Investments in Operating Leases net of Accumulated Depreciation and Finance Receivables net of Unearned Income. Toyota Motor Credit Corporation's Balance Sheet is not classified into Current and Long-Term Assets and Liabilities. Total Costs includes Interest Expense and Depreciation on Leases.
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