-----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, PqS2S3n5WN7C2sds8fvzFgjeEbBAaM5JUciJupSnMkDVycsb+eakmDApfzstHc2w b1OUXku0tHoM+joDcDZCAA== 0000912057-97-029282.txt : 19970912 0000912057-97-029282.hdr.sgml : 19970911 ACCESSION NUMBER: 0000912057-97-029282 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970828 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYOTA AUTO LEASE TRUST 1997-A CENTRAL INDEX KEY: 0001038821 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-26717 FILM NUMBER: 97671195 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 BUSINESS PHONE: 3107871310 MAIL ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 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: S-3/A SEC ACT: SEC FILE NUMBER: 333-26717-01 FILM NUMBER: 97671196 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVE STREET 2: PO BOX 2958 FN12 CITY: TORRANCE STATE: CA ZIP: 90509-2958 BUSINESS PHONE: 800-392-2968 MAIL ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYOTA LEASING INC CENTRAL INDEX KEY: 0001038794 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-26717-02 FILM NUMBER: 97671197 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 BUSINESS PHONE: 3107871310 MAIL ADDRESS: STREET 1: 601 S FIGUEROA STE 4200 CITY: LOS ANGELES STATE: CA ZIP: 90017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYOTA LEASE TRUST CENTRAL INDEX KEY: 0001044642 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 336191745 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-26717-03 FILM NUMBER: 97671198 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVENUE TMCC LEGAL DEPT CITY: TORRENCE STATE: CA ZIP: 90509 BUSINESS PHONE: 3107871310 MAIL ADDRESS: STREET 1: 19001 S WESTERN AVENUE STREET 2: ATTN TMCC LEGAL DEPT CITY: TORRENCE STATE: CA ZIP: 90509 S-1/A 1 FORM S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1997 REGISTRATION NO. 333-26717 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO REGISTRATION STATEMENT ON FORM S-3 (WITH RESPECT TO TOYOTA MOTOR CREDIT CORPORATION ONLY) AND FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 TOYOTA AUTO LEASE TRUST 1997-A TOYOTA MOTOR CREDIT CORPORATION (Issuer with respect to the Certificates) (Originator of Toyota Lease Trust, transferor of SUBI to Transferor and Issuer of TMCC Demand Notes) TOYOTA LEASING, INC. TOYOTA LEASE TRUST (Originator of, and Transferor of the SUBI to, the (Issuer with respect to the SUBI) Toyota Auto Lease Trust 1997-A)
(Exact name of Registrants as specified in its charter) CALIFORNIA 6146 33-0755530 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) No.)
------------------------------ 19001 SOUTH WESTERN AVENUE TORRANCE, CALIFORNIA 90509 (310) 618-4000 (Address, including zip code, and telephone number, including area code, of Originator's principal executive offices) ------------------------------ ALAN F. COHEN, ESQ. GENERAL COUNSEL TOYOTA MOTOR CREDIT CORPORATION 19001 SOUTH WESTERN AVENUE TORRANCE, CALIFORNIA 90509 (310) 787-1310 (Name, address, including zip code, and telephone number, including area code, of agent for service with respect to the Registrant) COPIES TO: DAVID J. JOHNSON, JR., ESQ. RENWICK D. MARTIN, ESQ. AND DANIEL F. PASSAGE, ESQ. Brown & Wood LLP Andrews & Kurth L.L.P. One World Trade Center, 58th Floor 601 S. Figueroa, Suite 4200 New York, New York 10048 Los Angeles, California 90017 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the only securities being registered on this form are being offered pursuant to a dividend or interest reinvestment plan, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 134, please check the following box. / / CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF PROPOSED TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2) Automobile Lease Asset Backed Certificates, Class A-1................................ 100% Automobile Lease Asset Backed Certificates, Class A-2................................ $1,146,000,000 100% $1,146,000,000 $347,272.73 Automobile Lease Asset Backed Certificates, Class A-3................................ 100% Special Unit of Beneficial Interest........ (3) (3) (3) (3) TMCC Demand Notes.......................... (4) (4) (4) (4)
(1) Estimated solely for the purpose of calculating the registration fee on the basis of the proposed maximum offering price per unit. (2) Previously paid. (3) The Special Unit of Beneficial Interest (the "SUBI") issued by Toyota Lease Trust will constitute a beneficial interest in certain specified assets of Toyota Lease Trust, including certain lease contracts and the automobile and light-duty trucks relating to such lease contracts. The SUBI is not being offered to investors hereunder but will be transferred by Toyota Motor Credit Corporation (the originator of Toyota Lease Trust) to Toyota Leasing, Inc. (the originator of Toyota Auto Lease Trust 1997-A), and (excluding certain insurance proceeds) from Toyota Leasing, Inc. to Toyota Auto Lease Trust 1997-A. (4) The TMCC Demand Notes represent investments by the Trust of Collections in demand notes issued from time to time by TMCC. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. SUBJECT TO COMPLETION, DATED AUGUST 28, 1997 PROSPECTUS TOYOTA AUTO LEASE TRUST 1997-A $410,000,000 % AUTO LEASE ASSET BACKED CERTIFICATES, CLASS A-1 $650,000,000 % AUTO LEASE ASSET BACKED CERTIFICATES, CLASS A-2 $72,750,000 % AUTO LEASE ASSET BACKED CERTIFICATES, CLASS A-3 TOYOTA LEASING, INC. (TRANSFEROR) TOYOTA MOTOR CREDIT CORPORATION (SERVICER) ------------------------ The Auto Lease Asset Backed Certificates (the "Certificates") will represent undivided interests in the Toyota Auto Lease Trust 1997-A (the "Trust") formed pursuant to a securitization trust agreement (the "Agreement") between Toyota Leasing, Inc. (the "Transferor") and U.S. Bank National Association (formerly known as First Bank National Association), as trustee (the "Trustee"). The property of the Trust will consist of a Special Unit of Beneficial Interest (the "SUBI"), which, in turn, will evidence a beneficial interest in certain specified assets (the "SUBI Assets") of Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), monies on deposit in the Reserve Fund and certain other accounts and certain other assets described more fully herein under "The Trust and the SUBI". The assets of the Titling Trust (the "Titling Trust Assets") will consist primarily of retail closed-end lease contracts and the automobiles and light duty trucks relating thereto and certain other assets described more fully herein. Toyota Motor Credit Corporation ("TMCC") will service the lease contracts included in the Titling Trust Assets. (CONTINUED ON NEXT PAGE) FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A CERTIFICATES, SEE "RISK FACTORS" ON PAGE 20 HEREIN. THE CLASS A CERTIFICATES WILL REPRESENT BENEFICIAL INTERESTS IN THE TRUST AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF TOYOTA MOTOR CREDIT CORPORATION, TOYOTA MOTOR SALES, U.S.A., INC., TOYOTA LEASING, INC., TOYOTA LEASE TRUST OR ANY OF THEIR RESPECTIVE AFFILIATES. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. APPLICATION WILL BE MADE TO LIST THE CLASS A CERTIFICATES ON THE LUXEMBURG STOCK EXCHANGE AND FOR LISTING AND PERMISSION TO DEAL IN THE CLASS A CERTIFICATES ON THE STOCK EXCHANGE OF HONG KONG LIMITED.
UNDERWRITING PROCEEDS TO THE PRICE TO PUBLIC(1) DISCOUNTS(2) TRANSFEROR(1)(2)(3) Per Class A-1 Certificate.................. % % % Per Class A-2 Certificate.................. % % % Per Class A-3 Certificate % % % Total...................................... $ $ $
(1) Plus accrued interest, if any, calculated at the related Certificate Rate from the date of initial issuance. (2) The Underwriting Discount will be % per Class A-3 Certificate sold to certain noninstitutional investors. Therefore, to the extent of any such sales to such investors, the actual total Underwriting Discount will be more than, and the actual Proceeds to the Seller will be less than, the amounts indicated in this table. (3) Before deducting expenses payable by the Transferor estimated to be $ . ------------------------ The Class A Certificates are offered subject to prior sale, when, as and if issued to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that delivery of the Class A Certificates will be made in book-entry form only through the Same Day Funds Settlement System of The Depository Trust Company in the United States, and Cedel Bank, societe anonyme and the Euroclear System in Europe and Asia, on or about September , 1997, against payment therefor in immediately available funds. ------------------------ JOINT BOOKRUNNERS MERRILL LYNCH & CO. LEHMAN BROTHERS MORGAN STANLEY DEAN WITTER (GLOBAL COORDINATOR) The date of this Prospectus is , 1997. (CONTINUED FROM FRONT COVER) From time to time until principal is first allocated or distributed to the holders of Certificates ("Certificateholders"), as described below, Principal Collections on or in respect of the SUBI Assets will be reinvested in additional lease contracts originated as described herein and assigned to the Titling Trust, together with the automobiles and light duty trucks relating thereto, which at the time of reinvestment will become SUBI Assets. The SUBI will not evidence a direct interest in the SUBI Assets, nor will it represent a beneficial interest in any of the Titling Trust Assets other than the SUBI Assets. Payments made on or in respect of the Titling Trust Assets not represented by the SUBI will not be available to make payments on the Certificates. The Certificates will consist of three classes of senior certificates (respectively, the "Class A-1 Certificates", the "Class A-2 Certificates" and the "Class A-3 Certificates", and collectively, the "Class A Certificates") and one class of subordinated certificates (the "Class B Certificates"). The Class A Certificates are the only Certificates offered hereby. The Initial Certificate Balance of the Class B Certificates will be $73,850,000, and the Class B Certificates will be subordinated to the Class A Certificates to the extent described herein. The Class A-1, Class A-2, Class A-3 and Class B Certificates will initially evidence in the aggregate approximately 33%, 53%, 6% and 6% undivided interests in the Trust, respectively. The Transferor will own the undivided interest in the Trust not represented by the Certificates (the "Transferor Interest"). The initial balance of the Transferor Interest will be $24,631,519.20. SEE "Description of the Certificates". Interest on the Certificates will accrue at the respective per annum interest rates specified above and, except upon the occurrence of a Monthly Payment Event, if any, or in the case of a Class of Certificates that is not fully paid on its Targeted Maturity Date, will be distributed to holders thereof semiannually on March 25 and September 25 of each year (or, if such day is not a Business Day, on the next succeeding Business Day), commencing on March 25, 1998. The Targeted Maturity Date for the Class A-1 Certificates will be September 27, 1999, for the Class A-2 Certificates will be September 25, 2000, for the Class A-3 Certificates will be March 26, 2001 and for the Class B Certificates will be September 25, 2001. In general, the Certificates will be "sequential pay" certificates meaning that no principal payments will be made on the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments will be made on the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments will be made on the Class B Certificates until the Class A-3 Certificates are paid in full. Except upon the occurrence of a Monthly Payment Event, principal in respect of a Class of Class A Certificates will not be distributed until its respective Targeted Maturity Date. Upon the occurrence of certain Monthly Payment Events, if any, or in the event the full amount of principal of any Class of Class A Certificates is not available on its Targeted Maturity Date, principal will be distributed to holders of the related Class of Class A Certificates to the extent and in the order of priority described herein on Certificate Payment Dates which will thereafter be monthly on each Monthly Allocation Date. A "Monthly Allocation Date" is the day on which Collections in respect of the Contracts and Leased Vehicles represented by the SUBI are allocated, and shall occur on the twenty-fifth day of each month (or, if such day is not a Business Day, on the next succeeding Business Day) commencing on September 25, 1997. Each Class of Class A Certificates will also have a Stated Maturity Date on or before which payment in full is due. Certain persons participating in this offering may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A Certificates. Such transactions may include stabilizing and the purchase of Class A Certificates to cover syndicate short positions. For a description of these activities, see "Underwriting". UNTIL DECEMBER , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. UPON RECEIPT OF A REQUEST BY AN INVESTOR WHO HAS RECEIVED AN ELECTRONIC PROSPECTUS OR A REQUEST BY SUCH INVESTOR'S REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY OBLIGATION, THE TRANSFEROR OR THE UNDERWRITERS WILL PROMPTLY DELIVER, OR CAUSE TO BE DELIVERED, WITHOUT CHARGE, A PAPER COPY OF THE PROSPECTUS. ii AVAILABLE INFORMATION The Transferor, as originator of the Trust, and the Trust, as issuer of the Certificates, have filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement") of which this Prospectus is a part, under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Class A Certificates. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, which is available for inspection without charge at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511 and Suite 1300, Seven World Trade Center, New York, New York 10048. Copies of such information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, copies of the Registration Statement and all of the documents incorporated by reference herein (including the Titling Trust Agreement and the Agreement) may be obtained at no charge at the offices of Bankers Trust Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg and at the offices of Merrill Lynch & Co. at Asia Pacific Financial, 3 Garden Road, Hong Kong. The Servicer, on behalf of the Trust, will also file or cause to be filed with the Commission such periodic reports as are required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. Electronic filings made through the Electronic Data Gathering Analysis and Retrieval System are publicly available through the Commission's Website at http://www.sec.gov. DOCUMENTS INCORPORATED BY REFERENCE Certain documents with respect to Toyota Motor Credit Corporation ("TMCC") are incorporated herein. The documents incorporated by reference herein relate solely to TMCC as a registrant on the Registration Statement on Form S-3 with respect to the TMCC Demand Notes. The Certificates will represent beneficial interests in the Trust and will not represent interests in or obligations of TMCC or any of its affiliates. TMCC is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports and other information with the Commission. Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional Office, Citibank Center, Suite 1800, 500 West Madison Street, Chicago, Illinois 60611-2511. In addition, certain of TMCC's securities are listed on the New York Stock Exchange and the aforementioned material may also be inspected at the offices of such exchange. TMCC's Annual Report on Form 10-K for the year ended September 30, 1996, and TMCC's Quarterly Reports on Form 10-Q for the quarters ended December 31, 1996, March 31, 1997, and June 30, 1997, have been filed with the Commission and are made a part of this Registration Statement. All reports filed by TMCC pursuant to Sections 13(a) or 15(d) of the Exchange Act subsequent to the date of the Registration Statement and prior to the termination of the offering of the Class A Certificates and all supplements to the Registration Statement filed from time to time shall be deemed to be incorporated by reference into the Registration Statement to be a part hereof from the date of filing such documents. Any statement contained herein or made a part hereof, or contained in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for the purposes of the Registration Statement to the extent that a statement contained therein (or in any subsequently filed document which is also incorporated or deemed to be incorporated by iii reference herein) modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement. REPORTS TO CERTIFICATEHOLDERS U.S. Bank National Association, as Trustee, will provide to Certificateholders (which shall be Cede & Co. as the nominee of DTC unless Definitive Certificates are issued under the limited circumstances described herein) unaudited monthly and annual reports concerning the Contracts and Leased Vehicles. SEE "Description of the Certificates--Reports to Certificateholders". For so long as the Class A Certificates are outstanding, each such report (including a statement of the Class Certificate Balance of each Class of Certificates) also shall be delivered to the Luxembourg Stock Exchange and The Stock Exchange of Hong Kong Limited on the related date for delivery to Certificateholders. Copies of such reports may be obtained at no charge at the offices of Bankers Trust Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg and at the offices of Merrill Lynch & Co. at Asia Pacific Financial, 3 Garden Road, Hong Kong. iv OVERVIEW OF TRANSACTION [GRAPH] v SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. CERTAIN CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE IN THIS PROSPECTUS ON THE PAGES INDICATED IN THE "INDEX OF TERMS" BEGINNING ON PAGE 102 HEREOF. OVERVIEW.......................... Certain motor vehicle dealers ("Dealers") whose dealerships are located in California, Florida, Michigan, Pennsylvania and Ohio (the "Trust States") have assigned and will assign retail closed- end automobile and light duty truck leases to the Titling Trust pursuant to their dealer agreements with the Titling Trust. The Titling Trust was created in October 1996 to avoid the administrative difficulty and expense associated with retitling leased vehicles in connection with the securitization of automobile and light duty truck leases. The Titling Trust has issued to TMCC an Undivided Trust Interest (the "UTI") representing the entire beneficial interest in the unallocated Titling Trust Assets. SEE "The Trust and the SUBI--The Trust". TMCC will instruct the trustee of the Titling Trust to allocate a separate portfolio of leases and leased vehicles from and among the Titling Trust Assets represented by the UTI and create a special unit of beneficial interest (the "SUBI") which will represent the entire beneficial interest in such portfolio. Titling Trust Assets allocated to the SUBI will no longer be represented by the UTI. TMCC will sell the SUBI to the Transferor and the Transferor will contribute substantially all of the SUBI (excluding the related rights to proceeds of the Residual Value Insur- ance Policy described herein) to the Trust. In return, the Trust will issue the Class A Certificates offered hereby and the Class B Certificates, and will create the Transferor Interest for the benefit of the Transferor. The "Transferor Interest" is the undivided interest in the Trust not evidenced by the Certificates and will be permanently retained by the Transferor. TMCC, from time to time in the future, may cause the Titling Trust to allocate additional separate portfolios of leases and leased vehicles and to create additional special units of beneficial interest similar to the SUBI relating to such portfolios ("Other SUBIs") which may be sold to the Transferor or one or more other entities. The Trust and the Certificateholders will have no interest in the UTI, any Other SUBI or any Titling Trust Assets evidenced by the UTI or any Other SUBI. THE TRUST......................... The Trust will be formed pursuant to the Agreement between the Transferor and U.S. Bank National Association (formerly known as First Bank National Association, "U.S. Bank"), as Trustee. The property of the Trust will consist primarily of the SUBI and monies on deposit in certain accounts established as described herein. THE TITLING TRUST................. The Titling Trust is a Delaware business trust formed pursuant to the Titling Trust Agreement. The primary business purpose of the Titling Trust is to take assignments of and serve as holder of
1 title to substantially all of the lease contracts and the related leased vehicles originated by the Dealers beginning on dates prior to the execution of the SUBI Supplement. Pursuant to the Servicing Agreement, TMCC will service the lease contracts included in the Titling Trust Assets, including the Contracts. SEE "Additional Document Provisions--The Trust Agreement" and "--The Servicing Agreement" and "Certain Legal Aspects of the Titling Trust--The Titling Trust". The Titling Trust is governed by an Amended and Restated Trust and Servicing Agreement (the "Titling Trust Agreement") among TMCC, as grantor, initial beneficiary and Servicer, TMTT, Inc., as trustee (the "Titling Trustee"), and U.S. Bank, as trust agent (the "Trust Agent"). TMTT, Inc. is a Delaware corporation and a wholly owned, special purpose subsidiary of U.S. Bank that was organized solely for the purpose of acting as Titling Trustee. TMTT, Inc. is not affiliated with TMCC or any affiliate thereof. SEE "The Titling Trust-- The Titling Trustee". TITLING TRUST ASSETS ALLOCATED AS SUBI ASSETS........ The Titling Trust Assets consist primarily of retail closed-end lease contracts and the automobiles and light duty trucks relating thereto. The SUBI will evidence a beneficial interest in a specified portion of the Titling Trust Assets allocated to the SUBI. Certain lease contracts (the "Initial Contracts") originated by the Dealers, the automobiles and light duty trucks relating thereto (the "Initial Leased Vehicles") and certain monies due under or payable in respect of the Initial Contracts and the Initial Leased Vehicles on or after August 1, 1997 (the "Cutoff Date") will be allocated to the SUBI on the Closing Date. During the Revolving Period, payments made on or in respect of the SUBI Assets allocable to the Discounted Principal Balance thereof will be reinvested in additional retail closed-end lease contracts (the "Subsequent Contracts" and, together with the Initial Contracts, the "Contracts") assigned to the Titling Trust by Dealers and the related automobiles and light duty trucks (the "Subsequent Leased Vehicles" and, together with the Initial Leased Vehicles, the "Leased Vehicles"). At the time of such reinvestment, such Subsequent Contracts and Subsequent Leased Vehicles will be allocated to the SUBI and will no longer be UTI Assets. All such assets, together with certain other assets and rights, are the "SUBI Assets". SEE "--Principal--The Revolving Period" and "The Trust and the SUBI--The SUBI". The SUBI will evidence an indirect beneficial interest, rather than a direct legal interest, in the SUBI Assets. The SUBI will not represent a beneficial interest in any Titling Trust Assets other than the SUBI Assets. Payments made on or in respect of the Titling Trust Assets other than the SUBI Assets will not be available to make payments on the Certificates. THE TRANSFEROR.................... Toyota Leasing, Inc. is a California corporation which is a wholly
2 owned, special purpose subsidiary of TMCC. SEE "The Transferor". TMCC.............................. TMCC is a California corporation that has 34 branches in various locations in the United States and one branch in the Commonwealth of Puerto Rico. TMCC's primary business is providing retail leasing, retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle and Toyota industrial equipment dealers and their customers in the United States (excluding Hawaii) and Puerto Rico. TMCC is a wholly owned subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS"), which is primarily engaged in the wholesale distribution of automobiles, light duty trucks, industrial equipment and related replacement parts and accessories throughout the United States (excluding Hawaii). TMS is a wholly-owned subsidiary of Toyota Motor North America, Inc. ("TMA"). Substantially all of TMS's products are either manufactured by its affiliates or are purchased from Toyota Motor Corporation ("TMC"), which wholly owns TMA, or affiliates of TMC. Pursuant to the Agreement and the Series 1997-A SUBI Servicing Supplement to the Titling Trust Agreement dated as of September 1, 1997, among TMCC, the Titling Trustee and the Transferor (the "Servicing Supplement" and, together with the Titling Trust Agreement, the "Servicing Agreement"), TMCC will act as the initial servicer of the Titling Trust Assets, including the SUBI Assets (in such capacity, the "Servicer"). Pursuant to the terms of the Servicing Agreement, the Trustee is a third party beneficiary thereof. SECURITIES OFFERED A. GENERAL........................ The Certificates will represent fractional undivided beneficial interests in the Trust. The Certificates will consist of three classes of senior certificates (the Class A-1, Class A-2 and Class A-3 Certificates) and one class of subordinated certificates (the Class B Certificates). Only the Class A Certificates are being offered hereby. Each Certificate will represent the right to receive semiannual payments of interest at the related Certificate Rate and, to the extent described herein, payments of principal during the Amortization Period. It is expected that repayment of principal on each Class of Certificates will be made on the related Targeted Maturity Date. Payments on the Certificates will be funded from payments received by the Trust on or in respect of the SUBI and, in certain circumstances, from monies on deposit in the Reserve Fund, from earnings in respect of monies, if any, on deposit in the Certificateholders' Account, and monies that otherwise would be distributable in respect of the Transferor Interest. Interests in the assets of the Trust will be allocated among the Class A-1
3 Certificateholders, the Class A-2 Certificateholders, the Class A-3 Certificateholders and the Class B Certificateholders (collectively, the "Investor Interest") and the Transferor Interest. In general, the Certificates will be "sequential pay" certificates, meaning that no principal payments will be made on the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments will be made on the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments will be made on the Class B Certificates until the Class A-3 Certificates are paid in full. The Class B Certificates will be subordinated to the Class A Certificates to the extent described herein. SEE "Description of the Certificates--Allocations and Distributions on the Certificates". The Transferor Interest also will be subordinated to the Certificates, as described herein. Payments will be made to Certificateholders of record as of the day immediately preceding each relevant Certificate Payment Date or, if Definitive Certificates are issued, as of the last Business Day of the preceding month (each, a "Record Date"). A "Business Day" is a day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, Chicago, Illinois, or Los Angeles, California are authorized or obligated by law, regulation, executive order or decree to be closed; provided that, solely for purposes of identifying any Certificate Payment Date with respect to the making of payments on the Class A Certificates in Luxembourg or Hong Kong by a paying agent there located, "Business Day" shall also exclude any day on which banking institutions located in that jurisdiction are authorized by law, regulation, governmental order or decree to be closed, whether or not payments are made with respect to such Certificates in any other jurisdiction on such date, but such definition shall not be used for making any other calculation. On the date of initial issuance of the Certificates (the "Closing Date"), the Trust will issue $410,000,000 aggregate initial Certificate Balance of Class A-1 Certificates (the "Initial Class A-1 Certificate Balance"), $650,000,000 aggregate initial Certificate Balance of Class A-2 Certificates (the "Initial Class A-2 Certificate Balance"), $72,750,000 aggregate initial Certificate Balance of Class A-3 Certificates (the "Initial Class A-3 Certificate Balance" and, together with the Initial Class A-1 Certificate Balance and the Initial Class A-2 Certificate Balance, the "Initial Class A Certificate Balance") and $73,850,000 aggregate initial Certificate Balance of Class B Certificates (the "Initial Class B Certificate Balance" and, together with the Initial Class A Certificate Balance, the "Initial Certificate Balance"). Except as described below, such Class Certificate Balances will remain fixed at the indicated Initial Certificate Balances during the Revolving Period and until the related Targeted Maturity Date,
4 except that such Class Certificate Balances may decline in connection with the allocation of Loss Amounts thereto or, commencing upon the occurrence of a Monthly Payment Event, in connection with distributions thereto in respect of principal to the extent described herein. The "Class Certificate Balance" of any Class of Certificates on any day will equal the Initial Certificate Balance thereof, reduced by the sum of all distributions made in respect of principal of such Class (including any distributions in respect of Loss Amounts and Certificate Principal Loss Amounts allocable to such Class) on or prior to such day and any unreimbursed Certificate Principal Loss Amounts in respect of such Class (and in the case of the Class B Certificates, minus the aggregate amount of unreimbursed Class B Available Principal applied to cover interest shortfalls and reimburse Loss Amounts and Certificate Principal Loss Amounts allocated to the Class A Certificates), as described herein. The "Class A Certificate Balance" will mean the sum of the Class A-1, Class A-2 and Class A-3 Class Certificate Balances. The "Certificate Balance" with respect to the Certificates will mean the sum of the Class A Certificate Balance and the Class B Certificate Balance. The Transferor Interest will represent the interest in the Trust not represented by the Investor Interest. The Transferor Interest will initially equal $24,631,519.20 (2% of the Aggregate Net Investment Value as of the Cutoff Date) and on any day will equal the difference between the Aggregate Net Investment Value and the Adjusted Certificate Balance, calculated as described below. SEE "Summary--The SUBI--1. The Contracts". As more fully described herein, the Aggregate Net Investment Value can change daily and the Transferor Interest can decrease daily as the Aggregate Net Investment Value decreases. The Transferor Interest may increase on a Monthly Allocation Date as the Adjusted Certificate Balance declines. SEE "Description of the Certificates--General". B. DISTRIBUTIONS.................. INTEREST. Payments of interest on each Class of Certificates will be made, to the extent funds are allocated and are available therefor as described herein, (i) on each Monthly Allocation Date in March and September, commencing in March 1998, as well as on the Targeted Maturity Date for such Class and (ii) for any Class of Certificates not paid in full on the related Targeted Maturity Date, on any subsequent Certificate Payment Date until such Class is paid in full. In addition, after the occurrence of any Monthly Payment Event, payments of interest on each Class of Certificates will be made monthly, to the extent funds are allocated and are available therefor as described herein, on each Monthly Allocation Date (and each such subsequent Monthly Allocation Date will be a Certificate Payment Date). PRINCIPAL. Principal of each Class of Certificates will be payable in full on the related Targeted Maturity Date. If Principal Collections during the Collection Periods preceding such date (but
5 commencing after the end of the Revolving Period) that are allocable to such Class of Certificates, together with amounts allocated thereto from amounts on deposit in the Reserve Fund, through subordination or from any related Maturity Advance, are insufficient to make such payment in full, all such amounts available will be paid to the related Certificateholders on the related Targeted Maturity Date and, thereafter, payment of all Principal Collections in respect of the related Collection Period allocable to the Investor Interest will be paid on each related Certificate Payment Date on a monthly basis until such Class of Class A Certificates has been paid in full. In addition, after the occurrence of any Monthly Payment Event, payments of principal of the Certificates will be made monthly, sequentially as described herein to the extent funds are allocated and are available therefor as described herein, on each Certificate Payment Date (and each such subsequent Monthly Allocation Date will be a Certificate Payment Date). Each Monthly Allocation Date on which any such distribution of interest or principal is required to be made with respect to any Class of Certificates is a "Certificate Payment Date" with respect to such Class. The Targeted Maturity Date for each Class of Certificates is as follows:
CLASS TARGETED MATURITY DATE - ----------- ---------------------- Class A-1 September 27, 1999 Class A-2 September 25, 2000 Class A-3 March 26, 2001 Class B September 25, 2001
The Stated Maturity Date for each Class of Certificates (the date on which ultimate payment thereof in full is due) is April 26, 2004. C. INTEREST....................... Interest will accrue on the Certificates at the following rates (the "Certificate Rates"): (i) Class A-1 Certificates, % per annum (the "Class A-1 Rate"), (ii) Class A-2 Certificates, % per annum (the "Class A-2 Rate"), (iii) Class A-3 Certificates, % per annum (the "Class A-3 Rate") and (iv) Class B Certificates % per annum (the "Class B Rate"). Interest will accrue on the Class Certificate Balance of each Class of Certificates and on Certificate Principal Loss Amounts allocated thereto at the applicable Certificate Rate during each Interest Period. The "Interest Period" with respect to each related Certificate Payment Date for a Class of Certificates will be the period from and including the preceding Certificate Payment Date, to but excluding such Certificate Payment Date. However, the first Interest Period for any Class of Certificates will be the period from and including the Closing Date, to but excluding the related first Certificate Payment Date. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.
6 Interest allocations and payments to all Classes of Class A Certificates will have the same priority. Under certain circumstances, the amount available for interest allocations or distributions could be less than the amount of interest allocable to or distributable on the Class A Certificates on any Monthly Allocation Date, in which case each Class of Class A Certificates will be allocated or paid its ratable share (based upon the aggregate amount of interest due thereon) of the aggregate amount available to be allocated or paid in respect of interest on the Class A Certificates. D. PRINCIPAL, REVOLVING PERIOD AND AMORTIZATION PERIOD......... Unless a Monthly Payment Event has occurred, principal will be paid to the holders of each Class of Certificates on the related Targeted Maturity Date in an amount equal to the lesser of (i) the related Class Certificate Balance, and (ii) the sum of (x) all amounts allocated for distributions in respect of principal of the Certificates then on deposit in the Certificateholders' Account and (y) any Maturity Advance. SEE "--Maturity Advances". To the extent that the entire Class Certificate Balance is not paid on the related Targeted Maturity Date, distributions of principal in respect of the related Class of Certificates will be made on each Certificate Payment Date commencing in the month immediately following such Targeted Maturity Date, and shall con- tinue on a monthly basis until such Class is paid in full. Interest at the related Certificate Rate will continue to accrue on the outstanding Certificate Balance of each Class of Certificates (and on unreimbursed Certificate Principal Loss Amounts allo- cated thereto) and will be distributable on each such Certificate Payment Date. SEE "--Interest". Failure to pay the entire Class Certificate Balance of any Class of Certificates on its Targeted Maturity Date because Collections and other amounts allocable thereto are insufficient therefor will not constitute a Monthly Payment Event or an Event of Servicing Termination. However, failure to make any scheduled interest payment on or within three Business Days of a relevant Certificate Payment Date, or failure to pay in full any Class of Certificates on or before its Stated Maturity Date, will constitute an Event of Servicing Termination. SEE "Additional Document Provisions--The Servicing Agreement--Events of Servicing Termination" and "--Rights Upon Event of Servicing Termination." THE REVOLVING PERIOD. No principal will be allocable or distributable on the Certificates until the Monthly Allocation Date (the "First Principal Monthly Allocation Date") in the month commencing after the earlier to occur of October 1, 1998 (the "Amortization Date") or an Early Amortization Event. From the
7 Closing Date and through the Business Day preceding the commencement of the Amortization Period (I.E., the earlier of October 1, 1998, or the date of an Early Amortization Event) (the "Revolving Period"), all Principal Collections and amounts otherwise distributable to Certificateholders as reimbursements of Loss Amounts and Certificate Principal Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles so as to maintain the Certificate Balance at a constant level during the Revolving Period; provided that during the Revolving Period the Certificate Balance of a Class of Certificates will decrease to the extent Certificate Principal Loss Amounts are allocated thereto and not reimbursed. Early Amortization Events are described under "Description of the Certificates--Early Amortization Events". While any Early Amortization Event will terminate the Revolving Period, only certain Early Amortization Events (which are Monthly Payment Events) will cause monthly distributions in respect of principal to commence. During the Revolving Period, on one or more Business Days selected by the Servicer each month (each, a "Transfer Date"), the Servicer will direct the Titling Trustee to reinvest Principal Collections and certain reimbursed Loss Amounts in Subsequent Contracts and Subsequent Leased Vehicles. Upon such reinvestment, such Subsequent Contracts and Subsequent Leased Vehicles will become SUBI Assets. If on the last Business Day of any month during the Revolving Period commencing in October 1997 the Servicer determines that the amount of Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts for the preceding Collection Period not reinvested in Subsequent Contracts and Subsequent Leased Vehicles as of the first day of such month exceeds $1,000,000, an Early Amortization Event will be deemed to have occurred, the Revolving Period will terminate as of such day and all Principal Collections and reimbursed Loss Amounts not reinvested as of such day will then be allocable or distributable to Certificateholders on the succeeding Monthly Allocation Date. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Revolving Period". During the Revolving Period, Subsequent Contracts and Subsequent Leased Vehicles will be selected from the Titling Trust's portfolio of lease contracts and related vehicles not allocated to any Other SUBI, based on the criteria specified in the Titling Trust Agreement and SUBI Supplement as described under the "The Contracts--Representations, Warranties and Covenants". Reinvestment of Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts will be in the lease contracts having the earliest origination dates and the related vehicles and Titling Trust Assets (excluding those previously allocated to any Other SUBI). If any Other SUBI is created and allocations are being made in respect of such Other
8 SUBI at the same time out of the Titling Trust's general pool of unallocated lease contracts, reinvestment in respect of the SUBI will be given priority. SEE "The Contracts". "Principal Collections" will mean, with respect to any Collection Period, all Collections allocable to the principal component of any Contract (including any payment in respect of the related Leased Vehicle, other than any payment as to which a Loss Amount has been realized and allocated during any prior Collection Period), discounted to the extent described below, less the portions of Advances and Nonrecoverable Advances reimbursable to the Servicer therefrom. With respect to any Monthly Allocation Date, the related "Collection Period" will be the preceding calendar month. For purposes of determining Principal Collections, the principal component of all payments made on or in respect of a Contract (or the related Leased Vehicle) with a Lease Rate less than 9.75% per annum (each, a "Discounted Contract") will be discounted at a per annum rate of 9.75%, thereby effectively reallocating a portion of the payments received in respect of the principal component of the Contracts to Interest Collections and providing additional credit enhancement for the benefit of the Certificateholders. With respect to any Collection Period, "Collections" will include all net collections received in respect of the Contracts and Leased Vehicles during such Collection Period, such as Monthly Payments (including previously collected Payments Ahead that represent Monthly Payments due during such Collection Period), Prepayments, Advances, Net Matured Leased Vehicle Proceeds, Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds, less (i) amounts representing Payments Ahead with respect to future Collection Periods, (ii) amounts retained by or paid to the Servicer in respect of outstanding Advances and Nonrecoverable Advances and (iii) Additional Loss Amounts in respect of such Collection Period. In addition, for each Collection Period during the Revolving Period, amounts otherwise allocable or distributable to the Certificateholders on the related Monthly Allocation Date as reimbursement of Loss Amounts or Certificate Principal Loss Amounts allocable to the Investor Interest will be treated as Principal Collections and reinvested in Subsequent Contracts and Subsequent Leased Vehicles. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections". With respect to any Collection Period "Interest Collections" generally will equal the amount by which Collections exceed Principal Collections, less the portions of Advances and Nonrecoverable Advances reimbursable to the Servicer therefrom. "Net Repossessed Vehicle Proceeds" will equal Repossessed Vehicle Proceeds net of Repossessed Vehicle Expenses, and "Net Liquidation Proceeds" will equal Liquidation Proceeds net of Liquidation Expenses.
9 AMORTIZATION PERIOD. The "Amortization Period" shall commence on the earlier of the Amortization Date or the day on which an Early Amortization Event occurs, and will end when (i) the Class Certificate Balance of each Class of Certificates has been reduced to zero, or (ii) the Trust otherwise terminates. During the Amortization Period, Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts will no longer be reinvested in Subsequent Contracts and Subse- quent Leased Vehicles. During the Amortization Period, the amount of Principal Collections allocable to the Investor Interest in respect of a Collection Period (the "Principal Allocation") generally will mean the Principal Collections in respect of such Collection Period alloca- ble to the SUBI multiplied by the Investor Percentage for such Principal Collections. The "Investor Percentage" for purposes of the Principal Allocation will equal the percentage equivalent of a fraction (not to exceed 100%), the numerator of which is the Adjusted Certificate Balance and the denominator of which is the Aggregate Net Investment Value, calculated as of the last day of the Collection Period (i) preceding the Amortization Date or (ii) preceding the month, if any, during which an Early Amortization Event occurs. The "Adjusted Certificate Balance" for any Class of Certificates is the Initial Certificate Balance thereof reduced by the sum of all amounts deposited into the Certificateholders' Account in respect of principal on such Class plus the amount of all unreimbursed Loss Amounts and Certificate Principal Loss Amounts previously allocated thereto (and in the case of the Class B Certificates, minus the aggregate amount of unreimbursed Class B Available Principal applied to cover interest shortfalls and reimburse Loss Amounts and Certificate Principal Loss Amounts allocated to the Class A Certificates). SEE "Description of the Certificates--Calculation of Investor Percentage and Transferor Percentage." Following the occurrence of a Monthly Payment Event, if any, allocations based upon the Principal Allocation may result in allocations or distributions to Certificateholders of Principal Collections in amounts that are greater relative to the declining Certificate Balances than would be the case if no fixed Investor Percentage were used. To the extent that on any Monthly Allocation Date during the Amortization Period any portion of the Investor Percentage of Interest Collections in respect of the related Collection Period remains after required distributions have been made, such excess interest will be deposited into the Reserve Fund until the amount on deposit therein equals the Specified Reserve Fund Balance. Any remaining excess interest, up to but not exceeding the product of (i) one-twelfth of 0.25% and (ii) the Aggregate Net Investment Value as of the last day of such Collection Period will constitute the "Accelerated Principal Distribution Amount". The Accelerated Principal Distribution
10 Amount will be allocable or distributable to the Certificateholders (or for reimbursements of Maturity Advances) in addition to (and in the same manner and priority as) ordinary allocations and distributions of principal in respect of the Certificates. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections" and "Assets of the Trust--The Accounts; Collections--The SUBI Collection Account" and "--Certain Withdrawals from the SUBI Collection Account". The "Aggregate Net Investment Value" as of any date will equal the sum of (i) the Discounted Principal Balance of all Contracts other than Charged-off, Liquidated, Matured and Additional Loss Contracts, (ii) the aggregate Residual Value of all Leased Vehicles to the extent that the related Contracts have reached their scheduled maturities and been terminated (each, a "Matured Contract") within the three immediately preceding Collection Periods but which Leased Vehicles as of the last day of the most recent Collection Period have remained unsold and not otherwise disposed of by the Servicer for no more than three full Collection Periods (the "Matured Leased Vehicle Inventory") plus certain related charges and (iii) during the Revolving Period, the amount of unreinvested Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts. The "Discounted Principal Balance" for each Contract with a Lease Rate less than 9.75% will be its Outstanding Principal Balance discounted by 9.75% (each such Contract, a "Discounted Contract"), and for each Contract with a Lease Rate at least equal to 9.75% will be its Outstanding Principal Balance. As of the Cutoff Date, the Aggregate Net Investment Value equaled the aggregate Discounted Principal Balance of the Initial Contracts or $1,231,231,519.20. E. INVESTMENT OF COLLECTIONS PRIOR TO MONTHLY PAYMENT EVENT........ So long as a Monthly Payment Event has not occurred, and so long as the Certificates of any Class are outstanding, amounts allocated to interest on the Certificates during the Revolving Period, and amounts allocated to interest or principal in respect of the Certificates during the Amortization Period, in each case on Monthly Allocation Dates that are not relevant Certificate Payment Dates will be deposited into the Certificateholders' Account and invested in Permitted Investments maturing prior to the succeeding relevant Certificate Payment Date or Targeted Maturity Date, as appropriate, and bearing rates of interest equal to the related Required Rates. Such Permitted Investments are expected to include one or more demand obligations issued by TMCC (each a "TMCC Demand Note"). SEE "Addi- tional Document Provisions--TMCC Demand Notes". From and after the occurrence of a Monthly Payment Event, payments of interest on, and payments of principal of each Class of Certificates in the sequential order described herein, will instead
11 be made monthly on each subsequent relevant Certificate Payment Date. "Monthly Payment Events", the occurrence of which will terminate the investment of amounts held in the Certificateholders' Account and will cause payments of interest on and principal of the Certificates to be made monthly thereafter, will include (a) the occurrence of any of the Early Amortization Events described in clauses (ii) through (vi) and (viii) of the definition thereof or (b) the downgrade by Standard & Poor's of TMCC's short-term debt to a rating less than A-1+, or the downgrade by Moody's of TMCC's short term debt to a rating less than P-1 or TMCC's long term debt to a rating less than Aa3, unless within ten Business Days of such event alternative arrangements satisfactory to the Rating Agencies are made with respect to the investment of Collections to be invested. The Trustee is expected to exercise the demand feature of the TMCC Demand Notes only upon the occurrence of a Monthly Payment Event and at the direction of the Certificateholders. The exercise of such feature by the Trustee will not of itself constitute a Monthly Payment Event. F. PRIORITY OF MONTHLY ALLOCATIONS AND DISTRIBUTIONS................ On each Monthly Allocation Date, the Trustee will make allocations, payments and distributions with respect to the related Collection Period in accordance with the priorities set forth herein. SEE "Description of the Certificates--Allocations and Distributions on the Certificates". G. OPTIONAL PURCHASE.............. The Transferor will have an option to purchase the SUBI Certificate on any Monthly Allocation Date on or after the Class A-3 Targeted Maturity Date if, either before or after giving effect to any payment of principal required to be made on the related Certificate Payment Date, the Adjusted Certificate Balance has been reduced to an amount less than or equal to $123,123,151.92 (10% of the Aggregate Net Investment Value as of the Cutoff Date) or amounts sufficient to effectively reduce the Certificate Balance to such amount have been deposited in the Collection Account on such date. Such a purchase would result in the retirement of the Certificates of each outstanding Class. SEE "Description of the Certificates--Termination of the Trust; Retirement of the Certificates". H. FORM, DENOMINATIONS AND REGISTRATION OF THE CLASS A CERTIFICATES............ Except under limited circumstances, the Class A Certificates will be available only in book-entry form in minimum denominations of $1,000. Persons acquiring beneficial ownership interests in the Class A Certificates ("Certificate Owners") will hold their Cer- tificates through The Depository Trust Company ("DTC"), in the United States, or Cedel Bank, societe anonyme ("Cedel Bank") or the Euroclear System ("Euroclear") in Europe or
12 Asia. SEE "Description of the Certificates--Book-Entry Registration" and "ANNEX I: Global Clearance, Settlement and Tax Documentation Procedures". I. LISTING........................ Application will be made for listing of the Class A Certificates on the Luxembourg Stock Exchange and for listing of and permission to deal in the Class A Certificates on The Stock Exchange of Hong Kong Limited. The Trust has requested that such permission be made effective on or before September 23, 1997. THE SUBI.......................... The SUBI will be evidenced by a certificate (the "SUBI Certificate") evidencing a 100% beneficial interest in the SUBI Assets and will not evidence an interest in any Titling Trust Assets other than the SUBI Assets. Payments made on or in respect of any other Titling Trust Assets (and proceeds of the Residual Value Insurance Policy) will not be available to make payments on the Certificates. The Titling Trust Assets evidenced by the SUBI will primarily include the Contracts and Leased Vehicles allocated to the SUBI. SEE "The Trust and the SUBI" and "The Titling Trust". 1. THE CONTRACTS................ The Contracts will consist of retail closed-end lease contracts originated by the Dealers in California, Florida, Michigan, Ohio and Pennsylvania (the "Trust States") having original terms of not more than 60 months. Each Contract will be a finance lease for accounting purposes and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price and may include certain origination fees), plus a lease charge which is based on an imputed interest rate (the "Lease Rate"). Each Contract will provide for equal monthly payments (each, a "Monthly Payment") that when allocated between principal and the lease charge at the Lease Rate on a constant yield basis, will be sufficient to amortize the capitalized cost over the term of the lease to an amount equal to the Residual Value. A Residual Value is established at the origination of a lease contract (based on documentation provided to the Dealers by TMCC) and represents the estimated wholesale market value at the end of the lease term, as such estimated value may be reduced in connection with any extension granted as described herein ("Residual Value"). The amount to which the capitalized cost of a Contract has been amortized at any point in time is referred to herein as its "Outstanding Principal Balance". The Initial Contracts consist of 56,340 lease contracts. As of the Cutoff Date, the Initial Contracts had Lease Rates ranging from 0.254% to 13.653% and a weighted average Lease Rate of 7.655%. As of the Cutoff Date, the Initial Contracts had an aggregate Outstanding Principal Balance of $1,287,004,969.02, an Aggregate Net Investment Value of $1,231,231,519.20 (of which amount approximately 69.35% represented Residual Values), a weighted average original term of 39.8 months and a
13 weighted average remaining term to scheduled maturity of 35.8 months. SEE "The Contracts". 2. THE LEASED VEHICLES.......... The Leased Vehicles will be comprised of automobiles and light duty trucks. As of the times of origination of the Contracts, the related Leased Vehicles will include new vehicles, including dealer demonstrator vehicles driven fewer than 20,000 miles, or used vehicles up to four model years old at the time of origination of the related Contract, including certified used vehicles and vehicles previously sold under manufacturer's programs. Certified used vehicles are Toyota or Lexus vehicles that are purchased by dealers, reconditioned and certified to meet certain Toyota/Lexus required standards and sold or leased with an extended warranty from the manufacturer. Manufacturer's program vehicles are Toyota or Lexus vehicles that have been sold to rental car companies, repurchased by the manufacturer and subsequently purchased by the dealer to sell or lease as current year and one year old used vehicles with 20,000 miles or less. SEE "The Contracts--General". The certificates of title to the Initial Leased Vehicles are, and the certificates of title to all Leased Vehicles will be, registered at all times prior to liquidation in the name of the Titling Trust. The certificates of title will not reflect the indirect interest of the Trustee in the Leased Vehicles by virtue of its beneficial interest in the SUBI. Therefore, if the Class A Certificates were recharacterized as secured loans, the Trustee would have a perfected security interest in the SUBI Certificate (excluding rights to proceeds of the Residual Value Insurance Policy retained by the Transferor), Contracts and Contract Rights but not in the Leased Vehicles. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations" and "--Back-up Security Interests". THE SUBI COLLECTION ACCOUNT; COLLECTIONS..................... The Titling Trustee will maintain the SUBI Collection Account for the benefit of the holders of interests in the SUBI. Except under certain limited circumstances, the Servicer will be permitted to deposit amounts collected in respect of payments made on or in respect of the Contracts or the Leased Vehicles during each Collection Period into the SUBI Collection Account on the Business Day preceding the related Monthly Allocation Date (the related "Deposit Date") rather than when received. Such payments will include, but will not be limited to, (i) Monthly Payments, not including Monthly Payments (or portions thereof) determined by the Servicer to be due in one or more future Collection Periods, (each, a "Payment Ahead") until the Collection Period during which such Payment Ahead is due, (ii) Prepayments, (iii) proceeds from the sale or other disposition of Leased Vehicles under Matured Contracts, including payments for excess mileage and excess wear and tear ("Matured Leased Vehicle Proceeds"), (iv) proceeds received in connection with the sale or other disposition of Leased Vehicles
14 that have been repossessed ("Repossessed Vehicle Proceeds") and (v) other amounts received in connection with the realization of the amounts due under any Contract (together with Matured Leased Vehicle Proceeds and Repossessed Vehicle Proceeds, "Liquidation Proceeds"). The Servicer will be entitled to reimbursement for expenses incurred in connection with the realization of Matured Leased Vehicle Proceeds ("Matured Leased Vehicle Expenses"), Repossessed Vehicle Proceeds ("Repossessed Vehicle Expenses") and other Liquidation Proceeds (such expenses, together with Matured Leased Vehicle Expenses and Repossessed Vehicle Expenses, "Liquidation Expenses"), to be netted from proceeds or Collections in respect of such payments (including other Liquidation Proceeds), whether or not on deposit in the SUBI Collection Account. The Servicer also will be entitled to reimbursement of certain payments made and expenses and charges incurred by it in the ordinary course of servicing the Contracts (including payments it makes on behalf of the related lessees in connection with the payment of taxes, vehicle registration, clearance of parking tickets and similar items) from Collections with respect to the related Contracts, separate payment thereof by the related lessees or from amounts realized upon the final disposition of the related leased vehicle. To the extent such amounts are reimbursed prior to or at the final disposition of the related leased vehicle but remain unpaid by the related lessee, such unreimbursed amounts (together with any unpaid Monthly Payments under the related Contract) will be treated as Matured Leased Vehicle Expenses or Liquidation Expenses, as the case may be, and will therefore reduce Matured Leased Vehicle Proceeds or Liquidation Proceeds, as the case may be. On each Deposit Date, the following additional amounts also will be deposited into the SUBI Collection Account: (i) Advances by the Servicer, (ii) any Maturity Advances by the Transferor and (iii) Reallocation Payments by TMCC (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred. In addition, to the extent set forth herein, amounts will be withdrawn from the Reserve Fund and deposited into the SUBI Collection Account on each Deposit Date to cover certain Loss Amounts or shortfalls in Collections. Thereafter, the Interest Collections (and, with respect to the Deposit Date in any month following the month during which the Amortization Period commences, the Principal Collections) on deposit in the SUBI Col- lection Account in respect of the related Collection Period will be available for allocation or distribution of required amounts to Certificateholders and the Transferor. SEE "Assets of the Trust-- The Accounts; Collections--The SUBI Collection Account".
15 The Certificateholders and the Transferor (as holder of the Transferor Interest) are entitled on any Monthly Allocation Date to be allocated or to receive Matured Leased Vehicle Proceeds up to, but not in excess of, the aggregate of the Residual Values of Leased Vehicles sold or otherwise disposed of from Matured Leased Vehicle Inventory during the related Collection Period. It is possible that in any Collection Period the Servicer could incur Matured Lease Vehicle Expenses that, if reimbursed from collections in respect of Matured Leased Vehicle Proceeds, would result in Net Matured Leased Vehicle Proceeds being less than the sum of the Residual Values of all Leased Vehicles so sold or otherwise disposed. Any such shortfall will result in the realization of Residual Value Loss Amounts. On each Deposit Date on which Matured Leased Vehicle Proceeds received during the related Collection Period net of related Matured Leased Vehicle Expenses incurred during such Collection Period ("Net Matured Leased Vehicle Pro- ceeds") exceed the aggregate Residual Value of the related Leased Vehicles (the "Residual Value Surplus"), such excess will be released to the Transferor and neither the Trust nor the Certificateholders will have any further claim thereto or interest therein. THE RESERVE FUND.................. A Reserve Fund will be maintained with the Trustee for the benefit of the Certificateholders and the Transferor. The Reserve Fund is designed to provide additional funds for the benefit of the Certificateholders in the event that on any Monthly Allocation Date Interest and Principal Collections allo- cable to the Investor Interest for the related Collection Period are insufficient to allocate for or make distributions in respect of, among other things, (i) accrued interest, (ii) overdue interest (with interest thereon at the applicable Interest Rate, to the extent lawful) and (iii) Loss Amounts allocable to the Investor Interest and unreimbursed Certificate Principal Loss Amounts, together with interest thereon at the applicable Certificate Rate (the aggregate amount of such deficiency, the "Required Amount"). A portion of the amounts on deposit in the Reserve Fund (the Class B Interest Reserve Amount) will be available only to cover interest shortfalls with respect to the Class B Certificates, and will not be available to cover interest shortfalls, Loss Amounts or Certificate Principal Loss Amounts allocated to the Class A Certificates. Monies on deposit in the Reserve Fund also will be available to Certificateholders should Collec- tions ultimately be insufficient to pay in full any Class of Certificates at its Stated Maturity Date. The Reserve Fund will not be an asset of the Trust. SEE "Assets of the Trust--The Accounts; Collections-- The Reserve Fund". The Reserve Fund will be created with an initial deposit (the "Initial Deposit") by the Transferor of $30,780,787.98 (2.50% of the Aggregate Net Investment Value as of the Cutoff Date). On
16 each Monthly Allocation Date, the Reserve Fund will be supplemented by Interest Collections and Principal Collections that would otherwise be released to the Transferor after making all required allocations and distributions to Certificateholders, until the amount on deposit therein equals the applicable Specified Reserve Fund Balance. After giving effect to all payments from the Reserve Fund on a Monthly Allocation Date, monies on deposit therein in excess of the Specified Reserve Fund Balance will be paid to the Transferor, free and clear of any interest of the Trust. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections" and "Assets of the Trust--The Accounts; Collections--The Reserve Fund--The Specified Reserve Fund Balance". Under certain circumstances it is possible that, as of any Monthly Allocation Date, the amount of funds actually on deposit in the Reserve Fund could be less than the Specified Reserve Fund Balance. Moreover, pursuant to the Agreement, the Specified Reserve Fund Balance may, under certain circumstances, be reduced on one or more Monthly Allocation Dates to the extent approved by each Rating Agency. SUBORDINATION..................... The Class B Certificates will be subordinated to the Class A Certificates so that on any Certificate Payment Date (i) interest payments generally will not be made in respect of the Class B Certificates until interest on the Class Certificate Balance of each Class of Class A Certificates and on Certificate Principal Loss Amounts previously allocated thereto has been paid on such Certificate Payment Date and (ii) principal payments generally will not be made in respect of the Class B Certificates until all of the Class A Certificates have been paid in full. To provide additional credit enhancement for the Certificates, payments will not be made to the Transferor in respect of the Transferor Interest on any Monthly Allocation Date until all allocations or distributions required to be made with respect to the Certificates on such date have been made as described under "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections" and the amount on deposit in the Reserve Fund on such Monthly Allocation Date equals the Specified Reserve Fund Balance. SEE "Description of the Certificates--Certain Payments to the Transferor". ADVANCES.......................... On each Deposit Date, the Servicer will be obligated to make an advance with respect to each outstanding delinquent Contract and certain Contracts as to which payments have been deferred that have not been reallocated to the UTI with an accompanying Reallocation Payment as described herein, provided that the Servicer will not be required to make any Advance to the extent that it determines such Advance may not be ultimately recoverable from Net Liquidation Proceeds or otherwise. Each such
17 advance will be made by deposit into the SUBI Collection Account of an amount equal to the aggregate amount of Monthly Payments due but not received during the related Collection Period (each, an "Advance"). SEE "Additional Document Provisions--The Servicing Agreement--Collections" and "--Advances". MATURITY ADVANCES................. Pursuant to the Agreement, on the Targeted Maturity Date for any Class of Class A Certificates on which the aggregate of amounts available to be paid as principal thereof (including any amount of Interest Collections or net investment income applied to cover such shortfall on such date) are insufficient to pay in full the related Certificate Principal Balance, the Transferor will have the option to make an advance (a "Maturity Advance") in any amount up to the amount of such shortfall. All such amounts advanced by the Transferor will be reimbursable to the Transferor from the Investor Percentage of Principal Collections on subsequent Monthly Allocation Dates as described herein. SERVICING COMPENSATION............ The Servicer will be entitled to receive a monthly fee with respect to the SUBI Assets (the "Servicing Fee"), payable on each Monthly Allocation Date, equal to one-twelfth of 1% of the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Monthly Allocation Date, as of the Cutoff Date). The Servicer also will be entitled to additional servicing compensation in the form of, among other things, late fees, Deferral Fees and other administrative fees or similar charges under the Contracts. SEE "Additional Document Provisions--The Servicing Agreement--Servicing Compensation". TAX STATUS........................ Andrews & Kurth L.L.P., special federal income tax counsel to the Transferor, is of the opinion that the Class A Certificates will be characterized as indebtedness for federal income tax purposes. Each Class A Certificateholder, by its acceptance of a Class A Certificate, and each Certificate Owner by its acquisi- tion of an interest in the Class A Certificates, will agree to treat the Class A Certificates as indebtedness for federal, state and local income tax purposes. SEE "Material Federal Income Tax Considerations". ERISA CONSIDERATIONS.............. Subject to considerations described below, the Class A-1, Class A-2 and Class A-3 Certificates are eligible for purchase by employee benefit plan investors as of the Closing Date. Under a regulation issued by the Department of Labor, the Trust's assets would not be deemed "plan assets" of an employee benefit plan holding Class A Certificates if certain conditions are met, including that Certificates of each such Class must be held, upon completion of the public offering made hereby, by at least 100 investors who are independent of the Transferor and of one another and that such Certificates are registered under the Exchange Act. Although no assurances can be given, and no monitoring or other measures will be taken to ensure, that such
18 condition will be met, the Underwriters expect that the Class A-1, Class A-2 and Class A-3 Certificates will be held by at least 100 independent investors at the conclusion of the offering. The Transferor anticipates that the other conditions of the regulation will be met. The Transferor has applied to the DOL for the Requested Exemption described herein pursuant to which the Class A-1, Class A-2 and Class A-3 Certificates would be eligible to be held by employee benefit plan investors meeting the conditions specified therein as of the effective date of the Requested Exemption. In the event the Requested Exemption is granted substantially in the form for which such application was made, the Transferor intends to deregister the Class A Certificates under the Exchange Act as soon as permitted by law. As a result, the Class A Certificates may no longer be eligible to be held by Benefit Plans that did not meet the eligibility criteria for the Requested Exemption, even if more than 100 other qualified investors continued to hold securities of each such Class. The Transferor anticipates that all of the conditions of the Requested Exemption that are within its control will be satisfied if and when the Requested Exemption is granted. There can be no assurance that the Requested Exemption will be granted, or the date on which the Requested Exemption might be granted. If the Trust's assets were deemed to be "plan assets" of an employee benefit plan investor (e.g., if the 100 independent investor criterion is not satisfied and any of the conditions upon which the Requested Exemption is contingent are not satisfied), violations of the "prohibited transaction" rules of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), could result and generate excise tax and other liabilities under ERISA and section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), unless another statutory, regulatory or administrative exemption is available. It is uncertain whether existing exemptions from the "prohibited transaction" rules of ERISA would apply to all transactions involving the Trust's assets if such assets were treated for ERISA purposes as "plan assets" of employee benefit plan investors. SEE "ERISA Considerations". RATINGS........................... It is a condition of issuance that each of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" and, together with Moody's, the "Rating Agencies") rate each Class of Class A Certificates in its highest rating category. The ratings of the Class A Certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold a security. The ratings of each Class of Class A Certificates address the likelihood of the payment of principal of and interest on such Certificates in accordance with their terms and may be subject to revision or withdrawal at any time by the assigning Rating Agency. SEE "Ratings of the Class A Certificates".
19 RISK FACTORS RISK OF LIMITED LIQUIDITY FOR THE CLASS A CERTIFICATES; ABSENCE OF SECONDARY MARKET FOR THE CLASS A CERTIFICATES There is currently no market for the Class A Certificates. The Underwriters currently intend to make a market in each Class of Class A Certificates but are under no obligation to do so. There can be no assurance that a secondary market for any Class of Class A Certificates will develop or, if one does develop, that it will provide the related Certificateholders with liquidity of investment or will continue for the life of the related Class of Class A Certificates. RISK OF ABSENCE OF FUNDS FOR REIMBURSEMENT OF CERTAIN LOSSES In the event that Loss Amounts are incurred in respect of the Contracts and the Leased Vehicles during a Collection Period relating to a Monthly Allocation Date during the Revolving Period, an amount equal to the Investor Percentage of such Loss Amounts, to the extent reimbursed out of Collections available therefor or otherwise, will be treated as Principal Collections received during the succeeding Collection Period and will be available for reinvestment in Subsequent Contracts and Subsequent Leased Vehicles. If the related Monthly Allocation Date occurs during the Amortization Period, reimbursements of Loss Amounts will be distributed or allocated to the Class A Certificateholders (pro rata, based on their Certificate Principal Balances as of the last day of the related Collection Period, in an amount equal to the Investor Percentage of such Loss Amounts), as a distribution or allocation of principal from, to the extent available therefor, the Investor Percentage of Interest Collections remaining after certain other applications thereof, amounts on deposit in the Reserve Fund available therefor, Transferor Amounts and Class B Available Principal. Loss Amounts (including Certificate Principal Loss Amounts) will be allocated first to the Class B Certificates and then to the Class A Certificates on a pro rata basis as described above. Reimbursements of Loss Amounts realized during the Amortization Period may accelerate the rate of return of principal on the Certificates. To the extent that Principal Collections and reimbursements of Loss Amounts are reinvested in Subsequent Contracts during the Revolving Period, the aggregate Residual Value of the Leased Vehicles as a percentage of the Aggregate Net Investment Value may increase, thereby increasing the exposure of the Certificates of each Class to the risk of being allocated Residual Value Loss Amounts. Furthermore, to the extent that Loss Amounts (including Residual Value Loss Amounts) ultimately exceed the sources available for repayment thereof, such Loss Amounts will be allocated to the Certificates as Certificate Principal Loss Amounts, temporarily or permanently reducing the Class Certificate Balances of each Class to which they are allocated. Because Loss Amounts and Certificate Principal Loss Amounts will not be reimbursable to Class A Certificates after the related Certificate Principal Balance is reduced to zero, investors in the Class A Certificates of any Class may ultimately incur a loss on their investment. "Loss Amounts" will include Charged-off Amounts, Residual Value Loss Amounts and Additional Loss Amounts. The "Residual Value Loss Amount" for any Collection Period generally will represent the aggregate net losses on dispositions of Matured Leased Vehicle Inventory, and will be equal to the sum of (a) the aggregate of the Residual Values of all those Leased Vehicles that were included in Matured Leased Vehicle Inventory but that had remained unsold and not otherwise disposed of by the Servicer for at least three full Collection Periods as of the last day of such Collection Period and (b) the excess, if any, of (i) the aggregate of the Residual Values of all Leased Vehicles previously included in Matured Leased Vehicle Inventory that were sold or otherwise disposed of during such Collection Period over (ii) Net Matured Vehicle Proceeds for such Collection Period. SEE "TMCC--Delinquency, Repossession and Loss Data". Residual Value Loss Amounts experienced will depend on a variety of factors, including the effect of TMCC's active encouragement of lessees under lease contracts with remaining terms of less than one year to buy, trade in or refinance the related vehicles, and the supply of, and demand for, vehicles similar to the Leased Vehicles in the used car market. Uncollected payments for excess mileage or excess wear and 20 use also could affect the related proceeds. No assurance can be given as to the likely Residual Value Loss Amounts allocated to the Investor Interest over the life of the Certificates. MATURITY AND PREPAYMENT CONSIDERATIONS No principal will be paid to the Certificateholders until the first Certificate Payment Date that is a Targeted Maturity Date or, following the occurrence of a Monthly Payment Event, each subsequent Certificate Payment Date. During the Revolving Period, Principal Collections will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles. The continuation of the Revolving Period will be dependent upon, among other things, the continued origination and assignment to the Titling Trust of lease contracts and leased vehicles meeting the eligibility criteria described herein in amounts corresponding to Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts to be reinvested. An unexpectedly high rate of Principal Collections (including Prepayments) received during any Collection Period or a significant decline in the number of qualifying lease contracts available to be assigned to the Titling Trust could result in the occurrence of an Early Amortization Event and the commencement of the Amortization Period prior to the Amortization Date. The retail automobile and light duty truck leasing business in the United States or in one or more of the Trust States may be affected by a variety of social, economic and geographic factors. Economic factors include interest rates, unemployment levels, the rate of inflation and consumer perception of economic conditions. However, it is not possible to determine or predict whether or to what extent economic, geographic or social factors will affect retail automobile and light duty truck leasing in general, or that of the Dealers in particular. As a result, there can be no assurance that the Revolving Period will not terminate prior to the Amortization Date, possibly shortening the final maturities and weighted average lives of and affecting the yields on one or more Classes of Certificates. SEE "Description of the Certificates--Early Amortization Events". The payment, prepayment, loss and liquidation experience with respect to the Contracts, which cannot be predicted, will affect the weighted average lives of each Class of Certificates then outstanding if a Monthly Payment Event occurs, and will affect the weighted average life of any Class of Certificates as to which the related Certificate Principal Balance is not reduced to zero on the related Targeted Maturity Date. If on any Monthly Allocation Date during the Amortization Period the amount on deposit in the Reserve Fund is at least equal to the Specified Reserve Fund Balance and the Investor Percentage of Collections exceeds the aggregate of amounts required to be allocated or distributed to Certificateholders as described herein, the related Accelerated Principal Distribution Amount will be allocated or distributed as additional principal to Certificateholders. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections". A substantial increase in the rate of payments on or in respect of the Contracts and Leased Vehicles (including prepayments and liquidations of the Contracts) after the occurrence of a Monthly Payment Event may shorten the final maturity and weighted average lives of, and may significantly affect the yields on, each then-outstanding Class of Certificates. The rate of payment of principal of the Certificates may also be affected (i) during such period by payment by TMCC of Reallocation Payments (and under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred and (ii) by the exercise by the Transferor of its right to purchase the SUBI Certificate under certain circumstances, thereby retiring the Certificates. SEE "Description of the Certificates--Termination of the Trust; Retirement of the Certificates", "The Contracts--Representations, Warranties and Covenants" and "Additional Document Provisions--The Servicing Agreement--Collections". Each of the Contracts may be prepaid by the related lessee without penalty in full or in part at any time. TMCC actively encourages lessees under lease contracts with remaining terms of less than one year to either buy, trade in or refinance the related leased vehicles prior to their scheduled maturities. TMCC estimates that, of the retail automobile and light duty truck lease contracts in its portfolio that were scheduled to mature during fiscal year 1996 or during the nine-month period ended June 30, 1997, 21 approximately 52% and 49%, respectively, were purchased by the related lessee or a dealer prior to the scheduled maturity date specified in the related lease contract. Such early terminations primarily were due to voluntary prepayments. No assurance can be given that the Contracts will experience the same rate of prepayment or default or any greater or lesser rate than TMCC's historical rate for the retail automobile and light duty truck lease contracts in its portfolio. SEE "Maturity, Prepayment and Yield Considerations". Because the Certificates have Targeted Maturity Dates prior to which principal thereof will not be paid unless a Monthly Payment Event occurs or the Transferor exercises its option to repurchase the SUBI, the weighted average life of any such Class of Certificates will not be reduced by prepayments prior to the occurrence of a Monthly Payment Event. Moreover, there can be no assurance as to whether a Maturity Advance will be made or, if made, will be sufficient to pay in full the related Class Certificate Balance on the Targeted Maturity Date with respect to any Class of Certificates and, therefore, any such Class may mature significantly later than its Targeted Maturity Date. In addition, earlier collections in respect of interest on, or the Discounted Principal Balance of, the Contracts due to full or partial prepayments may result in increased amounts of collections being held in the Certificateholder's Account, and then invested in Permitted Investments at any given time than would otherwise be the case. Irrespective of the rate of payments on the Contracts, because the Certificateholders generally will receive payments only on Certificate Payment Dates, more collections will be invested in Permitted Investments at any given time than would be the case in a securitization in which all securities are entitled to monthly distributions of interest and principal. Because it is anticipated that such investments will include one or more TMCC Demand Notes, the effect of an increased rate of prepayment will be to expose significant portions of the amounts allocable, payable and distributable to Certificateholders to risk of default by TMCC on such obligations. RISKS ASSOCIATED WITH SEQUENTIAL PAYMENT OF PRINCIPAL ON THE CERTIFICATES In general, the Certificates will be "sequential pay" certificates meaning that no principal payments will be made on the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments will be made on the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments will be made on the Class B Certificates until the Class A-3 Certificates are paid in full. During the Amortization Period, reimbursements of Loss Amounts will be distributed or allocated to the Certificateholders (first to the Class A Certificates pro rata, based on their Class Certificate Balances as of the last day of the related Collection Period, and then to the Class B Certificates up to the Investor Percentage of such Loss Amounts), as a distribution or allocation of principal from, to the extent available therefor, the Investor Percentage of Interest Collections remaining after certain other applications thereof, amounts on deposit in the Reserve Fund available therefor and Transferor Amounts (and, in the case of the Class A Certificates, from Class B Available Principal). SEE "Description of the Certificates-- Allocations and Distributions on the Certificates--Allocations and Distributions of Collections". Certificate Principal Loss Amounts will be allocated first to the Class B Certificates and then to the Class A Certificates on a pro rata basis as described above. To the extent net proceeds of any sale or other disposition of the SUBI, the SUBI Certificate or other property of the Trust constitute Principal Collections, which may occur under certain circumstances involving an Insolvency Event of the Transferor (as described under "Description of the Certificates--Early Amortization Events"), they will be distributed first, on a pro rata basis, to the Class A Certificateholders based on their respective Class Certificate Balances until the Class A Certificates have been paid in full, and second, to the Class B Certificateholders until the Class B Certificates have been paid in full. Sequential payment of the Certificates is also likely to cause Classes of Certificates that pay later than other Classes to be outstanding during periods when an increasingly large percentage of the Aggregate Net Investment Value will be represented by Residual Values as opposed to unpaid Monthly Payments, thereby increasing the exposure of such Certificates to the risk of being allocated Residual Value Loss Amounts. 22 As a result, Class A Certificates that have lower sequential principal payment priority may be allocated more Loss Amounts (including Residual Value Loss Amounts) and Certificate Principal Loss Amounts than Class A Certificates with higher payment priority as a relative percentage of their respective Initial Certificate Balances, primarily because Loss Amounts and Certificate Principal Loss Amounts will be allocated thereto on each Monthly Allocation Date based on the outstanding Class Certificate Balances thereof as of the last day of the related Collection period, which will be relatively higher as the Class Certificate Balances of the higher priority Class A Certificates decrease during the Amortization Period. However, any portion of Principal Collections comprised of the Investor Percentage of the net proceeds of any sale or other disposition of the SUBI Interest, the SUBI Certificate or other property of the Trust (which may occur under certain circumstances involving an Insolvency Event with respect to the Transferor as described under "Description of the Certificates--Early Amortization Events") will not be distributed to the Class A Certificateholders sequentially, but instead will be distributed to the holders of each Class of Class A Certificates pro rata, based on the respective Class A Certificate Balances, until all Class A Certificates have been paid in full, and then to the Class B Certificateholders. RISKS ASSOCIATED WITH GEOGRAPHIC, ECONOMIC AND OTHER FACTORS The Dealers which originated and will originate the Contracts are located in California, Florida, Michigan, Ohio and Pennsylvania (the "Trust States") and the Contracts and Leased Vehicles generally are and will be located in the Trust States. However, a significant number of lessees may live in or relocate to other states and may register and/or operate Leased Vehicles in other states. For a breakdown of the percentage of Initial Contracts originated in each of the Trust States, see "The Contracts--Characteristics of Contracts--Distribution of the Initial Contracts by State". Due to the geographic concentration of Contracts in the Trust States, adverse economic conditions in one or more of the Trust States may have a significant impact on the performance of the SUBI Assets. Approximately 58% of the Initial Contracts, based on outstanding Principal Balance as of the Cutoff Date, were originated in the State of California. TMCC's loss experience for retail automobile and light-duty truck lease contracts originated by branches serving California has been an average of approximately 60% higher than TMCC's loss experience with respect to its entire lease contract portfolio over the past five years. However, TMCC's loss experience for lease contracts originated through branches serving all of the Trust States considered as one pool over the same period has been only slightly higher than its loss experience with respect to its entire lease contract portfolio. Branches serving each Trust State also serve other states that are not Trust States, and therefore information available and provided herein with respect to loss experience for the Trust States is influenced by the inclusion of contracts originated in states other than the Trust States, but serviced by a branch that also serves the Trust States (although such contracts represent a relatively small percentage of total contracts serviced by such branches). Economic factors such as unemployment, interest rates, the rate of inflation and consumer perceptions of the economy may affect the rate of prepayment and defaults on the Contracts and the ability to sell or otherwise dispose of Leased Vehicles relating to Matured Contracts for an amount at least equal to their respective Residual Values. These economic factors, as well as other factors such as consumer perceptions of used vehicle values, also may affect the ability to realize the Residual Values of Leased Vehicles upon sale. RISKS ASSOCIATED WITH VEHICLES RETURNED AT THE TERMINATION OF THE LEASE The number of leased vehicles returned to TMCC (as opposed to the number being purchased by the related lessee or a dealer) at the termination of the related lease contracts as a percentage of the number of leased vehicles scheduled to terminate during the related period (the "Full Term Ratio") can be affected by a variety of factors including new and used car markets which may influence the related vehicles' market values at the related termination date relative to their contractual residual values, the duration of the lease 23 (leased vehicles that have shorter term leases have a greater likelihood of being returned rather than purchased) and other factors. TMCC's Full Term Ratio has generally increased during the year ended September 30, 1996 as compared to the same period for the previous year and again for the nine month period ended June 30, 1997, and is expected to increase in the future. SEE "TMCC's Leasing Operations-- Delinquency, Repossession and Loss Data". A higher rate of return at the termination of a lease exposes the lessor to a higher risk of loss on such vehicles since the related vehicle will not be purchased by the lessee or a dealer and must be disposed of through means that may result in a purchase price which may be lower than the related residual value. RISKS ASSOCIATED WITH CONCENTRATIONS OF VEHICLE TYPES The Full Term Ratio for Lexus vehicles has increased for each of the past five years, and has historically been significantly higher than the Full Term Ratio for Toyota leased vehicles. Of the Lexus leased vehicles scheduled to terminate during the nine months ended June 30, 1997, 41.4% were returned to TMCC. The Full Term Ratio for Toyota leased vehicles has generally decreased for each of the past five years, but increased to 10.3% for the nine months ended June 30, 1997. SEE "TMCC's Leasing Operations-- Delinquency, Repossession and Loss Data". A higher Full Term Ratio exposes the lessor to a higher risk of loss on such vehicles since the related vehicles will not have been purchased by the related lessees or dealers and must be disposed of through means that may result in purchase prices which may be lower than the related residual value. Although approximately 19.27% of the leased vehicles in TMCC's entire portfolio as of June 30, 1997 were Lexus vehicles, only approximately 12.47% of the Initial Contracts relate to Lexus leased vehicles, based on number of vehicles. The used car market for any particular model type could be adversely affected by factors not affecting other model types, such as changes in consumer tastes or discovery of defects in respect of such model type. TMCC tracks twenty-five model types in its lease portfolio, of which twenty-one model types initially will be included as SUBI Assets. By number of vehicles, the Camry, Corolla, 4Runner and Tacoma pick-up represent approximately 26.4%, 15.6%, 11.1% and 8.2%, respectively, of the Initial Leased Vehicles as compared to approximately 27.1%, 16.2%, 8.4% and 3.6%, respectively, of leased vehicles included in TMCC's entire lease portfolio as of June 30, 1997. Any such adverse change with respect to a specific model type could result in less proceeds upon the liquidation or other disposition of Leased Vehicles of such model type, and therefore could result in increased Residual Value Losses. RISKS ASSOCIATED WITH CONSUMER PROTECTION LAWS Numerous federal and state consumer protection laws, including the federal Consumer Leasing Act of 1976 and Regulation M promulgated by the Board of Governors of the Federal Reserve System, impose requirements upon lessors and servicers of retail lease contracts such as the Contracts. Each of California and Florida have enacted comprehensive vehicle leasing statutes that, among other things, regulate the disclosures to be made at the time a vehicle is leased. These laws apply to the Titling Trust as the lessor under the Contracts and may also apply to the Trust as owner of the SUBI Certificate. Failure by the Titling Trust or the Servicer to comply with such requirements may give rise to liabilities on the part of the Titling Trust, and enforcement of the Contracts by the Titling Trust may be subject to set-off as a result of such noncompliance. Many states, including each of the Trust States, have adopted Lemon Laws that provide vehicle users certain rights in respect of substandard vehicles. A successful claim under a Lemon Law could result in, among other things, the termination of the Contract relating to a substandard Leased Vehicle and/or require the refund of all or a portion of payments previously paid thereon. TMCC will make representations and warranties that each Contract complies with all requirements of law in all material respects. If any such representation and warranty proves incorrect, has certain material adverse effects and is not timely cured, TMCC will be required to make a Reallocation Payment (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) into the SUBI Collection Account and reallocate the related Contract and Leased Vehicle out of the SUBI, as 24 described under "The Contracts--Representations, Warranties and Covenants" and "Description of the Certificates--Reallocation Payments and Reallocation Deposit Amounts". SEE "Certain Legal Aspects of the Contracts and the Leased Vehicles--Consumer Protection Laws". RISKS ASSOCIATED WITH ERISA LIABILITIES It is possible that the Titling Trust Assets, including the SUBI Assets, could become subject to liens in favor of the Pension Benefit Guaranty Corporation to satisfy unpaid ERISA obligations of any member of an "affiliated group" that includes TMCC, TMS, Toyota Leasing, Inc. and their respective affiliates. However, the Transferor believes that the likelihood of any such liability being asserted against the Titling Trust Assets, including the SUBI Assets, or being successfully pursued is remote. In particular, the Transferor believes that the Titling Trust should, as a legal matter, be treated as a distinct entity separate and apart from such affiliated group, under ERISA's "common control" provisions. All such plans maintained by such affiliated group historically have had assets that significantly exceeded their liabilities. However, no assurance can be given that any of these conditions will continue in the future. RISKS ASSOCIATED WITH VICARIOUS TORT LIABILITY WITH RESPECT TO LEASED VEHICLES Although the Titling Trust will own the Leased Vehicles and the Trust will have an interest therein, they will be controlled and operated by the related lessees and their invitees. 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, the Titling Trust and the Titling Trust Assets, including the SUBI Assets, may be subject to liability to such an injured party. However, the laws of most states, including the Trust 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 the case of Florida, the lessor was permitted to maintain), but failed to maintain. Notwithstanding the foregoing, in the event that vicarious liability is imposed on the Titling Trust as owner of a Leased Vehicle and the coverage provided by the Contingent and Excess Liability Insurance Policies is insufficient to cover such loss, including in certain circumstances with respect to a leased vehicle that is an Other SUBI Asset or a UTI Asset, investors in the Class A Certificates could incur a loss on their investments. SEE "Certain Legal Aspects of the Contracts and the Leased Vehicles-- Vicarious Tort Liability", "Certain Legal Aspects of the Titling Trust--Structural Considerations--Allocation of Titling Trust Liabilities", "--Third-Party Liens on SUBI Assets" and "Assets of the Trust--The Contingent and Excess Liability Insurance Policies". All of the Contracts will contain provisions requiring the lessees to maintain levels of insurance satisfying applicable state law. Such policies may lapse, be terminated or otherwise not be maintained properly by a lessee. It is the practice of TMCC not to obtain insurance on behalf of and at the expense of the related lessee. TMCC's central insurance tracking unit, which monitors compliance with such lease contract provisions, will initiate follow-up procedures, including the telephone and mail contact with the related lessee, upon being alerted by the tracking system that any lessee has not obtained or is not maintaining required insurance. Typically, if such default is not cured within 70 days from the date TMCC's central insurance tracking unit becomes aware of such default, the related lease contract is forwarded to the appropriate TMCC branch for follow-up handling, including possible repossession of the related Leased Vehicles if the related lessee does not timely obtain a satisfactory replacement policy. Moreover, the policies issued with respect to a significant number of the Initial Contracts name TMCC rather than the Titling Trust as additional loss payee. If a primary insurer makes payment under such a policy to TMCC, TMCC will apply such amounts or forward such amounts to the Titling Trust for application as appropriate. If a primary insurer failed to make payments under a policy to the lessee and also to TMCC and the Titling Trust, losses could be experienced by the Certificateholders. However, the Transferor has been advised by the primary provider of the Contingent and Excess Liability Policies described herein that such provider will not refuse any claim under the Contingent and Excess Liability 25 Policies solely because a primary policy names TMCC or an approved TMCC affiliate, rather than the Titling Trust, as additional loss payee (although under such circumstances, if the primary insurer denies a claim on such basis, a deductible of $250,000 (rather than the standard deductible of $125,000) will be payable by TMCC, as to which TMCC will indemnify the Trust). Actions by third parties might exceed the limits of the policies maintained by lessees or claims might arise based on legal theories other than negligence, such as a product defect or improper vehicle preparation prior to the origination of the related lease contract that are not covered thereby. The Titling Trust will be the beneficiary of the Contingent and Excess Liability Insurance Policies which will cover certain claims in excess of the limits of the lessees' policies. Such Contingent and Excess Liability Insurance Policy will be subject to significant per occurrence deductibles in respect of which TMCC will indemnify the Trust. SEE "Assets of the Trust--The Contingent and Excess Liability Insurance Policies". Although the Titling Trust's insurance coverage is for $100 million per claim, with an allowance for multiple claims in any policy period, in the event that all such insurance coverage were exhausted and/or TMCC did not satisfy its indemnity obligations such that damages were assessed against the Titling Trust, various claims could be imposed against the Titling Trust Assets, including the SUBI Assets. If any such claims are imposed against any SUBI Assets or, in certain limited circumstances, any Other SUBI Assets or UTI Assets, investors in the Class A Certificates could incur a loss on their investment. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations--Allocation of Titling Trust Liabilities", "--Third-Party Liens on SUBI Assets" and "Certain Legal Aspects of the Contracts and the Leased Vehicles--Vicarious Tort Liability". RISKS ASSOCIATED WITH POSSIBLE FUTURE INSOLVENCY OF TMCC; SUBSTANTIVE CONSOLIDATION WITH TMCC The Transferor has taken steps in structuring the transactions contemplated hereby intended to ensure that the voluntary or involuntary application for relief under the United States Bankruptcy Code or similar applicable state laws ("Insolvency Laws") by TMCC will not result in the consolidation of the assets and liabilities of the Transferor, the Titling Trust or the Trust with those of TMCC. With respect to the Transferor, these steps include its creation as a separate, special purpose finance subsidiary of TMCC pursuant to articles of incorporation containing certain limitations (including the requirement that it must have at all times at least one "independent director" and restrictions on the nature of its businesses and on its ability to commence a voluntary case or proceeding under any Insolvency Law without the affirmative vote of a majority of its directors including the independent director). Reallocation Payments or deposits of Reallocation Deposit Amounts made by TMCC and unreimbursed Advances made by TMCC, as Servicer, may be recoverable by TMCC as debtor-in-possession or by a creditor or a trustee in bankruptcy of TMCC as a preferential transfer from TMCC if such payments were made within one year prior to the filing of a bankruptcy case in respect of TMCC. In addition, the insolvency of TMCC could result in the replacement of TMCC as Servicer, which could result in a temporary interruption of payments on the Certificates. If prior to the Amortization Date a conservator, receiver or bankruptcy trustee were appointed by the Transferor, or if certain other events relating to the bankruptcy or insolvency of the Transferor were to occur (each, an "Insolvency Event"), the Amortization Period would commence and the Trustee may, and upon receipt of written instructions from holders of Certificates evidencing Voting Interests of not less than 51% of the Class A Certificates (voting together as a single class) or 51% of the Class A Certificates and the Class B Certificates (voting together as a single class) will, attempt to sell the SUBI, the SUBI Certificate and the other property of the Trust. The consummation of such sale would result in an early termination of the Trust and a pro rata loss to the Class A Certificateholders if the Investor Percentage of the net proceeds of such sale were insufficient to pay in full the Class A Certificate Balance, together with any unreimbursed Certificate Principal Loss Amounts, with accrued and unpaid interest thereon at the related Certificate Rates, respectively. 26 On the Closing Date, Andrews & Kurth L.L.P., special counsel to the Transferor and TMCC, will render an opinion based on a reasoned analysis of analogous case law (although there is no precedent based on directly similar facts) subject to certain facts, assumptions and qualifications specified therein, that, under applicable statutes and precedent, if TMCC were to become a debtor in a case under the Bankruptcy Code, it would not be a proper exercise by a federal bankruptcy court of its equitable discretion to disregard the separate legal forms so as to substantively consolidate the assets and liabilities of the Transferor, the Titling Trust or the Trust with those of TMCC. In addition, on the Closing Date, Andrews & Kurth L.L.P. will render an opinion to the effect that (i) the transfer of the SUBI Certificate by the Transferor to the Trust constitutes a sale of the SUBI Certificate and the SUBI Assets evidenced thereby, subject in each case to the rights of the Transferor as the holder of the Transferor Interest, or (ii) if such transfer does not constitute a sale, then the Agreement creates a valid perfected security interest, for the benefit of Certificateholders, in the Transferor's right, title and interest in the SUBI Certificate. SEE "Certain Legal Aspects of the Titling Trust--Insolvency Related Matters". The Titling Trust may be subject to the Insolvency Laws, and claims against the Titling Trust Assets could have priority over the beneficial interest therein represented by the SUBI. In addition, claims of a third party against the Titling Trust Assets, including the SUBI Assets, to the extent such claims are not covered by insurance, would take priority over the holders of beneficial interests in the Titling Trust, such as the Trustee. SEE "Assets of the Trust--The Contingent and Excess Liability Insurance Policies" and "Certain Legal Aspects of the Contracts and Leased Vehicles--Vicarious Tort Liability". RISKS ASSOCIATED WITH LEGAL PROCEEDINGS RELATING TO LEASED VEHICLES The Transferor is not a party to any legal proceeding. Neither the Titling Trust, nor the Titling Trustee on behalf of the Titling Trust, has been named as a defendant in any material legal proceeding. TMCC is a party to, and is vigorously defending, several legal proceedings, all of which it believes constitute ordinary routine litigation incidental to the business and activities conducted by TMCC. Certain of the actions naming TMCC are or purport to be class action suits. The amount of liability on pending claims and actions as of the date of this Prospectus were not determinable; however, in the opinion of management of TMCC, the ultimate liability resulting therefrom should not have a material adverse effect on TMCC's consolidated financial position or results of operations, or on the Titling Trust Assets, the SUBI or on the Dealers' or the Titling Trust's ability to originate sufficient new leases to satisfy reinvestment obligations under the Titling Trust Agreements, the SUBI Supplement and the Servicing Supplement. However, there can be no assurance in this regard. THE TRUST AND THE SUBI GENERAL The Trust and the Certificateholders will have no interest in the UTI, any Other SUBI or any Titling Trust Assets evidenced by the UTI or any Other SUBI. Payments made on or in respect of the Titling Trust Assets not represented by the SUBI will not be available to make payments on the Certificates. SEE "The Titling Trust". THE TRUST Pursuant to the Agreement, the Transferor will establish the Trust by transferring and assigning the SUBI and the SUBI Certificate (excluding proceeds of the Residual Value Insurance Policy) to the Trustee in exchange for the Certificates and a certificate evidencing the Transferor Interest. The property of the Trust will primarily include (i) the SUBI, which evidences a beneficial interest in certain specified Titling Trust Assets (i.e., the SUBI Assets), (ii) such amounts as from time to time may be held in the SUBI Collection Account and the Certificateholders' Account, and investments of amounts on deposit in the SUBI Collection Account and (iii) the Trustee's rights as a third-party beneficiary to the Servicing 27 Agreement and the SUBI Supplement. The Trust also will have a beneficial interest in such amounts as from time to time may be held in the SUBI Collection Account and investments of such amounts. Because of the administrative difficulty and expense associated with retitling leased vehicles, including federal and state regulatory requirements to obtain odometer readings and to pay vehicle transfer fees and taxes, the Trust will only have an interest in the portion of the SUBI transferred to it by the Transferor, and will not have a direct ownership interest in any Leased Vehicles. Except for the protection provided to the Class A Certificateholders by the Reserve Fund, the Class A Certificateholders ultimately will have to look to payments made on or in respect of the Contracts and the Leased Vehicles (including under certain related insurance policies) to make distributions on the SUBI Certificate, which in turn will be distributed to the Certificateholders. In such event, certain factors, such as the fact that the Trust will not have a direct ownership interest in the Contracts or the Leased Vehicles or a perfected security interest in the Leased Vehicles (which will be titled in the name of the Titling Trust) may limit the amount realized to less than the amount due from the related lessees. Investors in the Class A Certificates may thus be subject to delays in payment and may incur losses on their investment in the Class A Certificates as a result of defaults or delinquencies by lessees and because of depreciation in the value of the related Leased Vehicles. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations", "Assets of the Trust--The Accounts; Collections--The Reserve Fund", "Additional Document Provisions--The Servicing Agreement--Insurance on Leased Vehicles" and "Certain Legal Aspects of the Contracts and the Leased Vehicles". THE SUBI The SUBI will be issued pursuant to the Series 1997-A Supplement to the Titling Trust Agreement (the "SUBI Supplement") and will evidence a beneficial interest in certain specified Titling Trust Assets allocated to the SUBI consisting of (i) the Contracts, the Leased Vehicles and all proceeds or payments related thereto received or due on or after the related Cutoff Date; (ii) certain monies in the Reserve Fund, and (iii) all other related Titling Trust Assets allocated to the SUBI, including (A) the SUBI Collection Account (to the extent of funds therein relating to the Contracts and Leased Vehicles), (B) the right to receive payments made to TMCC, the Titling Trust or the Titling Trustee under certain insurance policies relating to the Contracts, the related lessees or the Leased Vehicles, (C) the right to receive the proceeds of any Dealer repurchase obligations in respect of the Contracts or Leased Vehicles, and (D) all proceeds of the foregoing. During the Revolving Period, Principal Collections and reimbursement of Loss Amounts will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles which will become SUBI Assets at the time of such reinvestment. Pursuant to the SUBI Supplement, on the Closing Date the Titling Trustee will issue the SUBI Certificate, which will evidence the SUBI, to the Transferor, and the Transferor will transfer and assign the SUBI Certificate to the Trustee pursuant to the Agreement. THE TITLING TRUST GENERAL The Titling Trust is a Delaware business trust formed pursuant to the Titling Trust Agreement. The primary business purpose of the Titling Trust is to take assignments of and serve as holder of title to substantially all of the lease contracts and the related leased vehicles originated by the Dealers beginning on dates prior to the execution of the SUBI Supplement. Pursuant to the Servicing Agreement, TMCC will service the lease contracts included in the Titling Trust Assets, including the Contracts. SEE "Additional Document Provisions--The Trust Agreement" and "--The Servicing Agreement" and "Certain Legal Aspects of the Titling Trust--The Titling Trust". Except as otherwise described under "Additional Document Provisions--The Titling Trust Agreement", pursuant to the Titling Trust Agreement the Titling Trust has not and will not (i) issue interests 28 therein or securities thereof other than the SUBI, the SUBI Certificate, Other SUBIs representing divided interests in Other SUBI Assets and certificates (the "Other SUBI Certificates") representing Other SUBIs or portions thereof, and one or more certificates (the "UTI Certificates") representing the UTI or portions thereof; (ii) borrow money (except from TMCC or as described in (vi) below) in connection with funds used to acquire lease contracts and the related leased vehicles; (iii) make loans; (iv) invest in or underwrite securities, other than Permitted Investments or as otherwise permitted by the Titling Trust Agreement or the SUBI Supplement; (v) offer securities in exchange for property (other than the SUBI Certificate, the Other SUBI Certificates and the UTI Certificates); or (vi) repurchase or otherwise reacquire its securities except in connection with financing or refinancing the acquisition of lease contracts and the related leased vehicles or as otherwise permitted by each such financing or refinancing. The Titling Trust will not be permitted to acquire lease contracts other than through the Dealers. The Titling Trust Agreement will permit the Titling Trust, in the course of its activities, to incur certain liabilities relating to its assets other than the SUBI Assets, or relating to its assets generally, and to which, in certain circumstances, the SUBI Assets may be subject. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations", "-- Allocation of Titling Trust Liabilities" and "--Third-Party Liens on SUBI Assets". However, the Titling Trust Agreement will require the holders of Other SUBI Certificates and UTI Certificates to waive any claim that they might otherwise have with respect to the SUBI Assets and to fully subordinate any claims to the SUBI Assets in the event that this waiver is not given effect. Similarly, by virtue of holding Certificates or a beneficial interest in the Certificates, Certificateholders and Certificate Owners will be deemed to have waived any claim that they might otherwise have with respect to Other SUBI Assets and the UTI Assets and to subordinate their interests therein. ALLOCATION OF TITLING TRUST LIABILITIES The Titling Trust Assets may be comprised of several portfolios of assets other than the SUBI Assets, including portfolios of Other SUBI Assets and the remaining portfolio of UTI Assets. The Titling Trust Agreement permits the Titling Trust, in the course of its activities, to incur certain liabilities relating to its assets other than the SUBI Assets, or relating to its assets generally, and to which, in certain circumstances, the SUBI Assets may be subject. Pursuant to the Titling Trust Agreement, as among the beneficiaries of the Titling Trust, liabilities relating to a particular Titling Trust Asset will be allocated to and charged against the allocated portfolio of Titling Trust Assets to which it belongs. Titling Trust liabilities that are incurred with respect to the Titling Trust Assets generally will be borne pro rata among all portfolios of Titling Trust Assets in proportion to the value of the lease contracts and vehicles in each portfolio. The Titling Trustee and the beneficiaries of the Titling Trust (including the Trustee and the Certificateholders) will be bound by this allocation. In particular, the Titling Trust Agreement will require the holders from time to time of Other SUBI Certificates and any UTI Certificates to waive any claim that they might otherwise have with respect to the SUBI Assets and to fully subordinate any claims to the SUBI Assets in the event that this waiver is not given effect. Similarly, by virtue of holding Certificates or a beneficial interest in the Certificates, Certificateholders and Certificate Owners will be bound by this allocation. Similarly, by virtue of holding Certificates or a beneficial interest in the Certificates, Certificateholders and Certificate Owners will be deemed to have waived any claim that they might otherwise have with respect to Other SUBI Assets and the UTI Assets. THE TITLING TRUSTEE The Titling Trustee is a wholly owned, special purpose subsidiary of U.S. Bank that was organized in 1996 solely for the purpose of acting as Titling Trustee. U.S. Bank, as Trust Agent, serves as agent for the Titling Trustee to perform certain functions of the Titling Trustee pursuant to the Titling Trust Agreement. The Titling Trust Agreement provides that in the event that U.S. Bank no longer can be the Trust Agent, a designee of TMCC (which may not be TMCC or any affiliate thereof) will have the option to purchase the stock of the Titling Trustee for a nominal amount. If TMCC's designee does not timely exercise this option, then the Titling Trustee will appoint a new trust agent, and that new trust agent (or its designee) will next 29 have the option to purchase the stock of the Titling Trustee. If none of these options is timely exercised, U.S. Bank may sell the stock of the Titling Trustee to another party. PROPERTY OF THE TITLING TRUST The property of the Titling Trust consists of (i) fixed rate retail closed-end lease contracts originated in the Trust States and assigned to the Titling Trust by the Dealers since November 1996, all rights thereunder including the right to receive proceeds of Dealer repurchase obligations under the related Dealer agreement, and all monies due from lessees thereunder; (ii) the automobiles and light duty trucks leased pursuant thereto and all proceeds thereof; (iii) the rights to proceeds from physical damage, credit life, disability and all other insurance policies, if any, covering the lease contracts, the related lessees or the leased vehicles, including, but not limited to, the Contingent and Excess Liability Insurance Policies; (v) all security deposits with respect to such lease contracts (to the extent applied to cover excess wear and tear charges or treated as Liquidation Proceeds as described herein and as provided in the contracts), and (vi) all proceeds of the foregoing (collectively, the "Titling Trust Assets"). From time to time after the date of this Prospectus, TMCC will cause Dealers to originate additional retail closed-end lease contracts and assign them to the Titling Trust and, as described below, title the related leased vehicles in the name of the Titling Trust. CONTRACT ORIGINATION; TITLING OF LEASED VEHICLES All lease contracts originated by the Dealers and assigned to the Titling Trust have been, or will be, underwritten by TMCC personnel using the underwriting criteria described under "TMCC--Lease Contract Underwriting Procedures". In connection with the origination of each lease contract, the Titling Trust will be listed as the owner of the related leased vehicle on the related certificate of title. Liens will not be placed on such certificates of title, and new certificates of title will not be issued, to reflect the interest of the Trustee, as holder of the SUBI Certificate, in the Leased Vehicles. Pursuant to agreements between the Titling Trust and the Dealers, each Dealer is obligated, after origination of lease contracts of the Titling Trust, to repurchase such lease contracts which do not meet certain representations and warranties made by such Dealer. These representations and warranties relate primarily to the origination of the lease contracts and the titling of the related leased vehicles, and do not typically relate to the creditworthiness of the related lessees or the collectibility of such lease contracts. The Dealer agreements do not generally provide for recourse to the Dealer for unpaid amounts in respect of a defaulted lease contract, other than in connection with the breach of such representations and warranties. The rights of the Titling Trust to receive proceeds of such Dealer repurchase obligations will constitute Titling Trust Assets (and SUBI Assets, to the extent they relate to the Contracts and Leased Vehicles), although the related Dealer agreements will not constitute Titling Trust Assets. USE OF PROCEEDS The net proceeds from the sale of the Class A Certificates (i.e., the proceeds of the public offering of the Class A Certificates minus expenses relating thereto) will be applied by the Transferor to purchase the SUBI Certificate and to make the Initial Deposit into the Reserve Fund. THE TRANSFEROR The Transferor is a wholly owned, special purpose finance subsidiary of TMCC and was incorporated under the laws of California in April 1997. TMCC may not transfer its ownership interest in the Transferor except to an affiliate of TMCC so long as any financings involving interests in the Titling Trust (including the transaction described herein) are outstanding. TMCC is the sole shareholder of the Transferor. The principal office of the Transferor is located at 19001 South Western Avenue, Torrance, California 90509 and its telephone number is (310) 787-1310. 30 The Transferor was organized solely for the purpose of acquiring interests in the SUBI and the Other SUBIs, causing the issuance of certificates similar to the Certificates and engaging in related transactions. The certificate of incorporation of the Transferor limits its activities to the foregoing purposes and to any activities incidental to and necessary for such purposes. TMCC Toyota Motor Credit Corporation ("TMCC") was incorporated in California on October 4, 1982, and commenced operations in May 1983. At December 31, 1996, TMCC had 34 branches in various locations in the United States and one branch in the Commonwealth of Puerto Rico. In addition to the Transferor, TMCC has four wholly owned subsidiaries engaged in the insurance business, a wholly owned subsidiary that provides retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle dealers and their customers in Puerto Rico and a wholly owned subsidiary through which TMCC securitizes retail installment sales contracts. TMCC's primary business is providing retail leasing, retail and wholesale financing and certain other financial services to authorized Toyota and Lexus vehicle and Toyota industrial equipment dealers and their customers in the United States (excluding Hawaii) and Puerto Rico. TMCC is a wholly owned subsidiary of TMS, which is primarily engaged in the wholesale distribution of automobiles, light duty trucks, industrial equipment and related replacement parts and accessories throughout the United States (excluding Hawaii). Substantially all of TMS's products are either manufactured by its affiliates or are purchased from TMC or its affiliates. As of September 30, 1996, September 30, 1995 and September 30, 1994, TMCC had approximately 624,000, 438,000 and 387,000 retail lease contracts outstanding (including retail lease contracts that were assigned to the Titling Trust and are still being serviced by TMCC), respectively. Aggregate net outstanding principal balances of retail lease contracts at such dates, were approximately $12.0 billion, $9.4 billion and $7.6 billion, respectively. The principal executive offices of TMCC are located at 19001 South Western Avenue, Torrance, California and its telephone number is (310) 787-1310. TMCC'S LEASING OPERATIONS LEASE CONTRACT UNDERWRITING PROCEDURES TMCC's underwriting standards are intended to evaluate a prospective lessee's credit standing and ability to make payments. Each prospective lessee is required by the Dealer to complete a credit application on a form prepared or approved by TMCC. As part of the description of the applicant's financial condition, the applicant is required to provide information demonstrating, among other things, employment history, residential status, bank account information, annual income and credit references. The Dealer then transmits the completed application to the appropriate branch office. Upon receipt, income and employment data generally are verified by a credit investigator within the branch office and certain data is obtained through an independent credit bureau report that is combined with data from the application and certain calculations made by a credit analyst within the branch office. Such data is entered into a centralized computer network (owned and maintained by TMCC) and weighted by a statistically validated credit scoring process which "scores" the application with the use of a scorecard. The scorecard enables TMCC to review an application and establish the probability that the proposed lease contract will be paid in accordance with its terms. The credit scores rank-order applications according to credit risk, which is the likelihood that the lessee will make all payments when due. TMCC actively monitors and regulates the volume of lease contracts that it acquires of any given credit grade in its efforts to maintain a portfolio it deems to contain an appropriate mix. 31 INSURANCE Each lease contract requires the lessee to maintain automobile bodily injury and property damage liability insurance which must name TMCC or, with respect to the Contracts, the Titling Trust, as an additional insured. Each lease contract further requires the lessee to maintain (all risks) comprehensive and collision insurance covering damage to the leased vehicle and naming TMCC or, with respect to the Contracts, the Titling Trust, as loss payee. COLLECTION, REPOSSESSION AND DISPOSITION PROCEDURES Collection efforts are performed through the applicable branch office. TMCC considers a lease to be past due when a borrower fails to make at least 90% of a scheduled monthly payment by the due date. TMCC automatically reviews all past due accounts for action every three working days. The account is placed in an on-line collection system for branch office follow up (prioritized by degree of delinquency) if payment is not received by the date such payment is 26 days past due. Occasionally, situations occur in the collection process when a lessee has become delinquent and is willing but unable to bring the related account current (i.e., where a deferred payment is deemed reasonably likely to be followed by subsequent performance). In this situation, at the discretion of collection department management, but subject to extensive guidelines, one or more payments under the lease contract may be deferred, provided that the lessee pays a deferral fee (each, a "Deferral Fee"). Deferral Fees relating to the Contracts will not be deposited into the SUBI Collection Account, but will be treated as additional servicing compensation. The Servicing Agreement will provide that a Contract may not be deferred more than four times in the aggregate, and that the Servicer will be required to make Advances with respect to the related Contracts as set forth herein. Deferral of payments has the practical effect of extending the maturity date of a lease contract. The Servicing Agreement will provide that Advances be made with respect to Contracts as to which payments are deferred to the extent such deferrals would diminish the amount of Collections received in connection therewith relative to the originally scheduled Monthly Payments. The Servicing Agreement will also provide for the reallocation to the UTI from the SUBI (accompanied by an appropriate Reallocation Payment by TMCC) of each Contract as to which more than four deferrals are made or as to which, through deferrals or extensions, the maturity date is extended beyond the last day of the Collection Period relating to the Stated Maturity Date in respect of the Class B Certificates. Upon any such reallocation, such Contract and the related Leased Vehicle and other related assets and rights will be UTI Assets and will no longer constitute SUBI Assets. SEE "Additional Document Provisions--The Servicing Agreement--Collections". Occasionally a lessee requests an extension of a lease contract for one or more months during the period of time between the original specified maturity of such lease and the time such lessee negotiates a new lease contract or sales contract with respect to a different vehicle. Any such extension is effected by the modification of the related lease contract to provide for an additional number of Monthly Payments with a continuation of the appropriate lease charge and a corresponding reduction in the related Residual Value to reflect receipt of additional amortizing payments. The Servicing Agreement will require that Contracts not be extended by more than twelve months in the aggregate or to a date later than the last day of the month immediately preceding the month in which the Stated Maturity Date in respect of the Class B Certificates occurs. Generally, TMCC collectors make every effort to preserve a lease as a performing lease. However, if a delinquency cannot be satisfactorily resolved through deferrals or otherwise, the decision to repossess a leased vehicle will be made before a payment is more than 60 days past due. Lessees are typically notified on the day of or within two days after repossession of any right they may have under applicable state law to redeem their vehicles. TMCC attempts to sell all repossessed vehicles within 30 days of repossession. TMCC disposes of off-lease and repossessed vehicles not purchased by the related lessee or the dealer to whom the vehicle is returned through regional automobile auctions. 32 DELINQUENCY, REPOSSESSION AND LOSS DATA The following tables set forth certain delinquency, repossession and loss data with respect to TMCC's entire retail automobile and light duty truck lease contract portfolio, including those Contracts originated in the Trust States during the periods shown, as of and for the periods shown. The data presented in the following tables are for illustrative purposes only. Delinquency, repossession and loss experience may be influenced by a variety of economic, social, geographic and other factors. There is no assurance that the Trust's delinquency, repossession and loss experience with respect to its retail automobile and light duty truck lease contracts and the related leased vehicles in the future, or the experience with respect to the Contracts and the Leased Vehicles, will be similar to that set forth below. ENTIRE PORTFOLIO RETAIL VEHICLE LEASE CONTRACT DELINQUENCY EXPERIENCE (DOLLARS IN THOUSANDS)
AT OR FOR THE NINE MONTHS ENDED AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30, -------------------------- ----------------------------------------------------------------------- JUNE 30, 1997 1996 1995 1994 -------------------------- ----------------------- ---------------------- ---------------------- UNITS % UNITS % UNITS % UNITS % --------------- --------- ------------ --------- ----------- --------- ----------- --------- Dollar Amount of Lease Contracts(1)............. $ 12,579,533 100.0% $ 12,358,716 100.0% $ 9,692,671 100.0% $ 7,934,817 100.0% Ending Number of Lease Contracts................ 637,966 100.0% 624,184 100.0% 483,178 100.0% 387,066 100.0% Number of Delinquent Lease Contracts(2)(3) 0-59 Days................ 7,870 1.23% 7,000 1.12% 3,865 0.80% 1,880 0.49% 60-89 Days............... 635 0.10% 497 0.08% 199 0.04% 113 0.03% 90 Days or More.......... 182 0.03% 134 0.02% 66 0.01% 41 0.01% --------------- --------- ------------ --------- ----------- --------- ----------- --------- TOTAL.................. 8,687 1.36% 7,631 1.22% 4,130 0.85% 2,034 0.53% --------------- --------- ------------ --------- ----------- --------- ----------- --------- --------------- --------- ------------ --------- ----------- --------- ----------- --------- 1993 1992 ---------------------- ---------------------- UNITS % UNITS % ----------- --------- ----------- --------- Dollar Amount of Lease Contracts(1)............. $ 5,017,258 100.0% $ 3,542,506 100.0% Ending Number of Lease Contracts................ 243,742 100.0% 173,667 100.0% Number of Delinquent Lease Contracts(2)(3) 0-59 Days................ 1,238 0.51% 883 0.51% 60-89 Days............... 75 0.03% 78 0.04% 90 Days or More.......... 29 0.01% 20 0.01% ----------- --------- ----------- --------- TOTAL.................. 1,342 0.55% 981 0.56% ----------- --------- ----------- --------- ----------- --------- ----------- ---------
- ------------------------------ (1) Based on the sum of all principal amounts outstanding under finance lease contracts and net investment in leased assets under operating lease contracts originated by TMCC in the United States (inclusive of the residual values of the related leased vehicles). (2) Excludes lease contracts the related lessees of which are bankrupt or have commenced bankruptcy proceedings. As of July 24, 1997, approximately 184 lease contracts involving bankrupt lessees were delinquent for at least 60 days. (3) The period of delinquency is based on the number of days payments are contractually past due. 33 ENTIRE PORTFOLIO RETAIL VEHICLE LEASE CONTRACT REPOSSESSION AND LOSS EXPERIENCE (DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
AT OR FOR THE NINE MONTHS ENDED AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30, ------------------------------------------------------ 1997 1996 1995 1994 1993 1992 ------------ ---------- --------- --------- --------- --------- Ending Number of Lease Contracts Outstanding......................... 637,966 624,184 483,178 387,066 243,742 173,667 Average Number of Lease Contracts Outstanding......................... 631,075 553,681 435,122 315,404 208,705 146,092 Repossessions: Number of Repossessions............. 8,968 8,440 6,149 3,758 3,236 2,683 Number of Repossessions as a Percentage of Lease Contracts Outstanding....................... 1.87%(4) 1.35% 1.27% 0.97% 1.33% 1.54% Number of Repossessions as a Percentage of Average Lease Contracts Outstanding............... 1.89%(4) 1.52% 1.41% 1.19% 1.55% 1.84% Losses: Dollar Amount of Net Receivables Outstanding(1).................... $12,579,533 $12,023,192 $9,382,655 $7,597,071 $4,616,064 $3,145,687 Average Dollar Amount of Net Receivables Outstanding(2)........ $12,301,363 $10,702,924 $8,489,863 $6,106,568 $3,880,876 $2,515,159 Net Repossession Losses(3).......... $ 41,246 $ 34,389 $ 23,592 $ 13,103 $ 11,132 $ 10,118 Average Net Repossession Loss per Liquidated Contract(1)(4)......... $ 4,599 $ 4,075 $ 3,837 $ 3,487 $ 3,440 $ 3,771 Net Repossession Losses as a Percentage of Average Net Receivables Outstanding(2)........ 0.45%(5) 0.32% 0.28% 0.21% 0.29% 0.40%
- ------------------------------ (1) Based on the sum of all principal amounts outstanding under finance lease contracts and net investment in leased assets under operating lease contracts originated by TMCC in the United States (inclusive of the residual values of the related leased vehicles) as of period end. (2) Average Net Receivables Outstanding is calculated as the average of the sum of all principal amounts outstanding under finance lease contracts and net investment in operating leases as of the beginning and the end of the indicated period. (3) Losses include expenses incurred to dispose of vehicles. (4) Dollars not in thousands. (5) Annualized. ENTIRE PORTFOLIO RESIDUAL VALUE LOSS EXPERIENCE(1) (DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
AT OR FOR THE NINE MONTHS ENDED AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30, JUNE 30, ----------------------------------------------------- 1997 1996 1995 1994 1993 1992 ------------ --------- --------- --------- --------- --------- Total Number of Leased Vehicles Scheduled to Terminate.......................................... 180,643 95,401 54,258 34,298 27,762 13,785 Number of Leased Vehicles Returned to TMCC........... 28,900 13,162 5,787 3,950 4,086 2,229 Full Term Ratio(2)................................... 16.0% 13.8% 10.7% 11.5% 14.7% 16.2% Total Losses on Vehicles that Reached Scheduled Term(3)............................................ $ 53,461 $ 29,368 $ 9,492 $ 2,005 $ 2,137 $ 1,526 Average Loss Per Returned Unit(4).................... $ 1,850 $ 2,231 $ 1,640 $ 508 $ 523 $ 685
- ------------------------------ (1) Because the terms of the retail closed-end lease contracts originated by TMCC have gradually shifted from five years to three years since 1991, the residual value loss experience for the periods in the table may not be fully comparable. (2) The ratio of line 2 over line 1 expressed as a percentage. (3) Losses include expenses incurred to dispose of vehicles. (4) Dollars not in thousands. 34 THE CONTRACTS GENERAL The Initial Contracts will consist of a pool of 56,340 closed-end retail lease contracts, having an aggregate Outstanding Principal Balance as of the Cutoff Date of $1,287,004,969.02, and an aggregate Discounted Principal Balance as of such date of $1,231,231,519.20, selected from the Titling Trust's portfolio of retail closed-end automobile and light duty truck lease contracts. During the Revolving Period, Principal Collections (and reimbursements of Loss Amounts) will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles, which at the time of such reinvestment will become SUBI Assets. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Revolving Period". The Initial Contracts were, and the Subsequent Contracts will be, originated by the Dealers in the Trust States and assigned to the Titling Trust in accordance with TMCC's underwriting procedures and underwriting criteria. The Initial Contracts have been selected, and the Subsequent Contracts will be selected, based upon the criteria specified in the Titling Trust Agreement and SUBI Supplement. SEE "The Contracts--Characteristics of the Contracts--General" and "--Representations, Warranties and Covenants". Subsequent Contracts may be originated by TMCC using different underwriting criteria than those which were applied to the Initial Contracts (but which criteria will be those that TMCC then applies to the origination of lease contracts for its own account) which may cause the characteristics of the Subsequent Contracts to vary from those of the Initial Contracts, and will be selected from among Titling Trust Assets not allocated or reserved for allocation to any Other SUBI. Principal Collections (and reimbursements of Loss Amounts) will first be reinvested in the eligible lease contract with the earliest origination date, then with the eligible lease contract with the next earliest origination date and so forth. To the extent that reinvestment of such amounts from the SUBI are being made out of the Titling Trust's general pool of available lease contracts at any time after the creation of one or more Other SUBIs, such reinvestment will first be made with respect to the SUBI. TMCC will represent and warrant that no adverse selection procedures were employed or will be employed in selecting the Initial Contracts or the Subsequent Contracts for inclusion in the SUBI Assets and that it is not aware of any bias in the selection of such Contracts that would cause the delinquencies or losses on such Contracts to be worse than other retail closed-end automobile and light duty truck lease contracts held in the Titling Trust's portfolio, although there can be no assurance in this regard. Each Contract will have been written for an original term of not more than 60 months, and will have been written for a "capitalized cost" (which may exceed the manufacturer's suggested retail price), plus a lease charge which is based on the imputed Lease Rate. Each Contract will provide for equal monthly payments that when allocated between principal and the lease charge at the Lease Rate on a constant yield basis, will be sufficient to amortize the capitalized cost over the term of the lease to an amount equal to the Residual Value. Each Residual Value is established at the origination of the lease (based on documentation provided to the Dealers by TMCC) and represents the estimated wholesale market value at the end of the lease term. At the times of origination of the related Contracts, the Leased Vehicles were, in the case of the Initial Contracts, or will be, in the case of the Subsequent Contracts, new vehicles, including dealer demonstrator vehicles driven fewer than 20,000 miles, or used vehicles up to four model years old at the time of origination of the related Contract, including certified used vehicles and vehicles previously sold under manufacturer's programs. Certified used vehicles are Toyota or Lexus vehicles that are purchased by dealers, reconditioned and certified to meet certain Toyota/Lexus required standards and sold or leased with an extended warranty from the manufacturer. Manufacturer's program vehicles are Toyota or Lexus vehicles that have been sold to rental car companies, repurchased by the manufacturer and subsequently purchased by the dealer to sell or lease as current year and one year old used vehicles with 20,000 miles or less. Although there will be no limit on the number of used Leased Vehicles included as SUBI Assets, TMCC will represent and warrant that no adverse selection procedures were employed or will be employed in selecting the Initial Contracts or the Subsequent Contracts for inclusion in the SUBI Assets and that it is 35 not aware of any bias in the selection of such Contracts that would cause the delinquencies or losses on such Contracts to be worse than other retail closed-end automobile and light duty truck lease contracts held in the Titling Trust's portfolio, although there can be no assurance in this regard. All of the Contracts will be closed-end leases. Under a "closed-end lease", at the end of its term, if the lessee does not elect to purchase the related leased vehicle by exercise of the purchase option contained in such lease contract, the lessee is required to return the leased vehicle to or upon the order of the lessor, at which time the lessee will then owe only incidental charges for excess mileage, excessive wear and use and other items as may be due under such lease. In contrast, under an "open-end lease", the lessee is also obligated to pay at the end of the lease term any deficit between the fair market value of the leased vehicle at that time and the residual value established at the time of origination of such lease. Each lessee will be permitted to purchase the Leased Vehicle at the end of the term of the related Contract. The purchase price will be a fixed dollar amount equal to the Residual Value plus any applicable taxes and all other incidental charges which may be due under the Contract. In addition, each Contract will allow the related lessee voluntarily to terminate such Contract by paying certain miscellaneous charges and the Payoff Amount described below. Each Contract will provide that the lessor may terminate such Contract and repossess the Leased Vehicle in the event of a default by the lessee. Events of default under the Contracts will include, but will not be limited to, failure to make payment when due, certain events of bankruptcy or insolvency, failure to maintain the insurance required by the Contract, failure to maintain or repair the Leased Vehicle as required or to comply with any other term or condition of the Contract and the making of a material misrepresentation by the lessee in the lease application. TMCC regularly tracks lessees' compliance with their payment obligations and monitors the related leases for noncompliance. SEE "TMCC--Insurance" and "--Collection, Repossession and Disposition Procedures". In the forms of contract used to originate Contracts, upon termination at or before maturity where the lessee is not in default and does not exercise its option to purchase the Leased Vehicle, the amount owed by the lessee (the "Payoff Amount") will be determined by adding (i) unpaid Monthly Payments and any incidental charges owing under the Contract, less unearned lease charges and (ii) the Residual Value, subtracting the "Realized Value" (as described below), from the sale or other disposition of the related Leased Vehicle and applying the Security Deposit, if any, to reduce any deficiency. In calculating the amount of unearned lease charges under clause (i) above, the Contracts will provide that the constant yield method will be used, in which lease charges are earned on a daily basis through the payment date immediately following the date of early termination. If, instead, there is an early termination and the lessee is in default, the amount owed by a lessee in default will be determined by adding (i) the Payoff Amount, (ii) payments accrued under the Contract through the date of termination, (iii) collection, repossession, storage, preparation and sale expenses and (iv) attorneys' fees and disbursements incurred after default. The "Realized Value" of a Leased Vehicle is the actual wholesale price or the wholesale price otherwise determined by TMCC in a commercially reasonable manner. However, each Contract provides that the lessee has the right to obtain from an independent third party acceptable to the lessor a professional appraisal of the wholesale value of the Leased Vehicle that could be realized at sale. This appraised value then would be used as the wholesale value for purposes of calculating sums due from the lessee. In the event of early termination of a Contract where the lessee is in default, the amounts collected with respect to such Contract and the related Leased Vehicle (after deducting the costs and other sums retained by the Servicer in connection therewith) may be less than the Outstanding Principal Balance (and therefore less than the outstanding Discounted Principal Balance) of such Contract. In the event that a Contract reaches the date on which the last Monthly Payment is due, as such date may have been extended (the "Maturity Date"), but the related Leased Vehicle cannot be sold or otherwise disposed of for a net amount at least equal to its Residual Value, there may be an additional shortfall in amounts otherwise 36 expected to be received in respect of the SUBI. In the event that any such shortfalls allocable to the Certificates are not covered by the Investor Percentage of certain excess Interest Collections, available monies on deposit in the Reserve Fund available therefor, Net Insurance Proceeds or Net Liquidation Proceeds, amounts otherwise payable to the Transferor in respect of the Transferor Interest (or as Excess Amounts) and the subordination of amounts otherwise payable to the Class B Certificateholders, in each case to the extent described herein, investors in the Class A Certificates could suffer a loss on their investments. CHARACTERISTICS OF THE CONTRACTS GENERAL The Initial Contracts were, and the Subsequent Contracts will be, selected by reference to several criteria, including, as of the related Cutoff Date, that each Contract (i) is written with respect to a Leased Vehicle that was at the time of the origination of the related lease contract a new or used vehicle, (ii) was originated in the United States, after October 31, 1996 in the case of the Initial Contracts, and on or before October 1, 1998 in the case of the Subsequent Contracts; (iii) has a Maturity Date on or after January 1, 1998 and no later than July 31, 2002 in the case of the Initial Contracts, and no later than October 1, 2003 in the case of the Subsequent Contracts; (iv) fully amortizes to an amount equal to the Residual Value of the related Leased Vehicle based on a fixed Lease Rate calculated on a constant yield basis and provides for level payments over its term (except for payment of the Residual Value); (v) was not more than 60 days past due as of the Cutoff Date or the related Transfer Date, as the case may be; and (vi) has not been deferred more than four times or extended by more than twelve months in the aggregate. 37 COMPOSITION OF INITIAL CONTRACTS Aggregate Outstanding Principal Balance as of Cutoff Date........... $1,287,004,969.02 Aggregate Discounted Principal Balance as of Cutoff Date............ $1,231,231,519.20 Aggregate Net Investment Value as of Cutoff Date.................... $1,231,231,519.20 Number of Initial Contracts......................................... 56,340 Average Outstanding Principal Balance as of Cutoff Date(2).......... $22,843.54 Average Discounted Principal Balance as of Cutoff Date.............. $21,853.59 $8,339.00 to Range of Original Principal Balances of Initial Contracts(2)........ $69,476.03 Weighted Average Lease Rate(1)...................................... 7.655% Range of Lease Rates(2)............................................. 0.254% to 13.653% Weighted Average Original Number of Monthly Payments(1)............. 39.8 months Range of Original Number of Monthly Payments........................ 12 months to 60 months Weighted Average Remaining Number of Monthly Payments(1)............ 35.8 months Range of Remaining Number of Monthly Payments....................... 5 months to 59 months Average Original Residual Value(2).................................. $15,155.98 $1,277.25 to Range of Original Residual Values(2)................................ $42,382.00 Aggregate of Residual Values as a Percentage of Aggregate Net Investment Value as of Cutoff Date................................ 69.35% Percentage of Lease Contracts for Lexus Vehicles (by Discounted Principal Balance as of the Cutoff Date).......................... 20.52% Percentage of Lease Contracts for Toyota Vehicles (by Discounted Principal Balance as of the Cutoff Date).......................... 79.48% Percentage of Lease Contracts for New Vehicles (by Outstanding Principal Balance)(2)............................................. 96.95% Percentage of Lease Contracts for Used Vehicles (by Outstanding Principal Balance)(2)............................................. 3.05%
- ------------------------ (1) Weighted by Outstanding Principal Balance as of the Cutoff Date. (2) Without giving effect to discounting for calculation of Discounted Principal Balances. INITIAL CONTRACTS
AVERAGE MINIMUM MAXIMUM ------------- ------------ ------------- Original Principal Balance........................................... $ 23,608.29 $ 8,339.00 $ 69,476.03 Outstanding Principal Balance(1)..................................... $ 22,843.54 $ 8,157.24 $ 66,296.80 Residual Value(1)(2)................................................. $ 15,155.98 $ 1,277.25 $ 42,382.00 Lease Rate(1)(2)..................................................... 7.655% 0.254% 13.653% Seasoning (months)(1)(3)............................................. 3.96 0 9 Remaining Term (months)(1)(3)........................................ 35.79 5 59
- ------------------------ (1) As of the Cutoff Date. (2) Without giving effect to discounting for calculation of Discounted Principal Balances. (3) Weighted by Outstanding Principal Balance as of the Cutoff Date. 38 DISTRIBUTION OF THE INITIAL CONTRACTS BY LEASE RATE The distribution of the Initial Contracts as of the Cutoff Date by Lease Rate was as follows:
PERCENTAGE OF PERCENTAGE OF AGGREGATE NUMBER OF NUMBER OF INITIAL CUTOFF DATE CUTOFF DATE INITIAL INITIAL OUTSTANDING OUTSTANDING LEASE RATE RANGE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE - ------------------------------------------ ------------ --------------- ------------------- ----------------- less than 2.00%........................... 21 0.04% $ 732,294.45 0.06% 2.00% to 2.99%............................ 189 0.34 4,652,479.21 0.36 3.00% to 3.99%............................ 735 1.30 20,041,121.32 1.56 4.00% to 4.99%............................ 3,792 6.73 66,575,084.03 5.17 5.00% to 5.99%............................ 6,036 10.71 132,994,786.81 10.33 6.00% to 6.99%............................ 1,880 3.34 50,446,770.99 3.92 7.00% to 7.99%............................ 12,621 22.40 329,367,995.06 25.59 8.00% to 8.99%............................ 27,744 49.24 607,537,073.77 47.21 9.00% to 9.99%............................ 1,432 2.54 32,998,762.77 2.56 10.00% to 10.99%.......................... 750 1.33 16,878,442.99 1.31 11.00% to 11.99%.......................... 451 0.80 10,114,477.40 0.79 12.00% to 12.99%.......................... 387 0.69 8,189,007.78 0.64 13.00% to 13.99%.......................... 302 0.54 6,476,672.44 0.50 ------------ ------ ------------------- ------ Total................................. 56,340 100.00% $ 1,287,004,969.02 100.00% ------------ ------ ------------------- ------ ------------ ------ ------------------- ------
DISTRIBUTION OF THE INITIAL CONTRACTS BY MATURITY The distribution of the Initial Contracts as of the Cutoff Date by year of maturity was as follows:
PERCENTAGE OF PERCENTAGE OF AGGREGATE CUTOFF NUMBER OF NUMBER OF CUTOFF DATE DATE INITIAL INITIAL OUTSTANDING OUTSTANDING YEARS OF MATURITY CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------------------------------------- ----------- --------------- ------------------- ----------------- 1998........................................ 323 0.57% $ 6,136,293.06 0.48% 1999........................................ 9,145 16.23 178,137,161.35 13.84 2000........................................ 33,927 60.22 778,534,934.93 60.49 2001........................................ 5,073 9.00 129,203,254.65 10.04 2002........................................ 7,872 13.97 194,993,325.03 15.15 ----------- ------ ------------------- ------ Total(1)................................ 56,340 100.00% $ 1,287,004,969.02 100.00% ----------- ------ ------------------- ------ ----------- ------ ------------------- ------
- ------------------------ (1) Percentages may not add to 100% due to rounding. 39 DISTRIBUTION OF THE INITIAL CONTRACTS BY STATE
PERCENTAGE OF PERCENTAGE OF NUMBER OF NUMBER OF CUTOFF DATE AGGREGATE CUTOFF INITIAL INITIAL OUTSTANDING DATE OUTSTANDING STATE OF ORIGINATION(1) CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE - -------------------------------------------- ----------- --------------- ------------------- ----------------- California.................................. 32,422 57.55% $ 751,267,173.73 58.37% Ohio........................................ 9,128 16.20 185,627,593.15 14.42 Pennsylvania................................ 6,874 12.20 145,319,401.76 11.29 Michigan.................................... 5,875 10.43 125,963,096.95 9.79 Florida..................................... 2,041 3.62 78,827,703.43 6.12 ----------- ------ ------------------- ------ Total(2)................................ 56,340 100.00% $ 1,287,004,969.02 100.00% ----------- ------ ------------------- ------ ----------- ------ ------------------- ------
- ------------------------ (1) by Dealer location. (2) Percentages may not add to 100% due to rounding. REPRESENTATIONS, WARRANTIES AND COVENANTS The Initial Contracts and Initial Leased Vehicles will be described in a schedule appearing as an exhibit to the SUBI Supplement, which schedule will be amended from time to time as Subsequent Contracts and Subsequent Leased Vehicles become SUBI Assets during the Revolving Period (collectively, the "Schedule of Contracts and Leased Vehicles"). The Schedule of Contracts and Leased Vehicles will identify each Contract by identification number, will identify each Leased Vehicle by its vehicle identification number and will set forth as to each such Contract, among other things, its: (i) date of origination; (ii) Maturity Date; (iii) Monthly Payment; (iv) original capitalized cost; (v) Outstanding Principal Balance and Discounted Principal Balance as of the related Cutoff Date; and (vi) Residual Value. In the Servicing Agreement, representations and warranties will be made with respect to each Contract and Leased Vehicle to the effect described under "The Contracts--Characteristics of the Contracts--General", and that, among other things, each such Contract, and, to the extent applicable, the related Leased Vehicle or lessee: (a) was originated by a Dealer located in the United States in the ordinary course of its business and in compliance with TMCC's normal credit and underwriting policies and practices; (b) is owned by the Titling Trust, free of all liens, encumbrances or rights of others; (c) was originated in compliance with, and complies with, all material applicable legal requirements; (d) all material consents, licenses, approvals or authorizations of, or registrations or declarations with, any governmental authority required to be obtained, effected or given by the originator of such Contract and the Titling Trustee in connection with (i) the origination of such Contract, (ii) the execution, delivery and performance by such originator of the Contract and (iii) the acquisition by the Titling Trust of such Contract and Leased Vehicle, have been duly obtained, effected or given and are in full force and effect as of such date of creation or acquisition; (e) is the legal, valid and binding obligation of the lessee; (f) to the knowledge of TMCC, is not subject to any right of rescission, setoff, counterclaim or any other defense of the related lessee to pay the Outstanding Principal Balance due under such Contract and no such right of rescission, setoff, counterclaim or other defense has been asserted or threatened; (g) the related Dealer, the Servicer and the Titling Trust have each satisfied all obligations required to be fulfilled on its part with respect thereto; (h) is payable solely in United States dollars in the United States; (i) the lessee thereunder is located in the United States and is not TMCC, the Transferor or any of their respective affiliates; (j) requires the lessee to maintain insurance against loss or damage to the related Leased Vehicle under an insurance policy that names the Titling Trust as loss payee; (k) the related certificate of title is registered in the name of the Titling Trust (or a properly completed application for such title has been submitted to the appropriate titling authority); (l) is a closed-end lease that requires equal monthly payments to be made within 60 months of the date of origination of such Contract; (m) is fully assignable and does not require the consent of the lessee as a condition to any transfer, sale or 40 assignment of the rights of the originator; (n) has a Residual Value that does not exceed an amount reasonably established by the Servicer consistent with its policies and practices; (o) has not been deferred more than four times or extended by more than twelve months in the aggregate or otherwise modified except in accordance with TMCC's normal credit and collection policies and practices; (p) is not an Other SUBI Asset; (q) to the knowledge of TMCC, the lessee thereunder is not bankrupt or currently the subject of a bankruptcy proceeding; (r) is not more than 60 days past due; (s) is a finance lease for accounting purposes; and (t) is a "true lease" for applicable state law purposes relating to the perfection of security interests. The Servicing Agreement will provide that the reinvestment of Principal Collections (and Loss Amounts otherwise reimbursable to Certificateholders) in Subsequent Contracts and Subsequent Leased Vehicles during the Revolving Period will be subject to the satisfaction of certain conditions precedent including, among other things, that after giving effect to such reinvestment, (i) each Subsequent Contract will be allocated as a SUBI Asset based upon its Discounted Principal Balance as of the relevant Transfer Date, (ii) the weighted average remaining term of the Contracts (including the Subsequent Contracts) is not greater than 39 months and (iii) the weighted average Residual Value of the Leased Vehicles relating to the Contracts (including the Subsequent Contracts), as a percentage of the aggregate Outstanding Principal Balance of the Contracts (including the Subsequent Contracts), in each case as of the related dates of origination, is not greater than 68%. The foregoing criteria may be changed without the consent of any Certificateholder if the Trustee receives notice from each Rating Agency to the effect that the use of such changed criteria will not result in the reduction, withdrawal or qualification of its then current rating of any Certificates. The Servicing Agreement will provide that upon the discovery by the Titling Trustee, TMCC, the Trustee or the Transferor of a breach of any representation, warranty or covenant referred to in the second preceding paragraph that materially and adversely affects the owners of interests in the SUBI or the Certificateholders in the related Contract or Leased Vehicle, which breach is not cured in all material respects within 60 days after TMCC discovers such breach or is given notice thereof, such Contract and Leased Vehicle (and the related SUBI Assets) will be reallocated to the UTI and TMCC will be required to deposit (or cause to be deposited) into the SUBI Collection Account an amount (the "Reallocation Payment") equal to the Discounted Principal Balance of such Contract as of the last day of the Collection Period during which the related cure period ended, plus an amount equal to any imputed lease charge on such Contract at the related Lease Rate that was delinquent as of the end of such Collection Period. The foregoing payment obligation will survive any termination of TMCC as Servicer under the Servicing Agreement. 41 MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS All of the Contracts will be prepayable, in whole or in part, at any time without penalty. The prepayment experience with respect to the Contracts will affect the weighted average lives of each Class of Certificates then outstanding if a Monthly Payment Event occurs, and will affect the weighted average life of any Class of Certificates as to which the related Class Certificate Balance is not reduced to zero on the related Targeted Maturity Date. In general, the rate of prepayments on the Contracts may be influenced by a variety of economic, social, geographic and other factors. The Titling Trust was formed and began to accept assignments of lease contracts in November 1996. All of the lease contracts assigned to the Titling Trust since that time have been, and all of the lease contracts to be assigned to the Titling Trust will be, assigned by Dealers using TMCC's underwriting standards. TMCC actively encourages lessees under lease contracts with remaining terms of less than one year to either buy, trade in or refinance the related leased vehicles prior to the related scheduled maturities of such lease contracts. TMCC estimates that, of the retail automobile and light duty truck lease contracts in its portfolio that were scheduled to mature during fiscal year 1996 or during the nine-month period ended June 30, 1997, approximately 52% and 49%, terminated prior to maturity, either because of voluntary prepayments or repossession of the leased vehicles due to default by the lessees under the related lease contracts. No assurance can be given that the Contracts will experience the same rate of prepayment or default or any greater or lesser rate than TMCC's historical rate, or that the Residual Value experience of Leased Vehicles related to Contracts that have reached their Maturity Dates will be the same as or higher or lower than from TMCC's historical residual value loss experience with respect to lease contracts in its portfolio. Moreover, there can be no assurance as to whether a Maturity Advance will be made or, if made, will be sufficient to reduce the Class Certificate Balance of any Class to zero on the related Targeted Maturity Date and, therefore, any Class may mature significantly later than its Targeted Maturity Date. The effective yield on, and weighted average life of, each Class of Certificates will depend upon, among other things, whether or not an Early Amortization Event occurs, whether or not a Monthly Payment Event occurs, whether or not a Maturity Advance sufficient to pay in full the related Class Certificate Balance on the related Targeted Maturity Date is made, the amount of scheduled and unscheduled payments on or in respect of the Contracts and the Leased Vehicles and the rate at which such payments are paid through to the Certificateholders pursuant to the payment priorities described herein. In the event of prepayments of the Contracts (including liquidations of the Contracts and payment of the Residual Value of the related Leased Vehicles) or payment of any Accelerated Principal Distribution Amount during the Amortization Period, Certificateholders who receive such amounts may not be able to reinvest the related payments of principal received on the Certificates at yields as high as the related Certificate Rate. Under such circumstances, the timing of changes in the rate of prepayments on the Contracts and payments in respect of the Leased Vehicles may also affect significantly an investor's actual yield to maturity and the weighted average life of the related Class of Certificates. In the event of a Monthly Payment Event, a substantial increase in the rate of payments on or in respect of the Contracts and Leased Vehicles during the Amortization Period may shorten the final maturity and weighted average lives of the Certificates. In the case of Certificates purchased at a discount to their principal amounts, a slower than anticipated rate of principal payments is likely to result in a lower than anticipated yield to the investor. In the case of Certificates purchased at a premium to their principal amounts, a faster than anticipated rate of principal payments is likely to result in a lower than anticipated yield to the investor. Additionally, although monies on deposit in the Accounts and Principal Collections (and reimbursed Loss Amounts) that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles during the Revolving Period will be invested in Permitted Investments, and all gain or other income from such investments will be available for making distributions on the Certificates, no assurance can be made as to the rate of return that will be realized on such Permitted Investments. Any reinvestment risk resulting 42 from the rate of prepayment of the Contracts (and payment of the Residual Value of the related Leased Vehicles) and the making of the foregoing investments will be borne by the Certificateholders. The Investor Percentage of Loss Amounts as to which no funds are available for reimbursement on any Monthly Allocation Date (I.E. Certificate Principal Loss Amounts) will be allocated first to the Class B Certificates and then among the Class A Certificateholders on a pro rata basis, based on the outstanding Class A Certificate Balances thereof as of the last day of the related Collection Period, and then reimbursed out of funds available therefor, if any, until the date on which the related Class Certificate Balance is reduced to zero in the amounts and order of priority described in "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections". In addition, the Investor Percentage of the net proceeds of any sale or other disposition of the SUBI, the SUBI Certificate and other property of the Trust, which may occur under certain circumstances involving an Insolvency Event with respect to the Transferor, to the extent constituting Principal Collections, will be distributed first, on a pro rata basis, to the Class A Certificateholders based on their respective Class Certificate Balances until the Class A Certificates have been paid in full, and second, to the Class B Certificateholders. CLASS A CERTIFICATE FACTORS AND TRADING INFORMATION; REPORTS TO CLASS A CERTIFICATEHOLDERS The "Certificate Factor" for each Class of Certificates will be a seven-digit decimal that the Servicer will compute each month indicating the related Class Certificate Balance, as the case may be, as of the close of business on the Monthly Allocation Date in such month as a fraction of the Initial Certificate Balance of the related Class of Class A Certificates. Each Certificate Factor will initially be 1.0000000 and will remain unchanged during the Revolving Period, except in certain limited circumstances where there are unreimbursed Certificate Principal Loss Amounts allocated to such Class, and during the Amortization Period until the related Targeted Maturity Date or the occurrence of a Monthly Payment Event, after which each Certificate Factor will decline to reflect reductions in the related Certificate Balance resulting from distributions of principal and such previously unreimbursed Certificate Principal Loss Amounts, if any. A Class A Certificateholder can determine the outstanding balance of the Certificate held thereby by multiplying the original denomination of the holder's Class A Certificate by the related Certificate Factor for such month. Pursuant to the Agreement, U.S. Bank, as Trustee, will provide to the Class A Certificateholders (which shall be Cede & Co. as the nominee of DTC unless Definitive Certificates are issued under the limited circumstances described herein) unaudited monthly reports concerning payments received on or in respect of the Contracts and the Leased Vehicles, the Aggregate Net Investment Value, the Investor Percentage, the Certificate Factors for each Class and various other items of information. Certificate Owners may obtain copies of such reports upon a request in writing to the Trustee. In addition, Class A Certificateholders during each calendar year will be furnished information for tax reporting purposes not later than the latest date permitted by law. SEE "Description of the Certificates--Statements to Certificateholders" and "--Book-Entry Registration". DESCRIPTION OF THE CERTIFICATES The Certificates will be issued pursuant to the Agreement which, together with the Titling Trust Agreement, the SUBI Supplement and the Servicing Supplement, has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The following summaries of material provisions of the foregoing documents as well as the summaries included elsewhere in this Prospectus do not purport to be complete and are subject to, and qualified in their entirety by reference to, the actual provisions of such documents. 43 GENERAL The Class A Certificates will be issued in minimum denominations of $1,000 and integral multiples thereof in book-entry form. The Class A Certificates will initially be represented by global certificates registered in the name of Cede & Co., the nominee of DTC. No Certificate Owner will be entitled to receive a certificate representing such owner's Certificate, except as set forth below. Unless and until Definitive Class A Certificates are issued under the limited circumstances described below, all references herein to distributions, notices, reports and statements to Class A Certificateholders will refer to the same actions made with respect to DTC or Cede & Co., as the case may be, for the benefit of Certificate Owners in accordance with DTC procedures. SEE "Description of the Certificates--Book-Entry Registration" and "--Definitive Certificates". Each Certificate will represent the right to receive semi-annual payments of interest at the related Interest Rate and, to the extent described herein, payments in respect of principal thereof during the Amortization Period funded from Available Interest, Principal Collections allocable to the SUBI, Accelerated Principal Distribution Amounts, amounts on deposit in the Reserve Fund available therefor, amounts otherwise payable to the Transferor in respect of the Transferor Interest and, in the case of the Class A Certificates, Class B Available Principal, in each case to the extent described herein. Distributions of interest and principal on the Class B Certificates will be subordinated to the right of the Class A Certificates to receive such payments to the extent provided herein. SEE "Description of the Certificates-- Allocations and Distributions on the Certificates". The Transferor will permanently retain the Transferor Interest, which will represent the interest in the Trust not represented by the Certificates, including the right to receive the Transferor Percentage of Interest Collections and Principal Collections. SEE "Description of the Certificates--Calculation of Investor Percentage and Transferor Percentage". The Transferor Interest will be subordinated to the Certificates to the extent described herein, and on any day will equal the difference between the Aggregate Net Investment Value and the Adjusted Certificate Balance. SEE "Description of the Certificates--Certain Payments to the Transferor". The Class Certificate Balances of the Certificates of each Class will remain constant, except to the extent there are unreimbursed Certificate Principal Loss Amounts or unreimbursed Class B Available Principal Amounts previously applied to fund interest shortfalls, Loss Amounts or Certificate Principal Loss Amounts with respect to the Class A Certificates, until the earlier of its Targeted Maturity Date or the occurrence, if any, of a Monthly Payment Event. However, during the Amortization Period, the Adjusted Certificate Balance will decline, to the extent described herein, as the Investor Percentage of Principal Collections allocable to the SUBI and Accelerated Principal Distribution Amounts are deposited into the Certificateholders' Account and the Certificate Balance and Adjusted Certificate Balance will decline as (a) Certificate Principal Loss Amounts are incurred and not reimbursed or (b) Class B Available Principal Amounts are applied to cover interest shortfalls, Loss Amounts and Certificate Principal Loss Amounts allocable to the Class A Certificates and not reimbursed. TRANSFER OF THE SUBI On the Closing Date, the Transferor will deliver the SUBI Certificate to the Trustee and transfer and assign to the Trustee, without recourse, all of its right, title and interest in and to the SUBI (excluding the right to proceeds of any residual value insurance policy represented thereby). Concurrently therewith, the Trustee will execute, authenticate and deliver the Certificates to or upon the order of the Transferor. Pursuant to the Agreement, the Transferor will represent and warrant that, immediately prior to the transfer and assignment of the SUBI Certificate to the Trustee, it had good title to and was the sole legal and beneficial owner of the SUBI Certificate, free and clear of liens and claims. 44 REALLOCATION PAYMENTS AND REALLOCATION DEPOSIT AMOUNTS Under certain circumstances TMCC will be required to make Reallocation Payments in respect of certain Contracts (and the related Leased Vehicles) discovered not to be in compliance with TMCC's representations or warranties or Contracts as to which certain servicing procedures have not been followed, in either case that materially and adversely affects the interests of the Transferor or the Certificateholders in the related Contract or Leased Vehicle. Upon any such payment during the Amortization Period (but not during the Revolving Period), the Aggregate Net Investment Value will decline by an amount equal to the Discounted Principal Balance of such Contract, and such Contract and the related Leased Vehicle will no longer constitute SUBI Assets as they will be reallocated and become UTI Assets. If such deduction would cause the Transferor Interest to become less than zero, TMCC will be required to deposit (or cause to be deposited) in the SUBI Collection Account the amount (the "Reallocation Deposit Amount") by which the Transferor Interest would be reduced to less than zero. Notwithstanding the foregoing, in the event a Reallocation Deposit Amount is required to be made, reallocation of the related Contract (and the related Leased Vehicle) will not be considered to have occurred unless such deposit is actually made. SEE "The Contracts--Representations, Warranties and Covenants" and "Additional Document Provisions--The Servicing Agreement--Collections" CALCULATION OF INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE Pursuant to the Servicing Agreement, to the extent allocable to the SUBI, the Servicer will allocate between the Investor Interest and the Transferor Interest, based on the applicable Investor Percentage and the Transferor Percentage for the related Collection Period, all Interest Collections and Principal Collections collected or received in respect of the related Collection Period. In addition, similar allocations will be made by the Servicer at the end of each Collection Period in respect of (i) an amount equal to the Discounted Principal Balance of any Contract that became a Charged-off Contract during such Collection Period (the aggregate of such amounts in any Collection Period, the "Charged-off Amount"), (ii) the Residual Value Loss Amount for such Collection Period and (iii) any Additional Loss Amounts incurred during such Collection Period. A "Charged-off Contract" will be a Contract (a) with respect to which the related Leased Vehicle has been repossessed and sold or otherwise disposed of or (b) which has been written off by the Servicer in accordance with its normal policies for writing off lease contracts other than with respect to repossession. The Investor Percentage in respect of any Collection Period will mean, with respect to (i) Charged-off Amounts, Residual Value Loss Amounts and Additional Loss Amounts (collectively, "Loss Amounts") and Interest Collections, in each case that are allocable to the SUBI, the percentage equivalent of a fraction (not to exceed 100%) the numerator of which is the Adjusted Certificate Balance on the last day of the immediately preceding Collection Period (or, in the case of the first Collection Period, the Initial Certificate Balance) and the denominator of which is the Aggregate Net Investment Value on the last day of the immediately preceding Collection Period (or, in the case of the first Collection Period, as of the Cutoff Date) and (ii) Principal Collections, the percentage equivalent of a fraction (not to exceed 100%) the numerator of which is the Adjusted Certificate Balance and the denominator of which is the Aggregate Net Investment Value, in each case as of the last day of the last Collection Period preceding (a) the Amortization Date or (b) the date on which an Early Amortization Event occurs. The "Transferor Percentage" will in all cases, be equal to 100% minus the applicable Investor Percentage. As a result of the calculations described above, Interest Collections allocable to the SUBI in each Collection Period will be allocated to the Certificateholders based on the relationship of the Adjusted Certificate Balance to the Aggregate Net Investment Value (which may change from Collection Period to Collection Period). As described above, the Investor Percentage applied when allocating Principal Collections allocable to the SUBI may vary monthly during the Revolving Period, because the Adjusted Certificate Balance as a percentage of the Aggregate Net Investment Value may fluctuate monthly. During the Amortization Period, however, the Principal Allocation will be determined by reference to a fixed 45 percentage which will equal the Investor Percentage with respect to Principal Collections allocable to the SUBI as of the last day of the Revolving Period. CERTAIN PAYMENTS TO THE TRANSFEROR On each Monthly Allocation Date, the Trustee will pay to the Transferor, from amounts on deposit in the SUBI Collection Account in respect of the related Collection Period that are allocable to the SUBI, the following amounts (the "Transferor Amounts"): (i) if such Monthly Allocation Date is prior to the First Principal Monthly Allocation Date, the Transferor Percentage of Interest Collections and (ii) if such Monthly Allocation Date is on or after the First Principal Monthly Allocation Date, the Transferor Percentage of Interest Collections and, to the extent that the Transferor Interest is equal to or greater than zero, the Transferor Percentage of Principal Collections. Amounts to be released to the Transferor pursuant to clause (13) under "--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections" will also be considered Transferor Amounts, but will not offset or reduce amounts allocable to the Transferor Interest as described in the preceding sentence. Notwithstanding the foregoing, no Transferor Amounts will be paid to the Transferor on a Monthly Allocation Date unless (i) the amounts required to be allocated or distributed to Certificateholders as described under "Description of the Certificates--Allocations and Distributions on the Certificates" have been allocated or distributed in full and (ii) the amount on deposit in the Reserve Fund, after giving effect to all withdrawals therefrom and other deposits thereto on such Monthly Allocation Date, is at least equal to the Specified Reserve Fund Balance. The principal portion of any Transferor Amounts not paid to the Transferor because the Transferor Interest is less than or equal to zero ("Unallocated Principal Collections") will be retained in the SUBI Collection Account until (a) applied to cover interest shortfalls, Loss Amounts or Certificate Principal Loss Amounts allocable to the Certificates, (b) the Certificates are paid in full (in which case such amounts will be released to the Transferor) or (c) the Transferor Interest again exceeds zero (in which case such amounts will again be releasable as Transferor Amounts). ALLOCATIONS AND DISTRIBUTIONS ON THE CERTIFICATES GENERAL On the second Business Day prior to each Monthly Allocation Date (each, a "Determination Date"), the Servicer will inform the Trustee of, among other things, the amount of Interest Collections and Principal Collections allocable to the SUBI, the Investor Percentage, the Transferor Percentage, the Certificate Factor for each Class, the amount of Advances and Maturity Advances, if any, to be made by or reimbursed to the Servicer, the aggregate amount, if any, to be withdrawn from the Reserve Fund and the Servicing Fee and other servicing compensation payable to the Servicer with respect to the related Collection Period. On or prior to each Determination Date, the Servicer shall also determine the Specified Reserve Fund Balance and the amounts to be distributed to the Certificateholders and to the Transferor in respect of the Transferor Interest and in respect of other amounts released from the Trust. ALLOCATIONS AND DISTRIBUTIONS OF COLLECTIONS On each Monthly Allocation Date, the Trustee will make the following allocations, payments and distributions in accordance with the following priorities from Available Interest (to the extent sufficient therefor): (1) in the event of an Early Amortization Event involving an Insolvency Event as a result of the Trustee having received written instructions from holders of Certificates evidencing Voting Interests of not less than 51% of the Class A Certificates (voting together as a single class) or 51% of the Class A Certificates and Class B Certificates (voting together as a single class) to sell or dispose of the SUBI, to the Trustee, the Investor Percentage of Capped Trust Administrative Expenses; 46 (2) to or for the benefit of the Class A Certificateholders, the amount of interest accrued on the Class Certificate Balances of the Class A Certificates and unreimbursed Certificate Principal Loss Amounts previously allocated thereto during the period from and including the immediately preceding Monthly Allocation Date to but excluding the related Monthly Allocation Date at the related Class A Rates, plus any Class A Interest Carryover Shortfall; (3) to or for the benefit of the Class B Certificateholders, the amount of interest accrued on the Class B Certificate Balance during the period from and including the immediately preceding Monthly Allocation Date to but excluding the related Monthly Allocation Date, plus any Class B Interest Carryover Shortfall; (4) to the Servicer, the Investor Percentage of the Servicing Fee for such Collection Period and the aggregate of the Investor Percentage of accrued but unpaid Servicing Fees in respect of prior Collection Periods; (5) to the Servicer, the Investor Percentage of Capped Contingent and Excess Liability Premiums that have not yet been reimbursed to the Servicer; (6) to the Titling Trustee, the Investor Percentage of Capped Titling Trust Administration Expenses; (7) in circumstances other than as set forth in clause (1) above, to the Trustee, the Investor Percentage of Capped Trust Administration Expenses; (8) to or for the benefit of the Class A Certificateholders the aggregate amount of Loss Amounts allocable to the Class A Certificateholders on such Monthly Allocation Date as described below plus the aggregate amount of Certificate Principal Loss Amounts allocated thereto on any prior Monthly Allocation Date (pro rata, based on the Loss Amounts and Certificate Principal Loss Amounts so allocated to each such Class), in each case to the extent not previously reimbursed pursuant to this clause or through the application of amounts withdrawn from the Reserve Fund, Transferor Amounts and Class B Available Principal; (9) to or for the benefit of the Class B Certificateholders, (a) the amount, if any, of (i) interest accrued during the period from and including the immediately preceding Monthly Allocation Date to but excluding the related Monthly Allocation Date at the Class B Rate on any Certificate Principal Loss Amounts previously allocated thereto and then (ii) to reimburse the aggregate amount of Loss Amounts allocable to the Class B Certificateholders on such Monthly Allocation Date as described below plus the aggregate amount of Certificate Principal Loss Amounts allocated thereto on any prior Monthly Allocation Date, in each case to the extent not previously reimbursed pursuant to this clause or through the application of amounts withdrawn from the Reserve Fund and Transferor Amounts, and (b) the amount, if any, of Class B Available Principal applied to fund interest shortfalls, Loss Amounts or Certificate Principal Loss Amounts allocated to the Class A Certificates on any Monthly Allocation Date and not previously reimbursed pursuant to this clause; (10) for deposit into the Reserve Fund, until the amount on deposit therein equals the Specified Reserve Fund Balance; (11) to the Titling Trustee, the Investor Percentage of Uncapped Titling Trust Administration Expenses; (12) to the Trustee, the Investor Percentage of Uncapped Trust Administration Expenses; and (13) except as described below, to the Transferor, all remaining Interest Collections, which shall for all purposes thereupon be deemed to have been released from the Trust. 47 Payments of interest on each Class of Certificates will be made, to the extent funds are allocated and are available therefor as described above, (i) on each Monthly Allocation Date in March and September, commencing in March 1998, as well as on the Targeted Maturity Date for such Class and (ii) for any Class of Certificates not paid in full on the related Targeted Maturity Date, on any subsequent Certificate Payment Date until the related Class Certificate Balance is reduced to zero. In addition, after the occurrence of any Monthly Payment Event, payments of interest on each Class of Certificates will be made monthly, to the extent funds are allocated and are available therefor as described above, on each Monthly Allocation Date (and each such subsequent Monthly Allocation Date will be a Certificate Payment Date). Interest amounts allocable or distributable to Holders of Class A Certificates will be allocated or distributed on a pro rata basis, based on the interest accrued thereon during the related Interest Period plus the aggregate amount of unreimbursed Class A Interest Carryover Shortfalls allocated thereto on all prior Monthly Allocation Dates. To the extent Available Interest is insufficient therefor, the amount of any deficiency in amounts allocable or distributable pursuant to clauses (1) through (9) will be covered, first, from amounts withdrawn from the Reserve Fund that are available therefor and, second, from Transferor Amounts. If any Transferor Amounts are required to be applied to make any of the allocations or distributions described in clauses (1) through (10) above, the Interest Collections that are part of the Transferor Amounts will be applied before any Principal Collections that are part of the Transferor Amounts are so applied. To the extent a deficiency in the amounts to be allocated or distributed pursuant to clause (2) or clause (8) remains after application of all of the foregoing amounts, such deficiency will be covered by application of Class B Available Principal, if any. The amount of funds to be withdrawn from the Reserve Fund on a Monthly Allocation Date and applied to payments to be made as described above will equal the lesser of (i) the amount on deposit in the Reserve Fund on the related Deposit Date and available therefor and (ii) the amount, if any, by which the aggregate of amounts allocable or distributable pursuant to clauses (2), (3), (8) or (9) exceeds the amount of Available Interest available to make such allocation or distribution based on the foregoing priorities. SEE "Assets of the Trust--The Accounts; Collections--The Reserve Fund". Notwithstanding the foregoing, Available Interest and Class B Available Principal allocated to Certificateholders to reimburse Loss Amounts or Certificate Principal Loss Amounts pursuant to clauses (8) and (9) above on a Monthly Allocation Date that is during the Revolving Period will be treated as Principal Collections for the Collection Period in which such Monthly Allocation Date occurs and, unless an Early Amortization Event happens prior to the related Transfer Date, will be available to be reinvested in Subsequent Contracts and Subsequent Leased Vehicles. The Investor Percentage of Loss Amounts will be allocable to the Certificates. Loss Amounts allocated to the Certificates on any Monthly Allocation Date will be allocated first to the Class B Certificates and then, on any Monthly Allocation Date on which the Class B Certificate Balance is reduced to zero, to the Class A Certificates. A "Certificate Principal Loss Amount" with respect to any Monthly Allocation Date and Class of Certificates will equal the Loss Amounts allocated to such Class of Certificates on such date less any reimbursement thereof from Available Interest, amounts withdrawn from the Reserve Fund that are available therefor, Transferor Amounts and Class B Available Principal (in the case of the Class A Certificates only). Loss Amounts allocated to the Class A Certificates will be allocated thereto on a pro rata basis, based on their respective outstanding Class Certificate Balances as of the end of the related Collection Period. Loss Amounts and Certificate Principal Loss Amounts allocated to the Class A Certificates will be reimbursable thereto on a pro rata basis, based on the aggregate amount of all unreimbursed Loss Amounts and Certificate Principal Loss Amounts allocated thereto on such Monthly Allocation Date and all prior Monthly Allocation Dates; provided, however, that no such reimbursements will be made to any Class of Class A Certificates after the Certificate Payment Date on which the related Class Certificate Balance is reduced to zero. Loss Amounts and Certificate Principal Loss Amounts allocated to the Class B Certificates will be reimbursable as described above until the Monthly Allocation 48 Date on which the Class B Certificate Balance has been reduced to zero. Certificate Principal Loss Amounts allocable to a Class of Certificates which are not reimbursed as provided herein will reduce the Certificate Balance of such Class of Certificates, but will bear interest at the related Certificate Rate until reimbursed or until the related Class Certificate Balance is reduced to zero. On each Monthly Allocation Date, Principal Collections (and if Principal Collections are insufficient therefor, Interest Collections) will be applied to reimburse the Servicer for the principal portion of unreimbursed Advances and Nonrecoverable Advances. Thereafter, the Investor Percentage of remaining Principal Collections plus any Accelerated Principal Distribution Amount will be applied first to reimburse the Transferor for unreimbursed Maturity Advances and second, for deposit into the Certificateholders' Account in respect of principal on the Certificates or, on any Monthly Allocation Date on which principal is distributable to the Holders of any Class of Certificates, as described below, for distribution to such Holders until the related Class Certificate Balance has been reduced to zero. On each Monthly Allocation Date that coincides with or follows a Targeted Maturity Date for a Class of Class A Certificates, the Trustee will distribute all amounts on deposit in the Collection Account and the Certificateholders' Account in respect of principal (after giving effect to any application of amounts withdrawn from the Reserve Fund and available for such application and Transferor Amounts described above) to the Holders of such Class of Class A Certificates until the Class Certificate Balance thereof is reduced to zero. To the extent such amounts are insufficient to reduce the related Class Certificate Balance to zero, the Transferor will have the option to make a Maturity Advance in any amount up to the amount of such deficiency. On each Monthly Allocation Date that follows a Monthly Payment Event, the Trustee will distribute all amounts on deposit in the Collection Account and the Certificateholders' Account in respect of principal (after giving effect to any application of amounts withdrawn from the Reserve Fund and available for such application and Transferor Amounts described above) to the Holders of each outstanding Class of Class A Certificates sequentially until the related Class Certificate Balance is reduced to zero, and then to the Class B Certificateholders until the Class B Certificate Balance is reduced to zero. "Available Interest" with respect to any Monthly Allocation Date is an amount equal to the sum of (i) the Investor Percentage of Interest Collections for the related Collection Period less any portion of such Interest Collections used to reimburse Advances and any Nonrecoverable Advances plus (ii) investment income (net of investment losses) on Permitted Investments of amounts in the Certificateholders' Account from the prior Monthly Allocation Date to, but not including, the current Monthly Allocation Date. The "Class A Interest Carryover Shortfall" with respect to any Monthly Allocation Date will equal the excess, if any, of (x) the aggregate amount of interest accrued on the Class A Certificate Balances and unreimbursed Certificate Principal Loss Amounts previously allocated thereto at the related Certificate Rates during the period from the prior Monthly Allocation Date to but not including the current Monthly Allocation Date, plus any outstanding Class A Interest Carryover Shortfall from the immediately preceding Monthly Allocation Date, plus interest on such outstanding Class A Interest Carryover Shortfall, to the extent permitted by law, at the weighted average of the Class A Certificate Rates for such period, over (y) Available Interest allocated or distributed to Class A Certificateholders in respect of interest on such Monthly Allocation Date. The "Class B Interest Carryover Shortfall" with respect to any Monthly Allocation Date will equal the excess, if any, of (x) the aggregate amount of interest accrued on the Class B Certificates at the Class B Rate during the period from the prior Monthly Allocation Date to but not including the current Monthly Allocation Date, plus any outstanding Class B Interest Carryover Shortfall from the immediately preceding Monthly Allocation Date, plus interest on such outstanding Class B Interest Carryover Shortfall, to the extent permitted by law, at the Class B Rate for such period, over (y) Available Interest allocated or distributed to Class B Certificateholders in respect of interest on such Monthly Allocation Date. 49 "Capped Titling Trust Administrative Expenses" with respect to any Monthly Allocation Date will equal one twelfth of the aggregate amounts sufficient to pay specified administrative costs and expenses of the Titling Trust that are allocable to the SUBI up to but not exceeding $100,000 in any calendar year. "Uncapped Titling Trust Administrative Expenses" with respect to any Monthly Allocation Date will equal one twelfth of the aggregate amounts sufficient to pay specified administrative costs and expenses of the Titling Trust that are allocable to the SUBI not subject to the limitations set forth in the preceding sentence. "Capped Trust Administrative Expenses" will equal the amounts sufficient to pay specified administrative costs and expenses associated with the Certificates such as the Trustee's compensation, the reasonable fees and disbursements of the Transferor's accountants and attorneys up to but not exceeding $75,000 in any calendar year (or $125,000 in a calendar year in which an Early Amortization Event occurs with respect to which the Trustee sells or otherwise disposes of the SUBI). "Uncapped Trust Administrative Expenses" will equal the amounts sufficient to pay specified administrative costs and expenses associated with the Certificates such as the Trustee's compensation, the reasonable fees and disbursements of the Transferor's accountants and attorneys not subject to the limitations set forth in the preceding sentence. "Capped Contingent and Excess Liability Premiums" with respect to any Monthly Allocation Date will equal the amounts sufficient to pay or reserve for payment one-twelfth of the portion of the annual premium payable on the Contingent and Excess Liability Insurance Policies allocable to the SUBI, up to but not exceeding $300,000 in any calendar year. "Class B Available Principal" with respect to any Monthly Allocation Date means the portion of Principal Collections derived by multiplying (i) a fraction, the numerator of which is the Class B Adjusted Certificate Balance, and the denominator of which is the Adjusted Certificate Balance as of such Monthly Allocation Date, by (ii) the Investor Percentage, and by (iii) Principal Collections plus any Accelerated Principal Distribution Amount for such Monthly Allocation Date. "Excess Amounts" with respect to any Monthly Allocation Date are the sum of the Interest Collections distributable to the Transferor pursuant to clause (13) above. REVOLVING PERIOD No principal will be allocable or distributable on the Certificates until the First Principal Monthly Allocation Date. On each Transfer Date, the Servicer will identify lease contracts and the related leased vehicles of the Titling Trust that meet the eligibility criteria described under "The Contracts" and are not evidenced by the SUBI or any Other SUBI and, on behalf of the Titling Trustee, will allocate lease contracts and related leased vehicles having an aggregate Discounted Principal Balance as of the related Transfer Date approximately equal to, but not greater than, all Principal Collections collected or received since the Cutoff Date (together with amounts used to fund or reimburse Loss Amounts allocated to any Certificates) that have not yet been so reinvested. Upon such allocation, the related lease contracts and leased vehicles will become Subsequent Contracts and Subsequent Leased Vehicles and accordingly will become SUBI Assets. No partial interest in lease contracts (and the related leased vehicles) will be so allocated. Coincident with such allocation, the Servicer, acting on behalf of the Titling Trustee, will withdraw from the SUBI Collection Account (or apply from its own funds if the Servicer is not then subject to the requirement to make deposits therein prior to the Deposit Date) an amount of unreinvested Principal Collections (together with amounts applied to reimburse Loss Amounts) equal to the aggregate Discounted Principal Balance of such Subsequent Contracts to make such reinvestment. Principal Collections and reimbursements of Loss Amounts allocated to Certificates and not previously reinvested may be reinvested in additional Subsequent Contracts and Subsequent Leased Vehicles on one or more subsequent Transfer Dates each month prior to the end of the Revolving Period. During the Revolving Period, if the Servicer determines on the last day of any calendar month commencing in October 50 1997 that the amount of Principal Collections and reimbursed Loss Amounts and Certificate Principal Loss Amounts for the preceding Collection Period that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles as of the first day of such month exceeds $1,000,000, an Early Amortization Event will occur, the Revolving Period will terminate and all unreinvested Principal Collections and reimbursements of Loss Amounts will be allocated or distributed as principal to the Trust and then to Certificateholders on succeeding Monthly Allocation Dates. SEE "--Early Amortization Events" below. AMORTIZATION PERIOD On each Monthly Allocation Date beginning with the First Principal Monthly Allocation Date and ending on the Monthly Allocation Date on which the Certificate Principal Balances of all Certificates have been reduced to zero (or monies sufficient to pay each outstanding Class of Certificates in full and reimburse Certificate Principal Loss Amounts have been allocated as principal and deposited into the Certificateholders' Account), the Trustee will deposit into the Certificateholders' Account and/or distribute to the Certificateholders then entitled to receive distributions in respect of principal, an amount equal to the Investor Percentage of all Principal Collections collected or received in respect of the related Collection Period, less amounts applied in reimbursement of Advances, Nonrecoverable Advances or Maturity Advances, together with any portion of Available Interest, amounts withdrawn from the Reserve Fund and available therefor, Transferor Amounts or Class B Available Principal allocable or distributable in respect of principal on such Monthly Allocation Date, rather than reinvesting such amounts in Subsequent Contracts and Subsequent Leased Vehicles. On the First Principal Monthly Allocation Date, the Trustee will also allocate or distribute to Certificateholders as a portion of Principal Collections, following the priorities described above, the Investor Percentage of any Principal Collections and reimbursements of Loss Amounts allocable to the SUBI that were not reinvested in Subsequent Contracts and Subsequent Leased Vehicles as of the end of the Revolving Period. The aggregate distributions of principal to the Holders of Certificates of any Class will not exceed the related Initial Certificate Balance thereof. The Class Certificate Balance of each Class of Certificates will be payable in full on the related Targeted Maturity Date. If the aggregate of amounts allocated to cover such principal payment during the Collection Periods from the end of the Revolving Period through such date (whether from Principal Collections, Transferor Amounts, Available Interest or a Maturity Advance) are insufficient to make such payment in full, all such amounts available will be paid to the related Certificateholders on the related Targeted Maturity Date and, thereafter, payments of principal and interest will be made to the related Holders to the extent described below on a monthly basis on each subsequent Monthly Allocation Date until the related Class Certificate Balance of such Class of Certificates has been reduced to zero. In addition, after the occurrence of any Monthly Payment Event, payments of principal will be made monthly to the Holders of each Class of Certificates sequentially, to the extent funds are allocated and are available therefor as described above, on each Monthly Allocation Date (and each such subsequent Monthly Allocation Date will be a Certificate Payment Date). The Investor Percentage of the net proceeds of any sale or other disposition of the SUBI, the SUBI Certificate or other property of the Trust, to the extent such net proceeds constitute Principal Collections, will be distributed first, to the Class A Certificateholders on a pro rata basis, based on their respective Class Certificate Balances as of the last day of the preceding Collection Period, until the Class A Certificates have been paid in full and, second, to the Class B Certificateholders. INVESTMENT OF AVAILABLE AMOUNTS During the Revolving Period, Available Interest not paid out to the Trustee or Servicer and not released to the Transferor or distributed to Certificateholders will be deposited into the Certificateholders' Account on such Monthly Allocation Date and invested in Permitted Investments maturing prior to the succeeding relevant Certificate Payment Date and bearing interest at the related Required Rates. Following the termination of the Revolving Period, so long as any Certificates are outstanding, such amounts of 51 unreleased and undistributed Available Interest and the Investor Percentage of Principal Collections with respect to any Monthly Allocation Date that is not a Certificate Payment Date will be deposited into the Certificateholders' Account on such Monthly Allocation Date and invested in Permitted Investments maturing prior to the succeeding relevant Certificate Payment Date or Targeted Maturity Date, as appropriate, and bearing interest at the related Required Rates. Such Permitted Investments are expected to include one or more TMCC Demand Notes. TMCC Demand Notes will be unsecured general obligations of TMCC and will rank pari passu with all other unsecured and unsubordinated indebtedness of TMCC outstanding from time to time. Each Demand Note will mature on the earlier of the Deposit Date prior to the next succeeding Certificate Payment Date or Targeted Maturity Date, as the case may be, and the Certificate Payment Date following the occurrence of a Monthly Payment Event. Pursuant to the terms of the TMCC Demand Notes, the Trustee will be entitled to demand payment of the principal amount of the TMCC Demand Notes, together with accrued interest thereon, on any Deposit Date. EARLY AMORTIZATION EVENTS As described above, the Amortization Period will commence on the earlier of the Amortization Date or the occurrence of an Early Amortization Event and continue until the Class Certificate Balances of each Class of Certificates is reduced to zero. An "Early Amortization Event" will mean any of the following events: (i) failure by the Servicer (a) to make any payment or deposit required with respect to the SUBI, the SUBI or the Certificates under the Agreement or the Servicing Agreement, within five Business Days after the date the payment or deposit is required to be made, or (b) to deliver a Servicer's Certificate within ten Business Days after any Determination Date which failure continues unremedied for three Business Days; (ii) failure by the Transferor or the Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the Agreement (other than those described in clause (i) above) or the Servicing Agreement, which failure materially and adversely affects the rights of holders of the SUBI or Certificateholders and which continues unremedied for 60 days after the giving of written notice of such failure (a) to the Transferor or the Servicer, as the case may be, by the Trustee or the Titling Trustee or (b) to the Transferor or the Servicer, as the case may be, and to the Trustee by holders of Certificates evidencing not less than 25% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class; (iii) failure to cure the inaccuracy of certain representations, warranties and certificates of the Transferor or the Servicer in the Agreement or the Servicing Agreement, which failure materially and adversely affects the rights of holders of the Transferor or Certificateholders and which continues uncured for 60 days after notice is given as described in clause (ii) above; provided that an Early Amortization Event pursuant to this subparagraph (iii) will not be deemed to occur if a related Reallocation Payment is due in connection with such breach and has been paid by the Servicer in accordance with the Servicing Agreement; (iv) the occurrence of certain Insolvency Events relating to the Transferor; (v) creation of any lien or encumbrance not otherwise permitted by the Agreement or the Servicing Agreement on the SUBI Assets, which lien or encumbrance is not released within 60 days of its creation; (vi) the Transferor, the Trust or the Titling Trust becomes subject to registration as an "investment company" for purposes of the Investment Company Act of 1940, as amended; (vii) if the Servicer determines on the last day of any calendar month commencing in October 1997 that the amount of Principal Collections and reimbursed Loss Amounts and Certificate Principal 52 Loss Amounts for the preceding Collection Period that have not been reinvested in Subsequent Contracts and Subsequent Leased Vehicles as of the first day of such month exceeds $1,000,000; (viii) an Event of Servicing Termination occurs; or (ix) if on any Monthly Allocation Date the aggregate amount withdrawn from the Reserve Fund and deposited into the SUBI Collection Account or the Certificateholders' Account on or prior to such Monthly Allocation Date (without giving effect to any deposits into the Reserve Fund) exceeds $3,078,079 (i.e., 0.25% of the Aggregate Net Investment Value as of the Cutoff Date). If, because of the occurrence of an Early Amortization Event, the Amortization Period begins earlier than the Amortization Date, Certificateholders may (and if a Monthly Payment Event occurs, will) begin receiving distributions of principal earlier than they would otherwise have under the Agreement, which may shorten the final maturity and the weighted average life of any such Class of Certificates. In addition, if an Insolvency Event with respect to the Transferor were to occur during the Revolving Period, the Agreement will require the Transferor promptly to give notice of such Insolvency Event to the Trustee. Pursuant to the Agreement, within 15 days of such notice, the Trustee may, and upon receipt of written instructions from holders of Certificates evidencing Voting Interests of not less than 51% of the Class A Certificates (voting together as a single class) or 51% of the Class A Certificates and Class B Certificates (voting together as a single class) shall, publish a notice of the Insolvency Event stating that the Trustee intends to sell or dispose of the SUBI and the SUBI Certificate and the other property of the Trust in a commercially reasonable manner. Following such publication, unless otherwise prohibited by applicable law, the Trustee will sell or otherwise dispose of the SUBI, the SUBI Certificate and such other property in a commercially reasonable manner and on commercially reasonable terms; provided that such sale shall not be made without the consent of all the Certificateholders if a net loss would be realized as a result of such sale. Proceeds of the sale or disposition of the SUBI, the SUBI Certificate and such other property, net of related Trust Administrative Expenses, will be deposited into the SUBI Collection Account and treated as Collections on or in respect of the SUBI Assets. The interest portion of the Investor Percentage of such proceeds will be distributed to the Certificateholders in the priority provided for herein, and the principal portion of the Investor Percentage of such proceeds will be distributed first, on a pro rata basis, to the Class A Certificateholders based on their respective Class Certificate Balances until each such Class of Certificates has been paid in full, and second, to the Class B Certificateholders. If such proceeds, together with all amounts on deposit in the Accounts and on deposit in the Reserve Fund and available therefor, amounts otherwise payable to the Transferor in respect of the Transferor Interest and certain amounts otherwise distributable in respect of the Class B Certificates, are insufficient to pay in full the Certificate Balance of a Class of Class A Certificates and any accrued and unpaid interest thereon, the related Class A Certificateholders will suffer a corresponding loss. The "VOTING INTERESTS" of the (i) Class A Certificates will be allocated among the Class A Certificateholders or Certificate Owners, as the case may be, in accordance with their respective Class Certificate Balances, and (ii) Class B Certificates will be allocated among the Class B Certificateholders in accordance with the Class B Certificate Balance represented thereby. Notwithstanding the foregoing, in certain circumstances, any Class A Certificates or Class B Certificates held or beneficially owned by the Transferor, TMCC or any of their respective affiliates shall be excluded from such determination. STATEMENTS TO CERTIFICATEHOLDERS On each Monthly Allocation Date, the Trustee will include with each distribution to each Certificateholder a statement, setting forth with respect to such Monthly Allocation Date or the related Collection Period, among other things, the following: (i) the Investor Percentage and Transferor Percentage in effect with respect to the related Collection Period; 53 (ii) the amount being allocated or distributed to each Class of Certificateholders (the "Certificate Distribution Amount"); (iii) the amount of the Certificate Distribution Amount allocable to interest on and principal of each Class of Certificates, separately identifying any Maturity Advances; (iv) the amount of the Certificate Distribution Amount allocable to any Class A or Class B Interest Carryover Shortfall; (v) the amount, if any, of any unpaid Class A or Class B Interest Carryover Shortfall, after giving effect to distribution of the Certificate Distribution Amount; (vi) the Certificate Balance, the Class Certificate Balance of each Class and the Certificate Factor with respect to each Class , in each case as of such Monthly Allocation Date and after giving effect to the allocation and/or distribution of the Certificate Distribution Amount; (vii) the aggregate amount, if any, of the reimbursement of Loss Amounts included in distribution of the Certificate Distribution Amount and the amount thereof allocated to each Class of Certificateholders; (viii) the amount of the Certificate Distribution Amount allocable to reimbursement of previous Certificate Principal Loss Amounts for each Class, in each case together with the amount of accrued interest thereon included in such distribution; (ix) the amount, if any, of the aggregate unreimbursed Certificate Principal Loss Amounts for each Class, after giving effect to distribution of the Certificate Distribution Amount; (x) the amount of any Class B Available Principal and unreimbursed Class B Available Principal, after giving effect to distribution of the Certificate Distribution Amount; (xi) the Investor Percentage of the Servicing Fee; (xii) the amount of any Required Amount included in the Certificate Distribution Amount and the balance on deposit in the Reserve Fund and the Class B Interest Reserve Amount on such Monthly Allocation Date, after giving effect to withdrawals therefrom and deposits thereto on such Monthly Allocation Date, the change in such balance from the immediately preceding Monthly Allocation Date and the Specified Reserve Fund Balance; (xiii) the amount of Transferor Amounts, if any, included in the Certificate Distribution Amount; (xiv) the Aggregate Net Investment Value as of the end of such Collection Period; (xv) the aggregate amount of Payments Ahead received by the Servicer and being held thereby or on deposit in the SUBI Collection Account in respect of future Collection Periods and the change in such amount from the immediately preceding Monthly Allocation Date; (xvi) the amount of Advances and Maturity Advances made, and the amount of unreimbursed Advances and Maturity Advances outstanding after giving effect to distribution of the Certificate Distribution Amount; and (xvii) certain information used in determining the Specified Reserve Fund Balance. Copies of such statements may be obtained by Certificateholders or Certificate Owners by a request in writing addressed to the Trustee. In addition, within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the Agreement, the Trustee will mail to each person who at any time during such calendar year shall have been a Class A or Class B Certificateholder or a Certificate Owner, a statement containing the sum of the amounts described in clauses (ii) through (xi) above for the purpose of preparing such person's federal income tax return. 54 TERMINATION OF THE TRUST; RETIREMENT OF THE CERTIFICATES The respective obligations and responsibilities of the Transferor and the Trustee created by the Agreement will terminate upon the earliest to occur of (i) the maturity, sale or other liquidation, as the case may be, of the last outstanding Contract and Leased Vehicle evidenced by the SUBI and the distribution of all proceeds thereof, together with all amounts on deposit in the Accounts and the Reserve Fund, in the manner to be prescribed in the Agreement, (ii) the day following the Monthly Allocation Date on which the Class Certificate Balance of each Class of Certificates has been reduced to zero and (iii) the Transferor's optional repurchase of the SUBI Certificate as described below. In order to avoid excessive administrative expenses, the Transferor will be permitted at its option to purchase the SUBI Certificate from the Trust on any Monthly Allocation Date on or after the Class A-3 Targeted Maturity Date if, either before or after giving effect to any payment of principal required to be made on such Monthly Allocation Date, the Certificate Balance is less than or equal to $123,123,151.92 (10% of the Aggregate Net Investment Value as of the Cutoff Date) or amounts sufficient to effectively reduce the Certificate Balance to such amount have been deposited in the Collection Account on such date. The purchase price will be equal to the greater of (i) the sum of the Class A Certificate Balance and the Class B Certificate Balance, in each case plus accrued and unpaid interest thereon and on all unreimbursed Certificate Principal Loss Amounts at the related Certificate Rate, plus certain other accrued and unpaid amounts, if any, due to the Investor Certificateholders or the Servicer, and (ii) the Aggregate Net Investment Value as of the last day of the preceding Collection Period. The Trustee will give written notice of termination of the Trust to each Certificateholder. In connection with any such termination, except as otherwise provided in the Agreement, the Transferor will be deemed to relinquish all claims it may have against the assets of the Trust in respect of Transferor Amounts that were not paid to the Transferor. The final distribution to any Certificateholder will be made only upon surrender and cancellation of such Certificateholder's Certificate at an office or agency of the Trustee specified in the notice of termination. PRESCRIPTION In the event that any Certificateholder shall not surrender its Certificates for retirement within six months after the date specified in written notice given by the Trustee of the date for final payment thereof, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for retirement and receive the final distribution with respect thereto. If within one year after such second notice any Certificates shall not have been surrendered, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets that remain subject to this Agreement. Any funds remaining in the Trust after exhaustion of such remedies shall be distributed by the Trustee to a charity specified in the Agreement. 55 BOOK-ENTRY REGISTRATION Unless and until Definitive Certificates are issued with respect to the Certificates or any Class of Certificates, each Class of Certificates offered hereby will be represented by one or more certificates registered in the name of Cede & Co., as nominee of DTC. Until then, Certificate Owners will hold beneficial interests in Certificates through DTC (in the United States) or Cedel Bank or Euroclear (in Europe or Asia) directly if they are participants of such systems, or indirectly through organizations which are participants in such systems. All references herein to actions by Certificateholders shall refer to actions taken by DTC upon instructions from DTC Participants, and all references herein to distributions, notices, reports and statements to Certificateholders shall refer to distributions, notices, reports and statements to Cede & Co., as the registered holder of the Securities, for distribution to Certificateholders in accordance with DTC procedures. As such, it is anticipated that the only Certificateholder will be Cede & Co., as nominee of DTC. Certificate Owners will not be recognized by the Trustee as Certificateholders as such term is used in the Agreement or Servicing Supplement, and Certificate Owners will only be permitted to exercise their rights as such indirectly through DTC and DTC Participants, as further described below. Cedel Bank and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in their respective names on the books of their respective Depositaries which in turn will hold such positions in customers' securities accounts in the Depositaries' names on the books of DTC. Transfers between DTC Participants will occur in accordance with DTC rules. Transfers between Cedel Bank Participants and Euroclear Participants will occur in accordance with their applicable rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Cedel Bank or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant international clearing system by its Depositary. However, each such cross-market transaction will require delivery of instructions to the relevant international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines. The relevant international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Cedel Bank Participants and Euroclear Participants may not deliver instructions directly to the Depositaries. Because of time-zone differences, credits of Certificates received in Cedel Bank or Euroclear as a result of a transaction with a DTC Participant will be made during subsequent securities settlement processing and dated the Business Day following the DTC settlement date. Such credits or any transactions in such Certificates settled during such processing will be reported to the relevant Euroclear or Cedel Bank Participant on such Business Day. Cash received in Cedel Bank or Euroclear as a result of sales of Certificates by or through a Cedel Bank Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Cedel Bank or Euroclear cash account only as of the Business Day following settlement in DTC. As used in this paragraph, "Business Day" means a Business Day on which Cedel Bank and Euroclear are also transacting settlements in securities. DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York UCC and a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participating members ("DTC Participants") and to facilitate the clearance and settlement of securities transactions between DTC Participants through electronic book-entries, thereby eliminating the need for physical movement of certificates. DTC Participants include securities brokers and dealers, banks, trust 56 companies and clearing corporations which may include underwriters, agents or dealers with respect to the Certificates of any class or series. Indirect access to the DTC system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect DTC Participants"). The rules applicable to DTC and DTC Participants are on file with the Commission. Certificate Owners that are not DTC Participants or Indirect DTC Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, Certificates may do so only through DTC Participants and Indirect DTC Participants. DTC Participants will receive a credit for the Certificates on DTC's records. The ownership interest of each Certificate Owner will in turn be recorded on respective records of the DTC Participants and Indirect DTC Participants. Certificate Owners will not receive written confirmation from DTC of their purchase, but Certificate Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the DTC Participant or Indirect DTC Participant through which the Certificate Owner entered into the transaction. Transfers of ownership interests in the Certificates of any Class will be accomplished by entries made on the books of DTC Participants acting on behalf of Certificate Owners. The deposit of Certificates with DTC and their registration in the name of Cede & Co. will effect no change in Certificate ownership. DTC will have no knowledge of the identities of Certificate Owners and its records will reflect only the identity of the DTC Participants to whose accounts such Certificates are credited, which may or may not be the Certificate Owners. DTC Participants and Indirect DTC Participants will remain responsible for keeping account of their holdings on behalf of their customers. While the Certificates are held in book-entry form, Certificate Owners will not have access to the list of Certificate Owners, which may impede the ability of Certificate Owners to communicate with each other. Conveyance of notices and other communications by DTC to DTC Participants, by DTC Participants to Indirect DTC Participants and by DTC Participants and Indirect DTC Participants to Certificate Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers among DTC Participants on whose behalf it acts with respect to the Certificates and is required to receive and transmit distributions of principal of and interest on the Certificates. DTC Participants and Indirect DTC Participants with which Certificate Owners have accounts with respect to the Certificates similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Certificate Owners. DTC's practice is to credit DTC Participants' accounts on each Certificate Payment Date in accordance with their respective holdings shown on its records, unless DTC has reason to believe that it will not receive payment on such Certificate Payment Date. Payments by DTC Participants and Indirect DTC Participants to Certificate Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name", and will be the responsibility of such DTC Participant and not of DTC, the Trustee or Titling Trustee (or any paying agent appointed thereby), the Transferor or the Servicer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of and interest on each class of Certificates to DTC will be the responsibility of the Trustee, disbursement of such payments to DTC Participants will be the responsibility of DTC and disbursement of such payments to the related Certificate Owners will be the responsibility of DTC Participants and Indirect DTC Participants. As a result, under the book-entry format, Certificate Owners may experience some delay in their receipt of payments. DTC will forward such payments to its DTC Participants which thereafter will forward them to Indirect DTC Participants or Certificate Owners. The ability of a Certificate Owner to pledge Certificates to persons or entities that do not participate in the DTC system, or otherwise take actions with respect to such Certificates, may be limited due to the lack of a physical certificate for such Certificates. 57 DTC has advised the Transferor that it will take any action permitted to be taken by a Certificateholder only at the direction of one or more DTC Participants to whose account with DTC the Certificates are credited. Additionally, DTC has advised the Transferor that it will take such actions with respect to specified percentages of the Certificateholders' interest only at the direction of and on behalf of DTC Participants whose holdings include undivided interests that satisfy such specified percentages. DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of DTC Participants whose holdings include such undivided interests. Neither DTC nor Cede & Co. will consent or vote with respect to the Certificates. Under its usual procedures, DTC will mail an "Omnibus Proxy" to the Trustee as soon as possible after any applicable Record Date for such a consent or vote. The Omnibus Proxy will assign Cede & Co.'s consenting or voting rights to those DTC Participants to whose accounts the related Certificates are credited on that record date (which record date will be identified in a listing attached to the Omnibus Proxy). Cedel Bank is incorporated under the laws of Luxembourg as a professional depository. Cedel Bank holds securities for its participating organizations ("Cedel Bank Participants") and facilitates the clearance and settlement of securities transactions between Cedel Bank Participants through electronic book entry changes in accounts of Cedel Bank Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in Cedel Bank in any of 28 currencies, including United States dollars. Cedel Bank provides to Cedel Bank Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Cedel Bank interfaces with domestic markets in several countries. As a professional depository, Cedel Bank is subject to regulation by the Luxembourg Monetary Institute. Cedel Bank Participants are recognized financial institutions around the world including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include any underwriters, agents or dealers with respect to any Class A Certificates offered hereby. Indirect access to Cedel Bank is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Cedel Bank Participant, either directly or indirectly. The Euroclear System was created in 1968 to hold securities for participants of the Euroclear System ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of 27 currencies, including United States dollars. The Euroclear System includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. The Euroclear System is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear Operator"), under contract with Euroclear Clearance System S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for the Euroclear System on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include any underwriters, agents or dealers with respect to any Class A Certificates offered hereby. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member Bank of the Federal Reserve System. As such, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. 58 Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System. All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Distributions with respect to Certificates held through Cedel Bank or Euroclear will be credited to the cash accounts of Cedel Bank Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by its Depositary. Such distributions will be subject to tax withholding in accordance with relevant United States tax laws and regulations. SEE "Material Income Tax Considerations" and "Annex I--Global Clearance, Settlement and Tax Documentation Procedures-- Certain U.S. Federal Tax Documentation Requirements". Cedel Bank or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Certificateholder on behalf of a Cedel Bank Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to its Depositary's ability to effect such actions on its behalf through DTC. Although DTC, Cedel Bank and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Certificates among participants of DTC, Cedel Bank and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. DEFINITIVE CERTIFICATES Definitive Certificates will be issued to Certificate Owners rather than to DTC only if (i) DTC is no longer willing or able to discharge its responsibilities with respect to the Class A Certificates, and neither the Trustee nor the Transferor is able to locate a qualified successor, (ii) the Transferor, at its option, elects to terminate the book-entry system through DTC or (iii) after an Early Amortization Event, Certificate Owners representing in the aggregate not less than 51% of the Voting Interests of the Class A Certificates (voting together as a single class) advise the Trustee through DTC or its successor in writing that the continuation of a book-entry system through DTC or its successor is no longer in the best interest of Certificate Owners. Upon the occurrence of any of the events described in the immediately preceding paragraph, the Trustee will be required to notify all Certificate Owners, through Participants, of the availability through DTC of Definitive Certificates. Upon surrender by DTC of the certificates representing the related Class A Certificates and the receipt of instructions for re-registration, the Trustee will issue Definitive Certificates to Certificate Owners, who thereupon will become Certificateholders for all purposes of the Agreement. Payments on the related Class A Certificates will thereafter be made by the Trustee directly to holders of such Class A Certificates in accordance with the procedures set forth herein and to be set forth in the Agreement. Interest payments and any principal payments on the Definitive Certificates on each Certificate Payment Date will be made to holders in whose names the Definitive Certificates were registered at the close of business on the related Record Date. Payments will be made by check mailed to the address of such holders as they appear on the Certificate Register or, under the circumstances to be provided by the Agreement, by wire transfer to a bank or depository institution located in the United States and having appropriate facilities therefor. The final payment on any Class A Certificates, however, will be made only upon presentation and surrender of such Definitive Certificates or global certificates at the office or agency specified in the notice of final distribution to Class A Certificateholders. 59 Definitive Certificates will be transferable and exchangeable at the offices of the Trustee or the Certificate Registrar to be set forth in the Agreement. No service charge will be imposed for any registration of transfer or exchange, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. ASSETS OF THE TRUST GENERAL The property of the Trust will primarily consist of the SUBI evidenced by the SUBI Certificate, excluding the right to proceeds of the Residual Value Insurance Policy retained by the Transferor pursuant to the Agreement. The property of the Trust will also include such amounts as from time to time are held in the SUBI Collection Account and the Certificateholders' Account. The Trust will also have the collateral benefit of the Contingent and Excess Liability Insurance Policies described below (and indemnification by TMCC of the related deductibles) and the Trustee's rights as a third-party beneficiary of the Servicing Supplement and SUBI Supplement. As registered holder of the SUBI Certificate, the Trustee will be deemed to have ownership of the SUBI Certificate and, through such ownership, an indirect beneficial ownership interest in the Contracts and Leased Vehicles. If a court of competent jurisdiction recharacterizes the transfer of the SUBI to the Trust as a transfer for security, the Trustee may instead be deemed to have a perfected security interest in the SUBI Certificate, the Contracts and Contract Rights susceptible of perfection under the UCC, but in no event will the Trustee be deemed to have a perfected security interest in the Leased Vehicles. SEE "Material Legal Aspects of the Titling Trust--Structural Considerations". THE ACCOUNTS; COLLECTIONS THE SUBI COLLECTION ACCOUNT On or prior to the Closing Date, the Titling Trustee will establish an account maintained at the Trust Agent in the name of the Titling Trustee as the SUBI Collection Account (the "SUBI Collection Account" and, together with the Certificateholders' Account and the Reserve Fund, the "Accounts") as a trust account for the exclusive benefit of the holders of interests in the SUBI into which collections on or in respect of the Contracts and the Leased Vehicles with respect to each Collection Period generally will be deposited on the Deposit Date. DEPOSITS INTO THE SUBI COLLECTION ACCOUNT. Deposits into the SUBI Collection Account will include, but will not be limited to, the following payments made in respect of the SUBI Assets: (i) Monthly Payments; (ii) early payments in full of any Contract, including an amount equal to the Residual Value of the related Leased Vehicle (each, a "Prepayment"); (iii) Matured Leased Vehicle Proceeds, Repossessed Vehicle Proceeds and other Liquidation Proceeds; (iv) Payments Ahead; (v) Advances made by the Servicer and Maturity Advances made by the Transferor; and (vi) Reallocation Payments by TMCC (together with, under certain circumstances during the Amortization Period, Reallocation Deposit Amounts) in respect of certain Contracts as to which an uncured breach of certain representations and warranties or certain servicing covenants has occurred. Pursuant to the Agreement and the Servicing Agreement, in the event that TMCC, as Servicer, ceases to satisfy certain tests with respect to its credit ratings, the Servicer will thereafter be required to commence depositing Interest and Principal Collections and other proceeds in respect of the Contracts and Leased Vehicles into the SUBI Collection Account within two Business Days of receipt thereof, and will cease to have the right, described below, to make such deposits net of amounts payable, reimbursable or distributable to TMCC, as Servicer. SEE "Assets of the Trust-- The Accounts; Collections". Deposits also will be made to the SUBI Collection Account from, among other sources, (i) monies on deposit in the Reserve Fund and (ii) the Transferor, in the event it purchases the SUBI Certificate on or after the Class A-3 Targeted Maturity Date when the Certificate Balance is less than or equal to $123,123,151.92 (10% of the Aggregate Net Investment Value as of the 60 Cutoff Date) or amounts sufficient to effectively reduce the Certificate Balance to such amount have been deposited in the Collection Account on such date. "Net Insurance Proceeds" will include recoveries pursuant to the Contingent and Excess Liability Insurance Policies and the comprehensive, collision, public liability and property damage insurance policy required to be obtained and maintained by the lessee pursuant to each Contract (or payment by TMCC of the deductibles as to which it has indemnified the Trust as described in "Additional Document Provisions-- The Servicing Agreement--Insurance on Leased Vehicles"), and amounts paid by any insurer under any other insurance policies relating to the Contracts, the related lessees or the Leased Vehicles (excluding any Residual Value insurance policy the proceeds of which will be a SUBI Asset but will not be transferred by the Transferor to the Trust), in each case net of certain sums applied to the repair of the related Leased Vehicles. NET DEPOSITS. So long as TMCC is the Servicer, the Servicer will be permitted to deposit in the SUBI Collection Account only the net amount distributable to the Trustee, as holder of the SUBI Certificate, and the Transferor on the related Deposit Date. The Servicer, however, will account to the Trustee, the Titling Trustee, the Certificateholders and the Transferor as if all of the deposits and distributions described herein were made individually. This "net deposit" provision will be for the administrative convenience of the parties involved and will not affect amounts required to be deposited into the Accounts. CERTAIN WITHDRAWALS FROM THE SUBI COLLECTION ACCOUNT. To the extent not already netted against Collections, Matured Leased Vehicle Proceeds or Liquidation Proceeds, as the case may be, the Titling Trustee shall remit to the Servicer, without interest and prior to any other distribution from the SUBI Collection Account on such date, monies from the SUBI Collection Account representing (i) unreimbursed Matured Leased Vehicle Expenses, Repossessed Vehicle Expenses and other Liquidation Expenses; (ii) delinquent Monthly Payments with respect to which the Servicer has made an unreimbursed Advance; and (iii) an amount equal to any unreimbursed Advances that the Servicer has concluded are Nonrecoverable Advances. SEE "Additional Document Provisions--The Servicing Agreement--Advances" regarding "Nonrecoverable Advances". THE CERTIFICATEHOLDERS' ACCOUNT On or prior to the Closing Date, the Trustee will establish an account maintained at the Trust Agent in the name of the Trustee as the Certificateholders' Account (the "Certificateholders' Account") as a trust account for the exclusive benefit of the Certificateholders into which the Investor Percentage of Interest Collections and Principal Collections will be deposited on each Monthly Allocation Date to the extent allocated for distribution on subsequent Certificate Payment Dates in the amounts described above under "Description of the Certificates--Allocations and Distributions on the Certificates". Amounts so deposited will be invested in Permitted Investments (which are expected to include one or more TMCC Demand Notes) meeting the criteria and bearing a rate of interest satisfactory to the Rating Agencies that mature on or before the next relevant Certificate Payment Date. Upon the occurrence of a Monthly Payment Event, however, no further deposits will be made to the Certificateholders' Account, but instead all such investments will be liquidated and amounts on deposit therein will be distributed to Certificateholders on the next Monthly Allocation Date (which will be a relevant Certificate Payment Date with respect to interest on all Classes of Certificates and with respect to principal on the outstanding Classes of Certificates to the extent described above under "Description of the Certificates--Allocations and Distributions on the Certificates"). Thereafter, Collections will simply be deposited into the SUBI Collection Account for distribution to Certificateholders on a monthly basis on each Certificate Payment Date as described under "Description of the Certificates--Allocations and Distributions on the Certificates". 61 THE RESERVE FUND On or prior to the Closing Date, pursuant to the Agreement, the Transferor will establish the Reserve Fund as a trust account with the Trustee for the benefit of the Certificateholders and the Transferor. The Reserve Fund will not be an asset of the Trust. On each Monthly Allocation Date, to the extent described herein, monies on deposit in the Reserve Fund will be applied to pay certain Loss Amounts and shortfalls in respect of amounts collected with respect to the related Collection Period. In addition, to the extent not otherwise required to make any of the payments specified under "Description of the Certificates-- Allocations and Distributions on the Certificates--Allocations and Distributions of Collections", monies on deposit in the Reserve Fund will be available to make payments to the Certificateholders should Collections ultimately be insufficient to reduce the Class A Certificate Balances or the Class B Certificate Balance to zero on the related Stated Maturity Date. A portion of the amounts on deposit in the Reserve Fund equal to the Class B Interest Reserve Amount will be available only to cover interest shortfalls with respect to the Class B Certificates, and will not be available to cover interest shortfalls, Loss Amounts or Certificate Principal Loss Amounts allocated to the Class A Certificates. The "Class B Interest Reserve Amount" with respect to any Monthly Allocation Date, means the lesser of (i) $ less all amounts previously withdrawn from the Reserve Fund and applied to make allocations or distributions in respect of interest accrued on the Class B Certificates or Certificate Principal Loss Amounts allocated thereto or (ii) % of the Class B Certificate Balance as of the day prior to such Monthly Allocation Date; provided that the Class B Interest Reserve Amount will be zero on and after any date on which any Rating Agency reduces its rating of the Class A Certificates to less than "A" or its equivalent or withdraws its rating of any Class of Class A Certificates (unless such rating is restored). Amounts on deposit in the Reserve Fund not allocated to the Class B Interest Reserve Amount will be available for application for all of the purposes described above. THE SPECIFIED RESERVE FUND BALANCE. The Reserve Fund will be created on or prior to the Closing Date with the deposit by the Transferor of the Initial Deposit. On each Monthly Allocation Date, the Reserve Fund will be supplemented by certain Collections in excess of those amounts required to be allocated or distributed to the Certificateholders and certain monies that otherwise would be distributed as Transferor Amounts, until the amount on deposit therein equals the applicable Specified Reserve Fund Balance. Except as described below, the "Specified Reserve Fund Balance" with respect to any Monthly Allocation Date will equal $30,780,787.98 (2.5% of the Aggregate Net Investment Value as of the Cutoff Date), except that, if on any Monthly Allocation Date (i) the average of the Charge-off Rates for the three preceding Collection Periods exceeds 1.25%, (ii) the average of the Delinquency Percentages for the three preceding Collection Periods exceeds 1.25%, or (iii) the Residual Value Test is not satisfied as of the related Determination Date, then the Specified Reserve Fund Balance will equal $61,561,575.96 (5.0% of the Aggregate Net Investment Value as of the Cutoff Date); provided, however, that the Specified Reserve Fund Balance shall in no event be more than the sum of the outstanding principal amounts of each Class of Certificates. The "Charge-off Rate" with respect to a Collection Period will equal the Aggregate Net Losses with respect to the Contracts expressed, on an annualized basis, as a percentage of the average of (i) the Aggregate Net Investment Value on the last day of the immediately preceding Collection Period and (ii) the Aggregate Net Investment Value on the last day of such Collection Period. The "Aggregate Net Losses" with respect to a Collection Period will equal the Discounted Principal Balance of all Contracts newly designated during such Collection Period as Charged-off Contracts minus the sum of (x) Net Liquidation Proceeds collected during such Collection Period with respect to all Charged-off Contracts and (y) the portion of amounts subsequently received in respect of Contracts liquidated in prior Collection Periods specified in the SUBI Supplement. The "Delinquency Percentage" with respect to a Collection Period will equal (a) the number of all outstanding Contracts 60 days or more delinquent (after taking into account permitted deferrals) as of the 62 last day of such Collection Period, determined in accordance with the Servicer's normal practices, plus (b) the number of repossessed Leased Vehicles that have not been liquidated (to the extent the related Contract is not otherwise reflected in clause (a) above), expressed as a percentage of the aggregate number of Current Contracts on the last day of such Collection Period. The "Residual Value Test" will not be satisfied as of any Determination Date if (i) with respect to the related Collection Period the number of Leased Vehicles returned to the Servicer during such period relating to Contracts that became Matured Contracts during such period is greater than 25% of all Contracts that, as of their respective origination dates, had been scheduled to become Matured Contracts during such period (provided that at least 500 such Contracts had been scheduled to become Matured Contracts during such Collection Period), and (ii) the average Net Matured Leased Vehicle Proceeds during the three immediately preceding calendar months (or the months of August and September 1997 in the case of the October 1997 Determination Date) is less than 75% of the average Residual Values of Leased Vehicles disposed of or liquidated during such period. A "Current Contract" will be a Contract that is not a Charged-off Contract, a Liquidated Contract, a Matured Contract or an Additional Loss Contract. A "Liquidated Contract" will be a Contract that has been the subject of a Prepayment in full or otherwise has been paid in full or, in the case of a Charged-off Contract, a Contract as to which the Servicer has determined that the final amounts in respect thereof have been paid. An "Additional Loss Contract" will be a Contract as to which the related SUBI Assets have been sold or otherwise disposed of by the Servicer, acting on behalf of the Titling Trust, to pay an Additional Loss Amount. The Transferor may, from time to time after the date of this Prospectus, request each Rating Agency to (a) approve a formula for determining the Specified Reserve Fund Balance that is different from the one described above that would result in a decrease in the amount of the Specified Reserve Fund Balance or (b) a change in the manner by which the Reserve Fund is funded or to meet the Specified Reserve Fund Balance. If each Rating Agency delivers a letter to the Trustee to the effect that the use of any such new formula or change will not result in a qualification, reduction or withdrawal of its then-current rating of any Class of Certificates, then such new formula or change will be implemented and, to the extent necessary, the Agreement will be amended, without the consent of any Certificateholder or Certificate Owner. WITHDRAWALS FROM THE RESERVE FUND. On each Deposit Date the Trustee shall withdraw from the Reserve Fund, to the extent available, and deposit in the SUBI Collection Account or Certificateholders' Account, as appropriate, an aggregate amount equal to the Required Amount. Amounts on deposit in the Reserve Fund will also be available to make certain other payments to Certificateholders and the Transferor. Monies on deposit in the Reserve Fund on a Monthly Allocation Date in excess of the Specified Reserve Fund Balance will be released to the Transferor. Income on investment of amounts held in the Reserve Fund will belong to the Transferor and will be distributed thereto on each Monthly Allocation Date. Any such amounts received by the Transferor shall be free of any claim of the Trust, the Trustee or the Certificateholders and shall not be available to the Trustee or the Trust for the purpose of making deposits to the Reserve Fund or making payments to the Investor Certificateholders, nor shall the Transferor be required to refund any amount properly received by it. MAINTENANCE OF THE ACCOUNTS The Accounts will be maintained with the Trustee so long as either (i) the short-term unsecured debt obligations of the Trustee are rated at least P-1 by Moody's and A-1+ by Standard & Poor's or (ii) the Trustee is a depository institution or trust company having a long-term unsecured debt rating from Moody's of at least Baa3 and corporate trust powers and the related Account is maintained in a segregated trust account in the corporate trust department of the Trustee. If the Trustee at any time does not qualify under either of these criteria, the Servicer shall, with the assistance of the Trustee, as necessary, cause the 63 related Account to be moved to a depository institution organized under the laws of the United States or any state thereof that does so qualify, or moved to a segregated trust account located in a corporate trust department of a depository institution or trust company as described above. PERMITTED INVESTMENTS At the direction of the Servicer, the Trustee or the Trust Agent, as the case may be, shall invest funds on deposit in the SUBI Collection Account and the Reserve Fund in one or more Permitted Investments maturing no later than the Deposit Date succeeding the date of such investment. Additionally, at the direction of the Servicer, the Trustee or the Trust Agent, as the case may be, shall invest funds on deposit in the Certificateholders' Account in one or more Permitted Investments maturing no later than the Deposit Date preceding the next relevant Certificate Payment Date or the Target Maturity Date, as appropriate and bearing interest at the Required Rate. It is expected that all or substantially all Permitted Investments identified by the Servicer with respect to amounts on deposit in the Certificateholders' Account will be TMCC Demand Notes. "Permitted Investments" will be specified in the SUBI Supplement and will include, among other things, U.S. treasury securities, certificates of deposit issued by highly rated U.S. depository institutions or trust companies (including the Trustee), demand or time deposits of, bankers acceptances issued by, or federal funds sold by highly rated U.S. depository institutions or trust companies or other savings institutions that are fully insured by the FDIC, certain repurchase obligations held by any Securitization Trustee backed by similar securities, certain highly rated mutual funds, certain debt securities issued by highly rated U.S. corporations, certain highly rated money market funds for which the Trustee or an Affiliate of the Trustee serves as an investment advisor, administrator, shareholder servicing agent and/or custodian and the TMCC Demand Notes. Notwithstanding the foregoing, (a) investments on which the obligor is the entity at which the related Account is located may mature on the related Deposit Date or Monthly Allocation Date, as the case may be, and (b) investments during the Revolving Period of Principal Collections and reimbursements of Loss Amounts and Certificate Principal Loss Amounts on deposit in the SUBI Collection Account may mature on such dates as in the Servicer's discretion will maintain sufficient cash to acquire Subsequent Contracts and Subsequent Leased Vehicles on the related Transfer Dates. All income or other gain from the foregoing investments generally shall be retained in the related Account with such gain in respect of funds in the SUBI Collection Account generally being treated as Interest Collections received in respect of the related Collection Period. Any loss resulting from such investments shall be charged to the related Account. The "Required Rate" with respect to any Permitted Investment of amounts held in the Certificateholders' Account in respect of principal for any Class of Certificates will be the related Certificate Rate, and with respect to amounts held in the Certificateholders' Account in respect of interest for any Class of Certificates will be the one month commercial paper rate, which rate will reset monthly. THE CONTINGENT AND EXCESS LIABILITY INSURANCE POLICIES In addition to the physical damage and liability insurance coverage required to be obtained and maintained by the lessees pursuant to the Contracts, and as additional protection in the event that any lessee fails to maintain all such required insurance, TMCC maintains contingent liability insurance with third party insurers for bodily injury and property damage suffered by third persons caused by any vehicle owned by any insured. TMCC also maintains with such insurers substantial amounts of excess insurance coverage for which the Titling Trust is an additional named insured (together with the aforementioned primary contingent liability insurance policy, the "Contingent and Excess Liability Insurance Policies"). These insurance policies collectively provide insurance coverage of $100 million per occurrence, and permit multiple claims in any policy period (with no annual or aggregate cap on the number of claims thereunder). Such Contingent and Excess Liability Insurance Policies are subject to significant per occurrence deductibles (generally $125,000, but $250,000 if the related lessees primary insurance policy has 64 lapsed or the related insurer denies coverage on the basis that TMCC or an approved TMCC affiliate is named as loss payee instead of the Titling Trust) in respect of which TMCC will indemnify the Trust. However, in the event that all such insurance coverage were exhausted and/or TMCC did not satisfy its indemnity obligations such that damages were assessed against the Titling Trust, various claims could be imposed against the Titling Trust Assets, including the SUBI Assets. In such event, investors in the Class A Certificates could incur a loss on their investment. However, the Titling Trust will be an additional named insured under the Contingent and Excess Liability Insurance Policies and payments made thereunder in respect of Leased Vehicles comprising SUBI Assets, and indemnity payments made by TMCC in respect of related deductibles, will constitute SUBI Assets. To the extent that payments under the Contingent and Excess Liability Insurance Policies are made to third party claimants, they will reduce the Additional Loss Amounts that otherwise would be required to be paid out of the SUBI Assets. SEE "Risk Factors--Risks Associated with Vicarious Tort Liability with Respect to Leased Vehicles", "--Structural Considerations-- Allocation of Titling Trust Liabilities" and "--Third-Party Liens on SUBI Assets" and "Certain Legal Aspects of the Contracts and the Leased Vehicles--Vicarious Tort Liability". The Servicing Agreement will provide that so long as any Certificates are outstanding, the Titling Trustee and TMCC will maintain one or more Contingent and Excess Liability Insurance Policies with coverages specified in the Servicing Supplement unless each Rating Agency has delivered notice to the Trustee to the effect that failure to maintain any such insurance policy will not cause it to qualify, reduce or withdraw its then-current rating of any Class of Certificates. The foregoing obligations of TMCC will survive any termination of TMCC as Servicer under the Servicing Agreement. SUBORDINATION The rights of the Class B Certificateholders will be subordinated to the rights of the Class A Certificateholders to the extent described herein. This subordination is intended to enhance the likelihood of timely receipt by Class A Certificateholders of the full amount of interest and principal required to be paid to them, and to afford such Certificateholders limited protection against losses in respect of the Contracts. The Class B Certificateholders will not receive any distributions of interest with respect to a Certificate Payment Date until the full amount of interest accrued on the Class A Certificate Balances and on unreimbursed Certificate Principal Loss Amounts previously allocated thereto has been distributed to the Class A Certificateholders. The Class B Certificateholders will not receive any distributions of principal with respect to any Certificate Payment Date until the Class Certificate Principal Balance and each Class of Class A Certificates has been reduced to zero. Distributions of interest on the Class B Certificates, to the extent of collections on Contracts allocable to interest and the amount on deposit in the Reserve Fund, will not be subordinated to the payment of principal of or reimbursement of Loss Amounts allocated to the Class A Certificates. In addition, the rights of the Certificateholders to receive certain distributions with respect to the Contracts will be subordinated to the rights of the Servicer (to the extent that the Servicer is paid the Servicing Fee with respect to the related Collection Period, including any unpaid Servicing Fees with respect to one or more prior Collection Periods and any additional servicing compensation as described herein, and to the extent the Servicer is reimbursed for certain unreimbursed Advances). ADDITIONAL DOCUMENT PROVISIONS The following summaries of certain provisions of the Agreement, the Titling Trust Agreement, the Servicing Agreement, TMCC Demand Notes and of the Indenture do not purport to be complete and are qualified in their entirety by reference to such agreements, copies of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part. Capitalized terms used but not defined in such summaries have the meanings given to them in the respective agreements. 65 ADDITIONAL AGREEMENT PROVISIONS Certain additional provisions of the Agreement are summarized below. NO PETITION The Trustee will agree not to institute, or join in, any bankruptcy or similar proceeding against the Transferor, TMCC, the Titling Trust or the Titling Trustee until one year and one day after the later of (i) payment of the Certificates in full and (ii) final payment of all other financings involving interests in the Titling Trust (including the transaction described herein and all other transactions involving the UTI and each Other SUBI). AMENDMENT The Agreement may be amended by the Transferor and the Trustee, without the consent of the Certificateholders, to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein, to add any other provisions with respect to matters or questions arising under the Agreement which are not inconsistent with the provisions of the Agreement or to add or amend any provision therein in connection with permitting transfers of the Class B Certificates; provided that any such action will not, in the good faith judgment of the parties, materially and adversely affect the interest of any Certificateholder and the Trustee shall have been furnished with an opinion of counsel to the effect that such amendment will not materially and adversely affect the interest of any Certificateholder. The Agreement may also be amended from time to time by the Transferor and the Trustee (including with respect to changing the formula for determining the Specified Reserve Fund Balance, the manner in which the Reserve Fund is funded, changing the remittance schedule for collection deposits in the SUBI Collection Account or changing the definition of Permitted Investments) if (a) the Trustee has been furnished with a letter from each Rating Agency to the effect that such amendment would not cause its then-current rating on any Class of Certificates to be qualified, reduced or withdrawn or (b) the Trustee has received the consent of the holders of Certificates evidencing not less than 51% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of each Class of Certificateholders; provided, however, that no such amendment shall increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the SUBI or the SUBI Certificate or distributions that shall be required to be made on any Class of Certificates or the applicable Certificate Rate and no amendment of any type shall reduce the percentage of the aggregate Voting Interests of the Certificates of any Class required to consent to any such amendment, in each case without the consent of all Certificateholders and Certificate Owners. Any amendment eliminating the Reserve Fund or reducing the Specified Reserve Fund Balance shall also require the Transferor to deliver to the Trustee an opinion of counsel to the effect that after such amendment, for federal income tax purposes, the Trust will not be treated as an association taxable as a corporation, and the Class A Certificates will, and the Class B Certificates should, properly be characterized as indebtedness that is secured by the assets of the Trust. LIST OF CERTIFICATEHOLDERS Upon a written request of the Servicer, the Trustee, as Certificate Registrar, will provide to the Servicer within 15 days after receipt thereof a list of the names and addresses of all Certificateholders. In addition, three or more Certificateholders or holders of Certificates evidencing not less than 25% of the Voting Interests of any Class of Certificates, upon compliance by such Certificateholders with certain 66 provisions of the Agreement, may request that the Trustee, as Certificate Registrar, afford such Certificateholders access during business hours to the current list of Certificateholders for purposes of communicating with other Certificateholders with respect to their rights under the Agreement. SEE "Description of the Certificates--Book-Entry Registration" and "--Definitive Certificates". The Agreement will not provide for the holding of any annual or other meetings of Certificateholders. THE TRUSTEE U.S. Bank will be the Trustee under the Agreement. The Corporate Trust Office of the Trustee is located at One Illinois Center, 111 E. Wacker Drive, Suite 3000, Chicago, Illinois 60601. U.S. Bank is not affiliated with TMCC, although it does act as a service provider to TMCC. The Trustee may resign at any time, in which event the Transferor will be obligated to appoint a successor Trustee. The Transferor may also remove the Trustee if the Trustee ceases to be eligible to continue as such under the Agreement, becomes legally unable to act or becomes insolvent. In such circumstances, the Transferor will be obligated to appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee will not become effective until acceptance of the appointment by such successor Trustee. The Trustee must be a bank or trust company organized under the laws of the United States, any state of the United States, the District of Columbia or the Commonwealth of Puerto Rico, authorized to exercise corporate trust powers under those laws, and subject to supervision or examination by federal or state laws, with a combined capital and surplus of at least $50,000,000 and a long-term deposit rating no lower than Baa3 by Moody's, or must be otherwise acceptable to each Rating Agency. A co-trustee or separate trustee appointed as described above need not meet these eligibility requirements. Holders of Certificates evidencing not less than 25% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class, generally will have the power to direct any proceeding for any remedy available to the Trustee under the Agreement, and the exercise of any trust or power conferred on the Trustee by the Agreement (including actions by the Trustee in its capacity as a party to, or a third-party beneficiary of, the SUBI Supplement or the Servicing Supplement). However, the Trustee will not be required to follow such a direction if, after being advised by counsel, it concludes that the action is unlawful, or if it in good faith determines that the proceedings directed would be illegal, would subject it to personal liability or would be unduly prejudicial to the rights of other Certificateholders. A Certificateholder may institute proceedings under the Agreement, but only if (i) such holder previously has given to the Trustee written notice of default, (ii) holders of Certificates evidencing not less than 25% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class, have made written request upon the Trustee to institute such proceeding in its own name as Trustee and have offered to the Trustee reasonable indemnity and (iii) the Trustee for 30 days has neglected or refused to institute any such proceeding. The Trustee will be under no obligation to exercise any of the trusts or powers vested in it by the Agreement or to make any investigation of matters arising thereunder or to institute, conduct or defend any litigation thereunder or in relation thereto at the request, order or direction of any of the Certificateholders, unless such holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. Certificateholders will have no express right to institute a proceeding directly under the Titling Trust Agreement or the Servicing Agreement. GOVERNING LAW The Agreement will be governed by the laws of the State of California. 67 THE TITLING TRUST AGREEMENT THE SUBI, THE OTHER SUBIS AND THE UTI TMCC is the grantor and (as holder of the UTI) a beneficiary of the Titling Trust. In its capacity as grantor, TMCC will from time to time assign, transfer, grant and convey (or cause to be assigned, transferred, granted and conveyed) to the Titling Trustee in trust the Titling Trust Assets. TMCC will hold the UTI, which represents a beneficial interest in all Titling Trust Assets other than the SUBI Assets and the Other SUBI Assets. TMCC may pledge the UTI as security for obligations to third-party lenders and may create and sell or pledge Other SUBIs in connection with financings similar to the transaction described herein. Each holder or pledgee of the UTI and any Other SUBI will be required expressly to disclaim any interest in the Titling Trust Assets other than the UTI Assets or the Other SUBI Assets, respectively, and to subordinate fully any claims to such other Titling Trust Assets in the event that this disclaimer is not given effect. Except under the limited circumstances described under "Certain Legal Aspects of the Titling Trust--Structural Considerations--Allocation of Titling Trust Liabilities", the SUBI Assets will not be available to make payments in respect of, or pay expenses relating to, the UTI or any Other SUBIs, and the Other SUBI Assets evidenced by any Other SUBIs will not be available to make payments on, or pay expenses relating to, the SUBI, the UTI or any other SUBI. Each Other SUBI will be created pursuant to a supplement to the Titling Trust Agreement (each, an "Other SUBI Supplement") which will amend the Titling Trust Agreement only with respect to the Other SUBI to which it relates. The SUBI Supplement will amend the Titling Trust Agreement only as it relates to the SUBI, and no Other SUBI Supplement will amend the Titling Trust Agreement as it relates to the SUBI. All Titling Trust Assets, including the SUBI Assets, will be owned by the Titling Trust on behalf of the beneficiaries of the Titling Trust. The SUBI Assets will be segregated from the rest of the Titling Trust Assets on the books and records of the Titling Trustee and the Servicer and the holders of other beneficial interests in the Titling Trust (including the UTI and any Other SUBIs) will have no rights to the SUBI Assets. Liabilities of the Titling Trust shall be allocated to the SUBI Assets, the UTI Assets or Other SUBI Assets, respectively, if incurred with respect thereto, or will be allocated pro rata among all Titling Trust Assets if incurred with respect to the Titling Trust Assets generally. TMCC has obtained an insurance policy naming the Titling Trust as an additional loss payee and providing coverage with respect to shortfalls in amounts collected in respect of the Residual Values of lease contracts and related leased vehicles that are Titling Trust Assets and that are or become SUBI Assets. The proceeds of such policy with respect to Contracts and Leased Vehicles that are SUBI Assets will also be SUBI Assets, but will be retained by the Transferor and not transferred to the Trust with the SUBI Certificate and will therefore not be available as Collections, Net Insurance Proceeds or otherwise for the benefit of the Certificateholders. Additional Loss Amounts will be incurred in the event that any uninsured liability to third parties (i.e., litigation risk) on the part of the Titling Trust is ultimately borne by the SUBI Assets, whether such liability is incurred (i) with respect to the SUBI Assets and is therefore allocated to the SUBI Assets pursuant to the SUBI Supplement, (ii) with respect to the Titling Trust Assets generally and a pro rata portion of such liability is allocated to the SUBI Assets pursuant to the Titling Trust Agreement or (iii) with respect to UTI Assets or Other SUBI Assets if such UTI Assets or Other SUBI Assets are insufficient to pay such liability. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations--Allocation of Titling Trust Liabilities" and "--Third-Party Liens on SUBI Assets". For purposes of making calculations with respect to distributions on the Certificates, "Additional Loss Amounts" will include both losses incurred with respect to the foregoing uninsured liabilities and monies reserved within the SUBI Collection Account against future losses in respect of such liabilities by the Servicer on behalf of the Trustee. 68 SPECIAL OBLIGATIONS OF TMCC AS BENEFICIARY AND GRANTOR TMCC, as grantor and holder of the UTI Certificate, will be liable for all debts and obligations arising with respect to the Titling Trust Assets or the operation of the Titling Trust; provided, however, that its liability to any holder, assignee or pledgee of the SUBI or the SUBI Certificate will be governed by the SUBI Supplement, the Agreement and the agreement pursuant to which TMCC transfers the SUBI to the Transferor, and its liability with respect to any transfer, pledge or other financing of the UTI or any UTI Certificate, or any Other SUBI or Other SUBI Certificate shall be as set forth in the documents relating thereto. To the extent that TMCC shall pay or suffer any liability or expense with respect to the Titling Trust Assets or the operation of the Titling Trust (including reasonable attorneys' fees and expenses, but excluding all obligations with respect to making Advances, Reallocation Payments and Reallocation Deposits), TMCC shall be indemnified, defended and held harmless out of the Titling Trust Assets. TITLING TRUSTEE DUTIES AND POWERS; FEES AND EXPENSES Pursuant to the Titling Trust Agreement, the Titling Trustee will be required to, among other things, (i) apply for and maintain, or cause to be applied for and maintained, all licenses, permits and authorizations necessary and appropriate to accept assignments of the Contracts and the Leased Vehicles and to carry out its duties as Titling Trustee, including motor vehicle dealer licenses, and (ii) file, or cause to be filed, applications for certificates of title as are necessary and appropriate so as to cause the Titling Trust to be recorded as the holder of legal title of record to the Leased Vehicles. The Titling Trustee may be replaced by TMCC only if it ceases to be qualified in accordance with the terms of the Titling Trust Agreement and shall be removed if certain representations and warranties made by the Titling Trustee therein prove to have been materially incorrect when made, or in certain events of bankruptcy or insolvency thereof. The Trustee, as holder of the SUBI Certificate, on behalf of the Certificateholders may, or at the direction of holders of Certificates evidencing not less than 51% of the Voting Interests of the Class A Certificates and the Class B Certificates voting together as a single class will, exercise its powers under the Titling Trust Agreement to cause the Trustee to be removed or replaced for a material breach of its obligations. The Titling Trustee will make no representations as to the validity or sufficiency of the SUBI or the SUBI Certificate (other than as to the execution and authentication of the SUBI Certificate), or of any Contract, Leased Vehicle or related document, will not be responsible for performing any of the duties of TMCC or the Servicer and will not be accountable for the use or application by any owners of beneficial interests in the Titling Trust Assets of any funds paid in respect of the Titling Trust Assets, or the investment of any of such monies before such monies are deposited into the accounts relating to the SUBI, the Other SUBIs and the UTI. The Titling Trustee will not independently verify the Contracts or the Leased Vehicles. The duties of the Titling Trustee will generally be limited to the holding and liquidation of lease contracts, the titling of the related leased vehicles in the name of the Titling Trust, the creation of the SUBI, the Other SUBIs and the UTI, the maintenance of the SUBI Collection Account and accounts relating to the Other SUBIs and the UTI and the receipt of the various certificates, reports or other instruments required to be furnished to the Titling Trustee under the Titling Trust Agreement, in which case it will only be required to examine them to determine whether they conform to the requirements of the Titling Trust Agreement. The Titling Trustee will be under no obligation to exercise any of the rights or powers vested in it by the Titling Trust Agreement or to make any investigation of matters arising thereunder or to institute, conduct or defend any litigation thereunder or in relation thereto at the request, order or direction of the Servicer, the UTI Beneficiary or by the holders of a majority in interest in the SUBI, unless such party or parties have offered to the Titling Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby. The reasonable expenses of every such exercise of rights 69 or powers or examination shall be paid by the party or parties requesting such exercise or examination or, if paid by the Titling Trustee, shall be a reimbursable expense of the Titling Trustee. The Titling Trustee may enter from time to time into one or more agency agreements (each, an "Agency Agreement") with such person or persons, including without limitation any affiliate of the Titling Trustee (each, a "Trust Agent"), as are by experience and expertise qualified to act in a trustee capacity and otherwise acceptable to TMCC. The Titling Trustee has engaged U.S. Bank as the Trust Agent. Pursuant to the Agency Agreement, the Trust Agent shall perform each and every obligation of the Titling Trustee under the Titling Trust Agreement. The Titling Trustee shall be paid out of Titling Trust Assets reasonable compensation and reimbursement of all reasonable expenses (including reasonable attorneys' fees). However, with regard to the SUBI Assets allocable to the SUBI, this requirement is subject to provisions regarding Capped Titling Trust Administrative Expenses. SEE "Description of the Certificates--Allocations and Distributions on the Certificates--Allocations and Distributions of Collections". INDEMNITY OF TITLING TRUSTEE AND TRUST AGENTS The Titling Trustee and each Trust Agent will be indemnified and held harmless out of and to the extent of the Titling Trust Assets with respect to any loss, liability or expense, including reasonable attorneys' fees and expenses (collectively "Claims"), arising out of or incurred in connection with (i) any of the Titling Trust Assets (including without limitation any Claims relating to lease contracts or leased vehicles of the Titling Trust, any personal injury or property damage claims arising with respect to any such leased vehicle or any claim with respect to any tax arising with respect to any Titling Trust Asset) or (ii) the Titling Trustee's or the Trust Agent's acceptance or performance of the trusts and duties contained in the Agreement or any Agency Agreement. Notwithstanding the foregoing, neither the Titling Trustee nor any Trust Agent will be indemnified or held harmless out of the Titling Trust Assets as to any Claim (i) which TMCC shall have satisfied because of its liability therefor pursuant to the Servicing Agreement, (ii) incurred by reason of the Titling Trustee's or such Trust Agent's willful misfeasance, bad faith or negligence or (iii) incurred by reason of the Titling Trustee's or Trust Agent's breach of its respective representations and warranties pursuant to the Titling Trust Agreement or the Servicing Supplement. Such indemnities may result in Additional Loss Amounts to the extent payable in respect of the SUBI Assets or allocated to the SUBI. TERMINATION The Titling Trust and the respective obligations and responsibilities of TMCC and the Titling Trustee shall terminate upon the last to occur of (i) the payment to TMCC and each permitted purchaser, assignee and pledgee of any of TMCC's interests in the Titling Trust (including the Trustee, with respect to the SUBI) of all amounts and obligations required to be paid to them, and the expiration or termination of all financings secured by the Titling Trust Assets by their respective terms and (ii) the maturity or liquidation and the disposition of all Titling Trust Assets and the disposition to or upon the order of TMCC or any permitted purchaser, assignee or pledgee of all net proceeds thereof. NO PETITION The Titling Trustee and the Trust Agent will agree not to institute, or join in, any bankruptcy or similar proceeding against the Transferor or TMCC until one year and one day after final payment of all financings involving interests in the Titling Trust. Each pledgee or assignee of any UTI or other SUBI must give a similar non-petition covenant. 70 AMENDMENT The Titling Trust Agreement may be amended by written agreement between TMCC and the Titling Trustee, with the approval of the Trustee (which may be given in the circumstances described under "Additional Document Provisions--Additional Agreement Provisions--Amendment"). To the extent that any such amendment relates to or affects the UTI or any Other SUBI in addition to the SUBI, the SUBI Certificate or the SUBI Assets, such amendment may require certain other approvals. GOVERNING LAW The Titling Trust Agreement will be governed by the laws of the State of Delaware. TRUSTEE AS THIRD-PARTY BENEFICIARY As the holder of the SUBI Certificate, the Trustee will be a third-party beneficiary of the Titling Trust Agreement. Therefore, the Trustee may, and, upon the direction of Certificateholders representing at least 51% of the Voting Interests of the Class A Certificates and the Class B Certificates (voting together as a single class) will, exercise any right conferred by the Titling Trust Agreement upon a holder of any interest in the SUBI. THE SERVICING AGREEMENT Pursuant to the Servicing Agreement, the Servicer will perform on behalf of the Titling Trustee all of the obligations of the Trust as lessor under the Contracts, including, but not limited to, collecting and posting payments, responding to inquiries of the lessees, investigating delinquencies, sending payment statements to the lessees, collecting and remitting certain sales and use and other taxes to state and local governments and agencies, advancing certain licensing fees, payments of fines for citations and costs of disposition of Leased Vehicles related to Charged-off Contracts, Matured Contracts and Additional Loss Contracts and policing the Contracts, commencing legal proceedings to enforce a Contract on behalf of the Titling Trust, administering the Contracts, including accounting for collections and furnishing monthly and annual statements to the Titling Trustee with respect to distributions and generating federal income tax information. The Titling Trustee will furnish the Servicer with all powers of attorney and other documents necessary or appropriate to enable the Servicer to carry out such servicing and administrative duties under the Servicing Agreement. The Trustee will be a third-party beneficiary of the Servicing Agreement. CUSTODY OF CONTRACT DOCUMENTS AND CERTIFICATES OF TITLE To assure uniform quality in servicing the Contracts and TMCC's own portfolio of automobile and light duty truck lease contracts and to reduce administrative costs, the Titling Trustee will appoint TMCC, as Servicer, to be its agent, bailee and custodian of the Contracts, the certificates of title relating to the Leased Vehicles and insurance policies and other documents relating to the Contracts, the related lessees and the Leased Vehicles. Such documents will not be physically segregated from other automobile and light duty truck lease contracts, certificates of title and insurance policies and other documents relating to such lease contracts and leased vehicles of TMCC, or those which TMCC services for others, including those leased vehicles constituting Titling Trust Assets that are not evidenced by the SUBI. The accounting records and computer systems of TMCC will reflect the interests of the holders of interest in the SUBI in the Initial Contracts, the Subsequent Contracts, the Initial Leased Vehicles, the Subsequent Leased Vehicles and all related Contract Rights, and "protective" UCC financing statements reflecting certain interests in the Contracts and the Contract Rights will be filed. SEE "Material Legal Aspects of the Titling Trust--Structural Considerations--Back-up Security Interest in Certain SUBI Assets" and "Certain Legal Aspects of the Contracts and Leased Vehicles--Back-up Security Interests". The Servicer will be responsible for filing all periodic sales and use tax or property (real or personal) tax reports, periodic renewals of licenses and permits, periodic renewals of qualification to act as a trust and a business trust and other 71 periodic governmental filings, registration or approvals arising with respect to or required of the Titling Trustee or the Titling Trust. COLLECTIONS The Servicer will service, administer and collect all amounts due on or in respect of the Contracts. The Servicer will make reasonable efforts to collect all such amounts and, in a manner consistent with the Servicing Agreement, will be obligated to service the Contracts generally in accordance with its customary and usual procedures in respect of lease contracts serviced by it for its own account. Consistent with its usual procedures, the Servicer may, in its discretion, defer one or more payments (having the practical effect of extending the Maturity Date of any Contract) by up to four months in the aggregate, provided that no Contract may be deferred more than four times and that the new Maturity Date of any such Contract must not be later than the last day of the Collection Period with respect to the Stated Maturity Date in respect of the Class B Certificates occurs. The amount of any Deferral Fee received by the Servicer in connection with the deferral of a Contract will be treated as additional servicing compensation and will not be deposited into the SUBI Collection Account. The Servicing Agreement will provide that Advances be made with respect to Contracts as to which deferrals of payments are made that result in any diminution of the amount of Collections received in connection therewith relative to the originally scheduled Monthly Payments. The Servicing Agreement will also provide for the reallocation to the UTI from the SUBI (accompanied by an appropriate Reallocation Payment by TMCC) of each Contract as to which more than four deferrals are made or as to which, through deferrals or extensions, the maturity date is extended beyond the last day of the Collection Period relating to the Stated Maturity Date in respect of the Class B Certificates. Upon any such reallocation, such Contract and the related Leased Vehicle and other related assets and rights will be UTI Assets and will no longer constitute SUBI Assets. NOTIFICATION OF LIENS AND CLAIMS The Servicer will be required to notify the Transferor (in the event that TMCC is not acting as the Servicer), the Trustee and the Titling Trustee as soon as practicable of all liens or claims of whatever kind made by a third party that would materially adversely affect the interests of, among others, the Transferor, the Titling Trust, the Trust or any Certificateholder in or with respect to the Contracts or Leased Vehicles. Following its learning of any such lien or claim with respect to the Contracts or Leased Vehicles, the Servicer will take whatever actions it deems reasonably necessary to cause such lien or claim to be removed. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations". ADVANCES In addition to Advances with respect to delinquent Monthly Payments, on each Deposit Date, the Servicer will be obligated to make, by deposit into the SUBI Collection Account, an advance with respect to delinquent Contracts and Contracts as to which it has deferred payments as described above under "Collections" in an amount equal to the aggregate amount of Monthly Payments due thereon but not received during the related Collection Period. Notwithstanding the foregoing, the Servicer will not be required to make an Advance to the extent that such Advance would constitute a Nonrecoverable Advance. A "Nonrecoverable Advance" will be any Advance that, in the reasonable judgment of the Servicer, may not be ultimately recoverable by the Servicer from Net Liquidation Proceeds or otherwise. In making Advances, the Servicer will assist in maintaining a regular flow of scheduled principal and interest payments on such delinquent or deferred Contracts, rather than to guarantee or insure against losses. Accordingly, all Advances including Nonrecoverable Advances shall be reimbursable to the Servicer monthly, without interest, from Collections prior to the deposit thereof into the SUBI Collection Account. 72 SECURITY DEPOSITS The Contract Rights will include all rights under the Contracts to the security deposits paid by the lessees at the time of origination of the Contracts (the "Security Deposits") to the extent applied to cover excess wear and tear charges or treated as Liquidation Proceeds as described below. As part of its general servicing obligations, the Servicer will retain possession of each Security Deposit remitted by the lessees as an agent for the Titling Trust and will apply the proceeds of Security Deposits in accordance with the terms of the Contracts, its customary and usual servicing procedures and applicable law. However, in the event that any Contract becomes a Charged-off Contract or the related Leased Vehicle is repossessed, the related Security Deposit will, to the extent provided by applicable law and such Contract, constitute Liquidation Proceeds. The Titling Trustee may not have an interest in the Security Deposits that is enforceable against third parties until such time as they are deposited into the SUBI Collection Account. The Servicer will not be required to segregate Security Deposits from its own funds, and any income earned from any investment thereof by the Servicer shall be for the account of the Servicer as additional servicing compensation. INSURANCE ON LEASED VEHICLES The terms of the Contracts require each lessee to maintain in full force and effect during the term of a Contract a comprehensive collision and physical damage insurance policy covering the actual cash value of the related Leased Vehicle and naming the Titling Trust as loss payee. The terms of the Contracts also require each lessee to maintain bodily injury and property damage liability insurance in amounts equal to the greater of the amount prescribed by applicable state law or industry standards as set forth in the Contract and naming the Titling Trust as an additional insured. Since lessees may choose their own insurers to provide the required coverage, the specific terms and conditions of their policies vary. If a lessee fails to obtain or maintain the required insurance, the related Contract will be in default. It is the practice of TMCC not to obtain insurance on behalf of and at the expense of the related lessee. TMCC's central insurance tracking unit, which monitors compliance with such lease contract provisions, will initiate follow-up procedures, including the telephone and mail contact with the related lessee, upon being alerted by the tracking system that any lessee has not obtained or is not maintaining required insurance. Typically, if such default is not cured within 70 days from the date TMCC's central insurance tracking unit becomes aware of such default by the tracking system, the related lease contract is forwarded to the appropriate TMCC branch for follow-up handling, including possible repossession of the related Leased Vehicles if the related lessee does not timely obtain a satisfactory replacement policy. The policies issued with respect to a significant number of the Contracts may name TMCC rather than the Titling Trust as additional loss payee. If a primary insurer makes payment under such a policy to TMCC, TMCC will apply such amounts or forward such amounts to the Titling Trust for application as a portion of Net Insurance Proceeds. If a primary insurer failed to make payments under a policy to the lessee and also to TMCC and the Titling Trust, losses could be experienced by the Certificateholders. However, the Transferor has been advised by the primary provider of the Contingent and Excess Liability Policies described herein that such provider will not refuse any claim under the Contingent and Excess Liability Policies solely because a primary policy names TMCC or an approved TMCC affiliate, rather than the Titling Trust, as additional loss payee (although under such circumstances, if the primary insurer denies a claim on such basis, a deductible of $250,000 (rather than the standard deductible of $125,000) will be payable by TMCC, as to which TMCC will indemnify the Trust). TMCC does not require lessees to carry credit disability, credit life or credit health insurance or other similar insurance coverage which provides for payments to be made on the Contracts on behalf of such lessees in the event of disability or death. To the extent that such insurance coverage is obtained by a lessee, payments received in respect of such coverage may be applied to payments on the related Contract to the extent that the lessee's beneficiary chooses to do so. 73 REALIZATION UPON CHARGED-OFF CONTRACTS The Servicer will use commercially reasonable efforts to repossess and liquidate the Leased Vehicle relating to a Contract that comes into and continues in default and for which no satisfactory arrangements can be made for collection of delinquent payments. Such liquidation may be through repossession of such Leased Vehicle and disposition at a public or private sale, or the Servicer may take any other action permitted by applicable law. The Servicer may enforce all rights under any such Contract, sell the Leased Vehicle in accordance with the Contract and commence and prosecute any proceedings in connection with the Contract. In connection with any such repossession, the Servicer will follow its usual and customary practices and procedures in respect of lease contracts serviced by it for its own account, and in any event will act in compliance with all applicable laws. The Servicer will be required to repair the Leased Vehicle if it reasonably determines that such repairs will increase the related Net Repossessed Vehicle Proceeds. The Servicer will be responsible for all costs and expenses incurred in connection with the sale or other disposition of Leased Vehicles related to Charged-off Contracts and other Contracts as to which a lessee has defaulted, but will be entitled to reimbursement to the extent that such costs constitute Repossessed Vehicle Expenses or other Liquidation Expenses or expenses recoverable under an applicable insurance policy. Proceeds from the sale or other disposition of repossessed Leased Vehicles will constitute Repossessed Vehicle Proceeds and will be deposited into the SUBI Collection Account. The Servicer will be entitled to reimbursement of all related Repossessed Vehicle Expenses, and Principal Collections in respect of a Collection Period will include all Net Repossessed Vehicle Proceeds collected during such Collection Period. MATURED LEASED VEHICLE INVENTORY Upon the scheduled maturity of a Contract, the related lessee has the option to acquire the related Leased Vehicle for an amount equal to its Residual Value plus any applicable taxes and all other incidental charges which may be due under such Contract. If the lessee chooses not to exercise this option but instead returns the Leased Vehicle, the dealer to whom such vehicle is returned will have the option to purchase such vehicle for the same price. TMCC disposes of off-lease and repossessed vehicles not purchased by the related lessee or dealer to whom the vehicle is returned through regional automobile auctions. Off-lease and repossessed vehicles not yet disposed of constitute Matured Leased Vehicle Inventory. Principal Collections in respect of a Collection Period will include all Net Matured Leased Vehicle Proceeds collected during such Collection Period. The Servicer also will be entitled to reimbursement of certain payments made and expenses and charges incurred by it in the ordinary course of servicing the Contracts (including payments it makes on behalf of the related lessees in connection with the payment of taxes, vehicle registration, clearance of parking tickets and similar items) from Collections with respect to the related Contracts, separate payment thereof by the related lessees or from amounts realized upon the final disposition of the related Leased Vehicle. To the extent such amounts are reimbursed prior to or at the final disposition of the related leased vehicle but remain unpaid by the related lessee, such unreimbursed amounts (together with any unpaid Monthly Payments under the related Contract) will be treated as Matured Leased Vehicle Expenses or Liquidation Expenses, as the case may be, and will therefor reduce Net Matured Leased Vehicle Proceeds or Liquidation proceeds, as the case may be. Related Matured Leased Vehicle Expenses may be retained by the Servicer or released from amounts on deposit in the SUBI Collection Account upon request therefor presented to the Trustee by the Servicer together with any supporting documentation reasonably requested by the Trustee. Any Residual Value Surplus for a Collection Period will be released to the Transferor on the related Monthly Allocation Date, and thereafter neither the Trust nor any Certificateholder will have a claim to or interest in such amounts. RECORDS, SERVICER DETERMINATIONS AND REPORTS The Servicer will retain or cause to be retained all data (including, without limitation, computerized records, operating software and related documentation) relating directly to or maintained in connection 74 with the servicing of the Contracts for at least 2 years after the termination of the Trust. Upon the occurrence and continuance of an Event of Servicing Termination and termination of the Servicer's obligations under the Servicing Agreement, the Servicer will use commercially reasonable efforts to effect the orderly and efficient transfer of the servicing of the Contracts, including all such records to the extent necessary, to a successor servicer. The Servicer will perform certain monitoring and reporting functions on behalf of the Transferor, the Trustee, the Titling Trustee and Certificateholders, including the preparation and delivery to the Trustee, the Titling Trustee and each Rating Agency of a monthly certificate, on or before each Determination Date, setting forth all information necessary to make all distributions required in respect of the related Collection Period (the "Servicer's Certificate"), and the preparation and delivery of (i) monthly statements setting forth information described under "Description of the Certificates--Statements to Certificateholders" and (ii) an annual officer's certificate specifying, among other things, the occurrence and status of any Event of Servicing Termination. EVIDENCE AS TO COMPLIANCE The Servicing Agreement will provide that a firm of nationally recognized independent public accountants will furnish to the Trustee annually, commencing in 1998, a statement as to compliance by the Servicer during the preceding twelve months (or since the Closing Date in the case of the first such statement) with certain standards relating to the servicing of the Contracts. The Servicing Agreement will also provide for delivery to the Trustee, substantially simultaneously with the delivery of such accountants' statement, of a certificate signed by an officer of the Servicer stating that the Servicer has fulfilled its obligations under the Servicing Agreement throughout the preceding twelve months (or since the Closing Date in the case of the first such certificate) or, if there has been a default in the fulfillment of any such obligation, describing each such default. Copies of such statements and certificates may be obtained by Certificate Owners or Class A Certificateholders by a request in writing addressed to the Trustee at its Corporate Trust Office. SERVICING COMPENSATION The Servicer will be entitled to compensation for the performance of its servicing obligations under the Servicing Agreement. The Servicer will be entitled to receive on each Monthly Allocation Date, the Servicing Fee in respect of the related Collection Period equal to one-twelfth of the product of 1.00% and the Aggregate Net Investment Value as of the first day of the related Collection Period (or, in the case of the first Monthly Allocation Date, as of the Cutoff Date). The Servicing Fee will be calculated and paid based upon a 360-day year consisting of twelve 30-day months. So long as TMCC is the Servicer, it may, by notice to the Trustee and the Titling Trustee, on or before a Determination Date, elect to waive the Servicing Fee with respect to the related Collection Period, so long as TMCC believes that sufficient collections will be available from Interest Collections on one or more future Monthly Allocation Dates to pay such waived Servicing Fee, without interest. In such event, the Servicing Fee for such Collection Period shall be deemed to equal zero for all purposes of the Agreement and the Servicing Agreement. The Servicer will also be entitled to additional servicing compensation in the form of certain late payment fees, Deferral Fees and other administrative fees or similar charges paid with respect to the Contracts, and earnings from the investment of Security Deposits (to the extent lawful and as provided in the Contracts). SEE "Additional Document Provisions--The Servicing Agreement-- Security Deposits". The Servicer will be entitled to retain Deferral Fees paid in connection with deferred Contracts as additional servicing compensation. The Servicer will pay all expenses incurred by it in connection with its servicing activities under the Servicing Agreement, including the payment of Uncapped Titling Trust Administrative Expenses allocable to the SUBI, and will not be entitled to reimbursement of such expenses except to the extent any such expenses constitute Liquidation Expenses in respect of a Contract or Leased 75 Vehicle or reasonable expenses under an applicable insurance policy, or to the extent that Uncapped Titling Trust Administrative Expenses are reimbursed out of Interest Collections. The Servicing Fee will compensate the Servicer for performing the functions of a third party servicer of the Contracts as an agent for the Trustee under the Servicing Agreement, including collecting and posting payments, responding to inquiries of lessees on the Contracts, investigating delinquencies, policing the SUBI Assets, administering the Contracts, making Advances, accounting for collections and furnishing monthly and annual statements to the Trustee with respect to distributions and generating federal income tax information. SERVICER RESIGNATION AND TERMINATION The Servicer may not resign from its obligations and duties under the Servicing Agreement unless it determines that its duties thereunder are no longer permissible by reason of a change in applicable law or regulations. No such resignation will become effective until a successor servicer has assumed the Servicer's obligations under the Servicing Agreement. The Servicer may not assign the Servicing Agreement or any of its rights, powers, duties or obligations thereunder except as otherwise provided therein or except in connection with a consolidation, merger, conveyance, transfer or lease made in compliance with the Servicing Agreement. The rights and obligations of the Servicer under the Servicing Agreement may be terminated following the occurrence and continuance of an Event of Servicing Termination. SEE "Additional Document Provisions--The Servicing Agreement-- Rights Upon Event of Servicing Termination". INDEMNIFICATION BY THE SERVICER The Servicer will indemnify the Trustee and its agents for any and all liabilities, losses, damages and expenses that may be incurred by them as a result of any act or omission by the Servicer in connection with the performance of its duties under the Servicing Agreement. EVENTS OF SERVICING TERMINATION "Events of Servicing Termination" under the Servicing Agreement with respect to the SUBI Assets will consist of, among other things: (i) any failure by the Servicer to deliver to the Titling Trustee for distribution to holders of interests in the SUBI or to the Trustee for distribution to the Certificateholders any required payment on the related Certificates as to allocations and distributions, which failure continues unremedied for three Business Days after discovery of such failure by an officer of the Servicer or receipt by the Servicer of notice thereof from the Trustee, the Titling Trustee or holders of Certificates evidencing not less than 25% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class; (ii) any failure by the Servicer duly to observe or perform in any material respect any other of its covenants or agreements in the Servicing Agreement which failure materially and adversely affects the rights of holders of interests in the SUBI or the Certificateholders and which continues unremedied for 90 days after written notice of such failure is given as described in clause (i) above; or (iii) the occurrence of certain Insolvency Events relating to the Servicer. Notwithstanding the foregoing, a delay in or failure of performance referred to under clause (i) above for a period of ten Business Days shall not constitute an Event of Servicing Termination if such failure or delay was caused by an event of force majeure. Upon the occurrence of any such event, the Servicer shall not be relieved from using all commercially reasonable efforts to perform its obligations in a timely manner in accordance with the terms of the Servicing Agreement and the Servicer shall provide to the Trustee, the Titling Trustee, the Transferor and the Certificateholders prompt notice of such failure or delay by it, together with a description of its efforts to so perform its obligations. 76 RIGHTS UPON EVENT OF SERVICING TERMINATION As long as an Event of Servicing Termination remains unremedied, the Titling Trustee, upon the direction of the Trustee or holders of Certificates evidencing not less than 51% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class, may terminate all of the rights and obligations of the Servicer under the Servicing Agreement with respect to the SUBI Assets. In the event of such a termination affecting the SUBI Assets, the Trust Agent generally will succeed to the rights, powers, responsibilities, duties and liabilities of the Servicer under the Servicing Agreement with respect to the SUBI Assets (excluding certain specific obligations listed in the Servicing Agreement) or provide for a new Servicer to be approved by each Rating Agency. The Trust Agent or other new Servicer will receive substantially the same servicing compensation to which the Servicer otherwise would have been entitled. If, however, a bankruptcy trustee or similar official has been appointed for the Servicer, and no Event of Servicing Termination other than such appointment has occurred, such trustee or official may have the power to prevent the Titling Trustee, the Trustee or such Certificateholders from effecting a transfer of servicing. Notwithstanding the termination of the Servicer's rights and powers in such event, the Servicer will remain obligated to perform certain specific obligations listed in the Servicing Agreement and to reimburse the Trust Agent for any losses incurred in performing certain such obligations, and will be entitled to payment of certain amounts payable to it for services rendered prior to such termination. The holders of Certificates evidencing not less than 51% of the Voting Interests of the Class A Certificates and the Class B Certificates, voting together as a single class, with the consent of the Titling Trustee and the Trustee (which consents shall not be unreasonably withheld) may waive any default by the Servicer in the performance of its obligations under the Servicing Agreement and its consequences with respect to the SUBI Assets, other than a default in making any required deposits to or payments from an Account in accordance with the Servicing Agreement or in respect of a covenant or provision of the Servicing Agreement that cannot be modified or amended without the consent of each Certificateholder, in which event the related waiver will require the approval of holders of all of the Certificates. No such waiver will impair the rights of the Certificateholders with respect to subsequent defaults. COMPLIANCE WITH ERISA If the credit rating of TMCC becomes less than investment grade, then on a quarterly basis, TMCC shall provide the Trustee and each Rating Agency with an officer's certificate stating that none of TMCC and its affiliates for purposes of ERISA (i) maintains an ERISA plan which, as of its last valuation date, had unfunded current liability, (ii) anticipates that the value of the assets of any ERISA plan it maintains would not be sufficient to cover any current liability and (iii) is contemplating benefit improvements with respect to any plans then maintained or the establishment of any new ERISA plans, either of which would cause it to maintain an ERISA plan with unfunded current liability (the "ERISA Compliance Test"). In the event that TMCC does not timely make the foregoing certifications, all Excess Amounts in respect of each Monthly Allocation Date, after giving effect to all payments or allocations required to be made therefrom on such Monthly Allocation Date, will be deposited into the Reserve Fund until the ERISA Compliance Test is satisfied. On the Monthly Allocation Date following the date on which such failure is cured, monies on deposit in the Reserve Fund in excess of the Specified Reserve Fund Balance shall be distributed to the Transferor. NO PETITION The Servicer will agree not to institute, or join in, any bankruptcy or similar proceeding against the Transferor, the Titling Trustee or the Titling Trust until one year and one day after final payment of all financings involving interests in the Titling Trust. 77 AMENDMENT The Servicing Agreement may be amended from time to time in a writing signed by the Titling Trustee and the Servicer, with the approval of the Trustee (which approval may be given in the circumstances described under "Additional Document Provisions--Additional Agreement Provisions--Amendment"). Any such amendment relating to the UTI or any Other SUBI may require certain other approvals. TERMINATION The Servicing Agreement shall terminate upon the earlier to occur of (i) the termination of the Titling Trust, (ii) the discharge of the Servicer in accordance with its terms or (iii) the termination of the Agreement. GOVERNING LAW The Servicing Supplement will be governed by the laws of the State of Delaware. TMCC DEMAND NOTES GENERAL So long as a Monthly Payment Event has not occurred, and so long as the Certificates of any Class are outstanding, amounts allocated to interest on or principal of the Certificates of such Class on a Monthly Allocation Date that is not also a Certificate Payment Date will be deposited into the Certificateholders' Account on such Monthly Allocation Date and invested in Permitted Investments maturing prior to the succeeding relevant Certificate Payment Date or Targeted Maturity Date, as appropriate. The Servicer will have the power to direct the investment of such funds in Permitted Investments. Due to the incremental administrative difficulty in obtaining highly rated investments in variable amounts and with variable maturities that bear the required interest rate, the Servicer expects initially to invest all such funds in TMCC Demand Notes. The TMCC Demand Notes will be issued under an indenture, dated as of September 1, 1997, as such indenture may be amended from time to time (the "Indenture"), between TMCC and U.S. Bank, as trustee thereunder (in such capacity, the "Indenture Trustee"). The terms of the TMCC Demand Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The principal amount of the TMCC Demand Notes outstanding will change from time to time on Monthly Allocation Dates. The aggregate principal amount of TMCC Demand Notes that may be issued under the Indenture is limited to $1.6 billion. The principal amount of TMCC Demand Notes will bear interest from and including the date of issuance of such principal amount, to but excluding its date of Maturity. Interest on the TMCC Demand Notes will only be paid at Maturity. Each TMCC Demand Note will mature on the earlier of (x) in the case of the TMCC Demand Notes issued with respect to the investment of Available Interest, the next succeeding Certificate Payment Date, and in the case of the TMCC Demand Notes issued with respect to the investment of Principal Collections and other amounts allocable as principal, the next succeeding Targeted Maturity Date, and (y) the date on which the Trustee demands payment of the TMCC Demand Notes (each such date, a "Maturity"). Each TMCC Demand Note will bear interest at the related Required Rate. Interest accrued on TMCC Demand Notes will be calculated on the basis of a 360 day year of twelve 30-day months. The TMCC Demand Notes will be unsecured general obligations of TMCC and will rank pari passu with all other unsecured and unsubordinated indebtedness of TMCC from time to time outstanding. Currently, no outstanding debt of TMCC is senior in right of payment to the TMCC Demand Notes. The TMCC Demand Notes will be obligations solely of TMCC and will not be obligations of, or guaranteed by, TMS or any affiliate of TMCC or TMS, directly or indirectly. The TMCC Demand Notes will not be subject to redemption by TMCC and will not have the benefit of any sinking fund. 78 The TMCC Demand Notes will be issued only in fully registered form without coupons and payment of principal of and interest on TMCC Demand Notes will be made by the Indenture Trustee as paying agent by wire transfer to an account maintained by the Trustee, as the holder of the TMCC Demand Notes. No Certificateholder will have a direct interest in the TMCC Demand Notes or have any direct rights under the TMCC Demand Notes or the Indenture. The Trustee will be the only holder of the TMCC Demand Notes, which it will hold for the benefit of the Certificateholders. In the event any vote or other action, including action upon the occurrence of an Event of Default under the Indenture, is required or permitted by the holders of the TMCC Demand Notes under the Indenture, the Trustee as such holder will be permitted to vote or take such other action as it shall deem fit. However, the Trustee shall be permitted to seek the direction of the Certificateholders, who in such case shall be permitted to vote in the manner set forth under "--Additional Agreement Provisions--Amendment" above. References under this caption to "holders of the TMCC Demand Notes" and phrases of similar import shall be to the Trustee as the holder of the TMCC Demand Notes. REMOVAL OF INDENTURE TRUSTEE; SUCCESSOR INDENTURE TRUSTEE The Indenture Trustee may resign by providing written notice to TMCC and the Trust, as holder of the TMCC Demand Notes. The Trust, as holder of the TMCC Demand Notes, may remove the Indenture Trustee by written notice thereto and to TMCC, and may appoint a successor Indenture Trustee. TMCC may remove the Indenture Trustee in the event that: (a) the Indenture Trustee fails to continue to satisfy the criteria for eligibility to act as Indenture Trustee; (b) the Indenture Trustee is adjudged a bankrupt or insolvent; (c) a receiver or other public officer takes charge of the Indenture Trustee or its property; or (d) the Indenture Trustee otherwise becomes incapable of acting in such capacity. If the Indenture Trustee resigns, is removed or is unable to act as Indenture Trustee for any reason, TMCC shall promptly appoint a successor Indenture Trustee, unless the Trust shall already have done so. Within one year after a successor Indenture Trustee takes office, the Trust may appoint a successor Indenture Trustee to replace any successor Indenture Trustee appointed by TMCC. Any resignation or removal of the Indenture Trustee and appointment of a successor Indenture Trustee shall become effective only upon such successor's acceptance of such appointment and the payment of outstanding fees and expenses due to the prior Indenture Trustee as set forth in the Indenture. SUCCESSOR CORPORATION The Indenture provides that TMCC may consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into, any other corporation, provided, that in any such case: (i) either TMCC shall be the continuing corporation, or the successor corporation shall be a corporation organized and existing under the laws of the United States or any state thereof and shall expressly assume, by execution and delivery to the Indenture Trustee of a supplemental indenture in form satisfactory thereto, all of the obligations of TMCC under the TMCC Demand Notes and the Indenture; and (ii) TMCC or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale, lease or conveyance, be in default in the performance of any such obligation. Subject to certain limitations in the Indenture, the Indenture Trustee may receive from TMCC an officer's certificate and an opinion of counsel as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, complies with the provisions of the Indenture. SUPPLEMENTAL INDENTURES Supplemental indentures may be entered into by TMCC and the Indenture Trustee with the consent of the holder of the TMCC Demand Notes, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights with respect to the TMCC Demand Notes, provided that no supplemental indenture may, among other things, 79 reduce the principal amount of or interest on any TMCC Demand Notes, change the maturity date for the payment of the principal, the date on which interest will be payable or other terms of payment or reduce the percentage of holders of TMCC Demand Notes necessary to modify or alter the Indenture, without the consent of each holder of Certificates affected thereby. Under certain circumstances, supplemental indentures may also be entered into without the consent of the holders. EVENTS OF DEFAULT UNDER THE INDENTURE The Indenture defines an Event of Default with respect to the TMCC Demand Notes as being any one of the following events: (i) default in payment of principal on the TMCC Demand Notes; (ii) default in payment of any interest on the TMCC Demand Notes and continuance of such default for a period of 30 days; (iii) default in the performance, or breach, of any other covenant or warranty of TMCC in the Indenture continued for 60 days after appropriate notice; and (iv) certain events of bankruptcy, insolvency or reorganization. If an Event of Default occurs and is continuing, the Indenture Trustee or the holders of at least 25% in aggregate principal amount of TMCC Demand Notes may declare the TMCC Demand Notes to be due and payable. Any past default with respect to the TMCC Demand Notes may be waived by the holders of a majority in aggregate principal amount of the outstanding TMCC Demand Notes, except in a case of failure to pay principal of or interest on the TMCC Demand Notes for which payment has not been subsequently made or a default in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the Holder of each outstanding TMCC Demand Note. TMCC will be required to file with the Indenture Trustee annually an officer's certificate as to the absence of certain defaults. The Indenture Trustee may withhold notice to holders of the TMCC Demand Notes of any default with respect to such series (except in payment of principal or interest) if it in good faith determines that it is in the interest of such holders to do so. Subject to the provisions of the Indenture relating to the duties of the Indenture Trustee in case an Event of Default shall occur and be continuing, the Indenture Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders have offered to the Indenture Trustee reasonable indemnity or security against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. Subject to provisions in the Indenture for the indemnification of the Indenture Trustee and to certain other limitations, the holders of a majority in principal amount of the outstanding TMCC Demand Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee with respect to the TMCC Demand Notes. ABSENCE OF COVENANTS The provisions of the Indenture do not contain any covenants that limit the ability of TMCC to subject its properties to liens, to enter into any type of transaction or business or to secure any of its other indebtedness without providing security for the TMCC Demand Notes. The provisions of the Indenture do not afford the holders of the TMCC Demand Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, change in control, merger or similar transaction or other event. DEFEASANCE AND DISCHARGE OF INDENTURE The Company may satisfy and discharge its obligations under the Indenture by delivering to the Indenture Trustee for cancellation all outstanding TMCC Demand Notes, or depositing with the Indenture Trustee money and/or U.S. Government Obligations which through the payment of principal and interest in accordance with their terms will provide money sufficient to pay the principal of and interest on the outstanding TMCC Demand Notes on the date on which any such payments are due and payable in accordance with the terms of the Indenture and the TMCC Demand Notes, and in each case by satisfying certain additional conditions in the Indenture. However, in the case of any such deposit, certain of the 80 Company's obligations under the Indenture (including the obligation to pay the principal and interest on the outstanding TMCC Demand Notes) will continue until all of the TMCC Demand Notes are paid in full. REGARDING THE INDENTURE TRUSTEE The Indenture Trustee is the Trustee under the Agreement. The Indenture contains certain limitations on the right of the Indenture Trustee, should it become a creditor of TMCC, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Indenture Trustee is permitted to engage in other transactions with TMCC; provided, however, that if the Indenture Trustee acquires any conflicting interest (as defined) it must eliminate such conflict or resign. The Indenture provides that, in case an Event of Default has occurred and is continuing, the Indenture Trustee is required to use the degree of care and skill of a prudent person in the conduct of his or her own affairs in the exercise of its powers. GOVERNING LAW The Indenture and the TMCC Demand Notes will be governed by and construed in accordance with the laws of the State of New York. CERTAIN LEGAL ASPECTS OF THE TITLING TRUST THE TITLING TRUST The Titling Trust was formed as a Delaware business trust. The Titling Trust also has been qualified as a business trust authorized to transact business in certain other states where it is required to be so qualified. Because the Titling Trust has been registered as a business trust for Delaware and other state law purposes, like a corporation, it may be eligible to be a debtor in its own right under the United States Bankruptcy Code. SEE "Risk Factors--Risks Associated with Possible Future Insolvency of TMCC; Substantive Consolidation with TMCC". STRUCTURAL CONSIDERATIONS Unlike many structured financings in which the holders of the related securities have a direct ownership interest or a perfected security interest in the underlying assets being securitized, the Trust will not own directly the SUBI Assets. Instead, the Titling Trust will own the Titling Trust Assets, including the SUBI Assets, and the Titling Trustee will take action with respect thereto in the name of the Titling Trust on behalf of and as directed by the beneficiaries of the Titling Trust (i.e. the holders of the UTI Certificate and each SUBI Certificate or Other SUBI Certificate). The Trust will own the assets of the Trust, the primary asset of which will be the SUBI Certificate evidencing a 100% beneficial interest in the SUBI Assets, and the Trustee will take action with respect thereto in the name of the Trust and on behalf of the Certificateholders and the Transferor. Beneficial interests in the Contracts and Leased Vehicles, rather than direct legal ownership thereof, are transferred under this structure in order to avoid the administrative difficulty and expense of retitling the Leased Vehicles in the name of the transferee. The SUBI Assets will be segregated from the other Titling Trust Assets on the books and records maintained with respect thereto by the Servicer and/or the Titling Trustee. Except under the limited circumstances described below, neither the Servicer nor any holders of other beneficial interests in the Titling Trust will have rights in the SUBI Assets, and payments made on or in respect of any Titling Trust Assets other than the SUBI Assets will not be available to make payments on the Certificates or to cover expenses of the Titling Trust allocable to the SUBI Assets. 81 ALLOCATION OF TITLING TRUST LIABILITIES Pursuant to the Titling Trust Agreement, the various liabilities of the Titling Trust will be allocated to and charged against (i) to the extent incurred specifically with respect thereto, the SUBI Assets, the Titling Trust Assets allocated to Other SUBIs ("Other SUBI Assets") or Titling Trust Assets not allocated to the SUBI or any Other SUBI (the "UTI Assets"), respectively, or (ii) pro rata among the Titling Trust Assets if incurred with respect to the Titling Trust Assets generally. The Titling Trustee and the beneficiaries of the Titling Trust and their assignees and pledgees will be bound by the foregoing allocation. Thus, any liability to third parties arising from or in respect of a Contract or Leased Vehicle will be borne by the Trust as a holder of interests in the SUBI. If any such liability arises from or in respect of a contract or leased vehicle that is an Other SUBI Asset or a UTI Asset, the SUBI Assets will not be subject to such liability unless such Other SUBI Assets or UTI Assets are insufficient to pay the liability. However, to the extent that there are no other assets from which to satisfy such liability, and such liability is owed to entities other than the Titling Trustee or other beneficiaries of the Titling Trust, the SUBI Assets may be used to satisfy such liabilities. Under such circumstances, investors in the Class A Certificates could incur a loss on their investment. THIRD-PARTY LIENS ON SUBI ASSETS Because the Trustee will not own directly the SUBI Assets, and since its interest therein generally will be an indirect beneficial ownership interest, perfected liens of third-party creditors of the Titling Trust in one or more SUBI Assets will take priority over the interest of the Trustee therein. With respect to claims relating to the SUBI Assets, this result is no different than would be the case if a claim were made against the Trust and the Trust directly owned the SUBI Assets. However, because the Titling Trust also will hold Other SUBI Assets and UTI Assets, and third-party creditors of the Titling Trust may not be bound in all cases by the allocation of liabilities described above, a general creditor of the Titling Trust may obtain a lien on one or more SUBI Assets. Such liens could include tax liens arising against the Transferor or the Trust, liens arising under various federal and state criminal statutes, judgment liens arising from successful claims under federal and state consumer protection laws and Lemon Laws with respect to leases and leased vehicles that are Titling Trust Assets and judgment liens arising from successful claims against the Titling Trust arising from the operation of such leased vehicles. Various liens could be imposed upon all or part of the SUBI Assets that, by operation of law, would take priority over the Trustee's interest therein. SEE "Risk Factors--Risks Associated with Consumer Protection Laws", "--Risks Associated with ERISA Liabilities" and "--Risks Associated with Vicarious Tort Liability with Respect to Leased Vehicles" and "Certain Legal Aspects of the Contracts and the Leased Vehicles--Back-up Security Interests". The Titling Trust Agreement provides that, to the extent that such a third-party claim is satisfied out of one or more SUBI Assets rather than Other SUBI Assets or UTI Assets, as the case may be, the Titling Trustee will reallocate the remaining Titling Trust Assets (i.e., the Other SUBI Assets and the UTI Assets) so that each portfolio will bear the expense of the claim as nearly as possible as if the claim had been allocated as provided in the Titling Trust Agreement. However, if a third party claim exceeds the value of the portfolio or portfolios of Titling Trust Assets to which it should be allocated, and as a result the damages and expenses with respect to such claim are borne by the SUBI Assets, investors in the Class A Certificates could incur a loss on their investment. SEE "Additional Document Provisions--The Titling Trust Agreement--The SUBI, the Other SUBIs and the UTI". TMCC may pledge the UTI as security for obligations to third-party lenders, and may create and sell or pledge Other SUBIs in connection with other financings. Each holder or pledgee of the UTI or any Other SUBI will be required expressly to disclaim any interest in the SUBI Assets, and to fully subordinate any claims to the SUBI Assets in the event that this disclaimer is not given effect. Although no assurance can be given, in the unlikely event of a bankruptcy of TMCC, the Transferor believes that the SUBI Assets would not be treated as part of TMCC's bankruptcy estate and that, even if they were so treated, the subordination by holders and pledgees of the UTI and Other SUBIs should be enforceable. In addition, a 82 pledge of the UTI will not impair the Titling Trustee's ability to reallocate leases and leased vehicles out of the UTI Assets as Subsequent Contracts and Subsequent Leased Vehicles during the Revolving Period. BACK-UP SECURITY INTEREST IN CERTAIN SUBI ASSETS The transfer of the SUBI Certificate by the Transferor to the Trust is intended to constitute a sale of the SUBI Certificate and of the beneficial interest in the SUBI Assets evidenced thereby, subject in each case to the rights of the Transferor as the holder of the Transferor Interest. Although unlikely, it is possible that a court could recharacterize (for accounting and general state law purposes) the transactions contemplated by the Titling Trust Agreement and SUBI Supplement as a financing secured by a pledge of the SUBI Certificate or the SUBI Assets rather than as a sale. In such an event, absent prior perfection of the Trustee's security interest in the SUBI Assets, the holder of a perfected lien in one or more SUBI Assets would have priority over the interest of the Trustee in such SUBI Assets. Certain actions have been taken to ensure that, if the transfer of the SUBI were to be so recharacterized as a transfer to secure a loan, the Trustee would be deemed to have a perfected security interest in the SUBI Certificate (and the SUBI evidenced thereby) and in the Contracts and the Contract Rights susceptible of perfection under the Uniform Commercial Code (the "UCC") as in effect in the Trust States. The "Contract Rights" are all rights relating to the Contracts and the proceeds thereof, including the documents evidencing such Contracts, Monthly Payments received or due on or after the related Cutoff Date, Security Deposits (to the extent applied to cover excess wear and tear charges or treated as Liquidation Proceeds as described herein and as provided for in the Contracts), Prepayments, Liquidation Proceeds and Net Insurance Proceeds (to the extent constituting proceeds of the related Contract rather than proceeds of the related Leased Vehicle) received on or after the related Cutoff Date. The SUBI Certificate will constitute an "instrument" under the UCC and, by virtue of its possession thereof, the Trustee will be deemed to have a perfected security interest therein (and the SUBI evidenced thereby). The Contracts will not be stamped to reflect the Trustee's indirect interest therein. On or prior to the Closing Date, however, "protective" UCC-1 financing statements will be filed in California, Illinois and Delaware with respect to the Contracts and the Contract Rights to reflect the perfection of any security interest that the Trustee would be deemed to have therein. However, no action will be taken to perfect the lien that the Trustee would be deemed to have in the Leased Vehicles in the event of such a recharacterization. Therefore, to the extent that a valid lien is imposed by a third party against a Leased Vehicle, the interest of the lienholder will be superior to the unperfected beneficial interest of the Trustee in such Leased Vehicle. The Servicing Agreement will require the Servicer to contest all such liens and cause the removal of any liens that may be imposed, but investors in the Class A Certificates could incur a loss on their investment if any such liens are imposed against the Leased Vehicles. SEE "Additional Document Provisions--The Servicing Agreement--Notification of Liens and Claims". Additionally, any perfected security interest of the Trustee in all or part of the property of the Trust could be subordinate to claims of any trustee in bankruptcy or debtor-in-possession in the event of a bankruptcy of the Transferor prior to any perfection of the transfer of the assets transferred by the Transferor to the Trust pursuant to the Agreement. SEE "Risk Factors--Risks Associated with Possible Future Insolvency of TMCC; Substantive Consolidation with TMCC". INSOLVENCY RELATED MATTERS Although no assurance can be given, the Transferor believes that in the unlikely event of a bankruptcy of TMCC the SUBI Assets would not be treated as part of TMCC's bankruptcy estate and that, even if they were so treated, the subordination by holders and pledgees of the UTI and Other SUBIs should be enforceable. In addition, the Transferor has taken steps in structuring the transactions contemplated hereby that are intended to make it unlikely that the voluntary or involuntary application for relief by TMCC under any Insolvency Laws will result in consolidation of the assets and liabilities of the Transferor, the Titling Trust or the Trust with those of TMCC. If, however, (i) a court concluded that the assets and 83 liabilities of the Transferor, the Titling Trust or the Trust should be consolidated with those of TMCC in the event of the application of applicable Insolvency Laws to TMCC, (ii) a filing were made under any Insolvency Law by or against the Transferor, the Titling Trust or the Trust or (iii) an attempt were made to litigate any of the foregoing issues, delays in payments on the Certificates and possible reductions in the amount of such payments could occur. CERTAIN LEGAL ASPECTS OF THE CONTRACTS AND THE LEASED VEHICLES Although all Contracts have been or will be originated in the Trust States, in some instances the related lessees may live in other states at the time of origination or may move to another state after the time of origination. Consequently, the related Leased Vehicles may be operated and registered in states other than Trust States and the related certificates of title may be recorded in such other states. The following discussion of certain legal aspects of the Contracts and Leased Vehicles does not purport to address the laws of every state in which a Leased Vehicle may be operated or registered or in which title may be recorded. BACK-UP SECURITY INTERESTS The Contracts are "chattel paper" as defined in the UCC. Pursuant to the California UCC, a non-possessory security interest in or transfer of chattel paper in favor of the Titling Trust and the Transferor may be perfected by filing a UCC-1 financing statement with the appropriate state authorities in the jurisdiction in which the principal place of business of the transferor is located (i.e. the California Secretary of State). On or prior to the Closing Date, "protective" UCC-1 financing statements will be filed in California, Delaware and Illinois to effect this perfection. If the Certificates were to be recharacterized as loans secured by the SUBI Assets, the Trustee will be deemed to have a perfected security interest in certain SUBI Assets, including the Contracts. The Trustee's security interest in that circumstance could be subordinate to the interest of certain other parties, if any, who take possession of the Contracts before the filing described above has been completed. Specifically, the Trustee's security interest in a Contract could be subordinate to the rights of a purchaser of such Contract who takes possession thereof without knowledge or actual notice of the Trustee's security interest. The Contracts will not be stamped to reflect the foregoing back-up security arrangements. Any perfected security interest of the Trustee in the Contracts will be unaffected by any change of location of any lessee, since, under the UCC, this back-up security interest will be perfected by the filing of a UCC-1 financing statement in the jurisdiction in which the chief executive office of the "debtor" (in this case, the Titling Trust) is located, not the location of any lessee. Various liens could be imposed upon all or part of the SUBI Assets (including the Leased Vehicles) that, by operation of law, would take priority over the Trustee's interest therein. Such liens could include tax liens arising against the Transferor or the Trust, mechanic's, repairmen's, garagemen's and motor vehicle accident liens and certain liens for personal property taxes, in each case arising with respect to a particular Leased Vehicle, and liens arising under various state and federal criminal statutes. Additionally, any perfected security interest of the Trustee in all or part of the property of the Trust could also be subordinate to claims of any trustee in bankruptcy or debtor-in-possession in the event of a bankruptcy of the Transferor prior to any perfection of the transfer of the assets transferred by the Transferor to the Trust pursuant to the Agreement. VICARIOUS TORT LIABILITY Although the Titling Trust will own the Leased Vehicles, they will be operated by the lessees and their respective invitees. 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 84 the extent that applicable State law permits such an action, the Titling Trust and the Titling Trust Assets may be subject to liability to such an injured party. For example, in California, where a majority of the Initial Contracts were originated, under Section 17150 of the California Vehicle Code, the owner of a motor vehicle subject to a lease is responsible for injuries to persons or property resulting from the negligent or wrongful operation of the vehicle by any person using the vehicle with the owner's permission. The owner's liability for personal injuries is limited to $15,000 per person and $30,000 in total per accident and for property damage is limited to $5,000 per accident. However, recourse for any judgment arising out of the operation of the vehicle must first be had against the operator's property if the operator is within the jurisdiction of the court. The laws of most states, including the Trust 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 the case of Florida, the lessor was permitted to maintain), but failed to maintain. Notwithstanding the foregoing, in the event that vicarious liability is imposed on the Titling Trust as owner of a Leased Vehicle in a state that does not so limit liability, and the coverage provided by the Contingent and Excess Liability Insurance Policies is insufficient to cover such loss, including in certain circumstances with respect to a leased vehicle that is an Other SUBI Asset or a UTI Asset, investors in the Class A Certificates could incur a loss on their investments. The Titling Trust's insurance coverage is substantial. However, in the event that all applicable insurance coverage were exhausted and damages were assessed against the Titling Trust, claims could be imposed against the Titling Trust Assets, including the Leased Vehicles. Such claims would not take priority over any SUBI Assets to the extent that the Trustee has a prior perfected security interest therein (such as would be the case, in certain limited circumstances, with respect to the Contracts). If any such claims were imposed against the Titling Trust Assets and the Trustee did not have a prior perfected security interest, investors in the Class A Certificates could incur a loss on their investment. SEE "Certain Legal Aspects of the Titling Trust--Structural Considerations--Back-up Security Interest in Certain SUBI Assets". REPOSSESSION OF LEASED VEHICLES In the event that a default by a lessee has not been cured within a certain period of time after notice, the Servicer will ordinarily retake possession of the related leased vehicle. Some jurisdictions require that the lessee be notified of the default and be given a time period within which to cure the default prior to repossession. Generally, this right to cure may be exercised on a limited number of occasions in any one-year period. In these jurisdictions, if the lessee objects or raises a defense to repossession, an order must be obtained from the appropriate state court, and the vehicle must then be repossessed in accordance with that order. Other jurisdictions (including each of the Trust States) permit repossession without notice, but only if the repossession can be accomplished peacefully. If a breach of the peace cannot be avoided, judicial action is required. If a breach of the peace cannot be avoided, the lessor typically must seek a writ of possession or replevin in a state court action or pursue other judicial action to repossess such leased vehicle. After the Servicer has repossessed a Leased Vehicle, it may provide the lessee with a period of time within which to cure the default under the related Contract. If by the end of such period the default has not been cured, the Servicer will attempt to sell the Leased Vehicle. The Net Repossessed Vehicle Proceeds therefrom may be less than the remaining amounts due under the Contract at the time of default by the lessee. DEFICIENCY JUDGMENTS The proceeds of sale of a leased vehicle generally will be applied first to the expenses of resale and repossession and then to the satisfaction of the amounts due under the related lease contract. While some 85 states impose prohibitions or limitations on deficiency judgments if the net proceeds from resale of a leased vehicle do not cover the full amounts due under the related lease contract, a deficiency judgment can be sought in those states (including each of the Trust States) that do not prohibit directly or limit such judgments. However, in some states (including California), a lessee may be allowed an offsetting recovery for any amount not recovered at resale because the terms of the resale were not commercially reasonable. In any event, a deficiency judgment would be a personal judgment against the lessee for the shortfall, and a defaulting lessee might have little capital or sources of income available following repossession. Therefore, in many cases, it may not be useful to seek a deficiency judgment. Because it is a personal judgment against an obligor who may have few if any assets remaining after the repossession, even if a deficiency judgment is obtained, it may be settled at a significant discount or it may prove impossible to collect all or any portion thereof. CONSUMER PROTECTION LAWS Numerous federal and state consumer protection laws impose requirements upon lessors and servicers involved in consumer leasing. The federal Consumer Leasing Act of 1976 and Regulation M, issued by the Board of Governors of the Federal Reserve System, for example, require that a number of disclosures be made at the time a vehicle is leased, including, among other things, all amounts due at the time of origination of the lease, a description of the lessee's liability at the end of the lease term, the amount of any periodic payments, the circumstances under which the lessee may terminate the lease prior to the end of the lease term and (beginning in October 1997) the capitalized cost of the vehicle and a warning regarding possible charges for early termination. Each of the Trust States has adopted Article 2A of the uniform commercial code which provides protection to lessees through certain implied warranties and the right to cancel a lease contract relating to defective goods. In addition, California and Florida have enacted comprehensive vehicle leasing statutes that, among other things, regulate the disclosures to be made at the time a vehicle is leased. The various federal and state consumer protection laws would apply to the Titling Trust as a "co-lessor" of the Contracts and may also apply to the Trust as holder of a beneficial interest in the Contracts. The failure to comply with such consumer protection laws may give rise to liabilities on the part of the Servicer, the Titling Trust and the Titling Trustee, including liabilities for statutory damages and attorneys' fees. In addition, claims by the Servicer, the Titling Trust and the Titling Trustee may be subject to set-off as a result of such noncompliance. Courts have applied general equitable principles in litigation relating to repossession and deficiency balances. These equitable principles may have the effect of relieving a lessee from some or all of the legal consequences of a default. In several cases, consumers have asserted that the self-help remedies of lessors violate the due process protection provided under the Fourteenth Amendment to the Constitution of the United States. Courts have generally found that repossession and resale by a lessor do not involve sufficient state action to afford constitutional protection to consumers. Many states, including each of the Trust States, have adopted laws (each, a "Lemon Law") providing redress to consumers who purchase or lease a vehicle that remains out of conformance with its manufacturer's warranty after a specified number of attempts to correct a problem or after a specific time period. Should any Leased Vehicle become subject to a Lemon Law, a lessee could compel the Titling Trust to terminate the related Contract and refund all or a portion of payments that previously have been paid. Although the Titling Trust may be able to assert a claim against the manufacturer of any such defective Leased Vehicle, there can be no assurance any such claim would be successful. To the extent a lessee is able to compel the Titling Trust to terminate the related Contract, such Contract will be deemed to be a Liquidated Contract and amounts received thereafter on such Contract will be deemed to be Liquidation Proceeds. As noted below, TMCC will represent and warrant to the Trustee as of the Cutoff Date and as of each Transfer Date that none of the Initial Leased Vehicles or the related Subsequent Leased Vehicles, as the case may be, is out of compliance with any law, including any Lemon Law. Nevertheless, there can be 86 no assurance that one or more Leased Vehicles will not become subject to return (and the related Contract terminated) in the future under a Lemon Law. Representations and warranties will be made in the Titling Trust Agreement that each Contract complies with all requirements of law in all material respects. If any such representation and warranty proves to be incorrect with respect to any Contract, has certain material adverse effects, and is not timely cured, TMCC will be required under the Servicing Agreement to deposit an amount equal to the Reallocation Payment (together with, in certain circumstances during the Amortization Period, an amount equal to the Reallocation Deposit Amount) in respect of such Contract into the SUBI Collection Account unless the breach is cured. SEE "Additional Document Provisions--The Titling Trust Agreement--The SUBI, the Other SUBIs and the UTI" and "The Contracts--Representations, Warranties and Covenants". OTHER LIMITATIONS In addition to laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including applicable Insolvency Laws, may interfere with or affect the ability of a lessor to enforce its rights under an automobile or light duty truck lease contract. For example, if a lessee commences bankruptcy proceedings, the lessor's receipt of rental payments due under the lease contract is likely to be delayed. In addition, a lessee who commences bankruptcy proceedings might be able to assign the lease contract to another party even though the lease prohibits assignment. 87 MATERIAL FEDERAL INCOME TAX CONSIDERATIONS GENERAL Set forth below is a discussion representing the opinion of Andrews & Kurth L.L.P., special federal income tax counsel to the Transferor, as to material federal income tax consequences to holders of the Class A Certificates who are original owners and who hold the Class A Certificates as capital assets under the Internal Revenue Code of 1986, as amended (the "Code"). This discussion does not purport to be complete or to deal with all aspects of federal income taxation or any aspects of state or local taxation that may be relevant to Class A Certificateholders or Certificate Owners in light of their particular circumstances, nor to certain types of Class A Certificateholders or Certificate Owners subject to special treatment under the federal income tax laws (for example, banks and life insurance companies). This discussion is based upon present provisions of the Code, the regulations promulgated thereunder and judicial and ruling authorities, all of which are subject to change, which change may be retroactive. The parties do not intend to seek a ruling from the Internal Revenue Service ("IRS") on any of the issues discussed below. Moreover, there can be no assurance that if such a ruling were sought, the IRS would rule favorably. Taxpayers and preparers of tax returns (including those filed by any partnership or other issuer) should be aware that under applicable Treasury Regulations a provider of advice on specific issues of law is not considered an income tax return preparer unless the advice is (i) given with respect to events that have occurred at the time the advice is rendered and is not given with respect to the consequences of contemplated actions and (ii) is directly relevant to the determination of an entry on a tax return. Accordingly, taxpayers should consult their respective tax advisors and tax return preparers regarding the preparation of any item on a tax return, even where the anticipated tax treatment has been discussed herein. Prospective investors should consult their own tax advisors with regard to the federal income tax consequences of the purchase, ownership or disposition of the Class A Certificates, as well as the tax consequences arising under the laws of any state, foreign country or other taxing jurisdiction. CHARACTERIZATION OF THE CLASS A CERTIFICATES AS INDEBTEDNESS The Transferor and the Trustee (by entering into the Agreement) and each Certificateholder, and each Certificate Owner (by acquiring a beneficial interest in a Class A Certificate) will agree to and will express their intent that the Class A Certificates be treated as indebtedness, secured by the assets of the Trust, for all federal, state and local income and franchise tax purposes. However, because different criteria are used to determine the non-tax accounting characterization of the transaction, the Transferor will treat the transfer of the SUBI to the Trust, for financial accounting purposes, as a sale of an ownership interest in the Titling Trust Assets and not as the issuance of a debt obligation. In general, the characterization of a transaction for federal income tax purposes is based upon economic substance, and the substance of the transaction in which the Class A Certificates are issued is consistent with the treatment of the Class A Certificates as debt for federal income tax purposes. Although there are certain judicial precedents holding that under appropriate circumstances a taxpayer should be required to treat a transaction in accordance with the form chosen by the taxpayer regardless of the transaction's substance, the operative provisions of the transaction and the Agreement will not be inconsistent with treating the Class A Certificates as debt and, accordingly, these authorities should not be applied to require sale characterization for federal income tax purposes. The determination of whether the economic substance of a property transfer is a sale or a loan secured by the transferred property depends upon numerous factors designed to determine whether the Transferor has relinquished (and the transferee has obtained) substantial incidents of ownership in the property. The primary factors examined are whether the transferee has the opportunity to gain if the property increases in value, and has the risk of loss if the property decreases in value. Based upon its analysis of such factors, Andrews & Kurth L.L.P. is of the opinion that, for federal income tax purposes, the characterization of the Class A Certificates should be governed by the substance of the transaction and accordingly, (i) the Trust will not be treated as an 88 association or a publicly traded partnership taxable as a corporation and (ii) the Class A Certificates will properly be characterized as indebtedness that is secured by the assets of the Trust. TAXATION OF INTEREST AND DISCOUNT INCOME Assuming that the Certificate Owners are owners of debt obligations for federal income tax purposes, interest generally will be taxable as ordinary income for federal income tax purposes when received by the Certificate Owners utilizing the cash method of accounting and when accrued by Certificate Owners utilizing the accrual method of accounting. Interest received on the Class A Certificates may also constitute "investment income" for purposes of certain limitations of the Code concerning the deductibility of investment interest expense. ORIGINAL ISSUE DISCOUNT. Under regulations issued with respect to the original issue discount ("OID") provisions of the Code, the Class A Certificates will be deemed to have been issued with OID in an amount equal to the excess of the "stated redemption price at maturity" of the Class A Certificates (generally equal to their Initial Class Certificate Balances plus all interest other than "qualified stated interest" payable prior to or at maturity), over their original issue price (in this case, the initial offering price at which a substantial amount of the related Class of Class A Certificates is sold to the public). Qualified stated interest generally means interest payable at a single fixed rate or qualified variable rate provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the relevant Class A Certificates. Under the OID provisions of the Code, interest will only be treated as qualified stated interest if it is "unconditionally payable". Interest will be treated as "unconditionally payable" only if Certificateholders have reasonable remedies to compel payment of interest deficiencies (E.G., default and acceleration rights). Because Class A Certificateholders will not be entitled to penalty payments of interest on interest deficiencies, and Class A Certificateholders will have no default and acceleration rights in the event of interest shortfalls, interest paid on the Class A Certificates may not be treated by the IRS as qualified stated interest, and, in such event, would be treated as OID. A Class A Certificateholder must include OID income over the term of the related Class A Certificate under a constant yield method. In general, OID must be included in income in advance of the receipt of cash representing that income, regardless of the Certificateholder's method of accounting. The issue price of a Class A Certificate is the first price at which a substantial amount of Class A Certificates are sold to the public (excluding brokers, underwriters or wholesalers). If less than a substantial amount of a particular Class of Class A Certificates is sold for cash on or prior to the Closing Date, the issue price of such Class will be treated as the fair market value of such Class on the Closing Date. The issue price of a Class A Certificate also includes the amount paid by a Class A Certificateholder for accrued interest that relates to a period prior to the issue date of the Class A Certificate. The stated redemption price at maturity of a Class A Certificate includes the initial Certificate Balance of the Class A Certificate, but generally will not include distributions of interest if such distributions constitute "qualified stated interest." Under the de minimis rule, OID on a Class A Certificate will be considered to be zero if such OID is less than 0.25% of the stated redemption price at maturity of the Class A Certificate multiplied by the weighted average maturity of the Class A Certificate. Certificateholders generally must report de minimis OID pro rata as principal payments are received, and such income will be capital gain if the Class A Certificate is held as a capital asset. However, accrual method holders may elect to accrue all de minimis OID as well as market discount under a constant interest method. The holder of a Class A Certificate issued with OID must include in gross income, for all days during its taxable year on which it holds such Class A Certificate, the sum of the "daily portions" of such original issue discount. The amount of OID includible in income by a Certificateholder will be computed by allocating to each day during a taxable year a pro rata portion of the original issue discount that accrued during the relevant accrual period. If a Certificateholder purchases a Class A Certificate issued with OID 89 at an "acquisition premium" (i.e., at a price in excess of the adjusted issue price of the Class A Certificate, but less than or equal to the "stated redemption price at maturity"), the amount includible by such Certificateholder in income in each taxable year as OID will be reduced by that portion of the premium properly allocable to such year. Although the matter is not entirely clear, the Transferor currently intends to report all stated interest on the Class A Certificates as qualified stated interest and not as OID. MARKET DISCOUNT. Certificate Owners should be aware that the resale of a Class A Certificate may be affected by the market discount rules of the Code. These rules generally provide that, subject to a de minimis exception, if a holder acquires a Class A Certificate at a market discount (i.e., at a price below its "adjusted issue price") and thereafter recognizes gain upon a disposition of the Class A Certificate, the lesser of such gain or the portion of the market discount that accrued while the Class A Certificate was held by such holder will be treated as ordinary interest income realized at the time of the disposition. A taxpayer may elect to include market discount currently in gross income in taxable years to which it is attributable, computed using either a ratable accrual or a yield to maturity method. PREMIUM. A Certificate Owner who purchases a Class A Certificate for more than its stated redemption price at maturity will be subject to the premium amortization rules of the Code. Under those rules, the Certificate Owner may elect to amortize such premium on a constant yield method. Amortizable premium reduces interest income on the related Class A Certificate. If the Certificate Owner does not make such an election, the premium paid for the Class A Certificate generally will be included in the tax basis of the Class A Certificate in determining the gain or loss on its disposition. Each Certificate Owner should consult his own tax advisor regarding the impact of the original issue discount, market discount, and premium amortization rules. SALES OF CLASS A CERTIFICATES In general, a Certificate Owner will recognize gain or loss upon the sale, exchange, redemption or other taxable disposition of a Class A Certificate measured by the difference between (i) the amount of cash and the fair market value of any property received (other than amounts attributable to, and taxable as, accrued stated interest) and (ii) the Certificate Owner's tax basis in the Class A Certificate (as increased by any OID or market discount previously included in income by the holder and decreased by any deductions previously allowed for amortizable bond premium and by any payments, other than qualified stated interest payments, received with respect to such Class A Certificate). Subject to the market discount rules discussed above and to the applicable holding period requirement for long-term capital gain treatment, any such gain or loss generally will be long-term capital gain or loss, provided that the Class A Certificate was held as a capital asset. Moreover, capital losses generally may be used only to offset capital gains. The recently enacted Tax Relief Act of 1997 reduces the maximum rate of tax on net capital gains for individuals on sales of certain assets (including stocks and securities) and increases the time period for which an asset must be held for the gain from its sale to be eligible for the lowest rate. Generally, the holding period is increased from 12 to 18 months for the lowest rate, with a further rate reduction scheduled to take effect after the year 2000 for the sale of certain assets that have been held at least five years. FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN INVESTORS The following information describes the United States federal income tax treatment of investors that are not United States persons ("Foreign Investors") if the Class A Certificates are treated as debt. The 90 term "Foreign Investor" means any person other than (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity organized in or under the laws of the United States or any state or political subdivision thereof, or (iii) an estate the income of which is includible in gross income for United States federal income tax purposes, regardless of its source or (iv) a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States fiduciaries who have authority to control all substantial decisions of the trust. The Code and Treasury regulations generally subject interest paid to a Foreign Investor to a withholding tax at a rate of 30% (unless such rate were changed by an applicable treaty). The withholding tax, however, is eliminated with respect to certain "portfolio debt investments" issued to Foreign Investors. Portfolio debt investments include debt instruments issued in registered form for which the United States payor receives a statement that the beneficial owner of the instrument is a Foreign Investor. The Class A Certificates will be issued in registered form; therefore, if the information required by the Code is furnished (as described below) and no other exceptions to the withholding tax exemption are applicable, no withholding tax will apply to the Class A Certificates. For the Class A Certificates to constitute portfolio debt investments exempt from United States withholding tax, the withholding agent must receive from the Certificate Owner an executed IRS Form W-8 signed under penalty of perjury by the Certificate Owner stating that the Certificate Owner is a Foreign Investor and providing such Certificate Owner's name and address. The statement must be received by the withholding agent in the calendar year in which the interest payment is made, or in either of the two preceding calendar years. A Certificate Owner that is a nonresident alien or foreign corporation will not be subject to United States federal income tax on gain realized on the sale, exchange or redemption of such Class A Certificate, provided that (i) such gain is not effectively connected with a trade or business carried on by the Certificate Owner in the United States, (ii) in the case of a Certificate Owner that is an individual, such Certificate Owner is not present in the United States for 183 days or more during the taxable year in which such sale, exchange or redemption occurs and (iii) in the case of gain representing accrued interest, the conditions described in the immediately preceding paragraph are satisfied. BACKUP WITHHOLDING A Certificate Owner may be subject to a backup withholding at the rate of 31% with respect to interest paid on the Class A Certificates if the Certificate Owner, upon issuance, fails to supply the Trustee or his broker with such Certificate Owner's taxpayer identification number, fails to report interest, dividends or other "reportable payments" (as defined in the Code) properly, or under certain circumstances, fails to provide the Trustee or his broker with a certified statement, under penalty of perjury, that such Certificate Owner is not subject to backup withholding. Information returns will be sent annually to the IRS and to each Certificate Owner setting forth the amount of interest paid on the Class A Certificates and the amount of tax withheld thereon. POSSIBLE ALTERNATIVE TREATMENT OF THE CLASS A CERTIFICATES Although, as described above, it is the opinion of Andrews & Kurth L.L.P. that the Class A Certificates will properly be characterized as debt for federal income tax purposes, such opinion will not be binding on the IRS and thus no assurance can be given that such a characterization shall prevail. If the IRS were to contend successfully that the Class A Certificates did not represent debt for federal income tax purposes, certain adverse tax consequences to the Class A Certificateholders could result. For example, the Trust generally should be required to pay corporate income tax on its taxable income (thus reducing the cash available to make payments on the Class A Certificates). In addition, income to certain tax-exempt entities (including pension funds) generally should be "unrelated business taxable income", and income to 91 foreign holders generally should be subject to U.S. withholding tax and reporting requirements. Prospective investors are advised to consult with their own tax advisors regarding the federal income tax consequences of the purchase, ownership and disposition of the Class A Certificates. ERISA CONSIDERATIONS Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code prohibit pension, profit sharing or other employee benefit plans ("Benefit Plans") from engaging in certain transactions with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to such Benefit Plans. ERISA also imposes certain duties on persons who are fiduciaries of Benefit Plans subject to ERISA. Under ERISA, any person who exercises any authority or control with respect to the management or disposition of the assets of a Benefit Plan is considered to be a fiduciary of such Benefit Plan (subject to certain exceptions not here relevant). A violation of these "prohibited transaction" rules may result in liability under ERISA and the Code for such persons. Neither ERISA nor the Code defines the terms "plan assets". Under Section 2510.3-101 of the United States Department of Labor ("DOL") regulations (the "Regulation"), a Plan's assets may include an interest in the underlying assets of an entity (such as a trust) for certain purposes, including the prohibited transaction provisions of ERISA and the Code, if the Plan acquires an "equity interest" in such entity. The Transferor believes that the Certificates will give Certificateholders an equity interest in the Trust for purposes of the Regulation. Under the Regulation, when a Plan acquires an equity interest that is neither a "publicly offered security" nor a security issued by an investment company registered under the Investment Company Act of 1940, the underlying assets of the entity will be considered "plan assets" unless the entity is an "operating company" or equity participation in the entity by benefit plan investors is not "significant". A "publicly-offered security" is a security that is (a) freely transferable, (b) part of a class of securities that is owned, immediately subsequent to the initial offering, by 100 or more investors who were independent of the issuer and of one another ("Independent Investors") and (c) either is (i) part of a class of securities registered under section 12(b) or 12(g) of the Exchange Act, or (ii) sold to the plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act and the class of securities of which such security is a part is registered under the Exchange Act within 120 days (or such later time as may be allowed by the Commission) after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred. For purposes of the 100 Independent Investor criterion, each Class of Certificates should be deemed to be a "class" of securities that would be tested separately from any other securities that may be issued by the Trust. Except to the extent otherwise disclosed herein, it is anticipated that each Class of Class A Certificates will meet the foregoing criteria for treatment as "publicly-offered securities." No restrictions will be imposed on the transfer of the Class A-1, Class A-2 or Class A-3 Certificates. Although no assurances can be given, and no monitoring or other measures will be taken to ensure, that such condition will be met, the Underwriters expect that the Class A-1, Class A-2 and Class A-3 Certificates will be held by at least 100 independent investors at the conclusion of the initial public offering. The Class A Certificates will be sold as part of an offering pursuant to an effective registration statement under the Act and then will be timely registered under the Exchange Act except as described below. The Transferor has applied to the DOL for the Requested Exemption described herein pursuant to which the Class A-1, Class A-2 and Class A-3 Certificates would be eligible to be held by employee benefit plan investors meeting the conditions specified therein as of the effective date of the Requested Exemption. In the event the Requested Exemption is granted substantially in the form for which such application was made, the Transferor intends to deregister the Class A Certificates under the Exchange Act as soon as permitted by law or not to register such Classes if the Requested Exemption is granted prior to the date such registration is required. As a result, the Class A-1, Class A-2 or Class A-3 Certificates may no longer 92 be eligible to be held by Benefit Plans that did not meet the eligibility criteria for the Requested Exemption, even if more than 100 other qualified investors continued to hold securities of each such Class. Accordingly, Benefit Plans intending to purchase any Class A Certificates should confirm that they meet the conditions specified in the Requested Exemption. The Transferor anticipates that all of the conditions of the Exemption that are within its control will be satisfied if and when the Exemption is granted. There can be no assurance that the Exemption will be granted, or the date on which the Exemption might be granted. Equity participation in an entity by "benefit plan investors" (i.e., Plans and other employee benefit plans not subject to ERISA, such as governmental or foreign plans, as well as entities holding assets deemed to be "plan assets") is not "significant" on any date on which any series of certificates is issued and outstanding if, immediately after the most recent acquisition of any equity interest therein, less than 25% of the value of each class of equity interests therein (excluding interests held by the related transferor, the trustee or their affiliates in the case of a trust) is held by benefit plan investors. No assurance can be given by the Transferor as to whether the value of each Class of Certificates that might be deemed to be equity interests in the Trust held by benefit plan investors will be "significant" upon completion of the offering of any Certificates or thereafter, and no monitoring or other measures will be taken with respect to the satisfaction of the conditions to this exception. TMCC, on behalf of itself and certain of its affiliates (including the Transferor), has applied to the DOL for an administrative exemption (the "Requested Exemption") from certain of the prohibited transaction rules of ERISA with respect to the initial purchase, the holding and the subsequent resale by Benefit Plans of certificates similar to the Class A Certificates. There can be no assurance that the Requested Exemption will be granted or that, if granted, it will be made retroactive through the date of the issuance of the Class A Certificates. Should the Requested Exemption be granted, it would apply to the acquisition, holding and resale by Benefit Plans of the Class A Certificates provided that specified conditions (including those described below) are met. The Transferor believes that all conditions of the Requested Exemption other than those within the control of the investors have or will be met. For the Requested Exemption to apply to the acquisition by a Benefit Plan of Class A Certificates, the Class A Certificates would be required to be offered and sold initially to the public (including Benefit Plans) pursuant to an underwriting arrangement with one or more underwriters which have received one of a group of administrative exemptions from certain of the prohibited transaction rules of ERISA. Such exemptions apply with respect to the initial purchase, the holding and the subsequent resale by Benefit Plans of certificates representing interests in asset backed pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements of such exemption. The DOL has granted such an administrative exemption to one of the underwriters (Prohibited Transaction Exemption 90-25; Exemption Application No. D-8102, 55 Fed. Reg. 42597 (1990), as amended). Among the other conditions that are required to be satisfied for the Requested Exemption to apply to the acquisition by a Benefit Plan of the Class A Certificates are the following (each of which the Transferor believes has been or will be met in connection with the Class A Certificates): (i) The acquisition of the Class A Certificates by a Benefit Plan is on terms (including the price for the Class A Certificates) that are at least as favorable to the Benefit Plan as they would be in an arm's length transaction with an unrelated party. (ii) The rights and interests evidenced by the Class A Certificates acquired by the Benefit Plan are not subordinated to the rights and interests evidenced by any other Class of Certificates, and the rights and interests evidenced by the SUBI are not subordinated to the rights and interests evidenced by Other SUBI Certificates or UTI Certificates. (iii) The Class A Certificates acquired by the Benefit Plan have received a rating at the time of such acquisition that is in one of the three highest generic rating categories from Standard & Poor's, 93 Moody's, Duff & Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc. ("Fitch"). (iv) The sum of all payments made to the Underwriters in connection with the distribution of the Class A Certificates represents not more than reasonable compensation for underwriting the Class A Certificates. The sum of all payments made to and retained by the Transferor pursuant to the sale of the SUBI to the Trust represents not more than the fair market value of the interest in the Contracts and Leased Vehicles represented thereby. The sum of all payments made to and retained by the Servicer with regard to the SUBI Assets represents not more than reasonable compensation for the Servicer's services under the Servicing Agreement and reimbursement of the Servicer's reasonable expenses in connection therewith. (v) The Revolving Period ends no more than 15 consecutive months from the Closing Date and (A) all Subsequent Contracts meet the terms and conditions for eligibility described in this Prospectus, and (B) the addition of Subsequent Contracts does not result in the reduction of the ratings on the Class A Certificates received from any of Moody's, Standard & Poor's, Duff & Phelps or Fitch. (vi) After the Revolving Period ends, the average Lease Rate for the Contracts included in the SUBI Assets shall not be more than 200 basis points greater than the average Lease Rate for the Initial Contracts. (vii) Principal Collections that are reinvested in Subsequent Contracts during the Revolving Period are first invested in an eligible lease contract with the earliest origination date, then in an eligible lease contract with the next earliest origination date and so forth, beginning with the lease contracts that have been reserved specifically for such purpose at the time of the initial allocation of lease contracts to the SUBI, but excluding those specific lease contracts reserved for allocation to or allocated to Other SUBIs. In addition, it is a condition that the Benefit Plan investing in the Class A Certificates be an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act. The Requested Exemption would not apply to Benefit Plans sponsored by the Transferor, the Underwriters, the Trustee, the Servicer, any lessee with respect to Contracts allocated to the SUBI Assets constituting more than 5% of the aggregate unamortized principal balance of the SUBI Assets, or any affiliate of such parties (the "Restricted Group"). As of the date hereof, no lessee with respect to the Contracts allocated to the SUBI Assets constitutes more than 5% of the aggregate unamortized principal balance of the Trust (i.e., more than 5% of the Aggregate Net Investment Value as of the Cutoff Date). Moreover, the Requested Exemption would provide relief for sales, exchanges or transfers between a Benefit Plan and the underwriter or sponsor with discretionary investment authority over such Benefit Plan's assets, from certain self-dealing/conflict of interest prohibited transactions, only if, among other requirements, (i) a Benefit Plan's investment in the Class A Certificates does not exceed 25% of all of the Class A Certificates outstanding at the time of the acquisition, and (ii) immediately after the acquisition, no more than 25% of the assets of a Benefit Plan with respect to which the person who has discretionary authority or renders investment advice are invested in Class A Certificates representing an interest in a trust containing assets sold or serviced by the same entity. Due to the complexities of these rules and the penalties imposed upon persons involved in prohibited transactions, it is important that the fiduciary of a Benefit Plan considering the purchase of Class A Certificates consult with its counsel regarding the grant and applicability of the Requested Exemption and the prohibited transaction provisions of ERISA and the Code to such investment. Moreover, each Benefit Plan fiduciary should determine whether, under the general fiduciary standards of investment prudence and diversification, an investment in the Class A Certificates is appropriate for the Benefit Plan, taking into account the overall investment policy of the Benefit Plan and the composition of the Benefit Plan's investment portfolio. 94 UNDERWRITING Under the terms and subject to the conditions contained in an Underwriting Agreement dated September , 1997 (the "Underwriting Agreement"), among the Transferor, TMCC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated (the "Underwriters"), the Transferor has agreed to sell to the Underwriters, and the Underwriters have agreed to purchase from the Transferor, severally but not jointly, the following respective amounts of Class A Certificates:
CLASS A-1 CLASS A-2 CLASS A-3 UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES - -------------------------------------------------------- ----------- ----------- ----------- Merrill Lynch, Pierce, Fenner & Smith Incorporated.................................. $ $ $ Lehman Brothers Inc..................................... $ $ $ Morgan Stanley & Co. Incorporated....................... $ $ $ ----------- ----------- ----------- Total......................................... $ $ $ ----------- ----------- ----------- ----------- ----------- -----------
In the Underwriting Agreement the Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Class A Certificates if any are purchased. The Underwriting Agreement provides that, in the event of a default by an Underwriter, in certain circumstances the purchase commitments of the non-defaulting Underwriter may be increased or the Underwriting Agreement may be terminated. The Transferor has been advised by the Underwriters that they propose to offer the Class A Certificates to the public initially at the public offering prices set forth on the cover page of this Prospectus and to certain dealers at such prices less a concession of %, % and % of the principal amount per Class A-1, Class A-2 and Class A-3 Certificate, respectively, and that the Underwriters and such dealers may allow a discount of %, % and % of such principal amount per Class A-1, Class A-2 and Class A-3 Certificate, respectively, on sales to certain other dealers. After the initial public offering, the public offering price and concessions and discounts to dealers may be changed by the Underwriters. The Transferor and TMCC have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Class A Certificates are a new issue of securities with no established trading markets. The Transferor has been advised by the Underwriters that the Underwriters intend to make a market in each Class of Class A Certificates, as permitted by applicable laws and regulations. The Underwriters are not obligated, however, to make a market in any Class of Class A Certificates and any such market-making may be discontinued at any time at the sole discretion of the Underwriters without notice. Accordingly, no assurance can be given as to the liquidity of or trading markets for any Class of Class A Certificates. The Underwriters have advised the Transferor that, pursuant to Regulation M under the Securities Act, certain persons participating in this offering may engage in transactions, including stabilizing bids and syndicate covering transactions, which may have the effect of stabilizing or maintaining the market price of any Class of Class A Certificates at levels above those that might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of any Class A Certificates on behalf of the Underwriters for the purpose of fixing or maintaining the price of such Certificates. A "syndicate covering transaction" is the bid for or the purchase of Class A Certificates on behalf of the Underwriters to reduce a short position incurred by the Underwriters in connection with this offering. Stabilizing bids and syndicate covering transactions may have the effect of causing the price of the Class A Certificates of any Class to be higher than it might be in the absence thereof. Neither the Transferor nor the Underwriters makes any representation or prediction as to the direction or magnitude of any such effect on the prices for the Certificates. Neither the Transferor nor the Underwriters makes any 95 representation that the Underwriters will engage in any such transactions or that, once commenced, any such transactions will not be discontinued without notice. The Trust may, from time to time, invest the funds in the Accounts in Permitted Investments acquired from one or more of the Underwriters or the Servicer. It is expected that delivery of the Class A Certificates will be made against payment therefor on or about the date specified in the last paragraph of the cover page of this Prospectus, which is the business day following the date hereof. Under Rule 15c6-1 of the Commission under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Class A Certificates on the date hereof will be required, by virtue of the fact that the Class A Certificates initially will settle business days after the date hereof, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. TMCC has agreed to pay the Underwriters a fee for certain advisory, analytical and structuring services relating to the Titling Trust. Upon receipt of a request by an investor who has received an electronic Prospectus from an Underwriter or a request by such investor's representative within the period during which there is an obligation to deliver a Prospectus, the Transferor or the Underwriters will promptly deliver, or cause to be delivered, without charge, a paper copy of the Prospectus. LISTING AND GENERAL INFORMATION FOR NON-U.S. INVESTORS REPRESENTATIONS OF TRANSFEROR AND UNDERWRITERS The Transferor, having made all reasonable inquiries, confirms that this Prospectus contains all information with regard to the Trust and the Class A Certificates offered hereby that is material in the context of the issuance of the Class A Certificates, that such information is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed herein are honestly held and that there are no other facts the omission of which makes this Prospectus, including any information incorporated by reference herein, as a whole, or any of such information or the expression of any such opinions or intentions misleading. The Transferor accepts responsibility accordingly. The Stock Exchange of Hong Kong Limited and the Luxembourg Stock Exchange take no responsibility for the contents of this Prospectus, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of its contents. In connection with the listing of the Class A Certificates on The Stock Exchange of Hong Kong Limited, the Underwriters have each represented and agreed that they have not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell in Hong Kong, by means of any document, the Class A Certificates other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong. The Underwriters have further represented and agreed that, unless they are persons who are permitted to do so under the securities laws of Hong Kong, they have not issued, or had in their possession for the purposes of issuing, and they will not issue, or have in their possession for the purposes of issuing, any advertisement, invitation or document relating to the Class A Certificates other than with respect to Class A Certificates intended to be disposed of to persons outside Hong Kong or to persons whose business involves the acquisition, or disposal or holding of securities, whether as principal or agent. This Prospectus includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with 96 regard to the Class A Certificates. For the purposes of such Rules, the Class A Certificates are treated as "selectively marketed debt securities". Bankers Trust Company Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg, has been appointed as paying agent in Luxembourg in relation to the Class A Certificates. The Transferor will maintain a paying agent in relation to the Class A Certificates in Luxembourg for so long as any Class A Certificates are listed on the Luxembourg Stock Exchange. Each Underwriter will represent that: (i) it has not offered or sold and will not offer or sell, prior to the date six months after their date of issuance, any Class A Certificates to persons in the United Kingdom, except to persons whose activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted in and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Class A Certificates in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the Class A Certificates to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person to whom the document can otherwise lawfully be issued or passed on. No action has been taken or will be taken by the Transferor or the Underwriters that would permit a public offering of any Class A Certificates in any country or jurisdiction other than in the United States where action for that purpose is required. Accordingly, the Class A Certificates may not be offered or sold, directly or indirectly, and neither this Prospectus nor any circular, prospectus, form of application, advertisement or other material may be distributed in or from or published in any country or jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose hands this Prospectus comes are required by the Transferor and the Underwriters to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, sell or deliver Class A Certificates or have in their possession or distribute this Prospectus, in all cases at their own expense. Each Underwriter will represent and agree that it will comply with all applicable laws and regulations in each jurisdiction in which it purchases, offers or sells Class A Certificates or possesses or distributes this Prospectus or any other offering material and will obtain any consent, approval or permission required by it for the purchase, offer or sale by it of Class A Certificates under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or sales and neither the Transferor nor TMCC shall have any responsibility therefor. Each Underwriter will also represent and agree that it will not offer, sell or deliver any of the Class A Certificates or distribute any such offering material in or from any jurisdiction except under circumstances which will result in compliance with applicable laws and regulations and which will not impose any obligation on the Transferor, TMCC or the Underwriters. LISTING Application will be made for listing the Class A Certificates on the Luxembourg Stock Exchange and for listing and permission to deal in the Class A Certificates on The Stock Exchange of Hong Kong Limited. The Trust has requested that such permission become effective on September 23, 1997. In connection with the listing application made to the Luxembourg Stock Exchange, the Articles of Incorporation and Bylaws of the Transferor and the Agreement and a legal notice relating to the issuance of the Class A Certificates will be deposited prior to the listing with the Chief Registrar of the District Court of Luxembourg, where copies thereof may be obtained upon request. 97 TOYOTA LEASING, INC. The Transferor was incorporated in the State of California in April 1997 as a wholly owned, limited purpose subsidiary of TMCC. The principal executive offices of the Transferor are located at 19001 South Western Avenue, Torrance, California 90509 and its telephone number is (310) 618-4000. DOCUMENTS AVAILABLE FOR COLLECTION AND INSPECTION Copies of the Articles of Incorporation and Bylaws of the Transferor, the Agreement, the Titling Trust Agreement, the SUBI Supplement, the Servicing Supplement and the Indenture will be available for inspection during the term of the Class A Certificates, and for so long as any Class A Certificates are listed on the Luxembourg Stock Exchange or The Stock Exchange of Hong Kong Limited, copies of the reports to Certificateholders to be delivered by the Trustee will be obtainable at the offices of Bankers Trust Company Luxembourg S.A., 14 Boulevard F.D. Roosevelt, L-2450, Luxembourg and at the offices of Merrill Lynch & Co. at Asia Pacific Financial, 3 Garden Road, Hong Kong. AUTHORIZATION The execution and delivery of the Agreement, the Titling Trust Agreement, the SUBI Supplement, the Servicing Supplement and the Indenture and the sale of the Class A Certificates were authorized by the Boards of Directors of the Transferor and/or TMCC, as appropriate, on July 29, 1997 and August 15, 1997. NO MATERIAL CHANGE There has been no material adverse change in the information provided in this Prospectus with respect to the SUBI, the Contracts, the Leased Vehicles or the Trust since August 1, 1997 except as otherwise disclosed herein. LITIGATION Neither the Trust nor TMCC or any of its subsidiaries are involved in, nor are there any, legal or arbitration proceedings pending or threatened of which TMCC is aware, which may have or have had during the 12 months prior to the date hereof a material effect on the financial position of TMCC and its subsidiaries on a consolidated basis. INDEPENDENT ACCOUNTANTS Price Waterhouse LLP of Los Angeles, California are independent public accountants of TMCC. EUROCLEAR AND CEDEL The Class A Certificates have been accepted for clearance through the Cedel Bank and Euroclear systems. The Common Codes and ISIN numbers for the Class A Certificates are:
CLASS COMMON CODE ISIN - ----------- ------------------- ----------- Class A-1 Class A-2 Class A-3
UNITED STATES LAW Andrews & Kurth L.L.P., a law firm licensed in the states of California, New York and Texas, and in the District of Columbia, in the United States, has given and has not withdrawn its consent to the inclusion in the Registration Statement and this Prospectus of the descriptions of its opinions regarding matters of 98 United States federal income taxation and other matters with respect to the Class A Certificates in the forms and contexts in which they are included, in each case effective as of the dates of such documents. NOTICES For so long as any Class A Certificates are listed on the Luxembourg Stock Exchange, notices to Certificateholders will be given by publication in a leading daily newspaper of general circulation in Luxembourg or, if publication in Luxembourg is not practical, in Europe. Such publication is expected to be made in the Luxembourg Wort. For so long as the Class A Certificates are listed on The Stock Exchange of Hong Kong Limited, notices to Certificateholders will be given by publication in a leading daily newspaper of general circulation in the English language in Hong Kong. Such publication is expected to be made in the South China Morning Post. In addition, if Definitive Certificates are issued, such notices will be mailed to the addresses of holders thereof at the addresses therefor as they appear in the register maintained by the Trustee prior to such mailing. Such notices will be deemed to have been given on the date of such publication or mailing. NOTICE TO CANADIAN RESIDENTS RESALE RESTRICTIONS The distribution of the Class A Certificates in Canada is being made only on a private placement basis exempt from the requirement that the Transferor, on behalf of the Trust, prepare and file a prospectus with the securities regulatory authorities in each province where trades of the Class A Certificates are effected. Accordingly, any resale of the Class A Certificates in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Class A Certificates. REPRESENTATIONS OF PURCHASERS Each purchaser of Class A Certificates in Canada who receives a purchase confirmation will be deemed to represent to the Transferor, the Trust, the Trustee, TMCC and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Class A Certificates without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "Resale Restrictions". RIGHTS OF ACTION AND ENFORCEMENT (ONTARIO PURCHASERS) The securities being offered are those of foreign issuers and Ontario purchasers will not receive the contractual right of action prescribed by section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liabilities provisions of the U.S. federal securities laws. All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Ontario purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. Following a recent decision of the U.S. Supreme Court, it is possible that Ontario purchasers will not be able to rely upon the remedies set out in Section 12(2) of the Securities Act if the securities are being offered under a U.S. private placement memorandum. 99 NOTICE TO BRITISH COLUMBIA RESIDENTS A purchaser of Class A Certificates to whom the SECURITIES ACT (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Class A Certificates acquired by such purchaser pursuant to this offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR #95/17, a copy of which may be obtained from the Transferor. Only one such report must be filed in respect of Class A Certificates acquired on the same date and under the same prospectus exemption. TAXATION AND ELIGIBILITY FOR INVESTMENT Canadian purchasers of Class A Certificates should consult their own legal and tax advisers with respect to the tax consequences of an investment in the Class A Certificates in their particular circumstances and with respect to the eligibility of the Class A Certificates for investment by the purchaser under relevant Canadian legislation. RATINGS OF THE CLASS A CERTIFICATES It is a condition of issuance that each of Moody's and Standard & Poor's rates each Class of Class A Certificates in its highest rating category. The ratings of the Class A Certificates will be based primarily upon the value of the Initial Contracts, the Reserve Fund and the terms of the Transferor Interest and the Class B Certificates. There is no assurance that any such rating will not be lowered or withdrawn by the assigning Rating Agency if, in its judgment, circumstances so warrant. In the event that a rating with respect to any Class of Class A Certificates is qualified, reduced or withdrawn, no person or entity will be obligated to provide any additional credit enhancement with respect to such Class of Class A Certificates. The ratings of the Class A Certificates should be evaluated independently from similar ratings on other types of securities. A rating is not a recommendation to buy, sell or hold the related Class A Certificates, inasmuch as such rating does not comment as to market price or suitability for a particular investor. The ratings of each Class of Class A Certificates addresses the likelihood of the payment of principal of and interest on such Certificates pursuant to their terms. There can be no assurance as to whether any rating agency other than Moody's and Standard & Poor's will rate the Class A Certificates, or, if one does, what rating will be assigned by such other rating agency. A rating on any Class of Class A Certificates by another rating agency, if assigned at all, may be lower than the ratings assigned to such Class A Certificates by each of Moody's and Standard & Poor's. LEGAL MATTERS Certain legal matters, including certain federal income tax matters, with respect to the Class A Certificates have been passed upon for TMCC and the Transferor by Andrews & Kurth L.L.P., Los Angeles, California. Brown & Wood LLP, New York, New York will act as counsel for the Underwriters and has performed certain legal services for TMCC in connection with the Titling Trust. EXPERTS The financial statements incorporated in this Prospectus by reference to the Annual Report on Form 10-K of Toyota Motor Credit Corporation for the year ended September 30, 1996 have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of that firm as experts in auditing and accounting. With respect to the unaudited consolidated financial information of Toyota Motor Credit Corporation for the three-month periods ended December 31, 1996 and 1995, the six-month periods ended March 31, 1997 and 196, and the nine-month periods ended June 30, 1997 and 1996 incorporated by reference in this Prospectus, Price Waterhouse LLP reported that they have applied limited procedures in accordance with 100 professional standards for a review of such information. However, their separate reports dated February 12, 1997, May 12, 1997 and August 12, 1997 incorporated by reference herein state that they did not audit and they do not state an opinion on that unaudited consolidated financial information. Price Waterhouse LLP has not carried out any significant additional audit tests beyond those which would have been necessary if their reports had not been included. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of section 11 of the Securities Act for their reports on the unaudited consolidated financial information because those reports are not a "report" or a "part" of the registration statement prepared or certified by Price Waterhouse LLP within the meaning of section 7 and 11 of the Securities Act. 101 INDEX OF CAPITALIZED TERMS Accelerated Principal Distribution Amount........................................ 10 Accounts......................................................................... 60 Additional Loss Amounts.......................................................... 68 Additional Loss Contract......................................................... 63 Adjusted Certificate Balance..................................................... 10 Advance.......................................................................... 18 Agency Agreement................................................................. 70 Aggregate Net Investment Value................................................... 11 Aggregate Net Losses............................................................. 62 Agreement........................................................................ i Amortization Date................................................................ 7 Amortization Period.............................................................. 10 Available Interest............................................................... 49 Benefit Plans.................................................................... 92 Business Day..................................................................... 4 Capped Contingent and Excess Liability Premiums.................................. 50 Capped Origination Trust Administrative Expenses................................. 50 Capped Titling Trust Administrative Expenses..................................... 50 Capped Trust Administrative Expenses............................................. 50 Cedel Bank....................................................................... 12 Cedel Bank Participants.......................................................... 58 Certificate Balance.............................................................. 5 Certificate Distribution Amount.................................................. 54 Certificate Factor............................................................... 43 Certificate Owners............................................................... 12 Certificate Payment Date......................................................... 6 Certificate Principal Loss Amounts............................................... 5, 48 Certificate Rates................................................................ 6 Certificateholders' Account...................................................... 61 Certificateholders............................................................... ii Certificates..................................................................... i Charge-off Rate.................................................................. 62 Charged-off Amount............................................................... 45 Charged-off Contract............................................................. 45 Claims........................................................................... 70 Class A Certificate Balance...................................................... 5 Class A Certificates............................................................. ii Class A Interest Carryover Shortfall............................................. 49 Class A-1 Certificates........................................................... ii Class A-1 Rate................................................................... 6 Class A-2 Rate................................................................... 6 Class A-3 Rate................................................................... 6 Class B Available Principal...................................................... 50 Class B Certificates............................................................. ii Class B Interest Carryover Shortfall............................................. 49 Class B Interest Reserve Amount.................................................. 62 Class B Rate..................................................................... 6 Class Certificate Balance........................................................ 5 Closing Date..................................................................... 4
102 Code............................................................................. 19, 88 Collection Period................................................................ 9 Collections...................................................................... 9 Commission....................................................................... iii Contingent and Excess Liability Insurance Policies............................... 64 Contract Rights.................................................................. 83 Contracts........................................................................ 2 Cooperative...................................................................... 58 Current Contract................................................................. 63 Cutoff Date...................................................................... 2 Dealers.......................................................................... 1 Deferral Fee..................................................................... 32 Definitive Certificates.......................................................... 59 Delinquency Percentage........................................................... 62 Deposit Date..................................................................... 14 Determination Date............................................................... 46 Discounted Contract.............................................................. 9, 11 Discounted Principal Balance..................................................... 11 DOL.............................................................................. 92 DTC.............................................................................. 12 DTC Participants................................................................. 56 Early Amortization Event......................................................... 52 ERISA............................................................................ 19, 92 Euroclear........................................................................ 12, 61 Euroclear Operator............................................................... 58 Euroclear Participants........................................................... 58 Events of Servicing Termination.................................................. 76 Excess Amounts................................................................... 50 Exchange Act..................................................................... iii First Principal Monthly Allocation Date.......................................... 7 Full Term Ratio.................................................................. 23 Indenture........................................................................ 78 Indenture Trustee................................................................ 78 Indirect DTC Participants........................................................ 57 Initial Certificate Balance...................................................... 4 Initial Class A Certificate Balance.............................................. 4 Initial Class A-1 Certificate Balance............................................ 4 Initial Class A-2 Certificate Balance............................................ 4 Initial Class A-3 Certificate Balance............................................ 4 Initial Class B Certificate Balance.............................................. 4 Initial Contracts................................................................ 2 Initial Deposit.................................................................. 16 Initial Leased Vehicles.......................................................... 2 Insolvency Event................................................................. 26 Insolvency Laws.................................................................. 26 Interest Collections............................................................. 9 Interest Period.................................................................. 7 Investor Interest................................................................ 4 Investor Percentage.............................................................. 10 IRS.............................................................................. 88 Lease Rate....................................................................... 13
103 Leased Vehicles.................................................................. 2 Lemon Law........................................................................ 86 Liquidated Contract.............................................................. 63 Liquidation Expenses............................................................. 15 Liquidation Proceeds............................................................. 15 Loss Amounts..................................................................... 20, 45 Matured Contract................................................................. 11 Matured Leased Vehicle Expenses.................................................. 15 Matured Leased Vehicle Inventory................................................. 11 Matured Leased Vehicle Proceeds.................................................. 14 Maturity......................................................................... 78 Maturity Advance................................................................. 18 Maturity Date.................................................................... 36 Monthly Allocation Date.......................................................... ii Monthly Payment.................................................................. 13 Monthly Payment Events........................................................... 12 Moody's.......................................................................... 19 Net Insurance Proceeds........................................................... 61 Net Liquidation Proceeds......................................................... 9 Net Matured Leased Vehicle Proceeds.............................................. 16 Net Repossessed Vehicle Proceeds................................................. 9 Nonrecoverable Advance........................................................... 72 OID.............................................................................. 89 Other SUBI Assets................................................................ 82 Other SUBI Certificates.......................................................... 29 Other SUBIs...................................................................... 1 Other SUBI Supplement............................................................ 68 Outstanding Principal Balance.................................................... 13 Payment Ahead.................................................................... 14 Payoff Amount.................................................................... 36 Permitted Investments............................................................ 64 Prepayment....................................................................... 60 Principal Allocation............................................................. 10 Principal Collections............................................................ 9 Rating Agencies.................................................................. 19 Realized Value................................................................... 36 Reallocation Deposit Amount...................................................... 45 Reallocation Payment............................................................. 41 Record Date...................................................................... 4 Registration Statement........................................................... iii Repossessed Vehicle Expenses..................................................... 15 Repossessed Vehicle Proceeds..................................................... 15 Requested Exemption.............................................................. 93 Required Amount.................................................................. 16 Required Rate.................................................................... 64 Reserve Fund..................................................................... 16 Residual Value................................................................... 13 Residual Value Loss Amount....................................................... 20 Residual Value Surplus........................................................... 16 Residual Value Test.............................................................. 63 Revolving Period................................................................. 8
104 Schedule of Contracts and Leased Vehicles........................................ 40 Securities Act................................................................... iii Security Deposits................................................................ 73 Servicer......................................................................... 3 Servicer's Certificate........................................................... 75 Servicing Agreement.............................................................. 3 Servicing Fee.................................................................... 18 Servicing Supplement............................................................. 3 Specified Reserve Fund Balance................................................... 62 Standard & Poor's................................................................ 19 Stated Maturity Date............................................................. i, 6 SUBI............................................................................. i, 1 SUBI Supplement.................................................................. 28 SUBI Assets...................................................................... i, 2 SUBI Certificate................................................................. 13 SUBI Collection Account.......................................................... 14, 60 Subsequent Contracts............................................................. 2 Subsequent Leased Vehicles....................................................... 2 Targeted Maturity Date........................................................... 6 Titling Trust.................................................................... i Titling Trust Agreement.......................................................... 2 Titling Trust Assets............................................................. i, 30 Titling Trustee.................................................................. 2 TMA.............................................................................. 3 TMC.............................................................................. 3 i, iii, TMCC............................................................................. 31 TMCC Demand Note................................................................. 11 TMS.............................................................................. 3 Transfer Date.................................................................... 8 Transferor....................................................................... i Transferor Amounts............................................................... 46 Transferor Interest.............................................................. ii, 1 Transferor Percentage............................................................ 45 Trust............................................................................ i Trust Administrative Expenses.................................................... 55 Trust Agent...................................................................... 2, 70 Trust Indenture Act.............................................................. 78 Trust States..................................................................... 1, 13, 23 Trustee.......................................................................... i U.S. Bank........................................................................ 1 Unallocated Principal Collections................................................ 46 Uncapped Titling Trust Administrative Expenses................................... 50 Uncapped Trust Administrative Expenses........................................... 50 Underwriters..................................................................... 95 Underwriting Agreement........................................................... 95 UTI.............................................................................. 1 UTI Assets....................................................................... 82 UTI Certificates................................................................. 29 Voting Interests................................................................. 53
105 ANNEX 1 GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Class A-1 Certificates (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold such Global Securities through DTC, Cedel Bank or Euroclear. The Global Securities will be tradeable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Cedel Bank and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedure applicable to U.S. corporate debt obligations and prior asset-backed securities issues. Secondary cross-market trading between Cedel Bank or Euroclear and DTC Participants holding securities will be effected on a delivery-against-payment basis through the Relevant Depositaries of Cedel Bank and Euroclear (in such capacity) and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. INITIAL SETTLEMENT All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Cedel Bank and Euroclear will hold positions on behalf of their participants through their Depositaries, which in turn will hold such positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow DTC settlement practice. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Cedel Bank or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to securities custody accounts on the settlement date against payment in same-day funds. SECONDARY MARKET TRADING Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior asset-backed securities issues in same-day funds. TRADING BETWEEN CEDEL BANK AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading between Cedel Bank Participants or Euroclear Participants will be settled using the Procedures applicable to conventional eurobonds in same-day funds. TRADING BETWEEN DTC SELLER AND CEDEL BANK OR EUROCLEAR PARTICIPANTS. When Global Securities are to be transferred from the account of a DTC Participant to the account of a Cedel Bank Participant or a Euroclear Participant, the purchaser will send instructions to Cedel Bank or Euroclear through a Cedel A-1 Bank Participant or Euroclear Participant at least one business day prior to settlement. Cedel Bank or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of the actual number of days in such accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary to the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Cedel Bank Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Cedel Bank or Euroclear cash debt will be valued instead as of the actual settlement date. Cedel Bank Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Cedel Bank or Euroclear. Under this approach, they may take on credit exposure to Cedel Bank or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Cedel Bank or Euroclear has extended a line of credit to them, Cedel Bank Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Cedel Bank Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they clear the overdraft when the Global Securities are credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each Cedel Bank Participants or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Cedel Bank Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. TRADING BETWEEN CEDEL BANK OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time zone differences in their favor, Cedel Bank Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Cedel Bank or Euroclear through a Cedel Bank Participant or Euroclear Participant at least one business day prior to settlement. In these cases, Cedel Bank or Euroclear will instruct the Relevant Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the settlement date on the basis of the actual number of days in such accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Cedel Bank Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Cedel Bank Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Cedel Bank Participant or Euroclear Participant have a line of credit with its respective clearing system and elect A-2 to be in debt in anticipation of receipt of the sale proceeds in its account, the back valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Cedel Bank Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. Finally, day traders that use Cedel Bank or Euroclear and that purchase Global Securities from DTC Participants for delivery to Cedel Bank Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (a) borrowing though Cedel Bank or Euroclear for one day (until the purchase side of the day trade is reflected in their Cedel Bank or Euroclear accounts) in accordance with the clearing system's customary procedures; (b) borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Cedel Bank or Euroclear account in order to settle the sale side of the trade; or (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Cedel Bank Participant or Euroclear Participant. CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS A beneficial owner of Global Securities holding securities through Cedel Bank or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons, unless (i) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global Securities that are Non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If the information shown on Form W-8 changes, a new Form W-8 must be filed within 30 days of such change. EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM 4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States). EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES (FORM 1001). Non-U.S. Persons residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only for a reduced rate, withholding tax will be imposed at that rate unless the filer alternatively files Form W-8. Form 1001 may be filed by the Certificate Owners or their agents. EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). A-3 U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Certificate Owner of a Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the appropriate form to the person though whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8 and Form 1001 are effective for three calendar years, and Form 4224 is effective for one calendar year. As used in the foregoing discussion, the term "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate that is subject to United States federal income tax, regardless of the source of its income or (iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and (b) one or more United States fiduciaries have the authority to control all substantial decisions of the Trust. The term "Non-U.S. Person" means any person who is not a U.S. Person. This summary does not deal with all aspects of U.S. federal income tax withholding that may be relevant to foreign holders of Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of Global Securities. A-4 PRINCIPAL OFFICES OF THE TRANSFEROR Toyota Leasing, Inc. 19001 South Western Avenue Torrance, California 90509 United States JOINT BOOKRUNNERS Merrill Lynch & Co. Lehman Brothers Morgan Stanley Dean Witter (GLOBAL COORDINATOR) TRUSTEE, REGISTRAR AND PAYING AGENT (U.S.) U.S. Bank National Association One Illinois Center 111 E. Wacker Drive, Suite 3000 Chicago, Illinois 60601 United States ADDITIONAL PAYING AGENT Bankers Trust Company Luxembourg S.A. 14 Boulevard F.D. Roosevelt L-2450, Luxembourg LUXEMBOURG LISTING AGENT HONG KONG LISTING AGENT Bankers Trust Company Luxembourg S.A. Clifford Chance 14 Boulevard F.D. Roosevelt 30th Floor, Jardine House L-2450, Luxembourg One Connaught Place Hong Kong
LEGAL ADVISER INDEPENDENT PUBLIC ACCOUNTANTS (as to United States law) OF THE COMPANY Andrews & Kurth L.L.P. Price Waterhouse LLP 601 S. Figueroa, Suite 4200 400 South Hope Street, 22nd Floor Los Angeles, California 90017 Los Angeles, California 90071-2889 United States United States
- ------------------------------------------------ ------------------------------------------------ - ------------------------------------------------ ------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRANSFEROR OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFEROR SINCE SUCH DATE. ------------------- TABLE OF CONTENTS
PAGE --------- Available Information................................ iii Documents Incorporated by Reference.................. iii Reports to Certificateholders........................ iv Summary.............................................. 1 Risk Factors......................................... 20 The Trust and the SUBI............................... 27 The Titling Trust.................................... 28 Use of Proceeds...................................... 30 The Transferor....................................... 30 TMCC................................................. 31 TMCC's Leasing Operations............................ 31 The Contracts........................................ 35 Maturity, Prepayment and Yield Considerations........ 42 Class A Certificate Factors and Trading Information; Reports to Class A Certificateholders.............. 43 Description of the Certificates...................... 43 Assets of the Trust.................................. 60 Additional Document Provisions....................... 65 Certain Legal Aspects of the Titling Trust........... 82 Certain Legal Aspects of the Contracts and the Leased Vehicles........................................... 84 Material Federal Income Tax Considerations........... 88 ERISA Considerations................................. 92 Underwriting......................................... 95 Listing and General Information for Non-U.S. Investors.......................................... 96 Notice to Canadian Residents......................... 99 Ratings of the Class A Certificates.................. 100 Legal Matters........................................ 100 Experts.............................................. 100 Index of Capitalized Terms........................... 102 Global Clearance, Settlement and Tax Documentation Procedures......................................... A-1
TOYOTA AUTO LEASE TRUST 1997-A $410,000,000 % Auto Lease Asset Backed Certificates, Class A-1 $650,000,000 % Auto Lease Asset Backed Certificates, Class A-2 $72,750,000 % Auto Lease Asset Backed Certificates, Class A-3 TOYOTA LEASING, INC. TRANSFEROR TOYOTA MOTOR CREDIT CORPORATION SERVICER ------------------- PROSPECTUS ------------------- JOINT BOOKRUNNERS MERRILL LYNCH & CO. (GLOBAL COORDINATOR) LEHMAN BROTHERS MORGAN STANLEY DEAN WITTER , 1997 - ------------------------------------------------ ------------------------------------------------ - ------------------------------------------------ ------------------------------------------------ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND PAYMENT. Expenses in connection with the offering of the Class A Certificates being registered herein are estimated as follows: SEC registration fee.......................................... $ 347,272.73 Legal fees and expenses....................................... 617,500.00 Accounting fees and expenses.................................. 90,000.00 Blue sky fees and expenses.................................... 10,000.00 Rating agency fees............................................ 203,181.00 Trustee fees and expenses..................................... 45,000.00 Printing...................................................... 75,000.00 Miscellaneous................................................. 62,046.27 ------------ Total..................................................... $1,450,000.00 ------------ ------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Toyota Motor Credit Corporation ("TMCC") and Toyota Leasing, Inc. ("TLI") were incorporated as California corporations. Section 317 of the California Corporations Code authorizes a corporation to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that such person is or was an officer or director of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding if such person acted in good faith and in a manner such person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. Each of TMCC's and TLI's Bylaws authorize TMCC and the Transferor to indemnify their officers and directors to the maximum extent permitted by the California Corporations Code. TMCC has entered into indemnification agreements with its officers and directors to indemnify such officers and directors to the maximum extent permitted by the California Corporations Code. This item is not applicable to the other Registrants. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Not applicable. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. a. Exhibits: 1.1 Form of Underwriting Agreement.* 3.1 Articles of Incorporation of Toyota Leasing, Inc. 3.2 Bylaws of Toyota Leasing, Inc. 4.1 Form of Securitization Trust Agreement between Toyota Leasing, Inc. and First Bank National Association ("First Bank")+, as Trustee (including forms of Class A Certificates). 5.1 Opinion of Andrews & Kurth L.L.P. with respect to legality.
II-1 8.1 Opinion of Andrews & Kurth L.L.P. with respect to federal income tax matters. 10.1 Amended and Restated Trust and Servicing Agreement among Toyota Motor Credit Corporation ("TMCC"), TMTT, Inc., as Trustee and First Bank, as Trust Agent, dated as of October 1, 1996.** 10.2 UTI Supplement to Amended and Restated Trust and Servicing Agreement among TMCC, TMTT, Inc., as Trustee, and First Bank, as Trust Agent, dated October 1, 1996 (including form of UTI Certificate).** 10.3 Form of SUBI Supplement 1997-A to Amended and Restated Trust Agreement among TMCC, TMTT, Inc., as Trustee and U.S. Bank National Association (f/k/a First Bank National Association, "U.S. Bank")+, as Trust Agent (including form of SUBI Certificate).** 10.4 Form of 1997-A SUBI Servicing Supplement to Amended and Restated Trust and Servicing Agreement between TMTT, Inc., TMCC and Toyota Leasing, Inc.** 10.5 Form of SUBI Certificate Purchase and Sale Agreement between TMCC and Toyota Leasing, Inc.** 10.6 Form of Indenture with respect to TMCC Demand Notes between TMCC and U.S. Bank, as Trustee. 15.1 Awareness Letter of Price Waterhouse LLP.** 23.1 Consent of Andrews & Kurth L.L.P. (included as part of Exhibit 5.1). 23.2 Consent of Andrews & Kurth L.L.P. (included as part of Exhibit 8.1). 23.3 Consent of Price Waterhouse LLP.** 24.1 Powers of Attorney.** 25.1 Statement of Eligibility on Form T-1 of U.S. Bank.
- ------------------------ * To be filed by amendment. ** Previously filed. + First Bank changed its name to U.S. Bank National Association following its merger therewith in July 1997. b. Financial Statement Schedules: Not applicable. ITEM 17. UNDERTAKINGS. The undersigned Registrants hereby undertake as follows: (a) To provide to the Underwriters at the closing date specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to provide prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question II-2 whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act will be deemed to be part of this registration statement as of the time it was declared effective. (d) For the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment that contains a form of prospectus will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial BONA FIDE offering thereof. (e) TMCC, one of the undersigned registrants, hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of such registrant's annual report pursuant to Section 13(a) and 15(d) of the Securities Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (f) The undersigned Registrants hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (f)(1)(i) and (f)(1)(ii) do not apply if the registration statement is on Form S-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 3 to Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Torrance and State of California, on the 28th day of August, 1997. TOYOTA AUTO LEASE TRUST 1997-A By: TOYOTA LEASING, INC., solely as originator of Toyota Auto Lease Trust 1997-A By: /s/ GREGORY WILLIS ----------------------------------------- Gregory Willis, DIRECTOR AND PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 3 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ GREGORY WILLIS Director and Principal - ------------------------------ Executive Officer of August 28, 1997 Gregory Willis Toyota Leasing, Inc. Director and Principal /s/ NOBU SHIGEMI* Financial Officer and - ------------------------------ Principal Accounting August 28, 1997 Nobu Shigemi Officer of Toyota Leasing, Inc. /s/ WILLIAM LATHAM, III* - ------------------------------ Director of Toyota August 28, 1997 William Latham, III Leasing, Inc. *By: /s/ GREGORY WILLIS ------------------------- Gregory Willis ATTORNEY-IN-FACT II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Amendment No. 3 to Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Torrance and State of California, on the 28th day of August, 1997. TOYOTA LEASING, INC. By: /s/ GREGORY WILLIS ----------------------------------------- Gregory Willis, DIRECTOR AND PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 3 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ GREGORY WILLIS Director and Principal - ------------------------------ Executive Officer of August 28, 1997 Gregory Willis Toyota Leasing, Inc. Director and Principal /s/ NOBU SHIGEMI* Financial Officer and - ------------------------------ Principal Accounting August 28, 1997 Nobu Shigemi Officer of Toyota Leasing, Inc. /s/ WILLIAM LATHAM, III* - ------------------------------ Director of Toyota August 28, 1997 William Latham, III Leasing, Inc. *By: /s/ GREGORY WILLIS ------------------------- Gregory Willis ATTORNEY-IN-FACT II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 3 to Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the City of Torrance and State of California, on the 28th day of August, 1997. TOYOTA MOTOR CREDIT CORPORATION, solely as transferor of the SUBI to the Transferor and issuer of the TMCC Demand Notes By: /s/ GEORGE BORST ----------------------------------------- George Borst SENIOR VICE PRESIDENT AND GENERAL MANAGER TOYOTA LEASE TRUST By: TOYOTA MOTOR CREDIT CORPORATION, solely as originator of the Toyota Lease Trust By: /s/ GEORGE BORST ----------------------------------------- George Borst SENIOR VICE PRESIDENT AND GENERAL MANAGER
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 3 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- Director, Senior Vice /s/ GEORGE BORST President and General - ------------------------------ Manager of TMCC August 28, 1997 George Borst (principal executive officer) /s/ ROBERT PITTS* - ------------------------------ Director and Secretary of August 28, 1997 Robert Pitts TMCC Director, Senior Vice /s/ NOBU SHIGEMI* President and Treasurer - ------------------------------ of TMCC (principal August 28, 1997 Nobu Shigemi financial officer) /s/ DOUGLAS WEST* - ------------------------------ Director of TMCC August 28, 1997 Douglas West Vice President of Finance /s/ GREGORY WILLIS and Administration - ------------------------------ (principal accounting August 28, 1997 Gregory Willis officer) *By: /s/ GREGORY WILLIS ------------------------- Gregory Willis ATTORNEY-IN-FACT II-6 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT DESCRIPTION NUMBERED PAGE - ----------- ---------------------------------------------------------------------------------------- ----------------- 1.1 Form of Underwriting Agreement.*........................................................ 3.1 Articles of Incorporation of Toyota Leasing, Inc........................................ 3.2 Bylaws of Toyota Leasing, Inc........................................................... 4.1 Form of Securitization Trust Agreement between Toyota Leasing, Inc. and First Bank National Association ("First Bank")+, as Trustee (including forms of Class A Certificates)......................................................................... 5.1 Opinion of Andrews & Kurth L.L.P. with respect to legality.............................. 8.1 Opinion of Andrews & Kurth L.L.P. with respect to federal income tax matters............ 10.1 Amended and Restated Trust and Servicing Agreement among Toyota Motor Credit Corporation ("TMCC"), TMTT, Inc., as Trustee and First Bank, as Trust Agent, dated as of October 1, 1996.**............................................................................ 10.2 UTI Supplement to Amended and Restated Trust and Servicing Agreement among TMCC, TMTT, Inc., as Trustee, and First Bank, as Trust Agent, dated October 1, 1996 (including form of UTI Certificate).**........................................................... 10.3 Form of SUBI Supplement 1997-A to Amended and Restated Trust Agreement among TMCC, TMTT, Inc., as Trustee and U.S. Bank National Association (f/k/a First Bank National Association, "U.S. Bank")+, as Trust Agent (including form of SUBI Certificate).**.... 10.4 Form of 1997-A SUBI Servicing Supplement to Amended and Restated Trust and Servicing Agreement between TMTT, Inc., TMCC and Toyota Leasing, Inc.**......................... 10.5 Form of SUBI Certificate Purchase and Sale Agreement between TMCC and Toyota Leasing, Inc.**................................................................................ 10.6 Form of Indenture with respect to TMCC Demand Notes between TMCC and U.S. Bank, as Trustee............................................................................... 15.1 Awareness Letter of Price Waterhouse LLP.**............................................. 23.1 Consent of Andrews & Kurth L.L.P. (included as part of Exhibit 5.1)..................... 23.2 Consent of Andrews & Kurth L.L.P. (included as part of Exhibit 8.1)..................... 23.3 Consent of Price Waterhouse LLP.**...................................................... 24.1 Powers of Attorney.**................................................................... 25.1 Statement of Eligibility on Form T-1 of U.S. Bank.......................................
- ------------------------ * To be filed by amendment. ** Previously filed. + First Bank changed its name to U.S. Bank National Association following its merger therewith in July 1997. II-7 EX-3.1 2 EXHIBIT 3.1 ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION OF TOYOTA LEASING, INC. ------------------------- ARTICLE I NAME The name of the corporation is Toyota Leasing, Inc. Toyota Leasing, Inc. is referred to throughout these articles of incorporation as the "Corporation". ARTICLE II The existence of the corporation is perpetual. ARTICLE III PURPOSES (a) Subject to paragraph (b) below, the purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession that is permitted to be incorporated under the California Corporations Code. (b) Notwithstanding paragraph (a) above, the purpose of the Corporation is limited to the following purposes, and activities incident to and necessary or convenient to accomplish the following purposes: (i) to acquire from time to time from Toyota Motor Credit Corporation ("TMCC"), all right, title and interest in and to certificates ("SUBI Certificates") evidencing units of beneficial interest in segregated portfolios of assets of Toyota Lease Trust, a Delaware business trust, including lease contracts arising out of or relating to the lease of new or used motor vehicles or industrial equipment, moneys due thereunder, ownership or security interests in the vehicles or industrial equipment leased thereby, proceeds from claims on insurance policies related thereto and related rights (collectively, "SUBI Assets"); (ii) to acquire, own, hold, service, sell, assign, pledge and otherwise deal with the SUBI Certificates and SUBI Assets, related insurance policies, related agreements with TMCC and any proceeds or further rights associated with any of the foregoing; (iii) to sell, assign, transfer, convey and/or pledge all or any part of each such SUBI Certificate to one or more trusts or other persons or legal entities pursuant to one or more Securitization Trust 1 Agreements, Indentures or similar agreements (the "Agreements") to be entered into by and among TMCC, as servicer, the Corporation and each other pledgee or transferee named therein (the "transferees"); (iv) to sell any series or class of asset-backed certificates or other securities issued by or evidencing interests in the transferees or obligations of the transferees or the Corporation under the related Agreements ("Securities"); (v) to hold and enjoy all of the rights and privileges of any Securities so issued under the related Agreements; (vi) to perform its obligations under the Agreements; and (vii) to engage in any activity and to exercise any powers permitted to corporations under the laws of the State of California that are related or incidental to the foregoing and necessary, convenient or advisable to accomplish the foregoing. So long as any outstanding debt of the Corporation or Securities are rated by any nationally recognized statistical rating agency, the Corporation shall not issue unsecured notes or otherwise borrow money unless (A) the Corporation has made a written request to the related nationally recognized rating agency to issue unsecured notes or incur borrowings and such notes or borrowings are rated by the related nationally recognized rating agency the same as or higher than the rating afforded any outstanding rated debt or Securities, or (B) such notes or borrowings (1) are fully subordinated (and which shall provide for payment only after payment in respect of all outstanding rated debt and/or Securities) or are nonrecourse against any assets of the Corporation other than the assets pledged to secure such notes or borrowings, (2) do not constitute a claim against the Corporation in the event such assets are insufficient to pay such notes or borrowings, and (3) where such notes or borrowings are secured by the rated debt or Securities, are fully subordinated (and which shall provide for payment only after payment in respect of all outstanding rated debt and/or Securities) to such rated debt or Securities. ARTICLE IV SERVICE OF PROCESS The name and address of the Corporation's initial agent for service of process are: Alan F. Cohen, Esq. 19001 South Western Avenue Torrance, California 90509 ARTICLE V CAPITAL STOCK The Corporation shall have one class of stock designated as Common Stock, and the total number of shares of stock of that class that the Corporation shall have authority to issue is 1,000 2 shares of $100.00 par value stock. No shareholder shall have any preemptive right to acquire additional shares of the Corporation. ARTICLE VI LIMITATIONS ON CERTAIN ACTIONS BY THE CORPORATION Notwithstanding any other provision of these Articles and any provision of law, the Corporation shall not do any of the following: (a) Engage in any business or activity other than as set forth in Article III hereof; or (b) without the unanimous affirmative vote of the members of the Board of Directors of the Corporation, merge or consolidate with any other corporation, company or entity or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock or other ownership interest of any other corporation, company or equity, provided that such restrictions shall not limit the acquisition of SUBI Certificates from TMCC or the ability of the Corporation to sell, assign, transfer, convey and/or pledge all or any part of any SUBI Certificate in accordance with the terms of Article III(b) hereof, on which there shall be no such restriction. ARTICLE VII INTERNAL AFFAIRS The Corporation shall insure at all times that (a) it maintains separate corporation records and books of account from those of TMCC's, and (b) except as permitted by contract between the Corporation and TMCC with respect to deposits in certain accounts of collections in respect of the assets securing a SUBI Certificate pursuant to an agreement between the Corporation and TMCC, none of the Corporation's assets will be commingled with those of TMCC or any of their affiliates. ARTICLE VIII AMENDMENTS The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles in any manner now or hereafter provided herein or by statute and all rights, preferences and privileges conferred by these Articles upon shareholders, directors or any other person are granted subject to such right; provided, however, that the Corporation shall not amend, alter, change or repeal any provision of Articles III, VI, VII, VIII and IX (the "Restricted Articles") without the unanimous affirmative vote of the members of the Board of Directors and provided, 3 further, that the Corporation shall not amend or change any article so as to be inconsistent with the Restricted Articles. ARTICLE IX LIABILITY OF DIRECTORS; INDEMNIFICATION The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. The Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) for breach of duty to the Corporation and its shareholders through bylaw provisions, agreements with agents, vote of shareholders or disinterested directors, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the applicable limits set forth in Section 204 of the California Corporations Code. Any amendment, repeal or modification of any provision of this Article IX shall not adversely affect any right or protection of an agent of this corporation existing at the time of such amendment, repeal or modification. IN WITNESS WHEREOF, I have set my hand to be affixed to these Articles of Incorporation, as of this 22nd day of April, 1997. By: /s/ Daniel F. Passage ------------------------------ Name: Daniel F. Passage Title: Incorporator 4 EX-3.2 3 EXHIBIT 3.2 BYLAWS OF TOYOTA LEASING B Y L A W S TOYOTA LEASING, INC. A CALIFORNIA CORPORATION INDEX ARTICLE I SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . -1- Section 1. PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . -1- Section 2. ANNUAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . -1- Section 3. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . -1- Section 4. NOTICE OF MEETINGS . . . . . . . . . . . . . . . . . . . . -1- Section 5. CONSENT TO SHAREHOLDERS' MEETINGS. . . . . . . . . . . . . -2- Section 6. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . -2- Section 7. VOTING RIGHTS, CUMULATIVE VOTING . . . . . . . . . . . . . -2- Section 8. PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . -2- ARTICLE II DIRECTORS; MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- Section 1. POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . -3- Section 2. NUMBER AND QUALIFICATION . . . . . . . . . . . . . . . . . -3- Section 3. ELECTION AND TENURE OF OFFICE. . . . . . . . . . . . . . . -3- Section 4. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . -3- Section 5. REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . . -4- Section 6. PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . -4- Section 7. ORGANIZATION MEETINGS. . . . . . . . . . . . . . . . . . . -4- Section 8. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . -4- Section 9. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . -5- Section 10. WRITTEN CONSENT. . . . . . . . . . . . . . . . . . . . . . -5- Section 11. NOTICE OF ADJOURNMENT. . . . . . . . . . . . . . . . . . . -5- Section 12. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . -5- Section 13. FEES AND COMPENSATION. . . . . . . . . . . . . . . . . . . -5- Section 14. INDEPENDENT DIRECTORS. . . . . . . . . . . . . . . . . . . -6- Section 15. DEFINITIONS OF CERTAIN TERMS USED IN SECTION 14. . . . . . -6- Section 16. LIMITATIONS ON CERTAIN ACTIONS BY THE CORPORATION. . . . . -8- ARTICLE III OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8- Section 1. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . -8- Section 2. ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . -8- Section 3. TENURE OF OFFICE . . . . . . . . . . . . . . . . . . . . . -9- Section 4. REMOVAL AND RESIGNATION. . . . . . . . . . . . . . . . . . -9- Section 5. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . -9- Section 6. CHAIRMAN OF THE BOARD AND PRESIDENT. . . . . . . . . . . . -9- A. CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . -9- B. PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . -9- Section 7. VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . .-10- A. Senior Vice Presidents . . . . . . . . . . . . . . . . . .-10- B. Vice Presidents. . . . . . . . . . . . . . . . . . . . . .-10- Section 8. SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . .-10- Section 9. CHIEF FINANCIAL OFFICER/TREASURER. . . . . . . . . . . . .-10- Section 10. ASSISTANTS . . . . . . . . . . . . . . . . . . . . . . . .-10- Section 11. SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . .-11- -i- INDEX ARTICLE IV EXECUTIVE AND OTHER COMMITTEES . . . . . . . . . . . . . . . . . . . . . . .-11- ARTICLE V CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-11- Section 1. RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . .-11- Section 2. INSPECTION OF BOOKS AND RECORDS. . . . . . . . . . . . . .-11- Section 3. CERTIFICATION AND INSPECTION OF BYLAWS . . . . . . . . . .-11- Section 4. ENDORSEMENT OF CHECKS, DRAFTS, OR OTHER INSTRUMENTS. . . .-11- Section 5. ENDORSEMENT OF CONTRACTS OR OTHER DOCUMENTS. . . . . . . .-12- Section 6. ANNUAL REPORTS . . . . . . . . . . . . . . . . . . . . . .-12- ARTICLE VI CERTIFICATES AND TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . .-12- Section 1. CERTIFICATES FOR SHARES. . . . . . . . . . . . . . . . . .-12- Section 2. TRANSFER ON THE BOOKS. . . . . . . . . . . . . . . . . . .-12- Section 3. RECORD DATE FOR SHAREHOLDERS . . . . . . . . . . . . . . .-12- ARTICLE VII CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-13- ARTICLE VIIIAMENDMENTS TO BYLAWS . . . . . . . . . . . . . . . . . . . . . .-13- Section 1. BY SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . .-13- Section 2. POWERS OF DIRECTORS. . . . . . . . . . . . . . . . . . . .-13- Section 3. RECORD OF AMENDMENTS . . . . . . . . . . . . . . . . . . .-14- ARTICLE IX INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-14- ARTICLE X FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-14- -ii- BYLAWS Bylaws for the regulation, except as otherwise provided by statute or its Articles of Incorporation, of Toyota Leasing, Inc., a California corporation. ARTICLE I SHAREHOLDERS' MEETINGS SECTION 1. PLACE OF MEETINGS All meetings of the shareholders shall be held at such place as may be designated for that purpose from time to time by the President, by any Vice President who is a director or by the Secretary. SECTION 2. ANNUAL MEETINGS The annual meeting of the shareholders shall be held on the 5th day of December in each year, if not a legal holiday, and if a legal holiday, then on the next succeeding day; or if such date is found to be inconvenient, then the President may set an alternate date within 60 days either before or after the 5th of December. At this meeting, the shareholders, by plurality vote, shall, subject to Article II hereof, elect a Board of Directors, consider reports of the affairs of the corporation, and transact such other business as may properly be brought before the meeting. SECTION 3. SPECIAL MEETINGS Special meetings of the shareholders, for any purpose or purposes whatsoever, may be called at any time by the President, or by the Board of Directors, or by any two or more members thereof, or by one or more shareholders holding not less than one-fifth (1/5) of the voting power of the corporation. SECTION 4. NOTICE OF MEETINGS Notices of meetings, annual or special, shall be given in writing to shareholders entitled to vote by the Secretary or an Assistant Secretary. Such notices shall be sent to the shareholder's address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice, not less than ten (10) days nor more than sixty (60) days before such meeting. Notice of any meeting of shareholders shall specify the place, the date and the hour of meeting, and in the case of a special meeting, as provided by the California Corporations Code, the general nature of the business to be transacted. When a meeting is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save, as aforesaid, it shall not be necessary to give any notice of the adjournment or of the business to be transacted at an -1- adjourned meeting other than by announcement at the meeting at which such adjournment is taken. SECTION 5. CONSENT TO SHAREHOLDERS' MEETINGS The transactions of any meeting of shareholders, however called and noticed, shall be valid as though taken at a meeting duly held after regular call and notice if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Any action which may be taken at a meeting of the shareholders, may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to vote at a meeting for such purpose, and filed with the Secretary of the corporation. SECTION 6. QUORUM The holders of a majority of the shares entitled to vote thereat, present in person, or represented by proxy, shall be requisite for and shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws. If, however, such majority shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person, or by proxy, shall have power to adjourn the meeting from time to time, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 7. VOTING RIGHTS, CUMULATIVE VOTING Only persons in whose names shares entitled to vote are registered on the stock records of the corporation on the day of any meeting of shareholders, or if some other day be fixed by the Board of Directors for the determination of shareholders of record, then on such other day, shall be entitled to vote at such meeting. Every shareholder entitled to vote shall be entitled to one vote for each of said shares and shall have the right to cumulate his votes as provided in the appropriate section of the California Corporations Code. SECTION 8. PROXIES Every shareholder entitled to vote, or to execute consents, may do so either in person or by written proxy executed in accordance with the appropriate provisions of the California Corporations Code and filed with the Secretary of the corporation. -2- ARTICLE II DIRECTORS; MANAGEMENT SECTION 1. POWERS Subject to the limitation of the Articles of Incorporation, of the Bylaws and of the California Corporations Code as to the action to be authorized or approved by the shareholders, all corporate powers shall be exercised by or under authority of, and the business and affairs of this corporation shall be controlled by, a Board of Directors. SECTION 2. NUMBER AND QUALIFICATION The authorized number of directors of the corporation shall be not less than three nor more than five, unless changed by a Bylaw duly adopted whether by the Board or the shareholders amending this Section 2, Article II. The exact number of directors shall be fixed from time to time within the limits specified by resolution duly adopted either by the Board or the shareholders. Until modified by such a resolution or automatically increased as provided in Section 14 of this Article II, the number of directors shall be three. SECTION 3. ELECTION AND TENURE OF OFFICE At each annual meeting of the shareholders, directors shall be elected to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. SECTION 4. VACANCIES Subject to Section 14 of this Article II, vacancies on the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual meeting of shareholders or at a special meeting called for that purpose. Subject to Section 14 of this Article II, the shareholders may at any time elect a director to fill any vacancy not filled by the directors, and may elect the additional directors at the meeting at which an amendment of the Bylaws is voted authorizing an increase in the number of directors. A vacancy or vacancies shall be deemed to exist in case of the death, resignation or removal of any director, or if the shareholders shall increase the authorized number of directors but shall fail at the meeting at which such increase is authorized, or at any adjournment thereof, to elect the additional director so provided for. Subject to Section 14 of this Article II, if the Board of Directors accepts the resignation of a director tendered to take effect at a future time, the Board or the shareholders -3- shall have power to elect a successor to take office when the resignation shall become effective. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his or her term of office. SECTION 5. REMOVAL OF DIRECTORS Subject to Section 14 of this Article II, the entire Board of Directors or any individual director may be removed from office as provided by the appropriate sections of the California Corporations Code. SECTION 6. PLACE OF MEETINGS Meetings of the Board of Directors shall be held at such place as may be designated for that purpose, from time to time, by the President, by any Vice President who is a director or by the Secretary. Any meeting shall be valid, wherever held, if held by the written consent of all Members of the Board of Directors, given either before or after the meeting and filed with the Secretary of the corporation. SECTION 7. ORGANIZATION MEETINGS The organizational meetings of the Board of Directors shall be held immediately following the adjournment of the annual meetings of the shareholders. SECTION 8. SPECIAL MEETINGS - NOTICES Special meetings of the Board of Directors for any purpose or purposes shall be called at any time by the President or, if he is absent or unable or refuses to act, by any Vice President who is a director. Special meetings of the Board shall be held upon four days' written notice or 48 hours' notice given personally or by telephone, telegraph, telex or other similar means of communication. Any such notice shall be addressed or delivered to each director at such director's address as it is shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such address is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient. -4- SECTION 9. WAIVER Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. SECTION 10. WRITTEN CONSENT Any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Any certificate or other document filed which relates to action so taken shall state that the action was taken by the unanimous written consent of the Board of Directors without a meeting and that the Bylaws authorize the directors so to act. Such statement shall be the prima facie evidence of such authority. This section is drafted pursuant to and is intended to comply with the appropriate section of the California Corporations Code. SECTION 11. NOTICE OF ADJOURNMENT Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place was fixed at the meeting adjourned. SECTION 12. QUORUM A majority of the authorized number of directors as fixed by the Articles or Bylaws shall be necessary to constitute a quorum for the transaction of business, and, subject to the provisions of the Articles of Incorporation, the action of a majority of the directors present at any meeting at which there is a quorum, when duly assembled, is valid as a corporate act; provided that a minority of the directors, in the absence of a quorum, may adjourn from time to time, but may not transact any business. Members of the Board of Directors may participate in a meeting through use of conference telephone, video conference or similar communications equipment, so long as all members participating in such a meeting can hear one another. Participation in a meeting as permitted in the preceding sentence constitutes presence in person at such meeting. SECTION 13. FEES AND COMPENSATION Directors and members of committees may receive such compensation and fees, if any, for their services, and such reimbursement for expenses, as may be determined by resolution of the Board of Directors. -5- SECTION 14. INDEPENDENT DIRECTORS Of the authorized number of directors provided in Section 2, Article II hereof, the corporation shall at all times have at least one individual who is an Independent Director (as defined in Section 15) and provided further that in the event that the authorized number of directors exceeds four, at least two of such directors shall be Independent Directors. Notwithstanding the foregoing, at all times after the occurrence of a Rating Event (as defined in Section 15) the Board of Directors shall include at least two individuals who are Independent Directors. Accordingly, upon the occurrence of a Rating Event, the authorized number of directors established by the Board of Directors shall be increased by one and such vacancy shall be filled promptly with an individual who is an Independent Director unless, at the time of such Rating Event, the Board of Directors includes two Independent Directors. This Section 14 shall not be amended, altered or repealed without the written consent of each nationally recognized statistical rating agency which has been requested by the corporation to rate one or more classes of securities issued by the corporation or by a trust in which the corporation holds a beneficial interest and which is then rating such class or classes of securities (each a "Rating Agency"). SECTION 15. DEFINITIONS OF CERTAIN TERMS USED IN SECTION 14 For purposes of Section 14, the following terms shall have the meaning set forth in this Section 15: (i) A "Rating Event" shall be deemed to have occurred upon the earlier to occur of (A) the downgrading of Toyota Motor Credit Corporation's short-term unsecured debt to or below (1) A-2 by Standard & Poor's, a division of the McGraw-Hill Companies or (2) P-2 by Moody's Investors Service, Inc., and (B) the downgrading of Toyota Motor Credit Corporation's long-term debt below (1) A- by Standard & Poor's, a division of the McGraw-Hill Companies, or (2) A2 by Moody's Investors Service, Inc. (ii) An "Independent Director" shall be an individual who: (A) is not and has not been employed by Toyota Motor Credit Corporation or any of its subsidiaries or affiliates as a director, officer or employee within the five years immediately prior to such individual's appointment as an Independent Director; (B) is not (and is not affiliated with a company or a firm that is) a significant advisor or consultant to Toyota Motor Credit Corporation or any of its subsidiaries and affiliates; (C) is not affiliated with a significant customer or supplier of Toyota Motor Credit Corporation or any of its subsidiaries or affiliates; (D) is not affiliated with a company of which Toyota Motor Credit Corporation or any of its subsidiaries and affiliates is a significant customer or supplier; (E) does not have significant personal services contract(s) with Toyota Motor Credit Corporation or any of its subsidiaries or affiliates; (F) is not affiliated with a tax-exempt entity that receives significant contributions from Toyota Motor Credit Corporation or any of its subsidiaries or affiliates; (G) is not the beneficial owner at the time of such individual's appointment as an Independent Director, or any time thereafter while serving as an Independent Director, of shares of any class of common stock of Toyota Motor Credit Corporation or any of its subsidiaries or affiliates the value of which constitutes more than 5% of such individual's net worth; and (H) is not a spouse, parent, sibling or child of any person described by (A) through (H). -6- (iii) An "affiliate" of a person, or a person "affiliated with," a specified person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified person. (iv) The term "control" (including the terms "controlling," "controlled by" and "under common control with") shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, that a person shall not be deemed to control another person solely because he or she is a director of such other person. (v) The term "person" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group deemed to be a person pursuant to Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, as in effect on April 24, 1997. (vi) A "subsidiary" of Toyota Motor Credit Corporation shall mean any corporation a majority of the voting stock of which is owned, directly or indirectly, through one or more other subsidiaries, by Toyota Motor Credit Corporation. (vii) A person shall be deemed to be, or to be affiliated with a company or firm that is a "significant advisor or consultant to Toyota Motor Credit Corporation or any of its subsidiaries or affiliates" if he, she or it, as the case may be, received or would receive fees or similar compensation from Toyota Motor Credit Corporation or any of its subsidiaries or affiliates in excess of the lesser of (A) 3% of the consolidated gross revenues which Toyota Motor Credit Corporation and its subsidiaries received for the sale of their products and services during the last fiscal year of Toyota Motor Credit Corporation; (B) 5% of the gross revenues of the person during the last calendar year, if such person is a self-employed individual, and (C) 5% of the consolidated gross revenues received by such company or firm for the sale of its products and services during its last fiscal year, if the person is a company or firm; provided, however, that director's fees and expense reimbursements shall not be included in the gross revenues of an individual for purposes of this determination. (viii) A "significant customer of Toyota Motor Credit Corporation or any of its subsidiaries or affiliates" shall mean a customer from which Toyota Motor Credit Corporation and any of its subsidiaries or affiliates collectively in the last fiscal year of Toyota Motor Credit Corporation received payment in consideration for the products and services of Toyota Motor Credit Corporation and its subsidiaries or affiliates which are in excess of 3% of the consolidated gross revenues of Toyota Motor Credit Corporation and its subsidiaries during such fiscal year. (ix) A "significant supplier of Toyota Motor Credit Corporation or any of its subsidiaries or affiliates" shall mean a supplier to which Toyota Motor Credit Corporation and any of its subsidiaries or affiliates collectively in the last fiscal year of Toyota Motor Credit Corporation made payments in consideration for the supplier's products and services in excess of 3% of the consolidated gross revenues of Toyota Motor Credit Corporation and its subsidiaries during such fiscal year. -7- (x) Toyota Motor Credit Corporation or any of its subsidiaries and affiliates shall be deemed a "significant customer" of a company if Toyota Motor Credit Corporation and any of its subsidiaries and affiliates collectively were the direct source during such company's last fiscal year or in excess of 5% of the gross revenues which such company received for the sale of its products and services during such fiscal year. (xi) Toyota Motor Credit Corporation or any of its subsidiaries and affiliates shall be deemed a "significant supplier" of a company if Toyota Motor Credit Corporation and any of its subsidiaries and affiliates collectively received in such company's last fiscal year payments from such company in excess of 5% of the gross revenues which such company received during such fiscal year for the sale of its products and services. SECTION 16. LIMITATIONS ON CERTAIN ACTIONS BY THE CORPORATION Notwithstanding any other provision of these Bylaws, the Articles of Incorporation and any other provision of these Bylaws, the Articles of Incorporation and any provision of law, the Corporation shall not do any of the following without the affirmative vote of a majority of the members of the Board of Directors of the Corporation (which must include the affirmative vote of all duly appointed Independent Directors): (i) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (ii) consent to the institution of bankruptcy or insolvency proceedings against it, (iii) file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy, (iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or a substantial part of its property, (v) make a general assignment for the benefit of creditors, (vi) admit in writing its inability to pay its debts generally as they become due, or (vii) take any corporate action in furtherance of the actions set forth in clauses (i) through (vi) of this section; provided, however, that no director may be required by any shareholder of the Corporation to consent to the institution of bankruptcy or insolvency proceedings against the Corporation so long as the Corporation is solvent. ARTICLE III OFFICERS SECTION 1. OFFICERS The officers of the corporation shall be a president, a secretary and a chief financial officer/treasurer, which officers shall be elected by, and hold office at the pleasure of, the Board of Directors. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 11 of this Article. SECTION 2. ELECTION After their election, the directors shall meet and organize by electing a President from their own number, Secretary and a Chief Financial Officer, and, at the discretion of the directors, one or more Vice Presidents, who may, but need not, be members of the Board of -8- Directors. Any two or more of such offices, except those of President and Secretary, may be held by the same person. SECTION 3. TENURE OF OFFICE The tenure of office of all the officers of the corporation shall be fixed by the Board of Directors. SECTION 4. REMOVAL AND RESIGNATION Any officer may be removed, either with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the Board of Directors or to the President, or to the Secretary of the corporation. Any such resignation shall take effect on the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5. VACANCIES A vacancy in any office because of death, resignation, removal, disqualification or other cause shall be filled in the manner prescribed in the Bylaws for regular appointment to such office. SECTION 6. CHAIRMAN OF THE BOARD AND PRESIDENT A. CHAIRMAN OF THE BOARD The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board of Directors as prescribed by these Bylaws. B. PRESIDENT The President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business affairs of the corporation. He or she shall preside at all meetings of the shareholders, and in the absence of the Chairman of the Board, he or she shall preside at meetings of the Board of Directors. He or she shall be ex officio, a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties as may be prescribed by the Board of Directors or the Bylaws. -9- SECTION 7. VICE PRESIDENTS A. Senior Vice Presidents The Senior Vice Presidents shall be the deputy chief executive officers of the corporation and shall exercise such corporate level authority over the activities of the corporation as prescribed by the President. In the absence or disability of the President, they shall, in the order designated by the President or the Board of Directors, perform the duties and exercise the powers of the President. B. Vice Presidents The Vice Presidents shall exercise authority over the activities of their assigned area of responsibility as prescribed by the President and under the overall direction and control of the President or Senior Vice Presidents. SECTION 8. SECRETARY The Secretary shall keep, or cause to be kept, a book of minutes at the principal office or such other place as the Board of Directors may order, of all meetings of directors and shareholders, with the time and place of holding, whether regular or special and, if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at shareholders' meetings and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation's transfer agent, a share register, or a duplicate share register, showing the names of the shareholders and their addresses; the number and classes of shares held by each; the number and date of certificates issued for the same; and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given; he shall keep the seal of the corporation and affix said seal to all documents requiring a seal, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws. SECTION 9. CHIEF FINANCIAL OFFICER/TREASURER The Chief Financial Officer/Treasurer shall receive and keep all the funds of the corporation, and pay them out only on the check of the corporation, signed in the manner authorized by the Board of Directors. SECTION 10. ASSISTANTS Any Assistant Secretary or Assistant Treasurer, respectively, may exercise any of the powers of Secretary or Treasurer, respectively, as provided in these Bylaws or as -10- directed by the Board of Directors, and shall perform such other duties as are imposed upon them by these Bylaws of the Board of Directors. SECTION 11. SUBORDINATE OFFICERS The Board of Directors may from time to time appoint such subordinate officers or agents as the business of the corporation may require, and fix their tenure of office. ARTICLE IV EXECUTIVE AND OTHER COMMITTEES The Board of Directors may designate an executive committee, and such other committees as may be necessary from time to time, each consisting of two or more of its members and with such powers as it may designate, consistent with the Articles of Incorporation and these Bylaws and the California Corporations Code. Such committees shall hold office at the pleasure of the Board of Directors. ARTICLE V CORPORATE RECORDS SECTION 1. RECORDS The corporation shall maintain adequate and correct accounts, books and records of its business and properties. All of such books, records and accounts shall be kept at its principal place of business in the State of California, as fixed by the Board of Directors from time to time. SECTION 2. INSPECTION OF BOOKS AND RECORDS All books and records provided for in the appropriate sections of the California Corporations Code shall be open to inspection of the directors and shareholders from time to time and in the manner provided in said sections. SECTION 3. CERTIFICATION AND INSPECTION OF BYLAWS The original or a copy of these Bylaws, as amended or otherwise altered to date, certified by the Secretary, shall be open to inspection by the shareholders of the corporation, as provided for in the appropriate sections of the California Corporations Code. SECTION 4. ENDORSEMENT OF CHECKS, DRAFTS, OR OTHER INSTRUMENTS All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by resolution of the Board of Directors. -11- SECTION 5. ENDORSEMENT OF CONTRACTS OR OTHER DOCUMENTS The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement, or to pledge its credit, or to render it liable for any purpose or amount. SECTION 6. ANNUAL REPORTS The Board of Directors may cause annual reports to be made to the shareholders as provided by the appropriate sections of the California Corporations Code, but need not, except upon written request of the shareholders owning at least five (5) percent of the number of outstanding shares. The Board of Directors shall cause such annual reports, when so made, to be sent to the shareholders at least fifteen (15) days prior to the annual meeting, but not later than one hundred twenty (120) days after the close of the fiscal or calendar year. ARTICLE VI CERTIFICATES AND TRANSFER OF SHARES SECTION 1. CERTIFICATES FOR SHARES Certificates for shares shall be of such form and device as the Board of Directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; the par value, if any, or a statement that such shares are without par value; a statement of the rights, privileges, preferences and restrictions, if any; a statement as to redemption or conversion, if any; and a statement of liens or restrictions upon transfer or voting, if any. Every certificate for shares must be signed by the President or a Vice President and the Secretary or Assistant Secretary. SECTION 2. TRANSFER ON THE BOOKS Upon surrender to the Secretary of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and to cancel the old certificate and record the transaction upon its books. SECTION 3. RECORD DATE FOR SHAREHOLDERS In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, the directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the directors, the -12- record date for determining shareholders entitled to notice of or to vote at such meeting shall be at the close of business on the date next preceding the day on which the meeting is held. If no record date has been fixed by the directors, the record date for determining the shareholders entitled to consent to corporate action in writing without a meeting, when no prior action by the directors is required by the California Corporations Code, shall be the first date on which a signed written consent setting forth the action taken on or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of shareholders are recorded. If no record date has been fixed by the directors and prior action by the directors is required by the California Corporations Code, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the directors adopt the resolution taking such prior action. In order that the Corporation may determine the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the directors adopt the resolution relating thereto. ARTICLE VII CORPORATE SEAL The corporate seal shall be circular in form, and shall have inscribed thereon the name of the corporation, the date of its incorporation, and the word California. ARTICLE VIII AMENDMENTS TO BYLAWS SECTION 1. BY SHAREHOLDERS New Bylaws may be adopted or these Bylaws may be repealed or amended at the annual meeting of shareholders, or any other meeting of the shareholders called for that purpose, by a vote of shareholders entitled to exercise a majority of the voting power of the corporation, or by written assent of such shareholders. Notwithstanding the foregoing, Sections 14 and 15 of Article II may not be amended, altered or repealed without the further consents specified therein. SECTION 2. POWERS OF DIRECTORS Subject to the right of the shareholders to adopt, amend or repeal the Bylaws, as provided in Section 1 of this Article VIII, the Board of Directors may adopt, amend or repeal any of these Bylaws other than a Bylaw or amendment thereof changing the range (as opposed -13- to the number within the authorized range) of the authorized number of directors. Notwithstanding the foregoing, Sections 14, 15 and 16 of Article II may not be amended, altered or repealed without the further consents specified therein. SECTION 3. RECORD OF AMENDMENTS Whenever an amendment or new Bylaw is adopted, it shall be copied in the Minute Book of the corporation with the original Bylaws, in the appropriate place. If any Bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in said book. ARTICLE IX INDEMNIFICATION The corporation shall have the authority, to the maximum extent permitted by the California Corporations Code, to indemnify each of its directors, officers, employees and agents to the fullest extent permissible under California law and the corporation's Articles of Incorporation. The corporation may enter into agreements with any director, officer, employee or agent of the corporation providing for indemnification to the fullest extent permissible under California law and the corporation's Articles of Incorporation. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. -14- EX-4.1 4 SECURITIZATION TRUST AGREEMENT Draft 8/25/97 ----------------------------------------------------------------- TOYOTA LEASING, INC. AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE TOYOTA AUTO LEASE TRUST 1997-A AUTOMOBILE LEASE ASSET-BACKED CERTIFICATES SECURITIZATION TRUST AGREEMENT DATED AS OF SEPTEMBER 1, 1997 ----------------------------------------------------------------- TABLE OF CONTENTS PAGE ---- RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Article and Section References . . . . . . . . . . . . . . . 2 ARTICLE TWO CREATION OF TRUST Section 2.01. Creation of Trust. . . . . . . . . . . . . . . . . . . . . . 3 Section 2.02. Conveyance of 1997-A SUBI Interest . . . . . . . . . . . . . 3 Section 2.03. Acceptance by Trustee. . . . . . . . . . . . . . . . . . . . 4 ARTICLE THREE DISTRIBUTIONS; RESERVE FUND; STATEMENTS TO CERTIFICATEHOLDERS Section 3.01. Distributions. . . . . . . . . . . . . . . . . . . . . . . . 4 Section 3.02. Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.03. Statements to Certificateholders . . . . . . . . . . . . . . 11 ARTICLE FOUR THE CERTIFICATES Section 4.01. The Certificates . . . . . . . . . . . . . . . . . . . . . . 14 Section 4.02. Authentication and Delivery of Certificates. . . . . . . . . 15 Section 4.03. Registration of Transfer and Exchange of Certificates. . . . 15 Section 4.04. Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . 18 Section 4.05. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . 19 Section 4.06. Access to List of Certificateholders' Names and Addresses. . . . . . . . . . . . . . . . . . . . . . . . 19 Section 4.07. Maintenance of Office or Agency. . . . . . . . . . . . . . . 19 Section 4.08. Temporary Certificates . . . . . . . . . . . . . . . . . . . 20 Section 4.09. Book-Entry Certificates. . . . . . . . . . . . . . . . . . . 20 Section 4.10. Notices to Clearing Agency . . . . . . . . . . . . . . . . . 22 Section 4.11. Definitive Certificates. . . . . . . . . . . . . . . . . . . 22 i Section 4.12. Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE FIVE THE TRANSFEROR Section 5.01. Representations of Transferor. . . . . . . . . . . . . . . . 24 Section 5.02. Liability of Transferor; Indemnities . . . . . . . . . . . . 26 Section 5.03. Merger or Consolidation of, or Assumption of the Obligations of, Transferor; Certain Limitations. . . . . . . . . . . . . . . . . . . . . 26 Section 5.04. Limitation on Liability of Transferor and Others . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 5.05. Transferor May Own Investor Certificates . . . . . . . . . . 29 Section 5.06. No Transfer. . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 5.07. Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . 30 ARTICLE SIX THE SECURITIZATION TRUSTEE Section 6.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . 30 Section 6.02. Certain Matters Affecting the Securitization Trustee.. . . . 32 Section 6.03. Trustee Not Liable for Certificates or Contracts . . . . . . 33 Section 6.04. Trustee May Own Certificates . . . . . . . . . . . . . . . . 35 Section 6.05. Trustee's Fees and Expenses. . . . . . . . . . . . . . . . . 35 Section 6.06. Eligibility Requirements for Trustee.. . . . . . . . . . . . 35 Section 6.07. Resignation or Removal of Trustee. . . . . . . . . . . . . . 36 Section 6.08. Successor Trustee. . . . . . . . . . . . . . . . . . . . . . 37 Section 6.09. Merger or Consolidation of Trustee.. . . . . . . . . . . . . 37 Section 6.10. Appointment of Co-Trustee or Separate Trustee.. . . . . . . . . . . . . . . . . . . . . . 38 Section 6.11. Representations and Warranties of Trustee. . . . . . . . . . 39 Section 6.12. Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.13. Trustee May Enforce Claims Without Possession of Certificates.. . . . . . . . . . . . . . . . . 40 Section 6.14. Suit for Enforcement . . . . . . . . . . . . . . . . . . . . 41 Section 6.15. Rights of Certificateholders to Direct Trustee . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.16. No Petition. . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE SEVEN TERMINATION ii Section 7.01. Termination of the 1997-A Securitization Trust . . . . . . . . . . . . . . . . . . . . 42 Section 7.02. Optional Purchase of 1997-A SUBI Interest. . . . . . . . . . 44 ARTICLE EIGHT EARLY AMORTIZATION EVENTS Section 8.01. Early Amortization Events. . . . . . . . . . . . . . . . . . 45 Section 8.02. Additional Rights Upon the Occurrence of Certain Event . . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE NINE MISCELLANEOUS PROVISIONS Section 9.01. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 9.02. Protection of Title to Trust . . . . . . . . . . . . . . . . 50 Section 9.03. Limitation on Rights of Certificateholders . . . . . . . . . 51 Section 9.04. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 53 Section 9.05. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 9.06. Severability of Provisions; Counterparts . . . . . . . . . . 53 Section 9.07. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 9.08. Certificates Nonassessable and Fully Paid. . . . . . . . . . 54 ARTICLE TEN AGENT FOR SERVICE Section 10.01. Agent for Service of Transferor . . . . . . . . . . . . . . 54 Section 10.02. Agent of Trustee. . . . . . . . . . . . . . . . . . . . . . 54 EXHIBITS: Exhibit A-1 - Form of Class A-1 Certificate ..............................A-1 Exhibit A-2 - Form of Class A-2 Certificate ..............................A-2 Exhibit A-3 - Form of Class A-3 Certificate ..............................A-3 Exhibit B - Form of Class B Certificate ................................B-1 Exhibit C - Form of Transferor Certificate .............................C-1 Exhibit D-1 - Form of Non-Rule 144-A Representation Letter..............D-1-1 Exhibit D-2 - Form of Rule 144-A Representation Letter..................D-2-1 Exhibit E - Annex of Definitions........................................E-1 Exhibit F - Annex of Supplemental Definitions...........................F-1 iii iv SECURITIZATION TRUST AGREEMENT THIS SECURITIZATION TRUST AGREEMENT, dated as of September 1, 1997, is made with respect to the formation of the TOYOTA AUTO LEASE TRUST 1997-A (the "1997-A SECURITIZATION TRUST"), between TOYOTA LEASING, INC. a California corporation ("TLI" or, in its capacity as transferor hereunder, the "Transferor"), and U.S. BANK NATIONAL ASSOCIATION, as trustee (the "SECURITIZATION TRUSTEE"). RECITALS A. The Toyota Lease Trust (the "Titling Trust") is governed by the Amended and Restated Trust and Servicing Agreement dated as of October 1, 1996 (the "Titling Trust Agreement") among Toyota Motor Credit Corporation, a California corporation, as grantor, initial beneficiary and servicer ("TMCC" and in its capacity as servicer, the "Servicer"), TMTT, Inc. (the "TITLING TRUSTEE"), a Delaware corporation, as trustee, and, for the limited purposes stated therein, U.S. Bank National Association ("U.S. BANK"), a national banking association. The Titling Trust acquires and holds title to various automobiles, light-duty trucks, related lease contracts and certain other assets in accordance with the terms of the Titling Trust Agreement. Capitalized terms used and not defined in these Recitals have the meanings given in Article I below. B. Concurrently herewith, TMCC, the Titling Trustee and U.S. Bank have entered into the 1997-A SUBI Supplement to the Titling Agreement dated as of September 1, 1997 (the "1997-A SUBI Supplement") pursuant to which the Titling Trust, at the direction of TMCC, will create and issue to TLI a special unit of beneficial interest in the Titling Trust (the "1997-A SUBI"), whose beneficiaries generally will be entitled to the net cash flow arising from the related SUBI Portfolio (such SUBI Portfolio, the "1997-A SUBI Portfolio"). The 1997-A SUBI will be evidenced by one SUBI Certificate representing the entire beneficial interest in the 1997-A SUBI (the "1997-A SUBI Certificate"). C. Concurrently herewith, the Titling Trustee (on behalf of the Titling Trust) and the Servicer also have entered into a Supplement 1997-A to Servicing Agreement dated as of September 1, 1997 (the "1997-A SUBI Servicing Supplement"), pursuant to which the terms of the Titling Trust Agreement will be supplemented insofar as they apply to the 1997-A SUBI Portfolio, providing for further servicing obligations that will benefit the holders of the 1997-A SUBI Certificate. D. Concurrently herewith, TMCC and the Transferor have entered into the 1997-A SUBI Certificate Purchase and Sale Agreement dated as of September 1, 1997 (the "SUBI Certificate Agreement"), pursuant to which TMCC sold to the Transferor, without recourse, all of TMCC's right, title and interest in and to the 1997-A SUBI and the 1997-A SUBI Certificate, all monies due thereon and the right to realize on any property subject to the 1997-A SUBI, and all proceeds thereof, all in consideration of the cash payment to TMCC of an amount equal to the Aggregate Net Investment Value of the 1997-A SUBI Portfolio as of the 1997-A Cutoff Date. E. The parties desire to enter into this Securitization Trust Agreement to create the 1997-A Securitization Trust, to provide for the issuance by the 1997-A Securitization Trust of certain Certificates and to provide for the exchange of those Certificates for the 1997-A SUBI Certificate in connection with a Securitized Financing by the Transferor. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE ONE DEFINITIONS SECTION 1.01. DEFINITIONS. For all purposes of this Securitization Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) unless otherwise defined herein, all capitalized terms used herein shall have the meanings attributed to them in the Annex of Definitions or the Annex of Supplemental Definitions attached hereto as Exhibit E and Exhibit F, respectively, (b) defined terms include (i) all genders and (ii) the plural as well as the singular, (c) all references to words such as "herein", "hereof" and the like shall refer to this Securitization Trust Agreement as a whole and not to any particular article or section within this Securitization Trust Agreement, (d) the term "include" and all variations thereon shall mean "include without limitation", and (e) the term "or" shall include "and/or". SECTION 1.02. ARTICLE AND SECTION REFERENCES. Except as otherwise specified herein, all article and section references shall be to Articles and Sections in this Securitization Trust Agreement. ARTICLE TWO CREATION OF TRUST SECTION 2.0 1. CREATION OF TRUST. Upon the execution of this Securitization Trust Agreement by the parties hereto, there is hereby created the Toyota Auto Lease Trust 1997-A. 2 SECTION 2.02. CONVEYANCE OF 1997-A SUBI INTEREST. In consideration of the Securitization Trustee's delivery to, or upon the order of, the Transferor of executed and authenticated Investor Certificates, in authorized denominations, in an aggregate amount equal to the Initial Certificate Balance, and of the executed and authenticated Transferor Certificate, the Transferor does hereby transfer, assign and otherwise convey to the Securitization Trustee, in trust for the benefit of the Certificateholders, to the full extent of the Transferor's interest therein, without recourse (subject to the Transferor's obligations herein): (i) all right, title and interest of the Transferor in and to the 1997-A SUBI and the 1997-A SUBI Certificate evidencing the 1997-A SUBI and all monies due thereon and paid thereon or in respect thereof; (ii) the right to realize upon any property that may be deemed to secure the 1997-A SUBI Interest; (iii) all rights accruing to the holder of the 1997-A SUBI Interest under the Titling Trust Agreement, the 1997-A SUBI Supplement and the 1997-A SUBI Servicing Supplement; and (iv) all proceeds of the foregoing; PROVIDED that all monies and payments due or payable under any Residual Value Insurance Policy applicable to the 1997-A Leased Vehicles and the right to receive such payments and monies are retained by the Transferor and are not hereby transferred, assigned or otherwise conveyed to the Securitization Trustee. The Transferor also does hereby grant to the Securitization Trustee a security interest in all of the foregoing, and the Securitization Trustee shall have all the rights, powers and privileges of a secured party under the UCC. SECTION 2.03. ACCEPTANCE BY TRUSTEE. The Securitization Trustee does hereby accept all consideration conveyed by the Transferor pursuant to Section 2.02 and declares that the Securitization Trustee shall hold such consideration in trust as herein set forth for the benefit of the Certificateholders, subject to the terms and provisions of this Securitization Trust Agreement. ARTICLE THREE 3 ALLOCATIONS AND DISTRIBUTIONS; RESERVE FUND; STATEMENTS TO CERTIFICATEHOLDERS SECTION 3.01. ALLOCATIONS AND DISTRIBUTIONS. (a) On each Determination Date, pursuant to Section 4.02(g) of the 1997-A SUBI Servicing Supplement, the Servicer shall calculate the amounts to be allocated or distributed to the holder of the 1997-A SUBI Certificate, the Class A-1 Distributable Amount, the Class A-2 Distributable Amount, the Class A-3 Distributable Amount, the Class B Distributable Amount, the Transferor Distributable Amount, and all other distributions to be made on the related Distribution Date. (b) The rights of the Class B Certificateholders to receive distributions of Interest Collections allocable to the 1997-A SUBI Interest in respect of the Class B Certificates shall be and hereby are subordinated to the rights of the Class A-1 Certificateholders, the Class A-2 Certificateholders and the Class A-3 Certificateholders to receive distributions of Interest Collections allocable to the 1997-A SUBI Interest to the extent provided in this subsection. On each Monthly Allocation Date, based on the monthly servicing report prepared by the Servicer, the Securitization Trustee shall distribute from the 1997-A SUBI Collection Account the Available Interest, together with any Transferor Amounts and the Reserve Fund Withdrawal Amount, if any, for such Monthly Allocation Date, and any amount of Principal Collections allocable to the Class B Certificates but applied pursuant to subsection (e)(iii) below, in the following amounts and in the following order of priority to the following accounts and Persons: (i) in the event of an Early Amortization Event involving an Insolvency Event, as a result of which the Securitization Trustee has elected or has been instructed to sell the property of the 1997-A Securitization Trust pursuant to Section 8.02(a), to the Securitization Trustee, the Investor Percentage of Capped Securitization Trust Administrative Expenses; (ii) to the Certificateholders' Account until there has been deposited therein pursuant to this clause (ii), the Class A-1 Interest Distributable Amount for the next Distribution Date together with any Class A-1 Certificate Principal Loss Interest Amount for such Distribution Date and any unpaid Class A-1 Interest Carryover Shortfall, the Class A-2 Interest Distributable Amount for such Distribution Date together with any Class A-2 Certificate Principal Loss Interest Amount for such Distribution Date and any Class A-2 Interest Carryover Shortfall and the Class A-3 Interest Distributable Amount for such Distribution Date together with any Class A-3 Certificate Principal Loss Interest Amount for such Distribution Date and any Class A-3 Interest Carryover Shortfall; 4 (iii) to the Certificateholders' Account until there has been deposited therein pursuant to this clause (iii), the Class B Interest Distributable Amount for such Distribution Date, together with any unpaid Class B Interest Carryover Shortfall; (iv) to the Servicer, the Investor Percentage of (a) the Servicing Fee and (b) any unpaid Servicing Fee in respect of any prior Collection Period; (v) to the Servicer, the Investor Percentage of the Capped Contingent and Excess Liability Premium in respect of the related Collection Period; (vi) to the Titling Trustee, the Investor Percentage of Capped Titling Trust Administration Expenses; (vii) in circumstances other than those set forth in clause (i), the Investor Percentage of Capped Securitization Trust Administrative Expenses for the preceding Collection Period, to the Securitization Trustee; (viii) to the Certificateholders' Account until there has been deposited therein pursuant to this clause (viii), the Class A-1 Loss Amount, the Class A-2 Loss Amount and the Class A-3 Loss Amount plus the aggregate amounts of the Class A-1 Certificate Principal Loss Amounts, Class A-2 Certificate Principal Loss Amounts and Class A-3 Certificate Principal Loss Amounts, if any, for previous Distribution Dates that have not been previously deposited in the Certificateholders' Account; (ix) to the Certificateholders' Account until there has been deposited therein pursuant to this clause (ix), the Class B Certificate Principal Loss Interest Amount and the Class B Certificate Principal Carryover Shortfall Interest Amount, if any, for such Distribution Date, the Class B Loss Amount, the aggregate of the Class B Certificate Principal Loss Amounts and Class B Certificate Principal Carryover Shortfall, if any, for previous Distribution Dates that has not been previously deposited in the Certificateholders' Account pursuant to this clause (ix); (x) into the Reserve Fund until the amount on deposit therein equals the Specified Reserve Fund Balance; (xi) the Investor Percentage of Uncapped Administrative Expenses, to the Titling Trustee or the Securitization Trustee, as applicable; (xii) the balance, if any, shall constitute Excess Collections and shall be applied as set forth in subsection (c) below. 5 Notwithstanding the foregoing, on any Distribution Date related to a Collection Period in the Revolving Period, the amounts set forth in clauses (viii) through (ix) above shall not be deposited in the Certificateholders' Account, but shall be treated as Principal Collections for purposes of Section 3.02 of the 1997-A SUBI Servicing Supplement and this Section 3.01. On each Semiannual Distribution Date, or if a Monthly Payment Event has occurred, then on each Monthly Distribution Date, the Securitization Trustee shall distribute to the holders of Investor Certificates of each Class the amounts deposited in the Certificateholders' Account for such Class pursuant to the following clauses of this Section 3.01(b) and in the following order of priority: (ii), (iii), (viii) and (ix); provided that if the amount deposited pursuant to any such clause in the Certificateholders' Account is distributable to Class A Certificateholders and the amount available pursuant to such clause is less than the full amount due to be distributed pursuant to such clause, then such available amount shall be distributed to the Class A-1 Certificateholders, the Class A-2 Certificateholders and the Class A-3 Certificateholders PRO RATA on the basis of the full amounts due them pursuant to such clause. (c) On each Monthly Allocation Date, based on the Servicer's Certificate prepared by the Servicer, the Securitization Trustee shall distribute any Excess Collections as follows: (i)if the Monthly Allocation Date relates to a Collection Period in the Revolving Period, any remainder to the Transferor, and (ii) if the Monthly Allocation Date relates to a Collection Period in the Amortization Period, any remainder up to but not exceeding the product of one-twelfth of [.25%] and the Aggregate Net Investment Value as of the last day of the related Collection Period (the "Accelerated Principal Distribution Amount") to the Certificateholders' Account as additional principal. The balance of any remainder will then be paid to the Transferor. (d)(i) On each Monthly Allocation Date beginning with the Monthly Allocation Date related to the Collection Period in which the Amortization Period commences and ending on the Monthly Allocation Date that is the Distribution Date on which the Class B Certificates will be paid in full, based on the Servicer's Certificate prepared by the Servicer, the Securitization Trustee shall withdraw from the 1997-A SUBI Collection Account and deposit in the Certificateholders' Account an amount equal to the Investor Percentage of all Principal Collections collected or received in respect of the related Collection Period allocable to the 1997-A SUBI Interest. (ii) If a Monthly Payment Event has not occurred, the Securitization Trustee, based on the Servicer's Certificate prepared by the Servicer, shall distribute to holders of the Certificates of 6 each Class on the Targeted Maturity Date for such Class the lesser of (x) the entire Certificate Principal Balance of such Class of Investor Certificates and (y) the sum of the amount of Principal Collections and the Accelerated Principal Distribution Amount on deposit in the Certificateholders' Account and the Maturity Advance actually made by the Servicer in respect of such Class of Investor Certificates pursuant to Section ____ of the 1997-A SUBI Servicing Supplement. (iii) If on the Targeted Maturity Date for any Class of Investor Certificates the entire Certificate Principal Balance of such Class of Investor Certificates is not distributed, then the Securitization Trustee shall, based on the Servicer's Certificate, distribute to the holders of such Class of Investor Certificates on each following Monthly Distribution Date, until the Certificate Principal Balance of such Class of Investor Certificates has been reduced to zero, (I) the lesser of (x) the outstanding Certificate Principal Balance of such Class of Investor Certificates and (y) the amount of Principal Collections and the Accelerated Principal Distribution Amount on deposit in the Certificateholders' Account on such Monthly Distribution Date and (II) the amount of interest deposited into the Certificateholders' Account and allocated to such Class of Investor Certificates pursuant to Section 3.01(b) in respect of such Monthly Distribution Date. (iv) If a Monthly Payment Event occurs in any month, then on the Monthly Distribution Date in each succeeding month the Securitization Trustee shall, based on the Servicer's Certificate for such Monthly Distribution Date, distribute the sum of the Principal Collections and the Accelerated Principal Distribution Amount in the following order of priority: (1) to the Class A-1 Certificateholders until the Class A-1 Certificate Principal Balance is reduced to zero; (2) to the Class A-2 Certificateholders until the Class A-2 Certificate Principal Balance is reduced to zero; (3) to the Class A-3 Certificateholders until the Class A-3 Certificate Principal Balance is reduced to zero; and (4) to the Class B Certificateholders until the Class B Certificate Principal Balance is reduced to zero. (v) If a Monthly Payment Event occurs in any month, then on the Monthly Distribution Date in each succeeding month the Securitization Trustee shall, based on the Servicer's Certificate for such Monthly Distribution Date, distribute the amount of interest deposited into the Certificateholders' Account and allocated to each Class of Investor Certificates pursuant to Section 3.01(b) in respect of such Monthly Distribution Date. 7 (e) On each Monthly Allocation Date for which there is a Required Amount, based on the Servicer's Certificate prepared by the Servicer, the Securitization Trustee shall apply the following amounts in the following order to the payment of the unpaid components of the Required Amount (in the order of clauses (i) through (xiv) of Section 3.01(b)) to the extent necessary to pay such components: (i) the Reserve Fund Withdrawal Amount; (ii) to the extent of any remaining Required Amount, first the Transferor Interest Distributable Amount and then the Transferor Principal Distributable Amount; and (iii) to the extent of any remaining unpaid components of the Required Amount in clauses (ii) and (viii) of Section 3.01(b), the amounts otherwise available for distribution on account of principal to the Class B Certificateholders pursuant to Section 3.01(d). Amounts applied pursuant to the preceding sentence on a Distribution Date in respect of the Revolving Period pursuant to clauses (viii) through (xiii) of Section 3.01(b) shall be treated as Principal Collections and applied pursuant to Section 3.02 of the 1997-A SUBI Servicing Supplement. On such Distribution Date, after giving effect to all payments required to be made and all required deposits to or withdrawals from the Reserve Fund, amounts that otherwise would be payable to the Transferor in respect of the Transferor Distributable Amount (other than Transferor Amounts) will be deposited into the Reserve Fund until the amount on deposit therein equals the Specified Reserve Fund Balance, and any remaining amounts so payable to the Transferor will be distributed to the Transferor by the Securitization Trustee as follows: (A) if such Distribution Date relates to a Collection Period during the Revolving Period, the interest component of such remaining amounts will be paid in respect of the Transferor Interest Distributable Amount and (B) if such Distribution Date relates to a Collection Period during the Amortization Period, (l) the interest component of such remaining amounts will be paid in respect of the Transferor Interest Distributable Amount and (2) if and to the extent that the Transferor Interest will be equal to or greater than zero, after all required distributions have been made on such Distribution Date, the principal component of such remaining amounts will be paid in respect of the Transferor Principal Distributable Amount. Any amounts that would otherwise be payable to the Transferor pursuant to the foregoing as the Transferor Principal Distributable Amount, but may not be so paid because the Transferor Interest would be less than or equal to zero, shall instead be distributed to the Investor Certificateholders pursuant to Section 3.01(d). (f) Subject to Section 7.01 respecting the final payment upon retirement of each Certificate, the Securitization Trustee shall on each Distribution Date distribute to each 8 Certificateholder of any Class of record on the related Record Date by check mailed to such Certificateholder at the address of such Holder appearing in the Certificate Register (or, if DTC, its nominee or a Clearing Agency is the relevant Certificateholder, by wire transfer of immediately available funds or pursuant to other arrangements), the amount to be distributed to such Certificateholder pursuant to such Holder's Certificates. (g) Amounts properly received by the Transferor pursuant to this Securitization Trust Agreement shall be free of any claim of the Securitization Trust, the Securitization Trustee or the Investor Certificateholders and shall not be available to the Securitization Trustee or the Securitization Trust for the purpose of making deposits to the Reserve Fund or making payments to the Investor Certificateholders, nor shall the Transferor be required to refund any amount properly received by it. SECTION 3.02. RESERVE FUND. (a)(i) The Servicer shall establish and maintain with the Securitization Trustee a separate trust account to be known as the "Reserve Fund", which will include the money and other property deposited and held therein pursuant to Section 3.01(b) and this Section. Funds in the Reserve Fund shall be property of the Transferor, and the Transferor hereby grants to the Securitization Trustee for the benefit of the Investor Certificateholders a security interest in all funds (including Permitted Investments) and the proceeds thereof. The Reserve Fund shall be an Eligible Account and initially shall be established with the Securitization Trustee. If for any reason the Reserve Fund is no longer an Eligible Account, the Securitization Trustee shall promptly cause the Reserve Fund to be moved to another institution or otherwise changed so that the Reserve Fund becomes an Eligible Account. (ii) All amounts held in the Reserve Fund shall, to the extent permitted by applicable laws, rules and regulations, be invested, as directed by the Servicer, in Permitted Investments. Earnings on investment of funds in the Reserve Fund shall be paid to the Transferor on each Distribution Date, and losses and any investment expenses shall be charged against the funds on deposit therein. (b) On or prior to the Closing Date, the Transferor shall deposit an amount equal to the Reserve Fund Initial Deposit into the Reserve Fund. The Transferor also does hereby grant to the Securitization Trustee a security interest in such initial deposit, and the Securitization Trustee shall have all the rights and powers of a secured party under the UCC. Amounts on deposit in the Reserve Fund shall be supplemented from time to time by the deposit therein of Excess Collections otherwise distributable to the Transferor pursuant to Section 3.01(c), and amounts that otherwise would be payable to the Transferor pursuant to Section 3.01(e) but for the fact that the amount on deposit in the Reserve Fund is less than the Specified Reserve Fund Balance, to the extent described in this subparagraph (b). On each Distribution Date the amounts 9 on deposit in the Reserve Fund shall be available for distribution as provided in Section 3.01; provided that the Class B Interest Reserve Amount shall only be applied to distributions of interest on the Class B Certificates and, on each Distribution Date, if the amount on deposit in the Reserve Fund (after giving effect to all deposits thereto or withdrawals therefrom on such Distribution Date) is greater than the Specified Reserve Fund Balance, the Securitization Trustee will distribute any such excess amount to the Transferor, whereupon such excess amount shall no longer be available to the Securitization Trustee or the Investor Certificateholders. (c) Upon termination of the Securitization Trust pursuant to Section 7.01, any amounts on deposit in the Reserve Fund shall be available for payment of any remaining amounts due to the Investor Certificateholders, and for payment of any remaining amounts due to the Securitization Trustee, and after payment of such amounts due, shall be paid to the Transferor. SECTION 3.03. STATEMENTS TO CERTIFICATEHOLDERS. (a) On each Distribution Date, the Securitization Trustee shall include with each distribution to each Certificateholder of record, a statement, prepared by the Servicer, based on information in the Servicer's Certificate furnished pursuant to Section 5.01(b) of the 1997-A SUBI Servicing Supplement, setting forth for the related Collection Period and such Distribution Date the following information as of the related Record Date or Deposit Date or such Distribution Date, as the case may be: (i) the Investor Percentage for such Collection Period, stated separately for Interest Collections and Loss Amounts, and for Principal Collections; (ii) the total amount being distributed to Investor Certificateholders in such distribution; (iii) the total amount being distributed to each Class of Investor Certificateholders in such distribution; (iv) the total amount of interest being distributed to each Class of Investor Certificateholders in such distribution; (v) the amount, if any, of Class A-1 Interest Carryover Shortfall, Class A-2 Interest Carryover Shortfall, Class A-3 Interest Carryover Shortfall and Class B Interest Carryover Shortfall included in such distribution; 10 (vi) the amount, if any, of the remaining unpaid Class A-1 Interest Carryover Shortfall, Class A-2 Interest Carryover Shortfall, Class A-3 Interest Carryover Shortfall and Class B Interest Carryover Shortfall after giving effect to such distribution; (vii) the total amount of principal being distributed to each Class of Investor Certificateholders in such distribution; (viii) the Class A-1 Allocation Percentage, the Class A-2 Allocation Percentage, the Class A-3 Allocation Percentage, the Class B Allocation Percentage and the amount, if any, of the reimbursement of Class A-1 Charged-off Amounts, Class A-1 Residual Value Loss Amounts and Class A-1 Additional Loss Amounts, Class A-2 Charged-off Amounts, Class A-2 Residual Value Loss Amounts and Class A-2 Additional Loss Amounts, Class A-3 Charged-off Amounts, Class A-3 Residual Value Loss Amounts and Class A-3 Additional Loss Amounts, Class B Charged-off Amounts, Class B Residual Value Loss Amounts and Class B Additional Loss Amounts being included in such distribution; (ix) the amount, if any, of the reimbursement of Class A-1 Certificate Principal Loss Amounts, Class A-2 Certificate Principal Loss Amounts, Class A-3 Certificate Principal Loss Amounts and Class B Certificate Principal Loss Amounts included in such distribution; (x) the amount, if any, of the aggregate of unreimbursed Class A-1 Certificate Principal Loss Amounts, Class A-2 Certificate Principal Loss Amounts, Class A-3 Certificate Principal Loss Amounts and Class B Certificate Principal Loss Amounts after giving effect to such distribution; (xi) the amount, if any, of accrued Class A-1 Certificate Principal Loss Interest Amounts, Class A-2 Certificate Principal Loss Interest Amounts, Class A-3 Certificate Principal Loss Interest Amounts and Class B Certificate Principal Loss Interest Amounts included in such distribution; (xii) the amount, if any, of accrued and unpaid Class A-1 Certificate Principal Loss Interest Amounts, Class A-2 Certificate Principal Loss Interest Amounts, Class A-3 Certificate Principal Loss Interest Amounts and Class B Certificate Principal Loss Interest Amounts after giving effect to such distribution; (xiii) the amount, if any, of accrued and unpaid Class B Certificate Principal Carryover Shortfall after giving effect to such distribution; 11 (xiv) the Investor Percentage of the Servicing Fee allocable to the 1997-A SUBI Interest for such Distribution Date and any unpaid previous such amounts with respect to prior Distribution Dates; (xv) the Certificate Balance, the Class A-1 Certificate Balance, the Class A-2 Certificate Balance, the Class A-3 Certificate Balance, the Class B Certificate Balance, the Class A-1 Certificate Factor, the Class A-2 Certificate Factor, the Class A-3 Certificate Factor and the Class B Certificate Factor, each after giving effect to such distribution; (xvi) the Transferor Amount, if any, included in such distribution and the amount of the Transferor Interest, after giving effect to all payments made on such Distribution Date; (xvii) the Reserve Fund Withdrawal Amount, if any, included in such distribution; (xviii) the Aggregate Net Investment Value as of the end of such Collection Period; (xix) the portion of any Required Amount included in the distribution to Investor Certificateholders, the amount on deposit in the Reserve Fund on such Distribution Date, after giving effect to such distributions, the change in such balance from the immediately preceding Distribution Date and the Specified Reserve Fund Balance; (xx) the amount of Payments Ahead on deposit in the 1997-A SUBI Collection Account and representing Monthly Contract Payments due in one or more immediately subsequent Collection Periods and the change in such balance from the immediately preceding Distribution Date; (xxi) the amount of Advances made in respect of such Distribution Date, the amount of Outstanding Advances on such Distribution Date and the change in such amount from the immediately preceding Distribution Date; and (xxii) the weighted average Contract Rate of the Contracts in the 1997-A SUBI Portfolio for the immediately preceding Collection Period and the Charge-off Rate and Delinquency Percentage for each of the three immediately preceding Collection Periods. [Each amount set forth pursuant to subclauses (ii) through (xiii) above shall be expressed as a dollar amount per $1,000 of original principal balance of an Investor Certificate.] Any Certificate Owner may obtain a copy of any such statement, of any Servicer's Certificate required 12 pursuant to Section 5.01(b) of the 1997-A SUBI Servicing Supplement, any annual report of Independent Accountants required pursuant to Section 5.02 of the 1997-A SUBI Servicing Supplement, and of any annual Officer's Certificate required pursuant to Section 5.03 of the 1997-A SUBI Servicing Supplement, upon written request to the Securitization Trustee at the Corporate Trust Office. (b) Within a reasonable period of time after the end of each calendar year, but not later than the latest date permitted by law, the Securitization Trustee shall mail to each Person who at any time during such calendar year shall have been a Holder of an Investor Certificate, a statement or statements which in the aggregate contain the sum of the amounts set forth in clauses (a)(ii) through (xiii) in Section 3.03(a) for such calendar year or, in the event such Person shall have been a Holder of an Investor Certificate during a portion of such calendar year, for the applicable portion of such year, for the purposes of such Certificateholder's preparation of federal income tax returns. In addition, the Servicer shall furnish to the Securitization Trustee for distribution to such Person at such time any other information reasonably necessary under applicable law for the preparation of such income tax returns. ARTICLE FOUR THE CERTIFICATES SECTION 4.01. THE CERTIFICATES. (a) The Class A-1 Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class B Certificates and the Transferor Certificate shall be substantially in the form of Exhibits A-1, A-2, A-3, B and C, respectively, to this Securitization Trust Agreement. The Class A-1 Certificates, the Class A-2 Certificates and the Class A-3 Certificates shall be issuable in minimum denominations of $1,000 and integral multiples in excess thereof and the Class B Certificates shall be issuable in minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof (provided that no Class B Certificate may be issued or transferred in a denomination that would cause there to be, immediately after such issuance or transfer, one hundred (100) or more Class B Certificateholders); PROVIDED, HOWEVER, that one Class A-1 Certificate, one Class A-2 Certificate, one Class A-3 Certificate and one Class B Certificate may be issued in a denomination that includes any remaining portion of the Initial Class A-1 Certificate Balance, the Initial Class A-2 Certificate Balance, the Initial Class A-3 Certificate Balance and the Initial Class B Certificate Balance, respectively (each, a "Residual Certificate"). A single Transferor Certificate shall be issued. The Certificates shall be executed on behalf of the Transferor by manual or facsimile signature of an officer of the Transferor. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Securitization Trustee shall not be rendered invalid, notwithstanding that such individuals or any of them have ceased to be so 13 authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificates. All Certificates shall be dated the date of their authentication. (b) The Investor Certificates shall represent fractional undivided interests in the 1997-A Securitization Trust, including the right to receive the Investor Percentage of Interest Collections and Principal Collections and the other amounts at the times and in the amounts specified in this Securitization Trust Agreement. The Transferor Certificate shall represent the interest in the 1997-A Securitization Trust not represented by the Investor Certificates. SECTION 4.02. AUTHENTICATION AND DELIVERY OF CERTIFICATES. In exchange for, and simultaneously with the sale, assignment and transfer to the Securitization Trustee of the 1997-A SUBI Interest, the 1997-A SUBI Certificate and the other assets of the 1997-A Securitization Trust, the Securitization Trustee shall cause to be executed, authenticated and delivered to or upon the order of the Transferor Investor Certificates in authorized denominations equaling in the aggregate the sum of the Initial Class A-1 Certificate Balance, the Initial Class A-2 Certificate Balance, the Initial Class A-3 Certificate Balance and the Initial Class B Certificate Balance, and the Transferor Certificate, each duly authorized by the Securitization Trustee, and evidencing the entire ownership of the Securitization Trust. No Certificate shall be entitled to any benefit under this Securitization Trust Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form set forth in Exhibit A-1, A-2, A-3, B or C to this Securitization Trust Agreement, as the case may be, executed by the Securitization Trustee by manual signature, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered under this Securitization Trust Agreement. SECTION 4.03. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) The Certificate Registrar shall maintain a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Certificate Register shall provide for the registration of Certificates and transfers and exchanges of Certificates as provided in this Securitization Trust Agreement. The Securitization Trustee is hereby initially appointed Certificate Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as provided in this Securitization Trust Agreement. In the event that, subsequent to the Closing Date, the Securitization Trustee notifies the Servicer that it is unable to act as Certificate Registrar, the Servicer shall appoint another bank or trust company, having an office or agency located in the Borough of Manhattan, The City of New York, agreeing to act in accordance with the provisions of this Securitization Trust Agreement applicable to it, and 14 otherwise acceptable to the Securitization Trustee, to act as successor Certificate Registrar under this Securitization Trust Agreement. The Transferor Certificate shall be owned by the Transferor and may not be transferred, as provided by Section 5.06. No transfer of a Class B Certificate shall be made unless the registration requirements of the Securities Act and any applicable state securities laws are complied with, or such transfer is exempt from the registration requirements under the Securities Act and such state securities laws. In the event that a transfer is to be made in reliance upon an exemption from the Securities Act and such state securities laws, the Securitization Trustee shall require that the transferee execute a representation letter acceptable to and in form and substance satisfactory to the Securitization Trustee (PROVIDED that the forms attached as Exhibits D-1 and D-2 shall be deemed acceptable if they are completed in a manner acceptable to the Securitization Trustee) certifying to the Securitization Trustee the facts surrounding such transfer, which representation letter shall not be an expense of the Securitization Trustee, the Transferor or the Servicer. The Holder of a Class B Certificate desiring to effect such transfer shall, and does hereby agree to, indemnify the Securitization Trustee, the Transferor and the Servicer against any liability that may result if the transfer is not so exempt or is not made in accordance with the Securities Act and such state laws. Neither the Transferor, the Servicer nor the Securitization Trustee is under any obligation to register the Class B Certificates under the Securities Act or any state securities laws. Notwithstanding anything to the contrary contained herein, no resale or other transfer of a Class B Certificate or any interest therein shall be made unless (i) immediately after giving effect to such resale or other transfer, there would be less than 100 Class B Certificateholders and (ii) the Securitization Trustee shall have received either a representation letter or Opinion of Counsel from the prospective transferee of such Class B Certificate, in form and substance satisfactory to the Transferor and the Securitization Trustee (provided that the forms attached as Exhibits D-1 and D-2 shall be deemed acceptable), to the effect that (A) such transferee will not acquire such Class B Certificate with the assets of any "employee benefit plan" as defined in Section 3(3) of ERISA, (B) no "prohibited transaction" under ERISA or the Code will occur in connection with such prospective transferee's acquisition of such Class B Certificate, (C) the acquisition of such Class B Certificate is subject to a statutory or administrative exemption, specified in such letter or opinion, from the "prohibited transaction" provisions of ERISA and the Code, and (D) if the transferee is a partnership, grantor trust or S corporation for federal income tax purposes (a "Flow-Through Entity"), any Class B Certificates owned by such Flow-Through Entity will represent less than 50% of the value of all the assets owned by such Flow-Through Entity and no special allocation of income, gain, loss, deduction or credit from such Class B Certificates will be made among the beneficial owners of such Flow-Through Entity. Each prospective transferee of any Class B Certificate will be required to represent to the Securitization Trustee whether it 15 will purchase such Class B Certificate with the assets of an "employee benefit plan" as defined under ERISA or other benefit plan investor. The Class B Certificates, this Securitization Trust Agreement and related documents may be amended or supplemented from time to time to modify restrictions on and procedures for resale and other transfer of such Class B Certificates to reflect any change in applicable law or regulation (or the interpretation thereof) or practices relating to the resale or transfer of restricted securities generally. (b) Upon surrender for registration of transfer of any Certificate at the Corporate Trust Office of the Securitization Trustee in its capacity as Certificate Registrar, or at the office of the agent of the Securitization Trustee as Certificate Registrar, who shall initially be First Trust of New York, National Association, 100 Wall Street, 20th Floor, New York, New York 10005, in the Borough of Manhattan, the City of New York, or the appropriate office of any successor Certificate Registrar, the Securitization Trustee shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates of the same Class in authorized denominations of a like aggregate principal amount. (c) At the option of a Certificateholder, Certificates may be exchanged for other Certificates of the same Class of authorized denominations of a like aggregate principal amount, upon surrender of the Certificates to be exchanged at any such office or agency. Whenever any Certificates are so surrendered for exchange the Securitization Trustee on behalf of the 1997-A Securitization Trust shall execute, authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Securitization Trustee and the Certificate Registrar duly executed by the Holder thereof or his attorney duly authorized in writing. (d) No service charge shall be made to any Holder for any registration of transfer or exchange of Certificates, but the Securitization Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (e) All Certificates surrendered for registration of transfer and exchange shall be cancelled and subsequently destroyed by the Securitization Trustee. (f) No Class B Certificate shall be listed for trading on any recognized securities exchange. SECTION 4.04. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. 16 If (i) any mutilated Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (ii) there is delivered to the Certificate Registrar and the Securitization Trustee such security or indemnity as may be required by them to save each of them and the Securitization Trust harmless, then, in the absence of notice that such Certificate has been acquired by a bona fide purchaser, the Securitization Trustee on behalf of the 1997-A Securitization Trust shall execute and the Securitization Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and fractional undivided interest. In connection with the issuance of any new Certificate under this Section, the Securitization Trustee may require the payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. Any duplicate Certificate issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the 1997-A Securitization Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time, and any such lost, stolen or destroyed Certificate shall, upon issuance of any such duplicate Certificate, be null, void and of no effect. SECTION 4.05. PERSONS DEEMED OWNERS. Prior to due presentation of a Certificate for registration of transfer, the Securitization Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 3.01 and for all other purposes whatsoever, and neither the Securitization Trustee, the Certificate Registrar nor any of their respective agents shall be affected by any notice to the contrary. SECTION 4.06. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to the Servicer, within 15 days after receipt by the Certificate Registrar of a written request therefor from the Servicer, a list, in such form as the Servicer may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. If three or more Certificateholders or holders of Investor Certificates evidencing not less than 25% of the aggregate Percentage Interests of any Class (hereinafter referred to as "Applicants") apply in writing to the Securitization Trustee, and such application states that the Applicants desire to communicate with other Investor Certificateholders with respect to their rights under this Securitization Trust Agreement or under the Certificates and such application is accompanied by a copy of the communication that such Applicants propose to transmit, then the Securitization Trustee shall, within five Business Days after the receipt of such application, afford such Applicants access, during normal business hours, to the current list of Investor Certificateholders. Every 17 Certificateholder, by receiving and holding a Certificate, agrees with the Servicer and the Securitization Trustee that neither the Servicer nor the Securitization Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders under the Agreement, regardless of the source from which such information was derived. SECTION 4.07. MAINTENANCE OF OFFICE OR AGENCY. The Securitization Trustee shall maintain in the Borough of Manhattan, The City of New York, an office or offices or agency or agencies where Certificates may be surrendered for registration of transfer or exchange. The initial such agency shall be c/o First Trust of New York, National Association, 100 Wall Street, 20th Floor, New York, New York 10005; PROVIDED that a copy of any such Certificate surrendered shall be sent to the Securitization Trustee at the Corporate Trust Office. The Securitization Trustee shall give prompt written notice to the Transferor, the Servicer and the Certificateholders of any change in the location of any such office or agency. Notices and demands to or upon the Securitization Trustee in respect of the Certificates and this Securitization Trust Agreement shall not be sent to such office or agency, but shall be sent as set forth in Section 10.02. SECTION 4.08. TEMPORARY CERTIFICATES. Pending the preparation of definitive Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates, the Securitization Trustee, on behalf of the 1997-A Securitization Trust, may execute, authenticate and deliver, temporary Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates in lieu of which they are issued. If temporary Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates are issued, the Transferor will cause definitive Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates to be prepared without unreasonable delay. After the preparation of definitive Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates, the temporary Class A-1 Certificates, Class A-2 Certificates, Class A-3 Certificates shall be exchangeable for definitive Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates upon surrender of the temporary Class A-1 Certificates, Class A-2 Certificates, or Class A-3 Certificates at the office or agency to be maintained as provided in Section 4.07, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Class A Certificates, the Securitization Trustee shall execute and authenticate and deliver in exchange therefor a like principal amount of definitive Class A Certificates in authorized denominations. Until so exchanged the temporary Class A Certificates shall in all respects be entitled to the same benefits under the Agreement as definitive Class A Certificates. 18 SECTION 4.09. BOOK-ENTRY CERTIFICATES. The Class A-1 Certificates, the Class A-2 Certificates and the Class A-3 Certificates, upon original issuance will be issued in the form of one or more typewritten certificates representing the Book-Entry Certificates, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Transferor. The certificate or certificates delivered to DTC evidencing such Class A-1 Certificates, Class A-2 Certificates and Class A-3 Certificates shall initially be registered on the Certificate Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Class A-1 Certificates, the Class A-2 Certificates or the Class A-3 Certificates, except as provided in Section 4.11. Unless otherwise specified in this Securitization Trust Agreement, unless and until definitive, fully registered Class A-1 Certificates, Class A-2 Certificates, and Class A-3 Certificates (the "Definitive Certificates") have been issued to Certificate Owners pursuant to Section 4.11: (i) the provisions of this Section shall be in full force and effect; (ii) the Transferor, the Servicer, the Certificate Registrar and the Securitization Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Class A-1 Certificates, the Class A-2 Certificates and the Class A-3 Certificates) as the authorized representative of the Certificate Owners; (iii) to the extent that the provisions of this Section conflict with any other provisions of the Agreement, the provisions of this Section shall control; (iv) the rights of Certificate Owners shall be exercised only through (or through procedures established by) the Clearing Agency and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency and/or the Clearing Agency Participants. Unless and until Definitive Certificates are issued pursuant to Section 4.11, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Class A-1 Certificates, the Class A-2 Certificates and the Class A-3 Certificates to such Clearing Agency Participants; and (v) whenever this Securitization Trust Agreement requires or permits actions to be taken based upon instructions or directions of Holders of Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates evidencing a specified aggregate Percentage Interest thereof the Clearing Agency shall be deemed to represent such percentage (if and to the extent that it will act on behalf of Certificate Owners and/or Clearing Agency Participants) only to the extent that it has received instructions to such effect from Certificate Owners and/or Clearing Agency Participants owning or representing, 19 respectively, such required percentages of the beneficial interest in Class A-1 Certificates, Class A-2 Certificates or Class A-3 Certificates and has delivered such instructions to the Securitization Trustee. SECTION 4.10. NOTICES TO CLEARING AGENCY. Whenever notice or other communication to the Class A-1 Certificateholders, Class A-2 Certificateholders or the Class A-3 Certificateholders is required under this Securitization Trust Agreement, other than to the Holder of the Residual Certificate with respect to the Class A-1 Certificates, the Class A-2 Certificates or the Class A-3 Certificates, respectively, unless and until Definitive Certificates shall have been issued to Certificate Owners pursuant to Section 4.11, the Securitization Trustee and the Servicer shall give all such notices and communications specified herein to be given to Holders of the Class A-1 Certificates, the Class A-2 Certificates or the Class A-3 Certificates to the Clearing Agency. SECTION 4.11. DEFINITIVE CERTIFICATES. If (i)(A) the Transferor advises the Securitization Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities as described in the letter of representations among the Transferor, the Securitization Trustee and the Clearing Agency and (B) the Securitization Trustee or the Transferor is unable to locate a qualified successor, (ii) the Transferor at its option, advises the Securitization Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency, or (iii) after the occurrence of an Early Amortization Event, Certificate Owners representing beneficial interests in the Class A-1 Certificates, the Class A-2 Certificates and the Class A-3 Certificates (voting together as a single class) aggregating not less than 51% of the Percentage Interests advise the Securitization Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Owners, then the Securitization Trustee shall notify all Certificate Owners, through the Clearing Agency, of the occurrence of such event and of the availability of Definitive Certificates to Certificate Owners requesting the same. Upon surrender to the Securitization Trustee of the Class A-1 Certificates, the Class A-2 Certificates or the Class A-3 Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Securitization Trustee shall issue the Definitive Certificates and deliver such Definitive Certificates in accordance with the instructions of the Clearing Agency. None of the Transferor, the Certificate Registrar or the Securitization Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates, the Securitization Trustee shall recognize the Holders of the Definitive Certificates as Class A-1 Certificateholders, Class A-2 Certificateholders or Class A-3 Certificateholders hereunder, as 20 applicable. The Securitization Trustee shall not be liable if the Securitization Trustee or the Transferor is unable to locate a qualified successor Clearing Agency. SECTION 4.12. TAX TREATMENT. (a) It is the intention of the Transferor and the Investor Certificateholders that the Investor Certificates will be indebtedness of the Transferor for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Transferor, the Securitization Trustee and each Holder of an Investor Certificate (or Certificate Owner) by acceptance of its Investor Certificate (or, in the case of a Certificate Owner, by virtue of such Certificate Owner's acquisition of a beneficial interest therein) agree to treat the Investor Certificates (or beneficial interest therein), for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as secured indebtedness of the Transferor and to report the transactions contemplated by this Securitization Trust Agreement on all applicable tax returns in a manner consistent with such treatment. Each Holder of an Investor Certificate agrees that it will cause any Certificate Owner acquiring an interest in a Certificate through it to comply with this Securitization Trust Agreement as to treatment as secured indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. Each Holder of an Investor Certificate also agrees that it will not be entitled to any of the tax benefits related to the Contracts and Leased Vehicles, including any of the depreciation deductions resulting therefrom. (b) In the event that, notwithstanding the statement of intentions and undertakings set forth in Section 4.12(a), it is finally determined that the Class A-1 Certificates, the Class A-2 Certificates, the Class A-3 Certificates and/or the Class B Certificates do not evidence indebtedness of the Transferor for all income and franchise tax purposes, but rather represent an equity interest in the assets of the 1997-A Securitization Trust, then the Transferor, the Securitization Trustee, each Holder of such Investor Certificate and each Certificate Owner thereof, by virtue of acquiring a beneficial interest therein, all agree (i) to treat such Investor Certificates, together with the Transferor Certificate, as representing an interest in a partnership for all tax purposes, (ii) to treat all payments in respect of such Investor Certificates (to the extent not a return of capital) as a "guaranteed payment" thereon made pursuant to Section 707(c) of the Code, and (iii) to allocate all other items of income, gain, deduction, loss or credit with respect to the assets and operations of the 1997-A Securitization Trust to the Transferor. 21 ARTICLE FIVE THE TRANSFEROR SECTION 5.01. REPRESENTATIONS OF TRANSFEROR. The Transferor hereby makes the following representations on which the Securitization Trustee relies in accepting the 1997-A SUBI Interest and 1997-A SUBI Certificate in trust and authenticating the Certificates. The representations speak as of the execution and delivery of this Securitization Trust Agreement, but shall survive the sale, transfer and assignment of the 1997-A SUBI Interest and 1997-A SUBI Certificate to the Securitization Trustee. (a) ORGANIZATION AND GOOD STANDING. The Transferor is a corporation duly incorporated and validly existing and in good standing under the laws of the State of California, with power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted, and has power, authority and legal right to acquire, own and sell the 1997-A SUBI Interest and 1997-A SUBI Certificate. (b) DUE REGISTRATION. The Transferor is duly registered as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications, except where the failure to so qualify or to have obtained such licenses and approvals would not have a material adverse effect on the earnings, business affairs or business prospects of the Transferor. (c) POWER AND AUTHORITY. The Transferor has the power and authority to execute and deliver this Securitization Trust Agreement and to carry out its terms, the Transferor has full power and authority to sell and assign the property to be sold and assigned to and deposited with the Securitization Trustee as part of the 1997-A Securitization Trust and has duly authorized such sale and assignment to the Securitization Trustee by all necessary action; and the execution, delivery and performance of this Securitization Trust Agreement have been duly authorized by the Transferor by all necessary corporate action. (d) VALID SALE; BINDING OBLIGATIONS. This Securitization Trust Agreement evidences a valid sale, transfer and assignment of the 1997-A SUBI Interest and 1997-A SUBI Certificate, enforceable against creditors of and purchasers from the Transferor; and constitutes a legal, valid and binding obligation of the Transferor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights in general and by general principles of equity, regardless of whether such enforceability shall be considered in a proceeding in equity or at law. 22 (e) NO VIOLATION. The consummation of the transactions contemplated by this Securitization Trust Agreement and the fulfillment of the terms of this Securitization Trust Agreement do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the certificate of incorporation of the Transferor, or conflict with or violate any of the material terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement or other instrument to which the Transferor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than this Securitization Trust Agreement); nor violate any law or, to the best of the Transferor's knowledge, any order, rule or regulation applicable to the Transferor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Transferor or its properties; which breach, default, conflict, lien or violation would have a material adverse effect on the earnings, business affairs or business prospects of the Transferor. (f) NO PROCEEDINGS. There are no proceedings or investigations pending, or to the Transferor's best knowledge, threatened, before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Transferor or its properties: (i) asserting the invalidity of this Securitization Trust Agreement or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Securitization Trust Agreement, (iii) seeking any determination or ruling that might materially and adversely affect the performance by the Transferor of its obligations under, or the validity or enforceability of, this Securitization Trust Agreement or the Certificates or (iv) relating to the Transferor and which might adversely affect the federal, Delaware or Illinois income tax attributes of the Certificates. (g) TITLE TO 1997-A SUBI CERTIFICATE. The Transferor has good title to, and is the sole legal and beneficial owner of, the 1997-A SUBI Certificate, free and clear of all Liens. (h) CONSENTS AND APPROVALS. The Transferor has obtained or made all necessary licenses, consents, approvals, waivers and notifications of creditors, lessors and other nongovernmental Persons, in each case in connection with the execution and delivery of this Securitization Trust Agreement and the consummation of all the transactions herein contemplated, and the Transferor is not required to obtain the consent of any other party or the consent, license, approval, or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Securitization Trust Agreement. SECTION 5.02. LIABILITY OF TRANSFEROR; INDEMNITIES. 23 (a) The Transferor shall be liable in accordance with this Securitization Trust Agreement only to the extent of the obligations in this Securitization Trust Agreement specifically undertaken by the Transferor in such capacity under this Securitization Trust Agreement and shall have no other obligations or liabilities hereunder. (b) The Transferor agrees to be, and shall be, liable (as if the 1997-A Securitization Trust were a limited partnership under the [California Limited Partnership Act] in which the Transferor is the general partner) without limitation for all liabilities (including taxes), contracts, expenses, indemnity payments and other charges of the 1997-A Securitization Trust, other than distributions to Certificateholders. SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, TRANSFEROR; CERTAIN LIMITATIONS. (a) Any Person (i) into which the Transferor may be merged or consolidated, (ii) which may result from any merger, conversion or consolidation to which the Transferor shall be a party or (ii) which may succeed to all or substantially all of the business of the Transferor, shall be the successor to the Transferor under this Securitization Trust Agreement without the execution or filing of any document or any further act on the part of any of the parties to this Securitization Trust Agreement, except that if the Transferor in any of the foregoing cases is not the surviving entity, then the surviving entity shall execute an agreement of assumption to perform every obligation of the Transferor either generally or specifically as provided herein. The Transferor shall provide notice of any merger, consolidation or succession pursuant to this Section to each Rating Agency and shall receive from each Rating Agency a letter to the effect that such merger, consolidation, or succession will not result in a qualification, downgrading or withdrawal of the then-current rating assigned to any Rated Certificates. (b)(i) Subject to subparagraph (ii) below, the purpose of the Transferor shall be to engage in any lawful activity for which a corporation may be organized under the laws of the State of California. (ii) Notwithstanding subparagraph (b)(i) above, the purpose of the Transferor shall be limited to the following purposes: (A) to acquire from time to time from TMCC all right, title and interest in and to the SUBI Certificates evidencing units of beneficial interest in the SUBI Assets; (B) to acquire, own, hold, service, sell, assign, pledge and otherwise deal with the SUBI Certificates and SUBI Assets, related insurance policies, related agreements with TMCC and any proceeds or further rights associated with any of the foregoing; 24 (C) to sell, assign, transfer, convey and/or pledge all or any part of each such SUBI Certificate to one or more trusts or other persons or legal entities pursuant to one or more Securitization Trust Agreements, indentures or similar agreements (the "Agreements") to be entered into by and among TMCC, as servicer, the Transferor and each other pledgee or transferee named therein (the "transferees"); (D) to sell any series or class of asset-backed certificates or other securities issued by or evidencing interests in the transferees or obligations of the transferees or the Transferor under the related Agreements, including the Investor Certificates ("Securities"); (E) to hold and enjoy all of the rights and privileges of any Securities so issued under the related Securitization Trust Agreements; (F) to perform its obligations under the Securitization Trust Agreements, indentures or similar agreements; and (G) to engage in any activity and to exercise any powers permitted to corporations under the laws of the State of California that are related or incidental to the foregoing and necessary, convenient and advisable to accomplish the foregoing. (c) Notwithstanding any other provision of this Section and any provision of law, the Transferor shall not do any of the following: (i) engage in any business or activity other than as set forth in clause (b) above; (ii)without the affirmative vote of a majority of the members of the Board of Directors of the Transferor (which must include the affirmative vote of all Independent Directors of the Transferor, as required by certificate of incorporation of the Transferor), (A) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (D) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Transferor or a substantial part of its property, (E) make a general assignment for the benefit of creditors, (F) admit in writing its inability to pay its debts generally as they become due, or (G) take any corporate action in furtherance of the actions set forth in clauses (A) through (F) above; (iii) without the unanimous affirmative vote of the members of the Board of Directors of the Transferor, merge or consolidate with any other Person or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock 25 or other ownership interest of any other Person, (provided that such restrictions shall not limit the acquisition of SUBI Certificates or the ability of the Transferor to sell, assign, transfer, convey and/or pledge all or any part of any SUBI Certificate in accordance with Section 5.03(b)(ii) hereof, financing, and refinancing of, or otherwise dealing with, beneficial interests in the Titling Trust in accordance with the terms of subparagraph (b)(ii) above, which shall not be otherwise restricted by this Section 5.03(c)); or (iv) so long as any outstanding debt of the Transferor or Securities are rated by any nationally recognized statistical rating agency issue, unsecuritized notes or otherwise borrow money unless (A) the Transferor has made a written request to the related nationally recognized rating agency to issue unsecured notes or incur borrowings and such notes or borrowings are rated by the related nationally recognized rating agency the same as or higher than the rating afforded any outstanding rated debt or Securities, or (B) such notes or borrowings (1) are fully subordinated (and which shall provide for payment only after payment in respect of all outstanding rated debt and/or Securities) or are nonrecourse against any assets of the Transferor other than the assets pledged to secure such notes or borrowings, (2) do not constitute a claim against the Transferor in the event that such assets are insufficient to pay such notes or borrowings, and (3) where such notes or borrowings are secured by the rated debt or Securities, are fully subordinated (and which shall provide for payment only after payment in respect of all outstanding rated debt and/or Securities) to such rated debt or Securities. SECTION 5.04. LIMITATION ON LIABILITY OF TRANSFEROR AND OTHERS. The Transferor and any director or officer or employee or agent of the Transferor may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising under this Securitization Trust Agreement. SECTION 5.05. TRANSFEROR MAY OWN INVESTOR CERTIFICATES. Each of the Transferor and any Person controlling, controlled by or under common control with the Transferor may in its individual or any other capacity become the owner or pledgee of Investor Certificates with the same rights as it would have if it were not the Transferor or such an affiliate thereof except as otherwise specifically provided in the definition of the term "Certificateholder." Investor Certificates so owned by or pledged to the Transferor or such controlling or commonly controlled Person shall have an equal and proportionate benefit under the provisions of this Securitization Trust Agreement, without preference, priority or distinction 26 as among all of the Investor Certificates. The Transferor will give notice to each Rating Agency if any such controlling or commonly controlled Person shall at any time become the owner or pledgee of Investor Certificates. SECTION 5.06. NO TRANSFER. The Transferor on behalf of itself and its successors and assigns hereby covenants that it will not transfer, pledge or assign to any Person the Transferor Certificate or any part of its right to receive any Excess Collections pursuant to Section 3.01(c). SECTION 5.07. TAX MATTERS PARTNER. In the event that the 1997-A Securitization Trust is recharacterized as a partnership for tax purposes, the Transferor shall act as "Tax Matters Partner" (i) to represent the Transferor and the Class B Certificateholders, in their capacities as partners in a partnership for tax purposes, before taxing authorities or courts of competent jurisdiction in any tax matters affecting the 1997-A Securitization Trust as a tax partnership; and (ii) to execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents binding the Class B Certificateholders with respect to such tax matters or otherwise affecting their rights, including, but not limited to, extending the statute of limitations for assessment of tax deficiencies against the Class B Certificateholders and adjusting the 1997-A Securitization Trust's federal, state or local tax returns. The Transferor shall not be liable to the 1997-A Securitization Trust or to any Certificateholder for any action taken or omitted by the Transferor with regard to such tax matters or otherwise as a result of its holding the position of Tax Matters Partner. ARTICLE SIX THE SECURITIZATION TRUSTEE SECTION 6.01. DUTIES OF TRUSTEE. (a) The Securitization Trustee, both prior to and after the occurrence of an Event of Servicing Termination under the 1997-A SUBI Servicing Supplement, undertakes to perform such duties and only such duties as are specifically set forth in this Securitization Trust Agreement. (b) The Securitization Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Securitization Trustee that shall be specifically required to be furnished pursuant to any provision of this Securitization 27 Trust Agreement, shall examine them to determine whether they conform on their face to the requirements of this Securitization Trust Agreement. (c) No provision of this Securitization Trust Agreement shall be construed to relieve the Securitization Trustee from liability for its own negligent action, its own negligent failure to act, its own bad faith or its own willful misfeasance; PROVIDED, HOWEVER, that (i) the duties and obligations of the Securitization Trustee shall be determined solely by the express provisions of this Securitization Trust Agreement, the Securitization Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Securitization Trust Agreement, no implied covenants or obligations shall be read into this Securitization Trust Agreement against the Securitization Trustee, the permissive right of the Securitization Trustee to do things enumerated in this Securitization Trust Agreement shall not be construed as a duty and, in the absence of bad faith on the part of the Securitization Trustee, the Securitization Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Securitization Trustee and conforming on their face to the requirements of this Securitization Trust Agreement; (ii) the Securitization Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Securitization Trustee was negligent in performing its duties in accordance with the terms of this Securitization Trust Agreement; and (iii) the Securitization Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken in good faith in accordance with the direction of the Holders of Investor Certificates evidencing not less than 51% of the aggregate Percentage Interest relating to the time, method and place of conducting any proceeding for any remedy available to the Securitization Trustee, or exercising any trust or power conferred upon the Securitization Trustee, under this Securitization Trust Agreement or the Titling Trust Agreement (as supplemented by the 1997-A SUBI Supplement). (d) The Securitization Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties under this Securitization Trust Agreement, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 28 (e) All information obtained by the Securitization Trustee regarding the Obligors and the Contracts contained in the 1997-A SUBI, whether upon the exercise of its rights under this Securitization Trust Agreement or otherwise, shall be maintained by the Securitization Trustee in confidence and shall not be disclosed to any other Person, unless such disclosure is required by any applicable law or regulation or pursuant to subpoena. SECTION 6.02. CERTAIN MATTERS AFFECTING THE SECURITIZATION TRUSTEE. (a) Except as otherwise provided in Section 6.01: (i) the Securitization Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate, certificate of an authorized signatory, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) the Securitization Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it under this Securitization Trust Agreement in good faith and in accordance with such Opinion of Counsel; (iii) the Securitization Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Securitization Trust Agreement or the Titling Trust Agreement (as supplemented by the 1997-A SUBI Supplement), or to institute, conduct or defend any litigation under this Securitization Trust Agreement or the Titling Trust Agreement (as supplemented by the 1997-A SUBI Supplement), or in relation to this Securitization Trust Agreement or the Titling Trust Agreement (as supplemented by the 1997-A SUBI Supplement), at the request, order or direction of any of the Certificateholders pursuant to the provisions of this Securitization Trust Agreement or the Titling Trust Agreement (as supplemented by the 1997-A SUBI Supplement), unless such Certificateholders shall have offered to the Securitization Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; (iv) the Securitization Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Securitization Trust Agreement; (v) the Securitization Trustee shall not be bound to recalculate, reverify, or make any investigation into the facts of matters stated in any resolution, certificate, statement, 29 instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by Holders of Investor Certificates evidencing not less than 25% of the aggregate Percentage Interest of any Class; PROVIDED, HOWEVER, that if the payment within a reasonable time to the Securitization Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Securitization Trustee, not reasonably assured to the Securitization Trustee by the security afforded to it by the terms of this Securitization Trust Agreement, the Securitization Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding; the reasonable expense of every such examination shall be paid by the Transferor or, if paid by the Securitization Trustee, shall be reimbursed by the Transferor upon demand; and nothing in this clause shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors; and (vi) the Securitization Trustee may execute any of the trusts or powers under this Securitization Trust Agreement or perform any duties under this Securitization Trust Agreement either directly or by or through agents or attorneys or a custodian. (b) No Certificateholder will have any right to institute any proceeding with respect to this Securitization Trust Agreement except upon satisfying the conditions set forth in Section 9.03(c). SECTION 6.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR CONTRACTS. The Securitization Trustee shall make no representations as to the validity or sufficiency of this Securitization Trust Agreement or of the Certificates (other than the execution by the Securitization Trustee on behalf of the 1997-A Securitization Trust of, and the certificate of authentication on, the Certificates), or of the 1997-A SUBI Interest or 1997-A SUBI Certificate. The Securitization Trustee shall have no obligation to perform any of the duties of the Transferor unless explicitly set forth in this Securitization Trust Agreement. The Securitization Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of the 1997-A SUBI Interest or 1997-A SUBI Certificate or any 1997-A Contract, any ownership interest in any 1997-A Leased Vehicle, or the maintenance of any such ownership interest, or for or with respect to the efficacy of the 1997-A Securitization Trust or its ability to generate the payments to be distributed to Certificateholders under this Securitization Trust Agreement, including without limitation the validity of the assignment of the 1997-A SUBI Interest or 1997-A SUBI Certificate to the 1997-A Securitization Trust or of any intervening assignment; the existence, condition, location and ownership of any 1997-A Contract or 1997-A Leased Vehicle; the existence and enforceability of any physical damage or credit life or credit disability insurance; the existence and contents of any 1997-A Contract or any computer or other record thereof; the completeness of any 1997-A Contract; the performance or enforcement of any 30 Contract; the compliance by the Transferor with any covenant or the breach by the Transferor of any warranty or representation made under this Securitization Trust Agreement or in any related document and the accuracy of any such warranty or representation prior to the Securitization Trustee's receipt of notice or other discovery of any noncompliance therewith or any breach thereof; the acts or omissions of the Transferor or the Servicer; or any action by the Securitization Trustee taken at the instruction of the Servicer PROVIDED, HOWEVER, that the foregoing shall not relieve the Securitization Trustee of its obligation to perform its duties under this Securitization Trust Agreement. Except with respect to a claim based on the failure of the Securitization Trustee to perform its duties under this Securitization Trust Agreement or based on the Securitization Trustee's willful misconduct, bad faith or negligence, no recourse shall be had for any claim based on any provision of this Securitization Trust Agreement, the Certificates, the 1997-A SUBI Interest or 1997-A SUBI Certificate or assignment thereof against the institution serving as Trustee in its individual capacity. The Securitization Trustee shall not have any personal obligation, liability or duty whatsoever to any Certificateholder or any other Person with respect to any such claim, and any such claim shall be asserted solely against the 1997-A Securitization Trust or any indemnitor who shall furnish indemnity as provided in this Securitization Trust Agreement. The Securitization Trustee shall not be accountable for the use or application by the Transferor of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Servicer in respect of the 1997-A SUBI Interest or 1997-A SUBI Certificate. SECTION 6.04. TRUSTEE MAY OWN CERTIFICATES. The Securitization Trustee in its individual or any other capacity may become the owner or pledgee of Certificates with the same rights as it would have if it were not Trustee. SECTION 6.05. TRUSTEE'S FEES AND EXPENSES. The Securitization Trustee shall be entitled to reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts created by this Securitization Trust Agreement and in the exercise and performance of any of the powers and duties of the Securitization Trustee under this Securitization Trust Agreement, and payment or reimbursement upon its request for all reasonable expenses, disbursements and advances incurred or made by the Securitization Trustee in its capacity as Trustee in accordance with any of the provisions of this Securitization Trust Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence, willful misfeasance or bad faith or that is the responsibility of Certificateholders under this Securitization Trust Agreement. Such compensation and reimbursement shall be paid as set forth in Section 3.01(b) hereof. 31 SECTION 6.06. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Securitization Trustee under this Securitization Trust Agreement shall at all times be a national banking association or state banking institution [having its corporate trust office in the same State as the location of the Corporate Trust Office as specified in this Securitization Trust Agreement]; and organized and doing business under the laws of such State or the United States; authorized under such laws to exercise corporate trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; and having a long-term deposit rating no lower than Baa3 by Moody's, so long as Moody's is a Rating Agency, or be otherwise acceptable to each Rating Agency, as evidenced by a letter to such effect from each of them. If the Securitization Trustee shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Securitization Trustee shall cease to be eligible in accordance with the provisions of this Section, the Securitization Trustee shall resign immediately in the manner and with the effect specified in Section 6.07. SECTION 6.07. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Securitization Trustee may at any time resign and be discharged from the trusts created by this Securitization Trust Agreement by giving written notice thereof to the Transferor. Upon receiving such notice of resignation, the Transferor shall promptly appoint a successor Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (b) If at any time the Securitization Trustee shall cease to be eligible in accordance with the provisions of Section 6.06 and shall fail to resign after written request therefor by the Transferor, or if at any time the Securitization Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Securitization Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Securitization Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Transferor may remove the Securitization Trustee. If it shall remove the Securitization Trustee under the authority of the immediately preceding sentence, the Transferor shall promptly appoint a successor Trustee by written instrument, in duplicate, one copy of 32 which instrument shall be delivered to the Securitization Trustee so removed and one copy to the successor Trustee, and payment of all fees owed to the outgoing Trustee. (c) Any resignation or removal of the Securitization Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Trustee as provided in Section 6.08. The Servicer shall give each Rating Agency notice of any such resignation or removal of the Securitization Trustee and appointment and acceptance of a successor Trustee. SECTION 6.08. SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 6.07 shall execute, acknowledge and deliver to the Transferor and to its predecessor Trustee an instrument accepting such appointment under this Securitization Trust Agreement, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Securitization Trust Agreement, with like effect as if originally named as Trustee. The predecessor Trustee shall deliver to the successor Trustee all documents and statements held by it under this Securitization Trust Agreement; and the Transferor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Trustee all such rights, powers, duties and obligations. No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.06. Upon acceptance of appointment by a successor Trustee as provided in this Section, the Transferor shall cause notice of the successor of such Trustee under this Securitization Trust Agreement to be mailed to all Certificateholders at their addresses as shown in the Certificate Register and shall give notice by mail to each Rating Agency. If the Transferor fails to mail or cause to be mailed such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Transferor. SECTION 6.09. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation (i) into which the Securitization Trustee may be merged or consolidated, (ii) which may result from any merger, conversion or consolidation to which the Securitization Trustee shall be a party, or (iii) which may succeed to the corporate trust business of the Securitization Trustee, shall be the successor of the Securitization Trustee hereunder, provided such corporation shall be eligible pursuant to Section 6.06, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding, except that if the Securitization Trustee in any of the foregoing cases is not the surviving entity, then the surviving entity shall execute an agreement of assumption to 33 perform every obligation of the Securitization Trustee, either generally or particularly as provided herein. Notice of any such event shall be given by the Securitization Trustee to each Rating Agency. SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions of this Securitization Trust Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Securitization Trust may at the time be located, the Transferor and the Securitization Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Securitization Trustee to act as co-trustee, jointly with the Securitization Trustee, or separate trustee or separate trustees, of all or any part of the 1997-A Securitization Trust, and to vest in such Person, in such capacity and for the benefit of the Certificateholders, such title to the 1997-A Securitization Trust, or any part thereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Transferor and the Securitization Trustee may consider necessary or desirable. If the Transferor shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Securitization Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee under this Securitization Trust Agreement shall be required to meet the terms of eligibility as a successor Trustee pursuant to Section 6.06 and no notice of a successor Trustee pursuant to Section 6.08 and no notice to Certificateholders of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 6.08. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Securitization Trustee shall be conferred upon and exercised or performed by the Securitization Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Securitization Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Securitization Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the 1997-A Securitization Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Securitization Trustee; (ii) no trustee under this Securitization Trust Agreement shall be personally liable by reason of any act or omission of any other trustee under this Securitization Trust Agreement; and 34 (iii) the Transferor and the Securitization Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Securitization Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Securitization Trust Agreement and the conditions of this Section. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Securitization Trustee or separately, as may be provided therein, subject to all the provisions of this Securitization Trust Agreement, specifically including every provision of this Securitization Trust Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Securitization Trustee. Each such instrument shall be filed with the Securitization Trustee and a copy thereof given to the Transferor and the Servicer. Any separate trustee or co-trustee may at any time appoint the Securitization Trustee its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Securitization Trust Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Securitization Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Notwithstanding anything to the contrary in this Securitization Trust Agreement, the appointment of any separate trustee or co-trustee shall not relieve the Securitization Trustee of its obligations and duties under this Securitization Trust Agreement. SECTION 6.11. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Securitization Trustee makes the following representations and warranties on which the Transferor and Certificateholders may rely: (i) ORGANIZATION AND GOOD STANDING. The Securitization Trustee is a national banking association organized, existing and in good standing under the laws of the United States of America. (ii) POWER AND AUTHORITY. The Securitization Trustee has full power, authority and right to execute, deliver and perform this Securitization Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Securitization Trust Agreement. (iii) DUE EXECUTION. This Securitization Trust Agreement has been duly executed and delivered by the Securitization Trustee. 35 (iv) ENFORCEABILITY. This Securitization Trust Agreement constitutes the legal, valid and binding obligation of the Securitization Trustee, enforceable against it in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting enforcement of creditors' rights generally and by general principles of equity. SECTION 6.12. TAX RETURNS. The Securitization Trustee shall, at the direction of the Servicer and on behalf of the Transferor, prepare or shall cause to be prepared any required federal tax information returns (in a manner consistent with the treatment of the Investor Certificates as indebtedness) and shall file and distribute such forms as required by law. The Servicer shall prepare or cause to be prepared any federal and state tax returns that may be required with respect to the 1997-A Securitization Trust or the Securitization Trust assets and shall deliver any such returns to the Securitization Trustee for signature at least five days prior to the date such returns are required by law to be filed. SECTION 6.13. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CERTIFICATES. All rights of action and claims under this Securitization Trust Agreement or the Certificates may be prosecuted and enforced by the Securitization Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Securitization Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Securitization Trustee, its agents and counsel, be for the ratable benefit of the Certificateholders in respect of which such judgment has been obtained. SECTION 6.14. SUIT FOR ENFORCEMENT. If an Event of Servicing Termination shall occur and be continuing under the Titling Trust Agreement, as supplemented by the 1997-A SUBI Servicing Supplement with respect to the 1997-A SUBI Portfolio, the Securitization Trustee, in its discretion may, subject to the provisions of Sections 6.01 and 6.02 hereof and Section 6.01(b) of the 1997-A SUBI Servicing Supplement, proceed to protect and enforce its rights and the rights of the Certificateholders under this Securitization Trust Agreement, the Titling Trust Agreement and the 1997-A SUBI Servicing Supplement by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained herein or therein or in aid of the execution of any power granted herein or therein or for the enforcement of any other legal, equitable or other remedy as the Securitization Trustee, being advised by counsel, shall deem 36 most effectual to protect and enforce any of the rights of the Securitization Trustee or the Certificateholders. SECTION 6.15. RIGHTS OF CERTIFICATEHOLDERS TO DIRECT TRUSTEE. Holders of Investor Certificates evidencing not less than 25% of the aggregate Percentage Interest shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Securitization Trustee under this Securitization Trust Agreement, or exercising any trust or power conferred on the Securitization Trustee by this Securitization Trust Agreement; PROVIDED, HOWEVER, that (a) if any greater Percentage Interest is required to cause any action to be taken under the Titling Trust Agreement or the 1997-A SUBI Supplement by the Securitization Trustee in its capacity as a transferee of the 1997-A SUBI Certificate, the greater Percentage Interest shall prevail; (b) subject to Sections 6.01 and 6.02, the Securitization Trustee shall have the right to decline to follow any such direction if the Securitization Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Securitization Trustee in good faith shall determine that the proceedings so directed would be illegal or subject it to personal liability or be unduly prejudicial to the rights of Certificateholders not parties to such direction; and (c) nothing in this Securitization Trust Agreement shall impair the right of the Securitization Trustee to take any action deemed proper by the Securitization Trustee and which is not inconsistent with such direction by the Certificateholders. SECTION 6.16. NO PETITION. The Securitization Trustee covenants and agrees that prior to the date which is one year and one day after the last date upon which (a) each Class of Investor Certificates has been paid in full, and (b) all obligations due under any other Securitized Financing have been paid in full, the Securitization Trustee will not institute against, or join any other Person in instituting against the Transferor, TMCC, the Titling Trustee or the Titling Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law. The foregoing shall not limit the Securitization Trustee's right to file any claim in or otherwise take actions with respect to any such proceeding instituted by any Person not under such a constraint. This Section shall survive the termination of this Securitization Trust Agreement or the resignation or removal of the Securitization Trustee under this Securitization Trust Agreement. 37 ARTICLE SEVEN TERMINATION SECTION 7.01. TERMINATION OF THE 1997-A SECURITIZATION TRUST. (a) The 1997-A Securitization Trust and the respective obligations and responsibilities of the Transferor and the Securitization Trustee shall terminate upon the earliest of (i) the purchase as of any Distribution Date by the Transferor of the corpus of the 1997-A Securitization Trust as described in Section 7.02 (except that the Securitization Trust shall continue solely for the limited purposes set forth in (b) and (c) below), (ii) the day following the Distribution Date upon which all Investor Certificates have been paid in full and after which there is no unreimbursed Class A-1 Certificate Principal Loss Amount, Class A-2 Certificate Principal Loss Amount, Class A-3 Certificate Principal Loss Amount, Class B Certificate Principal Loss Amount, Class A-1 Certificate Principal Loss Interest Amount, Class A-2 Certificate Principal Loss Interest Amount, Class A-3 Certificate Principal Loss Interest Amount, Class B Certificate Principal Loss Interest Amount, Class B Certificate Principal Carryover Shortfall or Class B Certificate Principal Carryover Shortfall Interest Amount or (iii) the expiration, disposition or termination of the 1997-A SUBI Interest; PROVIDED, HOWEVER, that in no event shall the trust created by this Securitization Trust Agreement continue beyond the expiration of 21 years from the death of the last survivor of the descendants of William Jefferson Clinton of the State of Arkansas, living on the date of the Agreement. The Transferor shall promptly notify the Securitization Trustee and each Rating Agency of any prospective termination of the 1997-A Securitization Trust. (b) Notice of any termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Securitization Trustee for payment of the final distribution and retirement of the Certificates, shall be given promptly by the Securitization Trustee by letter to Certificateholders mailed not earlier than the 15th day and not later than the 30th day prior to the date on which such final distribution is expected to occur specifying (i) the Distribution Date upon which final payment of the Certificates shall be made upon presentation and surrender of Certificates at the Corporate Trust Office or such other office of the Securitization Trustee therein specified, (ii) the amount of any such final payment and (iii) if applicable, that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the Corporate Trust Office or such other office of the Securitization Trustee therein specified. The Securitization Trustee shall give such notice to the Certificate Registrar (if other than the Securitization Trustee) at the time such notice is given to Certificateholders. In the event such notice is given, in the case of an optional purchase of the Securitization Trust corpus pursuant to Section 7.02, the Transferor shall deposit the amount specified in Section 7.02. Upon presentation and surrender of the Certificates, the Securitization Trustee shall cause to be 38 distributed to Certificateholders so surrendering amounts distributable on such Distribution Date pursuant to Section 3.01. No further interest will accrue with respect to any Investor Certificate from and after the final Distribution Date with respect thereto. (c) In the event that all of the Certificateholders shall not have surrendered their Certificates for retirement within six months after the date specified in the above-mentioned written notice, the Securitization Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for retirement and receive the final distribution with respect thereto. If within one year after the second notice all the Certificates shall not have been surrendered for retirement, the Securitization Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets that remain subject to this Securitization Trust Agreement. Any funds remaining in the Securitization Trust after exhaustion of such remedies shall be distributed by the Securitization Trustee to the [United Way]. SECTION 7.02. OPTIONAL PURCHASE OF 1997-A SUBI INTEREST. (a) On each Distribution Date following the last day of a Collection Period as of which the Certificate Balance shall be less than or equal to ten percent (10%) of the Initial Certificate Balance, the Transferor shall have the option to purchase the Investor Certificateholders' interest in the corpus of the 1997-A Securitization Trust. To exercise such option, the Transferor shall notify the Securitization Trustee and the Servicer, in writing, no later than the tenth day of the month preceding the month in which the Distribution Date as of which such purchase is to be effected and shall deposit in the 1997-A SUBI Collection Account an amount equal to the greater of (i) the Aggregate Net Investment Value as of the last day of the related Collection Period, and (ii) the sum of (A) the Certificate Balance (B) the accrued and unpaid Class A-1 Interest Distributable Amount, Class A-2 Interest Distributable Amount, Class A-3 Interest Distributable Amount and Class B Interest Distributable Amount, (C) any accrued and unpaid Class A-1 Interest Carryover Shortfall, Class A-2 Interest Carryover Shortfall, Class A-3 Interest Carryover Shortfall, Class A-4 Interest Carryover Shortfall and Class B Interest Carryover Shortfall, (D) any unpaid Class A-1 Certificate Principal Loss Amount, unpaid Class A-2 Certificate Principal Loss Amount, unpaid Class A-3 Certificate Principal Loss Amount, unpaid Class B Certificate Principal Loss Amount and unpaid Class B Certificate Principal Carryover Shortfall, and (E) any accrued and unpaid Class A-1 Certificate Principal Loss Interest Amount, unpaid Class A-2 Certificate Principal Loss Interest Amount, unpaid Class A-3 Certificate Principal Loss Interest Amount, unpaid Class B Certificate Principal Loss Interest Amount and Class B Certificate Principal Carryover Shortfall Interest Amount through the day preceding the final Distribution Date. The Transferor also shall pay to the Servicer the aggregate amount of any unreimbursed Advances. Thereupon the Transferor shall succeed to all of the Investor Certificateholders' interests in and to the 1997-A Securitization Trust corpus. 39 (b) The Investor Certificateholders' interest in the corpus of the Securitization Trust may only be purchased pursuant to this Section 7.02 if the Securitization Trustee and each Rating Agency receives an Opinion of Counsel from the Transferor's counsel to the effect that such purchase would not constitute a fraudulent conveyance, or each Rating Agency is otherwise satisfied (as evidenced by written notice from each to the Securitization Trustee). ARTICLE EIGHT EARLY AMORTIZATION EVENTS SECTION 8.01. EARLY AMORTIZATION EVENTS. If any one of the following events shall occur during the Revolving Period: (a) failure on the part of the Servicer (i) to make any payment or deposit required with respect to the 1997-A SUBI, the 1997-A SUBI Interest, or the Investor Certificates under this Securitization Trust Agreement, the Titling Trust Agreement or the 1997-A SUBI Supplement or the 1997-A SUBI Servicing Supplement, on or before the date occurring five Business Days after the payment or deposit is required to be made, or (ii) to deliver a Servicer's Certificate within ten Business Days after any Determination Date, which failure continues for three Business Days; (b) failure on the part of the Transferor or the Servicer duly to observe or perform in any material respect any other covenants or agreements of the Transferor or the Servicer set forth in this Securitization Trust Agreement, the Titling Trust Agreement, the 1997-A SUBI Supplement or the 1997-A SUBI Servicing Supplement, which failure materially and adversely affects the rights of the holder of the 1997-A SUBI Interest or of the Investor Certificateholders and which continues unremedied and continues to affect materially and adversely the rights of the holder of the 1997-A SUBI Interest or of the Investor Certificateholders for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, is given (i) to the Transferor or the Servicer, as the case may be, by the Securitization Trustee or the Titling Trustee, or (ii) to the Transferor or the Servicer, as the case may be, and to the Securitization Trustee by the Holders of Investor Certificates evidencing not less than 25% of the aggregate Percentage Interest; (c) any representation or warranty made by TMCC in the SUBI Certificate Agreement, by the Transferor in this Securitization Trust Agreement, or the representation and warranty made by the Servicer in Section 3.02( ) of the 1997-A SUBI Servicing Supplement or any certificate given pursuant to Section 3.02( ) of the 1997-A SUBI Servicing Supplement, shall prove to have been incorrect in any material respect when made or given, as a result of which the interests of the holder of the 1997-A SUBI Interest or of the Investor Certificateholders are 40 materially and adversely affected and which continues to be incorrect in any material respect and continues to affect materially and adversely affect the interests of the holder of the 1997-A SUBI Interest or of the Certificateholders for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, is given (i) to TMCC, the Transferor or the Servicer, as the case may be, by the Securitization Trustee or the Titling Trustee, or (ii) to TMCC, the Transferor or the Servicer, as the case may be, and to the Securitization Trustee by the Holders of Investor Certificates evidencing not less than 25% of the aggregate Percentage Interest; PROVIDED, HOWEVER, that an Early Amortization Event pursuant to this subparagraph (c) shall not be deemed to have occurred hereunder if the Servicer has made the deposit contemplated by Section of the 1997-A SUBI Servicing Supplement and has reallocated the relevant 1997-A Contract and 1997-A Leased Vehicle to the UTI Portfolio within the time provided therefor; (d) the Transferor shall file a petition commencing a voluntary case under any chapter of the Federal bankruptcy laws; or the Transferor shall file a petition or answer or consent seeking reorganization, arrangement, adjustment, or composition under any other similar applicable Federal law, or shall consent to the filing of any such petition, answer, or consent; or the Transferor shall appoint, or consent to the appointment of a custodian, receiver, liquidator, trustee, assignee, sequestrator or other similar official in bankruptcy or insolvency of it or of any substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due; (e) any order for relief against the Transferor shall have been entered by a court having jurisdiction in the premises under any chapter of the Federal bankruptcy laws; or a decree or order by a court having jurisdiction in the premises shall have been entered approving as properly filed a petition seeking reorganization, arrangement, adjustment, or composition of the Transferor under any other similar applicable Federal law; or a decree or order of a court having jurisdiction in the premises for the appointment of a custodian, receiver, liquidator, trustee, assignee, sequestrator or other similar official in bankruptcy or insolvency of the Transferor or of any substantial part of its property, or for the winding up or liquidation of its affairs, shall have been entered; (f) any Lien, other than Liens permitted under this Securitization Trust Agreement, the Titling Trust Agreement or the 1997-A SUBI Supplement or the 1997-A SUBI Servicing Supplement shall be created on or extend to or otherwise arise upon or burden the 1997-A SUBI Interest, the 1997-A SUBI Certificate, or the 1997-A Contracts or 1997-A Leased Vehicles, or any part thereof or any interest therein or the proceeds thereof, and not be released or bonded over within 60 days thereafter; (g) the Transferor, the 1997-A Securitization Trust or the Titling Trust shall become subject to registration as an "investment company" under the Investment Company Act; 41 (h) on the last calendar day of any calendar month (commencing September 1997) the aggregate amount of Principal Collections collected through the last day of the related Collection Period that have not been reinvested in new 1997-A Contracts and 1997-A Leased Vehicles, as contemplated by Section 3.02 of the 1997-A SUBI Servicing Supplement, exceeds [$1,000,000]; (i) an Event of Servicing Termination has occurred; or (j) on any Distribution Date the aggregate amount withdrawn from the Reserve Fund and deposited in the 1997-A SUBI Collection Account on or prior to such Distribution Date (without reference to any subsequent deposits to the Reserve Fund from any source) exceeds $_________; then (but in the case of any event described in subparagraph (a), (b), (c) or (f) after any applicable grace period) an early amortization event (an "Early Amortization Event") shall have occurred. SECTION 8.02. ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN EVENTS (a) Following the occurrence of an Early Amortization Event described in Section 8.01(d) or (e) (such event, an "Insolvency Event"), the Transferor shall promptly give notice to the Securitization Trustee of such Insolvency Event. Within 15 days of the receipt by the Securitization Trustee of the notice, the Securitization Trustee may and, upon receipt of a notice from Investor Certificateholders evidencing more than 51% of the aggregate Percentage Interest of the Class A Certificates or 51% of the aggregate Percentage Interests of the Class A Certificates and the Class B Certificates (voting together as a single class), shall publish a notice in Authorized Newspapers that an Insolvency Event has occurred and that the Securitization Trustee intends to sell, dispose of or otherwise liquidate the 1997-A SUBI Interest, the 1997-A SUBI Certificate and the other property of the 1997-A Securitization Trust in a commercially reasonable manner. Following such publication, the Securitization Trustee shall, unless otherwise prohibited by applicable law from any such action, sell, dispose of, or otherwise liquidate the 1997-A SUBI Interest, the 1997-A SUBI Certificate and the other property of the 1997-A Securitization Trust, in a commercially reasonable manner and on commercially reasonable terms, which shall include the solicitation of competitive bids, and shall proceed to consummate the sale, liquidation or disposition thereof as provided above with the highest bidder; PROVIDED, HOWEVER, that such sale, disposition or other liquidation shall not be made without the consent of all Holders of Investor Certificates if a net loss would be realized. The Transferor and the Servicer shall be permitted to bid for the 1997-A Securitization Trust property. The Securitization Trustee may obtain a prior determination from the conservator, receiver, or trustee in bankruptcy of the Transferor that the terms and manner of any proposed 42 sale, disposition or liquidation are commercially reasonable. The provisions of Sections 8.01 and 8.02 shall not be deemed to be mutually exclusive. (b) The proceeds from the sale, disposition or liquidation of the 1997-A SUBI Interest, the 1997-A SUBI Certificate and the other property of the 1997-A Securitization Trust pursuant to Section 8.02 (a) above, net of expenses incurred in such sale, disposition or liquidation, shall be treated as Principal Collections and Interest Collections received during the Amortization Period; PROVIDED that such Principal Collections, will be distributed, first, on a PRO RATA basis, to the Class A-1 Certificateholders, the Class A-2 Certificateholders and the Class A-3 Certificateholders based on their respective Certificate Balances, and second, to the Class B Certificateholders; FURTHER PROVIDED that the Servicer on behalf of the Securitization Trustee shall determine conclusively without liability for such determination the amount of such proceeds which are allocable to Interest Collections and the amount of such proceeds which are allocable to Principal Collections. On the day following the Distribution Date on which such proceeds are distributed to the Investor Certificateholders, the 1997-A Securitization Trust shall terminate. ARTICLE NINE MISCELLANEOUS PROVISIONS SECTION 9.01. AMENDMENT. (a) This Securitization Trust Agreement and the other Transaction Documents may be amended by the respective parties thereto, without the consent of any of the Certificateholders, (i) to cure any ambiguity, mistake or error, (ii) to correct or supplement any provisions herein or therein that may be inconsistent with any provisions hereof or thereof or with the prospectus pursuant to which the Class A Certificates were offered, (iii) to add, change or eliminate any other provisions hereof or thereof with respect to matters or questions arising hereunder or thereunder that shall not be inconsistent with the provisions hereof or thereof, or (iv) to add or amend any provision therein in connection with permitting transfers of the Class B Certificates; PROVIDED, HOWEVER, that in the case of clause (iii), any such action shall not, in the good faith judgment or the parties hereto or thereto, adversely affect in any material respect the interests of the Certificateholders and the Titling Trustee and the Securitization Trustee shall have received an Opinion of Counsel to the effect that such action shall not affect the legal interests or positions of the Certificateholders. (b) This Securitization Trust Agreement and the other Transaction Documents may also be amended from time to time by the respective parties hereto or thereto including with respect to (i) changing the formula for determining the Specified Reserve Fund Balance which change would result in a decrease in the amount of the Specified Reserve Fund Balance, (ii) changing the manner by which the Reserve Fund is funded, which changes could include 43 borrowings by the Transferor to fund all or a portion of the Reserve Fund Initial Deposit (which borrowings would be payable from assets or cash flow otherwise payable to the Transferor), (iii) changing the remittance schedule for collection deposits in the 1997-A SUBI Collection Account, or (iv) changing the definition of "Permitted Investments"), if either (A) the Securitization Trustee has been furnished with a letter from each Rating Agency to the effect that such amendment would not cause its then-current rating of any Rated Certificate to be qualified, reduced or withdrawn, or (B) the Securitization Trustee has received the consent of the Holders of Investor Certificates representing not less than 51% of the aggregate Percentage Interests (which consent of any Holder of an Investor Certificate given pursuant to this Section or pursuant to any other provision of this Securitization Trust Agreement shall be conclusive and binding on such Holder and on all future Holders of such Investor Certificate and of any Investor Certificate issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Investor Certificate); PROVIDED, HOWEVER, that no such amendment shall (x) except as otherwise provided in Section 9.01(a), increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the 1997-A SUBI or any 1997-A SUBI Certificate or distributions that shall be required to be made on any Investor Certificate or the applicable Certificate Rate or (y) reduce the aforesaid percentage of the aggregate Percentage Interest of the Investor Certificates of each Class required to consent to any such amendment, without the consent of the Holders of all Certificates of such Class then outstanding. (c) The Securitization Trustee shall provide each Rating Agency prior notice of any proposed amendment hereto and copies of an Opinion of Counsel, if required pursuant to Section 9.01(a), whether or not such amendment requires its approval. Any notice of any such amendment or modification as to which notice is required to be given to any Rating Agency shall contain both the substance and substantial form of the proposed amendment or modification. (d) Promptly after the execution of any such amendment or consent, the Securitization Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder. The failure to send such notification shall not affect the validity of such amendment. It shall not be necessary for the consent of Certificateholders pursuant to Section 9.01(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization by Certificateholders of the execution thereof shall be subject to such reasonable requirements as the Securitization Trustee may prescribe. (e) Prior to the execution of any amendment to this Securitization Trust Agreement, the Securitization Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Securitization Trust Agreement. The Securitization Trustee may, but shall not be obligated to, 44 enter into any such amendment which affects the Securitization Trustee's own rights, duties or immunities under this Securitization Trust Agreement or otherwise. SECTION 9.02. PROTECTION OF TITLE TO TRUST. (a) The Transferor shall execute and file, or cause to be executed and filed, such financing statements and such continuation and other statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Certificateholders and the Securitization Trustee under this Securitization Trust Agreement in the 1997-A SUBI Interest, the 1997-A SUBI Certificate and in the proceeds thereof. The Transferor shall deliver (or cause to be delivered) to the Securitization Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) The Transferor shall not change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed by the Transferor in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given the Securitization Trustee written notice thereof and shall have promptly filed appropriate amendments to all previously filed financing statements or continuation statements. (c) The Transferor shall give the Securitization Trustee prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall promptly make any such filing. (d) The Transferor shall deliver to the Securitization Trustee promptly after the execution and delivery of each amendment to this Securitization Trust Agreement, an Opinion of Counsel either (i) stating that, in the opinion of such Counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Securitization Trustee in the 1997-A SUBI Interest, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such Counsel, no such action is necessary to preserve and protect such interest. (e) The Transferor shall, to the extent required by applicable law, cause the Class A-1 Certificates, the Class A-2 Certificates and the Class A-3 Certificates to be registered with the Commission pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time periods specified in such Sections. 45 SECTION 9.03. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The death or incapacity of any Certificateholder shall not operate to terminate this Securitization Trust Agreement or the 1997-A Securitization Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the 1997-A Securitization Trust, nor otherwise affect the rights, obligations and liabilities of the parties to this Securitization Trust Agreement or any of them. (b) No Certificateholder shall have any right to vote (except as provided in Section 9.01) or in any manner otherwise control the operation and management of the 1997-A Securitization Trust, or the obligations of the parties to this Securitization Trust Agreement, nor shall anything set forth in this Securitization Trust Agreement, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association; nor shall any Certificateholder be under any liability to any third person by reason of any action pursuant to any provision of this Securitization Trust Agreement. (c) No Certificateholder shall have any right by virtue or by availing itself of any provisions of this Securitization Trust Agreement to institute any suit, action, or proceeding in equity or at law upon or under or with respect to this Securitization Trust Agreement or any other Transaction Document, unless such Holder previously shall have given to the Securitization Trustee a written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of Investor Certificates evidencing not less than 25% of the aggregate Percentage Interest, shall have made written request upon the Securitization Trustee to institute such action, suit or proceeding in its own name as Trustee under this Securitization Trust Agreement and shall have offered to the Securitization Trustee such reasonable indemnity as it may require against the costs, expenses, and liabilities to be incurred therein or thereby, and the Securitization Trustee, for 30 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit, or proceeding and during such 30-day period, no request or waiver inconsistent with such written request has been given to the Securitization Trustee pursuant to this Section; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Securitization Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Securitization Trust Agreement or any other Transaction Document to affect, disturb, or prejudice the rights of the Holders of any other of the Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Securitization Trust Agreement or any other Transaction Document, except in the manner provided in this Securitization Trust Agreement and for the equal, ratable, and common benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section, 46 each and every Certificateholder and the Securitization Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 9.04. GOVERNING LAW. THIS SECURITIZATION TRUST AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. SECTION 9.05. NOTICES. All demands, notices and communications under this Securitization Trust Agreement shall be in writing, personally delivered or mailed by certified mail, return receipt requested, and shall be deemed to have been duly given upon receipt (i) in the case of the Transferor, to the agent for service as specified in this Securitization Trust Agreement, or at such other address as shall be designated by the Transferor in a written notice to the Securitization Trustee; (ii) in the case of the Securitization Trustee, at the Corporate Trust Office; (iii) in the case of Standard & Poor's, at 25 Broadway, 20th Floor, New York, New York 10004, Attention: Asset Backed Surveillance Department; and (iv) in the case of Moody's, at 99 Church Street, New York, New York 10007 Attention: ABS Monitoring Department. Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Securitization Trust Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder shall receive such notice. SECTION 9.06. SEVERABILITY OF PROVISIONS; COUNTERPARTS. If any one or more of the covenants, agreements, provisions or terms of this Securitization Trust Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Securitization Trust Agreement and shall in no way affect the validity or enforceability of the other provisions of this Securitization Trust Agreement or of the Certificates or the rights of the Holders thereof. This Securitization Trust Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. 47 SECTION 9.07. ASSIGNMENT. Notwithstanding anything to the contrary contained in this Securitization Trust Agreement, except as provided in Section 5.03, this Securitization Trust Agreement may not be assigned by the Transferor without the prior written consent of Holders of Investor Certificates evidencing not less than 51% of the aggregate Percentage Interest. The Transferor shall provide a copy of any such assignment to each Rating Agency. SECTION 9.08. CERTIFICATES NONASSESSABLE AND FULLY PAID. Except as provided in Section 5.02(b) with regard to the Transferor, Certificateholders shall not be personally liable for obligations of the 1997-A Securitization Trust. The interests represented by the Certificates shall be nonassessable for any losses or expenses of the 1997-A Securitization Trust or for any reason whatsoever, and, upon the execution and authentication thereof by the Securitization Trustee pursuant to Section 4.02, 4.03 or 4.04, the Certificates are and shall be deemed fully paid. ARTICLE TEN AGENT FOR SERVICE SECTION 10.01. AGENT FOR SERVICE OF TRANSFEROR. The agent for service of process for the Transferor shall be its Treasurer, at 19001 South Western Avenue, Torrance, California 90501, Attention: Corporate Treasury Manager (fax: 310-787-6194). SECTION 10.02. AGENT OF TRUSTEE. The Securitization Trustee shall maintain an office or offices or agency or agencies where notices and demands to or upon the Securitization Trustee in respect of the Certificates and this Securitization Trust Agreement may be served. The initial such office shall be the Corporate Trust Office. The Securitization Trustee shall give prompt written notice to the Transferor, the Servicer and to Certificateholders of any change in the location of the Certificate Register or any such office or agency. Certificates shall be surrendered for transfer or exchange not at this office, but as set forth in Section 4.07. [SIGNATURES ON NEXT PAGE] 48 IN WITNESS WHEREOF, the parties have caused this Securitization Trust Agreement to be duly executed by their respective officers as of the day and year first above written. TOYOTA LEASING, INC. as Transferor By: ----------------------------------- Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Securitization Trustee By: --------------------------------- Name: Title: 49 EXHIBIT A-1 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TOYOTA AUTO LEASE TRUST 1997-A _____% AUTOMOBILE LEASE ASSET BACKED CERTIFICATE, CLASS A-1 evidencing a percentage interest in the distributions allocable to the Investor Certificates, as defined below, evidencing an undivided interest in the Securitization Trust, as defined below, the property of which includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust, which SUBI Interest represents a beneficial interest in a pool of retail lease contracts for new and used automobiles and light duty trucks (and the related automobiles and light-duty trucks) entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, and which 1997-A SUBI Interest was originally issued to Toyota Leasing, Inc. and then to the Securitization Trust. (This Certificate does not represent an obligation of, or an interest in, Toyota Leasing, Inc., Toyota Motor Credit Corporation, the Titling Trustee, the Securitization Trustee or any of their respective affiliates.) Aggregate Denominations of all Class A-1 Certificates: CUSIP # $_______________ Number A-1- Denomination: $____________ A-1-1 THIS CERTIFIES THAT CEDE & CO. is the registered owner of a _______________________________ ($____________) nonassessable, fully-paid, fractional undivided interest in the Toyota Auto Lease Trust 1997-A (the "Trust") formed by Toyota Leasing, Inc., a Delaware corporation, as Transferor (the "Transferor"). The Securitization Trust was created pursuant to a Securitization Trust Agreement dated as of 1, 1997 (the "Agreement"), between the Transferor and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). A summary of certain of the pertinent provisions of the Agreement is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates issued under the Agreement and designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class 1997 A-1" (the "Class A-1 Certificates"). Also issued under the Agreement are Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-2" (the "Class A-2 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-3" (the "Class A-3 Certificates" and, together with the Class A-1 Certificates and the Class A-2 Certificates, the "Class A Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class B" (the "Class B Certificates" and, together with the Class A Certificates, the "Investor Certificates") and a Certificate designated as the "Toyota Auto Lease Trust 1997-A Asset Backed Transferor Certificate" (the "Transferor Certificate" and, together with the Investor Certificates, the "Certificates"). The Class B Certificates are subordinated to the Class A Certificates and the Transferor Certificate is subordinated to the Investor Certificates to the extent described in the Agreement. This Class A-1 Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Class A-1 Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Securitization Trust includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), which 1997-A SUBI Interest represents a beneficial interest in a pool of retail automobile and light duty truck lease contracts ("Contracts") and the new and used automobiles and light duty trucks leased thereby ("Leased Vehicles") (such pool of Contracts and Leased Vehicles, the "1997-A SUBI Portfolio") entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, which also acts as servicer (in that capacity, the "Servicer") of the 1997-A SUBI Portfolio. Under the Agreement, there will be distributed on the 25th day of March and September or, to the extent provided in the Agreement, on the 25th day of each month, or if such 25th day is not a Business Day, the next succeeding Business Day (each, a "Distribution Date"), commencing on March 25, 1998, to the Person in whose name this Class A-1 Certificate is A-1-2 registered at the close of business on the last calendar day immediately preceding calendar month (each a "Record Date"), such Class A-1 Certificateholder's percentage interest in the amount distributed on the Class A-1 Certificates pursuant to Section 3.01 of the Agreement, all to the extent and as more specifically set forth in the Agreement. To the extent provided in the Agreement, no principal payments shall be made in respect of the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments shall be made in respect of the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments will be made in respect of the Class B Certificates until the Class A-3 Certificates have been paid in full. Distributions on this Class A-1 Certificate will be made by the Securitization Trustee by check mailed to the Class A-1 Certificateholder of record in the Certificate Register without the presentation or surrender of this Class A-1 Certificate or the making of any notation hereon except that with respect to Class A-1 Certificates registered in the name of Cede & Co., the nominee for The Depository Trust Company, distributions will be made by wire transfer of immediately available funds. Except as otherwise provided in the Agreement and notwithstanding the foregoing, the final distribution on this Class A-1 Certificate will be made after due notice by the Securitization Trustee of the pendency of such distribution and only upon presentation and surrender of this Class A-1 Certificate at the Corporate Trust Office of the Securitization Trustee. It is the intention of the Transferor and the Holders of Investor Certificates that the Investor Certificates will be indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Transferor, the Securitization Trustee and the Holder of this Certificate (or Certificate Owner) by acceptance of this Certificate (or, in the case of a Certificate Owner, by virtue of such Certificate Owner's acquisition of a beneficial interest herein) agree to treat the Investor Certificates (or beneficial interests therein), for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness and to report the transactions contemplated by the Agreement on all applicable tax returns in a manner consistent with such treatment. Each Holder of this Certificate agrees that it will cause any Certificate Owner acquiring an interest in this Certificate through it to comply with the Agreement as to treatment as indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. By accepting this Certificate, the Holder hereof (and each Certificate Owner with respect hereto, by virtue of such Certificate Owner's acquisition of a beneficial interest herein) waives any claim to any proceeds or assets of the Titling Trustee and to all assets of the Titling Trust other than those from time to time included in the 1997-A SUBI Assets and those proceeds or assets derived from or earned by such 1997-A SUBI Assets. A-1-3 In the event that, notwithstanding the statement of intentions and undertakings set forth in SECTION 4.12(a) of the Agreement and herein, it is finally determined that the Class A-1 Certificates do not evidence indebtedness of the Transferor for all income and franchise tax purposes, but rather represent an equity interest in the assets of the Securitization Trust, then the Holder (and each Certificate Owner hereof with respect hereto by virtue of acquiring a beneficial interest herein), agrees (i) to treat such Certificates, together with the Transferor Certificate, as representing an interest in a partnership for all tax purposes, (ii) to treat all payments in respect of such Certificates (to the extent not a return of capital) as a "guaranteed payment" thereon made pursuant to Section 707(c) of the Code, and (iii) to allocate all other items of income, gain, deduction, loss or credit with respect to the assets and operations of the Securitization Trust to the Transferor. The Certificates do not represent an obligation of, or an interest in, the Transferor, the Servicer, the Titling Trust, the Titling Trustee, the Securitization Trustee or any of their respective affiliates. The Certificates are limited in right of payment to certain collections and recoveries respecting the 1997-A SUBI Interest and 1997-A SUBI Certificate and certain monies on deposit in the Reserve Fund and in certain other accounts established for the benefit of the Certificateholders, in each case to the extent and as more specifically set forth in the Agreement. A copy of the Agreement may be examined during normal business hours at the Corporate Trust Office of the Securitization Trustee, and at such other places, if any, designated by the Securitization Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the parties thereto and the rights of the Certificateholders under the Agreement at any time by the Transferor and the Securitization Trustee. In certain limited circumstances, the Agreement may only be amended with the consent of the Holders of Investor Certificates evidencing not less than 51% of the aggregate Percentage Interest of all Investor Certificates, voting together as a single class. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and on all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the Corporate Trust Office of the Securitization Trustee in its capacity as Certificate Registrar, or at the office of the agent of the Securitization Trustee in its capacity as Certificate Registrar, who shall initially be First Trust of New York, National Association, 100 Wall Street, 20th Floor, New York, New York 10005, in the Borough of Manhattan, the City of New York, or at the appropriate office of any successor Certificate Registrar, accompanied by a written instrument of transfer in form satisfactory to the Securitization Trustee and the Certificate Registrar duly executed by the Holder hereof or such A-1-4 Holder's attorney duly authorized in writing, and thereupon one or more new Class A-1 Certificates of authorized denominations and of a like aggregate fractional undivided interest will be issued to the designated transferee. The Class A-1 Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof (except for one Class A-1 Certificate in a smaller minimum denomination representing any remaining portion of the Initial Class A-1 Certificate Balance). As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class, of authorized denominations of a like aggregate principal amount, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Securitization Trustee may require payment of a sum sufficient to cover any tax or governmental charges payable in connection therewith. Prior to due presentation of this Certificate for registration of transfer, the Securitization Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name this Class A-1 Certificate is registered as the owner hereof for the purpose of receiving distributions and for all other purposes, and neither the Securitization Trustee, the Certificate Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Securitization Trust created thereby shall terminate upon the payment to Investor Certificateholders of all amounts required to be paid to them pursuant to the Agreement and the disposition of all property held as part of the Securitization Trust. The Transferor may at its option purchase the corpus of the Securitization Trust at a price specified in the Agreement, and such purchase of the 1997-A SUBI Interest and 1997-A SUBI Certificate and other property of the Securitization Trust will effect early retirement of the Certificates; PROVIDED, HOWEVER, such right of purchase is exercisable only on the Distribution Date following the last day of a Collection Period as of which the Certificate Balance shall be less than or equal to ten percent (10%) of the Initial Certificate Balance. By accepting this Certificate, the Holder hereof (and each Certificate Owner with respect hereto, by virtue of acquiring a beneficial interest herein) covenants and agrees that prior to the date which is one year and one day after the last date upon which (a) each Class of Investor Certificates has been paid in full, and (b) all obligations due under any other Securitized Financing have been paid in full, the Holder and/or Certificate Owner will not institute against, or join any other Person in instituting against the Transferor, Toyota Motor Credit Corporation, the Securitization Trust, the Titling Trustee or the Titling Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law. The foregoing shall not limit the Holder's and/or Certificate Owner's right to file any claim in or otherwise take actions with respect to any such proceeding instituted A-1-5 by any Person not under such a constraint. This non-petition covenant shall survive the termination of the Agreement. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Securitization Trustee, by manual signature, this Class A-1 Certificate shall not entitle the Holder hereof to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Class A-1 Certificate to be duly executed. Dated: __________ __, 199_ TOYOTA LEASING, INC., By: -------------------------------- Authorized Officer A-1-6 This is one of the Class A-1 Certificates referred to in the within-mentioned Agreement. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: -------------------------------- A-1-7 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ----------------------------------------------------------------- (Please print or typewrite name and address, including postal zip code, of assignee) - ----------------------------------------------------------------- the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing - ----------------------------------------------------------------- Attorney to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: * ----------------------------- Signature Guaranteed: * ----------------------------- * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-8 EXHIBIT A-2 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TOYOTA AUTO LEASE TRUST 1997-A _____% AUTOMOBILE LEASE ASSET BACKED CERTIFICATE, CLASS A-2 evidencing a percentage interest in the distributions allocable to the Investor Certificates, as defined below, evidencing an undivided interest in the Securitization Trust, as defined below, the property of which includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust, which SUBI Interest represents a beneficial interest in a pool of retail lease contracts for new and used automobiles and light duty trucks (and the related automobiles and light-duty trucks) entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, and which 1997-A SUBI Interest was originally issued to Toyota Leasing, Inc. and then to the Securitization Trust. (This Certificate does not represent an obligation of, or an interest in, Toyota Leasing, Inc., Toyota Motor Credit Corporation, the Titling Trustee, the Securitization Trustee or any of their respective affiliates.) Aggregate Denominations of all Class A-2 Certificates: CUSIP # $________________ Number A-2-__ Denomination: $__________ A-2-1 THIS CERTIFIES THAT CEDE & CO. is the registered owner of a ____________________________ ($__________) nonassessable, fully-paid, fractional undivided interest in the Toyota Auto Lease Trust 1997-A (the "Trust") formed by Toyota Leasing, Inc., a Delaware corporation, as Transferor (the "Transferor"). The Securitization Trust was created pursuant to a Securitization Trust Agreement dated as of 1, 1997 (the "Agreement"), between the Transferor and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). A summary of certain of the pertinent provisions of the Agreement is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates issued under the Agreement and designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-2" (the "Class A-2 Certificates"). Also issued under the Agreement are Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-1" (the "Class A-1 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-3" (the "Class A-3 Certificates" and, together with the Class A-1 Certificates, the Class A-3 Certificates and the Class A-3 Certificates, the "Class A Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class B" (the "Class B Certificates" and, together with the Class A Certificates, the "Investor Certificates") and a Certificate designated as the "Toyota Auto Lease Trust 1997-A Asset Backed Transferor Certificate" (the "Transferor Certificate" and, together with the Investor Certificates, the "Certificates"). The Class B Certificates are subordinated to the Class A Certificates and the Transferor Certificate is subordinated to the Investor Certificates to the extent described in the Agreement. This Class A-2 Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Class A-2 Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Securitization Trust includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), which 1997-A SUBI Interest represents a beneficial interest in a pool of retail automobile and light duty truck lease contracts ("Contracts") and the new and used automobiles and light duty trucks leased thereby ("Leased Vehicles") (such pool of Contracts and Leased Vehicles; the "1997-A SUBI Portfolio") entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, which also acts as servicer (in that capacity, the "Servicer") of the 1997-A SUBI Portfolio. Under the Agreement, there will be distributed on the 25th day of March and September or, to the extent provided in the Agreement, on the 25th day of each month, or if such 25th day is not a Business Day, the next succeeding Business Day (each, a "Distribution Date"), commencing on March 25, 1998, to the Person in whose name this Class A-2 Certificate is A-2-2 registered at the close of business on the last calendar day immediately preceding calendar month (each a "Record Date"), such Class A-2 Certificateholder's percentage interest in the amount distributed on the Class A-2 Certificates pursuant to Section 3.01 of the Agreement, all to the extent and as more specifically set forth in the Agreement. To the extent provided in the Agreement, no principal payments shall be made in respect of the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, and no principal payments shall be made in respect of the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments shall be made in respect of the Class B Certificates until the Class A-3 Certificates have been paid in full. Distributions on this Class A-2 Certificate will be made by the Securitization Trustee by check mailed to the Class A-2 Certificateholder of record in the Certificate Register without the presentation or surrender of this Class A-2 Certificate or the making of any notation hereon except that with respect to Class A-2 Certificates registered in the name of Cede & Co., the nominee for The Depository Trust Company, distributions will be made by wire transfer of immediately available funds. Except as otherwise provided in the Agreement and notwithstanding the foregoing, the final distribution on this Class A-2 Certificate will be made after due notice by the Securitization Trustee of the pendency of such distribution and only upon presentation and surrender of this Class A-2 Certificate at the Corporate Trust Office of the Securitization Trustee. It is the intention of the Transferor and the Holders of Investor Certificates that the Investor Certificates will be indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Transferor, the Securitization Trustee and the Holder of this Certificate (or Certificate Owner) by acceptance of this Certificate (or, in the case of a Certificate Owner, by virtue of such Certificate Owner's acquisition of a beneficial interest herein) agree to treat the Investor Certificates (or beneficial interest therein), for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness and to report the transactions contemplated by the Agreement on all applicable tax returns in a manner consistent with such treatment. Each Holder of this Certificate agrees that it will cause any Certificate Owner acquiring an interest in this Certificate through it to comply with the Agreement as to treatment as indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. By accepting this Certificate, the Holder hereof (and each Certificate Owner with respect hereto, by virtue of such Certificate Owner's acquisition of a beneficial interest herein) waives any claim to any proceeds or assets of the Titling Trustee and to all assets of the Titling Trust other than those from time to time included in the 1997-A SUBI Assets and those proceeds or assets derived from or earned by such 1997-A SUBI Assets. A-2-3 In the event that, notwithstanding the statement of intentions and undertakings set forth in SECTION 4.12(a) of the Agreement and herein, it is finally determined that the Class A-2 Certificates do not evidence indebtedness of the Transferor for all income and franchise tax purposes, but rather represent an equity interest in the assets of the Securitization Trust, then the Holder (and each Certificate Owner hereof with respect hereto by virtue of acquiring a beneficial interest herein), agrees (i) to treat such Certificates, together with the Transferor Certificate, as representing an interest in a partnership for all tax purposes, (ii) to treat all payments in respect of such Certificates (to the extent not a return of capital) as a "guaranteed payment" thereon made pursuant to Section 707(c) of the Code, and (iii) to allocate all other items of income, gain, deduction, loss or credit with respect to the assets and operations of the Securitization Trust to the Transferor. The Certificates do not represent an obligation of, or an interest in, the Transferor, the Servicer, the Titling Trust, the Titling Trustee, the Securitization Trustee or any of their respective affiliates. The Certificates are limited in right of payment to certain collections and recoveries respecting the 1997-A SUBI Interest and 1997-A SUBI Certificate and certain monies on deposit in the Reserve Fund and in certain other accounts established for the benefit of the Certificateholders, in each case to the extent and as more specifically set forth in the Agreement. A copy of the Agreement may be examined during normal business hours at the Corporate Trust Office of the Securitization Trustee, and at such other places, if any, designated by the Securitization Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the parties thereto and the rights of the Certificateholders under the Agreement at any time by the Transferor and the Securitization Trustee. In certain limited circumstances, the Agreement may only be amended with the consent of the Holders of Investor Certificates evidencing not less than 51% of the aggregate Percentage Interest of all Investor Certificates, voting together as a single class. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and on all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the Corporate Trust Office of the Securitization Trustee in its capacity as Certificate Registrar, or at the office of the agent of the Securitization Trustee in its capacity as Certificate Registrar, who shall initially be First Trust of New York, National Association, 100 Wall Street, 20th Floor, New York, New York 10005, in the Borough of Manhattan, the City of New York, or at the appropriate office of any successor Certificate Registrar, accompanied by a written instrument of transfer in form satisfactory to the Securitization Trustee and the Certificate Registrar duly executed by the Holder hereof or such A-2-4 Holder's attorney duly authorized in writing, and thereupon one or more new Class A-2 Certificates of authorized denominations and of a like aggregate fractional undivided interest will be issued to the designated transferee. The Class A-2 Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof (except for one Class A-2 Certificate in a smaller minimum denomination representing any remaining portion of the Initial Class A-2 Certificate Balance). As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class, of authorized denominations of a like aggregate principal amount, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Securitization Trustee may require payment of a sum sufficient to cover any tax or governmental charges payable in connection therewith. Prior to due presentation of this Certificate for registration of transfer, the Securitization Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name this Class A-2 Certificate is registered as the owner hereof for the purpose of receiving distributions and for all other purposes, and neither the Securitization Trustee, the Certificate Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Securitization Trust created thereby shall terminate upon the payment to Investor Certificateholders of all amounts required to be paid to them pursuant to the Agreement and the disposition of all property held as part of the Securitization Trust. The Transferor may at its option purchase the corpus of the Securitization Trust at a price specified in the Agreement, and such purchase of the 1997-A SUBI Interest and 1997-A SUBI Certificate and other property of the Securitization Trust will effect early retirement of the Certificates; PROVIDED, HOWEVER, such right of purchase is exercisable only on the Distribution Date following the last day of a Collection Period as of which the Certificate Balance shall be less than or equal to ten percent (10%) of the Initial Certificate Balance. By accepting this Certificate, the Holder hereof (and each Certificate Owner with respect hereto, by virtue of acquiring a beneficial interest herein) covenants and agrees that prior to the date which is one year and one day after the last date upon which (a) each Class of Investor Certificates has been paid in full, and (b) all obligations due under any other Securitized Financing have been paid in full, the Holder and/or Certificate Owner will not institute against, or join any other Person in instituting against the Transferor, Toyota Motor Credit Corporation, the Securitization Trust, the Titling Trustee or the Titling Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law. The foregoing shall not limit the Holder's and/or Certificate Owner's right to file any claim in or otherwise take actions with respect to any such proceeding instituted A-2-5 by any Person not under such a constraint. This non-petition covenant shall survive the termination of the Agreement. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Securitization Trustee, by manual signature, this Class A-2 Certificate shall not entitle the Holder hereof to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Class A-2 Certificate to be duly executed. Dated: __________ __, 199_ TOYOTA LEASING INC. By: -------------------------------- Authorized Officer A-2-6 This is one of the Class A-2 Certificates referred to in the within-mentioned Agreement. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: -------------------------------- A-2-7 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ----------------------------------------------------------------- (Please print or typewrite name and address, including postal zip code, of assignee) - ----------------------------------------------------------------- the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing - ----------------------------------------------------------------- Attorney to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: * ----------------------------- Signature Guaranteed: * ----------------------------- * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-2-8 EXHIBIT A-3 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TOYOTA AUTO LEASE TRUST 1997-A _____% AUTOMOBILE LEASE ASSET BACKED CERTIFICATE, CLASS A-3 evidencing a percentage interest in the distributions allocable to the Investor Certificates, as defined below, evidencing an undivided interest in the Securitization Trust, as defined below, the property of which includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust, which SUBI Interest represents a beneficial interest in a pool of retail lease contracts for new and used automobiles and light duty trucks (and the related automobiles and light-duty trucks) entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, and which 1997-A SUBI Interest was originally issued to Toyota Leasing, Inc. and then to the Securitization Trust. (This Certificate does not represent an obligation of, or an interest in, Toyota Leasing, Inc., Toyota Motor Credit Corporation, the Titling Trustee, the Securitization Trustee or any of their respective affiliates.) Aggregate Denominations of all Class A-3 Certificates: CUSIP # $______________ Number A-3-__ Denomination: $____________ A-3-1 THIS CERTIFIES THAT CEDE & CO. is the registered owner of a _______________________________ ($____________) nonassessable, fully-paid, fractional undivided interest in the Toyota Auto Lease Trust 1997-A (the "Trust") formed by Toyota Leasing, Inc., a Delaware corporation, as Transferor (the "Transferor"). The Securitization Trust was created pursuant to a Securitization Trust Agreement dated as of 1, 1997 (the "Agreement"), between the Transferor and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). A summary of certain of the pertinent provisions of the Agreement is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates issued under the Agreement and designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-3" (the "Class A-3 Certificates"). Also issued under the Agreement are Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-1" (the "Class A-1 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A_____% Automobile Lease Asset Backed Certificates, Class A-2" (the "Class A-2 Certificates" and, together with the Class A-1 Certificates and, the Class A-2 Certificates, the "Class A Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class B" (the "Class B Certificates" and, together with the Class A Certificates, the "Investor Certificates") and a Certificate designated as the "Toyota Auto Lease Trust 1997-A Asset Backed Transferor Certificate" (the "Transferor Certificate" and, together with the Investor Certificates, the "Certificates"). The Class B Certificates are subordinated to the Class A Certificates and the Transferor Certificate is subordinated to the Investor Certificates to the extent described in the Agreement. This Class A-3 Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Class A-3 Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Securitization Trust includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Least Trust, a Delaware business trust (the "Titling Trust"), which 1997-A SUBI Interest represents a beneficial interest in a pool of retail automobile and light duty truck lease contracts ("Contracts") and the new and used automobiles and light duty trucks leased thereby ("Leased Vehicles") (such pool of Contracts and Leased Vehicles; the "1997-A SUBI Portfolio") entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, which also acts as servicer (in that capacity, the "Servicer") of the 1997-A SUBI Portfolio. Under the Agreement, there will be distributed on the 25th day of March and September or, to the extent provided in the Agreement, on the 25th day of each month, or if such 25th day is not a Business Day, the next succeeding Business Day (each, a "Distribution Date"), commencing on March 25, 1998, to the Person in whose name this Class A-3 Certificate is A-3-2 registered at the close of business on the last calendar day immediately preceding calendar month (each a "Record Date"), such Class A-3 Certificateholder's percentage interest in the amount distributed on the Class A-3 Certificates pursuant to Section 3.01 of the Agreement, all to the extent and as more specifically set forth in the Agreement. To the extent provided in the Agreement, no principal payments shall be made in respect of the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, and no principal payments shall be made in respect of the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments shall be made in respect of the Class B Certificates until the Class A-3 Certificates have been paid in full. Distributions on this Class A-3 Certificate will be made by the Securitization Trustee by check mailed to the Class A-3 Certificateholder of record in the Certificate Register without the presentation or surrender of this Class A-3 Certificate or the making of any notation hereon except that with respect to Class A-3 Certificates registered in the name of Cede & Co., the nominee for The Depository Trust Company, distributions will be made by wire transfer of immediately available funds. Except as otherwise provided in the Agreement and notwithstanding the foregoing, the final distribution on this Class A-3 Certificate will be made after due notice by the Securitization Trustee of the pendency of such distribution and only upon presentation and surrender of this Class A-3 Certificate at the Corporate Trust Office of the Securitization Trustee. It is the intention of the Transferor and the Holders of Investor Certificates that the Investor Certificates will be indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Transferor, the Securitization Trustee and the Holder of this Certificate (or Certificate Owner) by acceptance of this Certificate (or, in the case of a Certificate Owner, by virtue of such Certificate Owner's acquisition of a beneficial interest herein) agree to treat the Investor Certificates (or beneficial interest therein), for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness and to report the transactions contemplated by the Agreement on all applicable tax returns in a manner consistent with such treatment. Each Holder of this Certificate agrees that it will cause any Certificate Owner acquiring an interest in this Certificate through it to comply with the Agreement as to treatment as indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. By accepting this Certificate, the Holder hereof (and each Certificate Owner with respect hereto, by virtue of such Certificate Owner's acquisition of a beneficial interest herein) waives any claim to any proceeds or assets of the Titling Trustee and to all assets of the Titling Trust other than those from time to time included in the 1997-A SUBI Assets and those proceeds or assets derived from or earned by such 1997-A SUBI Assets. A-3-3 In the event that, notwithstanding the statement of intentions and undertakings set forth in SECTION 4.12(a) of the Agreement and herein, it is finally determined that the Class A-3 Certificates do not evidence indebtedness of the Transferor for all income and franchise tax purposes, but rather represent an equity interest in the assets of the Securitization Trust, then the Holder (and each Certificate Owner hereof with respect hereto by virtue of acquiring a beneficial interest herein), agrees (i) to treat such Certificates, together with the Transferor Certificate, as representing an interest in a partnership for all tax purposes, (ii) to treat all payments in respect of such Certificates (to the extent not a return of capital) as a "guaranteed payment" thereon made pursuant to Section 707(c) of the Code, and (iii) to allocate all other items of income, gain, deduction, loss or credit with respect to the assets and operations of the Securitization Trust to the Transferor. The Certificates do not represent an obligation of, or an interest in, the Transferor, the Servicer, the Titling Trust, the Titling Trustee, the Securitization Trustee or any of their respective affiliates. The Certificates are limited in right of payment to certain collections and recoveries respecting the 1997-A SUBI Interest and 1997-A SUBI Certificate and certain monies on deposit in the Reserve Fund and in certain other accounts established for the benefit of the Certificateholders, in each case to the extent and as more specifically set forth in the Agreement. A copy of the Agreement may be examined during normal business hours at the Corporate Trust Office of the Securitization Trustee and at such other places, if any, designated by the Securitization Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the parties thereto and the rights of the Certificateholders under the Agreement at any time by the Transferor and the Securitization Trustee. In certain limited circumstances, the Agreement may only be amended with the consent of the Holders of Investor Certificates evidencing not less than 51% of the aggregate Percentage Interest of all Investor Certificates, voting together as a single class. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and on all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the Corporate Trust Office of the Securitization Trustee in its capacity as Certificate Registrar, or at the office of the agent of the Securitization Trustee in its capacity as Certificate Registrar, who shall initially be First Trust of New York, National Association, 100 Wall Street, 20th Floor, New York, New York 10005, in the Borough of Manhattan, the City of New York, or at the appropriate office of any successor Certificate Registrar, accompanied by a written instrument of transfer in form satisfactory to the Securitization Trustee and the Certificate Registrar duly executed by the Holder hereof or such A-3-4 Holder's attorney duly authorized in writing, and thereupon one or more new Class A-3 Certificates of authorized denominations and of a like aggregate fractional undivided interest will be issued to the designated transferee. The Class A-3 Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof (except for one Class A-3 Certificate in a smaller minimum denomination representing any remaining portion of the Initial Class A-3 Certificate Balance). As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class, of authorized denominations of a like aggregate principal amount, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Securitization Trustee may require payment of a sum sufficient to cover any tax or governmental charges payable in connection therewith. Prior to due presentation of this Certificate for registration of transfer, the Securitization Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name this Class A-3 Certificate is registered as the owner hereof for the purpose of receiving distributions and for all other purposes, and neither the Securitization Trustee, the Certificate Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Securitization Trust created thereby shall terminate upon the payment to Investor Certificateholders of all amounts required to be paid to them pursuant to the Agreement and the disposition of all property held as part of the Securitization Trust. The Transferor may at its option purchase the corpus of the Securitization Trust at a price specified in the Agreement, and such purchase of the 1997-A SUBI Interest and 1997-A SUBI Certificate and other property of the Securitization Trust will effect early retirement of the Certificates; PROVIDED, HOWEVER, such right of purchase is exercisable only on the Distribution Date following the last day of a Collection Period as of which the Certificate Balance shall be less than or equal to ten percent (10%) of the Initial Certificate Balance. By accepting this Certificate, the Holder hereof (and each Certificate Owner with respect hereto, by virtue of acquiring a beneficial interest herein) covenants and agrees that prior to the date which is one year and one day after the last date upon which (a) each Class of Investor Certificates has been paid in full, and (b) all obligations due under any other Securitized Financing have been paid in full, the Holder and/or Certificate Owner will not institute against, or join any other Person in instituting against the Transferor, Toyota Motor Credit Corporation, the Securitization Trust, the Titling Trustee or the Titling Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law. The foregoing shall not limit the Holder's and/or Certificate Owner's right to file any claim in or otherwise take actions with respect to any such proceeding instituted A-3-5 by any Person not under such a constraint. This nonpetition covenant shall survive the termination of the Agreement. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Securitization Trustee, by manual signature, this Class A-3 Certificate shall not entitle the Holder hereof to any benefit under the Agreement or be valid for any purpose. A-3-6 IN WITNESS WHEREOF, the Transferor has caused this Class A-3 Certificate to be duly executed. Dated: __________ __, 199_ TOYOTA LEASING INC. By: -------------------------------- Authorized Officer A-3-7 This is one of the Class A-3 Certificates referred to in the within-mentioned Agreement. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: -------------------------------- A-3-8 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ----------------------------------------------------------------- (Please print or typewrite name and address, including postal zip code, of assignee) - ----------------------------------------------------------------- the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing - ----------------------------------------------------------------- Attorney to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: * ----------------------------- Signature Guaranteed: * ----------------------------- * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-3-9 EXHIBIT B THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1 CERTIFICATES, THE CLASS A-2 CERTIFICATES AND THE CLASS A-3 CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. THIS CERTIFICATE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS IN RELIANCE ON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 4.03 OF THE AGREEMENT REFERRED TO HEREIN AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii) TO TOYOTA LEASING INC. (THE "TRANSFEROR") OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A. NEITHER THE TRANSFEROR NOR U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE (THE "SECURITIZATION TRUSTEE"), IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS. IN THE EVENT THAT THE TRANSFER OF A CLASS B CERTIFICATE IS TO BE MADE, EITHER (A) AN OPINION OF COUNSEL OR (B) A REPRESENTATION LETTER FROM THE PROSPECTIVE INVESTOR, IN EITHER CASE IN FORM AND SUBSTANCE SATISFACTORY TO THE SECURITIZATION TRUSTEE AND THE TRANSFEROR, IS REQUIRED TO BE DELIVERED TO THE SECURITIZATION TRUSTEE AND THE TRANSFEROR, TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS THE SECURITIZATION TRUSTEE SHALL HAVE RECEIVED A REPRESENTATION LETTER OR OPINION OF COUNSEL FROM THE TRANSFEREE OF THIS CERTIFICATE, ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE TRANSFEROR AND THE SECURITIZATION TRUSTEE, TO THE EFFECT THAT (A) SUCH TRANSFEREE WILL NOT ACQUIRE THIS CERTIFICATE ON BEHALF OR WITH THE ASSETS OF B-1 ANY "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), (B) NO "PROHIBITED TRANSACTION" UNDER ERISA OR THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), WILL OCCUR IN CONNECTION WITH SUCH TRANSFEREE'S ACQUISITION OF THIS CERTIFICATE OR (C) THE ACQUISITION OF THIS CERTIFICATE IS SUBJECT TO A STATUTORY OR ADMINISTRATIVE EXEMPTION FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE CODE. IN ADDITION, NO TRANSFER OF THIS CERTIFICATE WILL BE PERMITTED IF, AS A RESULT OF SUCH TRANSFER, 25% OR MORE OF THE OUTSTANDING CERTIFICATE BALANCE OF ALL CLASS B CERTIFICATES WOULD BE HELD BY "EMPLOYEE BENEFIT PLANS" (AS DEFINED IN SECTION 3(3) OF ERISA) OR OTHER BENEFIT PLAN INVESTORS. THE RESTRICTIONS ON RESALE OR TRANSFER DESCRIBED ABOVE ARE SUBJECT TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF THE HOLDER'S PROPERTY SHALL AT ALL TIMES BE AND REMAIN WITHIN ITS CONTROL. TOYOTA AUTO LEASE TRUST 1997-A _____% AUTOMOBILE LEASE ASSET BACKED CERTIFICATE, CLASS B evidencing a percentage interest in the distributions allocable to the Investor Certificates, as defined below, evidence an undivided interest in the Securitization Trust, as defined below, the property of which includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust, which 1997-A SUBI Interest represents a beneficial interest in a pool of retail lease contracts for new and used automobiles and light duty trucks (and the related automobiles and light-duty trucks) entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, and which special unit of beneficial interest was originally issued to Toyota Leasing Inc. and then to the Securitization Trust. (This Certificate does not represent an obligation of, or an interest in, Toyota Leasing, Inc., Toyota Motor Credit Corporation, the Titling Trustee or the Securitization Trustee or any of their respective affiliates.) Aggregate Denominations of all Class B Certificates: CUSIP # B-2 $_____________ Number B-__ Denomination: $__________ THIS CERTIFIES THAT _______________ is the registered owner of a ________________________________________________ DOLLAR and ________________ CENTS ($__________ ) nonassessable, fully-paid, fractional undivided interest in the Toyota Auto Lease Trust 1997-A (the "Trust") formed by Toyota Leasing, Inc., a Delaware corporation, as Transferor (the "Transferor"). The Securitization Trust was created pursuant to a Securitization Trust Agreement dated as of ___________________ 1, 1997 (the "Agreement"), between the Transferor and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). A summary of certain of the pertinent provisions of the Agreement is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates issued under the Agreement and designated as "Toyota Auto Lease Trust 1997-A_____% Automobile Contract Asset Backed Certificates, Class B" (the "Class B Certificates"). Also issued under the Agreement are Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-1" (the "Class A-1 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A_____% Automobile Lease Asset Backed Certificates, Class A-2" (the "Class A-2 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A _____% Automobile Lease Asset Backed Certificates, Class A-3" (the "Class A-3 Certificates" and, together with the Class A-1 Certificates and the Class A-2 Certificates, the "Class A Certificates" and, together with the Class B Certificates, the "Investor Certificates") and a Certificate designated as the "Toyota Auto Lease Trust 1997-A Automobile Asset Backed Transferor Certificate" (the "Transferor Certificate" and, together with the Investor Certificates, the "Certificates"). The Class B Certificates are subordinated to the Class A Certificates, and the Transferor Certificate is subordinated to the Investor Certificates, to the extent described in the Agreement. This Class B Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Class B Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Securitization Trust includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), which 1997-A SUBI Interest represents a beneficial interest in a pool of retail automobile and light duty truck lease contracts ("Contracts") and the new and used automobiles and light duty trucks leased thereby ("Leased Vehicles") (such pool of Contracts and Leased Vehicles, the "1997-A SUBI Portfolio") entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, which also acts as servicer (in that capacity, the "Servicer") of the 1997-A SUBI Portfolio. B-3 Under the Agreement, there will be distributed on the 25th day of March and September or, to the extent provided in the Agreement, on the 25th day of each month, or if such 25th day is not a Business Day, the next succeeding Business Day (each, a "Distribution Date"), commencing on March 25, 1998, to the Person in whose name this Class B Certificate is registered at the close of business on the last calendar day immediately preceding calendar month (each a "Record Date"), such Class B Certificateholder's percentage interest in the amount distributed on the Class B Certificates pursuant to Section 3.01 of the Agreement, all to the extent and as more specifically set forth in the Agreement. To the extent provided in the Agreement, no principal payments shall be made in respect of the Class A-2 Certificates until the Class A-1 Certificates have been paid in full, no principal payments shall be made in respect of the Class A-3 Certificates until the Class A-2 Certificates have been paid in full and no principal payments shall be made in respect of the Class B Certificates until the Class A-3 Certificates have been paid in full. Distributions on this Class B Certificate will be made by the Securitization Trustee by check mailed to the Class B Certificateholder of record in the Certificate Register without the presentation or surrender of this Class B Certificate or the making of any notation hereon or, at the option of a Holder who owns Class B Certificates having an aggregate initial denomination of $250,000 or more, upon written instructions received by the Securitization Trustee not later than fifteen days prior to the related Record Date, by wire transfer of immediately available funds to an account maintained by such Holder at a depository institution in the United States having appropriate facilities therefor. Except as otherwise provided in the Agreement and notwithstanding the foregoing, the final distribution on this Class B Certificate will be made after due notice by the Securitization Trustee of the pendency of such distribution and only upon presentation and surrender of this Class B Certificate at the Corporate Trust Office of the Securitization Trustee. It is the intention of the Transferor and the Holders of Investor Certificates that the Investor Certificates will be indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Transferor, the Securitization Trustee and the Holder of this Certificate by acceptance of this Certificate agree to treat the Investor Certificates, for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness and to report the transactions contemplated by the Agreement on all applicable tax returns in a manner consistent with such treatment. By accepting this Certificate, the Holder hereof waives any claim to any proceeds or assets of the Titling Trustee and to all assets of the Titling Trust other than those from time to time included in the 1997-A SUBI Assets and those proceeds or assets derived from or earned by such 1997-A SUBI Assets. B-4 In the event that, notwithstanding the statement of intentions and undertakings set forth in SECTION 4.12(a) of the Agreement and herein, it is finally determined that the Class B Certificates do not evidence indebtedness of the Transferor for all income and franchise tax purposes, but rather represent an equity interest in the assets of the Securitization Trust, then Holder hereof agrees (i) to treat such Certificates, together with the Transferor Certificate, as representing an interest in a partnership for all tax purposes, (ii) to treat all payments in respect of such Certificates (to the extent not a return of capital) as a "guaranteed payment" thereon made pursuant to Section 707(c) of the Code, and (iii) to allocate all other items of income, gain, deduction, loss or credit with respect to the assets and operations of the Securitization Trust to the Transferor. The Certificates do not represent an obligation of, or an interest in, the Transferor, the Servicer, the Titling Trust, the Titling Trustee, the Securitization Trustee or any of their respective affiliates. The Certificates are limited in right of payment to certain collections and recoveries respecting the 1997-A SUBI Interest and 1997-A SUBI Certificate and certain monies on deposit in the Reserve Fund and in certain other accounts established for the benefit of the Certificateholders, in each case to the extent and as more specifically set forth in the Agreement. A copy of the Agreement may be examined during normal business hours at the Corporate Trust Office of the Securitization Trustee, and at such other places, if any, designated by the Securitization Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the parties thereto and the rights of the Certificateholders under the Agreement at any time by the Transferor and the Securitization Trustee. In certain limited circumstances, the Agreement may only be amended with the consent of the Holders of Investor Certificates evidencing not less than 51% of the aggregate Percentage Interest of all Investor Certificates, voting together as a single class. Any such consent by the Holder of this Certificate shall be conclusive and binding on such Holder and on all future Holders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent is made upon this Certificate. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Certificate Registrar upon surrender of this Certificate for registration of transfer at the Corporate Trust Office of the Securitization Trustee in its capacity as Certificate Registrar, or at the office of the agent of the Securitization Trustee in its capacity as Certificate Registrar, who shall initially be First Trust of New York, National Association, 100 Wall Street, 20th Floor, New York, New York 10005, in the Borough of Manhattan, the City of New York, or at the appropriate office of any successor Certificate Registrar, accompanied by a written instrument of transfer in form satisfactory to the Securitization Trustee and the Certificate Registrar duly executed by the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Class B Certificate B-5 of authorized denominations and of a like aggregate fractional undivided interest will be issued to the designated transferee. The Class B Certificates are issuable only as registered Certificates without coupons in denominations of $250,000 and integral multiples of $1,000 in excess thereof, (except for one Class B Certificate in a smaller minimum denomination representing any remaining portion of the Initial Class B Certificate Balance). As provided in the Agreement, and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class, of authorized denominations of a like aggregate principal amount, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Securitization Trustee may require payment of a sum sufficient to cover any tax or governmental charges payable in connection therewith. Prior to due presentation of this Certificate for registration of transfer, the Securitization Trustee, the Certificate Registrar and any of their respective agents may treat the Person in whose name this Class B Certificate is registered as the owner hereof for the purpose of receiving distributions and for all other purposes, and neither the Securitization Trustee, the Certificate Registrar nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Securitization Trust created thereby shall terminate upon the payment to Investor Certificateholders of all amounts required to be paid to them pursuant to the Agreement and the disposition of all property held as part of the Securitization Trust. The Transferor may at its option purchase the corpus of the Securitization Trust at a price specified in the Agreement, and such purchase of the 1997-A SUBI Interest and 1997-A SUBI Certificate and other property of the Securitization Trust will effect early retirement of the Certificates; PROVIDED, HOWEVER, such right of purchase is exercisable only on the Distribution Date following the last day of a Collection Period as of which the Certificate Balance shall be less than or equal to ten percent (10%) of the Initial Certificate Balance. By accepting this Certificate, the Holder hereof covenants and agrees that prior to the date which is one year and one day after the last date upon which (a) each Class of Investor Certificates has been paid in full, and (b) all obligations due under any other Securitized Financing have been paid in full, the Holder will not institute against, or join any other Person in instituting against the Transferor, Toyota Motor Credit Corporation, the Securitization Trust, the Titling Trustee or the Titling Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law. The foregoing shall not limit the Holder's right to file any claim in or otherwise take actions with respect to any such proceeding instituted by any Person not under such a constraint. This non-petition covenant shall survive the termination of the Agreement. B-6 Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Securitization Trustee, by manual signature, this Class B Certificate shall not entitle the Holder hereof to any benefit under the Agreement or be valid for any purpose. B-7 IN WITNESS WHEREOF, the Transferor has caused this Class B Certificate to be duly executed. Dated: __________ __, 199_ TOYOTA LEASING INC. By: -------------------------------- Authorized Officer B-8 This is one of the Class B Certificates referred to in the within-mentioned Agreement. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: -------------------------------- B-9 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ----------------------------------------------------------------- (Please print or typewrite name and address, including postal zip code, of assignee) - ----------------------------------------------------------------- the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing - ----------------------------------------------------------------- Attorney to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: * ----------------------------- Signature Guaranteed: * ----------------------------- * NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Certificate Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-10 EXHIBIT C THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED. TOYOTA AUTO LEASE TRUST 1997-A AUTOMOBILE LEASE ASSET BACKED TRANSFEROR CERTIFICATE evidencing the entire interest in the distributions allocable to the Transferor Certificate evidencing an undivided interest in the Securitization Trust, as defined below, the property of which includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust, which 1997-A SUBI Interest represents a beneficial interest in a pool of retail lease contracts for new and used automobiles and light duty trucks (and the related automobiles and light-duty trucks) entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, and which 1997-A SUBI Interest was originally issued to Toyota Leasing, Inc., and then to the Securitization Trust. (This Certificate does not represent an obligation of, or an interest in, Toyota Leasing, Inc., Toyota Motor Credit Corporation, or any of their respective affiliates.) THIS CERTIFIES THAT TOYOTA LEASING, INC. (the "Transferor") is the registered owner of the entire interest not allocated to the Investor Certificates in the Toyota Auto Lease Trust 1997-A (the "Trust") formed by the Transferor. The Securitization Trust was created pursuant to a Securitization Trust Agreement dated as of __________________ 1, 1997 (the "Agreement"), between the Transferor and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). A summary of certain of the pertinent provisions of the Agreement is set forth below. To the extent not otherwise defined herein the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is the duly authorized Transferor Certificate issued under the Agreement and designated as the "Toyota Auto Lease Trust 1997-A Automobile Lease Asset Backed Transferor Certificate" (the "Transferor Certificate"). Also issued under the Agreement are Certificates designated as "Toyota Auto Lease Trust 1997-A ____% Automobile Lease Asset C-1 Backed Certificates, Class A-1" (the "Class A-1 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A ____% Automobile Contract Asset Backed Certificates, Class A-2" (the "Class A-2 Certificates"), Certificates designated as "Toyota Auto Lease Trust 1997-A ____% Automobile Lease Asset Backed Certificates, Class A-3" (the "Class A-3 Certificates" and, together with the Class A-1 Certificates and the Class A-2 Certificates, the "Class A Certificates") and Certificates designated as "Toyota Auto Lease Trust 1997-A ___% Automobile Lease Asset Backed Certificates, Class B" (the "Class B Certificates" and, together with the Class A Certificates, the "Investor Certificates" and, together with the Transferor Certificate, the "Certificates"). This Transferor Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Transferor Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. The property of the Securitization Trust includes, among other things, a special unit of beneficial interest (the "1997-A SUBI Interest") in Toyota Lease Trust, a Delaware business trust (the "Titling Trust"), which 1997-A SUBI Interest represents a beneficial interest in a pool of retail automobile and light duty truck lease contracts ("Contracts") and the new and used automobiles and light duty trucks leased thereby ("Leased Vehicles") (such pool of Contracts and Leased Vehicles, the "1997-A SUBI Portfolio") entered into by various automobile and light duty truck dealers pursuant to contractual arrangements with Toyota Motor Credit Corporation, which also acts as servicer (in that capacity, the "Servicer") of the 1997-A SUBI Portfolio. During the Revolving Period, Principal Collections allocable to the 1997-A SUBI Interest generally will be applied towards the allocation to the 1997-A SUBI Portfolio of additional qualifying Contracts and Leased Vehicles from among all other unallocated Contracts and Leased Vehicles owned by the Titling Trust. Payments in respect of the 1997-A SUBI Interest will be allocated between the Investor Certificates and this Transferor Certificate and paid to the registered Holder of this Transferor Certificate as provided in the Agreement. It is the intention of the Transferor, as the Holder of this Certificate, and the Holders of Investor Certificates that the Investor Certificates will be indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Securitization Trustee and Transferor, as the Holder of this Certificate, by acceptance of this Certificate, agree to treat the Investor Certificates, for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness and to report the transactions contemplated by the Agreement on all applicable tax returns in a manner consistent with such treatment. By accepting this Certificate, the Holder hereof waives any claim to any proceeds or assets of the Titling Trustee and to all assets of the Titling Trust other than those from time to C-2 time included in the 1997-A SUBI Assets and those proceeds or assets derived from or earned by such 1997-A SUBI Assets. In the event that, notwithstanding the statement of intentions and undertakings set forth in Section 4.12(a) of the Agreement and herein, it is finally determined that the Investor Certificates do not evidence indebtedness of the Transferor for all income and franchise tax purposes, but rather represent an equity interest in the assets of the Securitization Trust, then the Transferor, as Holder hereof, agrees (i) to treat the Investor Certificates, together with this Certificate, as representing an interest in a partnership for all tax purposes, (ii) to treat all payments in respect of such Certificates (to the extent not a return of capital) as a "guaranteed payment" thereon made pursuant to Section 707(c) of the Code, and (iii) to allocate all other items of income, gain, deduction, loss or credit with respect to the assets and operations of the Securitization Trust to the Transferor. The Certificates do not represent an obligation of, or an interest in, the Transferor, the Servicer, the Titling Trust, the Titling Trustee, the Securitization Trustee or any of their respective affiliates. The Certificates are limited in right of payment to certain collections and recoveries respecting the 1997-A SUBI Interest and 1997-A SUBI Certificate and certain monies on deposit in the Reserve Fund and in certain other accounts established for the benefit of the Certificateholders, in each case to the extent and as more specifically set forth in the Agreement. A copy of the Agreement may be examined during normal business hours at the Corporate Trust Office of the Securitization Trustee, and at such other places, if any, designated by the Securitization Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the parties thereto and the rights of the Certificateholders under the Agreement at any time by the Transferor and the Securitization Trustee. In certain limited circumstances, the Agreement may only be amended with the consent of the Holders of Certificates evidencing not less than 51% of the aggregate Percentage Interest of all Investor Certificates, voting together as a single class. As provided in the Agreement, this Certificate shall be owned by the Transferor and may not be transferred. As provided in the Agreement and subject to certain limitations therein set forth, Certificates are exchangeable for new Certificates of the same Class, of authorized denominations of a like aggregate principal amount, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Securitization Trustee may require payment of a sum sufficient to cover any tax or governmental charges payable in connection therewith. C-3 The obligations and responsibilities created by the Agreement and the Securitization Trust created thereby shall terminate upon the payment to Investor Certificateholders of all amounts required to be paid to them pursuant to the Agreement and the disposition of all property held as part of the Securitization Trust. The Transferor may at its option purchase the corpus of the Securitization Trust at a price specified in the Agreement, and such purchase of the 1997-A SUBI Interest and 1997-A SUBI Certificate and other property of the Securitization Trust will effect early retirement of the Certificates; PROVIDED, HOWEVER, such right of purchase is exercisable only on the Distribution Date following the last day of a Collection Period as of which the Certificate Balance shall be less than or equal to ten percent (10%) of the Initial Certificate Balance. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Securitization Trustee, by manual signature, this Transferor Certificate shall not entitle the Holder hereof to any benefit under the Agreement or be valid for any purpose. C-4 IN WITNESS WHEREOF, the Securitization Trustee on behalf of the Securitization Trust and not in its individual capacity has caused this Transferor Certificate to be duly executed. Dated: __________, 1997 TOYOTA LEASING, INC. (SEAL) By: -------------------------------- Authorized Officer ATTEST - ------------------------- C-5 This is the Transferor Certificate referred to in the within-mentioned Agreement. U.S. BANK NATIONAL ASSOCIATION, as Trustee By: -------------------------------- C-6 EXHIBIT D-1 NON-RULE 144A REPRESENTATION LETTER Toyota Leasing, Inc., 19001 S. Western Avenue Torrance, California 90509 U.S. Bank National Association 11 East Wacker Drive, Suite 3000 Chicago, Illinois 60601 Re: Toyota Auto Lease Trust 1997-A ____% Automobile Lease Asset Backed Certificates, Class B ---------------------------------------- Ladies and Gentlemen: The undersigned purchaser (the "Purchaser") understands that the purchase of the above-referenced certificates (the "Certificates") may be made only by institutions which are "Accredited Investors" under Regulation D, as promulgated under the Securities Act of 1933, as amended (the "Securities Act"), which includes banks, savings and loan associations, registered brokers and dealers, insurance companies, investment companies and organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), corporations, business trusts and partnerships, not formed for the specific purpose of acquiring the Certificates offered, with total assets in excess of $5,000,000. The undersigned represents on behalf of the Purchaser that the Purchaser is an "Accredited Investor" within the meaning of such definition. The Purchaser is urged to review carefully the responses, representations and warranties it is making herein. REPRESENTATIONS AND WARRANTIES The Purchaser makes the following representations and warranties in order to permit U.S. Bank National Association, as trustee (the "Trustee") of the Toyota Auto Lease Trust 1997-A (the "Securitization Trust"), and Toyota Leasing, Inc. (the "Transferor") to determine its suitability as a purchaser of Certificates and to determine that the exemption from registration relied upon by the Transferor under Section 4(2) of the Securities Act is available to it. 1. The Purchaser understands that the Certificates have not been, and throughout their term will not be, registered or qualified under the Securities Act or the securities law of any state and may be resold (which resale is not currently contemplated) only if registered pursuant to the provisions of the Securities Act or if an exemption from registration under the Securities D-1-1 Act and other applicable state securities laws are available, that neither the Transferor nor the Securitization Trustee is required to register the Certificates under the Securities Act or any applicable state securities laws and that any transfer must comply with Section 4.03 of the Securitization Trust Agreement, dated as of _______ 1, 1997 (the "Agreement"), among the Transferor, and the Securitization Trustee. 2. The Purchaser will comply with all applicable federal and state securities laws in connection with any subsequent resale of the Certificates. 3. The Purchaser is an institutional "accredited investor" within the meaning of paragraphs 1, 2, 3 or 7 Rule 501(a) under the Securities Act and a sophisticated institutional investor and has knowledge and experience in financial and business matters (and, in particular, in such matters related to securities similar to the Certificates) and is capable of evaluating the merits and risks of its investment in the Certificates and is able to bear the economic risk of such investment. The Purchaser has been given such information concerning the Certificates and the Transferor as it has requested. 4. The Purchaser is acquiring the Certificates as principal for its own account (or for the account of one or more other sophisticated institutional investors for which it is acting as duly authorized fiduciary or agent) for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, subject nevertheless to any requirement of law that the disposition of the Purchaser's property shall at all times be and remain within its control. 5. Neither the Purchaser nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of any Certificate, any interest in any Certificate or any other similar security of the Transferor to, or solicited any offer to buy or accept a transfer, pledge or other disposition of any Certificate, any interest in any Certificate or any other similar security of the Transferor with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, which would constitute a distribution of the Certificates under the Securities Act or which would render the disposition of any Certificate a violation of Section 5 of the Securities Act or any state securities law, require registration or qualification pursuant thereto, or require registration of the Securitization Trust or the Transferor as an "investment company" under the Investment Company Act of 1940, as amended, nor will it act, nor has it authorized or will it authorize any person to act in such manner with respect to the Certificates. 6. The Purchaser has reviewed the Private Placement Memorandum with respect to the Certificates dated _______ __, 1997, including the Prospectus attached thereto as Exhibit A (the "Private Placement Memorandum"), and the agreements and other materials referred to therein, and has had the opportunity to ask questions and receive answers concerning the terms and conditions of the transaction contemplated by the Private Placement Memorandum and to D-1-2 obtain additional information necessary to verify the accuracy and completeness of any information furnished to the Purchaser or to which the Purchaser had access. 7. [The Purchaser will not acquire the Certificates with the assets of any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").] [No "prohibited transaction" under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code will occur in connection with our acquisition of the Certificates.] [The acquisition of the Certificates is subject to a statutory or administrative exemption from the "prohibited transaction" provisions of the Employee Retirement Income Security act of 1974, as amended ("ERISA"), and the Code [specifying exemption].l* 8. [The Purchaser will not acquire the Certificates with the assets of any "employee benefit plan" or any other benefit plan investor.] [The Purchaser represents that it is an insurance company and is holding and will be holding all funds used to purchase the Certificates in its general account, the assets of which such Purchaser reasonably believes do not constitute "plan assets" as defined in the plan asset regulations under ERISA.] [The Purchaser will acquire the Certificates with the assets of an "employee benefit plan" or other benefit plan investor.]* 9. The Purchaser understands that the Certificates will bear a legend substantially as set forth in the form of Certificate included as Exhibit B to the Agreement. - ------------------- * Purchaser required to select applicable sentence. D-1-3 10. The Purchaser understands that there is no market, nor is there any assurance that a market will develop, for the Certificates and that the Transferor does not have any obligation to make or facilitate any such market (or to otherwise repurchase the Certificates from the Purchaser) under any circumstances. 11. The Purchaser has consulted with its own legal counsel, independent accountants and financial advisors to the extent it deems necessary regarding the tax consequences to it of ownership of the Certificates, is aware that its taxable income with respect to the Certificates in any accounting period may not correspond to the cash flow (if any) from the Certificates for such period, and is not purchasing the Certificates in reliance on any representations of the Transferor or its counsel with respect to tax matters. 12. The Purchaser represents, on behalf of itself (or, if it is acquiring the Certificates on behalf of one or more other sophisticated institutional investors, on behalf of each of such investors) that if the Purchaser or any such other investor is a partnership, grantor trust or S corporation for federal income tax purposes (a "Flow-Through Entity"), any Certificates owned by such Flow-Through Entity will represent less than 50% of the value of all the assets owned by such Flow-Through Entity and no special allocation of income, gain, loss, deduction or credit from such Certificates will be made among the beneficial owners of such Flow-Through Entity. 13. The Purchaser agrees that it will obtain from any subsequent purchaser of the Certificates substantially the same representations, warranties and agreements contained in the foregoing paragraphs 1 through 12 and in this paragraph 13. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Agreement or the Private Placement Memorandum, as the case may be. D-1-4 The representations and warranties contained herein shall be binding upon the successors of the undersigned. Executed at _________________, this ____ day of ____________ 199_ ------------------------------ Purchaser's Name (Print) By ---------------------------- Signature Its --------------------------- ------------------------------ Address of Purchaser ------------------------------ Purchaser's Taxpayer Identification Number D-1-5 EXHIBIT D-2 RULE 144A REPRESENTATION LETTER Toyota Leasing, Inc., 19001 S. Western Avenue Torrance, California 90509 U.S. Bank National Association 11 East Wacker Drive, Suite 3000 Chicago, Illinois 60601 Re: Toyota Auto Lease Trust ____% Automobile Lease Asset Backed Certificates, Class B ---------------------------------------- Ladies and Gentlemen: ______________________ (the "Purchaser") is today purchasing in a private resale from ________________________ (the "Transferor") $__________ aggregate principal amount of the above-captioned certificates (the "Certificates"), issued pursuant to the securitization trust agreement, dated as of _______ 1, 1997 (the "Agreement"), among Toyota Leasing, Inc. ("the Transferor") and U.S. Bank National Association. In connection with the purchase of the Certificates, the Purchaser hereby represents and warrants to each of you as follows: 1. The Purchaser understands that the Certificates have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state. 2. The Purchaser is acquiring the Certificates for its own account only for investment and not for any other person, and not with a view to, or for resale in connection with, a distribution that would constitute a violation of the Securities Act or any state securities laws (subject to the understanding that disposition of the Purchaser's property will remain at all times within its control). The Purchaser is not an affiliate of the Transferor, Toyota Motor Credit Corporation, the Securitization Trustee, any custodian of the Certificates or any of their respective affiliates. 3. The Purchaser agrees that the Certificates must be held indefinitely by it unless (i) the Certificates are subsequently registered under the Securities Act or (ii) an exemption from the registration requirements of the Securities Act is available. D-2-1 4. The Purchaser agrees that if at some time it wishes to dispose of or exchange any of the Certificates, it will not transfer or exchange any of the Certificates unless such transfer or exchange is in accordance with the provisions of Section 4.03 of the Agreement. 5. The Purchaser is a qualified institutional buyer as defined in Rule 144A of the Securities Act and has completed and is delivering herewith either of the forms of certification to that effect attached as Annexes hereto, it is aware that the sale to it is being made in reliance on Rule 144A, it is acquiring the Certificates for its own account or for the account of a qualified institutional buyer and it understands that such Certificates may be resold, pledged or transferred only (i) to a person who the Transferor reasonably believes is a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (ii) pursuant to another exemption from registration under the Securities Act and applicable state securities laws. 6. Neither the Purchaser nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of any Certificate, any interest in any Certificate or any other similar security of the Transferor to, or solicited any offer to buy or accept a transfer, pledge or other disposition of any Certificate any interest in any Certificate or any other similar security of the Transferor with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, which would constitute a distribution of the Certificates under the Securities Act or which would render the disposition of any Certificate a violation of Section 5 of the Securities Act or any state securities law, require registration or qualification pursuant thereto, or require registration of the 1997-A Securitization Trust or the Transferor as an "investment company" under the Investment Company Act of 1940, as amended, nor will it act, nor has it authorized or will it authorize any person to act in such manner with respect to the Certificates. 7. [The Purchaser will not acquire the Certificates with the assets of any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").] [No "prohibited transaction" under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended (the "Code"), will occur in connection with our acquisition of the Certificates.] [The acquisition of the Certificates is subject to a statutory or administrative exemption from the "prohibited transaction provisions of the Employee Retirement Income Security act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"), [specifying exemption]. - ----------------------- * Purchaser required to select applicable sentence. D-2-2 8. [The Purchaser will not acquire the Certificates with the assets of any "employee benefit plan" or any other benefit plan investor.] [The Purchaser represents that it is an insurance company and is holding and will be holding all funds used to purchase the Certificates in its general account, the assets of which such Purchaser reasonably believes do not constitute "plan assets" as defined in the plan asset regulations under ERISA.] [The Purchaser will acquire the Certificates with the assets of an "employee benefit plan" or other benefit plan investor.] 9. The Purchaser understands that there is no market, nor is there any assurance that a market will develop, for the Certificates and that the Transferor does not have any obligation to make or facilitate any such market (or to otherwise repurchase the Certificates from the Purchaser) under any circumstances. 10. The Purchaser has consulted with its own legal counsel, independent accountants and financial advisors to the extent it deems necessary regarding the tax consequences to it of ownership of the Certificates, is aware that its taxable income with respect to the Certificates in any accounting period may not correspond to the cash flow (if any) from the Certificates for such period, and is not purchasing the Certificates in reliance on any representations of the Transferor or its counsel with respect to tax matters. 11. The Purchaser has reviewed the Private Placement Memorandum with respect to the Certificates dated ________ ___, 1997, including the Prospectus attached as Exhibit A thereto (the "Private Placement Memorandum"), and the agreements and other materials referred to therein, and has had the opportunity to ask questions and receive answers concerning the terms and conditions of the transaction contemplated by the Private Placement Memorandum and to obtain additional information necessary to verify the accuracy and completeness of any information furnished to the Purchaser or to which the Purchaser had access. 12. The Purchaser understands that the Certificates will bear a legend substantially as set forth in the form of Certificate included as Exhibit B to the Agreement. 13. The Purchaser hereby further agrees to be bound by all the terms and conditions of the Certificates as provided in the Agreement. 14. The Purchaser represents that if the Purchaser is a partnership, grantor trust or S corporation for federal income tax purposes (a "Flow-Through Entity"), any Certificates owned by such Flow-Through Entity will represent less than 50% of the value of all the assets owned by such Flow-Through Entity and no special allocation of income, gain, loss deduction or credit from such Certificates will be made among the beneficial owners of such Flow-Through Entity. D-2-3 15. If the Purchaser sells any of the Certificates, the Purchaser will obtain from any subsequent purchaser substantially the same representations contained in this Representation Letter. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Agreement or the Private Placement Memorandum, as the case may be. The representations and warranties contained herein shall be binding upon the successors of the undersigned. Executed at ___________________, this ____ day of ___________ 199_ ------------------------------ Purchaser's Name (Print) By ---------------------------- Signature ------------------------------ Its ------------------------------ Address of Purchaser ------------------------------ Purchaser's Taxpayer Identification Number D-2-4 ANNEX 1 TO EXHIBIT D-2 QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees Other Than Registered Investment Companies] The undersigned (the "Purchaser") hereby certifies as follows to the addressees of the Rule 144A Representation Letter to which this certification is attached with respect to the Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Purchaser. 2. In connection with purchases by the Purchaser, the Purchaser is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A") because (i) the Purchaser owned and/or invested on a discretionary basis $________** in securities (except for the excluded securities referred to below) as of the end of the Purchaser's most recent fiscal year (such amount being calculated in accordance with Rule 144A) and (ii) the Purchaser satisfies the criteria in the category marked below. ___ CORPORATION, ETC. The Purchaser is a corporation (other than a bank, savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. ___ BANK. The Purchaser (a) is a national bank or banking institution organized under the laws of any State, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements. - ------------------------- ** Buyer must own and/or invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $10,000,000 in securities. D-2-5 ___ SAVINGS AND LOAN. The Purchaser (a) is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a State or Federal authority having supervision over any such institutions or is a foreign savings and loan association or equivalent institution and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto ___ BROKER-DEALER. The Purchaser is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934. ___ INSURANCE COMPANY. The Purchaser is an insurance company whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a State, territory or the District of Columbia ___ STATE OR LOCAL PLAN. The Purchaser is a plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of the State or its political subdivisions, for the benefit of its employees. ___ ERISA PLAN. The Purchaser is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974. ____ INVESTMENT ADVISOR. The Purchaser is an investment advisor registered under the Investment Advisors Act of 1940. ___ SMALL BUSINESS INVESTMENT COMPANY. The Purchaser is a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958. ___ BUSINESS DEVELOPMENT COMPANY. The Purchaser is a business development company as defined in Section 202(a) (22) of the Investment Advisors Act of 1940. ___ TRUST FUND. The Purchaser is a trust fund whose trustee is a bank or trust company and whose participants are exclusively State or Local Plans or ERISA Plans as defined above, and no participant of the Purchaser is an individual retirement account or an H.R. 10 (Keogh) plan. 3. The term "SECURITIES" as used herein does not include (i) securities of issuers that are affiliated with the Purchaser, (ii) securities that are part of an unsold allotment to or D-2-6 subscription by the Purchaser, if the Purchaser is a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. 4. For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Purchaser, the Purchaser used the cost of such securities to the Purchaser and did not include any of the securities referred to in the preceding paragraph, except (i) where the Purchaser reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. Further, in determining such aggregate amount, the Purchaser may have included securities owned by subsidiaries of the Purchaser, but only if such subsidiaries are consolidated with the Purchaser in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Purchaser's direction. However, such securities were not included if the Purchaser is a majority owned, consolidated subsidiary of another enterprise and the Purchaser is not itself a reporting company under the Securities Exchange Act of 1934, as amended. 5. The Purchaser acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Certificates are relying and will continue to rely on the statements made herein because one or more sales to the Purchaser may be in reliance on Rule 144A. 6. Until the date of purchase of the Certificates, the Purchaser will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Purchaser's purchase of the Certificates will constitute a reaffirmation of this certification as of the date of such purchase. In addition, if the Purchaser is a bank or savings and loan is provided above, the Purchaser agrees that it will furnish to such parties updated annual financial statements promptly after they become available. ------------------------------ Name of Purchaser or Adviser By: --------------------------- Name: Title: Date: ------------------------- D-2-7 D-2-8 ANNEX 2 TO EXHIBIT D-2 QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees That are Registered Investment Companies] The undersigned (the "Purchaser") hereby certifies as follows to the addressees of the Rule 144A Representation Letter which this certification is attached with respect to the Transferor Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Purchaser or, if the Purchaser is a "qualified institutional buyer as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A") because the Purchaser is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser. 2. In connection with purchases by the Purchaser, the Purchaser is a "qualified institutional buyer" as defined in SEC Rule 144A because (i) the Purchaser is an investment company registered under the Investment Company Act of 1940, as amended and (ii) as marked below, the Purchaser alone, or the Purchaser's Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the Purchaser's most recent fiscal year. For purposes of determining the amount of securities owned by the Purchaser or the Purchaser's Family of Investment Companies, the cost of such securities was used, except (i) where the Purchaser or the Purchaser's Family of Investment Companies reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. ___ The Purchaser owned $___________ in securities (other than the excluded securities referred to below) as of the end of the Purchaser's most recent fiscal year (such amount being calculated in accordance with Rule 144A). ___ The Purchaser is part of a Family of Investment Companies which owned in the aggregate $__________ in securities (other than the excluded securities referred to below) as of the end of the Purchaser's most recent fiscal year (such amount being calculated in accordance with Rule 144A). 3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other). D-2-9 4. The term "SECURITIES" as used herein does not include (i) securities of issuers that are affiliated with the Purchaser or are part of the Purchaser's Family of Investment Companies, (ii) bank deposit notes and certificates of deposit, (iii) loan participations, (iv) repurchase agreements, (v) securities owned but subject to a repurchase agreement and (vi) currency, interest rate and commodity swaps. 5. The Purchaser is familiar with Rule 144A and understands that the parties listed in the Rule 144A Representation Letter to which this certification relates are relying and will continue to rely on the statements made herein because one or more sales to the Purchaser will be in reliance on Rule 144A. In addition, the Purchaser will only purchase for the Purchaser's own account. 6. Until the date of purchase of the Transferor Certificates, the undersigned will notify the parties listed in the Rule 144A Transferee Certificate to which this certification relates of any changes in the information and conclusions herein. Until such notice is given, the Purchaser's purchase of the Certificates will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase. ------------------------------ Name of Purchaser or Adviser By: --------------------------- Name: Title: IF AN ADVISER: ------------------------------ Name of Purchaser Date: ------------------------- D-2-10 EX-5.1 5 EXHIBIT 5.1 OPINION OF ANDREWS & KURTH [Letterhead Of Andrews & Kurth L.L.P.] August 28, 1997 Toyota Leasing, Inc. Toyota Auto Lease Trust 1997-A c/o Toyota Motor Credit Corporation 19001 South Western Avenue Torrance, California 90509 Re: TOYOTA AUTO LEASE TRUST 1997-A, REGISTRATION STATEMENT ON FORM S-3 (REGISTRATION NO. 333-26717) Ladies and Gentlemen: We have acted as special counsel to Toyota Leasing, Inc. ("TLI"), as originator of Toyota Auto Lease Trust 1997-A (the "Securitization Trust") and to the Securitization Trust, in connection with the proposed issuance by the Securitization Trust of the Automobile Lease Asset Backed Certificates, Class A-1, Class A-2 and Class A-3 (the "Certificates") evidencing certain beneficial interests in the assets of the Securitization Trust pursuant to the Securitization Trust Agreement (the "Securitization Trust Agreement") to be dated as of September 1, 1997 between TLI and U.S. Bank National Association (formerly knows as First Bank National Association). We have also acted as special counsel to the Securitization Trust in connection with the execution and delivery by TLI of the Registration Statement and of Amendments No.1, No. 2 and No. 3 thereto (collectively, the "Registration Statement") on behalf of the Securitization Trust as issuer of the Certificates. The Securitization Trust Agreement has been filed with the Securities and Exchange Commission as an exhibit to the Registration Statement under the Securities Act of 1933, as amended (the "1933 Act"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of the form of Securitization Trust Agreement and the forms of Certificates included therein, and such other documents, records, certificates of officers of TLI and the Securitization Trust and of Toyota Auto Lease Trust 1997-A August 28, 1997 Page 2 public officials and such other instruments as we have deemed necessary for the purposes of rendering this opinion. In addition, we have assumed that the Securitization Trust Agreement will be duly executed and delivered by each of the parties thereto substantially in the form filed as an exhibit to the Registration Statement; that the Certificates, as completed, will be duly executed, authenticated and delivered substantially in the forms contemplated by the Securitization Trust Agreement; and that the Certificates will be sold as described in the Registration Statement, including all amendments thereto. Based upon the foregoing and subject to the limitations and qualifications set forth below, we are of the opinion that, assuming the due authorization, execution and delivery of the Securitization Trust Agreement by each of the parties thereto, and the due authorization of the Certificates by all necessary action on the part of the Securitization Trustee, when the Certificates have been validly executed, authenticated and issued in accordance with the Securitization Trust Agreement and delivered against payment therefor, the the Certificates will be validly issued and outstanding, fully paid and non-assessable, and entitled to the benefits of the Securitization Trust Agreement in accordance with their terms, except that the enforceability thereof may be subject to (a) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent or preferential conveyance or other similar laws now or hereinafter in effect relating to creditors' rights generally, and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the discretion of the court before which any proceeding therefor may be brought. The opinion expressed above is subject to the qualification that we do not purport to be experts as to the laws of any jurisdiction other than the federal laws of the United States of America and the laws of the States of California and New York, and we express no opinion herein as to the effect that the laws and decisions of courts of any such other jurisdiction may have upon such opinions. We consent to the use and filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus contained therein. In giving such consent we do not imply or admit that we are within the category of persons whose consent is required under Section 7 of the 1933 Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Andrews & Kurth L.L.P. EX-8.1 6 OPINION LETTER [LETTERHEAD OF ANDREWS & KURTH L.L.P.] August 28, 1997 Toyota Leasing, Inc. Toyota Auto Lease Trust 1997-A c/o Toyota Motor Credit Corporation 19001 South Western Avenue Torrance, California 90509 Re: TOYOTA AUTO LEASE TRUST 1997-A, REGISTRATION STATEMENT (REGISTRATION NO. 333-26717) Ladies and Gentlemen: We have acted as special counsel to Toyota Leasing, Inc. ("TLI"), as originator of Toyota Auto Lease Trust 1997-A (the "Securitization Trust") and to the Securitization Trust, in connection with the proposed issuance by the Securitization Trust of the Automobile Lease Asset Backed Certificates, Class A-1, Class A-2 and Class A-3 (the "Certificates") evidencing certain beneficial interests in the assets of the Securitization Trust pursuant to the Securitization Trust Agreement (the "Securitization Trust Agreement") to be dated as of September 1, 1997 between TLI and U.S. Bank National Association (formerly knows as First Bank National Association). We have also acted as special counsel to the Securitization Trust in connection with the execution and delivery by TLI of the Registration Statement and of Amendments No.1, No. 2 and No. 3 thereto (collectively, the "Registration Statement") on behalf of the Securitization Trust as issuer of the Certificates. The Securitization Trust Agreement has been filed with the Securities and Exchange Commission as an exhibit to the Registration Statement under the Securities Act of 1933, as amended (the "1933 Act"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of the form of Securitization Trust Agreement and the forms of Certificates included therein, and such other documents, records, certificates of officers of TLI and the Securitization Trust and of Page 2 public officials and such other instruments as we have deemed necessary for the purposes of rendering this opinion. In addition, we have assumed that the Securitization Trust Agreement will be duly executed and delivered by each of the parties thereto substantially in the form filed as an exhibit to the Registration Statement; that the Certificates, as completed, will be duly executed, authenticated and delivered substantially in the forms contemplated by the Securitization Trust Agreement; and that the Certificates will be sold as described in the Registration Statement, including all amendments thereto. On the basis of the foregoing, we are of the opinion that the description of federal income tax consequences appearing under the heading "Material Federal Income Tax Consequences" in the Prospectus accurately describes the material federal income tax consequences to holders of Certificates, under existing law and subject to the qualifications and assumptions stated therein. The opinions herein are based upon our interpretations of current law, including court authority and existing Final and Temporary Regulations, which are subject to change both prospectively and retroactively, and upon the facts and assumptions discussed herein. This opinion letter is limited to the matters set forth herein, and no opinions are intended to be implied or may be inferred beyond those expressly stated herein. Our opinion is rendered as of the date hereof and we assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of fact, circumstances, or law after the date hereof. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court. In addition, we must note that our opinion represents merely our best legal judgment on the matters presented and that others may disagree with our conclusion. Our opinion is not binding on the Internal Revenue Service or a court and there can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated. In the event any one of the statements, representations or assumptions we have relied upon to issue this opinion is incorrect, our opinion might be adversely affected and may not be relied upon. We hereby consent to the reference to us under the caption "Material Federal Income Tax Consequences" in the Prospectus, and to the filing of this opinion as an Exhibit to the Registration Statement, without implying or admitting that we are experts within the meaning of the 1933 Act with respect to any part of the Registration Statement. Very truly yours, /s/Andrews & Kurth L.L.P. EX-10.7 7 EXHIBIT 10.7 FORM OF INDENTURE - -------------------------------------------------------------------------------- TOYOTA MOTOR CREDIT CORPORATION and U.S. BANK NATIONAL ASSOCIATION as Trustee ---------------------------- Indenture Dated as of August 1, 1997 ---------------------------- $- TMCC Demand Notes - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE (not a part of this Indenture) TIA Indenture Section Section - ------- ---------- (Section)310(a) (1). . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a) (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a) (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a) (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a) (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08 7.10 11.02 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (Section)311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (Section)312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03 (Section)313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 (b) (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 11.02 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 (Section)314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09 4.10 11.02 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 11.02 (c) (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04 (c) (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04 (c) (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09(c) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (Section)315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a) (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c) (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11 i TIA Indenture Section Section - ------- ---------- (Section)316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . 2.09 (a) (1) (A). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05 (a) (1) (B). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04 (a) (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.04 (Section)317(a) (1) . . . . . . . . . . . . . . . . . . . . . . . . . 6.08 (a) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04 (Section)318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01 - --------- N.A. means not applicable ii TABLE OF CONTENTS ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.02. Incorporation by Reference of TIA.. . . . . . . . . . . . . . . 1 Section 1.03. Rules of Construction.. . . . . . . . . . . . . . . . . . . . . 2 ARTICLE TWO THE SECURITIES Section 2.01. Form; Title and Terms . . . . . . . . . . . . . . . . . . . . . 2 Section 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . . 3 Section 2.03. Securities Register.. . . . . . . . . . . . . . . . . . . . . . 4 Section 2.04. Paying Agent to Hold Money in Trust.. . . . . . . . . . . . . . 4 Section 2.05. Securityholder Lists. . . . . . . . . . . . . . . . . . . . . . 4 Section 2.06. Transfer and Exchange.. . . . . . . . . . . . . . . . . . . . . 5 Section 2.07. Replacement Securities. . . . . . . . . . . . . . . . . . . . . 5 Section 2.08. Outstanding Securities. . . . . . . . . . . . . . . . . . . . . 6 Section 2.09. Treasury Securities Not Outstanding.. . . . . . . . . . . . . . 6 Section 2.10. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . 6 Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.13. Persons Deemed Owners.. . . . . . . . . . . . . . . . . . . . . 8 Section 2.14. Computation of Interest.. . . . . . . . . . . . . . . . . . . . 8 ARTICLE THREE REDEMPTION Section 3.01. Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE FOUR COVENANTS Section 4.01. Payment of Securities.. . . . . . . . . . . . . . . . . . . . . 9 Section 4.02. Maintenance of Office or Agency.. . . . . . . . . . . . . . . . 9 Section 4.03. Company Statement as to Compliance; Notice of Certain Defaults. . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE FIVE CONSOLIDATIONS AND MERGERS, ETC. Section 5.01. Company May Consolidate, Etc., Only on Certain Terms. . . . . .10 Section 5.02. Successor Person Substituted for Company. . . . . . . . . . . .11 i ARTICLE SIX DEFAULT AND REMEDIES Section 6.01. Events of Default.. . . . . . . . . . . . . . . . . . . . . . .11 Section 6.02. Acceleration of Maturity; Rescission and Annulment. . . . . . .12 Section 6.03. Collection of Indebtedness and Suits for Enforcement by Trustee. . . . . . . . . . . . . . . . . . . . .13 Section 6.04. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . .14 Section 6.05. Trustee May Enforce Claims without Possession of Securities.. .14 Section 6.06. Application of Money Collected. . . . . . . . . . . . . . . . .15 Section 6.07. Limitation on Suits.. . . . . . . . . . . . . . . . . . . . . .15 Section 6.08. Unconditional Right of Holders to Receive Principal and Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Section 6.09. Restoration of Rights and Remedies. . . . . . . . . . . . . . .16 Section 6.10. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . .16 Section 6.11. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . .16 Section 6.12. Control by Holders of Securities. . . . . . . . . . . . . . . .16 Section 6.13. Waiver of Past Defaults.. . . . . . . . . . . . . . . . . . . .17 Section 6.14. Undertaking for Costs.. . . . . . . . . . . . . . . . . . . . .17 ARTICLE SEVEN TRUSTEE Section 7.01. Duties of Trustee.. . . . . . . . . . . . . . . . . . . . . . .18 Section 7.02. Rights of Trustee.. . . . . . . . . . . . . . . . . . . . . . .19 Section 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . .19 Section 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . .19 Section 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . .20 Section 7.06. Reports by Trustee to Holders.. . . . . . . . . . . . . . . . .20 Section 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . .20 Section 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . .21 Section 7.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . .22 Section 7.10. Eligibility; Disqualification.. . . . . . . . . . . . . . . . .22 Section 7.11. Preferential Collection of Claims Against Company . . . . . . .22 ARTICLE EIGHT DEFEASANCE; SATISFACTION AND DISCHARGE Section 8.01. Defeasance of the Indenture.. . . . . . . . . . . . . . . . . .22 Section 8.02. Satisfaction and Discharge of the Indenture.. . . . . . . . . .23 Section 8.03. Survival of Certain Obligations.. . . . . . . . . . . . . . . .24 Section 8.04. Acknowledgment of Discharge by Trustee. . . . . . . . . . . . .25 Section 8.05. Application of Trust Money. . . . . . . . . . . . . . . . . . .25 Section 8.06. Repayment to the Company. . . . . . . . . . . . . . . . . . . .25 Section 8.07. Reinstatement.. . . . . . . . . . . . . . . . . . . . . . . . .26 ii ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . .26 Section 9.02. With Consent of Holders.. . . . . . . . . . . . . . . . . . . .27 Section 9.03. Compliance with TIA.. . . . . . . . . . . . . . . . . . . . . .28 Section 9.04. Revocation and Effect of Consents.. . . . . . . . . . . . . . .28 Section 9.05. Notation on or Exchange of Securities.. . . . . . . . . . . . .29 Section 9.06. Trustee to Sign Amendments, Etc.. . . . . . . . . . . . . . . .29 Section 9.07. Effect of Supplemental Indentures.. . . . . . . . . . . . . . .29 ARTICLE TEN MEETINGS OF AND ACTIONS BY SECURITYHOLDERS Section 10.01. Purposes for Which Meetings may be Called.. . . . . . . . . . .30 Section 10.02. Manner of Calling Meetings. . . . . . . . . . . . . . . . . . .30 Section 10.03. Call of Meetings by Company or Holders. . . . . . . . . . . . .30 Section 10.04. Who May Attend and Vote at Meetings.. . . . . . . . . . . . . .31 Section 10.05. Regulations may be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment.. . . . . . . . . . . . . .31 Section 10.06. Voting at the Meeting and Record to be Kept.. . . . . . . . . .32 Section 10.07. Exercise of Rights of Trustee or Securityholders May Not be Hindered or Delayed by Call of Meeting.. . . . . . .32 Section 10.08. Evidence of Action Taken by Securityholders.. . . . . . . . . .32 Section 10.09. Proof of Execution of Instruments and of Holding of Securities.33 Section 10.10. Right of Revocation of Action Taken.. . . . . . . . . . . . . .33 ARTICLE ELEVEN MISCELLANEOUS Section 11.01. TIA Controls.. . . . . . . . . . . . . . . . . . . . . . . . .34 Section 11.02. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Section 11.03. Communications by Holders with Other Holders.. . . . . . . . .35 Section 11.04. Certificate and Opinion as to Conditions Precedent.. . . . . .35 Section 11.05. Statements Required in Certificate or Opinion. . . . . . . . .35 Section 11.06. Rules by Trustee, Paying Agent, Registrar. . . . . . . . . . .36 Section 11.07. Legal Holidays.. . . . . . . . . . . . . . . . . . . . . . . .36 Section 11.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .36 Section 11.09. No Adverse Interpretation of Other Agreements. . . . . . . . .36 Section 11.10. No Recourse Against Others.. . . . . . . . . . . . . . . . . .36 Section 11.11. Successors.. . . . . . . . . . . . . . . . . . . . . . . . . .37 Section 11.12. Duplicate Originals. . . . . . . . . . . . . . . . . . . . . .37 Section 11.13. Severability.. . . . . . . . . . . . . . . . . . . . . . . . .37 Section 11.14. Headings and Table of Contents.. . . . . . . . . . . . . . . .37 iii SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBITS Annex I -- Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 Exhibit A -- Form of Security. . . . . . . . . . . . . . . . . . . . . . . . A-1 iv INDENTURE dated as of August 1, 1997 between Toyota Motor Credit Corporation, a California corporation (the "Company"), and U.S. Bank National Association, a national banking association, as trustee (the "Trustee"). Recitals A. The Company is duly authorized to execute and deliver this Indenture and to provide for the issuance by the Company of the Securities as provided herein. B. All things have been done that are necessary to make the Securities, when executed by the Company and authenticated and delivered by the Trustee hereunder, the valid obligations of the Company in accordance with the terms of this Indenture. For and in consideration of the premises and the purchase of the Securities by the Holders, each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. All capitalized terms used in this Indenture and not defined elsewhere herein shall have the meanings assigned to them in Annex I, which is hereby incorporated by reference in and made a part of this Indenture. SECTION 1.02. INCORPORATION BY REFERENCE OF TIA. Wherever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the Commission. "indenture securities" means the Securities. "indenture security holder" means a Holder or a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) unless otherwise expressly provided in this Indenture, an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP and all financial computations required under this Indenture shall be made in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (7) "including" shall be deemed to mean "including, without limitation." ARTICLE TWO THE SECURITIES SECTION 2.01. FORM; TITLE AND TERMS. The Securities and the Trustee's certificate of authentication thereon shall be substantially in the forms set forth in Exhibit A hereto. The Securities may have notations, legends or endorsements required by law or stock exchange rules. Each Security shall be dated the date of its authentication. The terms and provisions contained in the Securities shall constitute a part of, and are hereby incorporated by reference in and made a part of, this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to their incorporation herein. 2 The Securities shall be known and designated as the "TMCC Demand Notes" of the Company. The aggregate original principal amount of Securities that may be authenticated and delivered under this Indenture is limited to $-, except as otherwise provided in Sections 2.06, 2.07, 2.10, 3.06 and 9.05. The Securities shall be issuable only in registered form, without coupons. The minimum denominations of the Securities will be $0.01. Interest on the Securities which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall, except as otherwise provided in Section 2.12, be paid to the Persons in whose names the Securities (or one or more Predecessor Securities) are registered at the close of business on the Record Date next preceding such Interest Payment Date. At the option of the Company, payment of interest on the Securities due on any Interest Payment Date, falling after a Record Date for the payment of interest on the Securities and on or before the related Interest Payment Date, may be paid by check mailed to the address of the Persons entitled thereto as they shall appear in the Securities register. SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities shall be executed on behalf of the Company by the Chairman, the President, or any Vice Chairman or Vice President of the Company. Any such signature may be by facsimile. If an Officer, Secretary or Assistant Secretary whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. All of the Securities to be issued under this Indenture, and all of the principal amounts to be evidenced by the Securities need not be issued at the same time and may be issued from time to time at the order of the Company as herein provided for. The principal amount of Securities to be issued hereunder shall all be of the same series known as the "TMCC Demand Notes", but need not have the same issue date, Stated Maturity Date, Interest Rate, or Interest Payment Date. Each Security will have a Schedule attached thereto indicating: (i) the amount of the increase in the principal amount outstanding under such Security and the date on which each principal amount under such Security was first issued, (ii) the Stated Maturity Date for such principal amount, (iii) the Interest Rate applicable to such principal amount,(iv) the amount of the decrease in the principal amount outstanding under such Security and the date on which such principal amount under such Security was paid, and (v) the amount of the interest paid on such Security and the date on which such interest was paid. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security, and an entry on the Schedule to any such Security shall not be valid until the Trustee manually signs the space provided for such entry as authentication of such increase or decrease in outstanding principal amount of such Security. Such signature shall be conclusive evidence that the Security and such entry has been authenticated under this Indenture. 3 The Trustee shall authenticate Securities and for original issue in the maximum aggregate principal amount as aforesaid, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company. The Trustee shall authenticate the Schedule attached to a Security to indicate the issuance of an additional principal amount of the Securities, upon either (i) a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, or (ii) if an Officers' Certificate has previously been delivered to the Trustee by the Company specifying the names and titles of officers, employees or agents of the Company eligible to give such an order, the order of any such officer, employee or agent of the Company, which order may be by telephone (confirmed in writing) or by facsimile. Any such order shall specify the principal amount of Securities to be authenticated, the applicable Interest Rate, the Stated Maturity Date and the date on which such issue of Securities is to be authenticated. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. SECTION 2.03. SECURITIES REGISTER. The Company shall keep or cause to be kept at the Corporate Trust Office or at any office or agency of the Company where Securities may be presented for registration of transfer or for exchange as provided in Section 4.02 a register in which, subject to such reasonable regulations as the Company may prescribe, the Company shall provide for the registration of Securities and registration of transfers and exchanges of Securities as in this Article provided. The Registrar shall keep the register of the Securities and of their transfer and exchange. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Each Paying Agent shall hold in trust for the benefit of the Persons entitled thereto, without interest, all money held by such Paying Agent for the payment of principal of, premium, if any, and interest on the Securities (whether such money has been paid to it by the Company or any other obligor on the Securities), and shall notify the Trustee of any Default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon payment of all funds held by it to the Trustee, the Paying Agent shall have no further liability for such money. As provided in Section 6.04 hereof, in any bankruptcy, insolvency, reorganization or other similar proceeding relative to the Company or any other obligor on the Securities, the Trustee shall serve as Paying Agent for the Securities; provided that the foregoing shall not relieve the Company of its obligations under Section 4.02. 4 SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list of the names and addresses of the Securityholders furnished to it or maintained by it in its capacity as Paying Agent and Registrar. If and so long as the Trustee is not the Registrar, in accordance with Section 312(a) of the TIA the Company shall furnish or cause to be furnished to the Trustee semiannually not less than 30 days nor more than 60 days before each Interest Payment Date and at such times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders including an identification of the Securities and the aggregate amount thereof. SECTION 2.06. TRANSFER AND EXCHANGE. When Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities in other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange if its reasonable requirements for such transactions (which may include a requirement that any Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing) are met. To permit registration of transfers and exchanges as provided herein, the Company shall execute and the Trustee shall authenticate and deliver Securities at the Registrar's or a co-Registrar's request. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt and entitling the Holders thereof to the same benefits under this Indenture as the Securities surrendered upon such registration of transfer or exchange. No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith, other than in the case of exchanges under Sections 2.10, 3.06 and 9.05 not involving any transfer. SECTION 2.07. REPLACEMENT SECURITIES. If a defaced or mutilated Security is surrendered to the Trustee or if the Holder of a Security presents evidence to the reasonable satisfaction of the Trustee that the Security has been lost, destroyed or stolen the Company shall execute and the Trustee shall authenticate a replacement Security if the Company's and the Trustee's reasonable requirements are met. The Trustee or the Company may require an indemnity bond, sufficient in the reasonable judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge such Holder for their reasonable expenses in replacing a Security. Every replacement Security is an additional obligation of the Company, whether or not the apparently destroyed, lost or stolen Security shall be at any time enforceable by anyone, and such replacement Security shall be entitled to the benefits of and subject to the limitations of rights set forth in this Indenture. 5 The provisions of this Section, as amended or supplemented pursuant to this Indenture with respect to particular Securities or generally, shall be exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any time under this Indenture are all Securities that have been theretofore authenticated and delivered under this Indenture, except (a) those cancelled by the Trustee, (b) those delivered to the Trustee for cancellation, (c) those in exchange for or in lieu of which other Securities have been authenticated and delivered under this Indenture and (d) those described in this Section as not outstanding. Except as provided in Section 2.09 hereof, a Security does not cease to be outstanding because the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor holds the Security. If a Security is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If on the Stated Maturity of the Securities, the Paying Agent (other than the Company or a Subsidiary) holds U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and interest due on the Securities payable on that date, then on and after that date such Securities shall cease to be outstanding and interest on them shall cease to accrue. SECTION 2.09. TREASURY SECURITIES NOT OUTSTANDING. In determining whether the Holders of the required principal amount of outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether a quorum is present at a meeting of Holders of Securities, Securities owned by the Company or an other obligor on the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver or upon any such determination as to the presence of a quorum, only Securities which a Trust Officer knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or an Affiliate of the Company or of such other obligor. The Trustee may require an Officers' Certificate listing Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. 6 SECTION 2.10. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company shall execute and, upon the written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall execute and the Trustee shall authenticate definitive Securities which shall be exchangeable for temporary Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 4.02 for the purpose of exchanges of Securities without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities and shall be subject to the same limitation of rights as definitive Securities. SECTION 2.11. CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, each co-Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation. Subject to Section 2.07 hereof, the Company may not execute new Securities to replace Securities it has paid or delivered to the Trustee for cancellation. All cancelled Securities held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order signed by two Officers the Company shall direct that cancelled Securities be returned to it. SECTION 2.12. DEFAULTED INTEREST. If the Company fails to pay any principal of, premium if any, or interest on any Security on the due date therefor (whether upon acceleration, at Stated Maturity or otherwise), the Company shall pay interest, at the rate per annum borne by the Securities, on such principal, premium, if any, and, to the extent permitted by law, interest until such amounts are paid. Any interest on any Security which shall be payable, but shall not be punctually paid or duly provided for, on any Interest Payment Date for such Security (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder thereof on the relevant Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Person in whose name such Security (or a Predecessor Security thereof) shall be registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on such Security and the date 7 of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of U.S. Legal Tender equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such U.S. Legal Tender when so deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon, the Trustee shall fix a "Special Record Date" for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class, postage prepaid, to each Holder of Securities at his address as it appears in the Security register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Person in whose name such Security (or a Predecessor Security thereof) shall be registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.13. PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any Agent may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payments of principal of, premium, if any, and, subject to Section 2.12, interest on such Security and for all other purposes whatsoever (whether or not such Security is overdue), and neither the Company nor the Trustee or any other Agent shall be affected by notice to the contrary. SECTION 2.14. COMPUTATION OF INTEREST. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. 8 ARTICLE THREE REDEMPTION SECTION 3.01. REDEMPTION. The Securities may not be redeemed at the option of the Company, in whole or in part at any time prior to their respective Stated Maturities ARTICLE FOUR COVENANTS SECTION 4.01. PAYMENT OF SECURITIES. The Company will punctually pay the principal of and premium, if any, and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. The Company will, on or prior to the day when any principal of or premium or interest on any of the Securities becomes payable, whether at the Stated Maturity thereof, by call for redemption, surrender for repurchase, declaration of acceleration or otherwise, deposit with the Paying Agent (or, if the Company or a Subsidiary of the Company is acting as Paying Agent, segregate and hold in trust), in immediately available funds, no later than 12:00 noon (New York City time), a sum in U.S. Legal Tender sufficient to pay the principal, premium and interest becoming due. Such sum shall be held in trust for the benefit of the Holders entitled to such payment and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of its action or failure so to act, and of the amount of each such payment made to each Paying Agent. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in -, an office or agency where Securities may be presented or surrendered for payment ("Paying Agent"), where Securities may be surrendered for registration of transfer or exchange ("Registrar") and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. Unless otherwise expressly provided herein, the Trustee, the Company or a Subsidiary of the Company may act as Registrar, co-Registrar or Paying Agent. The Company shall give prompt written notice to the Trustee and the Holders of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company initially appoints the Trustee, as the initial Registrar and Paying Agent in -, and designates such agent as an agency where notices and demands to or upon the Company in respect to the Securities and this Indenture may be served. 9 SECTION 4.06. COMPANY STATEMENT AS TO COMPLIANCE; NOTICE OF CERTAIN DEFAULTS. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, a written statement (which need not be contained in or accompanied by an Officer's Certificate) signed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company, stating that (a) a review of the activities of the Company during such year and of its performance under this Indenture has been made under his or her supervision, and (b) to the best of his or her knowledge, based on such review, (a) the Company has complied with all the conditions and covenants imposed on it under this Indenture throughout such year, or, if there has been a default in the fulfillment of any such condition or covenant, specifying each such default known to him or her and the nature and status thereof, and (b) no event has occurred and is continuing which is, or after notice or lapse of time or both would become, an Event of Default, or, if such an event has occurred and is continuing, specifying each such event known to him and the nature and status thereof. (c) The Company shall deliver to the Trustee, within five days after the occurrence thereof, written notice of any event which after notice or lapse of time or both would become an Event of Default pursuant to clause (c) of Section 6.01. ARTICLE FIVE CONSOLIDATIONS AND MERGERS, ETC. SECTION 5.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company with or into any other Person or Persons (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any conveyance, transfer or lease of the property of the Company as an entirety or substantially as an entirety, to any other Person (whether or not affiliated with the Company); provided, however, that: (1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the entity formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a Corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume, by an indenture (or indentures, if at such time there is more than one Trustee) supplemental hereto, executed by the successor Person and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of, any premium and interest on all the Securities and the 10 performance of every other covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no event which, after notice or lapse of time, would become an Event of Default, shall have occurred and be continuing; (3) either the Company or the successor Person shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 5.02. SUCCESSOR PERSON SUBSTITUTED FOR COMPANY. Upon any consolidation or merger or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety to any Person in accordance with Section 5.01, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and thereafter, except in the case of a lease to another Person, the predecessor Person shall be released from all obligations and covenants under this Indenture and the Securities. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. The occurrence of any one of the following events for any reason whatsoever, and whether voluntary, involuntary or by operation of law, shall constitute an "Event of Default": (a) default in the payment of any interest on any Security when such interest becomes due and payable, and continuance of such default for a period of [30] days; or (b) default in the payment of the principal of and any premium on any Security of such series when it becomes due and payable at its Maturity; or (c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture or the Securities, and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or 11 (d) the entry by a court having competent jurisdiction of: (i) a decree or order for relief in respect of the Company 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 (ii) a decree or order adjudging the Company to be insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of the Company and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (iii) a final and non-appealable order appointing a custodian, receiver, liquidator, assignee, trustee or other similar official of the Company or of any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company; or (e) the commencement by the Company 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 by the Company 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 the Company of a petition or answer or consent seeking reorganization or relief under any applicable law, or the consent by the Company 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 the Company or any substantial part of the property of the Company or the making by the Company of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action. SECTION 6.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default with respect to Securities occurs and is continuing, then the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal amount shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities has been made and before a judgment or decree for payment of the Money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of not less than a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum of Money sufficient to pay: 12 (A) all overdue installments of interest on all Securities; (B) the principal of any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by or provided for in such Securities; (C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate borne by or provided for in such Securities; and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities, other than the non- payment of the principal of, and interest on Securities which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in Section 6.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 6.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if: (1) default is made in the payment of any installment of interest on any Security when such interest shall have become due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of any Security at its Maturity, the Company shall, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount of Money then due and payable with respect to such Securities with interest upon the overdue principal, and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest at the rate borne by or provided for in such Securities, and, in addition thereto, such further amount of Money as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay the Money it is required to pay the Trustee pursuant to the preceding paragraph forthwith upon the demand of the Trustee, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the Money so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities and collect the Money adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities wherever situated. 13 If an Event of Default with respect to Securities occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or such Securities or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy. SECTION 6.04. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any overdue principal and/or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities, of the principal, interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents or counsel) and of the Holders of Securities allowed in such judicial proceeding, and (ii) to collect and receive any Money or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Securities, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security in any such proceeding. SECTION 6.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. All rights of action and claims under this Indenture or any of the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the 14 Trustee shall be brought in its own name as trustee of an express trust, and any recovery or judgment, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, shall be for the ratable benefit of each and every Holder of a Security in respect of which such judgment has been recovered. SECTION 6.06. APPLICATION OF MONEY COLLECTED. Any Money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such Money on account of principal or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 7.07; SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal and interest in respect of which or for the benefit of which such Money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities and Coupons for principal and interest, respectively; THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 6.07. LIMITATION ON SUITS. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; 15 it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture or any Security to affect, disturb or prejudice the rights of any other such Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders. SECTION 6.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest on such Security, as the case may be, on the respective Stated Maturity or Maturities therefor specified in such Security and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 6.09. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and each such Holder shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and each such Holder shall continue as though no such proceeding had been instituted. SECTION 6.10. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 2.07, no right or remedy herein conferred upon or reserved to the Trustee or to each and every Holder of a Security is intended to be exclusive of any other right or remedy, and every right and remedy, to the extent permitted by law, shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to any Holder of a Security may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by such Holder, as the case may be. SECTION 6.12. CONTROL BY HOLDERS OF SECURITIES. 16 The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities of such series provided that: (1) such direction shall not be in conflict with any rule of law, with this Indenture or with the Securities of such series; (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (3) such direction is not unduly prejudicial to the rights of the other Holders of Securities of such series not joining in such action. SECTION 6.13. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in principal amount of the Outstanding Securities on behalf of the Holders of all the Securities may waive any past default hereunder with respect to such series and its consequences, except a default: (1) in the payment of the principal of or interest on any Security; or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 6.14. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, the Trustee or by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder of any Security for the enforcement of the payment of the principal of or interest on any Security on or after the respective Stated Maturities expressed in such Security or interest on any overdue principal of any Security. 17 ARTICLE SEVEN TRUSTEE The Trustee hereby accepts the trust imposed upon it by this Indenture and covenants and agrees to perform the same, as herein expressed. SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture which are adverse to the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not verify the accuracy of the contents thereof. (c) The Trustee shall not be relieved from liability for its own negligent action, its own negligent failure to act, or its own misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 18 (e) Whether or not expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liability which might be incurred by the Trustee in compliance with such request or direction. SECTION 7.02. RIGHTS OF TRUSTEE. Subject to the provisions of Section 7.01 hereof: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to Section 11.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Subsidiaries or Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities or any money paid to the Company or upon the Company's direction under any provision hereof, and the Trustee shall not be accountable for the Company's use of the proceeds from the 19 Securities, and the Trustee shall not be responsible for any statement in the Securities other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or an Event of Default occurs and is continuing and it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it occurs; provided that, except in the case of a Default or an Event of Default in payment of principal of, or premium, if any, or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of the Securityholders. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder, and each other Person so entitled under TIA (Section )313(c), a brief report dated as of such May 15 that shall comply with TIA (Section )313(a). The Trustee need not send such report if such report is not required by TIA (Section )313(a). The Trustee also shall comply with TIA (Section )313(b)(2). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the Commission and each stock exchange, if any, on which the Securities are listed. The Company shall notify the Trustee if the Securities become listed on any stock exchange prior to such listing. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss, liability or expense incurred by it including, without limitation, the cost and expense of enforcement of this Indenture against the Company and of defending itself against any claim (whether asserted by any Holder or the Company or otherwise) without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the administration of this trust or any trust created under Section 8.01 or 8.02 and its duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence, wilful misconduct or bad faith. 20 To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or Property held or collected by the Trustee, in its capacity as Trustee, except money or Property held in trust to pay principal of, premium, if any, or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(d) or (e) hereof occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law. SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company in writing and mailing notice of such resignation to the Securityholders. The Holders of at least a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its Property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee, unless the Holders have appointed a successor Trustee in accordance with the previous paragraph. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08 and payment to the prior Trustee of all sums due under Section 7.07 hereof. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all Property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07 hereof, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. 21 If the Trustee fails to comply with Section 7.10 hereof, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 above shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirements of TIA (Section )310(a)(1). The Trustee shall have a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition. Neither the Company nor any Person directly or indirectly controlling, controlled by, or under common control with the Company shall serve as Trustee. The Trustee shall comply with TIA (Section )310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA (Section )311(a), excluding any creditor relationship listed in TIA (Section )311(b). A Trustee who has resigned or been removed shall be subject to TIA (Section )311(a) to the extent indicated. ARTICLE EIGHT DEFEASANCE; SATISFACTION AND DISCHARGE SECTION 8.01. DEFEASANCE OF THE INDENTURE. The Company shall be deemed to have terminated all of its obligations under this Indenture (subject to Section 8.03 hereof) if: (1) the Company irrevocably shall have deposited in trust with the Trustee, pursuant to an irrevocable trust agreement in form and substance reasonably satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders for that purpose, U.S. Legal Tender, or U.S. Government Obligations maturing as to principal and interest in such amounts and at such times, as are sufficient, without consideration of the investment of any such U.S. Legal Tender or the reinvestment of the proceeds from any such U.S. Government Obligations and after payment of all federal, state and local taxes or other charges or 22 assessments in respect thereof payable by the Trustee, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to, and in form and substance reasonably satisfactory to, the Trustee, to pay the principal of, premium, if any, and interest on the outstanding Securities on the dates on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities, provided that the Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender and the proceeds of such U.S. Government Obligations to the payment of said principal, premium, if any, and interest on the Securities; (2) no Default or Event of Default shall have occurred or be continuing on the date of such deposit or shall occur on or before the 366th day after the date of such deposit; (3) such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other instrument or agreement to which the Company is a party or by which it or its Property is bound; (4) the Company shall have delivered to the Trustee an Opinion of Counsel in form and substance satisfactory to the Trustee to the effect that Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and the defeasance contemplated hereby and will be subject to Federal income tax in the same amounts and in the same manner and at the same time as would have been the case if such deposit and defeasance had not occurred and that the deposit is not subject to the control of any bankruptcy court; (5) Such defeasance shall not cause the Securities, if then listed on any national securities exchange registered under the Exchange Act, to be delisted; (6) Such deposit shall not result in the Company, the Trustee or the irrevocable trust becoming or being deemed an "investment company" under the Investment Company Act of 1940, as amended; and (7) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating to the defeasance contemplated by this Section 8.01 have been complied with. In the event all or any portion of the Securities are to be redeemed through such irrevocable trust, the Company shall make arrangements satisfactory to the Trustee, at the time of such deposit, for the giving of notice of such redemption or redemptions by the Trustee in the name and at the expense of the Company. SECTION 8.02. SATISFACTION AND DISCHARGE OF THE INDENTURE. In addition to its rights under Section 8.01 above, the Company may terminate all of its obligations under this Indenture (subject to Section 8.03 hereof) if: 23 (1) either (A) all Securities theretofore authenticated and delivered (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.07 hereof) have been delivered to the Trustee for cancellation; or (B) all Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited in trust with the Trustee, pursuant to an irrevocable trust agreement in form and substance reasonably satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders for that purpose, an amount of U.S. Legal Tender sufficient, without consideration of the investment thereof and after payment of all federal, state and local taxes or other charges or assessments in respect thereof payable by the Trustee, to pay the principal of, premium, if any, and interest on the outstanding Securities on the dates on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities, provided that the Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender to the payment of said principal, premium, if any, and interest on the Securities; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture pursuant to this Section 8.02 have been complied with. SECTION 8.03. SURVIVAL OF CERTAIN OBLIGATIONS. Notwithstanding the defeasance of this Indenture or the satisfaction and discharge of this Indenture referred to in Section 8.01 and Section 8.02 above, respectively, the respective obligations of the Company and the Trustee under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.11, 2.13, 2.14, Article Three (to the extent that the Securities are to be redeemed through the trust established pursuant to Section 8.01 or 8.02, as the case may be), Sections 4.01, 4.02, 4.03, 6.08, 24 7.07, 7.08, 7.09, 7.10, 7.11, 8.03, 8.04, 8.05, 8.06 and 8.07, Article Nine, and Sections 11.01, 11.02, 11.06, 11.07 and 11.08 hereof shall survive until the Securities are no longer outstanding. Thereafter the obligations of the Company and the Trustee under Sections 7.07, 8.05, 8.06 and 8.07 hereof shall survive. SECTION 8.04. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE. Subject to Section 8.07 below and after the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in Section 8.01 or Section 8.02, as the case may be, relating to the defeasance or satisfaction and discharge of this Indenture have been complied with, the Trustee upon request of the Company shall acknowledge in writing the defeasance or the satisfaction and discharge, as the case may be, of this Indenture and the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.03 above. SECTION 8.05. APPLICATION OF TRUST MONEY. The Trustee shall hold any U.S. Legal Tender or U.S. Government Obligations deposited with it in the irrevocable trust established pursuant to Section 8.01 or 8.02, as the case may be. The Trustee shall apply the deposited U.S. Legal Tender and (in the case of a deposit pursuant to Section 8.01) any U.S. Government Obligations through the Paying Agent (other than the Company or a Subsidiary or Affiliate of the Company), in accordance with this Indenture and the terms of the irrevocable trust agreement, to the payment of principal of, premium, if any, and interest on the Securities as and when the same become due and payable. The U.S. Legal Tender and U.S. Government Obligations so held in trust shall not be part of the trust estate under this Indenture, but shall constitute a separate trust fund for the benefit of all Holders entitled thereto. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 8.01 or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders of the Securities. SECTION 8.06. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall pay to the Company upon written request, and, if applicable, in accordance with the irrevocable trust established pursuant to Section 8.01 or 8.02 above, any U.S. Legal Tender or U.S. Government Obligations held by them for the payment of principal of, premium, if any, or interest on the Securities that remains unclaimed for two years after the date on which such payment shall have become due; provided, however, that, before being required to make any such payment to the Company, the Trustee may, at the expense of the Company, cause to be mailed to the Holders of such Securities, at their last addresses as they appear on the Securities register, notice that such moneys or U.S. Government Securities remain unclaimed and that, after a date specified in said notice, the balance of such moneys then unclaimed will be returned to the Company. After payment to the Company as aforesaid, Holders entitled to such 25 moneys or U.S. Government Obligations must look to the Company for such payment unless an applicable abandoned property law designates another Person. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 or 8.02 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or Governmental Authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 or 8.02, as the case may be (provided, however, that any call for redemption of the Securities pursuant to Article Three shall continue to be effective) until such time as the Trustee or Paying Agent is permitted to apply all such funds in accordance with Section 8.01 or 8.02, as the case may be, and 8.05; provided, however, that if the Company has made any payment of principal of, premium, if any, or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized by a resolution of its Board of Directors, and the Trustee, together, may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder for any one or more of the following: (1) to cure any ambiguity, defect or inconsistency, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action does not adversely affect the rights or interests of any Holder of Securities; (2) to add to or change or eliminate any provision of this Indenture as shall be necessary or desirable in accordance with any amendments to the Trust Indenture Act, provided such action does not adversely affect the rights or interests of any Holder of Securities; (3) to provide for uncertificated Securities in addition to certificated Securities; (4) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company pursuant to Article Five; (5) to secure all of the Securities; 26 (6) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities; (7) to comply with the rules or regulations of any securities exchange on which any of the Securities may be listed; or (8) to add to the covenants and agreements of the Company such further covenants and agreements as the Board of Directors of the Company shall consider to be for the protection or benefit of the Holders or to add any Events of Default or to surrender any right or power reserved to or conferred upon the Company. SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Section 6.08 and the next succeeding paragraph, the Company, when authorized by a resolution of its Board of Directors, and the Trustee, together, with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities may amend or supplement this Indenture or the Securities without notice to any other Securityholders; provided that, subject to Section 6.08 and the next succeeding paragraph, Holders of at least 66 2/3% in aggregate principal amount of the outstanding Securities shall be required to amend or supplement, this provision or the provision to the next sentence. Subject to Section 6.08 and the next succeeding paragraph, the Holders of at least a majority in aggregate principal amount of the outstanding Securities may waive compliance by the Company with any provision of or obligation under this Indenture or the Securities without notice to any other Securityholders. Notwithstanding anything to the contrary in the foregoing provisions of this Section 9.02, without the consent of each Securityholder affected, no amendment, supplement or waiver, including a waiver pursuant to Section 6.02, may: (1) reduce the percentage in principal amount of the outstanding Securities the consent of whose Holders is required for any amendment or supplement to this Indenture, for any waiver (of compliance with any obligation or provision of this Indenture or of certain Defaults or Events of Default hereunder or their consequences) provided for in this Indenture, or for a rescission of acceleration of the Securities pursuant to Section 6.02, or reduce the requirements pursuant to Section 10.05 for a quorum or voting; (2) reduce the rate or change the time for payment of interest on any Security; (3) reduce the principal amount of or premium on any Security; (4) alter the redemption or repurchase provisions of any Security in a manner adverse to any Holder thereof, or change the Stated Maturity of any Security; (5) waive any default in the payment of the principal of, premium, if any, or interest on any Security; 27 (6) impair the right of Holders to institute suit for the enforcement of any payment of the principal of, premium, if any, or interest on the Securities on or after the respective due dates therefor; (7) make any changes in Section 6.02, 6.08 or this second paragraph of Section 9.02; (8) change any obligation of the Company to maintain an office or agency in the place and for the purpose specified in Section 4.02 or make the Securities payable in any coin or currency other than U.S. Legal Tender; or (9) make any change to or modify the priority between the Holders of the Securities and any other creditors of the Company. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. SECTION 9.03. COMPLIANCE WITH TIA. Every amendment to or waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any such Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives written notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented to the amendment, supplement or waiver. Such amendment, waiver or supplement, as the case may be, shall be effective upon receipt by the Trustee of such Officers' Certificate. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last two sentences of the immediately preceding paragraph, those Persons who were Holders at the close of business on such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, 28 whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. All Holders that consent to such modification, waiver or action in the manner and within the time period requested shall be entitled to receive the consideration, if any, offered for such consent. SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee has so determined, the Company in exchange for the Security may execute and the Trustee shall authenticate a new Security of like kind that reflects the changed terms. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. In signing or refusing to sign such amendment or supplement, the Trustee shall be entitled to receive and, subject to Section 7.01 hereof, shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment or supplement is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company shall not sign an amendment or supplement until its Board of Directors approves thereof. SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplement or amendment to this Indenture in accordance with this Article, this Indenture shall be modified in accordance therewith and such supplement or amendment shall form a part of the Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered shall be bound thereby. Any Holder and every subsequent Holder of a Security (or portion thereof) shall be bound by any waivers authorized or obtained by this Article. 29 ARTICLE TEN MEETINGS OF AND ACTIONS BY SECURITYHOLDERS SECTION 10.01. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article Ten for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to waive or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article Six; (b) to remove the Trustee or appoint a successor Trustee pursuant to the provisions of Article Seven; (c) to consent to an amendment, supplement or waiver pursuant to the provisions of Section 9.02; or (d) to take any other action (i) authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Securities under any other provision of this Indenture, or authorized or permitted by law or (ii) which the Trustee deems necessary or appropriate in connection with the administration of this Indenture. SECTION 10.02. MANNER OF CALLING MEETINGS. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 10.01 hereof, to be held at such time and at such place in The City of New York or elsewhere as the Trustee shall determine. Notice of every meeting of Securityholders, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed by the Trustee, first-class postage prepaid, to the Company, and to the Holders of the Securities at their last addresses as they shall appear on the registration books of the Registrar, not less than 10 nor more than 60 days prior to the date fixed for a meeting. Any meeting of Securityholders shall be valid without notice if the Holders of all Securities then outstanding are present in Person or by proxy, or if notice is waived before or after the meeting by the Holders of all Securities outstanding, and if the Company and the Trustee are either present by duly authorized representatives or have, before or after the meeting, waived notice. SECTION 10.03. CALL OF MEETINGS BY COMPANY OR HOLDERS. In case at any time the Company, pursuant to a Certified Resolution of its Board of Directors delivered to the Trustee, or the Holders of not less than 10% in aggregate principal amount of the 30 Securities then outstanding, shall have requested the Trustee to call a meeting of Securityholders to take any action specified in Section 10.01 hereof, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or the Holders of Securities in the amount above specified may determine the time and place in The City of New York or elsewhere for such meeting and may call such meeting for the purpose of taking such action, by notice given as provided in Section 10.02. SECTION 10.04. WHO MAY ATTEND AND VOTE AT MEETINGS. To be entitled to vote at any meeting of Securityholders, a Person shall (a) be a registered Holder of one or more Securities, or (b) be a Person appointed by an instrument in writing as proxy for the registered Holder or Holders of Securities. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 10.05. REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE MEETING; VOTING RIGHTS; ADJOURNMENT. Notwithstanding any other provision of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, and submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think appropriate. Such regulations may fix a record date and time for determining the Holders of record of Securities entitled to vote at such meeting, in which case those and only those Persons who are Holders of Securities at the record date and time so fixed, or their proxies, shall be entitled to vote at such meeting whether or not they shall be such Holders at the time of the meeting. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 10.03, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. At any meeting each Securityholder or proxy shall be entitled to vote with respect to the outstanding Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Securities challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall not have the right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the proxy to vote on behalf of other Securityholders. At any meeting of Securityholders, the presence of Persons holding or representing a majority of the principal amount of the outstanding Securities shall be sufficient for a quorum. Any meeting of Securityholders duly 31 called pursuant to the provisions of Sections 10.02 or 10.03 may be adjourned from time to time by vote of the Holders of a majority in aggregate principal amount of the Securities represented at the meeting and entitled to vote, and the meeting may be held as so adjourned without further notice. Except as limited by Sections 6.02 and 6.08 and the second paragraph of Section 9.02, any resolution presented to a meeting at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the outstanding Securities; provided however, that, except as limited by Section 6.08 and the second paragraph of Section 9.02, any resolution with respect to any matter as to which this Indenture or the Securities require the consent of the Holders of at least 662/3% in principal amount of the outstanding Securities may be adopted at such meeting only by the affirmative vote of the Holders of at least 662/3% in principal amount of the outstanding Securities. SECTION 10.06. VOTING AT THE MEETING AND RECORD TO BE KEPT. The vote upon any resolution submitted to any meeting of Securityholders shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities or of their representatives by proxy and the principal amount of the Securities voted by the ballot. The permanent chairman of the meeting shall appoint two inspectors of votes, who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts, setting forth a copy of the notice of the meeting and showing that such notice was mailed as provided in Section 10.02 or Section 10.03. The record shall be signed and verified by the affidavits of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 10.07. EXERCISE OF RIGHTS OF TRUSTEE OR SECURITYHOLDERS MAY NOT BE HINDERED OR DELAYED BY CALL OF MEETING. Nothing contained in this Article Ten shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Securityholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Securityholders under any of the provisions of this Indenture or of the Securities. SECTION 10.08. EVIDENCE OF ACTION TAKEN BY SECURITYHOLDERS. (a) In addition to the foregoing provisions of this Article Ten, any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be 32 given or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by agent duly appointed in writing, or by combination of such instrument or instruments and the record of a meeting of Securityholders duly called and held in accordance with this Article Ten. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article. (b) Any request, demand, authorization, direction, notice, consent, waiver or other action of the Holder of any Security in accordance with this Section 10.08 shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (c) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other action in accordance with this Section 10.08, the Company may, at its option, by or pursuant to an Officers' Certificate delivered to the Trustee, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or such other act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other act may be given before or after such record date, but only those Persons who were Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite percentage of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other act, and for that purpose the outstanding Securities shall be computed as of such record date; provided, that no such authorization, agreement or consent by the Holders on the record date shall be deemed effective unless such request, demand, authorization, direction, notice, consent, waiver or other act shall become effective pursuant to the provisions of paragraph (a) of this Section 10.08 not later than 90 days after the record date. SECTION 10.09. PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF SECURITIES. The execution of any instrument by a Securityholder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee, and the holding of Securities shall be proved by the Security register or by a certificate of the Registrar. SECTION 10.10. RIGHT OF REVOCATION OF ACTION TAKEN. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 10.08, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities specified in this Indenture in connection with such action, any Holder of a Security 33 the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Security. After such time, such action shall be conclusive and binding upon such Holder and the Securities issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Security. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. NOTICES. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telecopier or registered or certified mail, postage prepaid, return receipt, addressed as follows: if to the Company: Toyota Motor Credit Corporation 19001 South Western Avenue Torrance, California 90501 Attention: Treasury Department if to the Trustee: U.S. Bank National Association c/o First Trust of Illinois, National Association One Illinois Center 111 E. Wacker Drive, Suite 3000 Chicago, Illinois 60601 Attention: - The Company or the Trustee by notice to the other may designate additional or different addresses as shall be furnished in writing by either party. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if telecopied; and five days after mailing if sent 34 by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Securityholder shall be mailed to him by first class mail, postage prepaid, at his address as it appears on the register of the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed. If the Company mails a notice or communication to Securityholders, it shall simultaneously mail a copy to the Trustee. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA Section 312(c). SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with (and, if applicable, setting forth in reasonable detail any financial calculations providing the basis of such opinion); and (2) an Opinion of Counsel (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 35 (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. At the request of the Trustee, any Officers' Certificate or Opinion of Counsel shall address any particular condition precedent to such action. SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. LEGAL HOLIDAYS. If a payment date is a Legal Holiday at a particular place where the principal of, premium, if any, or interest on the Securities is payable, payment may be made on the next succeeding day that is not a Legal Holiday at such place of payment, and no interest shall accrue for the intervening period. SECTION 11.08. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD (TO THE EXTENT PERMITTED BY LAW) TO PRINCIPLES OF CONFLICTS OF LAW. SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer, employee, stockholder or incorporator, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such Persons from such liability. Such waivers and releases are part of the consideration for the issuance of the Securities. 36 SECTION 11.11. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 11.12. DUPLICATE ORIGINALS. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 11.13. SEVERABILITY. In case any provision in this Indenture or in the Securities shall be invalid, illegal or enforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim thereunder for or against any party hereto. SECTION 11.14. HEADINGS AND TABLE OF CONTENTS. The headings, Table of Contents and Cross-Reference Table in this Indenture are for convenience of reference only and shall not be deemed a part of this Indenture or limit or otherwise affect the meaning hereof. 37 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first written above. TOYOTA MOTOR CREDIT CORPORATION [Seal] By: ---------------------------------------- Name: Title: Attest: By: ---------------------- Name: Title: U.S. BANK NATIONAL ASSOCIATION as Trustee [Seal] By: ---------------------------------------- Name: Title: Attest: By: ---------------------- Name: Title: 38 State of __________________________ ) ) ss. County of _________________________ ) On -, 1997, before me, ________________________________, Notary Public, personally appeared _________________________________, personally known to me to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. ---------------------------------------- Notary Public State of __________________________ ) ) ss. County of _________________________ ) On -, 1997, before me, ________________________________, Notary Public, personally appeared _________________________________, personally known to me to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. ---------------------------------------- Notary Public 39 ANNEX I TO INDENTURE DATED AS OF AUGUST 1, 1997 BETWEEN TOYOTA MOTOR CREDIT CORPORATION AND U.S. BANK NATIONAL ASSOCIATION as Trustee Definitions The following terms have the respective meanings set forth below for all purposes of the Indenture, and Section and Article references are to Sections and Articles in the Indenture. "Affiliate" means, as to any Person, any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or co-Registrar or other agent of the Company acting under the Indenture. "Board of Directors" means the board of directors of the Company or any committee thereof authorized with respect to any particular matter to exercise the power of the board of directors of the Company. "Business Day" means a day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York, Los Angeles, California, or Chicago, Illinois are not authorized or required to be open. "Certified Resolution" means a copy of a resolution of the Board of Directors of the Company, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted and to be in full force and effect on the date of such certification. "Commission" means the Securities and Exchange Commission, or any successor thereto. "Company" means Toyota Motor Credit Corporation, a California corporation, the issuer of the Securities under the Indenture, until a successor replaces it pursuant to the Indenture and thereafter means such successor. I-1 "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which at the date of execution of the Indenture is located at One Illinois Center, 111 E. Wacker Drive, Suite 3000, Chicago, Illinois 60601 "Default" means any event that is or with the passing of time or giving of notice or both would be an Event of Default. "Defaulted Interest" has the meaning specified in Section 2.12. "Event of Default" has the meaning specified in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor thereto, and the regulations promulgated thereunder. "GAAP" means generally accepted accounting principles in the United States which are applied by the Company as of the date of the Indenture. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Indenture" means the Indenture dated as of September -, 1997 between the Company and U.S. Bank National Association, as trustee, relating to $- aggregate principal amount of the Company's TMCC Demand Notes, including Exhibit A and this Annex I thereto, as the same may be amended or supplemented from time to time in accordance with its terms. "Interest Payment Date" with respect to any principal amount means the Stated Maturity Date with respect to such amount specified on the attached Schedule. "Maturity", with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as provided in or pursuant to this Indenture, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment or otherwise. "Officer" means the Chairman, the President, any Vice Chairman or Vice President, the Chief Financial Officer, the Treasurer or the Controller of the Company. "Officers' Certificate" means a certificate signed by any two Officers of the Company, and otherwise complying with the applicable requirements of Sections 11.04 and 11.05 of the Indenture. "Opinion of Counsel" means a written opinion from legal counsel who, in the case of an Opinion of Counsel addressed to the Trustee, is reasonably acceptable to the Trustee. The counsel I-2 may be an employee of or counsel to the Company. Each opinion shall comply with the applicable requirements of Sections 11.04 and 11.05 of the Indenture. "Paying Agent" has the meaning specified in Section 4.02. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or governmental authority. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For purposes of this definition, any Security authenticated and delivered under Section 2.07 in exchange for or in lieu of a defaced, mutilated, lost, destroyed or stolen Security shall be deemed to evidence the same debt as the defaced, mutilated, lost, destroyed or stolen Security. "Record Date" means August 1 and February 1 of each year (whether or not a Business Day), in each case next preceding the applicable Interest Payment Date. "Registrar" has the meaning specified in Section 4.02. "Required Rate" with respect to any Monthly Allocation Date is the weighted average of the Certificate Rates (in each case expressed as the equivalent of monthly rates of interest rate rather than as semi-annual coupon rates) for each Class of Certificates outstanding at the close of business on such date, weighted on the basis of their respective Class Certificate Balances. "Securities" means the Company's TMCC Demand Notes. "Securities Act" means the Securities Act of 1933, as amended, or any successor thereto, and the regulations promulgated thereunder. "Special Record Date" has the meaning specified in Section 2.12. "Stated Maturity," when used with respect to any security (including the Securities) or Indebtedness or any installment of interest thereon, means the date specified in such security or with respect to such Indebtedness as the fixed date on which the principal thereof or such installment of interest is due and payable, including pursuant to mandatory redemption provisions; with respect to the Securities, the Stated Maturity thereof means each date specified in the Schedule attached to such Security. "Subsidiary" means any Corporation of which at the time of determination the Company or one or more Subsidiaries owns or controls directly or indirectly more than 50% of the shares of Voting Stock. "TIA" and "Trust Indenture Act" mean the Trust Indenture Act of 1939, as amended, and any reference herein to the Trust Indenture Act or a particular provision thereof shall mean such Act or provision, as the case may be, as amended or replaced from time to time or as supplemented from I-3 time to time by rules or regulations adopted by the Commission under or in furtherance of the purposes of such Act or provision, as the case may be. "Trustee" means U.S. Bank National Association, as trustee under the Indenture until a successor replaces it in accordance with the provisions of the Indenture, and thereafter means such successor. "Trust Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee, or any other officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "United States" and "U.S." each mean the United States of America. "U.S. Government Obligations" means securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. I-4 EXHIBIT A [FORM OF FACE OF SECURITY] TOYOTA MOTOR CREDIT CORPORATION TMCC Demand Notes No. ________________ Toyota Motor Credit Corporation, a California corporation (the "Company," which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to , or registered assigns, the principal sum of U.S. Dollars as shall be set forth on the Schedule attached hereto as of the date of Maturity, and to pay interest on the outstanding amount of principal, as set forth on the Schedule from time to time, from the date such principal amount is originally issued and outstanding (or from the most recent Interest Payment Date to which interest has been paid or duly provided for), on the date of Maturity with respect to such principal amount (each an "Interest Payment Date"), at then applicable Interest Rate , until the principal hereof is paid or duly provided for. Interest on this Security will be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable and punctually paid or duly provided for on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the date that is one Business Day, next preceding such Interest Payment Date (each, a "Record Date"). Any such interest which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on such Record Date by virtue of having been such Holder, and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of this Security not less than 10 days prior to such Special Record Date or may be paid in any other lawful manner, all as more fully provided in the Indenture. Payment of the principal of, premium, if any, and interest on this Security will be made at the office or agency of the Company maintained for that purpose in -, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, except as otherwise provided in the Indenture, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the register of Securities maintained by the Registrar. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. A-1 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: TOYOTA MOTOR CREDIT CORPORATION By: ---------------------------------------- Name: Title: Attest: - ------------------------- Secretary [Corporate Seal] [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities described in the within-mentioned Indenture. -, -, as Trustee OR as Trustee By: By: -------------------------------- -------------------------------- Authorized Signatory as Authenticating Agent By: -------------------------------- Authorized Signatory A-2 [FORM OF REVERSE OF SECURITY] TOYOTA MOTOR CREDIT CORPORATION TMCC DEMAND NOTES 1. INDENTURE. This Security is one of the duly authorized issue of the Company's TMCC Demand Notes (the "Securities"), issued by the Company under an Indenture dated as of August 1, 1997 (as the same may be amended or supplemented from time to time, the "Indenture") between the Company and The First National Bank of Boston, as Trustee (the "Trustee," which term includes any successor trustee under the Indenture). The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. Holders are referred to the Indenture and the Trust Indenture Act for a statement of such terms and for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of Securities. The Securities are general obligations of the Company, limited to an aggregate principal amount of $-, except as otherwise provided in the Indenture. No reference herein to the Indenture and no provision of this Security or the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Security at the times, places and rate and in the coin and currency herein and in the Indenture prescribed. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: -, Attention:-. 2. CAPITALIZED TERMS. Capitalized terms used in this Security have the meanings assigned to them in the Indenture unless otherwise defined in this Security. 3. PAYING AGENT AND REGISTRAR. - has been appointed to act as initial Paying Agent and Registrar for the Securities in-. The Company may appoint additional Paying Agents and co-Registrars, and may change any Paying Agent, Registrar or co-Registrar, all as provided in the Indenture. Except as otherwise provided in the Indenture, the Trustee, the Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar. 4. REDEMPTION. A-3 The Securities are not redeemable prior to their respective maturities at the option of the Company, in whole or from time to time in part. 5. DENOMINATIONS; TRANSFER; EXCHANGE. The Securities are issuable only in registered form, without coupons, in denominations of U.S.. A Holder may register the transfer of or exchange Securities in accordance with the Indenture, subject to the limitations provided therein. The Registrar or a co-Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents in form satisfactory to the Registrar and the Trustee. No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith, except as otherwise provided in the Indenture. The Company will maintain in -, an office or agency where Securities may be surrendered for registration of transfer or exchange. 6. PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any Agent may treat the Person in whose name such Security is registered as the owner of such Security for all purposes. 7. UNCLAIMED MONEY. The Trustee and the Paying Agent shall pay to the Company upon written request any U.S. Legal Tender or U.S. Government Obligations held by them for the payment of the principal of, premium, if any, or interest on the Securities which remains unclaimed for two years after the date on which such payment shall have become due. After payment to the Company as aforesaid, Holders entitled to such moneys or U.S. Government Obligations must look to the Company for such payment unless an applicable abandoned property law designates another Person. 8. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company irrevocably deposits with the Trustee U.S. Legal Tender or, in certain cases, U.S. Government Obligations sufficient to pay the principal of, premium, if any, and interest on the Securities to redemption or maturity, or if all the outstanding Securities have been delivered to the Trustee for cancellation, and in either case if the Company complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Securities (including the financial covenants, but excluding its obligation to pay the principal of, premium, if any, and interest on the Securities). 9. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions and limitations set forth in the Indenture, the Indenture or the Securities may be amended or supplemented with the consent of the Holders of at least a majority (or, in certain cases, 66 2/3%) in aggregate principal amount of the Securities then outstanding, and A-4 compliance with any provision or obligation under the Indenture or the Securities may be waived with the consent of the Holders of a majority (or, in certain cases, 66 2/3%) in aggregate principal amount of the Securities then outstanding. The Indenture also permits the Company and the Trustee, without notice to or consent of any Holder, to enter into certain amendments or supplements to the Indenture or the Securities. 10. DEFAULTS AND REMEDIES. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in principal amount of the outstanding Securities, may declare all unpaid principal of and accrued interest on the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. The Indenture provides that the Holders of a majority in principal amount of the Securities outstanding may rescind an acceleration of the Securities and its consequences on the terms and subject to the conditions set forth in the Indenture. The Indenture also provides that the Holders of a majority (or, in certain cases, 66 2/3%) in principal amount of the outstanding Securities may waive an existing Default or Event of Default and its consequences except, among other things, a default in the payment of the principal of or interest on any of the Securities. 11. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company or its Subsidiaries or Affiliates with the same rights it would have if it were not the Trustee. The Trustee, however, must comply with the provisions of the Trust Indenture Act, including those relating to the Trustee acquiring any "conflicting interest" as defined therein. 12. NO RECOURSE AGAINST OTHERS. A director, officer, employee, stockholder or incorporator, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such Persons from such liability. Such waiver and release are part of the consideration for the issuance of the Securities. 13. AUTHENTICATION. This Security and the entries on the Schedule shall not be valid unless the Trustee or an authenticating agent has signed the certificate of authentication on this Security and such Schedule by manual signature. 14. ABBREVIATION. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM ( = tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint A-5 tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 15. GOVERNING LAW; HEADINGS. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD (TO THE EXTENT PERMITTED BY LAW) TO PRINCIPLES OF CONFLICTS OF LAW. The headings in this Security are for convenience of reference only and shall not be deemed a part of this Security or limit or otherwise affect the meaning hereof. A-6 [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto (insert social security or other identifying number of assignee) (Please print or typewrite name and address, including zip code, of assignee) the within Security and all rights thereunder, hereby irrevocably constituting and appointing attorney to transfer said Security on the books of the Company with full power of substitution in the premises. Dated: _____________ Signed:____________________________________________________ (Sign exactly as name(s) appear(s) on the face of this Security) A-7 SCHEDULE TO TMCC DEMAND NOTE
ADVANCES PAYMENTS -------- -------- Date of Initial Effective Principal Advance or Advance Principal Required Stated Principal Interest Balance Payment No. Amount Rate Maturity Amount Amount Outstanding --------- ------- ---------- --------- -------- --------- -------- ----------- * ** ***
- ------------------- * -% ** -% *** -% A-8 EX-25.1 8 EXHIBIT 25.1 STATEMENT OF ELIGIBILITY ON FORM T-1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM T-1 Statement of Eligibility and Qualification Under the Trust Indenture act of 1939 of a Corporation Designated to Act as Trustee U.S. BANK NATIONAL ASSOCIATION F.K.A. FIRST BANK NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) United States 41-0417860 (State of Incorporation) (I.R.S. Employer Identification No.) 111 E. Wacker Drive, Suite 3000 Chicago, Illinois 60601 (Address of Principal Executive Offices) (Zip Code) TOYOTA MOTOR CREDIT CORPORATION (Exact name of registrant as specified in its charter) California (State of Incorporation) (I.R.S. Employer Identification No.) 19001 South Western Avenue Torrance, California 90509 (Address of Principal Executive Offices) (Zip Code) Demand Notes (Title of the Indenture Securities) GENERAL 1. GENERAL INFORMATION Furnish the following information as to the Trustee. (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. (Yes) 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any underwriter for the obligor is an affiliate of the Trustee, describe each such affiliation. None See Note following Item 16. Items 3-15 are not applicable because to the best of the Trustee's knowledge the obligor is not in default under any Indenture for which the Trustee acts as Trustee. 16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement of eligibility and qualification. *1. Copy of Articles of Association. *2. Copy of Certificate of Authority to commence Business. *3. Authorization of the Trustee to exercise corporate trust powers (included in Exhibits 1 and 2; no separate instrument). *4. Copy of existing By-Laws. 5. Copy of each Indenture referred to in Item 4. N/A. 6. The consents of the Trustee required by Section 321(b) of the act. **7. Copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. --------- * INCORPORATED BY REFERENCE TO FILE NUMBER 333-30939 ** INCORPORATED BY REFERENCE TO FILE NUMBER 333-26679 NOTE The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, U.S. Bank National Association, an Association organized and existing under the laws of the United States, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Chicago and State of Illinois on the 26th day of August, 1997. U.S. BANK NATIONAL ASSOCIATION /s/ Steven E. Charles ---------------------------------- Steven E. Charles Vice President /s/ Michael T. Goodwin - ----------------------- Michael T. Goodwin Assistant Secretary EXHIBIT 6 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: August 26, 1997 U.S. BANK NATIONAL ASSOCIATION /s/ Steven E. Charles ---------------------------------- Steven E. Charles Vice President -----END PRIVACY-ENHANCED MESSAGE-----