<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2001
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
AND
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
NCT FUNDING COMPANY, L.L.C.
(Exact name of registrant as specified in its charter)
--------------------------
DELAWARE 22-3634034
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
NCT FUNDING COMPANY, L.L.C.
650 CIT DRIVE
LIVINGSTON, NEW JERSEY 07039
(973) 740-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
--------------------------
ERNEST D. STEIN, ESQ.
EXECUTIVE VICE PRESIDENT & GENERAL COUNSEL
THE CIT GROUP, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
(Name, address, including zip code, and telephone number, including area code,
of registrant's agent for service)
--------------------------
Copies to:
PAUL N. WATTERSON, JR., ESQ.
SCHULTE ROTH & ZABEL LLP
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 756-2563
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, 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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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 statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
========================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT TO OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(1) PRICE(1) FEE(1)(2)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Receivable-Backed Notes............................... $1,000,000 100% $1,000,000 $250.00
========================================================================================================================
(1) Estimated solely, for the purpose of calculating the registration fee.
(2) Pursuant to Rule 429 under the Securities Act of 1933, this Registration Statement contains a combined prospectus
that also relates to Registration Statement No. 333-74847 previously filed by NCT Funding Company, L.L.C. on
Form S-3 and declared effective on July 19, 1999. The Registrants are carrying forward $346,669,888 aggregate
principal amount of Receivable-Backed Notes from Registration Statement No. 333-74847 for which a filing fee
of $96,188 was previously paid.
=========================================================================================================================
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
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, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement contains a combined prospectus that also relates to
Registration Statement No. 333-74847 previously filed by the Registrant on Form
S-3 and declared effective on July 19, 1999. This Registration Statement
constitutes Post-Effective Amendment No.1 to Registration Statement No.
333-74847 and such Post-Effective Amendment shall hereafter become effective
concurrently with the effectiveness of this Registration Statement and in
accordance with Section 8(c) of the Securities Act of 1933.
<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of prospectus relating
to the offering of a series of Receivable Backed Notes created from time to time
by NCT Funding Company, L.L.C. and (ii) a form of prospectus supplement relating
to the offering of the particular series of Receivable Backed Notes described
therein. The form of prospectus supplement relates only to the notes described
therein and is a form which may be used, among others, by NCT Funding Company,
L.L.C. to offer Receivable Backed Notes under this Registration Statement. The
features applicable to any actual series of Receivable Backed Notes may include
any features specified in the prospectus.
<PAGE>
Information contained in this prospectus supplement is not complete and
may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective. This
prospectus supplement is not an offer to sell these securities, and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED ________
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ]
$[ ] (APPROXIMATE)
CIT EQUIPMENT COLLATERAL TRUST _____-__
OWNER TRUST
RECEIVABLE-BACKED NOTES
NCT FUNDING COMPANY, L.L.C.
DEPOSITOR
CIT FINANCIAL USA, INC.
SERVICER
THE DEPOSITOR AND SERVICER ARE SUBSIDIARIES OF THE CIT GROUP, INC.
[LOGO]
THE OWNER TRUST WILL ISSUE THE FOLLOWING CLASSES OF NOTES--
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-__ IN THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 12 IN THE ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF THE OWNER TRUST ONLY. THIS
PROSPECTUS SUPPLEMENT MUST BE ACCOMPANIED BY THE PROSPECTUS.
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Approximate Interest First Stated Price to Underwriting
Class of Initial Rate Payment Maturity Public Discount
Notes Aggregate (per Date Date Per Note Per Note
Principal Amount annum)
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<S> <C> <C> <C> <C> <C> <C>
A-1 $[ ] ___% ____% 0.___%
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A-2 $[ ] ___% ____% 0.___%
------------------------------------------------------------------------------------------------------------
A-3 $[ ] ___% ____% 0.___%
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A-4 $[ ] ___% ____% 0.___%
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B $[ ] ___% ____% 0.___%
------------------------------------------------------------------------------------------------------------
C $[ ] ___% ____% 0.___%
------------------------------------------------------------------------------------------------------------
D $[ ] ___% ____% 0.___%
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</TABLE>
The total price to the public is $ .
The total underwriting discount is $ .
The total proceeds to the owner trust are $ .
------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
[NAMES OF UNDERWRITERS]
Prospectus Supplement dated [ ], 200_
<PAGE>
TABLE OF CONTENTS
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PAGE
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IMPORTANT NOTICE ABOUT
INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS............................. S-3
PROSPECTUS SUPPLEMENT SUMMARY....................... S-4
BACKGROUND INFORMATION..............................S-12
RISK FACTORS........................................S-12
THE OWNER TRUST.....................................S-16
The Owner Trust................................S-16
The Indenture..................................S-17
Capitalization of the Owner Trust..............S-17
The Owner Trustee..............................S-17
THE CONTRACTS.......................................S-17
Description of the Contracts...................S-17
Statistics Relating to the Initial Cut-Off
Date Contract Pool............................S-17
Statistics Relating to Delinquencies and
Defaults......................................S-21
SCHEDULED CASHFLOWS FROM THE
CONTRACTS...........................................S-24
WEIGHTED AVERAGE LIFE OF THE
NOTES...............................................S-25
DESCRIPTION OF THE NOTES AND INDENTURE..............S-33
General........................................S-33
Deposits.......................................S-34
Distributions..................................S-34
Interest.......................................S-36
Principal......................................S-36
Cash Collateral Account........................S-43
Optional Purchase of Contracts and
Redemption of Notes..........................S-45
Reports to Noteholders.........................S-45
Servicing......................................S-45
The Indenture Trustee..........................S-46
Representations and Warranties.................S-46
Amendments.....................................S-47
RATINGS OF THE NOTES................................S-47
USE OF PROCEEDS.....................................S-48
LEGAL PROCEEDINGS...................................S-48
PLAN OF DISTRIBUTION................................S-49
TAX MATTERS.........................................S-51
ERISA CONSIDERATIONS................................S-51
LEGAL MATTERS.......................................S-52
EXPERTS.............................................S-52
CIT EQUIPMENT COLLATERAL ____-__:
BALANCE SHEET AS OF [_______________]...............S-53
NOTES TO THE BALANCE SHEET..........................S-53
REPORT OF INDEPENDENT AUDITORS......................S-53
INDEX OF DEFINED TERMS..............................S-55
</TABLE>
S-2
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
The depositor tells you about the notes in two separate
documents:
the accompanying prospectus, which provides general
information, some of which may not apply to your series of
notes; and
this prospectus supplement, which describes the particular
terms of your series of notes.
The prospectus supplement and the prospectus, together,
provide a description of the material terms of your notes. You should rely only
on the information contained in this prospectus supplement to the extent it
provides a more specific description of your notes. We have not authorized
anyone to provide you with information that is different.
If you have received a copy of this prospectus supplement and
accompanying prospectus in an electronic format, and if the legal prospectus
delivery period has not expired, you may obtain a paper copy of this prospectus
supplement and the accompanying prospectus from NCT Funding Company, L.L.C., at
650 CIT Drive, Livingston, New Jersey 07039, telephone number (973) 740-5000, or
an underwriter by asking any of them for it.
We include cross-references in this prospectus supplement and
the accompanying prospectus to captions in these materials where you can find
further related discussions. The Table of Contents in this prospectus supplement
and the Table of Contents included in the accompanying prospectus provide the
pages on which these captions are located.
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is a short description of the main terms
of the notes and the offering of the notes. For that reason, this summary does
not contain all information that may be important to you. To fully understand
the terms of the notes and the offering of the notes, you will need to read both
this prospectus supplement and the accompanying prospectus, each in its
entirety. In addition, you may wish to read the documents governing the
transfers of the contracts, the formation of the owner trust and the issuance of
notes. Those documents have been filed as exhibits to the registration statement
of which this prospectus supplement is a part.
There are material risks associated with an investment in the
notes. See "Risk Factors" on page S-__ of this prospectus supplement and on page
12 in the accompanying prospectus for a discussion of factors you should
consider before investing in the notes.
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Owner Trustee......................... The owner trustee is [ ], acting not in its
individual capacity but solely as owner trustee under the trust
agreement with the depositor, and its telephone number is
[ ]. See "The Owner Trust" in this prospectus
supplement.
Originators........................... [ ]
[ ]
[ ]
The address of each originator is
[650 CIT Drive, Livingston, New
Jersey 07039].
Indenture and Indenture
Trustee............................... The notes will be issued under an indenture. [ ] will
serve as indenture trustee. See "Description of the Notes and
Indenture--The Indenture Trustee" in this prospectus supplement.
The Notes............................. [The owner trust is issuing notes in the classes set forth on the
cover page.]
Terms of the Notes:
Payment Dates................ The __ day of each [month] [quarter], or if that day is not a
business day, the next business day, beginning on [ ].
Interest..................... See the cover page for the interest rates as to all classes.
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S-4
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Interest Periods:
FROM TO DAY COUNT
CLASS (INCLUDING) (EXCLUDING) CONVENTION
----- ----------- ----------- ----------
A-1
A-2
A-3
A-4
B
C
D
On each payment date and after the owner trust repays any
outstanding servicer advances and pays the servicer's
monthly servicing fee, the owner trust will pay interest
on the notes in the following order:
CLASS OF RECEIVES
NOTES INTEREST
------- BEFORE CLASS
------------
If the available funds are insufficient to pay interest on
[ ], the owner trust will apply the available funds [ ].
See "Description of the Notes and Indenture--Distributions"
in this prospectus supplement.
Principal.................... After paying interest on [the] [Class __] notes, the owner trust will
pay principal on [the] [remaining classes of] notes on each payment
date.
In general, principal payments will be equal to the amount needed
to decrease the aggregate note principal balance to the contract
pool principal balance and will be allocated [__% to the Class A
Notes, __% to the Class B Notes, __% to the Class C Notes and __%
to the Class D Notes.]
However, exceptions to this general rule include
Until the Class [ ] Notes are paid in full, the Class [ ]
Notes will receive at least enough principal to reduce the
principal amount of the Class [ ] Notes
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S-5
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<TABLE>
<S> <C>
to the Class [ ] Scheduled Principal Balance (see table in
"Description of the Notes and Indenture-- Definitions
Concerning Principal Payments" in this prospectus
supplement). If there are insufficient prepayments or
payments on the contracts, this requirement may limit
principal payments on the Class [ ], Class [ ] and Class
[ ] Notes.
Principal payments will generally be made to the [various]
[Class ] Notes sequentially; so that no principal will be
paid on any class of Class [ ] Notes until each class with
a lower numerical designation has been paid in full, for
instance, the Class [ ] Notes will not receive any
principal until the Class [ ] and Class [ ] Notes are paid
in full.
This general description of distributions on the notes is subject
to certain targets, floors, events of default and other
qualifications. See "Description of the Notes and Indenture
--Distributions" in this prospectus supplement.
Stated Maturity Dates........ The notes will mature on the respective dates shown on the cover of
this prospectus supplement. However, if the stated maturity date is
not a business day, then the stated maturity date will be the next
business day.
[Subordination............... A class of notes may not be entitled to receive payments of principal
and interest until after the owner trust pays one or more other
classes of notes.]
[Residual Payment
Notes........................ An owner trust might issue one or more classes of notes entitled to
some or all of the remaining payments of principal and interest on
the related contracts after the trust has made all other payments it
is required to make.]
[Strip Notes................. An owner trust might issue one or more classes of notes providing for
distributions of interest which are disproportionately large or small
in comparison to the principal distributions.]
Optional Redemption When
the Aggregate Note Principal
Amount is Less Than [__%]
of Initial Contract Pool
Principal Balance............ Once the principal balance of a note series is less than [__%] of the
initial contract pool principal balance, the
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S-6
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<TABLE>
<S> <C>
depositor may repurchase all the contracts held by the owner
trust. If the seller exercises this option, the indenture trustee
will redeem all notes on the next payment date. The redemption
price for each note will be the note's principal amount plus
unpaid accrued interest to but excluding the redemption date.
The "contract principal balance" of any contract is the present
value of the unpaid scheduled payments due on that contract after
the Cut-Off Date discounted at the discount rate, called the
"Discount Rate," of ____%. The "contract pool principal balance"
is the aggregate of the individual discounted contract principal
balances.
See "Description of the Notes and Indenture -- Optional Purchase
of Contracts and Redemption of Notes" in this prospectus
supplement.
Cut-Off Date.......................... [ ]
Closing Date.......................... [ ]
[Purchase of Contracts After
the Closing Date........................ The owner trust may purchase additional contracts for [three] months
after the closing date (the "Funding Period") through the use of
$_______ deposited on the closing date in a pre-funding account from
the proceeds of the sale of the notes. If amounts in the pre-funding
account are not used to purchase additional contracts during the
Funding Period, one or more classes of notes may be prepaid as
further described in the prospectus supplement. The amount deposited
in the pre-funding account will not be available to cover contract
losses.]
[The depositor is required to sell, and the trust is required to
purchase, contracts with an aggregate principal balance
approximately equal to the amount on deposit in the pre-funding
account. These requirements are subject to:
the availability of additional contracts; and
any conditions provided in the related pooling and
servicing agreement.]
[Capitalized Interest Account........... $________ of the proceeds from the sale of the notes will be
deposited in a capitalized interest account to fund interest payments
on the notes at a rate of __% during the Funding Period. Amounts
deposited in the capitalized
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S-7
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<TABLE>
<S> <C>
interest account will not be available to cover contract losses.]
[If the funds in the capitalized interest account are not completely
used by the end of the Funding Period, they will be deposited in the
collection account to be used for distributions on the notes on the
next distribution date.]
Servicing; Servicing Fee.............. The servicer is CIT Financial USA, Inc. ("CIT Financial USA"). The
servicer will be responsible for servicing, managing and administering
the contracts and related interests, and enforcing and making
collections on the contracts. The servicer is required to make
advances for delinquent scheduled payments to the extent it determines
in its sole discretion that advances will be recoverable in future
periods. In the event that an entity other than an affiliate of CIT
becomes a successor servicer, that entity shall have no obligation to
make such servicer advances.
Servicer advances are reimbursable from contract payments.
See "Description of the Pooling and Servicing Agreement --
Servicing" in the accompanying prospectus.
The servicer's monthly fee will equal the product of
[one twelfth of 0.75 percent] per annum; and
the aggregate contract pool principal balance as of the
first day of the related collection period.
The servicer's fee is payable out of contract payments.
The servicer will pay any sub-servicer servicing fees from its
monthly servicing fee.
See "Description of the Notes and Indenture -- Servicing" in this
prospectus supplement.
Ratings............................... An owner trust will not issue a series of notes unless one or more
nationally recognized rating agencies have assigned investment grade
ratings to the notes.
See "Ratings of the Notes" in this prospectus supplement and the
accompanying prospectus.
S-8
</TABLE>
<TABLE>
<S> <C>
Owner Trust Assets
A. The Contracts................ The contracts will consist of the following:
[equipment lease contracts],
[installment payment agreements], and
[conditional sales and other financing agreements (including
promissory notes and loan and security agreements)].
As of [ ], the pool of contracts for the owner trust had the
following characteristics. Percentages are based on the statistical
contract pool principal balance which is computed using an assumed
discount rate of ___% (the "Statistical Discount Rate"):
initial statistical contract
pool principal balance $[ ]
number of contracts [ ]
average statistical contract
pool principal balance $[ ]
leases (true and finance) as
a percentage of the initial
statistical contract pool
principal balance [ ]%
loans and other financing
arrangements as a percentage
of the initial statistical
contract pool principal
balance [ ]%
underlying equipment type concentration:
PRINCIPAL BALANCE
EQUIPMENT TYPE CONCENTRATION
-------------- -------------
[ ] ---%
[ ] ---%
No other single type of equipment accounted for more than [5]% of
the initial statistical contract pool principal balance.
Geographic concentration (based on obligor billing address):
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S-9
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<TABLE>
<S> <C>
PRINCIPAL BALANCE
STATE CONCENTRATION
----- -------------
[ ] ---%
[ ] ---%
[ ] ---%
[ ] ---%
[ ] ---%
No other state represented more than [5]% of the initial contract
pool principal balance.
Remaining terms
of the contracts [ ] months to [ ] months
The weighted average
remaining term of the
contracts [ ] months
Weighted average age of the
contracts [ ] months
See "The Contracts -- Statistics Relating to the Initial
Cut-Off Date Contract Pool" in this prospectus supplement.
B. [Cash Collateral Account]............ [The indenture trustee will establish a cash collateral account
having an initial balance of $[ ] ([ ]% of the initial
contract pool principal balance) for the benefit of the noteholders,
which may include proceeds of loans from third party lenders to the
owner trust under a cash collateral account loan agreement. The
indenture trustee will use cash collateral account funds to pay the
following amounts if payments on the contracts are insufficient:
interest due on the notes;
the excess of
the aggregate note principal amount; over
the contract pool principal balance as of the last
day of the related collection period; and
principal on the notes on the applicable stated maturity
date. ]
[To the extent that the amount on deposit in the cash collateral
account as of any payment date is less than the required amount, any
remaining amount available in the collection account, after payment
of any reimbursement of servicer advances, the servicing fee and
interest and
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S-10
<PAGE>
<TABLE>
<S> <C>
principal then due and payable on the notes, will be transferred to
the cash collateral account to restore this deficiency.]
[The required amount of the cash collateral account will be, for any
payment date, the greater of:
(a) the sum of
(1) ___% of the contract pool principal balance as of the last
day of the related collection period, plus
(2) the excess, if any, of
(A) the sum of the principal amounts of the notes, after
giving effect to all distributions of principal on
that payment date, over
(B) the contract pool principal balance as of the last
day of the related collection period, and
(b) $[ ](___% of the initial contract pool principal balance).
However, in no event will the required amount exceed the aggregate
principal amount of the notes.]
See "Description of the Notes and Indenture -- Cash Collateral
Account" in this prospectus supplement.
Use of Proceeds....................... After the deposit of funds from the note sale proceeds into the cash
collateral account and payment of expenses, the indenture trustee will
pay the remaining proceeds of the sale of notes to the depositor. The
depositor will pay the proceeds to a warehousing trust and to CIT
Financial USA in payment of the purchase price of contracts acquired
from each of them.
See "Use of Proceeds" in this prospectus supplement.
[Legal Investment].................... [The Class [ ] Notes will be eligible securities for purchase by
money market funds under Rule 2a-7 under the Investment Company Act
of 1940.]
</TABLE>
S-11
<PAGE>
BACKGROUND INFORMATION
The information in this section will help you understand the
information in this prospectus supplement and the accompanying prospectus.
The principal balance of any contract is the present value of
the unpaid scheduled payments due on the contract after a cut-off date. The
principal balance of a contract excludes all scheduled payments due on or prior
to, but not received as of, that date, as well as any scheduled payments due
after but received before that date. The principal balance also excludes any
prepayments received on or prior to that date. The scheduled payments are
discounted monthly at the rate of ____% per annum.
The aggregate principal balance of the contracts expected to
be held by the owner trust as of any particular date is referred to as the
contract pool principal balance. The contract pool principal balance, as of the
initial cut-off date, is referred to as the initial contract pool principal
balance or the initial contract pool. The initial contract pool principal
balance is $____________. This amount is based upon the contract pool principal
balance determined as of the initial cut-off date, but also includes an amount
in respect of scheduled payments on the contracts due prior to, but not received
as of, the initial cut-off date. The initial cut-off date is ___________, ____
for all contracts transferred to the owner trust on the closing date for the
sale of the notes. The cut-off date will be the first day of the month of
transfer to the owner trust for each substitute contract.
Contract balance percentages and amounts discussed below are
based on the aggregate principal balance of the contracts being transferred to
the owner trust as of the initial cut-off date, unless a different date is
noted. Changes in the characteristics of the contract pool between the initial
cut-off date and the closing date will not affect more than __% of the initial
contract pool principal balance.
RISK FACTORS
You should carefully consider the following risk factors
before you invest in the notes. You should also carefully consider the risk
factors beginning on page 12 of the accompanying prospectus.
FUTURE CONTRACT DELINQUENCY AND LOSS EXPERIENCE OF THE CONTRACT POOL MAY VARY
SUBSTANTIALLY FROM THE ORIGINATORS' HISTORICAL EXPERIENCE
The depositor presents the historical contract delinquency and
loss experience of the originators' portfolios of contracts similar to those
being transferred to the owner trust under "The Contracts -- Statistics Relating
to Delinquencies and Defaults." However, the actual results for the owner
trust's contracts could be substantially worse. If so, you may not receive note
interest and principal payments in the amounts and at the times you expect.
S-12
<PAGE>
SOME NOTE CLASSES WILL BE ENTITLED TO INTEREST OR PRINCIPAL PAYMENTS BEFORE
OTHER NOTE CLASSES
The owner trust will pay interest, principal or both on some
classes of notes prior to paying interest, principal or both on other classes of
notes. The subordination of some classes of notes to others means that the
subordinated classes are more likely to suffer the consequences of delinquent
payments and defaults on the contracts than the classes having prior payment
rights. See "Description of the Notes and Indenture -- Distributions" and
"--Cash Collateral Account" in this prospectus supplement.
Moreover, the more senior classes of notes could lose the
credit enhancement provided by the more subordinate classes and the cash
collateral account if delinquencies and defaults on contracts increase and the
collections on contracts and amounts in the cash collateral account are
insufficient to pay even the more senior classes of notes.
ADVERSE EVENTS IN HIGH CONCENTRATION STATES MAY CAUSE INCREASED DEFAULTS AND
DELINQUENCIES
If adverse events or economic conditions were particularly
severe in a geographic region where there is a substantial concentration of
obligors, the amount of delinquent payments and defaults on the contracts may
increase. As a result, the overall timing and amount of collections on the
contracts held by the owner trust may differ from what you expect, and you may
experience delays or reductions in payments.
The following are the approximate percentages of the initial
statistical contract pool principal balance of the owner trust's contracts whose
obligors are located in the following states:
___% in ____________,
___% in ____________,
___% in ___________,
___% in ___________, and
___% in ___________.
The remaining states accounted for ___% of the initial statistical contract pool
principal balance, and none of these remaining states accounted for more than
__% of the initial statistical contract pool principal balance.
The depositor does not know of any matters likely to increase
the rate of delinquencies or defaults in these states. [An example of an adverse
event specific to a geographic region is the possibility of a catastrophic
earthquake in California. An earthquake in California could have negative
regional economic repercussions and potentially cause obligors in that region to
delay or reduce their payments on contracts. Additionally, a substantial
downturn in the financial services industry, which is highly concentrated in the
states of New York and New Jersey, or in the oil and gas industry, which is
concentrated in the state of Texas, or in the
S-13
<PAGE>
tourism industry in the state of Florida, could reduce revenues for obligors in
those states and ultimately reduce the associated obligors' ability to make
timely payments on their related contracts.]
ADVERSE ECONOMIC CONDITIONS IN HIGH CONCENTRATION INDUSTRIES MAY CAUSE INCREASED
DEFAULTS AND DELINQUENCIES
If the industries in which there is a substantial
concentration of contracts experience adverse events or economic conditions, the
timing and amount of collections on the contracts held by the owner trust may
differ from what you expect. This could result in delays or reduced payments to
you. As of the initial cut-off date, of the statistical contract pool principal
balance, approximately
[____% related to equipment used in the services industry,
excluding medical and financial services,]
[____% related to the manufacturing industry,]
[____% related to the retail and wholesale trade industry,]
[___% related to equipment used in the transportation industry,]
[____% related to equipment used in the medical and healthcare
industry,]
[____% related to the financial services industry.]
While the depositor does not know of any industry conditions, practices or other
matters likely to increase the rate of delinquencies or defaults on contracts
with end-users in these industries, some of them may be adversely affected by
various economic conditions. For example, a rise in interest rates may weaken
the demand for construction services. Moreover, the retail trade industry is
dependent upon the level of consumer confidence and spending. Adverse
developments concerning these conditions will tend to increase the rate of
delinquencies and defaults by contract obligors in those industries. This, in
turn, could result in reductions of or delays in the collection of funds for
payment of the notes.
As shown in the table under the heading "Types of Obligor" in
the section titled "The Contracts," the depositor's records list ___% of the
statistical contract pool principal balance in the category of "Other" obligor.
The depositor notes that the collateral securing approximately ___% of the
statistical contract pool principal balance represents small ticket computer
equipment typically leased to small businesses. The remaining "Other" obligor
category represents approximately ___% of the statistical contract pool
principal balance. The depositor does not believe that any other industry
accounts for more than __% of the statistical contract pool principal balance.
However, the depositor has not analyzed this category to determine whether or
not the contracts included in it could be grouped into some other more specific
type of obligor category. Any contracts in this "Other" category that relate to
any particular industry would be subject to all economic and other risks
associated with that industry. Any adverse developments in that industry will
tend to increase the rate of delinquencies and
S-14
<PAGE>
defaults by contract obligors in that industry. This, in turn, could result in
reductions or delays in collection of funds for payment of the notes.
PRODUCT DEFECTS OR OBSOLESCENCE OR ADVERSE ECONOMIC EVENTS FOR TWO VENDORS
ACCOUNTING FOR HIGH PROPORTIONS OF THE CONTRACTS MAY CAUSE INCREASED DEFAULTS
AND DELINQUENCIES
Leases relating to products of ___________________., a leading
producer of ___________, accounted for approximately ____% of the statistical
contract pool principal balance calculated as of the initial cut-off date.
Leases relating to products of ___________________., a leading producer of
___________, accounted for approximately ____% of the statistical contract pool
principal balance calculated as of the initial cut-off date. Although the
depositor is unaware of conditions likely to increase the rate of defaults or
delinquencies on contracts pertaining to equipment produced by these [two]
vendors, some events concerning these vendors or their products could have that
effect. For example, if either of these vendors were to experience financial
difficulties, the obligors' payment performance with respect to the related
contracts may decline as the obligors may be less inclined to make payments on
contracts with respect to a vendor which is suffering financial difficulties.
Additionally, the occurrence of a substantial number of defects in products
produced by either of these vendors may result in decisions by the obligors on
the contracts relating to equipment that proved defective not to pay the
contract amounts, to pay late or to pay smaller amounts. This could result in
reductions of or delays in payments you expect on the notes. Moreover,
obsolescence of the products of either of these vendors could result in
prepayments of contracts that would cause the notes to be paid earlier than you
expect. No other single vendor originated more than __% of the statistical
contract pool principal balance as of the initial cut-off date.
PRODUCT DEFECTS OR OBSOLESCENCE OF TYPES OF EQUIPMENT ACCOUNTING FOR HIGH
PROPORTIONS OF THE CONTRACTS MAY CAUSE INCREASED DEFAULTS OR DELINQUENCIES
If the types of equipment in which contracts are concentrated
suffer unexpectedly high rates of defects or become obsolete, the obligors on
the contracts may default, pay late or pay less than the amounts owed on the
contracts. This could result in reductions of or delays in payments you expect
on the notes.
As of the initial cut-off date, of the statistical contract
pool principal balance, approximately
__% related to contracts involving [computer and point-of-sale
equipment], and
__% related to contracts involving [telecommunications] equipment.
The depositor does not believe that any other type of equipment accounts for
more than ___% of the statistical contract pool principal balance. However, as
shown in the table under the heading "Types of Equipment" in the section titled
"The Contracts," the depositor's records list ___% of the statistical contract
pool principal balance in the category of "Other" types of equipment. The
depositor has not analyzed this category to determine whether or not the
contracts included in it could be grouped into some other more specific type of
equipment category. Any contracts in this
S-15
<PAGE>
"Other" category that relate to any particular type of equipment would be
subject to all defect, obsolescence and other risks associated with that type of
equipment. Any adverse developments concerning that type of equipment will tend
to increase the rate of delinquencies and defaults by obligors on contracts
involving that type of equipment. This, in turn, could result in reductions or
delays in collection of funds for payment of the notes.
[THE OWNER TRUST'S NOT HAVING SECURITY INTERESTS IN COMPUTER SOFTWARE AND
SERVICES WILL LEAVE THE OWNER TRUST WITHOUT COLLATERAL FOR THE ASSOCIATED
CONTRACTS]
[The owner trust will have no security interest in computer
software and computer services contracts, which accounted for __% of the initial
statistical contract pool principal balance. If the obligor on this type of
contract fails to pay or is late in paying, the owner trust will have no
recourse to the software or services, as the case may be, underlying the
contracts. This increases the risk that the owner trust will be unable to pay or
will be late in paying the amounts you expect on the notes.]
THE OWNER TRUST
THE OWNER TRUST
The depositor created the owner trust on __________ under a
trust agreement, which the parties will amend and restate on the closing date
for the sale of the notes, between the depositor and the owner trustee.
Under a pooling and servicing agreement, dated as of
___________, among
the depositor,
the owner trust,
[CIT Financial USA], the servicer and the seller of contracts
to the depositor,
the depositor will transfer all of the contracts and the related security
interests to the owner trust. As noted in "The Contracts -- Software and
Services" in the accompanying prospectus, some transferred contracts will not
have associated security interests.
The owner trust will issue an equity certificate, representing
the beneficial ownership interest in the owner trust, to the depositor. The
equity certificate will be entitled to any excess amount available on any
payment date after reimbursement of servicer advances and payment of servicing
fees, principal and interest then due and payable on the notes and amounts then
due and payable in connection with the cash collateral account. See oDescription
of the Notes and Indenture -- Distributionso in this prospectus supplement. The
depositor is not offering and selling the equity certificate under this
prospectus supplement and the accompanying prospectus.
S-16
<PAGE>
THE INDENTURE
Under an indenture dated as of [__________, 20__] between the
owner trust and [_________], as indenture trustee, the indenture trustee will
authenticate and deliver the notes.
CAPITALIZATION OF THE OWNER TRUST
If the issuance and sale of the notes had taken place on the
initial cut-off date, the capitalization of the owner trust on that date would
have consisted of notes with an aggregate principal amount of $___________ and
an equity certificate.
THE OWNER TRUSTEE
[_________] will be the owner trustee under the trust
agreement. The owner trustee is a national banking association and its principal
offices are located at [_________].
THE CONTRACTS
DESCRIPTION OF THE CONTRACTS
All of the contracts are commercial, rather than consumer,
leases, loans or agreements. See "The Contracts" in the accompanying prospectus.
STATISTICS RELATING TO THE INITIAL CUT-OFF DATE CONTRACT POOL
The following tables set forth the characteristics of the
contracts as of the initial cut-off date and are computed using the Statistical
Discount Rate of ___%. Since the Discount Rate is dependent on the note interest
rates, the depositor expects the discount rate at pricing to be slightly
different from the Statistical Discount Rate. While the statistical distribution
of the collateral characteristics as of the closing date calculated at the
Discount Rate (determined at pricing) will vary somewhat from the statistical
distribution of such characteristics as of the initial cut-off date calculated
at the Statistical Discount Rate as presented in this prospectus supplement,
such variance is not expected to be material. The percentages and balances set
forth in each of the following tables may not total due to rounding.
COMPOSITION OF THE INITIAL CUT-OFF DATE CONTRACT POOL
<TABLE>
<CAPTION>
AVERAGE
WEIGHTED WEIGHTED STATISTICAL
INITIAL AVERAGE AVERAGE CONTRACT POOL
STATISTICAL ORIGINAL REMAINING PRINCIPAL
NUMBER OF CONTRACT POOL TERM TERM BALANCE
CONTRACTS BALANCE (RANGE) (RANGE) (RANGE)
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
_____ $__________ ___ months ___ months $_____
(__ months to (__ months to ($___ to
___ months) ___ months) $__________)
</TABLE>
S-17
<PAGE>
TYPE OF CONTRACTS
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TYPE OF CONTRACT CONTRACTS CONTRACTS BALANCE BALANCE
------------------------------------ ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C>
True Leases......................... _____ __ $_________ ___
Finance Leases...................... _____ __ _________ ___
Loans and other financing
arrangements..................... __ _________ ___
--------- ------------ ----------- -------------
Total.......................... 100.00% 100.00%
--------- ------------ ----------- -------------
--------- ------------ ----------- -------------
</TABLE>
GEOGRAPHICAL DIVERSITY
(BASED ON OBLIGOR BILLING ADDRESS)
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
Alabama.......................... % $ %
Alaska...........................
Arizona..........................
Arkansas.........................
California.......................
Colorado.........................
Connecticut......................
Delaware.........................
District of Columbia.............
Florida..........................
Georgia..........................
Hawaii...........................
Idaho............................
Illinois.........................
Indiana..........................
Iowa.............................
Kansas...........................
Kentucky.........................
Louisiana........................
Maine............................
Maryland.........................
Massachusetts....................
Michigan.........................
Minnesota........................
Mississippi......................
Missouri.........................
Montana..........................
Nebraska.........................
Nevada...........................
New Hampshire....................
New Jersey.......................
New Mexico.......................
New York.........................
North Carolina...................
North Dakota.....................
Ohio.............................
</TABLE>
S-18
<PAGE>
GEOGRAPHICAL DIVERSITY
(BASED ON OBLIGOR BILLING ADDRESS)
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
Oklahoma.........................
Oregon...........................
Pennsylvania.....................
Rhode Island.....................
South Carolina...................
South Dakota.....................
Tennessee........................
Texas............................
Utah.............................
Vermont..........................
Virginia.........................
Washington.......................
West Virginia....................
Wisconsin........................
Wyoming..........................
----------- -------------- ----------- -------------
Total...................... 100.00% $ 100.00%
----------- -------------- ----------- -------------
----------- -------------- ----------- -------------
</TABLE>
PAYMENT STATUS
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
DAYS DELINQUENT CONTRACTS CONTRACTS BALANCE BALANCE
--------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
Current, including 1 to 30 day
delinquent contracts............. % $ %
31-60 days delinquent...............
----------- -------------- ----------- -----------
Total.......................... 100.00% $ 100.00%
----------- -------------- ----------- -----------
----------- -------------- ----------- -----------
</TABLE>
TYPES OF EQUIPMENT
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TYPE OF EQUIPMENT CONTRACTS CONTRACTS BALANCE BALANCE
----------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
Computer & Point-of Sale............ % $ %
Telecommunications..................
Medical/Healthcare..................
Automotive Diagnostic
Equipment........................
General Office Equipment............
Other...............................
Construction........................
Computer Software...................
Manufacturing.......................
Printing............................
Transportation......................
Commercial/Retail Fixtures..........
----------- -------------- ----------- -----------
Total.......................... 100.00% $ 100.00%
----------- -------------- ----------- -----------
----------- -------------- ----------- -----------
</TABLE>
S-19
<PAGE>
As shown in the table above, the depositor's records list __% of the initial
statistical contract pool principal balance in the category of "Other"
equipment. The depositor has not analyzed the contracts included in the category
"Other" in the above table to determine whether or not the contracts included in
it could be grouped into some other more specific type of equipment category.
CONTRACT PRINCIPAL BALANCE
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
-------------------------- -------- --------- ------- -------
<S> <C> <C> <C> <C>
0.01 to 5,000.00 ........ % $ %
5,000.01 to 10,000.00 ........
10,000.01 to 15,000.00 ........
15,000.01 to 25,000.00 ........
25,000.01 to 50,000.00 ........
50,000.01 to 100,000.00 ........
100,000.01 to 150,000.00 ........
150,000.01 to 250,000.00 ........
250,000.01 to 500,000.00 ........
500,000.01 to 1,000,000.00 ........
1,000,000.01 to 1,500,000.00 ........
1,500,000.01 to 2,500,000.00 ........
2,500,000.01 to 5,000,000.00 ........
5,000,000.01 to 14,127,084.70 ........
----------- --------- -------- ----------
Total.................................... 100.00% 100.00%
----------- --------- -------- ----------
----------- --------- -------- ----------
</TABLE>
REMAINING TERMS OF CONTRACTS
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
REMAINING TERMS OF CONTRACTS CONTRACTS CONTRACTS BALANCE BALANCE
---------------------------- -------- --------- ------- -------
(MONTHS)
<S> <C> <C> <C> <C>
1 - 12................................ % $ %
13 - 24................................
25 - 36................................
37 - 48................................
49 - 60................................
61 - 72................................
73 - 84................................
85 - 96................................
97 - 120.................................
----------- --------- -------- ----------
Total.............................. 100.00% $ 100.00%
----------- --------- -------- ----------
----------- --------- -------- ----------
</TABLE>
S-20
<PAGE>
TYPES OF OBLIGOR
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
STATISTICAL STATISTICAL
AGGREGATE % OF TOTAL CONTRACT POOL CONTRACT POOL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL
TYPE OF EQUIPMENT CONTRACTS CONTRACTS BALANCE BALANCE
----------------- --------- --------- ------- -------
<S> <C> <C> <C> <C>
Service Organizations............... % $ %
Manufacturing.......................
Retail & Wholesale..................
Transportation......................
Medical/Healthcare..................
Other...............................
Financial Services..................
Construction........................
Printing & Copy Centers.............
Government..........................
Resources...........................
Machine Tools.......................
---------- ---------- --------- --------
Total.......................... 100.00% $ 100.00%
---------- ---------- --------- --------
---------- ---------- --------- --------
</TABLE>
As shown in the table above, the depositor's records list ___% of the initial
statistical contract pool principal balance in the category of "Other" types of
obligor. The depositor notes that the collateral securing approximately ___% of
the statistical contract pool principal balance represents small ticket computer
equipment typically leased to small businesses. The remaining "Other" obligor
category represents approximately ___% of the initial statistical contract pool
principal balance. The depositor has not analyzed this category to determine
whether or not the contracts included in it could be grouped into some other
more specific type of obligor category.
OBLIGOR CONCENTRATION
<TABLE>
<CAPTION>
AGGREGATE INITIAL STATISTICAL % OF INITIAL STATISTICAL
OBLIGORS (INCLUDING CONTRACTS NUMBER OF CONTRACT POOL CONTRACT POOL PRINCIPAL
SECURING VENDOR LOANS) CONTRACTS PRINCIPAL BALANCE BALANCE
----------------------------- --------- -------- -------
<S> <C> <C> <C>
Top 5............................... $ __%
</TABLE>
STATISTICS RELATING TO DELINQUENCIES AND DEFAULTS
The following table sets forth the delinquency experience at
December 31 for the years ____ to ___, of the portfolios of receivables similar
to and including the contracts originated and serviced by the originators. The
originators listed on page S-_ used the underwriting standards described in the
accompanying prospectus under the section titled "The Originators --
Underwriting and Servicing -- Underwriting -- General" and under the section
titled "The Seller and Originators" in this prospectus supplement for all of
these receivables. For these purposes, a "delinquency" generally means that the
obligor on the contract has failed to make a required scheduled payment in an
amount equal to at least __% of the required scheduled payment within 30 days of
the due date. For these purposes, any payment made by the obligor on
S-21
<PAGE>
a contract subsequent to the required payment date is applied to the earliest
payment which was unpaid. Contracts included in the pool to be securitized are
no more than 60 days delinquent as of the initial cut-off date. These statistics
are not necessarily indicative of the future performance of the contracts.
Depending on the originator and the period, the statistics for the following
table are based on the net investment, gross receivable or principal balance of
the contracts. Net investment is the sum of all payments plus any expected
equipment residual value under a contract discounted to present value using the
contract's implicit interest rate. The gross receivable is the undiscounted sum
of all payments under a contract. The principal balance is the present value of
the scheduled payments of a contract discounted at the applicable securitization
pool discount rate. The delinquency percentage is calculated by dividing the
dollar amount of the delinquent contract balance by the total contract balance.
CONTRACT DELINQUENCIES
<TABLE>
<CAPTION>
PERCENTAGE OF CONTRACT BALANCES
WHICH WERE DELINQUENT
-------------------------------------------------------
CONTRACT 31 TO 60 61 TO 90 OVER 60
BALANCE DAYS DAYS DAYS TOTAL
------- ---- ---- ---- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
12/31/199_............................ $
12/31/199_............................ $
12/31/199_............................ $
12/31/199_............................ $
12/31/200_............................ $
</TABLE>
LOSSES AND RECOVERIES
The following table shows statistics for gross losses and
losses net of recoveries on defaulted contracts similar to the contracts
originated and serviced by the originators during the twelve-month period ending
December 31 in each of the past five years. Gross losses means total losses
before recoveries measured against the net investment or principal balance of
the contracts, gross of any allowance for losses. Net losses means losses after
recoveries measured against the net investment or principal balance of the
contracts, gross of any allowance for losses. Loss amounts are measured based on
a rolling 12 month basis. These statistics are not necessarily indicative of the
future performance of the contracts.
<TABLE>
<CAPTION>
AGGREGATE GROSS LOSSES AS A NET LOSSES AS A
INVESTMENT OF PERCENTAGE OF NET PERCENTAGE OF NET
CONTRACTS INVESTMENT INVESTMENT
--------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
12/31/____.......................................
12/31/____.......................................
12/31/____.......................................
12/31/____.......................................
12/31/____.......................................
</TABLE>
S-22
<PAGE>
The data presented in the preceding tables are for
illustrative purposes only. Such data relate to the performance of the portfolio
of receivables, similar to the contracts, originated and serviced by the
originators, and are not historical data regarding the contracts alone, since
the contracts constitute only a portion of the originators' portfolio.
____ MONTHS ENDED __/__ VERSUS ________ MONTHS ENDED __/__
Contract delinquencies [increased/decreased] from ___% at
_________ to ___% as of _________.
Net losses as a percentage of net investment
[increased/decreased] from ____% at _____, ___ to __% at _________, ___.
____ MONTHS ENDED __/__ VERSUS ________ MONTHS ENDED __/__
Contract delinquencies [increased/decreased] from ___% at
_________ to ___% as of _________.
Net losses as a percentage of net investment
[increased/decreased] from ____% at _____, ___ to __% at _________, ___.
____ MONTHS ENDED __/__ VERSUS ________ MONTHS ENDED __/__
Contract delinquencies [increased/decreased] from ___% at
_________ to ___% as of _________.
Net losses as a percentage of net investment
[increased/decreased] from ____% at _____, ___ to __% at _________, ___.
____ MONTHS ENDED __/__ VERSUS ________ MONTHS ENDED __/__
Contract delinquencies [increased/decreased] from ___% at
_________ to ___% as of _________.
Net losses as a percentage of net investment
[increased/decreased] from ____% at _____, ___ to __% at _________, ___.
S-23
<PAGE>
SCHEDULED CASHFLOWS FROM THE CONTRACTS
<TABLE>
<CAPTION>
COLLECTION SCHEDULED COLLECTION SCHEDULED COLLECTION SCHEDULED
PERIOD CASHFLOW PERIOD CASHFLOW PERIOD CASHFLOW
------ -------- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
September 2000......... $ $ $
October 2000...........
November 2000..........
December 2000..........
January 2001...........
February 2001..........
March 2001.............
April 2001.............
May 2001...............
June 2001..............
July 2001..............
August 2001............
September 2001.........
October 2001...........
November 2001..........
December 2001..........
January 2002...........
February 2002..........
March 2002.............
April 2002.............
May 2002...............
June 2002..............
July 2002..............
August 2002............
September 2002.........
October 2002...........
November 2002..........
December 2002..........
January 2003...........
February 2003..........
March 2003.............
April 2003.............
May 2003...............
June 2003..............
July 2003..............
August 2003............
September 2003.........
October 2003...........
November 2003..........
December 2003..........
</TABLE>
S-24
<PAGE>
WEIGHTED AVERAGE LIFE OF THE NOTES
The rate of payments on contracts will directly affect
the rate of note principal payments,
the aggregate amount of each note interest payment, and
the yield to maturity of the notes.
The payments on the contracts may be in the form of payments scheduled to
be made under the terms of the contracts, prepayments or liquidations due to
default, casualty and other events which cannot be predicted. CIT Financial USA
may purchase contracts from the owner trust if the contracts were ineligible for
transfer at the time of transfer to the owner trust. Any payments for these
reasons, other than scheduled payments, may result in distributions to you of
amounts which would otherwise have been distributed over the remaining term of
the contracts. Each prepayment, liquidation or repurchase of a contract, if the
contract is not replaced by the depositor with a comparable substitute contract
as described under "The Contracts -- Substitution of Contracts" in the
accompanying prospectus, will shorten the weighted average remaining term of the
contracts and the weighted average life of the notes. See "Risk Factors --
Contract Prepayments, Ineligibility or Default May Cause Earlier Repayment of
the Notes Than You Expect and You May Not be Able to Find Investments with the
Same Yield as the Notes at the Time of Repayment" in the accompanying
prospectus.
The following charts set forth the percentage of the initial principal
amount of each class of notes which would be outstanding on the payment dates
set forth below assuming the conditional prepayment rates ("CPR") indicated in
the chart. This information is hypothetical. The CPR assumes that a fraction of
the outstanding contracts is prepaid on each payment date, which implies that
each contract in the pool of contracts is equally likely to prepay. This
fraction, expressed as a percentage, is annualized to arrive at the CPR for the
contracts. The CPR measures prepayments based on the contract pool principal
balance, after the payment of all payments scheduled to be made under the terms
of the contracts during each collection period. The CPR further assumes that all
contracts are the same size and amortize at the same rate. The CPR also assumes
that each contract will be either paid as scheduled or prepaid in full. The
amounts set forth below are based upon the timely receipt of scheduled monthly
contract payments, and assume that:
the seller exercises its option to cause a redemption of the notes when
the aggregate note principal balance is less than 10% of the initial
contract pool principal balance, and
the closing date for the sale of the contracts to the owner trust is
________, ___.
These tables are based upon the statistical contract pool principal balance
determined using the Statistical Discount Rate. In addition, it is assumed for
the purposes of these tables only that the owner trust issues the notes in the
following initial principal amounts:
S-25
<PAGE>
<TABLE>
<CAPTION>
CLASS INITIAL PRINCIPAL AMOUNT
----- ------------------------
<S> <C>
[ ]..............................................
[ ]..............................................
[ ]..............................................
[ ]..............................................
[ ]................................................
[ ]................................................
</TABLE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS A-1 NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date......................................... 100.00 100.00 100.00 100.00 100.00
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
</TABLE>
---------------------
Weighted Average Life to Call (in years).............
Weighted Average Life to Maturity (in years).........
S-26
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS A-2 NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date......................................... 100.00 100.00 100.00 100.00 100.00
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
</TABLE>
---------------------
Weighted Average Life to Call (in years)...................
Weighted Average Life to Maturity (in years)...............
S-27
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS A-3 NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date.........................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
[ ]................................
</TABLE>
---------------------
Weighted Average Life to Call (in years).............
Weighted Average Life to Maturity (in years).........
S-28
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS A-4 NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date........................................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
</TABLE>
---------------------
Weighted Average Life to Call (in years)............
Weighted Average Life to Maturity (in years)........
S-29
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS B NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date........................................ 100.00 100.00 100.00 100.00 100.00
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
</TABLE>
---------------------
Weighted Average Life to Call (in years)............
Weighted Average Life to Maturity (in years)........
S-30
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS C NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date........................................ 100.00 100.00 100.00 100.00 100.00
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
</TABLE>
---------------------
Weighted Average Life to Call (in years)............
Weighted Average Life to Maturity (in years)........
S-31
<PAGE>
PERCENTAGE OF THE INITIAL PRINCIPAL
OF THE CLASS D NOTES
<TABLE>
<CAPTION>
CPR
--------------------------------------------------
PAYMENT DATE 0% 4% 9% 14% 18%
------------ -- -- -- --- ---
<S> <C> <C> <C> <C> <C>
Closing Date........................................ 100.00 100.00 100.00 100.00 100.00
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
[ ]...............................
</TABLE>
---------------------
Weighted Average Life to Call (in years)............
Weighted Average Life to Maturity (in years)........
S-32
<PAGE>
DESCRIPTION OF THE NOTES AND INDENTURE
This section adds to the information in the accompanying prospectus under
the caption "Description of the Notes and Indenture." However, as these
statements are only summaries, you should read the pooling and servicing
agreement and the indenture. The depositor filed the forms of these documents as
exhibits to the registration statement it filed with the Securities and Exchange
Commission for the notes.
GENERAL
The notes will be issued under an indenture between the owner trust and the
indenture trustee.
The owner trust will issue [seven] classes of notes, consisting of [four]
classes of senior notes, designated as the
Class [A-1] Notes;
Class [A-2] Notes;
Class [A-3] Notes; and
Class [A-4] Notes.
These are referred to in this document as "Class A Notes." The owner trust will
also issue three classes of subordinate notes, designated as the Class B Notes,
the Class C Notes and the Class D Notes. The Class A, Class B and Class C Notes
are the "Subordinate Classes."
Investors may purchase the notes in book-entry form in minimum
denominations of $1,000 and in integral multiples of $1 in excess thereof. Each
class will initially be represented by one or more notes registered in the name
of the nominee of The Depository Trust Company. The owner trust will pay note
interest and principal on the __ day of each month, or, if not a business day,
the next succeeding business day, commencing ___________, to registered
noteholders as of the related record date. So long as the notes remain in
book-entry form, the record date for any payment date will be the business day
immediately preceding the payment date. If the notes are no longer in book-entry
form, the record date will be the last business day of the calendar month
immediately preceding the payment date. However, the owner trust will make the
final payment on the notes only upon presentation and surrender of the notes to
the indenture trustee. The owner trust will make all payments on the notes in
immediately available funds. See "Description of the Notes and Indenture
--Book-Entry Registration" in the accompanying prospectus.
S-33
<PAGE>
DEPOSITS
The pooling and servicing agreement will permit the servicer to make
deposits into the collection account once each month on the deposit date
following the collection period for that month so long as
the servicer or the direct or indirect parent of the servicer has and
maintains a short-term debt rating of at least A-1 by Standard & Poor's
and a short-term debt rating of at least P-1 by Moody's; or
the servicer obtains a letter of credit, surety bond or insurance
policy which satisfies the requirements in the pooling and servicing
agreement, under which demands for payment may be made to secure timely
remittance of monthly collections to the collection account and the
trustees are provided with a letter from each rating agency to the
effect that the utilization of such alternative remittance schedule
will not result in a qualification, reduction or withdrawal of its
then-current rating of the notes.
As of the date of this prospectus supplement, CIT Financial USA, as servicer,
will be permitted to remit collections to the collection account on a monthly
basis pursuant to the first alternative listed above. In the event that the
servicer is permitted to make remittances of collections to the collection
account on a monthly basis pursuant to the second alternative listed above, the
pooling and servicing agreement will be modified, to the extent necessary,
without the consent of any noteholders. Pending each monthly deposit into the
collection account, collections on the contracts may be invested by the servicer
at its own risk and for its own benefit and will not be segregated from its own
funds. See "Risk Factors -- Commingling of Collections Could Result in Reduced
Payments to You " in the accompanying prospectus.
DISTRIBUTIONS
The owner trust will pay note principal and interest on each payment date
from the Available Pledged Revenues for the payment date, as well as amounts
permitted to be withdrawn from the cash collateral account. See "Cash Collateral
Account" below. The "Available Pledged Revenues" as of any payment date are the
sum of
(a) the following amounts on deposit in the collection account which
were received by the servicer during the related collection period:
(1) scheduled contract payments, except payments in respect of
taxes,
insurance premium reimbursements,
security deposits,
late charges,
documentation fees,
extension fees,
administrative charges, or
S-34
<PAGE>
maintenance premiums,
(2) prepayments of contracts, and
(3) proceeds of liquidating defaulted contracts,
(b) the purchase price paid by the seller in repurchasing ineligible
contracts from the owner trust,
(c) the amounts that the seller paid to purchase the contracts in
exercise of its option to do so when the aggregate note principal
amount is reduced to less than 10% of the initial contract pool
principal balance and that were on deposit in the collection
account as of the business day before the payment date,
(d) any servicer advances on deposit in the collection account as of
the immediately preceding deposit date,
(e) investment earnings on amounts held in the collection account and
note distribution account, and
(f) to the extent necessary to pay interest, amounts of the type
described in (a) above that the owner trust received after the end
of the related collection period.
However, Available Pledged Revenues do not include any amount allocable
to the depositor as representing the residual value of equipment subject to a
lease.
On each payment date, the servicer will direct the indenture trustee to
apply Available Pledged Revenues to the following payments in the following
order of priority:
(1) reimbursement of servicer advances;
(2) the servicing fee;
(3) interest on the notes in the following order of priority:
(a) interest on the [Class A-1, A-2, A-3 and A-4] Notes, including
any overdue interest, allocated pro rata based on the
respective principal amounts of the [Class A-1, A-2, A-3 and
A-4] Notes,
(b) interest on the Class [B] Notes, including any overdue
interest,
(c) interest on the Class [C] Notes, including any overdue
interest,
(d) interest on the Class [D] Notes, including any overdue
interest,
(4) principal on the notes in the amounts and priority described under
"Principal" below;
(5) any amount necessary to increase the cash collateral account
balance to its required level; amounts payable in connection with
the cash collateral account; and
S-35
<PAGE>
(6) any remainder to the holder of the equity certificate.
The owner trust is to make payments first from the Available Pledged Revenues,
and second, but only as to amounts described in clauses (3) and (4) immediately
above, from amounts permitted to be withdrawn from the cash collateral account
as described under "Cash Collateral Account" below.
INTEREST
The priorities of interest payments are set forth under "Distributions"
above.
The interest rate for each class is set forth on the cover page of this
prospectus supplement.
The owner trust will pay interest on each class of notes from and including
the closing date to but excluding the first payment date, and after that date
for each successive interest period.
INTEREST PERIODS:
Interest on the notes will accrue in the following manner:
<TABLE>
<CAPTION>
DAY COUNT
CLASS FROM (INCLUDING) TO (EXCLUDING) CONVENTION
----- --------------- -------------- -----------
<S> <C> <C> <C>
A-1 Prior Payment Date Current Payment Date Actual/360
A-2
A-3
A-4
B
C
D
</TABLE>
If on any payment date the owner trust does not have sufficient funds,
after payment of reimbursement of servicer advances and the servicing fee, to
make a full payment of interest on any class of notes, the amount of the
shortfall will be carried forward and, together with interest on the shortfall
amount at the applicable interest rate for that class, added to the amount of
interest the affected class of noteholders will be entitled to receive on the
next payment date.
PRINCIPAL
This section gives only an overview of how the owner trust will pay
principal. The depositor recommends that you read this section in connection
with the more detailed terms set forth in the pooling and servicing agreement
included as an exhibit to the registration statement filed with the Securities
and Exchange Commission for the notes.
S-36
<PAGE>
OVERVIEW OF PRINCIPAL DISTRIBUTIONS
The principal required to be paid on the notes on each payment date will be
the amount necessary to pay the notes down so that their aggregate principal
balance equals the contract pool principal balance as of the last day of the
immediately preceding calendar month. This amount will be allocated among the
various classes of notes according to the priorities described in this section.
first, the Class A Principal Payment Amount will be paid to the Class
A-1, Class A-2, Class A-3 and Class A-4 Notes, sequentially in that
order;
second, the Class B Principal Payment Amount will be paid to the Class
B Notes;
third, the Class C Principal Payment Amount will be paid to the Class C
Notes; and
fourth, the Class D Principal Payment Amount will be paid to the Class
D Notes.
Subject to the Class A-1 Notes receiving the Class A-1 Scheduled Principal
Balance and the operation of the floors for each of the Subordinate Classes, the
owner trust will pay principal proportionately, among the Class A Notes as a
group, the Class B Notes, the Class C Notes and the Class D Notes, in the
priorities listed above. However, Class B, Class C and Class D notes will not
receive principal pro rata while the Class A-1 Notes are outstanding unless
there are sufficient prepayments or payments. In addition, the principal paydown
rules incorporate a concept of a floor on each class of the Subordinate Classes,
which means that the Subordinate Classes, for so long as any notes senior to
that class are outstanding, cannot be paid an amount of principal which would
reduce that Subordinate Class below its floor principal amount. If a Subordinate
Class is at its floor level, that Subordinate Class is "locked out" from
receiving further principal payments, with the additional effect of reallocating
the principal that would otherwise have been paid to that Subordinate Class to
the most senior class then outstanding. The levels of the floors are not static,
but are subject to increase if the owner trust experiences contract pool losses
that cannot be funded from the current period's Available Pledged Revenues or
the cash collateral account. This increase in the level of the floors tends to
"lock out" the Subordinate Classes earlier, which accelerates the payment of the
reallocated principal to the senior classes. If unfunded losses become severe
and the cash collateral account is depleted, the unfunded loss amount could be
so large that the principal paydown rules result in a sequential-pay senior
subordinated structure among the various note classes, with no principal being
paid to a Subordinate Class unless the note principal amount of each class
senior to it has been paid in full.
BEFORE AN EVENT OF DEFAULT
The chart on the following page summarizes how principal will be paid on
the notes before any event of default. The section headed "Definitions
Concerning Principal Payments" below defines various terms relating to the
payment of principal.
S-37
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
CLASS PRINCIPAL PAYMENTS
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
Class A-1 Begins receiving principal on first payment date
Receives the Class A Principal Payment Amount until paid in full
May also receive principal payments reallocated away from the Subordinate Classes through
the operation of the floors
-----------------------------------------------------------------------------------------------------------------------
Class A-2 Begins receiving principal once Class A-1 is paid in full
Receives the Class A Principal Payment Amount until paid in full
May also receive principal payments reallocated away from the Subordinate Classes
through the operation of the floors
-----------------------------------------------------------------------------------------------------------------------
Class A-3 Begins receiving principal once Class A-2 is paid in full
Receives the Class A Principal Payment Amount until paid in full
May also receive principal payments reallocated away from the Subordinate Classes
through the operation of the floors
-----------------------------------------------------------------------------------------------------------------------
Class A-4 Begins receiving principal once Class A-3 is paid in full
Receives the Class A Principal Payment Amount until paid in full
May also receive principal payments reallocated away from the Subordinate Classes
through the operation of the floors
-----------------------------------------------------------------------------------------------------------------------
Class B Begins receiving principal on first payment date
Receives the Class B Principal Payment Amount until paid in full
Through the operation of its floor, Class B's principal payments are subject to
reallocation for the benefit of Class A
May also receive principal payments reallocated away from Class C and Class D
through the operation of the floors
-----------------------------------------------------------------------------------------------------------------------
Class C Begins receiving principal on first payment date
Receives the Class C Principal Payment Amount until paid in full
Through the operation of its floor, Class C's principal payments are subject to
reallocation for the benefit of Class A and Class B
May also receive principal payments reallocated away from Class D
through the operation of the floors
-----------------------------------------------------------------------------------------------------------------------
Class D Begins receiving principal on first payment date
Receives the Class D Principal Payment Amount until paid in full
Through the operation of its floor, Class D's principal payments are subject to
reallocation for the benefit of Class A, Class B and Class C
=======================================================================================================================
</TABLE>
DETAILED PRINCIPAL DISTRIBUTION RULES
The priority of principal payments, i.e., the Total Principal Payment
Amount, will be in the following order:
(1) the Class A Principal Payment Amount to the Class A-1, Class A-2, Class
A-3 and Class A-4 Notes in that order (with each successive class not
being entitled to principal until the prior class' principal amount is
reduced to zero); and
(2) the Class B Principal Payment Amount to the Class B noteholders;
S-38
<PAGE>
(3) the Class C Principal Payment Amount to the Class C noteholders;
(4) the Class D Principal Payment Amount to the Class D noteholders; and
(5) any Reallocated Principal, sequentially to the Class A-1, Class A-2,
Class A-3, Class A-4, Class B, Class C and Class D Notes.
PRINCIPAL DISTRIBUTIONS AFTER AN EVENT OF DEFAULT
After an event of default occurs, all principal distributions among the
classes will be made as follows:
<TABLE>
<CAPTION>
===================================================================================================
CLASS PRINCIPAL PAYMENTS
---------------------------------------------------------------------------------------------------
<S> <C>
Class A-1 100% of the Total Principal Payment Amount until paid in full
---------------------------------------------------------------------------------------------------
Class A-2 Pro Rata Share of the Total Principal Payment Amount until paid in full
Class A-3 and
Class A-4
---------------------------------------------------------------------------------------------------
Class B 100% of the Total Principal Payment Amount until paid in full
---------------------------------------------------------------------------------------------------
Class C 100% of the Total Principal Payment Amount until paid in full
---------------------------------------------------------------------------------------------------
Class D 100% of the Total Principal Payment Amount until paid in full
===================================================================================================
</TABLE>
Also, any Reallocated Principal will be allocated sequentially to the Class
A-1, Class A-2, Class A-3, Class A-4, Class B, Class C and Class D noteholders
in that order.
DEFINITIONS CONCERNING PRINCIPAL PAYMENTS
The CLASS A PRINCIPAL PAYMENT AMOUNT is equal to:
(1) as to any payment date until the payment date on which the Principal
Amount of the Class A-1 Notes has been reduced to zero, the greater of
(i) the excess of (x) the Principal Amount of the Class A-1 Notes over
(y) the Class A-1 Scheduled Principal Balance and (ii) the excess of
(x) the sum of the Principal Amount of the Class A-1, Class A-2, Class
A-3 and Class A-4 Notes over (y) the Class A Target Principal Amount;
and
(2) for any subsequent payment date, the excess of (x) the sum of the
Principal Amount of the Class A-2, Class A-3 and Class A-4 Notes over
(y) the Class A Target Principal Amount.
However, the Class A Principal Payment Amount may not exceed the Principal
Amount of the Class A Notes.
The CLASS A PERCENTAGE will be ____%.
S-39
<PAGE>
The CLASS A TARGET PRINCIPAL AMOUNT for any payment date will be the
product of (a) the Class A Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding the
payment date.
The CLASS A-1 SCHEDULED PRINCIPAL BALANCE on each payment date is set forth
in the following table:
<TABLE>
<CAPTION>
CLASS A-1
SCHEDULED
PAYMENT DATE PRINCIPAL BALANCE
------------ -----------------
<S> <C>
$
$
$
$
$
$
$
</TABLE>
The CLASS B FLOOR for any payment date will equal (1) __% of the initial
contract pool principal balance, plus (2) the Unfunded Loss Amount, if any, for
that payment date, minus (3) the sum of the Principal Amount of the Class C
Notes and the Principal Amount of the Class D Notes, prior to giving effect to
any payments of principal on the Class C or Class D Notes on that payment date,
and the amount on deposit in the cash collateral account after giving effect to
withdrawals to be made on the payment date. However, the Class B Floor may not
be greater than the Principal Amount of the Class B Notes or less than zero.
The CLASS B PERCENTAGE will be __%.
The CLASS B PRINCIPAL PAYMENT AMOUNT will equal the lesser of (1) the
excess, if any, of (a) the Total Principal Payment Amount over (b) the Class A
Principal Payment Amount and (2) the excess, if any, of (a) the Principal Amount
of the Class B Notes over (b) the greater of (x) the Class B Target Principal
Amount and (y) the Class B Floor. However, the Class B Principal Payment Amount
may not exceed the Principal Amount of the Class B Notes.
The CLASS B TARGET PRINCIPAL AMOUNT for any payment date will be the
product of (a) the Class B Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding the
payment date.
The CLASS C FLOOR for any payment date will equal (1) __% of the initial
contract pool principal balance, plus (2) the Unfunded Loss Amount, if any, for
that payment date, minus (3) the sum of the Principal Amount of the Class D
Notes, prior to giving effect to any payments of principal on the Class D Notes
on the payment date, and the amount on deposit in the cash collateral account
after giving effect to withdrawals to be made on that payment date. However,
S-40
<PAGE>
the Class C Floor may not be greater than the Principal Amount of the Class
C Notes or less than zero. Furthermore, if the Principal Amount of the Class B
Notes immediately prior to any payment date is less than or equal to the Class B
Floor for that payment date, the Class C Floor for that payment date will equal
the Principal Amount of the Class C Notes immediately prior to that payment
date.
The CLASS C PERCENTAGE will be ___%.
The CLASS C PRINCIPAL PAYMENT AMOUNT will equal the lesser of (1) the
excess, if any, of (a) the Total Principal Payment Amount over (b) the sum of
the Class A Principal Payment Amount and the Class B Principal Payment Amount
and (2) the excess, if any, of (a) the Principal Amount of the Class C Notes
over (b) the greater of (x) the Class C Target Principal Amount and (y) the
Class C Floor. However, the Class C Principal Payment Amount may not exceed the
Principal Amount of the Class C Notes.
The CLASS C TARGET PRINCIPAL AMOUNT for any payment date will be the
product of (a) the Class C Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding the
payment date.
The CLASS D FLOOR for any payment date will equal (1) __7% of the initial
contract pool principal balance, plus (2) the Unfunded Loss Amount, if any, for
that payment date, minus (3) the amount on deposit in the cash collateral
account after giving effect to withdrawals to be made on that payment date.
However, the Class D Floor may not be greater than the Principal Amount of the
Class D Notes or less than zero. Furthermore, if the Principal Amount of the
Class C Notes on any payment date is less than or equal to the Class C Floor on
that payment date, the Class D Floor for that payment date will equal the
Principal Amount of the Class D Notes immediately prior to that payment date.
The CLASS D PERCENTAGE will be __%.
The CLASS D PRINCIPAL PAYMENT AMOUNT will equal the lesser of (1) the
excess, if any, of (a) the Total Principal Payment Amount over (b) the sum of
the Class A Principal Payment Amount, the Class B Principal Payment Amount and
the Class C Principal Payment Amount and (2) the excess, if any, of (a) the
Principal Amount of the Class D Notes over (b) the greater of (x) the Class D
Target Principal Amount and (y) the Class D Floor. However, the Class D
Principal Payment Amount may not exceed the Principal Amount of the Class D
Notes.
The CLASS D TARGET PRINCIPAL AMOUNT for any payment date will be the
product of (a) the Class D Percentage and (b) the contract pool principal
balance as of the last day of the collection period immediately preceding the
payment date.
The COLLECTION PERIOD for any payment date is the calendar month preceding
the month in which the payment date occurs.
A DEFAULTED CONTRACT as to any collection period is any contract (a) which
the servicer has determined is uncollectible in accordance with its credit and
collection policies and procedures, (b) as to which during the collection period
10% or more of a scheduled payment
S-41
<PAGE>
shall have become delinquent 180 days or more, or (c) as to which the
end-user has suffered an insolvency event.
The DISCOUNT RATE is calculated by taking the sum of (a) the weighted
average interest rate of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes and the Class D
Notes, each weighted by (1) their respective initial principal amount, and (2)
the expected weighted average life (under a __% CPR prepayment and no loss
scenario to optional redemption) of each class of notes, as applicable, and (b)
the servicing fee rate of 0.75% per annum.
PLEDGED REVENUES means the sum of:
all scheduled payments on the contracts received on or after the
cut-off date;
any prepayment received on the contracts on or after the cut-off date;
the purchase amount of any contracts purchased by the seller;
the amount paid by the depositor to purchase the contracts under its
option to purchase all contracts when the aggregate principal amount of
the notes is less than 10% of the initial contract pool principal
balance;
the liquidation proceeds received in respect of any contracts; and
any earnings on the investment of amounts credited to the collection
account and the note distribution account.
However, Pledged Revenues shall not include any amounts received with
respect to any residual value of leased equipment.
PRINCIPAL AMOUNT means, when used with respect to a class of notes, the
initial principal balance of the class set forth on the cover page of this
prospectus supplement, less the sum of all distributions previously made to the
class (and all amounts held on deposit for payment to that class) in respect of
principal.
The REALLOCATED PRINCIPAL for any payment date will equal the excess, if
any, of (1) the Total Principal Payment Amount, over (2) the sum of the Class A
Principal Payment Amount, the Class B Principal Payment Amount, the Class C
Principal Payment Amount and the Class D Principal Payment Amount.
The RELATED COLLECTION PERIOD PLEDGED REVENUE means as to any payment date,
the amount of Pledged Revenues in the collection account as of the business day
preceding the payment date which were received by the depositor during the
related collection period, including all liquidation proceeds as to Defaulted
Contracts, but not including the residual value of leased equipment except to
the extent guaranteed by a vendor or end-user.
S-42
<PAGE>
The TOTAL PRINCIPAL PAYMENT AMOUNT for any payment date is the excess of
(x) the aggregate note principal amount immediately prior to that payment date
over (y) the contract pool principal balance as of the last day of the
collection period immediately preceding that payment date. For this purpose, the
contract pool principal balance will be deemed to be zero on any payment date on
which the contract pool principal balance is less than $____________. The
contract principal balance of any contract which became a defaulted contract
during a given collection period or which was a contract subject to a warranty
claim which the depositor was obligated to purchase as of the end of a given
collection period will, for purposes of computing the Total Principal Payment
Amount and the requisite amount for the cash collateral account, be deemed to be
zero on and after the last day of the collection period.
The UNFUNDED LOSS AMOUNT for any payment date will equal any excess of:
(a) the remainder of
(1) the aggregate note principal amount, prior to giving effect to the
payment of principal on the notes on that payment date, minus
(2) the lesser of
(A) the contract pool principal balance as of the last day of the
collection period immediately preceding the preceding payment
date, minus the contract pool principal balance as of the last
day of the collection period immediately preceding the payment
date; or
(B) the Related Collection Period Pledged Revenue remaining after
payment of amounts owing to the servicer and note interest on
the payment date plus any withdrawal from the cash collateral
account for payment of note principal on the payment date,
over
(b) the contract pool principal balance as of the last day of the
related collection period.
CASH COLLATERAL ACCOUNT
The indenture trustee will establish the cash collateral account on or
prior to the closing date. It will be available to the indenture trustee for the
benefit of the noteholders. The depositor will initially fund the cash
collateral account in the amount of $_________ (__)% of the initial contract
pool principal balance), which may include proceeds of loans from third party
lenders to the owner trust under a cash collateral account loan agreement.
Available amounts on deposit from time to time in the cash collateral account
shall be used to fund the amounts specified below in the following order of
priority to the extent that amounts on deposit in the collection account, after
payment of servicer fees and reimbursement of servicer advances, as of any
deposit date are insufficient:
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<PAGE>
(1) to pay interest on the notes in the order of priority described
under "Distributions" above;
(2) to pay any "principal deficiency amount," which is equal to the
excess, if any, of
(A) the aggregate principal amount of the notes, after giving
effect to all distributions of principal from Available Pledged
Revenues on the payment date, over
(B) the contract pool principal balance as of the last day of the
related collection period; and
(3) to pay principal on the notes at the applicable stated maturity
dates and on the first payment date on which the contract pool
principal balance is less than $10,000,000.
To the extent that the amount on deposit in the cash collateral account as
of any payment date is less than the required amount, any remaining amount
available in the collection account, after payment of any reimbursement of
servicer advances, the servicing fee, interest and principal then due and
payable on the notes, as described under " -- Distributions" above, will be
transferred to the cash collateral account to restore this deficiency.
The required amount of the cash collateral account will be, for any payment
date, the greater of:
(a) the sum of
(1) ____% of the contract pool principal balance as of the last day of
the related collection period, plus
(2) the excess, if any, of
(A) the sum of the principal amounts of the notes, after giving
effect to all distributions of principal on the payment date,
over
(B) the contract pool principal balance as of the last day of the
related collection period, and
(b) $_________ (__)% of the initial contract pool principal balance).
However, in no event will the required amount exceed the aggregate
principal amount of the notes.
The servicer or the indenture trustee acting at the direction of the
servicer will release any amount on deposit in the cash collateral account in
excess of the required amount and all net investment earnings on funds in the
cash collateral account. The indenture trustee will pay these amounts to or upon
the servicer's order, and they will not be available to make payments on the
notes.
S-44
<PAGE>
The cash collateral account must be maintained with a qualified
institution. Funds on deposit in the cash collateral account will be invested in
eligible investments, as defined under "Description of the Notes and Indenture
-- Trust Accounts" in the accompanying prospectus.
OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF NOTES
The seller may purchase all of the contracts on any payment date on or
following the date on which the aggregate note principal amount at the time is
less than __% of the initial contract pool principal balance. The purchase price
that the seller would pay in connection with a purchase shall be the sum of
the remaining principal amount of the notes, together with accrued
interest;
unreimbursed servicer advances and unpaid servicer fees; and
any other amounts payable at the time from Available Pledged Revenues;
minus
available amounts on deposit in the collection account.
If the seller does purchase the contracts, the notes shall be redeemed on
the payment date on which the purchase occurs. The redemption price will be the
principal amount of the notes redeemed plus accrued and unpaid interest on the
principal amount of each class of notes to but excluding the redemption date.
REPORTS TO NOTEHOLDERS
The servicer will furnish to the indenture trustee, and the indenture
trustee will include with each distribution, a statement in respect of the
related payment date. The statement shall set forth, among other things, all
information necessary to enable the indenture trustee to make the distribution
required for the notes and to reconcile all deposits to and withdrawals from
accounts. See "Description of the Notes and Indenture -- Reports to Noteholders"
in the accompanying prospectus. You will not receive reports directly from the
indenture trustee. The servicer will file the reports with the Securities and
Exchange Commission. However, in accordance with the Securities Exchange Act of
1934 and the rules and regulations of the Securities and Exchange Commission,
the owner trust expects that its obligation to file these reports will be
terminated at the end of [200_.]
SERVICING
The servicer will be responsible for
managing,
administering,
servicing, and
S-45
<PAGE>
making collections
on the contracts. Compensation to the servicer will include
(1) a monthly servicing fee, which will be payable to the servicer from the
amount available on each payment date, in an amount equal to the
product of one-twelfth of 0.75 percent per annum multiplied by the
contract pool principal balance determined as of the first day of the
related collection period;
(2) any late fees, late payment interest, documentation fees, insurance
administration charges, extension fees and other administrative
charges, collected with respect to the contracts during the related
collection period; and
(3) any investment earnings on collections prior to their deposit in the
collection account.
The indenture trustee may terminate the servicer as servicer under some
circumstances, in which event the indenture trustee would appoint a successor
servicer to service the contracts. See "CIT Financial USA, Inc., The Seller and
Servicer" and "Description of the Pooling and Servicing Agreements -- Servicing
-- Events of Termination" in the accompanying prospectus.
THE INDENTURE TRUSTEE
____________ will serve as the indenture trustee. The indenture trustee may
resign at any time, in which event the owner trust will be obligated to appoint
a successor trustee. The owner trust may also remove the indenture trustee if
(1) the indenture trustee ceases to be eligible to continue as indenture
trustee under the indenture,
(2) a bankruptcy proceeding results in the event of relief or appointment
of a receiver as to the indenture trustee,
(3) the indenture trustee commences bankruptcy or similar proceedings or
(4) the indenture trustee becomes incapable of acting.
Any resignation or removal of the indenture trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
by a successor trustee.
REPRESENTATIONS AND WARRANTIES
The seller will make representations and warranties with respect to the
contracts as described in the accompanying prospectus under "The Contracts --
Representations and Warranties Made by CIT Financial USA."
S-46
<PAGE>
AMENDMENTS
The pooling and servicing agreement and the indenture may be amended only
with the consent of the required majority of the noteholders, see "Description
of the Notes and Indenture -- Modification of Indenture with Noteholder Consent"
and "Description of the Pooling and Servicing Agreement-- Servicing --
Amendment" in the accompanying prospectus. The required majority means 66 2/3%
of the principal amount of the Class A Notes until paid in full, then of the
Class B Notes until paid in full, then of the Class C Notes until paid in full
and then of the Class D Notes.
The parties may amend the cash collateral account loan agreement without
noteholder consent to cure any ambiguity or inconsistency or to address any
other matter but only if the amendment will not adversely affect the
noteholders. The parties may also amend the cash collateral account loan
agreement in any other manner with the consent of the required majority of
noteholders determined as provided above. However, without the consent of all
noteholders, no amendment may reduce the amount available in the cash collateral
account for the payment of interest or principal on notes or reduce the
noteholder consent required for any amendment.
Also, any amendment of the cash collateral account loan agreement will not
be effective unless each rating agency confirms that the amendment will not
result in a reduction, qualification or withdrawal of the ratings on the
relevant notes.
RATINGS OF THE NOTES
It is a condition of issuance that _______ .
rate the Class A-1 Notes ____,
rate the Class A-2 Notes ____,
rate the Class A-3 and Class A-4 Notes ____,
rate the Class B Notes at least ____,
rate the Class C Notes at least ____, and
rate the Class D Notes at least ____.
The ratings address the likelihood of the timely receipt of interest and
payment of principal on each class of notes on or before the stated maturity
date for the class. The ratings will be based primarily upon the Available
Pledged Revenues, the cash collateral account and the subordination provided by
the Subordinate Classes, in the case of the Class A Notes,
the Class C and Class D Notes, in the case of the Class B Notes; and
S-47
<PAGE>
the Class D Notes, in the case of the Class C Notes.
There is no assurance that any rating will not be lowered or withdrawn by
the assigning rating agency. In the event that ratings with respect to the notes
are qualified, reduced or withdrawn, no person or entity will be obligated to
provide any additional credit enhancement with respect to the notes.
The ratings should be evaluated independently from similar ratings on other
types of securities. A rating is not a recommendation to buy, sell or hold
notes, inasmuch as these ratings do not comment as to market price or
suitability for a particular investor. The ratings do not address the likelihood
of payment of principal on any class of notes prior to the stated maturity date
or the possibility of the imposition of United States withholding tax with
respect to non-United States Persons.
The term "United States Person" means
(1) a citizen or resident of the United States,
(2) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof,
(3) an estate the income of which is includable in gross income for United
States federal income tax purposes, regardless of its source, or
(4) a trust, (A) with respect to which a court within the United States is
able to exercise primary supervision over its administration, and one
or more United States fiduciaries have the authority to control all of
its substantial decisions, or (B) otherwise, the income of which is
subject to U.S. federal income tax regardless of its source.
USE OF PROCEEDS
The owner trust will use the proceeds from the sale of notes, after paying
funds into the cash collateral account and paying expenses, to pay the purchase
price for the contracts to the depositor. The depositor will use a portion of
the proceeds to pay amounts owed to another trust for the acquisition of
contracts from the trust. The trust from which the owner trust acquired some of
the contracts will use the proceeds it receives to pay down a warehouse
receivables securitization facility.
LEGAL PROCEEDINGS
None of
the depositor,
the servicer,
S-48
<PAGE>
the originators,
the seller, or
the owner trust
are parties to any legal proceedings which could have a material adverse impact
on noteholders' interests in notes or the owner trust's assets.
PLAN OF DISTRIBUTION
Under the terms of an underwriting agreement dated ___________, the
underwriters have severally agreed to purchase the following respective initial
principal amounts of notes at the respective public offering prices less the
respective underwriting discounts shown on the cover page of this prospectus
supplement:
S-49
<PAGE>
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITER NOTES NOTES NOTES NOTES
----------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
INITIAL INITIAL INITIAL
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
CLASS B CLASS C CLASS D
UNDERWRITER NOTES NOTES NOTES
----------- ----- ----- -----
<S> <C> <C> <C>
</TABLE>
In the underwriting agreement, the underwriters have agreed to purchase all
of the notes being offered, if any of the notes are purchased. The underwriters
have advised the depositor that they propose initially to offer the notes to the
public at the respective public offering prices shown on the cover page of this
prospectus supplement, and to certain dealers at that price, less a concession
not in excess of the amount noted in the table below. The underwriters may allow
and the dealers may reallow to other dealers a discount not in excess of the
amount noted in the table below.
<TABLE>
<CAPTION>
DEALER DEALER
CONCESSION DISCOUNT
NOT TO NOT TO
CLASS OF NOTE EXCEED EXCEED
------------- ------ ------
<S> <C> <C>
A-1
A-2
A-3
A-4
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
DEALER DEALER
CONCESSION DISCOUNT
NOT TO NOT TO
CLASS OF NOTE EXCEED EXCEED
------------- ------ ------
<S> <C> <C>
B
C
D
</TABLE>
After the notes are released for sale to the public, the offering prices
and other selling terms may be varied by the underwriters.
In connection with the offering of the notes, _____________, on behalf of
the underwriters, may engage in overallotment, stabilizing transactions and
syndicate covering transactions in accordance with Regulation M under the
Securities Exchange Act of 1934. Overallotment involves sales in excess of the
offering size, which creates a short position for the underwriters. Stabilizing
transactions involve bids to purchase the notes in the open markets for the
purpose of pegging, fixing or maintaining the price of the notes. Syndicate
covering transactions involve purchases of notes in the open market after the
distribution has been completed in order to cover short positions. Stabilizing
and syndicate covering transactions may cause the price of the notes to be
higher than it would otherwise be in the absence of those transactions. If
_____________, on behalf of the underwriters, engages in stabilizing or
syndicate covering transactions, it may discontinue them at any time.
The depositor and some of its affiliates have agreed to indemnify the
underwriters against some liabilities in connection with the sale of notes,
including liabilities under the Securities Act of 1933, as amended.
The notes are new issues of securities with no established trading market.
The underwriters have advised the depositor that the underwriters intend to make
a market in the notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the notes.
The depositor has estimated that it will spend approximately $__________
for printing, rating agency, trustee and legal fees and other expenses related
to the offering.
TAX MATTERS
Schulte Roth & Zabel LLP, New York, New York, will deliver an opinion
confirming the accuracy of the statements regarding material United States
federal income tax consequences as set forth in the accompanying prospectus. See
"Material Federal Income Tax Consequences" in the accompanying prospectus.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations" in the
accompanying prospectus, the notes are eligible for purchase by employee benefit
plans.
S-51
<PAGE>
LEGAL MATTERS
Schulte Roth & Zabel LLP, New York, New York, has provided a legal opinion
relating to the notes in its capacity as special counsel to the owner trust, the
depositor, the originators, the servicer and the administrator. Other legal
matters for the underwriters will be passed upon by _________. The indenture,
the pooling and servicing agreement and the notes will be governed by the laws
of the State of New York. The trust agreement will be governed by the laws of
the State of Delaware.
EXPERTS
The balance sheet of CIT Equipment Collateral ____-__ as of _________ has
been included herein and in the registration statement in reliance upon the
report of ______, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
S-52
<PAGE>
CIT EQUIPMENT COLLATERAL ____-__:
BALANCE SHEET AS OF [_______________]
<TABLE>
<S> <C>
Assets - Cash.................................................. $ 0
===
Liabilities.................................................... $ 0
===
Beneficial Equity.............................................. $ 0
===
Total Liabilities and Beneficial Equity........................ $ 0
===
</TABLE>
See accompanying notes to balance sheet.
NOTES TO THE BALANCE SHEET
CIT Equipment Collateral ____-__ (the "Owner Trust") is a limited purpose
business trust established under the laws of the State of Delaware. It was
formed on __________ by NCT Funding Company, L.L.C. (the "Trust Depositor") and
_____________ (the "Owner Trustee") under a trust agreement dated as of
__________ between the Trust Depositor and the Owner Trustee. The activities of
the Owner Trust are limited by the terms of the trust agreement to acquiring,
owning and managing lease and loan contracts and related assets, issuing and
making payments on notes and subordinate securities and other related
activities. Prior to and including __________, the Owner Trust did not conduct
any activities.
The Trust Depositor will pay all fees and expenses related to the
organization and operations of the Owner Trust, other than withholding taxes
imposed by the United States or any other domestic taxing authority. The Trust
Depositor has also agreed to indemnify the indenture trustee and Owner Trustee
and certain other persons involved in the sale of notes.
REPORT OF INDEPENDENT AUDITORS
To the Owner Trustee of
CIT EQUIPMENT COLLATERAL _____-__
We have audited the accompanying balance sheet of CIT Equipment Collateral
____-__ (the "Trust"), as of _____________. This financial statement is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
S-53
<PAGE>
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of CIT Equipment Collateral _____-__
as of ___________ in conformity with generally accepted accounting principles.
Office Address
Date
S-54
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Pledged Revenues................................................................................... S-34
Class A Notes................................................................................................ S-33
Class A Percentage........................................................................................... S-39
Class A Target Principal Amount.............................................................................. S-40
Class A-1 Scheduled Principal Balance........................................................................ S-40
Class B Floor................................................................................................ S-40
Class B Percentage........................................................................................... S-40
Class B Principal Payment Amount............................................................................. S-40
Class B Target Principal Amount.............................................................................. S-40
Class C Floor................................................................................................ S-40
Class C Percentage........................................................................................... S-41
Class C Principal Payment Amount............................................................................. S-41
Class C Target Principal Amount.............................................................................. S-41
Class D Floor................................................................................................ S-41
Class D Percentage........................................................................................... S-41
Class D Principal Payment Amount............................................................................. S-41
Class D Target Principal Amount.............................................................................. S-41
collection period............................................................................................ S-41
contract pool principal balance.............................................................................. S-6
contract principal balance................................................................................... S-7
CPR.......................................................................................................... S-25
Defaulted Contract........................................................................................... S-41
Discount Rate................................................................................................ S-42
Funding Period............................................................................................... S-7
Pledged Revenues............................................................................................. S-42
Principal Amount............................................................................................. S-42
principal deficiency amount.................................................................................. S-44
Reallocated Principal........................................................................................ S-42
Related Collection Period Pledged Revenue.................................................................... S-42
Statistical Discount Rate.................................................................................... S-9
Total Principal Payment Amount............................................................................... S-43
Trust........................................................................................................ S-53
Unfunded Loss Amount......................................................................................... S-43
United States Person......................................................................................... S-48
</TABLE>
S-55
<PAGE>
Information contained in this prospectus is not complete and
may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED JANUARY 12, 2001
PROSPECTUS
----------
NCT FUNDING COMPANY, L.L.C.
RECEIVABLE-BACKED NOTES
(ISSUABLE IN SERIES)
NCT FUNDING COMPANY, L.L.C.
DEPOSITOR
The depositor will form an owner trust for each series of notes. Each
owner trust will offer receivable-backed notes under this prospectus and a
prospectus supplement. The prospectus supplement will be prepared separately for
each series of notes. Each series may include one or more classes of notes.
Each owner trust will use the note sale proceeds to acquire a pool of
contracts which the depositor will simultaneously transfer to the owner trust.
The right of each class of notes to receive payments may be senior or
subordinate to the rights of one or more of the other classes of notes. The rate
of payment on the notes of any class will depend on the priority of payment of
the class and the rate and timing of payments of the related contracts.
THE NOTES OF EACH SERIES WILL BE OBLIGATIONS OF THE RELATED OWNER
TRUST ONLY.
-----------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 12 OF THIS PROSPECTUS
AND THE OTHER RISK FACTORS INCLUDED IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This prospectus may be used to offer and sell a series of notes only if
accompanied by the prospectus supplement relating to the notes.
The date of this Prospectus is __________, 2001.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.....4
PROSPECTUS SUMMARY.............................................................................................5
RISK FACTORS..................................................................................................12
The Absence of an Existing Market for the Notes May Limit Your Ability to Resell the Notes...............12
Contract Prepayment, Ineligibility or Default May Cause Earlier Repayments of the Notes than You
Expect and You May Not Be Able To Find Investments with the Same Yield as the Notes at the Time
of the Repayment.......................................................................................12
The Price at Which You Can Resell Your Notes May Decrease if the Ratings of Your Notes Change............13
The Rights of the Holders of any Class of Notes to Receive Payments of Interest and Principal may
be Subordinated to One or More Other Classes of Notes..................................................13
The Subordination of Some Classes of Notes is Only a Limited Form of Credit Enhancement and Does
Not Ensure Payment of the More Senior Classes..........................................................14
Limited Assets are Available for Payment of the Notes; Noteholders Will Have No Recourse to the
Originators, Depositor, Servicer or their Affiliates in the Event Delinquencies and Losses Reduce
the Trust's Assets.....................................................................................14
Even if an Owner Trust Repossesses and Sells the Equipment Relating to a Contract After an Obligor
Defaults, Shortfalls in Amounts Available To Pay the Notes May Occur if the Market Value of the
Equipment Has Declined.................................................................................14
Not Having Possession of Contract Files May Hinder an Owner Trust's Ability to Realize the Value of
Equipment Securing the Contracts.......................................................................15
Failure to Take all Steps Necessary to Perfect Security Interests in Equipment, to Record
Assignment of Security Interests to the Owner Trust or to Record Security Interests in Titled
Equipment May Hinder the Owner Trust's Ability to Realize the Value of Equipment Securing the
Contracts..............................................................................................15
Repurchase Obligation of the Seller Provides You Only Limited Protection Against Prior Liens on the
Contracts or Equipment.................................................................................16
If a Bankruptcy Court Rules that the Transfer of Contracts from a Vendor to an Originator was not a
True Sale then Payments on the Contracts may be Reduced or Delayed.....................................17
A Bankruptcy Court Determination that the Transfer of Contracts from Originators to the Seller,
from the Seller to the Depositor or from the Depositor to the Owner Trust was not a True Sale
then Payments on the Contracts Could be Reduced or Delayed.............................................17
Insolvency of the Vendors Could Delay or Reduce Payments to You..........................................17
End-User Bankruptcy May Reduce or Delay Collections on the Contracts and Disposition of Equipment
Relating to These or Other Defaulting End-Users May be Delayed or May not Result in Complete
Recovery of Amounts Due................................................................................18
Change in Servicer May Result in Late Payments on Securities.............................................18
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Transfers of Assets and Exiting of Lines of Business May Affect the Servicer and Portfolio...............18
Commingling of Collections Could Result in Reduced Payments to You.......................................18
Bankruptcy of Depositor or the Owner Trust May Cause Delays in or Reduce Collections Under the
Contracts..............................................................................................19
The Seller's Obligation to Repurchase Contacts Could be Impaired by Bankruptcy...........................19
Contracts Relating to Software Or Related Support and Consulting Services are not Secured by the
Software or Related Services...........................................................................19
Limitations on Enforceability of Security Interests in the Equipment May Hinder the Owner Trust's
Ability to Realize the Value of Equipment Securing the Contracts.......................................20
Bankruptcy Court Rejection of "True Leases" May Reduce Funds Available to Pay Notes......................20
If the Seller Does Not Originate or Acquire a Sufficient Number of Contracts During the Funding
Period Meeting the Criteria for Sale to the Depositor, Amounts Remaining in the Pre-Funding
Account Will be Distributed to Noteholders as Payments of Principal....................................20
Book-Entry Registration May Limit Your Ability To Resell Your Notes......................................21
THE DEPOSITOR.................................................................................................21
THE OWNER TRUSTS..............................................................................................22
CIT FINANCIAL USA, INC., THE SELLER AND SERVICER..............................................................24
THE CIT GROUP, INC............................................................................................25
THE ORIGINATORS...............................................................................................26
THE CONTRACTS.................................................................................................35
DESCRIPTION OF THE NOTES AND INDENTURE........................................................................56
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT............................................................71
MATERIAL FEDERAL INCOME TAX CONSEQUENCES......................................................................78
ERISA CONSIDERATIONS..........................................................................................85
RATINGS OF THE NOTES..........................................................................................87
USE OF PROCEEDS...............................................................................................88
PLAN OF DISTRIBUTION..........................................................................................88
LEGAL MATTERS.................................................................................................88
WHERE YOU CAN FIND MORE INFORMATION...........................................................................88
INDEX OF TERMS................................................................................................90
</TABLE>
3
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
The depositor tells you about the notes in two separate documents:
this prospectus, which provides general information, some of
which may not apply to a particular series of notes, including
your series of notes; and
the prospectus supplement related to the particular terms of your
series of notes.
The prospectus and the prospectus supplement, together, provide a
description of the material terms of your notes. You should rely on the
information in the prospectus supplement to the extent it provides a more
specific description of your notes.
You should rely only on the information provided in this prospectus and
the accompanying prospectus supplement. See "Where You Can Find More
Information" in this prospectus. We have not authorized anyone to provide you
with information that is different. This prospectus and the accompanying
prospectus supplement may only be used where it is legal to sell the notes.
We include cross-references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The table of contents in each of the prospectus and
accompanying prospectus supplement provide the pages on which these captions are
located.
Some persons participating in this offering may engage in transactions
that stabilize, maintain or in some way affect the price of the notes. These
types of transactions may include stabilizing, the purchase of notes to cover
syndicate short positions and the imposition of penalty bids. For a description
of these activities, please read the section entitled "Plan of Distribution" in
your prospectus supplement.
4
<PAGE>
PROSPECTUS SUMMARY
The following is only a summary of the terms of the notes. It does not
contain all information that may be important to you. You should read this
entire prospectus and any accompanying prospectus supplement. In addition, you
may wish to read the documents governing the sale of the contracts, the
formation of the trust and the issuance of notes. Those documents have been
filed as exhibits to the registration statement of which this prospectus is a
part.
There are material risks associated with an investment in the notes.
See "Risk Factors" beginning on page 12 for a discussion of factors you should
consider before investing in notes.
<TABLE>
<S> <C>
Issuer and Owner Trust............. For each series of notes, the depositor
will form an owner trust and prepare a
prospectus supplement. Each owner trust
will own a pool of contracts and other
assets. The depositor will identify the
owner trust and trustee in your prospectus
supplement.
Servicer........................... CIT Financial USA, Inc. ("CIT Financial
USA"), an indirect subsidiary of The CIT
Group, Inc. ("CIT"), unless otherwise
specified in your prospectus supplement.
Indenture Trustee.................. For your series of notes, the depositor
will identify the indenture trustee in
your prospectus supplement.
The Notes.......................... Each owner trust will issue one or more
classes of notes.
Terms of the Notes................. See "Description of the Notes and
Indenture" in this prospectus and your
prospectus supplement.
Payment Dates................. Each owner trust will pay interest and
principal on notes on the dates specified
in the prospectus supplement.
Interest...................... The prospectus supplement will state the
interest rates for the notes described in
the prospectus supplement.
Principal..................... The principal payments to be made by the
owner trust on notes will be as described
in the prospectus supplement for the
notes.
Subordination................. A class of notes may not be entitled to
receive payments of principal and interest
until after the owner trust pays one or
more other classes of notes. This makes it
more likely that senior notes will be paid
all interest and principal due on them,
and less likely that subordinate notes
will be paid all interest and principal
due on them.
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Ratings....................... An owner trust will not issue a series of
notes unless one or more nationally
recognized rating agencies have assigned
investment grade ratings to the notes. For
a more complete description of note
ratings, see "Ratings of the Notes" in
this prospectus and in your prospectus
supplement.
Residual Payment Notes........ An owner trust might issue one or more
classes of notes entitled to some or all
of the remaining payments of principal and
interest on the related contracts after
the trust has made all other payments it
is required to make.
Strip Notes................... An owner trust might issue one or more
classes of notes providing for
distributions of interest which are
disproportionately large or small in
comparison to the principal distributions,
including -
distributions of interest with no or
only a nominal distribution of
principal; or
distributions of principal with no
or only a nominal distribution of
interest.
Targeted Scheduled
Distribution Dates............ An owner trust might issue one or more
classes of notes which have targeted
scheduled payment dates on which they will
be paid in full to the extent the trust
can issue another note in sufficient
principal amount to pay the specified
class of notes.
Trust Assets....................... Each owner trust will make payments on
notes it issues, primarily from funds from
the following assets:
equipment lease contracts,
installment payment contracts,
promissory notes,
conditional sale agreements,
financing agreements,
loan and security agreements, and
deposits in bank accounts.
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The Contracts...................... Your prospectus supplement provides the
particular terms of your series of notes
and information about:
the initial principal balance of the
contracts transferred to the owner
trust issuing the notes;
the number of contracts;
the average contract principal
balance;
the various types of contracts;
the geographical distribution of the
contracts;
the remaining term of the contracts;
and
the weighted average remaining term
of the contracts.
All of the contracts will be commercial
contracts. Most of the contracts are
end-user contracts. End-user contracts
relate to the financing by end-users of
equipment or software and related support
and consulting services. The obligors on
the end-user contracts are the actual
end-users. The other contracts are limited
recourse loans to equipment manufacturers,
dealers or distributors or to computer
software distributors, all of which are
secured by one or more end-user contracts.
As of the cut-off date for each pool of
contracts, no contract in that pool will
be delinquent.
The "contract principal balance" of any
contract is the present value of the
unpaid scheduled payments on that
contract, discounted at a discount rate
that will be stated in your prospectus
supplement. This prospectus and the
prospectus supplement refer to the
aggregate of the contract principal
balances as the "contract pool principal
balance."
Sellers and Originators............ CIT Financial USA will be the seller of
the contracts to the depositor for deposit
into the owner trust. The seller may
originate or acquire contracts and may
also acquire contracts originated or
acquired by other subsidiaries of CIT.
Prior to the offering of a series of
notes, a seller may have sold contracts to
the depositor for deposit into a trust
used in connection with temporary
financing arrangements. The depositor may
acquire some or all of these contracts for
deposit into the owner trust in connection
with the offering and sale of a particular
series of notes. See "CIT
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Financial USA, Inc., The Seller and
Servicer" and "The Originators" in this
prospectus.
Contract Prepayments............... Some contracts may:
not permit the obligor to prepay or
terminate the contract prior to its
expiration date,
allow for a prepayment or early
termination upon payment of at least
the contract principal balance,
allow for a prepayment or early
termination without the payment of the
contract principal balance, or
permit the obligor to prepay the
contract at any time by paying the
unpaid principal plus accrued interest.
Liquidated Contracts............... Your prospectus supplement will describe
how liquidation proceeds from a defaulted
contract will be allocated.
Purchase of Contracts After
the Closing Date................... To the extent provided in the related
prospectus supplement, an owner trust may
purchase additional contracts during a
specified period after the closing date
which may include a funding period, which
can be up to three months (a "Funding
Period"), or other period as specified in
the related prospectus supplement.
Pre-Funding........................ To the extent provided in the related
prospectus supplement, a trust may
purchase additional contracts through the
use of amounts deposited on the closing
date in a pre-funding account, which will
not exceed one-third of the initial
principal amount of the notes. If amounts
in the pre-funding account are not used to
purchase additional contracts during the
Funding Period, one or more classes of
notes may be prepaid as further described
in the prospectus supplement. In such an
event, the holders of notes that are
prepaid due to additional contracts not
being purchased may be entitled to a
prepayment premium if so specified in the
prospectus supplement. Amounts deposited
in the pre-funding account will not be
available to cover contract losses.
The prospectus supplement will specify the
amount of the deposit to the pre-funding
account.
To the extent provided in the related
prospectus supplement, the depositor may
be required to sell, and the
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trust may be required to purchase,
contracts with an aggregate principal
balance approximately equal to the amount
on deposit in the pre-funding account.
These requirements will be subject to:
the availability of additional contracts;
and
any conditions provided in the related
pooling and servicing agreement.
Capitalized Interest Account....... To the extent provided in the related
prospectus supplement, a portion of the
proceeds from the sale of the notes may be
deposited in a capitalized interest
account to fund interest payments on the
notes during a Funding Period. Amounts
deposited in the capitalized interest
account will not be available to cover
contract losses.
The prospectus supplement will specify the
amount of the deposit in the capitalized
interest account and the amount of
interest, or formula for determining the
amount of interest, payable on the notes
on each distribution date.
If the funds in the capitalized interest
account are not completely used by the end
of the Funding Period, they will be
deposited in the collection account to be
used for distributions on the notes on the
next distribution date.
Mandatory Purchase or
Replacement of Contracts........... CIT Financial USA will make
representations regarding all the
contracts sold to the depositor for
transfer into the owner trust, whether or
not it is the direct seller of the
contracts to the depositor. In the event
of an uncured material breach of any of
these representations, CIT Financial USA
must purchase or replace any contract. See
"The Contracts - Representations and
Warranties Made by CIT Financial USA" in
this prospectus and "Weighted Average Life
of the Notes" in your prospectus
supplement.
Leased Equipment................... The depositor will not transfer to any
owner trust the depositor's interest in
equipment covered by lease contracts.
Amounts representing payment of the
residual value of leased equipment are not
available to pay principal or interest on
notes, except to the extent that a vendor
or third party obligor has guaranteed the
residual value of leased equipment.
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Credit Enhancement................. The depositor may arrange for credit
enhancement for some notes. Credit
enhancement may include:
a cash collateral account;
a financial guaranty insurance policy;
subordination of one or more other classes
of notes;
a reserve account;
overcollateralization;
letters of credit or liquidity facilities;
repurchase obligations;
third party payments or other support;
cash deposits; or
other arrangements which may become
suitable in light of credit enhancement
practices or developments in the future.
Your prospectus supplement will describe
any credit enhancement applicable to your
notes.
Priority of Payments............... The indenture trustee for your notes will
apply contract payments as described in
the prospectus supplement for your notes.
Optional Purchase of Contracts..... Once the principal balance of a note
series is less than the percentage of the
initial contract pool principal balance
specified in the prospectus supplement,
the depositor may repurchase all the
contracts held by the owner trust. That
would result in a redemption of the
outstanding notes. See "Description of the
Notes and Indenture--Optional Purchase of
Contracts and Redemption of Notes" in this
prospectus and in your prospectus
supplement.
Substitution....................... CIT Financial USA and the depositor may
substitute into the owner trust one or
more similar contracts for prepaid
contracts or contracts in default. They
may not make substitutions for defaulted
contracts if all substitutions together
would exceed 10% of the contract pool
principal balance in the owner trust at
any time. They are not
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required to replace any contract. See "The
Contracts --Substitution of Contracts."
U.S. Taxation...................... In the opinion of the depositor's tax
counsel, Schulte Roth & Zabel LLP, the
notes will be characterized as debt and
the owner trusts will not be characterized
as "associations" or "publicly traded
partnerships" taxable as corporations for
federal income tax purposes.
By purchasing a note, you agree to treat
your note as debt for federal, state and
local income tax purposes.
The depositor suggests that you consult
your own tax advisor about the federal
income tax consequences of purchasing,
owning and disposing of notes, and the tax
consequences in any state or other taxing
jurisdiction. See "Material Federal Income
Tax Consequences" below.
ERISA Considerations............... Subject to the considerations described in
"ERISA Considerations" in this prospectus,
employee benefit plans that are subject to
the Employee Retirement Income Security
Act of 1974, as amended, may purchase
notes.
Registration, Clearance and
Settlement of Notes................ Each of the notes will be registered in
the name of Cede & Co., as the nominee of
The Depository Trust Company. You may
purchase the notes only in book-entry form
on the records of The Depository Trust
Company and participating members. The
owner trust will issue the notes in
definitive form only under the limited
circumstances described in this prospectus
under "Description of the Notes and
Indenture--Issuance of Certificated Notes
at a Later Date."
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RISK FACTORS
You should carefully consider the following risk factors and additional
risk factors listed in your prospectus supplement before you invest in the
notes.
THE ABSENCE OF AN EXISTING MARKET FOR THE NOTES MAY LIMIT YOUR ABILITY TO RESELL
THE NOTES
There is currently no public market for the notes and we cannot assure
you that one will develop. Thus, you may not be able to resell your notes at
all, or may be able to do so only at a substantial discount. The underwriters
may assist in resales of the notes but they are not obligated to do so. We do
not intend to apply for listing of the notes on any securities exchange or for
the inclusion of the notes on any automated quotation system. Even if a
secondary market does develop, it may not continue or it might not be
sufficiently liquid to allow you to resell any of your notes.
CONTRACT PREPAYMENT, INELIGIBILITY OR DEFAULT MAY CAUSE EARLIER REPAYMENTS OF
THE NOTES THAN YOU EXPECT AND YOU MAY NOT BE ABLE TO FIND INVESTMENTS WITH THE
SAME YIELD AS THE NOTES AT THE TIME OF THE REPAYMENT.
If your notes are prepaid, you may not be able to reinvest the
principal repaid to you earlier than expected at yields equivalent to the yield
on the notes; therefore, the ultimate return you receive on your investment in
the notes may be less than the return you expected on the notes.
A higher than anticipated level of prepayments or liquidation of
contracts that become defaulted may cause an owner trust to pay principal on the
notes sooner than you expected. Also, an owner trust may pay principal sooner
than you expected if CIT Financial USA, Inc. repurchases ineligible contracts.
Similarly, upon the occurrence of an event of default under the indenture, you
may receive principal of the notes sooner than you expected. For more
information about the implications of an event of default under the indenture,
see "Description of the Notes and Indenture -- Events of Default; Rights Upon
Event of Default."
The rate of early terminations or repurchases of contracts due to
prepayments, ineligibility, or defaults is influenced by a variety of economic,
social and other factors including:
technological change;
changes in customer requirements;
the level of interest rates;
the level of casualty losses; and
the overall economic environment.
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Most contracts do not permit prepayment or early termination.
Nevertheless, we have historically permitted lessees to terminate leases early
either in connection with the execution of a new lease of replacement equipment
or upon payment of a negotiated prepayment premium or both. Under the pooling
and servicing agreement, the servicer may allow an obligor to prepay a contract
at any time if the payment, alone, or together with the contract's remaining
contract principal balance and any scheduled payment owed and not yet received,
is equal to the entire contract principal balance of the contract. The principal
balance of a contract is the present value of the future scheduled payments
under the contract, discounted at a discount rate that will be specified in the
prospectus supplement for your notes.
We cannot assure you that prepayments on the contracts held by the
trust will conform to any historical experience. We cannot predict the actual
rate of prepayments which will be experienced on the contracts. However, your
prospectus supplement will present information as to the principal balances of
the notes remaining at various times under several hypothetical prepayment
rates. See "Weighted Average Life of the Notes" in your prospectus supplement.
THE PRICE AT WHICH YOU CAN RESELL YOUR NOTES MAY DECREASE IF THE RATINGS OF YOUR
NOTES CHANGE
At the initial issuance of the notes, at least one nationally
recognized rating agency will rate the notes in the categories specified in the
prospectus supplement. A rating is not a recommendation to purchase, hold or
sell notes, and it does not comment as to market price or suitability for a
particular investor. The ratings of the offered notes address likelihood of the
payment of principal and interest on the notes in accordance with their terms.
At any time, the rating agencies may lower their respective ratings of the notes
or withdraw their ratings entirely. In the event that a rating assigned to any
note is subsequently lowered or withdrawn for any reason, you may not be able to
resell your notes or to resell them without a substantial discount. For more
detailed information regarding the ratings assigned to any class of the notes,
see "Ratings of the Notes" in this prospectus and the prospectus supplement.
THE RIGHTS OF THE HOLDERS OF ANY CLASS OF NOTES TO RECEIVE PAYMENTS OF INTEREST
AND PRINCIPAL MAY BE SUBORDINATED TO ONE OR MORE OTHER CLASSES OF NOTES.
Holders of subordinated classes of notes will bear more credit risk
than more senior classes. Subordination may take the following forms:
interest payments on any date on which interest is due will first
be allocated to the more senior classes;
principal payments on the subordinated classes might not begin
until principal of the more senior classes is repaid in full;
subordinated classes bear the first risk of losses; and
if the trustee had to sell receivables, the net proceeds of that
sale may be allocated first to pay principal and interest on the
more senior classes.
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Your prospectus supplement will describe any subordination provisions
applicable to your notes.
THE SUBORDINATION OF SOME CLASSES OF NOTES IS ONLY A LIMITED FORM OF CREDIT
ENHANCEMENT AND DOES NOT ENSURE PAYMENT OF THE MORE SENIOR CLASSES
An owner trust will pay interest and principal on some classes of notes
prior to paying interest and principal on other classes of notes. The
subordination of some classes of notes to others means that the subordinated
classes of notes are more likely to suffer the consequences of delinquent
payments and defaults on the contracts than the more senior classes of notes.
The more senior classes of notes could lose the credit enhancement
provided by the more subordinate classes if delinquencies and defaults on the
contracts increase and if the collections on the contracts and any credit
enhancement described in your prospectus supplement are insufficient to pay even
the more senior classes of notes.
LIMITED ASSETS ARE AVAILABLE FOR PAYMENT OF THE NOTES; NOTEHOLDERS WILL HAVE NO
RECOURSE TO THE ORIGINATORS, DEPOSITOR, SERVICER OR THEIR AFFILIATES IN THE
EVENT DELINQUENCIES AND LOSSES REDUCE THE TRUST'S ASSETS
Each owner trust will be a limited purpose trust with limited assets.
Moreover, you have no recourse to the general credit of the servicer, depositor,
originator or their affiliates unless they provide credit enhancements that are
described in the prospectus supplement. Therefore, you must rely solely upon the
contracts and any credit enhancement described in your prospectus supplement for
payment of principal and interest on the notes.
An increase in delinquent or defaulted payments on contracts could
result in your being paid less than you expect on the notes or in delays in
payment.
If a contract is a vendor loan, you must rely solely upon the end-user
contracts securing the vendor loan for payments in respect of that contract.
Most vendor loans are non-recourse to the vendors. In non-recourse loans you are
limited to recovering amounts due solely from the end-user contracts and related
security.
EVEN IF AN OWNER TRUST REPOSSESSES AND SELLS THE EQUIPMENT RELATING TO A
CONTRACT AFTER AN OBLIGOR DEFAULTS, SHORTFALLS IN AMOUNTS AVAILABLE TO PAY THE
NOTES MAY OCCUR IF THE MARKET VALUE OF THE EQUIPMENT HAS DECLINED
If a contract held by the trust becomes a defaulted contract, the only
sources of payment for amounts owed on that contract will be the income and
proceeds from the sale of any related equipment and a deficiency judgment, if
any, against the obligor under the defaulted contract. Since the market value of
the equipment may decline faster than the discounted contract balance, the owner
trust may not recover the entire amount due on the contract and might not
receive any recoveries on the equipment. The prospectus supplement for your
notes may describe some forms of credit enhancement which are intended to make
up for deficiencies in the proceeds and recoveries on the contracts. However,
this protection is limited and could be depleted if those deficiencies are
larger than the depositor anticipates.
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NOT HAVING POSSESSION OF CONTRACT FILES MAY HINDER AN OWNER TRUST'S ABILITY TO
REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS.
To facilitate servicing and reduce administrative costs, the servicer
or a sub-servicer will retain possession of the documents evidencing the
contracts held by the owner trust. As a result, a subsequent purchaser of
contracts could take physical possession of the documents without knowledge of
their assignment. That subsequent purchaser could then have a security interest
in the contracts senior to the owner trust's security interest. In the event
that the owner trust must rely upon repossession and sale of the equipment
securing defaulted contracts to recover amounts due on the defaulted contracts,
the owner trust's ability to realize upon the equipment would be limited by the
existence of the third party's senior security interest in those contracts. In
this event, there may be a delay or reduction in distributions to you.
Similarly, with respect to contracts securing vendor loans, the vendor
will retain the original documents associated with some contracts. The
applicable originator will file Uniform Commercial Code financing statements
reflecting the pledge of those contracts to the applicable originator as
security for the vendor loans. However, the related documents will remain in the
vendor's possession. If a subsequent purchaser were able to take physical
possession of the related documents without knowledge of the pledge to the
originator, the owner trust's security interest in those contracts could be
defeated. In this event, there may be a delay or reduction in distributions to
you.
FAILURE TO TAKE ALL STEPS NECESSARY TO PERFECT SECURITY INTERESTS IN EQUIPMENT,
TO RECORD ASSIGNMENT OF SECURITY INTERESTS TO THE OWNER TRUST OR TO RECORD
SECURITY INTERESTS IN TITLED EQUIPMENT MAY HINDER THE OWNER TRUST'S ABILITY TO
REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS.
The depositor will receive security interests in financed equipment
securing contracts from the seller, which will obtain security interests in
financed equipment from the other originators or through its own origination
activities. The depositor will assign the security interests to the owner trust.
However, in some instances, the originators may not file financing statements
for equipment relating to a single obligor in a single jurisdiction when the
value of the equipment is less than the amounts described in the following
paragraph. As a result, the originator will not acquire, and the depositor and
owner trust will not have, a perfected security interest in the equipment. As a
result, creditors of the end-user may acquire superior interests in the
equipment.
As originators, none of
The CIT Group/Equipment Financing, Inc.,
CIT Technology Financing Services, Inc.,
CIT Communications Finance Corporation,
CIT Technologies Corporation, or
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CIT Financial USA
file financing statements against an obligor in the appropriate "filing"
jurisdiction unless the fair market value of the equipment relating to a
contract is at least $25,000 (or such other amount as it may in the future
determine). However, if the contract is a lease with a "fair market value"
purchase option, then the threshold fair market value of the equipment is
$50,000.
Additionally, regardless of equipment value, the depositor's practice
is to require the originators to annotate their records to note the depositor's
security interest but not to require the filing of assignments of financing
statements for the equipment to reflect the depositor's, the owner trust's or
the indenture trustee's interests. Because of this, an originator or the
servicer could inadvertently release the security interest in the equipment
securing a contract. The owner trust would then not have a security interest in
the equipment.
Also, any transfer to the depositor of an originator's security
interest in motor vehicles securing the contracts is subject to state vehicle
registration laws. The depositor's transfer of a security interest in motor
vehicles to the owner trust is also subject to these registration laws. These
registration laws require that the secured party's name appear on the
certificate of title or similar registration of title to a motor vehicle in
order for the secured party's security interest to be perfected. The applicable
originator will be identified on the certificates or similar registrations of
title. However, the certificates of title or similar registrations of title will
not identify the depositor or owner trust as secured party. In addition, some
equipment related to the contracts may constitute fixtures under the real estate
or Uniform Commercial Code provisions of the state in which the equipment is
located. The relevant originator will not file assignments of fixture filings in
favor of the depositor or owner trusts. Therefore, a third party could acquire
an interest in the motor vehicles or real estate fixtures superior to that of
the owner trusts.
REPURCHASE OBLIGATION OF THE SELLER PROVIDES YOU ONLY LIMITED PROTECTION AGAINST
PRIOR LIENS ON THE CONTRACTS OR EQUIPMENT
Federal or state law may grant liens on contracts or equipment that
have priority over the owner trust's interest. If the creditor associated with
any prior lien exercises its remedies it is unlikely that sufficient cash
proceeds from the contract and related equipment will be available to pay the
contract balance to the trust. In that event, there may be a delay or reduction
in distributions to you. An example of a lien arising under federal or state law
is a tax lien on property of the originator or the depositor arising prior to
the time a contract is conveyed to the owner trust. The tax lien has priority
over the interest of the owner trust in the contracts.
In most cases where vendors have assigned contracts to originators, the
vendors have warranted to the originators that there are no prior liens on the
contracts. Additionally, where vendors have assigned contracts to originators,
the vendors have agreed not to grant any lien on any contracts transferred to
the originators. In all cases, the seller will warrant to the depositor and the
owner trust that there are no prior liens on the contracts. The seller also will
warrant to the depositor and the owner trust that it will not grant any lien on
the contracts. In the event that those warranties are not true as to any
contract, the seller is required under the pooling and servicing agreement to
repurchase the contract. There can be no assurance that the seller will be able
to repurchase a contract at the time when it is asked to do so.
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IF A BANKRUPTCY COURT RULES THAT THE TRANSFER OF CONTRACTS FROM A VENDOR TO AN
ORIGINATOR WAS NOT A TRUE SALE THEN PAYMENTS ON THE CONTRACTS MAY BE REDUCED OR
DELAYED
Vendors sell contracts to the originators, which contracts will be
transferred directly or indirectly to the depositor and then the owner trust. If
a bankruptcy court decides that the acquisition of a contract by an originator
is not a sale of the contract from the vendor to the originator, the contract
would be part of the vendor's bankruptcy estate. Accordingly, the contract would
be available to the vendor's creditors. In that case, it is unlikely the trust
will receive all of the scheduled payments on the contracts, and there may be a
delay or reduction in distributions to you. In order to treat the transfer of
contracts to the trust as not being a true sale, the bankruptcy court would
recharacterize the transfer as a pledge of the contracts to secure borrowings by
the vendor. Additionally, if the transfer of contracts to an originator from a
vendor is recharacterized as a pledge, then a tax or government lien on the
property of the pledging vendor arising before the contracts came into existence
may have priority over the owner trust's interest in the contracts.
A BANKRUPTCY COURT DETERMINATION THAT THE TRANSFER OF CONTRACTS FROM ORIGINATORS
TO THE SELLER, FROM THE SELLER TO THE DEPOSITOR OR FROM THE DEPOSITOR TO THE
OWNER TRUST WAS NOT A TRUE SALE THEN PAYMENTS ON THE CONTRACTS COULD BE REDUCED
OR DELAYED
If an originator, the seller or the depositor became a debtor in a
bankruptcy case, creditors of that party, or that party acting as a
debtor-in-possession, may assert that the transfer of the contracts was
ineffective to remove the contracts from that party's estate. In that case, the
distribution of contract payments to the trust might be subject to the automatic
stay provisions of the United States Bankruptcy Code. This would delay the
distribution of those payments to the noteholders for an uncertain period of
time. Furthermore, if the bankruptcy court rules in favor of the creditors or
the debtor in possession, the result may be reductions in payments under the
contracts to the trust. In either case, you may experience delays or reduction
in distributions to you. In addition, a bankruptcy trustee would have the power
to sell the contracts if the proceeds of the sale could satisfy the amount of
the debt deemed owed by the originator, the seller or the depositor, as the case
may be. The bankruptcy trustee could also substitute other collateral in lieu of
the contracts to secure the debt. Additionally, the bankruptcy court could
adjust the debt if the originator, the seller or the depositor were to file for
reorganization under Chapter 11 of the Bankruptcy Code. Each of these parties
will represent and warrant that the conveyance of the contracts by it is in each
case a valid sale and transfer of the contracts. In addition, in agreements
conveying the contracts, the originators, the seller and the depositor have
agreed that they will each treat the transactions described in this prospectus
as a sale of the contracts.
INSOLVENCY OF THE VENDORS COULD DELAY OR REDUCE PAYMENTS TO YOU
In the event a vendor under a vendor loan becomes subject to insolvency
proceedings, the end-user contracts and equipment securing the vendor loan as
well as the vendor's obligation to make payments would also become subject to
the insolvency proceedings. In that event, payments to the owner trust in
respect of those vendor contracts may be reduced or delayed. Payments to you may
be reduced if collections from the remaining unaffected contracts are
insufficient to cover losses to the owner trust. In those cases in which
transfers of end-user
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contracts by vendors to originator provide that the originator have recourse to
the vendor for all or a portion of the losses the originator may incur as a
result of a default under those end-user contracts, the vendor's bankruptcy, may
similarly result in reductions or payment delays in amounts due from the vendor.
END-USER BANKRUPTCY MAY REDUCE OR DELAY COLLECTIONS ON THE CONTRACTS AND
DISPOSITION OF EQUIPMENT RELATING TO THESE OR OTHER DEFAULTING END-USERS MAY BE
DELAYED OR MAY NOT RESULT IN COMPLETE RECOVERY OF AMOUNTS DUE
Bankruptcy and insolvency laws could affect your interests in contracts
with end-user obligors who become subject to bankruptcy proceedings. Those laws
could result in contracts of a bankrupt end-user being written off as
uncollectible or result in delay in payments due on the contracts. As a result,
you may be subject to delays in receiving payments, and you may also suffer
losses if collections from the remaining unaffected contracts are insufficient
to cover losses to the trust. Foreclosure sales of equipment and obtaining
deficiency judgments following foreclosure sales may not yield sufficient
proceeds to pay off the balance owed on a contract. If you must rely on
repossession and disposition of equipment to recover amounts due on defaulted
contracts, those amounts may be insufficient. Factors that may affect whether
you receive the full amount due on a contract include the failure to file
financing statements to perfect the originator's or owner trust's security
interest in the equipment securing the contract. The depreciation, obsolescence,
damage, or loss of any item of equipment will also affect whether you receive
the full amount due on a contract.
CHANGE IN SERVICER MAY RESULT IN LATE PAYMENTS ON SECURITIES
If CIT Financial USA were to cease acting as servicer, the processing
of payments on the contracts and information relating to collections could be
delayed. These processing delays may result in late payments on the securities.
TRANSFERS OF ASSETS AND EXITING OF LINES OF BUSINESS MAY AFFECT THE SERVICER AND
PORTFOLIO
CIT continues to evaluate each of its business lines for profitability
and strategic purposes. Certain business lines have been and may continue to be
transferred among CIT's business segments. CIT may choose to exit non-strategic
or non-profitable business lines. The transfer of business lines within CIT or
the exiting by CIT of a line of business may adversely affect portfolio
servicing and performance.
COMMINGLING OF COLLECTIONS COULD RESULT IN REDUCED PAYMENTS TO YOU
The pooling and servicing agreement may permit the servicer to deposit
collections on the contracts into the collection account once each month. The
servicer may commingle and use the collected cash for its benefit prior to the
date on which the collections are required to be deposited in a collection
account, as described under "Description of the Pooling and Servicing Agreement
-- Collections on Contracts." If the servicer becomes insolvent or subject to
receivership, an owner trust may not have a perfected ownership or security
interest in these collections and you may suffer losses on your investment as a
result. If the servicer is otherwise unable to deposit the funds in the
collection account, you could incur a loss from such a failure.
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BANKRUPTCY OF DEPOSITOR OR THE OWNER TRUST MAY CAUSE DELAYS IN OR REDUCE
COLLECTIONS UNDER THE CONTRACTS
If an owner trust or the depositor becomes insolvent under any federal
bankruptcy or similar state laws, the right of an indenture trustee to foreclose
upon and sell the assets of an owner trust is likely to be significantly
impaired by applicable bankruptcy laws. This would be the case before or
possibly even after an indenture trustee has foreclosed upon and sold the assets
of an owner trust. Under the bankruptcy laws, payments on debts are not made,
and secured creditors are prohibited from repossessing their security from a
debtor in a bankruptcy case or from disposing of security repossessed from the
debtor, without bankruptcy court approval. Moreover, the bankruptcy laws may
permit the debtor to continue to retain and to use collateral even though the
debtor is in default under the applicable debt instruments, if the secured
creditor is provided adequate protection. The meaning of the term adequate
protection may vary according to circumstances, but it is intended in general to
protect the value of the security from any diminution in the value of the
collateral as a result of its use by the debtor during the pendency of the
bankruptcy case. Because there is no precise definition of the term adequate
protection and because the bankruptcy court has broad discretionary powers, it
is impossible to predict if or how you would be compensated for any diminution
in value of the owner trust assets.
THE SELLER'S OBLIGATION TO REPURCHASE CONTACTS COULD BE IMPAIRED BY BANKRUPTCY
CIT Financial USA will make representations and warranties regarding
all of the contracts, the equipment and other matters. See "The Contracts --
Representations and Warranties Made by CIT Financial USA." If any representation
or warranty with regard to a specific contract is breached, is not cured within
a specified period of time, and the value of the contract is materially and
adversely affected by the breach, CIT Financial USA must purchase the contract
from the applicable owner trust at a price equal to the amount required to pay
off the contract. If CIT Financial USA becomes bankrupt or insolvent, each
indenture trustee's right to compel a purchase would both be impaired and have
to be satisfied out of any available "assets" of the seller's bankruptcy estate.
In that case, you may suffer a loss on your investment in a note as a result.
CONTRACTS RELATING TO SOFTWARE OR RELATED SUPPORT AND CONSULTING SERVICES ARE
NOT SECURED BY THE SOFTWARE OR RELATED SERVICES
Some of the contracts held by the owner trust will relate to software
that is not owned by an originator or related support and consulting services.
In these cases, the vendor or a licensor traditionally owns the software, and
the software and related support and consulting services do not serve as
collateral for the contracts. Thus, the owner trust will not have an interest in
the software or related support and consulting services. The owner trust will
own solely the associated contracts' cash flow. Accordingly, if any of these
contracts becomes a defaulted contract, the owner trust will not be able to
foreclose on the software or related support and consulting services. Because
there will be no proceeds from the software or related support and consulting
services which could be used to make payments to you, the owner trust must look
solely to the obligor to collect amounts due on the contract. There can be no
assurance that the obligor will be able to pay in full amounts due under the
contract.
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LIMITATIONS ON ENFORCEABILITY OF SECURITY INTERESTS IN THE EQUIPMENT MAY HINDER
THE OWNER TRUST'S ABILITY TO REALIZE THE VALUE OF EQUIPMENT SECURING THE
CONTRACTS
State law limitations on the enforceability of security interests and
the manner in which a secured party may dispose of collateral may limit the
owner trust's ability to obtain or dispose of collateral in a timely fashion.
This could reduce or delay the availability of funds to pay the notes. Under
these state law limitations:
if the obligor becomes bankrupt or insolvent, the owner
trust may need the permission of a bankruptcy
court to obtain and sell its collateral;
some jurisdictions require that the obligor be notified of
the default and be given a time period within which it may
cure the default prior to repossession; and
the obligor may have the right to redeem collateral for
its obligations prior to actual sale by paying the lessor
or secured party the unpaid balance of the obligation plus
the secured party's expenses for repossessing, holding and
preparing the collateral for disposition.
BANKRUPTCY COURT REJECTION OF "TRUE LEASES" MAY REDUCE FUNDS AVAILABLE TO PAY
NOTES
A bankruptcy trustee or debtor-in-possession under federal bankruptcy
or similar state laws has the right to assume or reject any executory contract
or unexpired lease which is considered to be a "true lease" under applicable
law. A "true lease" is a contract under which the applicable originator or
vendor holds a residual interest in equipment of more than a nominal amount.
Some contracts will be true leases and thus subject to rejection by the lessor
under federal bankruptcy or similar state laws. For this reason, the originator,
as debtor-in-possession or the originator's bankruptcy trustee may reject the
leases of which that originator is the lessor. Upon any rejection, payments to
the applicable originator under the rejected contract may terminate and your
investment may be subject to losses. In addition, any contract which is a true
lease that a vendor originated and transferred to an originator in a transaction
whereby the vendor continues to be the lessor, will be subject to rejection by
the vendor, as debtor in possession, or by the vendor's bankruptcy trustee. An
example of this transaction is a transfer by a vendor to an originator of a
security interest in the lease contract or a transfer by a vendor to an
originator of an interest in the right to payments only under the lease
contract. Upon any rejection, payments to the applicable originator under the
rejected contract may terminate and your investment may be subject to losses.
IF THE SELLER DOES NOT ORIGINATE OR ACQUIRE A SUFFICIENT NUMBER OF CONTRACTS
DURING THE FUNDING PERIOD MEETING THE CRITERIA FOR SALE TO THE DEPOSITOR,
AMOUNTS REMAINING IN THE PRE-FUNDING ACCOUNT WILL BE DISTRIBUTED TO NOTEHOLDERS
AS PAYMENTS OF PRINCIPAL
If the related prospectus supplement for your notes provides that the
owner trust may purchase contracts from the depositor after the closing date
from proceeds deposited in a pre-funding account, then if the seller does not
originate or purchase enough contracts to sell to the depositor satisfying the
eligibility criteria for contracts as described in the related prospectus
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supplement during the Funding Period, then the depositor will not have enough
contracts to sell to the related owner trust before the Funding Period ends.
This may result in prepayments of principal to noteholders.
Unless otherwise specified in the related prospectus supplement, to the
extent that amounts on deposit in the Pre-Funding Account have not been fully
applied to the purchase of contracts by the related owner trust by the end of
the Funding Period, noteholders will receive a prepayment of principal in an
amount equal to the amount remaining in the Pre-Funding Account at such time,
which prepayment will be made on the first distribution date following the end
of the Funding Period or, if the Funding Period ends on a distribution date, on
that distribution date. It is anticipated that the principal amount of contracts
purchased by the owner trust will not be exactly equal to the amount on deposit
in the Pre-Funding Account and that therefore there will be at least a nominal
amount of principal prepaid to the noteholders at the end of any Funding Period.
Any reinvestment risk resulting from a partial retirement of the notes will be
borne by the noteholders.
BOOK-ENTRY REGISTRATION MAY LIMIT YOUR ABILITY TO RESELL YOUR NOTES
If the related prospectus supplement specifies that holders of notes
issued by an owner trust will hold their notes through a clearing agency or one
of its participating organizations, the notes will be registered in the name of
a nominee of the clearing agency and physical certificates will not be issued to
individual noteholders. These noteholders will not be recognized directly by the
trustee of the owner trust or the indenture trustee and must exercise all of
their rights and receive any payments through the clearing agency or the
participating organization, unless physical certificates are issued. Physical
certificates will only be issued in the limited circumstances described in the
prospectus section titled "Description of the Notes and Indenture -- Book-Entry
Registration." The clearing agency in the U.S. is expected to be DTC and in
Europe either Clearstream or Euroclear.
THE DEPOSITOR
The depositor is NCT Funding Company, L.L.C., a limited liability
company organized under the laws of the State of Delaware. CIT Financial USA
owns all of the depositor's membership interests. On or before the closing date
for a series of notes the depositor will arrange for CIT Financial USA to
transfer contracts and interests of the originators in the related equipment to
the depositor in exchange for cash proceeds. The transfer of a contract and
related equipment to the depositor will be from either or both of:
CIT Financial USA; or
The CIT Equipment Trust -- VFC Series, a trust the depositor
established to finance contracts and related equipment interests
through a warehouse receivable securitization facility.
In each case CIT Financial USA will have obtained contracts and
equipment interests from the originators or shall itself have been the
originator or shall have acquired contracts from third parties not affiliated
with CIT Financial USA.
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The depositor will pay to CIT Financial USA, as seller, or the
receivables securitization facility trust noted above, as the case may be, the
net proceeds received from the sale of the notes of each series.
NCT Funding Company, L.L.C., the depositor, was formed solely for the
transactions described in this prospectus and other similar transactions. Under
the depositor's formation documents and the pooling and servicing agreement
executed in connection with each owner trust, the depositor is permitted to
engage only in the following activities:
acquiring contracts, interests in pools of contracts and
interests of originators in equipment and other real or personal
property;
transferring and conveying the contracts and security interests
in the related equipment to owner trusts and other similar
trusts;
issuing and selling notes, certificates or other securities
secured by or representing interests in pools of contracts and
other property;
executing and performing obligations under the relevant trust
agreements, sale and contribution agreements, and pooling and
servicing agreements covering the transfer and servicing of a
pool of contracts;
holding or transferring other securities issued by each owner
trust;
investing proceeds from the sale of securities representing
interests in pools of contracts;
engaging in other transactions, including entering into
agreements that are necessary, suitable or convenient to
accomplish the foregoing or are incidental or connected to the
foregoing; and
other transactions of the type described in this prospectus.
The depositor is prohibited from incurring any debt, issuing any
obligations or incurring any liabilities, except in connection with the
formation of any owner trust and the issuance of the related series of
securities issued by the owner trust. The depositor is not responsible for
payment of any principal, interest or any other amount in respect of any series
of notes.
THE OWNER TRUSTS
The depositor will form each owner trust under a trust agreement
between the depositor and the owner trustee, as described in your prospectus
supplement. Each owner trust may issue one or more classes of securities,
representing debt of or beneficial ownership interests in the owner trust. The
trust will not offer the beneficial ownership interests under this prospectus.
The assets of each owner trust, as further specified in your prospectus
supplement, will consist of:
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(1) a pool primarily of the following types of contracts:
equipment lease contracts,
conditional sale/financing agreements,
installment payment agreements,
promissory notes, and
loan and security agreements;
(2) amounts on deposit in, and any eligible investments allocated to,
accounts established under the related indenture and the pooling and servicing
agreement;
(3) the depositor's rights under the related purchase and sale
agreement or other instrument by which it acquired contracts, if any; and
(4) the depositor's rights with respect to any cash collateral account
or other form of credit enhancement for the notes.
The owner trust will have the right to:
all funds payable under the contracts after the cut-off date, the
date on which the owner trust's right to contract payments
commences. This includes all scheduled but unpaid amounts due
prior to the cut-off date, but excludes any scheduled payments
due on or after, but received prior to, the date the depositor
transfers the contracts to an owner trust. This does not include
contract payments in respect of taxes, insurance premiums,
security deposits, late charges, administrative fees or charges;
prepayments, except for any portion allocated to the depositor in
respect of equipment leases;
liquidation proceeds received with respect to defaulted
contracts, except for any portion allocable to the depositor
under an equipment lease;
earnings from the investment of funds in the collection account
and note distribution account maintained by the servicer; and
security interests in the equipment related to the contracts, but
excluding ownership rights.
No owner trust will engage in any business activity other than
issuing notes and ownership interests in the owner trust;
purchasing contracts and related assets;
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holding and dealing with the assets of owner trust;
making payments on the notes and other securities it issued;
entering into and performing the duties, responsibilities and
functions required under any of the related pooling and servicing
agreement, indenture, contracts, and related documents; and
matters incidental to the above.
The assets of an owner trust will be separate from the assets of all
other owner trusts the depositor creates. Accordingly, the assets of one owner
trust will not be available to make payments on the securities issued by any
other owner trust.
The depositor will specify the owner trustee of the owner trust for
notes being offered in your prospectus supplement. The owner trustee's liability
in connection with the sale of notes will be limited to the express obligations
of the owner trustee in the related trust agreement and indenture. An owner
trustee may resign at any time, in which event the depositor or its designee
must appoint a successor owner trustee. The depositor or its designee may also
remove an owner trustee if the owner trustee ceases to be eligible to continue
as such under the related trust agreement or if the owner trustee becomes
insolvent. Any resignation or removal of an owner trustee will not become
effective until acceptance of the appointment of a successor owner trustee.
CIT FINANCIAL USA, INC., THE SELLER AND SERVICER
CIT Financial USA will be the seller and is currently expected to be
the servicer. However, if the depositor selects a different servicer for any
particular series of notes, the relevant prospectus supplement will provide
information about that servicer. In addition, CIT Financial USA may designate
one or more of the originators to act as a subservicer for any particular series
of notes and, as subservicer, to perform all or most of the servicing
responsibilities described in this prospectus under "The Pooling and Servicing
Agreement." All references in this prospectus and any related prospectus
supplement to the "servicer" or to CIT Financial USA in a servicing capacity
shall include CIT Financial USA acting through any sub-servicer or any agent.
CIT Financial USA was incorporated on January 8, 1992 in Delaware and
is an indirect wholly owned subsidiary of CIT. Its principal executive offices
are located at 650 CIT Drive, Livingston, New Jersey 07039 and its telephone
number is (973) 740-5000.
CIT Financial USA originates and acquires
conditional sales/financing agreements,
equipment lease contracts,
promissory notes,
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installment payment agreements and
loan and security agreements.
These contracts finance equipment of the following types:
transportation,
construction,
information technology (including software),
communications,
commercial and
industrial and resource.
CIT Financial USA typically structures its vendor financing
arrangements as
direct originations with customers and end-users of a vendor's
products, either with or without recourse, or
assignments of contracts, either with or without recourse, by a
vendor or other third party to CIT Financial USA.
CIT Financial USA will sell to the depositor contracts which it will
have originated or acquired from other originators. CIT Financial USA will sell
its contracts to the depositor under a purchase and sale agreement containing
seller representations and warranties as to the contracts sold to the depositor
by CIT Financial USA and its affiliates. Prior to the offering of your series of
notes, CIT Financial USA may have sold contracts to the depositor for deposit
into a trust used in connection with a warehouse receivables securitization
facility. The depositor may reacquire some or all of these contracts for deposit
into the owner trust in connection with the offering and sale of a particular
series of notes or such trust may sell the contracts directly to the owner
trust.
THE CIT GROUP, INC.
The CIT Group, Inc. ("CIT"), a Delaware corporation, is a leading
diversified commercial finance company with $54.6 billion of managed assets and
$5.9 billion of stockholders' equity at September 30, 2000. CIT's principal
executive offices are located at 1211 Avenue of the Americas, New York, New York
10036 and its telephone number is (212) 536-1390. CIT commenced operations in
1908. CIT has developed a broad array of "franchise" businesses that focus on
specific industries, asset types and markets, which are balanced by client,
industry and geographic diversification.
CIT's size, scope and diversification was expanded significantly when
it acquired Newcourt Credit Group Inc. ("Newcourt") on November 15, 1999. As of
the acquisition date,
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Newcourt had over $21.0 billion of managed assets. Newcourt, which was
headquartered in Toronto, Canada, was a non-bank financial services enterprise,
which originated, invested in and sold asset-based financing. Newcourt's
origination activities focused on the commercial and corporate finance segments
of the asset-based financing market through a global network of offices in 26
countries. The Newcourt acquisition combined the financial strength of CIT with
Newcourt's broad technology-based leasing business and international platform.
Prior to the acquisition of Newcourt, CIT had three business segments
-- Equipment Financing and Leasing, Commercial Finance and Consumer. During the
first quarter of 2000, CIT created two business segments from the former
Newcourt businesses, Vendor Technology Finance and Structured Finance.
CIT is organized into five business segments as follows:
Equipment Financing and Leasing
Vendor Technology Finance
Commercial Finance
Structured Finance
Consumer
Certain segments conduct their operations through strategic business
units that market their products and services to satisfy the financing needs of
specific customers, industries, vendors/manufacturers, and markets.
CIT is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission").
CIT will have no liabilities or obligations with respect to any of the
notes.
THE ORIGINATORS
The contracts in the contract pool will generally be originated or
acquired by originators within the Vendor Technology Finance business segment or
originators within the Equipment Financing and Leasing business segment.
VENDOR TECHNOLOGY FINANCE
Financing and leasing assets of Vendor Technology Finance ("VTF")
totaled $7.6 billion at September 30, 2000, and comprised 17.4% of CIT's total
financing and leasing assets. On a managed asset basis, VTF assets totaled $10.8
billion or 19.8% of total managed assets. VTF operates globally through
operations in North America, Europe, Latin America, Asia and Australia, and
serves many industries including a wide range of manufacturers. Additionally,
VTF customers range from small businesses and consumers to large-sized
companies.
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VTF builds alliances with industry-leading equipment vendors, including
manufacturers, dealers and distributors, to deliver customized asset-based
financing solutions. VTF offers credit financing to the manufacturer's customers
for the purchase or lease of the manufacturer's products, while also offering
enhanced sales tools to manufacturers and vendors, such as asset management
services, efficient lease and loan processing, and real-time credit
adjudication. By working in partnership with its vendors, VTF is integrated with
the vendor's business planning process and product offering systems. VTF has
significant vendor programs in information technology and telecommunications.
These vendor alliances are also characterized by the use of joint
ventures, profit sharing and other creative transaction structures. In the case
of joint ventures, through a contractual arrangement, VTF and the vendor combine
activities into one business model in a distinct legal entity. Generally, these
arrangements are accounted for on an equity basis, with profits and losses
distributed according to the joint venture agreement. VTF also utilizes
strategic alliances, whereby the assets are funded on CIT's balance sheet, while
performance based fees are paid to the vendor. VTF's strategy is to align its
interests with those of its vendor partners. These types of strategic alliances
are a key source of business for VTF.
EQUIPMENT FINANCING AND LEASING
Financing and leasing assets of Equipment Financing and Leasing totaled
$20.6 billion at September 30, 2000, and comprised 46.9% of CIT's total
financing and leasing assets. On a managed asset basis, Equipment Financing and
Leasing totaled $26.0 billion or 47.7% of total managed assets. Equipment
Financing and Leasing conducts its operations through two strategic business
units:
The CIT Group/Equipment Financing ("EF") offers secured equipment
financing and leasing and focuses on the broad distribution of
its products through manufacturers, dealers/distributors,
intermediaries and direct calling efforts in North America.
Contracts included in the contract pool securing the notes
offered by this prospectus will have been originated or acquired
by EF.
The CIT Group/Capital Finance offers secured equipment financing
and leasing and focuses on the direct marketing of customized
transactions, particularly operating leases relating primarily to
commercial aircraft and rail equipment. This portfolio will not
be included in the contract pool securing the notes offered by
this prospectus.
On an owned asset basis, EF is the largest of CIT's strategic business
units with total financing and leasing assets of $15.3 billion at September 30,
2000, representing 34.8% of CIT's total financing and leasing assets and 74.3%
of the Equipment Financing and Leasing segment assets. EF offers secured
equipment financing and leasing products, including direct secured loans,
leases, revolving lines of credit, operating leases, sale and leaseback
arrangements, vendor financing, specialized wholesale and retail financing for
distributors and manufacturers, and loans guaranteed by the U.S. Small Business
Administration. EF is a leading nationwide asset-based equipment lender. At
September 30, 2000, its portfolio included significant financing and
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leasing assets to customers in a number of different industries including
construction, manufacturing and transportation.
Products are originated through direct calling on customers and through
relationships with manufacturers, dealers/distributors and intermediaries that
have leading or significant marketing positions in their respective industries.
This provides EF with efficient access to equipment end-users in many industries
across a variety of equipment types.
THE COMPANIES WHICH MAY BE ORIGINATORS
The information in this section describes several companies which, in
addition to CIT Financial USA, may be originators in respect of a particular
pool of contracts and sellers of contracts to the depositor. Your prospectus
supplement may provide information on other originators. Each of the seller and
originators will be an indirect wholly owned subsidiary of The CIT Group, Inc.
CIT TECHNOLOGY FINANCING SERVICES, INC.
CIT Technology Financing Services, Inc. provides leasing and financing
programs for certain targeted manufacturers and distributors as well as leasing
and financing to existing customers.
CIT Technology Financing Services, Inc. is headquartered in Livingston,
New Jersey. The CIT Technology Financing Services, Inc. portfolio, which
includes both contracts owned by CIT Technology Financing Services, Inc. and
contracts serviced on behalf of others, is primarily comprised of leases of and
loans on the following equipment types:
computer,
machine tool manufacturing,
copier,
medical/dental,
printing and
automobile test/repair.
CIT COMMUNICATIONS FINANCE CORPORATION
CIT Communications Finance Corporation supports the sales of Avaya Inc.
and NCR Corporation equipment by providing leasing and financing options to
customers who have selected equipment manufactured or supplied by these vendors.
Avaya manufactures and distributes telecommunications and related equipment. NCR
Corporation manufactures and distributes information technology, including
retail point-of-sale systems, automated teller machines and computers. The CIT
Communications Finance Corporation portfolio of contracts is primarily comprised
of both leases and loans on the following equipment types:
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telecommunication,
retail point-of-sale system,
automatic teller machine and
computer.
CIT TECHNOLOGIES CORPORATION
CIT Technologies Corporation provides leasing, financing and
remarketing of computer equipment, electronics, manufacturing and other capital
equipment. CIT Technologies Corporation was established in 1987 and is
headquartered in Livingston, New Jersey.
THE CIT GROUP/EQUIPMENT FINANCING, INC.
The CIT Group/Equipment Financing, Inc. offers secured equipment
financing and leasing and focuses on the broad distribution of its products
through manufacturers, dealers/distributors, intermediaries and direct calling
efforts in North America. The CIT Group/Equipment Financing, Inc. is a
wholly-owned subsidiary of CIT and is headquartered in Livingston, New Jersey.
UNDERWRITING AND SERVICING
CREDIT MANAGEMENT PHILOSOPHY
In response to CIT's growing businesses, a corporate credit risk
management group, which reports to CIT's Chief Risk Officer, was formed in the
fourth quarter of 1999 to oversee and manage credit risk throughout CIT. This
group's structure includes senior credit executive alignment with each of the
business segments, as well as a senior executive with corporate-wide asset
recovery and work-out responsibilities. This group reviews non-traditional
transactions and transactions which are outside of established target market
definitions and risk acceptance criteria or which exceed each of the strategic
business units' credit authority. In addition, an Executive Credit Committee,
which includes CIT's Chairman and Chief Executive Officer, the Chief Risk
Officer, and three members of the corporate credit risk management group,
approves credits that are beyond the authority of the business units. The credit
risk management group also includes an independent credit audit function.
Each of CIT's business segments has developed and implemented a formal
credit management process in accordance with uniform guidelines established by
the credit risk management group. CIT strives to manage risks in connection with
its business, including credit risk, operational risk, execution risk, country
risk and residual value risk associated with acquiring and holding contracts.
The management of these risks is critical to the success of CIT. Each unit
within CIT has in place policies, controls, systems and procedures intended to
manage and limit these risks, promote early problem recognition and corrective
action, and facilitate consistent portfolio performance measurements. CIT's
credit risk management department periodically reviews these policies, controls,
systems and procedures.
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VTF and EF seek to minimize credit risk through diversification of the
portfolio by customer, industry segment, equipment type, geographic location and
transaction maturity. VTF's and EF's financing activities cover a wide range of
equipment types, including general equipment, telecommunications equipment,
office equipment, information technology computer equipment, construction
equipment, software and transportation equipment, and a large number of
end-users located throughout North America and, to a lesser extent, abroad.
CREDIT APPROVAL
Each unit within VTF and EF has a senior credit officer who is
responsible for overseeing the quality, integrity and performance of the unit's
credit underwriting and portfolio quality. Before any transaction can be
committed to, it must first qualify for credit approval under one of CIT's
proprietary credit scoring models, or by a duly authorized credit officer in
accordance with clearly defined authorities, policies and procedures. Each
unit's senior credit officer has the responsibility of establishing credit
policies appropriate for the unit's business and periodically reviewing its
credit personnel's exercise of credit authority for adherence to the established
credit policies. These credit policies must be consistent with CIT's overall
credit policies.
Credit authorities are set in order to enable individual credit
officers to handle approximately 85-90% of the transactions flowing to them.
This approach results in higher credit authorities reviewing approximately
10-15% of the transactions while ensuring oversight of an individual's judgment,
credit skills and compliance with credit policy by more senior credit officials.
Each unit's senior credit officer is empowered to establish credit authorities
for qualified members of their credit staff for up to $500,000. Approval of new
credit authorities up to $5,000,000 requires the approval of VTF's or EF's Chief
Credit Officer in addition to the approval of the unit's senior credit officer.
Approval of new credit authorities in excess of $5,000,000 also requires the
approval of the president of the business segment as well as CIT's Chief Risk
Officer. Each unit has a set credit authority limit. These limits vary by unit
based upon the size of the transactions encountered, the general risk profile,
the unit's perceived skills and experience, and other factors. The largest such
credit authority is $7,500,000.
Approval by VTF's or EF's Chief Credit Officer is required for
transactions in excess of an individual unit's credit authority. All investment
decisions involving amounts in excess of $10,000,000 must be reported to CIT's
Executive Credit Committee each month. The Executive Credit Committee must
approve amounts or exposure in excess of $35,000,000 for VTF and $40,000,000 for
EF.
The credit authority granted to approve transactions may not be
delegated.
CIT utilizes the "one obligor concept" in computing total credit
exposure; this means that the level of credit authority required to approve an
incremental transaction must be sufficient to approve the customer's total
credit exposure. Credit exposure is tracked in an automated fashion aggregating
all originators' exposure to each customer including its subsidiaries,
affiliates and commonly controlled companies. Unless otherwise specifically
approved, credit approvals are valid for up to 180 days for VTF and 90 days for
EF.
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UNDERWRITING -- GENERAL
CIT's underwriting standards are intended to evaluate a prospective
customer's credit standing and repayment ability. Credit decisions are made
based upon the credit characteristics of the applicant, loss experience with
comparable customers, the amount and terms and conditions of the proposed
transaction and the type of equipment to be leased or financed. For almost all
VTF transactions under $50,000 credit scoring systems are utilized to make
credit decisions. In a credit scoring system, a computer makes the initial
credit decision after consideration of many variables from the credit
application data and credit bureau information based on a statistical model of
such originator's prior loss experience. Proprietary credit scoring systems
utilized by VTF are designed to improve credit decisions on new lease
applications, expedite response times to customers and increase business volume
and portfolio profitability while maintaining credit quality.
With respect to credit decisions for those transactions which are not
based on credit scoring, each unit's credit officers conduct various credit
investigations, including reference calling and the procurement and analysis of
data from credit reporting agencies such as Dun & Bradstreet and other credit
bureaus. In the case of larger sized transactions, each unit's credit officers
will obtain and analyze financial statements from the potential customer.
Analysis will be conducted to determine the reliability of the financial
statements and to ascertain the financial condition and operating performance of
the potential customer. Asset quality is carefully reviewed and compared to the
information obtained from reference checking and credit reports. Cash flow is
checked for reliability and adequacy to service funded debt maturities and other
fixed charges. The financial analysis typically involves a review of the
potential customer's leverage, profitability, liquidity and cash flow utilizing
a variety of financial ratios and comparing the company to other companies its
size in similar businesses. In this connection, various reference sources are
utilized, such as Robert Morris Associates Annual Statement Studies.
Additionally, information may be obtained from rating agencies, securities
firms, Bloomberg and numerous other sources. The credit officer then prepares a
written analysis summarizing the amount and terms of the credit request and
setting forth the credit officer's recommendation including detailed supporting
rationale. Alternative exit strategies, including an analysis of the value of
the equipment as well as its essentiality of use, are also considered in the
event the customer fails to honor its payment obligations. However, VTF and EF
do not impose rigid loan-to-value ratios in their underwriting processes, nor is
a maximum loan-to-value ratio imposed for the types of contracts included in the
contract pool securing the notes offered by this prospectus.
The credit approval will also set forth any conditions of approval such
as personal or corporate guarantees, shorter lease terms, additional advance
payments or other credit enhancements, and it will dictate the necessary
documentation. An authorized credit officer must re-approve any subsequent
modification of approval terms or required documentation. The credit personnel
of each unit are required to rate the creditworthiness of customer accounts over
$100,000 and, in connection therewith, to take into account other factors
affecting the credit risk of a particular transaction, such as collateral value,
credit enhancement and duration of the credit.
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UNDERWRITING -- ADVANCED CREDIT SCORING SYSTEMS
In 1992, AT&T Capital Corporation, which CIT acquired when it acquired
Newcourt, commissioned the Bell Laboratories Operations Research Department to
design decision support systems and associated strategies for credit risk
management throughout the customer's financing life cycle. In 1998, Newcourt
hired five of the individuals who worked on this project and they now constitute
CIT's Management Science Department.
The life cycle approach, while commonplace in the consumer credit
field, is not as common in commercial leasing. This process developed and
implemented three sets of decision support systems, covering each stage of the
small ticket leasing life cycle:
front-end credit decisions,
credit line management, and
delinquent account collections.
See "--Collections" below. Each system includes
a suite of statistically derived risk prediction models,
a sequential decision strategy which determines the model to be
used in each instance, and
a risk based strategy which determines the optimal decision
based upon the model results.
The current front-end credit decisioning systems follow a series of
steps including:
the selection and electronic retrieval of credit bureau
information,
the quantification of credit risk, and
the decision to accept, reject or manually review the credit
applicant.
The credit scoring systems are monitored using various reporting
mechanisms and have been upgraded over time to incorporate the value of more
recent data and to take advantage of improved statistical techniques. Overrides
of credit scoring decisions are authorized by credit officers, but are
discouraged unless additional information is uncovered which materially
strengthens the transaction or if sufficient credit enhancements can be obtained
to mitigate the risk. Operating units track overrides each month.
In addition to credit scoring models developed by the Management
Science Department, CIT also utilizes credit models developed by companies such
as Fair Isaac. Fair Isaac is a major credit scoring company and has a long
history of building consumer, small business and related credit scoring models.
The performance of these models is overseen by the Management Science
Department.
Under credit scoring, empirical data is used to develop specific
parameters within a designated group to predict future delinquency and loss
rates. By setting approval cut-offs at levels associated with predetermined
default rates, the unit is able to control its risk acceptance within prescribed
parameters.
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UNDERWRITING -- VENDOR PROGRAMS
In initially establishing a program agreement or other form of
financing arrangement with a vendor, VTF and EF complete a formal underwriting
review of the vendor to ensure that the vendor can perform the financial and
other obligations contained in any vendor agreement. This review typically
encompasses a financial review, a product review (including an analysis of
market acceptance of the vendor's products) and a general operational and
managerial review of the vendor. Vendors must generally be well established in
their field and must market industry accepted equipment or other products. The
vendor must have sufficient financial resources to support their representations
and warranties which are made in connection with the proposed financing
relationship. VTF and EF continually monitor these program agreements and
perform regular reviews of a vendor's financial condition for a vendor which
generates a substantial amount of contracts involving direct or contingent
vendor risk. Vendor reviews are also determined based on portfolio performance.
DOCUMENTATION
Contract documentation may include:
a credit application or credit package including relevant
information,
a signed lease/installment sale or financing agreement,
a vendor invoice,
proof of insurance, where relevant,
delivery and acceptance acknowledgments, and
financial statements.
Filing of financing statements typically is required in the appropriate
"filing" jurisdiction if the cost of the equipment is at least $25,000 or, in
the alternative, at least $50,000 if the equipment relates to a lease with a
"fair market value" purchase option.
BILLING
For VTF, billing is generally handled by third parties, who prepare and
mail monthly invoices. EF prepares and mails invoices for its own portfolio. All
customers are assigned a billing cycle, and invoices are generated automatically
and mailed out before the due date with the exception of end-users whose payment
obligations are evidenced by payment coupon books or whose payments are
automatically debited from their accounts. From time to time to facilitate
customer needs, manual invoices are provided. Monthly invoices include the
scheduled payment, taxes, insurance and late charges, if any. The vast majority
of contracts provide for level payments throughout their term. Substantially all
customers forward payments to lockboxes with certain financial institutions.
Cash is applied by these financial institutions according to specified cash
application hierarchies dictated by CIT.
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PORTFOLIO MONITORING
Portfolio quality is monitored regularly to assess the overall
condition of the portfolio and identify the major exposures and trends within
the portfolio. Delinquency is tracked and calculated monthly for each business
unit, including segmentation by classification of days past due. Credit losses
are monitored each month and compared with credit losses for previous months and
the corresponding month in a number of prior years.
For transactions over $1,000,000, each unit endeavors to conduct annual
reviews of customer financial condition and risk rating. Such annual reviews are
conducted on transactions over $500,000 in the event of certain higher risk
ratings. For certain transactions with companies that hold an investment grade
rating by a recognized rating agency, the threshold for annual reviews is
$5,000,000. All other transactions are monitored via the normal collection
process, meaning that they would receive individual attention only if they
became delinquent or for some other reason came to the attention of the
company's credit and collections personnel. For example, a material adverse
change in the financial condition of the obligor in the transaction would
trigger an individual review.
In addition to providing an initial credit review, ongoing credit
review procedures exist to identify at an early stage those customers that may
be experiencing financial difficulty. Credit personnel monitor these customers
once they are identified and periodically make recommendations to the senior
credit officer of the unit as to
what remedial actions should be taken,
what portion, if any, of total credit exposures should be
written off, or
whether a specific allocation should be made to the loss
reserves.
COLLECTIONS
Each unit within VTF and EF is responsible for the collection and
management of their own portfolio. The methods which are used in collections
varies somewhat by unit and are based largely upon the number of accounts and
their average balances. For large portfolios of smaller dollar balances,
collection management systems have been developed and deployed including
outbound call management systems. The collection management systems prioritize
delinquent accounts into automated queues using delinquent account scoring
systems (also referred to as behavioral scoring). Telephone calls to delinquent
accounts are automatically dialed by the system eliminating no answer and busy
line calls (which are automatically rescheduled). Mid to larger ticket
portfolios typically utilize queuing systems to aid and manage collections.
Outside collection agencies and attorneys are frequently used to
supplement collection activity for VTF accounts. Typically an account is placed
with an outside collection agency or attorney when it is 180 days or more past
due. However, accounts past due less than 180 days may be placed with a
collection agency or attorney depending upon the circumstances of its
delinquency. Equipment may be repossessed at any time after the contractual
default but
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repossession typically is not made until the account is at least 90 days past
due. EF does not typically utilize outside collection agencies.
NON-ACCRUAL AND WRITE-OFF POLICY
VTF and EF maintain non-accrual and write-off policies. The policies
require that accounts which are 90 days past due, or less in the event of a
bankruptcy or other appropriate evidence of impairment, be placed on
non-accrual, and be written down to their underlying collateral value no later
than at 180 days past due.
THE CONTRACTS
With respect to any series of notes, this prospectus and any prospectus
supplement refer to the aggregate of the contracts in an owner trust, as of any
particular date, as the contract pool. This prospectus and any prospectus
supplement refer to the contract pool, as of the cut-off date or any other date
specified in the prospectus supplement for your notes, as the cut-off date
contract pool or initial contract pool. If specific information about the
contract pool is not known at the time your series of notes is initially
offered, general information will be provided in the related prospectus
supplement and specific information will be provided in a report on a Current
Report on Form 8-K to be filed with the Commission within fifteen days after the
initial issuance of your notes. Changes in the characteristics of the contracts
between the cut-off date and the closing date will not affect more than 5% of
the cut-off date contract pool principal balance. This prospectus and any
prospectus supplement refer to equipment, software and services collectively as
financed items.
DESCRIPTION OF THE CONTRACTS
All of the contracts in each owner trust will be commercial, rather
than consumer, leases or loans. The following description of the contracts
describes the material terms of the contracts to be included in each contract
pool, although an immaterial number of contracts in a contract pool may differ
in one or more provisions from the description below.
END-USER CONTRACTS
Each owner trust will include contracts to which the end-user of the
equipment is a party. The depositor lists the types of contracts under "The
Owner Trusts" above.
There will be no limit on the number of contracts in a particular
contract pool which may consist of any of those types. Each contract is
required, however, to be an "eligible contract," as of the date the depositor
transfers the contracts to the respective owner trusts. An eligible contract is
a contract as to which the representations and warranties listed below under
" -- Representations and Warranties Made by CIT Financial USA" are true as of
the transfer date.
CONDITIONAL SALE AGREEMENTS
Each originator will offer financing for equipment under conditional
sale agreements assigned to the applicable originator by the vendor of the
equipment. Each originator will generally use its standard pre-printed form to
document the conditional sale agreements in a
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contract pool. In some instances, the originator will use a vendor's standard,
pre-printed form. The conditional sale agreement sets forth the description of
each financed item and the schedule of installment payments. Typically, loans
under conditional sale agreements are fixed rate and are for a term of one to
seven years. Payments under conditional sale agreements typically are due
monthly. Conditional sale agreements typically:
provide for a grant by the end-user of the equipment of a
security interest in the equipment, which security interest is
assigned by the vendor to the originator;
may allow prepayment of the obligation upon payment, where
allowed by applicable state law, of an additional prepayment
fee;
require the end-user to maintain the equipment, keep it free
and clear of liens and encumbrances and pay all taxes related
to the equipment;
restrict the modification or disposal of the equipment without
the vendor's, or its assignee's, consent;
include a disclaimer of warranties;
include the end-user's indemnity against liabilities arising
from the use, possession or ownership of the equipment;
include the end-user's absolute and unconditional obligation to
pay the installment payments on the loan; and
include specific events of default and remedies for default.
A conditional sale agreement typically requires each end-user to maintain
insurance, the terms of which may vary. The terms of a conditional sale
agreement may be modified at its inception at the end-user's request. The
originator's legal department must approve modifications before the originator
will agree to accept an assignment of the conditional sale agreements from a
vendor unless the vendor has indemnified the originator against any losses or
damages it may suffer as a result of modifications.
LEASES
The originators, either directly or by assignment from vendors or other
third parties, will offer financing of equipment, software and services under
leases. Leases may consist of individual lease agreements relating to a single,
separate transaction and financed item. Alternatively, the individual leases may
be governed by a master lease agreement which contains the general terms and
conditions of the transaction. Specific terms and conditions, such as
descriptions of the specific equipment, software and services being leased or
financed and the schedule of related rental payments, are typically contained in
a supplement or schedule to the master lease agreement, which is signed by the
end-user as lessee, and either the vendor or the originator, as lessor. The
supplement to the master lease agreement incorporates the master lease
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agreement by reference, and is treated by the originator as a separate lease.
The originator or the vendor originates each lease in the ordinary course of
business. Vendors who originate leases assign them to the originator. An
originator also may purchase leases on a portfolio basis.
The initial terms of the leases in the contract pool typically range
from one to seven years. Each lease provides for the periodic payment by the
end-user of rent in advance or arrears, generally monthly or quarterly. The
periodic payments represent the amortization, generally on a level basis, of the
total amount that an end-user is required to pay throughout the term of a lease.
A contract pool will include "net leases" under which the end-user
assumes responsibility for
the financed items, including operation, maintenance, repair,
and insurance or self-insurance,
return of the equipment at the expiration or termination of the
lease, and
the payment of all sales, use and property taxes relating to
the financed items during the lease term.
The end-user further agrees to indemnify the lessor for any liabilities
arising out of the use or operation of the financed items. In most cases, the
end-user also authorized the lessor to perform the end-user's obligations under
the lease at the end-user's expense, if it so elects, in cases where the
end-user has failed to perform. In addition, the leases often contain "hell or
high water" clauses unconditionally obligating the end-user to make periodic
payments, without setoff, at the times and in the amounts specified in the
lease. If an originator is the lessor, the lease will contain no express or
implied warranties with respect to the financed items other than a warranty of
quiet enjoyment. If a vendor is the lessor, the lease or a related agreement may
contain representations and warranties with respect to the financed items in
addition to a warranty of quiet enjoyment. However, the end-user typically
agrees not to assert any warranty claims against any assignee, including the
originator, of the vendor by way of setoff, counterclaim or otherwise, and
further agrees that it may only bring that type of claim against the vendor.
Leases of equipment often require the end-user to maintain, at its expense,
casualty insurance covering damage to or loss of the equipment during the lease
term or to self-insure against these risks, if approved in advance by the
originator or vendor, as applicable.
The leases will include both "true leases" and leases creating a
security interest as described in Section 1-201(37) of the Uniform Commercial
Code. Under a "true lease", the lessor bears the risk of ownership, except for
the risk of loss of the equipment, which is passed to the end-user under the
leases. The lessor also takes any tax benefits associated with the ownership of
depreciable property under applicable law. No title is conferred upon the
lessee. The lessee under a "true lease" has the right to the temporary use of
property for a term shorter than the economic life of the property in exchange
for payments at scheduled intervals during the lease term. Additionally, the
lessor retains a significant "residual" economic interest in the leased
property. End of lease options for "true leases" include purchase or renewal at
fair market value.
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Under leases creating a security interest, the lessor in effect
finances the "purchase" of the leased property by the lessee and retains a
security interest in the leased property. The lessee retains the leased property
for substantially all its economic life and the lessor retains no significant
residual interest. Such leases are considered conditional sales type leases for
federal income tax purposes and, accordingly, the lessor does not take any
federal tax benefits associated with the ownership of depreciable property. End
of lease options for these leases depend on the terms of the related individual
lease agreement or master lease agreement supplement, but often these terms
provide for the purchase of the equipment at a prestated price, which may be
nominal. The inclusion of "true leases" in a contract pool should have no
federal income tax impact on holders of notes since the notes are treated as
debt for federal income tax purposes. However, the inclusion of "true leases"
may result in the imposition of state and local taxes which would reduce cash
available for payment on the notes.
A lease will either prohibit the end-user from altering or modifying
the equipment or permit the end-user to alter or modify the equipment only to
the extent the alterations or modifications are readily removable without damage
to the equipment. Under some master lease agreements, the end-user may assign
its rights and obligations under the lease, but only upon receiving the prior
written consent of the lessor. Under some leases, the lessee may relocate the
equipment upon giving the lessor prompt written notice of the relocation. The
right to grant or deny consent or to receive written notice will be exercised by
the servicer under the authority delegated to it in the related pooling and
servicing agreement. Some leases will permit the end-user to substitute
substantially identical leased equipment for leased equipment scheduled to be
returned to the lessor under the lease.
While the terms and conditions of the leases will not usually permit
cancellation by the end-user, the lessor and the end-user may modify or
terminate some leases before the end of the lease term. The originator, or a
vendor, with the consent of the originator, may permit the modifications to a
lease term or early lease terminations. The modifications typically arise in
connection with additional financing opportunities from the same end-user.
End-users may also negotiate with the originator, at the originator's
discretion, an early termination arrangement allowing the end-user to purchase
the equipment during the term of a lease. The early-termination purchase price
is often equal to or in excess of the present value of the remaining rental
payments under the lease plus the anticipated market value of the related
equipment as of the end of the lease term. The originator may permit early
termination of a lease in connection with the acquisition of new technology
requiring replacement of the equipment. In these cases, the end-user returns the
related equipment to the vendor or originator and pays an amount generally equal
to the present value of the remaining rental payments under the lease plus an
early termination fee to the originator. Modifications usually involve repricing
a lease or modification of the lease term. Occasionally the lessor and the
end-user may modify a lease in connection with an increase in the capacity or
performance of equipment by adding additional equipment that includes new
technology. Coincident with the financing of an upgrade to the equipment, the
originator may reprice and extend the related base lease term to be coterminous
with the desired term of the lease relating to the upgrade. In some cases,
subject to conditions described under "Description of the Pooling and Servicing
Agreements -- Servicing," base lease extensions may remain in a contract pool.
The depositor expects that the servicer will continue to permit these
modifications and terminations with respect to leases included in a contract
pool under the authority delegated to it in the related pooling and servicing
agreement. The servicer's
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ability to modify leases is limited by the conditions and covenants of the
servicer described under "Description of the Pooling and Servicing Agreements --
Servicing."
The originator may modify the standard terms and conditions of the
lease agreement at the inception of a lease at the request of the end-user. The
originator's legal department must approve material modifications before the
originator will agree to enter into the lease or accept an assignment of the
lease from a vendor unless the vendor indemnifies the originator against any
losses or damages it may suffer as a result of the modifications. Common
permitted modifications include, but are not limited to:
prearranged mid-lease purchase options, early termination
options and lease extension options as described above;
modifications to the lessor's equipment inspection rights;
modifications to the end-user's insurance requirements
permitting the end-user to self-insure against casualty to the
equipment;
the end-user's right to assign the lease or sub-lease the
financed items to an affiliated entity, so long as the end-user
remains liable under the lease and promptly notifies the lessor
or its assignee of the assignment or sublease; and
extended grace periods for late payments of rent.
In some cases, after a lease term expires the originator may permit the
end-user to continue to use the related equipment for so long as the end-user
continues to make lease payments. After the expiration of the term of a lease,
any continued lease payments will belong to the depositor, not the owner trust.
SECURED NOTES
Each originator will also provide direct initial financing or
refinancing of equipment and software under secured promissory notes, which
consist of an installment note and a separate security agreement. In an initial
financing transaction, the originator pays to the vendor the purchase price for
the equipment or software. In a refinancing transaction, the originator pays off
an end-user's existing financing source, and the initial financing or
refinancing is documented as a direct loan by the originator to the end-user of
the equipment or software using a secured note. In the case of a refinancing
transaction, upon payment to the existing financing source, the originator
obtains a release of the original financing party's lien on the financed
equipment. In either case, the originator records its own lien against the
financed equipment or software and takes possession of the secured note. Except
for the lack of references to "sale" or "purchase" of equipment, a secured note
contains terms and conditions substantially similar to those contained in
conditional sale agreements.
INSTALLMENT PAYMENT/FINANCING AGREEMENTS
Each originator will provide financing for software license fees and
related support and consulting services under
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installment payment supplements to software license
agreements;
separate installment payment agreements, and
other forms of financing agreements assigned to the originator
by vendors of software.
Each financing agreement of this type:
is an unsecured obligation of the end-user;
generally provides for a fixed schedule of payments with no
end-user right of prepayment;
is noncancellable for its term;
generally contains a "hell or high water" clause
unconditionally obligating the end-user to make periodic
payments, without setoff, at the times and in the amounts
specified. If a financing agreement does not provide for
noncancellability or a "hell or high water" clause, the
financing agreement will have the benefit of a vendor
guarantee. See "The Contracts-- Program Agreements with
Vendors;"
permits the assignment of the payment agreement to a third
party, including the originator, and includes the end-user's
agreement, not to assert against assignee any claims or
defenses the end-user may have against the vendor; and
contains default and remedy provisions that usually include
acceleration of amounts due and to become due and, in some
cases, the right of the vendor, or the originator by
assignment, to terminate the underlying software license and
all related support and consulting activities.
EQUIPMENT
The end-user contracts will cover a wide variety of new and used:
information technology equipment, including:
computer work stations,
personal computers,
data storage devices,
mainframe and mini-computers and
computer related peripheral equipment,
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communications equipment, such as telephone switching and
networking systems,
commercial business and industrial equipment, such as:
printing presses,
machine tools and other manufacturing equipment,
photocopiers, facsimile machines and other office
equipment,
energy savings and control equipment,
automotive diagnostic and
automated testing equipment,
medical equipment, such as diagnostic and therapeutic
examination equipment for radiology, nuclear medicine and
ultrasound and laboratory analysis equipment,
resources equipment, such as feller-bunchers and grapplers,
transportation and construction equipment, such as:
heavy and medium duty trucks and highway trailers,
school buses,
bulldozers,
loaders,
graders,
excavators,
forklifts,
other materials handling equipment,
golf carts,
other road and off-road machinery and
electronics manufacturing equipment.
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In each case, the depositor will transfer the security interests of the
originator in the equipment subject to each related end-user contract, but not
ownership interests in the case of leased equipment, to the relevant owner
trust.
SOFTWARE AND SERVICES
Some end-user contracts will cover license fees and other fees owed by
the end-user under either perpetual or term software license agreements and
other related agreements in connection with the end-user's use of computer
software programs. The end-user contracts may also cover related support and
consulting services which are provided by the vendor, an affiliate of the vendor
or a third party contract party and which facilitate the obligor's use of the
software. Neither the vendors or licensors of the software nor the end-users
under the related end-user contracts will convey to the originator any interest
in the software or the software license agreement, other than the right to
collect the payment of software license fees. However, in some cases, the
vendors may convey to the originator the right to exercise rights and remedies
under the relevant software license agreement or related agreements.
Consequently, an owner trust will not have title to or a security interest in
the software, nor will it own the related services, and would not be able to
realize any value from the software or related servicer under a related end-user
contract upon a default by the end-user.
VENDOR LOANS
The contracts may include limited recourse loan or repayment
obligations of a vendor. These may take the form of promissory notes with
related security interests documented by security agreements or specific
provisions in related program agreements. Each of the obligations is secured by
all of the vendor's interest in an individual end-user contract originated by
the vendor and by the equipment related to the end-user contract.
The originator may originate vendor loans through, and the vendor loans
may incorporate terms and conditions of, a program agreement. See "Program
Agreements with Vendors." Vendor loans generally are non-recourse to the vendor,
meaning that the originator may obtain repayment solely from the proceeds of the
end-user contracts and related equipment securing the vendor loan. In a few
instances, however, the originator may have recourse to a vendor for nonpayment
of a vendor loan through a limited recourse arrangement in the related program
agreement or other related agreement. The repayment terms under a vendor loan,
including periodic amounts payable and schedule of payments, will correspond to
the payment terms of the end-user under the end-user contract collaterally
assigned under the vendor loan. Each vendor loan will either include most, if
not all, of the representations and warranties regarding the end-user contract
and related equipment typically included in a vendor agreement, or incorporate
these representations and warranties included in any related program agreement
by reference.
PROGRAM AGREEMENTS WITH VENDORS
An originator's program agreement is typically an agreement with
equipment manufacturers, dealers and distributors, or software licensors or
distributors, located in the United States. The program agreement provides an
originator with the opportunity to finance transactions relating to the
acquisition or use by an end-user of a vendor's equipment, software,
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services or other products. Vendor program arrangements provide an originator
with a steady, sustainable flow of new business, often with lower costs of
origination than asset-based financings marketed directly to end-users. Some of
the program agreements take the form of a referral relationship, which is less
formal, and may or may not include credit or remarketing support to the
originator from the vendor.
Each program agreement under which vendors or another party originate
and document contracts and assign them to the originator typically includes
vendor representations, warranties and covenants regarding each contract
assigned to an originator, including that:
the obligations of the end-user under the assigned contract are
absolute, unconditional, noncancellable, enforceable in
accordance with their terms and free from any rights of offset,
counterclaim or defense;
the originator holds the sole original of the contract and has
either title to or a first priority perfected security interest
in the equipment, except with respect to situations where no
financing statement is filed due to the minimum value involved;
the equipment and the contract are free and clear of all liens,
claims or encumbrances except for permitted liens;
the end-user has irrevocably accepted the equipment or the
software; and
the end-user duly authorized and signed the assigned contract;
Each program agreement under which the originators document and
originate contracts typically include vendor representations, warranties and
covenants regarding each contract, including that
the equipment has been delivered to and accepted by the
end-user;
the vendor has not received any advance payments;
the vendor has good title to the equipment; and
the vendor has not made any misrepresentations to the end-user.
In each of the two above described program structures, relevant
agreements also typically provide for
remedies for misrepresentations or breaches of warranties or
covenants by the vendor regarding an assigned contract. These
remedies usually require the vendor to repurchase the affected
end-user contract for the originator's investment balance in
the contract plus costs incurred by the originator in breaking
any underlying funding arrangement; and
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the right of an originator to further assign its interests in
assigned contracts, all related payments and any related
interest in equipment.
In addition, the originators may enter into profit sharing arrangements
with some vendors. These arrangements typically will provide for sharing of
revenues generated under the program and for joint participation in management.
Under the terms of these arrangements, the originators maintain direct or
indirect control over all credit decision making activities.
Also, a program agreement or profit sharing arrangement may include
recourse against a vendor with respect to end-user defaults under some end-user
contracts,
by specifying that the assignment of the contract from the
vendor to the originator is with full recourse against the
vendor;
by specifying that the vendor will absorb a limited fixed
dollar or percentage amount of "first losses" on the contract;
by inclusion of the contract in an ultimate net loss pool
created under the program agreement as well as guarantees by
the applicable vendor with respect to certain contracts which
are cancelable or which do not contain "hell or high water"
provisions; or
by providing for vendor repurchase of the contract or vendor
indemnification payments for breaches of certain
representations and warranties made by the vendor with respect
to the contract.
If an end-user defaults under a contract subject to a net loss pool, the
originator may be permitted to draw against the net loss pool up to the amount
of the originator's remaining unpaid investment balance in the defaulted
contract. The originator may also be permitted to draw against the net loss pool
with respect to contracts that are not included in the pool of contracts in a
particular owner trust and, accordingly, there can be no assurance that any
amounts contributed by a vendor to a net loss pool will be available with
respect to a defaulted contract included in the pool of contracts owned by a
particular owner trust.
The manner in which the vendor assigns contracts to the originator
varies from one program agreement to another, depending upon
the nature of the items financed,
the form of the contract,
the accounting treatment sought by the vendor and the end-user,
and
tax considerations.
For example, an originator might:
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make a vendor loan and accept a collateral assignment of the
contract and related equipment or security interest therein
from the vendor; or
accept a full assignment of the contract and a collateral
assignment of the related equipment or security interest from
the vendor, which collateral assignment secures the end-user's
obligations under the contract or lease.
The originator also may receive, from a vendor with respect to
software, a full assignment of leases, installment payment agreements,
installment payment supplements to license agreements, and other types of
financing agreements used in financing software license payments and related
support and consulting services. These assignments may include an assignment of
the software vendor's or licensor's right, or the agreement of the vendor or
licensor, at the originator's instructions, to terminate the software license
covered by the contract and suspend related support in the event of an end-user
default under the contract. In some cases, the software vendor also agrees not
to relicense the same or similar software to a defaulted end-user for some
period of time, e.g., one year, unless the end-user cures its default.
Some portion of the contracts included in the pool of contracts,
especially in the case of conditional sale agreements, are likely to consist of
contracts originated by vendors and assigned to the originator in vendor
assignments, each of which relates to an individual contract, rather than under
a program agreement. Each vendor assignment will either be with or without
recourse against the vendor for end-user defaults. Each vendor assignment will
typically contain many, if not all, of the representations, warranties and
covenants typically contained in program agreements, as well as a vendor
repurchase requirement in the event of a breach by the vendor of the
representations, warranties or covenants. Vendor assignments may or may not
provide for any vendor remarketing support in the event of an end-user default.
RESIDUAL INVESTMENTS
Any of the originators may finance all or a portion of the residual
interest in the equipment under program agreements and under direct transactions
between an obligor and the applicable originator. Any investment by the
originator in a residual interest shall be referred to as a residual investment.
Program agreements may provide that the originator may, at its sole discretion
and in connection with the funding of a lease of equipment, make a residual
investment in that equipment by advancing additional funds against a portion of
the anticipated residual value of the equipment, and not just against the
discounted present value of the rental payments due under the contract. Residual
investments may take the form of an advance of the present value of some
specified percentage of the anticipated residual value of the equipment or a
specified percentage, typically not greater than 10%, of the amount to be paid
by the originator in funding the present value of the rental payments due under
the contract.
With respect to vendor assignments, the originator may advance the
entire purchase price of the equipment subject to a true lease, take title to
the equipment, and accept an assignment of the true lease contract from a
vendor. With respect to the leases originated by the originator the originator
may advance the entire purchase price of the equipment to the vendor, take title
to the equipment from the vendor, and enter into a true lease contract with an
obligor. In either of the two foregoing types of transactions, the originator
will have advanced more than the discounted
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present value of the rents payable under the true lease contracts by paying the
purchase price for the equipment, and so will have made a residual investment in
the equipment.
In some program agreements, the originator may make the residual
investment in the form of a full recourse loan of additional funds to the
vendor. That loan is repayable by the vendor at the expiration or termination of
the contract with interest and is secured by a security interest in the financed
equipment. In some transactions involving vendor assignments or direct
transactions with obligors under true lease contracts, the originator may obtain
the obligation of either the vendor or the obligor to purchase the equipment at
the end of the lease term for the full amount of the originator's residual
investment in the equipment with accrued interest. Any transaction in which the
originator may look to either the vendor or the obligor, and not just the value
of equipment itself, to recover its residual investment with interest shall be
referred to as a "guaranteed residual investment." Other than guaranteed
residual investments, a residual investment will not be included in the
discounted contract balance of any contract and, therefore, would not be
financed with the proceeds of the notes. This type residual investment is
referred to herein as the "excluded residual investment."
The seller or an affiliate of the seller will transfer the excluded
residual investment associated with any contract included in a pool of contracts
to the depositor or another affiliate under the terms of a purchase and sale
agreement or other transfer agreement. The depositor will not transfer the
excluded residual investment to an owner trust under the related pooling and
servicing agreement. The related owner trust's interest in contracts with
associated residual investments, other than with guaranteed residual
investments, will be limited to the discounted present value of the rental
payments due under the contract and a security interest in the related
equipment. The originator may assign its excluded residual investment to a third
party, including the security interest in the equipment in respect of the
residual investment.
CONTRACT FILES
Each originator will indicate in the appropriate computer files
relating to the contracts being transferred to an owner trust that the
originator has transferred the contracts for the benefit of the holders of the
notes. Each originator will also deliver to the indenture trustee a computer
file, microfiche or written list containing a true and complete list of all
contracts which it has transferred, identified by account number and by the
discounted contract balance of the contracts as of the transfer date.
COLLECTIONS ON CONTRACTS
Your prospectus supplement will describe how all collections received
with respect to the contracts will be allocated.
PAYMENTS GENERALLY
The contracts usually require that an obligor make periodic payments on
a monthly basis. Some contracts, however, provide for quarterly, semi-annual or
annual payments. Obligors must make the payments under all of the contracts in
United States dollars. Payment requirements usually are fixed and specified,
rather than being tied to a formula or are otherwise at a floating
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rate. Payments under the contracts are ordinarily payable in advance, although a
small percentage (e.g., software contracts) provide for payments in arrears.
EXPENSES RELATING TO EQUIPMENT
The contracts require the obligors to assume the responsibility for
payment of all expenses of the related equipment including, without limitation,
any expenses in connection with the maintenance and repair of
the related equipment,
the payment of any and all premiums for casualty and liability
insurance, and
the payment of all taxes relating to the equipment.
INSURANCE; REPAIR AND REPLACEMENT
Most lease contracts require that the obligors maintain liability
insurance which must name the lessor as additional insured. Contracts which are
subject to
leases,
installment sales contracts,
promissory notes or
loan and security agreements
require obligors to procure property insurance against the loss, theft or
destruction of, or damage to, the equipment for its full replacement value,
naming the lessor, or lender, as loss payee. An originator will waive this
requirement from time to time for a small number of transactions. For some lease
contracts, the obligor's already existing self-insurance program permits the
obligor to self-insure the equipment.
For lease contracts that CIT Communications Finance Corporation
originates relating to equipment with a cost of $100,000 or less, and for lease
contracts which CIT Technology Financing Services, Inc. or CIT Technologies
Corporation originates relating to equipment with a cost of $250,000 or less,
the originator often provides the obligor with written information concerning
its property insurance obligations under the contract. The CIT Group/Equipment
Financing, Inc. generally does not require evidence of insurance for contracts
with an equipment cost less than $250,000. For contracts for which evidence of
insurance is required by the originators, the obligor is generally given a
specified time period in which to provide evidence of insurance coverage. A
third party tracking company and licensed broker independently verifies and
tracks proper evidence of coverage. If the obligor does not provide satisfactory
evidence of insurance coverage then the originator will provide insurance. If
the originator provides the insurance coverage, the originator charges the
obligor a monthly fee covering the insurance charges and other related
administrative charges. If, at any time, the obligor provides evidence
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of its own coverage, these monthly charges cease. The obligor has the ability to
opt out of the program by providing evidence of its own coverage.
For transactions involving equipment with a cost of more than $100,000,
in the case of lease contracts that CIT Communications Finance Corporation
originates, or more than $250,000, in the case of lease contracts that CIT
Technology Financing Services, Inc., The CIT Group/Equipment Financing, Inc. or
CIT Technologies Corporation originates, insurance coverage generally is
verified and tracked by the respective originator. The failure to maintain this
insurance constitutes an event of default under the applicable contract.
Usually, the obligor also agrees to indemnify the originator for all liability
and expenses arising from the use, condition or ownership of the equipment.
If the equipment is damaged or destroyed, each lease contract requires
that the obligor:
repair the equipment;
make a termination payment to the lessor in an amount not less
than the amount required to pay off the contract; or
in some cases, replace the damaged or destroyed equipment with
other equipment of comparable use and value.
The related pooling and servicing agreement permits the servicer, in the case of
the destruction of the equipment related to a particular lease contract, either
to:
allow the lessee to replace this equipment, provided that the
replacement equipment is, in the judgment of the servicer, of
comparable use and at least equivalent value to the value of
the equipment which was destroyed, or
accept the termination payment referred to above.
ASSIGNMENT OF CONTRACTS
The contracts generally permit the assignment of the contract by the
lessor or secured party without the consent of the obligor. However, a small
number of contracts require notification of the assignment to, or the consent
of, the obligor. The seller will represent and warrant in the purchase and sale
agreement that these notices have been given, or approvals will have been
received, not more than ten days following the date of the transfer of the
contract to the depositor. The contracts do not permit assignment of the
contracts, or the related equipment, by the obligor without the prior consent of
the lessor or secured party, except the contracts may permit:
assignments to a parent, subsidiary or affiliate;
the assignment to a third party, provided the obligor remains
liable under the contract; or
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assignment to a third party with a credit standing, which the
originator determines in accordance with its underwriting
policy and practice at the time for an equivalent contract
type, term and amount, to be equal to or better than the
original obligor.
Under the related pooling and servicing agreement, the servicer may permit an
assignment of a particular contract from an obligor to a third party only if the
servicer, utilizing the current underwriting criteria for its contract
origination activities, determines that the third party is of sufficient credit
quality that the servicer would permit the third party to become an obligor with
respect to a contract that the servicer originates.
EVENTS OF DEFAULT AND REMEDIES
Events of default under the contracts ordinarily include:
the failure to pay all amounts required by the contract when
due;
the failure of the obligor to perform its agreements and
covenants under the applicable contract;
material misrepresentations made by the obligor;
the bankruptcy or insolvency of the obligor or the appointment
of a receiver for the obligor; and
in some cases, default by the obligor under other contracts or
agreements.
Some of these default provisions are, in some instances, subject to notice
provisions and cure periods. Remedies available to the lessor or secured party
upon the occurrence of an event of default by the obligor include the right
to cancel or terminate in the case of a contract subject to a
true lease,
to accelerate payments in the case of a contract subject to
financing,
to recover possession of the related equipment and
to receive an amount intended to make the lessor or secured
party, as the case may be, whole plus costs and expenses,
including legal fees, which the lessor or secured party incurs
as a result of the default.
Notwithstanding these events of default and remedies, the pooling and servicing
agreement, permits the servicer to take the actions, with respect to delinquent
and defaulted contracts, a reasonably prudent creditor would take under similar
circumstances. See "Description of the Pooling and Servicing Agreement --
Servicing." The originators may occasionally provide payment extensions,
typically of three months or less. Longer extensions are occasionally granted to
customers experiencing delays in payment due to cash flow shortages or other
reasons. However, originators do not intend extensions to be used to provide a
temporary
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solution for a delinquent account. Rather, extensions are intended to
be used when, in the judgment of the relevant credit authority, the extension is
necessary to avoid a termination and liquidation of the contract and will
maximize the amount to be received by the related owner trust with respect to
the contract.
PREPAYMENTS AND EARLY TERMINATION
Any contract may either:
not permit the obligor to prepay the amounts due under the
contract or otherwise terminate the contract prior to its
scheduled expiration date;
allow for a prepayment or early termination upon payment of an
amount that is at least equal to the contract principal
balance, determined using a discount rate specified in your
prospectus supplement; or
allow for a prepayment or early termination without the payment
of the contract principal balance.
Some contracts, often written as installment sales contracts, promissory notes
or loan and security agreements, permit the obligor to prepay the contract, in
whole or in part, at any time at par plus accrued interest.
Under each pooling and servicing agreement, the servicer may allow the
prepayment of any contract, but only if the amount paid, or, in the case of a
partial prepayment, the sum of that amount and the remaining principal balance
of the contract after application of that amount, is at least equal to the
amount required to pay off the contract. The required payoff amount, with
respect to any collection period for any contract, is equal to the sum of:
the scheduled payment due in that collection period and not yet
received, together with any scheduled payments due in prior
collection periods and not yet received; plus
the discounted contract principal balance of the contract as of
the last day of that collection period, after taking into
account the scheduled payment due in that collection period.
In no event will revenues pledged for a series of notes include, nor
will the notes otherwise be payable from, any portion of a prepayment on a
contract that exceeds the required payoff amount for that contract.
Under the pooling and servicing agreement, the depositor may replace
any prepaid contract with a substitute contract. See " -- Substitution of
Contracts" below.
DISCLAIMER OF WARRANTIES
The contracts which are subject to a true lease contain provisions
whereby the lessor, or the originator, as assignee of the lessor, disclaims all
warranties with respect to the equipment.
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In the majority of cases, the lessor assigns the manufacturer's warranties to
the obligor for the term of the lease. Under true leases, the obligor accepts
the equipment under the applicable contract following delivery and an
opportunity to inspect the related equipment.
ADDITIONAL EQUIPMENT
Some of the contracts which are subject to a true lease constitute
leases of additional equipment, generally costing $25,000 or less, with existing
obligors. Pursuant to the terms of the original contract between the lessor and
the obligor, the parties document leases for additional equipment on a written
form that the lessor prepares and delivers to the obligor, but the obligor does
not execute, which written form describes all of the terms of the lease. Under
the terms of the contract, the obligor agrees that unless it objects in writing
within a specified period of time, it is deemed to have accepted the lease of
this additional equipment.
REPRESENTATIONS AND WARRANTIES MADE BY CIT FINANCIAL USA
CIT Financial USA will make the following representations and
warranties regarding all of the contracts and the related equipment included in
each pool of contracts transferred by the depositor to an owner trust as of the
related transfer date, including for contracts sold to the depositor by
affiliates of CIT Financial USA. The representations and warranties will also
apply to contracts that the depositor reacquires from a trust to which the
depositor previously transferred the contracts in connection with a warehouse
receivables securitization facility.
(1) the information with respect to the contracts is true and
correct in all material respects;
(2) immediately prior to the transfer of a contract, the contract
was owned by the transferring party free and clear of any
adverse claim except for permitted claims;
(3) the contract is not a defaulted or delinquent contract;
(4) no provisions of the contract has been waived, altered or
modified in any material respect, except by instruments or
documents contained in the files relating to the contract;
(5) the contract is a valid and binding payment obligation of the
obligor and its terms are enforceable, except the enforcement
may be limited by insolvency, bankruptcy, moratorium,
reorganization, or other similar laws affecting enforceability
of creditors' rights and the availability of equitable
remedies;
(6) the contract is not and will not be subject to rights of
rescission, setoff, counterclaim or defense;
(7) the contract, at the time it was made, did not violate the
laws of the United States or any state in any material
respect;
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(8) (a) the contract and any related equipment have not been sold,
transferred, assigned or pledged by the originator to any
person other than the end-user, the seller, the depositor or
any related financing trust; and
(b) either
(i) the contract is secured by a perfected lien,
subject to permitted liens and subject to
minimum filing value exceptions, on the
related equipment or, in the case of any
vendor loan, related end-user contract or
equipment or
(ii) in the case of a contract secured by a
vehicle, within 90 calendar days of the
origination or a acquisition of the contract
by the originator all required state
registration or recording procedures were
initiated, and the originator's interest
will be so noted or recorded within 180 days
of the acquisition or origination;
(9) if the contract constitutes either an "instrument" or "chattel
paper" for purposes of the Uniform Commercial Code, there is
not more than one "secured party's original" of the contract;
(10) all filings necessary to evidence the conveyance or transfer
of the contract to the depositor have been made or provided
for in all appropriate jurisdictions, except that the parties
have not made filings to note the seller, the depositor or the
trust as an assignee of the interests of originators other
than the seller, and except that only filings in the State of
New Jersey have been made or provided for in favor of the
owner trust describing security interests in equipment;
(11) the obligor is not, to the seller's knowledge, subject to
bankruptcy or other insolvency proceedings;
(12) the contract is a U.S. dollar-denominated obligation and the
obligor's billing address is located in the United States or
Puerto Rico;
(13) the contract does not require the prior written notifications
to a consent of an obligor or contain any other restriction on
the transfer or assignment of the contract other than
notifications that will have been given and consents or
waivers of restrictions that will have been obtained within
ten days after the date of the contract was sold to the trust;
(14) the obligations of the related obligor under the contract are
irrevocable and unconditional and non-cancelable or, if not
irrevocable and unconditional, are guaranteed by the vendor;
or in the case of leases with governments, upon a cancellation
of the lease, either the vendor is obligated to repurchase the
lease or the seller will indemnify the trust depositor in
respect of the cancellation;
(15) no adverse selection procedure was used in selecting the
contract for transfer;
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(16) the obligor under the contract is required to maintain
casualty insurance with respect to the related equipment or to
self-insure against casualty with respect to the related
equipment in an amount that is consistent with the servicer's
normal servicing requirements;
(17) the contract constitutes chattel paper, an account, an
instrument or a general intangible as defined under the
Uniform Commercial Code;
(18) no lease is a "consumer lease" as defined in Section
2-A--103(1)(e) of the Uniform Commercial Code;
(19) to the best knowledge of the relevant originator each lessee
has accepted the related equipment and has had a reasonable
opportunity to inspect the equipment;
(20) except as provided in (14) above, the contract is not
guaranteed by any originator nor has the originator
established any specific credit reserve with respect to the
related obligor;
(21) each lease is a "triple net lease" under which the obligor is
responsible for the maintenance, taxes and insurance of the
related equipment in a manner that conforms with general
industry standards;
(22) each vendor loan is secured by an eligible end-user
contract(s) having an aggregate contract principal balance(s)
equal to the outstanding principal amount of the vendor loan.
In this context, an eligible end-user contract is one
that satisfies all of these representations and
warranties except number (2) above and number (8) above,
in respect of ownership by the applicable originator;
in which the relevant originator or financing trust has
a perfected lien; and
in which the transfer of the relevant originator's or
financing trust's security interest in the contract to
the owner trust creates a duly perfected lien;
(23) the obligor is not the United States of America or any agency,
department, subdivision or instrumentality of the United
States of America;
(24) the contract contains customary provisions for this type of
financing, and the provisions are sufficient and enforceable,
except as listed as noted in (5) above, to enable the relevant
originator or its assignees to realize against the financed
items securing the contract; and
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(25) if the obligor is a state or local government entity, the
transfer of the contract does not violate any applicable state
or local laws restricting or prohibiting transfer.
The owner trust may modify the above representations and warranties and
will describe any modification in the relevant prospectus supplement.
In the event of a breach of any representation or warranty with respect
to a contract that materially and adversely affects the owner trust's or any
noteholder's or equity certificateholder's interest in the contract or the
collectibility of the contract, the owner trust will have a warranty claim
against the seller. The seller will then be obligated to repurchase the
contract. However, the seller need not do so if the seller cures the breach by
the second deposit date after the date on which the servicer becomes aware and
gives notice to the seller of the breach. Any purchase shall be made on the
deposit date immediately following the end of the second collection period at a
price equal to the required payoff amount of the contract. The purchase price
will be allocated to the related owner trust plus, if applicable, the book value
of the related equipment which will be allocated to the depositor. The related
indenture trustee may enforce this purchase obligation on your behalf, and will
constitute your sole remedy available against the seller the depositor, the
trust or the originators for any uncured breach, except that the seller will
indemnify
the related indenture trustee,
the related owner trustee,
the related owner trust and
you
against losses, damages, liabilities and claims which may be asserted against
any of them as a result of third-party claims arising out of the facts giving
rise to that breach. The seller may, in lieu of repurchasing the contract, cause
the depositor to deliver a substitute contract as provided in the next-following
section of this prospectus.
Upon the purchase by the seller of a contract, the depositor will
release the contract and related equipment to the seller.
SUBSTITUTION OF CONTRACTS
The depositor will have the option to substitute one or more contracts
having similar characteristics for contracts which are in default or have been
prepaid or which have undergone material modification. In addition, in the case
of a contract subject to a warranty claim, as described in " -- Representations
and Warranties Made by CIT Financial USA" above, the seller may choose to
replace the contract with a substitute contract.
Some contracts may permit the obligor to prepay the amounts due under
the contract or otherwise to terminate the contract prior to its scheduled
expiration date. The depositor may
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replace any prepaid contract with a substitute contract in lieu of applying the
proceeds of the prepaid contract to the pledged revenues as described in this
section.
Material modification of a contract means a termination, release,
amendment, modification or waiver of a contract that is not otherwise permitted
under the pooling and servicing agreement. The depositor may provide substitute
contracts for any that have been so materially modified. The depositor may also
replace any defaulted contract with a substitute contract. The aggregate
contract principal balances of the defaulted contracts for which the depositor
may cause substitution is limited to 10% of the cut-off contract pool principal
balance. The depositor may replace a prepaid contract with a substitute contract
and the seller may choose to replace contracts subject to a warranty claim or a
material modification with substitute contracts, in either case without regard
to the 10% limitation described above.
The same credit criteria and eligibility standards for the contracts in
the contract pool on the closing date will also apply to substitute contracts
added to the assets of the owner trust. The servicer will include information
with respect to these substitute contracts, to the extent the servicer deems
them material, in required periodic reports under the Securities Exchange Act of
1934 filed with the Commission on behalf of the owner trust. The substitute
contracts will have contract principal balances equal to or greater than the
contracts being replaced. The representations and warranties the seller makes
with respect to the contracts in " -- Representations and Warranties Made by CIT
Financial USA" above will be equally applicable to substitute contracts.
On the date that the depositor adds a substitute contract to the
contract pool, the seller and the depositor will make the same representations
and warranties as if the transfer occurred on the closing date. However, for
these purposes (a) the contract pool on the closing date shall be deemed to
include the substitute contract in lieu of the contract being replaced or
substituted and (b) the contract principal balance of the substitute contract
shall be equal to or greater than the contract principal balance of the contract
being replaced or substituted as of the related cut-off date.
The owner trust shall reassign to the depositor, and the seller will be
obligated to purchase from the depositor, any contract transferred by the owner
trust at any time there is a breach of any of these representations or
warranties. However, the cure of the breach in all material respects, or the
waiver of the breach, will be an adequate remedy. This purchase shall occur no
later than the second deposit date after the servicer becomes aware, or receives
written notice, of the breach. The "deposit date" means the business day
preceding a payment date. This purchase obligation will constitute the sole
remedy against the depositor and the seller available to the owner trust, the
indenture trustee and the noteholders or equity certificateholder for a breach
of these representations or warranties.
Under the pooling and servicing agreement, a contract transferred by
the owner trust shall be reassigned to the seller and the seller shall make a
deposit in the collection account in immediately available funds in an amount
equal to the contract principal balance of the contract. Any amount the seller
deposits into the collection account in connection with reassignment of a
contract transferred by the owner trust shall be considered payment in full of
the ineligible contract. In the alternative, the seller may cause the depositor
to convey to the owner trust a
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substitute contract satisfying the terms and conditions applicable to substitute
contracts in replacement for the affected contract. The affected contract shall
be deemed released by the owner trust and indenture trustee and reconveyed to
the depositor and by the depositor to the seller.
DELINQUENCY AND NET LOSS EXPERIENCE
Your prospectus supplement will set forth statistics relating to the
delinquency and net loss experience on contracts within the originators' owned
and managed portfolios of receivables similar to the contracts in a contract
pool.
DESCRIPTION OF THE NOTES AND INDENTURE
GENERAL
The issuance of each series of notes will be under an indenture, a form
of which was filed with the Commission as an exhibit to the registration
statement of which this prospectus is a part. In addition, a copy of the
indenture for a series of notes will be filed with the Commission following the
issuance of each series. The following summary describes certain material terms
which may be common to each indenture and the related notes, but does not
purport to be complete and is subject to all of the provisions of the indenture,
the related notes and the description set forth in your prospectus supplement.
The notes of each series will be issued in fully registered form only
and will represent the obligations of a separate owner trust.
Payments on the notes will be made by the indenture trustee on each
payment date to persons in whose names the notes are registered as of the
related record date. Unless otherwise specified in your prospectus supplement,
the payment date for the notes will be the 20th day of each month, or if the
20th is not a business day, the next succeeding business day. For so long as the
notes are in book-entry form, the record date for any payment date will be the
business day immediately preceding the payment date. If the owner trust issues
certificated notes, the record date will be the last business day of the month
immediately preceding the payment date.
A business day is any day other than a Saturday, Sunday or legal
holiday on which commercial banks in New York City are open for regular
business.
DISTRIBUTIONS
Each class of notes will have a stated principal or notional amount and
may bear interest at a specified rate. Your prospectus supplement will describe
as to your series of notes
the timing and priority of distributions,
the amount or method of determining distributions of principal
and interest,
allocations of loss and
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the interest rates.
Your right to receive payments of principal and/or interest on your
notes may be senior or subordinate to the rights of holders of any other class
or classes of notes, as described in the related prospectus supplement. Payments
of interest on your notes may be made prior to payments of principal. To the
extent provided in your prospectus supplement, one or more classes of notes may
be designated as planned amortization classes, targeted amortization classes,
companion classes or variable pay term notes, each as described in the related
prospectus supplement.
STRIP NOTES AND RESIDUAL PAYMENT NOTES
To the extent provided in your prospectus supplement, an owner trust
might issue:
Strip Notes entitled to (1) principal payments with
disproportionate, nominal or no interest payments, or (2)
interest payments with disproportionate, nominal or no
principal payments, or
Residual Payment Notes entitled to some or all of the remaining
payments of principal and interest on the related contracts
after the owner trust has made all other distributions it is
required to make on a payment date.
TARGETED SCHEDULED PAYMENT DATES
To the extent provided in your prospectus supplement, an owner trust
might issue notes that have targeted scheduled payment dates on which they will
be paid in full if the trust can issue a variable pay term note in sufficient
principal amount to pay the specified class of notes. The variable pay term note
may be issued publicly or privately and will receive principal payments in the
amounts and with the priority described in the prospectus supplement.
CREDIT ENHANCEMENT
As further specified in your prospectus supplement, a
cash collateral account,
a financial guaranty insurance policy;
subordination of one or more classes of notes,
overcollateralizations,
letters of credit or liquidity facilities,
repurchase obligations,
third party payments or other support,
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cash deposits,
reserve fund or
other form of credit enhancement which may become suitable in light of credit
enhancement practices or developments in the future, may be established on or
prior to the date the contracts are transferred. The credit enhancement would be
available to the related indenture trustee to pay interest and principal on the
notes in the manner and to the extent specified in your prospectus supplement.
LIQUIDATION AND INSURANCE PROCEEDS
The allocation of liquidation proceeds which will consist generally of
all amounts the servicer receives in connection with the liquidation of a
contract and disposition of the related equipment, net of any related
out-of-pocket liquidation expenses, and the allocation of insurance proceeds for
physical damage to or loss of equipment covered by contracts, will be as
follows:
with respect to any contract subject to financing, the proceeds
will be allocated to the owner trust; and
with respect to any contract subject to a lease, the proceeds
will, unless otherwise specified in your prospectus supplement,
be allocated on a pro rata basis between the depositor, on the
one hand, and the owner trust, on the other, based respectively
on
(a) the book value of the related equipment and
(b) the required payoff amount for the contract.
However, if the proceeds in respect of any contract subject to
a lease and the related equipment exceed the sum of the
required payoff amount for the contract and the book value of
the equipment, the excess shall be allocated solely to the
depositor.
For example, if the servicer, in connection with a defaulted contract subject to
a lease, derived liquidation proceeds in the amount of $100 from the liquidation
of the contract and disposition of the related equipment, and if the required
payoff amount of the contract was, as of the collection period during which the
contract became a liquidated contract, $120 and the book value of the equipment
was $30, the liquidation proceeds would be allocated to the owner trust in the
amount of $80 and to the depositor in the amount of $20. All liquidation
proceeds which are so allocable to the owner trust will be deposited in a
collection account and constitute pledged revenues to be applied to the payment
of interest and principal on the notes in accordance with the priorities
described under " -- Distributions" above.
OPTIONAL PURCHASE OF CONTRACTS AND REDEMPTION OF NOTES
The depositor may purchase all of the contracts owned by an owner trust
on any payment date following the date on which the unpaid principal balance of
the related notes is less than the
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percentage of the initial contract pool principal balance described in the
prospectus supplement. Except as otherwise described in the prospectus
supplement for your notes, the purchase price to be paid in connection with the
purchase shall be at least equal to the sum of
the unpaid principal balance of the related notes as of that
payment date,
accrued but unpaid interest,
unreimbursed servicer advances, and
accrued but unpaid servicer fees.
If the depositor does purchase the contracts, the related notes shall be
redeemed on the payment date on which the purchase occurs. The redemption price
will be the principal amount of the notes plus accrued and unpaid interest to
but excluding the redemption date.
TRUST ACCOUNTS
Except as otherwise specified in your prospectus supplement, the
applicable indenture trustee will establish and maintain under each indenture
segregated trust accounts which need not be deposit accounts, but which must be
with a qualified institution. These accounts will include, among others, the
"Collection Account" and the "Distribution Account." The accounts may, as
described in the prospectus supplement for your notes, also include a cash
collateral or reserve fund account as credit enhancement. The accounts may also
include a pre-funding account or a capitalized interest account if the
prospectus supplement for your notes indicates that the owner trust may purchase
additional contracts during a Funding Period. All of these accounts are referred
to collectively as the "Trust Accounts."
"Qualified institution" means the corporate trust department of the
indenture trustee or any other depository institution
organized under the laws of the United States or any state or
any domestic branch of a foreign bank,
the deposits of which are insured by the Federal Deposit
Insurance Corporation and
which has, or whose parent corporation has, short-term or
long-term debt ratings acceptable to Moody's Investors Service,
Inc., Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and Fitch IBCA, Inc.
The servicer, as agent for the indenture trustee of any series, may
designate, or otherwise arrange for the purchase by the indenture trustee of,
investments to be made with funds in the trust accounts. All investments shall
be eligible investments as defined in the related indenture that will mature not
later than the business day preceding the applicable monthly payment date or any
other date approved by the rating agencies. Eligible investments include, among
other investments:
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obligations of the United States or of any agency thereof
backed by the full faith and credit of the United States;
demand deposits, certificates of deposit, time deposits demand
notes or bankers acceptance of eligible financial institutions;
highly rated commercial paper or money market funds;
repurchase agreements in respect of United States government
securities or securities guaranteed or otherwise backed by the
full faith and credit of the United States Government with
eligible institutions; and
other investments which have been approved by each rating
agency.
REPORTS TO NOTEHOLDERS
With respect to each series of notes, the servicer will furnish to the
applicable indenture trustee, and the indenture trustee will include with each
distribution to you, a statement, as specified in your prospectus supplement, in
respect of the related payment date.
If you purchase a note, you may receive these reports by making a
written request to The Depository Trust Company. These reports do not constitute
financial statements prepared in accordance with generally accepted accounting
principles. Neither the depositor nor the servicer intends to send any of their
respective financial reports to owners of notes. The servicer, on behalf of an
owner trust, will file with the Commission legally required periodic reports
concerning the owner trust.
With respect to any series, the notes will be registered in the name of
a nominee of The Depository Trust Company and will not be registered in the
names of the beneficial owners or their nominees. As a result, unless and until
definitive notes are issued in the limited circumstances described under " --
Issuance of Certificated Notes at a Later Date" below, the indenture trustee
will not recognize you as a noteholder, as that term is used in the related
indenture. Hence, until that time, you will receive reports and other
information provided for under the related indenture only if, when and to the
extent The Depository Trust Company and its participating organizations provide
this information. The servicer will file a copy of each report with the
Commission on Form 8-K to the extent the Securities Exchange Act of 1934 and the
rules and regulations of the Commission thereunder require it.
BOOK-ENTRY REGISTRATION
Unless your prospectus supplement states otherwise, you may hold your
notes through The Depository Trust Company, referred to as "DTC," in the United
States, or Clearstream or Euroclear System in Europe, if you are a participant
of those systems, or indirectly through organizations that are participants in
those systems.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under to Section
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17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its direct participants and to facilitate the clearance and
settlement of securities transactions between its direct participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. DTC's direct participants include
the underwriters offering the notes to you,
securities brokers and dealers,
banks,
trust companies and
clearing corporations, and may include other organizations.
Indirect access to the DTC system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly.
To facilitate subsequent transfers, DTC will register all deposited
notes in the name of DTC's nominee, Cede & Co. You will maintain beneficial
ownership of the notes despite the deposit of notes with DTC and their
registration in the name of Cede. DTC has no knowledge of the actual
noteholders; DTC's records reflect only the identity of its direct participants
to whose accounts the notes are credited, which may or may not be the
noteholders. DTC's direct and indirect participants will remain responsible for
keeping account of their holdings on behalf of their customers.
You have no entitlement to receive a certificate representing your
interest in a class of notes. As long as the notes are registered in the name of
Cede & Co., any action to be taken by you or any other noteholders will be taken
by DTC upon instructions from DTC's participants. All distributions, notices,
reports and statements to noteholders will be delivered to Cede, as the
registered holder of the notes, for distribution to noteholders in compliance
with DTC procedures.
You will receive all payments of principal and interest on the notes
through direct participants or indirect participants. DTC will forward the
payments to its direct participants which will forward them to indirect
participants or noteholders. Under a book-entry format, you may experience some
delay in their receipt of payments, since payments will be forwarded to Cede as
nominee of DTC. The indenture trustee will not recognize you as a noteholder, as
that term is used in the indenture. You may exercise the rights of noteholders
only indirectly through DTC and its direct participants and indirect
participants. Because DTC can act only on behalf of direct participants, who in
turn act on behalf of indirect participants, and on behalf of banks, trust
companies and other persons approved by it, there may be limits on your ability
to pledge the notes to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to notes, due to the absence of
physical notes for the notes.
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Arrangements among the various parties govern conveyance of notices and
other communications by
DTC to direct participants,
by direct participants to indirect participants and
by direct participants and indirect participants to noteholders,
subject to any statutory or regulatory requirements as may be in
effect from time to time.
Standing instructions and customary practices govern payments by DTC
participants to noteholders, 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 the DTC participant and not of DTC, the indenture trustee,
the owner trustee, the originators or the originator, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the indenture trustee,
disbursement of the payments to direct participants shall be the responsibility
of DTC and disbursement of payments to noteholders shall be the responsibility
of direct participants and indirect participants.
Purchases of notes under the DTC system must be made by or through
direct participants, which will receive a credit for the notes on DTC's records.
The ownership interest of each actual noteholder is in turn to be recorded on
the direct participants' and indirect participants' records. Noteholders will
not receive written confirmation from DTC of their purchase, but noteholders are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holders, from the direct participant or
indirect participant through which the noteholder entered into the transaction.
Entries made on the books of DTC's participants acting on behalf of noteholders
evidence transfers of ownership interests in the notes.
DTC will not comment or vote with respect to the notes. DTC has advised
that it will take any action permitted to be taken by a noteholder under the
indenture only at the direction of one or more direct participants to whose
accounts with DTC the notes are credited. Additionally, DTC has advised that to
the extent that the indenture requires that any action may be taken only by
noteholders representing a specified percentage of the aggregate outstanding
principal amount of the notes, DTC will take the action only at the direction of
and on behalf of direct participants, whose holdings include undivided interests
that satisfy the specified percentage.
DTC may discontinue providing its services as securities depositary
with respect to the notes at any time by giving reasonable notice to the
indenture trustee. Under these circumstances, in the event that a successor
securities depositary is not obtained, fully registered, certificated notes are
required to be printed and delivered. The originator may decide to discontinue
use of the system of book-entry transfers through DTC or a successor securities
depositary. In that event, fully registered, certificated notes will be
delivered to noteholders. See " -- Issuance of Definitive Notes at a Later
Date."
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The information in this section concerning DTC and DTC's book-entry
system are from sources that the depositor believes to be reliable, but neither
the depositor nor the owner trustee take any responsibility for the accuracy of
this information.
Clearstream and Euroclear will hold omnibus positions on behalf of the
participants in the Clearstream and Euroclear systems, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries which in turn will hold these positions
in customers' securities accounts in the depositaries' names on the books of
DTC.
Clearstream is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream holds securities for its participants and
facilitates the clearance and settlement of securities transactions between its
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates.
Indirect access to Clearstream is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Clearstream participant, either directly or
indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear's 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. The Brussels, Belgium
office of Morgan Guaranty Trust Company of New York operates Euroclear, under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation. Euroclear's operator conducts all operations and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
Euroclear's operator. Euroclear Clearance Systems S.C. establishes policy for
Euroclear on behalf of Euroclear's participants, including banks, securities
brokers and dealers, and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
Morgan Guaranty Trust Company of New York is the Belgian branch of a
New York banking corporation which is a member bank of the Federal Reserve
System. As such, the Board of Governors of the Federal Reserve System and the
New York Banking Department, as well as the Belgian Banking Commission,
regulates and examines it.
Euroclear holds all securities on a fungible basis without attribution
of specific certificates to specific securities clearance accounts. The
Euroclear operator acts under the Euroclear Terms and Conditions only on behalf
of Euroclear's participants, and has no record of or relationship with persons
holding through Euroclear's participants.
Transfers between direct participants will comply with DTC rules.
Transfers between Clearstream's participants and Euroclear's participants will
comply with their rules and operating procedures.
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DTC will effect, under DTC rules, cross-market transfers between
persons holding directly or indirectly through DTC in the United States, on the
one hand, and directly or indirectly through Clearstream or Euroclear, on the
other, through the relevant European international clearing system through its
Depositary; however, these cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in this system as required by its rules and procedures and within
its established deadlines, European time. The relevant European international
clearing system will, if the transaction meets its settlement requirements,
deliver instructions to its depositary to take action to effect final settlement
on its behalf by delivering or receiving securities in DTC, and making or
receiving payment using its normal procedures for same-day funds settlement
applicable to DTC. Clearstream participants and Euroclear participants may not
deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Clearstream
or Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing day, dated the business
day following the DTC settlement date, and the credits or any transactions in
the securities settled during the processing day will be reported to the
relevant Clearstream participant or Euroclear participant on that business day.
Cash received in Clearstream or Euroclear as a result of sales of securities by
or through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform these procedures and these procedures may be discontinued at any
time.
Except as required by law, none of the seller, any originator, the
owner trustee, the depositor or the indenture trustee will have any liability
for any aspect of the records relating to, actions taken or implemented by, or
payments made on account of, beneficial ownership interests in the notes held
through DTC, or for maintaining, supervising or reviewing any records or actions
relating to beneficial ownership interests.
ISSUANCE OF CERTIFICATED NOTES AT A LATER DATE
The owner trust will issue notes in fully registered, certificated form
to beneficial owners or their nominees rather than to DTC or its nominee, only
if:
(1) the owner trustee advises the indenture trustee in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the notes, and the owner
trustee or the indenture trustee is unable to locate a qualified
successor,
(2) the owner trustee elects to terminate the book-entry
system, or
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(3) after the occurrence of an event of default under the
indenture, the holder of at least 66 2/3% of the principal amount of
its outstanding notes advises the indenture trustee that the
continuation of the book-entry system is met in their best interests.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the indenture trustee must notify all beneficial owners for
each class of notes held through DTC of the availability of notes in fully
registered, certificated form. Upon surrender by DTC of the global note
representing the notes and instructions for reregistration, the indenture
trustee will issue these fully registered, certificated notes, and the indenture
trustee will recognize the holders of fully registered, certificated notes as
noteholders under the indenture.
Additionally, upon the occurrence of any event described above, the
indenture trustee will distribute principal of and interest on the notes
directly to you as required by the indenture. Distributions will be made by
check, mailed to your address as it appears on the note register. Upon at least
five days' notice to noteholders for the class, however, the indenture trustee
will make the final payment on any note only upon presentation and surrender of
the note at the office or agency specified in the notice of final distribution
to noteholders. The indenture trustee will make the final payment in this manner
whether the notes are fully registered, certificated notes or the note for the
class registered in the name of Cede & Co. representing the notes of the class.
You may transfer any fully registered, certificated notes of any class
at the offices of the indenture trustee or its agent in New York, New York,
which the indenture trustee shall designate on or prior to the issuance of any
fully registered, certificated notes with respect to that class. There is no
service charge for any registration of transfer or exchange, but the indenture
trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection with the transfer or exchange.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT
Unless your prospectus supplement states otherwise, the owner trust and
the indenture trustee for a note series may, without your consent, enter into
one or more supplemental indentures for any of the following purposes:
to change the collateral description;
to provide for a successor to the owner trust to assume the notes
and the indenture obligations;
to add additional covenants for your benefit, or to surrender any
rights or power of the owner trust;
to transfer or pledge any property to the indenture trustee;
if not adverse to the interests of noteholders, to correct or
supplement any provision in the indenture that is ambiguous or
inconsistent with any other
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provision of the indenture or to make any other provision in respect
of matters under the indenture;
to accept a successor indenture trustee or to change the provisions
of the indenture to facilitate the administration by more than one
trustee;
to comply with the Trust Indenture Act of 1939, as amended; or
to elect to come under the FASIT provision of the Internal Revenue
Code, if the owner trust provides an opinion of counsel as to no
adverse impact on noteholders.
MODIFICATION OF INDENTURE WITH NOTEHOLDER CONSENT
Unless your prospectus supplement states otherwise, with the consent of
the required majority of the noteholders determined as described in the related
prospectus supplement for your notes, prior notice to each rating agency and an
opinion of counsel, the owner trustee and the indenture trustee may modify the
indenture and your rights under it.
Without the consent of the holder of each outstanding note affected,
however, no modification of the indenture may:
reduce the note principal amount, interest rate or redemption price
or change the timing of payments;
modify the manner of application of payments in respect to contracts
to the notes;
impair your right to sue to enforce payment provisions of the
indenture;
reduce the percentage needed for consents of noteholders;
permit the creation of any lien on collateral under the indenture
ranking prior to or on a parity with the lien of the indenture;
adversely affect the manner of determining notes outstanding or the
requisite note for liquidating the trust estate; or
modify the provisions of the indenture relating to these types of
indenture modification without the consent of all noteholders.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
Except as otherwise provided in the prospectus supplement for your
notes, events of default under each indenture will consist of:
a default for five calendar days or more in the payment of interest
due on any note;
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failure to pay the unpaid principal amount of any class of notes on
the maturity date for the notes;
failure of the owner trust or the depositor to observe any
provisions set forth in the pooling and servicing agreement or the
indenture, which failure has a material adverse effect on the
noteholders and continues for 60 calendar days after written notice;
any representation or warranty made by the owner trust or the
depositor in the pooling and servicing agreement or indenture was
incorrect as of the time made, and continues to be incorrect for a
period of 60 calendar days after notice is given and as a result of
which the noteholders are materially and adversely affected. A
breach of a representation or warranty as to a contract will be
considered not to have occurred if the seller purchases the contract
or effects a substitution for it, as provided in "The Contracts --
Representations and Warranties Made by CIT Financial USA" and " --
Substitution of Contracts" above;
events of bankruptcy, insolvency, receivership or liquidation of the
owner trust or the depositor; or
the owner trust becomes an investment company.
If an event of default should occur and be continuing with respect to
the notes of a series, the required holders may, except as to a bankruptcy or
insolvency event of default, deem the event not to have occurred.
If the indenture trustee declares the notes of a series due and payable
following an event of default, the applicable indenture trustee may:
institute proceedings to collect amounts due or foreclose on the
indenture collateral,
exercise remedies as a secured party, or
sell the indenture collateral, or elect to have the owner trust
maintain possession of the pledged revenues.
The indenture trustee, however, may not sell the indenture collateral
following an event of default, except an event arising from the owner trust's
failure to pay interest or principal, unless:
the holders of all the outstanding notes consent to the sale;
the proceeds of the sale distributable to holders of the notes are
sufficient to pay in full the principal and accrued interest on all
the outstanding notes at the date of the sale; or
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the indenture trustee determines, in complete reliance on investment
banking or accounting firm certifications, that the trust estate
would not be sufficient on an ongoing basis to make all payments on
the notes as the payments would have become due if the obligations
had not been declared due and payable, and the indenture trustee
obtains the consent of the required holders.
Following a declaration upon an event of default that the notes are immediately
due and payable, the application of any proceeds of liquidation of the pledged
revenues will be in the order of priority described in the prospectus supplement
for your class of notes.
If an event of default occurs and is continuing, the indenture trustee
will be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the notes, if the
indenture trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which it may incur in complying with
that request. A majority of the noteholders will have the right to direct the
time, method and place of conducting any proceeding or any remedy available to
the indenture trustee. Additionally, a majority of the noteholders may, in some
cases, waive any default, except a default in the payment of principal or
interest or a default in respect of a covenant or provision of the indenture
that cannot be modified without the waiver or consent of all of the holders of
the outstanding notes.
No holder of a note will have the right to institute any proceeding
with respect to the indenture, unless:
the holder previously has given to the indenture trustee written
notice of a continuing event of default;
the holders of not less than 25% in principal amount of the
outstanding notes make written request of the indenture trustee to
institute the proceeding in its own name as indenture trustee;
the holder or holders offer the indenture trustee reasonable
indemnity;
the indenture trustee has for 60 days failed to institute the
proceeding; and
no direction inconsistent with that written request has been given
to the indenture trustee during the 60-day period by the holders of
a majority in principal amount of the outstanding notes.
In addition, the indenture trustee and you, by accepting the notes,
will covenant that they will not at any time institute against the seller, the
depositor or the owner trust any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law.
Neither the indenture trustee nor the owner trustee in its individual
capacity, nor the seller, the depositor, nor any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors or
assigns will be personally liable for the payment of the notes or for any
agreement or covenant of the owner trust contained in the indenture.
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OWNER TRUST COVENANTS
Each indenture will provide that the related owner trust may not
consolidate with or merge into any other entity, unless:
the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States or any state;
the entity expressly assumes the owner trust's obligation to make
due and punctual payments upon the notes and the performance or
observance of every agreement and covenant of the owner trust under
the indenture;
no event of default shall have occurred and be continuing
immediately after the merger or consolidation;
the rating agencies advise the owner trustee that the rating of the
notes then in effect would not be reduced or withdrawn as a result
of the merger or consolidation;
the owner trustee has received an opinion of counsel to the effect
that the consolidation or merger would have no material adverse tax
consequence to the owner trust or to any noteholder or equity
certificate holder; and
the owner trust or the person, if other than the owner trust, formed
by or surviving the consolidation or merger has a net worth,
immediately after the consolidation or merger, that is (a) greater
than zero and (b) not less than the net worth of the owner trust
immediately prior to giving effect to the consolidation or merger.
Each owner trust will not, among other things:
except as expressly permitted by the related indenture or trust
agreement, transfer any of the assets of the owner trust;
claim any credit on or make any deduction from, the principal and
interest payable in respect of the related notes, other than amounts
withheld under the bankruptcy code or applicable state law, or
assert any claim against any present or former holder of notes
because of the payment of taxes levied or assessed upon the owner
trust;
dissolve or liquidate in whole or in part;
permit the validity or effectiveness of the indenture to be impaired
or permit the release of any person from any covenants or
obligations relating to the notes under the indenture except as
expressly permitted in the indenture; or
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except as expressly permitted in the indenture, the pooling and
servicing agreement or the trust agreement, permit any lien or claim
to burden any assets of the owner trust.
No owner trust may engage in any activity other than as specified above
under "The Owner Trusts." Each owner trust will not incur, assume or guarantee
any indebtedness other than indebtedness incurred under the related notes and
the related indenture or otherwise in accordance with the related indenture,
trust agreement and pooling and servicing agreement.
ANNUAL COMPLIANCE STATEMENT
Each owner trust will be required to file annually with the applicable
indenture trustee a written statement as to the fulfillment of its obligations
under the indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
Each indenture trustee will be required to mail each year to all
noteholders of the related series a brief report relating to:
its eligibility and qualification to continue as indenture trustee
under the related indenture,
any amounts advanced by it under the indenture,
the amount, interest rate and maturity date of certain indebtedness
owing by the owner trust to the indenture trustee in its individual
capacity,
the property and funds physically held by the indenture trustee and
any action taken by it that materially affects the notes and that
has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE
The discharge of an indenture will occur with respect to the collateral
securing the notes of a series upon the delivery to the related indenture
trustee for cancellation of all the notes or, with certain limitations, upon
deposit with the indenture trustee of funds sufficient for the payment in full
of all of the notes.
THE INDENTURE TRUSTEE
The indenture trustee for any series will be specified in your
prospectus supplement. An indenture trustee may resign at any time, and must
resign if it ceases to be eligible to serve as an indenture trustee, in which
event the depositor will be obligated to appoint a successor trustee. The owner
trust may also remove an indenture trustee
if the indenture trustee ceases to be eligible to continue to serve
under the indenture,
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if the indenture trustee becomes subject to bankruptcy proceedings,
or
if the indenture trustee becomes incapable of acting as the
indenture trustee.
In these circumstances, the owner trust will be obligated to appoint a successor
trustee. Any resignation or removal of an indenture trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
by a successor trustee.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
The following summarizes the material terms of each pooling and
servicing agreement, a form of which was filed with the registration statement
of which this prospectus is a part. In addition, a copy of the pooling and
servicing agreement relating to a series of notes will be filed with the
Commission following the sale of those notes. This summary describes terms
expected to be common to each pooling and servicing agreement, but the depositor
does not intend this summary to be complete. This summary is subject to the
provisions of the pooling and servicing agreement relating to a particular
series and the description set forth in your prospectus supplement. You should
read the form of the pooling and servicing agreement filed as noted above.
TRANSFER OF CONTRACTS AND EQUIPMENT
CIT Financial USA, a subsidiary of CIT, will be the seller of contracts
to the depositor for deposit into the owner trust. The seller may originate
contracts and acquire contracts originated by other subsidiaries of CIT. Prior
to the offering of a series of notes, a seller may have sold contracts to the
depositor for deposit into a trust used in connection with temporary financing
arrangements. The depositor may reacquire some or all of these contracts for
deposit into the owner trust in connection with the offering and sale of a
particular series of notes. On or before the applicable closing date, the seller
will transfer to the depositor under one or more purchase agreements all of its
interest in the following:
the contracts and the related equipment;
the right to receive all scheduled payments and prepayments received
on the contracts on or after the date of transfer, but excluding any
scheduled payments due on or after, but received prior to, the
transfer date;
all rights under insurance policies maintained on the equipment
under the contracts;
all documents contained in the files; and
all proceeds derived from any of the above.
Under the pooling and servicing agreement, on the applicable closing
date, the depositor will transfer to the owner trust:
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all of its rights in the contracts and rights in the equipment and
other rights listed above, except that in the case of leased
equipment, the depositor will retain ownership of the equipment, any
rights to payments made or attributable to the leased equipment upon
expiration of the related lease contract, of contract prepayments
and liquidation proceeds allocable to the depositor under the
pooling and servicing agreement and of any portion of the purchase
amount attributable to the book value of the leased equipment, other
than any guaranteed residual investment;
all funds on deposit from time to time in the trust accounts; and
all its rights under the purchase and sale agreement.
Each pooling and servicing agreement will designate the servicer as
custodian to maintain possession, as the owner trust's agent, of the contracts
and all related documents. To facilitate servicing and save administrative
costs, the documents will not be physically segregated from other similar
documents that are in the servicer's possession. Financing statements will be
filed on the transfer date in the applicable jurisdictions reflecting:
the transfer of the contracts and the equipment by the originators,
other than the seller, to the seller,
the transfer of the contracts and the equipment by the seller to the
depositor and, as applicable by any temporary financing trust to the
depositor,
the transfer by the depositor to the owner trust, and
the pledge by the owner trust to the indenture trustee,
The originators' accounting records and computer systems will also
reflect these assignments and this pledge.
To the extent provided in the related prospectus supplement, an owner
trust may purchase additional contracts during a specified period after the
closing date which may include a funding period, which can be up to three months
(a "Funding Period"), or other period as specified in the related prospectus
supplement.
COLLECTIONS ON CONTRACTS
The applicable indenture trustee will maintain a collection account
into which the servicer will deposit the following amounts no later than the
second business day after their processing:
all scheduled payments made under the contracts;
all prepayments, excluding any portion which your prospectus
supplement states is allocable to the depositor;
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amounts constituting liquidation proceeds on liquidated contracts,
to the extent specified in your prospectus supplement;
all payments made by the seller under the pooling and servicing
agreement to repurchase any contract as a result of a breach of a
representation or warranty, as described under "The Contracts --
Representations and Warranties Made by CIT Financial USA,"
excluding, in the case of a lease contract, any portion which your
prospectus supplement states is allocable to the depositor; and
the amount paid by the depositor to purchase the contracts, as
described under "Description of the Notes and Indenture."
The pooling and servicing agreement will permit the servicer to make
the deposits described above into the collection account once each month on the
deposit date following the collection period for that month so long as
the servicer or the direct or indirect parent of the servicer has
and maintains a short-term debt rating of at least A-1 by Standard &
Poor's and a short-term debt rating of at least P-1 by Moody's; or
the servicer obtains a letter of credit, surety bond or insurance
policy which satisfies the requirements in the pooling and servicing
agreement, under which demands for payment may be made to secure
timely remittance of monthly collections to the collection account
and the trustees are provided with a letter from each rating agency
to the effect that the utilization of such alternative remittance
schedule will not result in a qualification, reduction or withdrawal
of its then-current rating of the notes.
As of the date of this prospectus supplement, CIT Financial USA, as servicer,
will be permitted to remit collections to the collection account on a monthly
basis pursuant to the first alternative listed above. In the event that the
servicer is permitted to make remittances of collections to the collection
account on a monthly basis pursuant to the second alternative listed above, the
pooling and servicing agreement will be modified, to the extent necessary,
without the consent of any noteholders. Pending each monthly deposit into the
collection account, collections on the contracts may be invested by the servicer
at its own risk and for its own benefit and will not be segregated from its own
funds. See "Risk Factors--Commingling of Collections Could Result in Reduced
Payments to You" in this prospectus.
So long as no event of termination shall have occurred and be
continuing with respect to the servicer, the servicer may make the required
remittances to the collection account net of its servicing fees.
The servicer may withdraw from the collection account any amounts
deposited in error or required to be repaid to an obligor, based on the
servicer's good-faith determination that the amount was deposited in error or
must be returned to the obligor.
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The servicer will pay to the depositor all proceeds from the
disposition of equipment subject to a true lease, to the extent allocable to the
depositor.
SERVICING
Your prospectus supplement will identify the servicer for your trust.
The servicer will be obligated under each pooling and servicing agreement to
service the contracts with reasonable care, using that degree of skill and
attention that the servicer generally exercises with respect to all comparable
contracts and related assets that it services for itself or others in accordance
with its credit and collections policy and applicable law. In performing these
duties, it shall comply in all material respects with its credit and collection
policies and procedures described under "The Originators -- Underwriting and
Servicing," as modified from time to time. The servicer may delegate servicing
responsibilities to subservicers which are third parties or affiliates, provided
that the servicer will remain obligated to the related owner trust and the
depositor for the proper performance of the servicing responsibilities.
The servicer is obligated to act in a commercially reasonable manner
with respect to the repossession and disposition of equipment following a
contract default with a view to realizing proceeds at least equal to the
equipment's fair market value. The servicer may choose to dispose of equipment
through a new lease or in some other manner which provides for payment for the
equipment over time. In these cases, the servicer will be required to pay from
its own funds an amount which, in its reasonable judgment, is equal to the fair
market value of the equipment, less liquidation expenses, and the servicer will
be entitled to all subsequent payments in respect of the equipment. Any amounts
the servicer pays will constitute additional liquidation proceeds with respect
to the related contract and equipment and will be allocated as described under
"Description of the Notes and Indenture - Liquidation and Insurance Proceeds."
The servicer is responsible for:
reviewing and certifying that the contract files are complete;
monitoring and tracking any property and sales taxes to be paid by
obligors;
billing, collecting, and recording payments from obligors;
communicating with and providing billing records to obligors;
deposit of funds into the collection account;
receiving payments as the owner trust's agent on the insurance
policies maintained by the obligors and communicating with insurers;
issuance of reports to the indenture trustee specified in the
indenture and in the pooling and servicing agreement;
repossession and remarketing of equipment following obligor
defaults; and
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paying the fees and ordinary expenses of the indenture trustee and
the owner trustee.
The servicer shall be entitled to recover all reasonable out-of-pocket
expenses incurred by it in liquidating a contract and disposing of the related
equipment. The servicer is entitled to retain, from liquidation proceeds, a
reserve for out-of-pocket liquidation expenses in an amount equal to the
expenses, in addition to those previously incurred, as it reasonably estimates
will be incurred. The servicer is permitted to grant payment extensions on a
contract not exceeding an aggregate of six months in accordance with its credit
and collection policies and procedures if the servicer believes in good faith
that an extension is necessary to avoid a termination and liquidation of the
contract and will maximize the amount to be received by the owner trust under
the contract. The servicer is permitted to agree to modifications or amendments
to a contract in accordance with its credit and collection policies and
procedures.
PREPAYMENTS
The servicer may allow a prepayment of any lease contract, but only if
the amount paid or, in the case of a partial prepayment, the sum of its
prepayment and the remaining contract principal balance, is at least equal to
the required payoff amount of the contract.
EVIDENCE AS TO COMPLIANCE
Annually, the servicer must deliver to the indenture trustee a report
from a nationally recognized accounting firm stating that the accounting firm
has audited the financial statements of the servicer or its parent and issued an
opinion on those financial statements and that the accounting firm has examined
and provided a report as to statements of the servicer concerning the servicer's
controls over the servicing of:
equipment contracts,
installment sales contracts,
promissory notes, and
loan and security agreements.
MATTERS REGARDING THE SERVICER
The servicer may not resign from its obligations under a pooling and
servicing agreement except if its duties are no longer permissible under
applicable law. No resignation will become effective until a successor servicer
has assumed the servicer's obligations and duties under the pooling and
servicing agreement. Removal of the servicer is permissible only upon the
occurrence of an event of termination as discussed below.
The servicer must maintain an insurance policy or financial guarantee
bond in customary form covering errors and omissions by the servicer.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Compensation to the servicer will include a monthly fee equal:
to the product of one-twelfth of a percentage per annum specified in
your prospectus supplement multiplied by the contract pool principal
balance as of the last day of the second preceding collection period
or, in the case of the servicing fee with respect to the collection
period commencing on the date of transfer of the contracts, the
contract pool principal balance as of the cut-off date,
plus any
late fees,
late payment interest,
documentation fees,
insurance administration charges, other administrative fees and any
extension fees collected with respect to the contracts during the
prior collection period and investment earnings on collections prior
to deposit thereof in the collection account.
The servicer will pay all expenses incurred by it in connection with its
activities under the pooling and servicing agreement and the annual fees and
expenses of the owner trustee as indenture trustee in connection with the notes.
The servicer is authorized to waive any administrative fees or extension fees
that may be collected in the ordinary course of servicing any contract.
EVENTS OF TERMINATION
An event of termination under a pooling and servicing agreement will
occur if:
the servicer fails to make any required payment or deposit and the
failure continues for five business days after notice from the
indenture trustee or discovery by the servicer;
the servicer fails to observe in any material respect any agreements
of the servicer set forth in the pooling and servicing agreement and
the failure (1) materially and adversely affects the rights of the
owner trust, the equity certificate holder or you, and (2) continues
unremedied for 30 days after written notice to the servicer;
events of bankruptcy or insolvency occur with respect to the
servicer; or
any representation, warranty or statement of the servicer made under
the pooling and servicing agreement is incorrect in any material
respect, and (1)
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has a material adverse effect on the owner trust or holders of the
notes, and (2) continues uncured for 30 days after the acquiring of
written notice.
RIGHTS UPON EVENT OF TERMINATION
If an event of termination remains unremedied, the indenture trustee
may, and at the written direction of the required majority of the noteholders,
which shall be the same as that required for amendment of the pooling and
servicing agreement, see "Amendment" below, shall, terminate all of the rights
and obligations of the servicer under the pooling and servicing agreement. A
successor servicer will succeed to all the responsibilities, duties and
liabilities of the servicer under the pooling and servicing agreement. The
successor servicer will be entitled to similar compensation arrangements, except
that any successor servicer will not be liable for any acts or omissions of the
prior servicer occurring prior to a transfer of the servicer's servicing and
related functions or for any breach by the prior servicer of any of its
obligations. A majority of the noteholders may waive any default by the servicer
under the pooling and servicing agreement and its consequences.
INDEMNIFICATION
The pooling and servicing agreement provides that the servicer will
indemnify
the depositor,
the owner trust,
the owner trustee,
the indenture trustee,
the holder of the equity certificate and
the noteholders
from and against any loss or injury sustained from third party claims and
resulting from acts or omissions of the servicer with respect to trust assets or
any duty or obligations of the servicer under the agreement, except where the
claims result from willful misconduct, gross negligence or bad faith of the
indemnified person.
AMENDMENT
The parties may amend any pooling and servicing agreement:
to cure any ambiguity,
to correct or supplement any provision therein that may be
inconsistent with any other provision, or
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to make any other provisions with respect to matters or questions
arising under the pooling and servicing agreement but only if the
amendment will not adversely affect in any material respect the
interests of the noteholders.
Any pooling and servicing agreement may also be amended in any respect
by the parties with the consent of the required majority of the noteholders
determined as described in the prospectus supplement for your notes, except that
no amendment
that reduces the amount or changes the timing of any contract
collections on any contracts or payments required to be distributed
on any note,
that changes the interest rate on any note, that adversely affects
the priority of payment of principal or interest to noteholders or
that reduces the noteholder percentage required to consent to these
amendments or any waiver under the pooling and servicing agreement,
may be effective without the consent of the holder of each note. Also, an
amendment under the foregoing sentence will not be effective unless each rating
agency confirms that the amendment will not result in a reduction, qualification
or withdrawal of the ratings on the notes.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of the material United
States federal income tax consequences of the purchase, ownership and
disposition of the notes. The discussion that follows constitutes the opinion of
Schulte Roth & Zabel LLP, special tax counsel to the trust depositor, and is
based upon current provisions of the Internal Revenue Code of 1986, as amended,
existing and proposed Treasury Regulations, current administrative rulings,
judicial decisions and other applicable authorities in effect as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
There are no cases, regulations, or Internal Revenue Service rulings on
comparable transactions or instruments to those described in this prospectus. As
a result, there can be no assurance that the Internal Revenue Service will not
challenge the conclusions reached in this description of Material Federal Income
Tax Consequences, and no ruling from the Internal Revenue Service has been or
will be sought on any of the issues discussed below. Furthermore, legislative,
judicial or administrative changes may occur, perhaps with retroactive effect,
which could affect the accuracy of the statements set forth below.
The following does not attempt to explain fully every relevant
technical aspect of the applicable tax provisions. Additionally, this summary
does not include some of the complex technical rules which would not be
applicable to most investors but may apply to some specific types of investors,
such as dealers in securities. Also, the descriptions of the relevant tax rules
are intended to explain the general application of the rules. BECAUSE THIS
SUMMARY OF MATERIAL FEDERAL INCOME TAX CONSEQUENCES IS INTENDED TO BE GENERAL IN
NATURE, THE DEPOSITOR SUGGESTS THAT YOU CONSULT WITH YOUR OWN TAX ADVISORS AS TO
THE FEDERAL, STATE, LOCAL, FOREIGN
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AND ANY OTHER TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NOTES.
This summary of material federal income tax matters is divided into two
parts. The first part describes the classification of the notes as debt and the
treatment of the trust as a pass-through entity rather than as a corporation or
other entity subject to tax at the entity level. The second part describes the
taxation of an investor in the notes. Under the caption "General Tax Treatment
of Noteholders" is a description of the tax consequences for what is expected to
be the typical investment situation. The description of "General Tax Treatment
of Noteholders" provides a summary of federal income tax consequences for
investors who are citizens or residents of the United States who purchase U.S.
dollar denominated notes for investment at a purchase price equal to the
principal amount of the notes plus accrued interest, if any. There are a variety
of technical tax rules which can be expected to apply only to particular types
of investors or in particular special circumstances. Those rules and the
investors and circumstances to which they apply are separately described under
the caption "Special Tax Rules." THE DEPOSITOR SUGGESTS THAT YOU CONSULT A TAX
ADVISOR TO DETERMINE WHETHER ANY OF THE SPECIAL TAX RULES ARE APPLICABLE.
CLASSIFICATION OF THE NOTES AND THE TRUST
Under existing federal income tax law each trust will not be treated as
an association or publicly traded partnership taxable as a corporation and the
notes will be treated as indebtedness. In rendering these opinions Schulte Roth
& Zabel LLP has assumed that the terms of the various documents relating to the
issuance of the notes will be complied with by all of the parties to the
transaction. Those terms include a requirement, which each investor agrees to by
virtue of acquiring ownership of any beneficial interest in a note, that the
trust and the investors in the notes treat the notes as indebtedness for federal
income tax purposes. The opinion of Schulte Roth & Zabel LLP does not foreclose
the possibility of a contrary determination by the Internal Revenue Service or
by a court or of a contrary position by the Internal Revenue Service or Treasury
Department in regulations or rulings issued in the future.
Although it is the opinion of Schulte Roth & Zabel LLP that the trust
will not be treated as an association or publicly traded partnership taxable as
a corporation and the notes will be characterized as indebtedness for federal
income tax purposes, no assurance can be given that this characterization of the
trust or the notes will prevail. If, contrary to the opinion of Schulte Roth &
Zabel LLP, the Internal Revenue Service successfully asserted that one or more
of the notes did not represent debt for federal income tax purposes, the notes
might be treated as equity interests in the trust. As a result, the trust might
be classified as a publicly traded partnership taxable as a corporation. If the
trust were classified as a publicly traded partnership taxable as a corporation,
the trust would be subject to United States federal income tax on its net
income. An imposition of a corporate-level income tax could materially reduce
the amount of cash that would be available to make payments of principal and
interest on the notes. Alternatively, if the trust were classified as a
partnership, other than a publicly traded partnership taxable as a corporation,
the trust itself would not be subject to United States federal income tax.
Instead, holders of notes that were determined to be equity interests in the
partnership would be required to take into account their allocable share of the
trust's income and deductions. This treatment may have adverse federal income
tax consequences for some noteholders. For example:
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(1) income to some tax-exempt entities, including pension
funds, may constitute "unrelated business taxable income,"
(2) income to foreign holders generally would be subject to
U.S. tax and U.S. tax return filing and withholding requirements,
(3) individual holders might be subject to certain limitations
on their ability to deduct their share of trust expenses, and
(4) income from the trust's assets would be taxable to
noteholders without regard to whether cash distributions are actually
made by the trust or any particular noteholder's method of tax
accounting.
The discussion that follows assumes that the notes will be treated as
indebtedness for federal income tax purposes.
GENERAL TAX TREATMENT OF NOTEHOLDERS
Payments of Interest. An investor will be taxed on the amount of
payments of interest on a note as ordinary interest income at the time it
accrues or is received in accordance with the investor's regular method of
accounting for United States federal income tax purposes.
Sale or Other Disposition of a Note. An investor who disposes of a
note, whether by sale, exchange for other property, or payment by the trust,
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale or other disposition, not including any amount attributable
to accrued but unpaid interest, and the investor's adjusted tax basis in the
note. In general, an investor's adjusted tax basis in a note will be equal to
the initial purchase price. Any gain or loss recognized upon the sale or other
disposition of a note will be capital gain or loss. For non-corporate investors,
the maximum tax rate on capital gain recognized on the sale or other disposition
of a note held by the investor (i) for more than one year is 20%, and (ii) for
more than five years is 18%. Capital gain for a note held for one year or less
is taxed at the rates applicable to ordinary income, i.e., up to 39.6%.
Taxpayers must aggregate capital gains and losses for each taxable year. In the
event a taxpayer realizes a net capital loss for any year there are limits on
the amount of these capital losses which can be deducted.
Information Reporting and Backup Withholding. The trust or an agent
acting on its behalf will be required to report annually to the Internal Revenue
Service, and to each non-corporate noteholder, the amount of interest paid on
the notes for each calendar year. Each non-corporate noteholder, other than
noteholders who are not subject to the reporting requirements, will be required
to provide, under penalties of perjury, a certificate, Form W-9, containing the
noteholder's:
name,
address,
correct federal taxpayer identification number, and
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a statement that the noteholder is not subject to backup
withholding.
Should a non-exempt noteholder fail to provide the required certification, the
trust will be required to withhold or cause to be withheld 31% of the interest
otherwise payable to the noteholder and remit the withheld amounts to the
Internal Revenue Service as a credit against the noteholder's federal income tax
liability.
SPECIAL TAX RULES
Special Types of Investors. The reference to United States citizens or
residents in the description of "General Tax Treatment of Noteholders" set forth
above applies not only to individuals but also to any investor who is:
(1) a corporation or partnership created or organized in or
under the laws of the United States, any state therein or the District
of Columbia,
(2) an estate the income of which is subject to United States
federal income taxation regardless of its source, or
(3) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all
substantial decisions of the trust.
Any investor which is not a United States citizen or resident should
review the summary below for investment in notes by foreign persons. Also,
neither the description of "General Tax Treatment of Noteholders" above nor this
discussion of "Special Tax Rules" describes tax consequences to special classes
of investors, including investors who are:
dealers in securities or currencies,
persons holding notes as a part of a hedging transaction,
certain financial institutions, or
insurance companies.
Those particular types of investors are subject to specific federal
income tax treatment which is not generally applicable to other investors. This
summary of "Material Federal Income Tax Consequences" does not describe tax
consequences for those types of investors.
Purchase at a Discount. An investor who purchases a note as part of the
initial offering by the trust for an issue price that is less than its "stated
redemption price at maturity" will generally be considered to have purchased the
note at an original issue discount for United States federal income tax
purposes. In general, the stated redemption price at maturity for a note is
equal to the principal amount. If a note is acquired with original issue
discount the investor will be required to include in income each year, taxable
as ordinary income in the same manner as
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cash interest payments, a portion of the original issue discount. For cash basis
investors, such as individuals, the requirement that original issue discount be
accrued as income each year means the investor recognizes taxable income even
though the investor does not receive cash corresponding to that income. The
amount of original issue discount accrued as income each year is based upon a
formula which looks at the constant yield on the notes and the term to maturity
so as to annually allocate a proportionate share of original issue discount.
Under these rules, investors generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
In determining whether a note has original issue discount, the issue
price of the note may not necessarily equal the investor's purchase price,
although they generally should be the same. The issue price of a note will equal
the initial offering price to the public, not including bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters or
wholesalers, at which price a substantial amount of the notes is sold.
If an investor acquires a note in a secondary market transaction for a
purchase price which is less than the principal amount or other amount payable
at maturity of the note, the difference is referred to for tax purposes as
market discount. Similarly to original issue discount, an investor must accrue a
portion of the market discount each year. The amount of market discount which
accrues annually will be calculated on a straight-line basis over the remaining
term to maturity of the note unless the investor elects to accrue market
discount using the constant yield method, i.e., the original issue discount
method. Unlike original issue discount, however, an investor does not include
accrued market discount in ordinary income each year. Rather, the aggregate
amount of accrued market discount is included in income when an investor sells
or otherwise disposes of the note. At that time, the portion of the amount
realized by the investor on the sale or other disposition of the note equal to
accrued market discount is taxed as ordinary income, which has a maximum tax
rate of 39.6%, rather than long term capital gain which is subject to a lower
maximum tax rate.
If an investor would prefer to be taxed on the annual accrual of market
discount each year rather than being taxed on the aggregate amount of all
accrued market discount when the note is sold or otherwise disposed of, the
investor can file an election to do so. This election would apply to all of the
investor's debt investments acquired in or after the taxable year in which the
notes are acquired and not just to the notes.
Limitations imposed by the federal tax law which are intended to match
deductions with the taxation of income may defer deductions for interest paid by
an investor on indebtedness incurred or continued, or short sale expenses
incurred, to purchase or carry a note with market discount. A noteholder who
elects to include market discount in gross income as it accrues is exempt from
this rule.
Whenever an investor accrues and includes in income an amount of
original issue discount or market discount, the investor's adjusted basis in the
corresponding note is increased by that same amount. As a result, the investor
would recognize a lower capital gain or greater capital loss on the sale or
other disposition of the note.
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In general, if the amount of original issue discount or market discount
would be less than 1/4th of one percent of the note's principal or other stated
redemption price at maturity, the investor can disregard the original issue
discount or market discount rules.
Purchase at a Premium. If an investor purchases a note for a price that
exceeds the principal amount or other amount payable at maturity, the investor
will be considered to have an amortizable bond premium. An investor can elect to
accrue a portion of the premium each year as a deduction to offset interest
income on the corresponding note. The amount of premium which can be amortized
and deducted each year is calculated using a constant yield method over the
remaining term to maturity of the note. The deduction is available only to
offset interest income on the corresponding note; it cannot be used as a
deduction to the extent it exceeds taxable note interest. The adjusted tax basis
which an investor has in a note must be reduced by the amount of premium for
which a deduction is claimed. Because the basis is reduced, the investor would
recognize a larger taxable capital gain, or a smaller capital loss, on the sale
or other disposition of the note. If an investor elects to amortize and deduct
premium, the election will apply to all of the investor's debt investments and
not just to the notes.
If an investor purchases in a secondary market transaction a note which
was originally issued with original issue discount for an amount which is less
than the sum of all amounts payable on the note after the purchase date other
than payments of qualified stated interest but in excess of its adjusted issue
price, i.e., the original issue price plus any accrued original issue discount
as those terms are described above, the excess is referred to for tax purposes
as "acquisition premium." The investor would be permitted to reduce the daily
portions of original issue discount the investor would otherwise include in
income by an amount corresponding to the ratio of (1) the excess of the
investor's purchase price for the note over the adjusted issue price of the note
as of the purchase date to (2) the excess of all amounts payable on the note
after the purchase date, other than payments of qualified stated interest, over
the note's adjusted issue price.
Election to Treat All Interest as Original Issue Discount. An investor
may elect to include in gross income all interest that accrues on a note using
the constant-yield method described above under the heading "Purchase at a
Discount" with modifications described below. For purposes of this election,
interest includes:
qualified stated interest,
original issue discount,
de minimis original issue discount,
market discount,
de minimis market discount, and
unstated interest,
as adjusted by any amortizable bond premium or acquisition premium.
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In applying the constant-yield method to a note with respect to which
this election has been made, the issue price of the note will equal the electing
investor's adjusted basis in the note immediately after its acquisition. The
issue date of the note will be the date of its acquisition by the electing
investor, and no payments on the note will be treated as payments of qualified
stated interest. This election, if made, may not be revoked without the consent
of the Internal Revenue Service. Investors should consult with their own tax
advisors as to the effect in their circumstances of making this election.
Foreign Investors. Special tax rules apply to the purchase of notes
by foreign persons. For U.S. tax purposes, foreign investors include any
person who is not
(1) a citizen or resident of the United States,
(2) a corporation or partnership organized in or under the
laws of the United States, any state therein or the District of
Columbia,
(3) an estate the income of which is includible in gross
income for U.S. federal income tax purposes, regardless of its source,
or
(4) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all
substantial decisions of the trust.
Interest paid or accrued to a foreign investor that is not effectively
connected with the conduct of a trade or business within the United States by
the investor will generally be considered "portfolio interest" and generally
will not be subject to United States federal income tax or withholding tax as
long as the foreign investor is not actually or constructively a 10 percent
shareholder of the trust or a controlled foreign corporation related to the
trust through stock ownership. Additionally, the foreign investor must provide
or have a financial institution provide on its behalf to the trust or paying
agent an appropriate statement Form W-8BEN, that is signed under penalties of
perjury, certifying that the beneficial owner of the note is a foreign person
and providing that foreign person's name and address. If the information
provided in this statement changes, the foreign investor must provide a new Form
W-8BEN within 30 days. The Form W-8BEN is generally effective for three years.
If the foreign investor fails to satisfy these requirements so that interest on
the investor's Notes was not portfolio interest, interest payments would be
subject to United States federal income and withholding tax at a rate of 30%
unless reduced or eliminated under an applicable income tax treaty. To qualify
for any reduction as the result of an income tax treaty, the foreign investor
must provide the paying agent with Form W-8BEN containing the appropriate
information (which will include the foreign investor's U.S. taxpayer
identification number if the notes are not actively traded) for claiming the
treaty benefits. This form is also effective for three years.
The realization of any capital gain on the sale or other taxable
disposition of a note by a foreign investor will be exempt from United States
federal income and withholding tax, provided that
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<PAGE>
(1) the gain is not effectively connected with the conduct of
a trade or business in the United States by the investor and
(2) in the case of an individual foreign investor, the
investor is not present in the United States for 183 days or more
during the taxable year.
If an individual foreign investor is present in the U.S. for 183 days
or more during the taxable year, the gain on the sale or other disposition of
the Notes could be subject to a 30% withholding tax unless reduced by treaty.
If the interest, gain or income on a note held by a foreign investor is
effectively connected with the conduct of a trade or business in the United
States by the investor, the noteholder will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax rates.
At the same time, the noteholder may be exempt from withholding tax if a Form
W-8ECI is furnished to the paying agent. Form W-8ECI generally is effective for
three years as long as the information contained therein remains correct. In
addition, if the foreign investor is a foreign corporation, it may be subject to
a branch profits tax equal to 30% of its "effectively connected earnings and
profits" for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable tax treaty.
If a foreign investor fails to provide necessary documentation to the
trust or its paying agent regarding the investor's taxpayer identification
number or certification of exempt status, a 31% backup withholding tax may be
applied to note payments to that investor. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against the foreign
investor's U.S. federal income tax liability provided the required information
is furnished to the Internal Revenue Service.
STATE AND LOCAL TAX CONSEQUENCES
Because of the differences in state and local tax laws and their
applicability to different investors, it is not possible to summarize the
potential state and local tax consequences of purchasing, holding or disposing
of the notes and no opinions of counsel have been obtained regarding state tax
matters. ACCORDINGLY, THE DEPOSITOR RECOMMENDS THAT YOU CONSULT YOUR OWN TAX
ADVISORS REGARDING THE STATE AND LOCAL TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes specific requirements on employee benefit plans subject to
ERISA and prohibits some transactions between ERISA-regulated plans and persons
who are "parties in interest," as defined under ERISA, with respect to assets of
these plans. Section 4975 of the Internal Revenue Code prohibits a similar set
of transactions between specified plans or individual retirement accounts and
persons who are "disqualified persons," as defined in the Internal Revenue Code,
with respect to Internal Revenue Code-regulated plans. Some employee benefit
plans, such as governmental plans and church plans, if no election has been made
under Section 410(d) of the Internal Revenue Code, are not subject to the
requirements of ERISA or Section
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<PAGE>
4975 of the Internal Revenue Code and assets of the plans may be invested in the
notes, subject to the provisions of other applicable federal and state law,
including Section 503 of the Internal Revenue Code.
Investments by ERISA-regulated plans are subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that investments comply with the terms of
the documents governing the ERISA-regulated plan. Before investing in the notes,
an ERISA-regulated plan fiduciary should consider, among other factors, whether
to do so is appropriate in view of the overall investment policy and liquidity
needs of the ERISA plan.
PROHIBITED TRANSACTIONS
In addition, Section 406 of ERISA and Section 4975 of the Internal
Revenue Code prohibit parties in interest and disqualified persons from engaging
in some transactions involving the plans or plan assets of the plans, unless a
statutory or administrative exemption applies to the transaction. Section 4975
of the Internal Revenue Code of 1986, as amended and Sections 502(i) and 502(1)
of ERISA provide for the imposition of excise taxes and civil penalties on
persons that engage or participate in prohibited transactions. The
originators,
depositor,
underwriters,
servicer,
indenture trustee or
owner trustee,
or their affiliates may be considered or may become parties in interest or
disqualified persons with respect to a plan. If so, the acquisition or holding
of the notes by, on behalf of or with plan assets of the plan may be considered
to give rise to a prohibited transaction within the meaning of ERISA and/or
Section 4975 of the Internal Revenue Code, unless an administrative exemption
described below or some other exemption is available.
The notes may not be purchased with the assets of a plan if the
originators, depositor, the underwriters, the servicer, the indenture trustee,
or the owner trustee or any of their affiliates either;
(a) has discretionary authority or control with respect to the
investment or management of the assets; or
(b) has authority or responsibility to give, or regularly gives,
investment advice with respect to the assets under an
agreement or understanding that the advice will serve as a
primary basis for investment decisions with
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<PAGE>
respect to the assets and that the advice will be based on the
particular needs of the plan; or
(c) is an employer of employees covered under the plan unless the
investment is made through an insurance company general or
pooled separate account or a bank collective investment fund
and an exemption is available.
Depending on the relevant facts and circumstances, some prohibited
transaction exemptions may apply to the purchase or holding of the notes - for
example,
Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
transactions effected on behalf of a plan by an in-house asset
manager;
PTCE 95-60, which exempts transactions between insurance company
general accounts and parties in interest;
PTCE 91-38, which exempts transactions between bank collective
investment funds and parties in interest;
PTCE 90-1, which exempts transactions between insurance company
pooled separate accounts and parties in interest;
PTCE 84-14, which exempts transactions effected on behalf of a plan
by a qualified professional asset manager; or
PTCE 2000-58, which exempts transactions related to the acquisition
of securities on behalf of a plan in investment pools holding
certain types of assets.
There can be no assurance that any of these exemptions will apply with respect
to any plan's investment in the notes or, even if an exemption were deemed to
apply, that any exemption would apply to all prohibited transactions that may
occur in connection with that investment.
Due to the complexity of these rules and the penalties imposed, any
fiduciary or other plan investor who proposes to invest assets of a plan in the
notes should consult with its counsel with respect to the potential consequences
under ERISA and Section 4975 of the Internal Revenue Code of doing so.
RATINGS OF THE NOTES
The owner trust will not sell notes of a series unless one or more
nationally recognized rating agencies rate the notes of that series in a rating
category that signifies investment grade. Any rating that is made may be lowered
or withdrawn by the assigning rating agency at any time if, in its judgment,
circumstances so warrant. If a rating or ratings of notes is qualified, reduced
or withdrawn, no person or entity will be obligated to provide any additional
credit enhancement with respect to the notes so qualified, reduced or withdrawn.
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<PAGE>
The rating of the notes should be evaluated independently from similar
ratings on other types of securities. A rating is not a recommendation to buy,
sell or hold notes, inasmuch as a rating does not comment as to market price or
suitability for a particular investor. The ratings of the notes do not address
the likelihood of payment of principal on any class of notes prior to the stated
maturity date of the notes, or the possibility of the imposition of United
States withholding tax with respect to non-United States persons.
USE OF PROCEEDS
The proceeds from the sale of the notes of each series, after funding
any pre-funding account or capitalized interest account and a portion of the
cash collateral account or other form of credit enhancement for the series, and
after paying the expenses of the depositor, will be used by the depositor to pay
the purchase price due to CIT Financial USA and any of its other affiliated
sellers, under the purchase and sale agreement or the trust through which the
depositor has arranged a warehouse receivables securitization facility relating
to the financing of contracts sold by the depositor to the owner. That trust
will use proceeds it receives to make payments on that facility.
PLAN OF DISTRIBUTION
The owner trust may sell notes to or through underwriters by a
negotiated firm commitment underwriting and public reoffering by the
underwriters, and also may sell notes directly to other purchasers or through
agents. The depositor intends to offer the notes through these various methods
from time to time and that offerings may be made concurrently through more than
one of these methods or that an offering of a particular series of notes may be
made through a combination of these methods.
The originators, the depositor and certain of its affiliates may agree
to indemnify the underwriters and agents who participate in the distribution of
the notes against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the underwritten
may be required to make.
Funds in cash collateral accounts and the trust accounts may, from time
to time, be invested in certain investments acquired from the underwriters.
LEGAL MATTERS
Schulte Roth & Zabel LLP, New York, New York, will provide a legal
opinion relating to the notes in its capacity as special counsel to the owner
trust, the depositor, the seller, the originators, the servicer and the
administrator. Other legal matters for underwriters will be passed upon by
counsel to underwriters. If an owner trust is formed pursuant to the laws of the
State of Delaware, certain legal matters will be passed upon for the owner trust
by its special Delaware counsel named in the related prospectus supplement.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with
the Securities and Exchange Commission, including annual, quarterly and special
reports, proxy statements and
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<PAGE>
other information. You can read and copy these documents at the public reference
facility maintained by the Securities and Exchange Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You can also
read and copy the reports, proxy statements and other information at the
following regional offices of the Securities and Exchange Commission:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, IL 60661
Please call the Securities and Exchange Commission at 1-800-SEC-0330
for more information about the public reference rooms or visit the Securities
and Exchange Commission's web site at http://www.sec.gov to access available
filings.
The Securities and Exchange Commission allows offerors of securities to
incorporate by reference some of the information they file with it. This means
that offerors can disclose important information to you by referring you to
those documents. The information that the depositor incorporates by reference is
considered to be part of this prospectus, and later information that the
depositor files with the Securities and Exchange Commission will automatically
update and supersede this information.
All documents filed by the servicer, on behalf of a respective owner
trust, under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, after the date of this prospectus and prior to the termination of the
offering of the notes will be incorporated by reference into this prospectus.
If you are a beneficial owner of the notes to whom a prospectus has
been delivered, the depositor will, on request, send you a copy of the
information that has been incorporated by reference in this prospectus. The
depositor will provide this information at no cost to you. Please address
requests to: The CIT Group, Inc., at 650 CIT Drive, Livingston, New Jersey
07039, Telephone No. (973) 740-5000.
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<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
TERM PAGE
<S> <C>
CIT........................................................................5, 25
CIT Financial USA..............................................................5
Commission....................................................................26
contract pool principal balance................................................7
contract principal balance.....................................................7
DTC...........................................................................60
EF............................................................................27
ERISA.........................................................................85
Funding Period.............................................................8, 72
Newcourt......................................................................25
PTCE..........................................................................87
VTF...........................................................................26
</TABLE>
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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CIT EQUIPMENT COLLATERAL ____-__
RECEIVABLE-BACKED NOTES
NCT FUNDING COMPANY, L.L.C.
DEPOSITOR
CIT FINANCIAL USA, INC.
SERVICER
THE DEPOSITOR AND SERVICER ARE SUBSIDIARIES OF THE CIT GROUP, INC.
[LOGO]
[NAMES OF UNDERWRITERS]
Until 90 days after the date of this prospectus supplement, all dealers
effecting transaction in the notes, whether or not participating in this
distribution, may be required to deliver this prospectus supplement and the
accompanying prospectus. Dealers acting as underwriters also have an obligation
to deliver a prospectus supplement and prospectus with respect to their unsold
allotments or subscriptions.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Expenses in connection with the offering of the notes being registered
herein are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee..........$250.00
Legal fees and expenses......................................$ *
Accounting fees and expenses.................................$ *
Blue sky fees and expenses...................................$ *
Rating agency fees...........................................$ *
Trustee's fees and expenses..................................$ *
Printing.....................................................$ *
Miscellaneous................................................$ *
-------
Total....................................................$ *
-------
-------
</TABLE>
* To be completed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the related trust agreement, the Depositor will agree to
indemnify the Owner Trustee for, from and against, any and all liabilities,
obligations, losses, damages, taxes, claims, actions and suits, and any and all
reasonable costs, expenses and disbursements (including reasonable legal fees
and expenses) of any kind and nature whatsoever incurred without willful
misconduct or negligence on the part of the Owner Trustee, which may at any time
be imposed on, incurred by or asserted against the Owner Trustee in any way
relating to or arising out of the trust agreement, the pooling and servicing
agreement, the indenture and related documents, the Trust's assets, the
administration of the Trust's assets or the action or inaction of the Owner
Trustee under the trust agreement; provided, however, the liability of the
Depositor described herein shall be limited to the assets of the Depositor and
any indemnity payments to be made pursuant to this Section shall not be made
from the Trust's assets and such indemnity payments, if unpaid, do not
constitute a general recourse claim against the Trust.
The Depositor's Limited Liability Company Agreement provides for
indemnity of its directors and officers to the fullest extent permitted by
Delaware law.
Pursuant to agreements which the Trusts and the Depositor may enter
into with underwriters (the form of which is included as Exhibit 1.1 to this
Registration Statement), officers and directors of the Depositor may be entitled
to indemnification by such underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, arising from information which has
been or will be furnished to the Depositor by such underwriters that appear in
the Registration Statement or any related prospectus.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Formation of the Depositor, incorporated by reference
herein to Exhibit 3.1 to Registration Statement 333-74847
3.2 Limited Liability Company Agreement of the Depositor, incorporated by
reference herein to Exhibit 3.2 to Registration Statement 333-74847
4.1 Form of Trust Agreement (including form of Certificates)*
4.2 Form of Pooling and Servicing Agreement*
4.3 Form of Indenture (including form of Notes)*
4.4 Form of International Swap Dealers Association Inc. Master Agreement
with attached schedule to the Master Agreement*
5.1 Opinion of Schulte Roth & Zabel LLP with respect to legality*
8.1 Opinion of Schulte Roth & Zabel LLP with respect to tax matters*
23.1 Consent of Schulte Roth & Zabel LLP (included in Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included on signature page of original filing)*
99.1 Form of Administration Agreement*
</TABLE>
---------------
* Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant 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 notes offered (if the total dollar
value of notes offered would not exceed that which was registered) and
any deviation from the low or high end 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 (a)(1)(i) and (a)(1)(ii) will not apply if the
information required to be included in a post-effective amendment thereby is
contained in periodic reports filed pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the notes offered therein, and the
offering of such notes at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the notes being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange 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 notes offered therein,
and the offering of such notes at that time shall be deemed to be the initial
bona fide offering thereof.
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 the 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
II-3
<PAGE>
connection with the notes 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 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.
The undersigned registrant hereby undertakes that
(1) 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 the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the notes offered
therein, and the offering of such notes at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Form S-3 and has duly caused this Form
S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Livingston, State of New Jersey, on January 12, 2001.
NCT FUNDING COMPANY, L.L.C.
as Depositor of the Trusts
By: /s/ Frank Garcia
----------------------------------------
Name: Frank Garcia
Title: Senior Vice President (Principal
Financial and Accounting Officer)
Each person whose signature to this Registration Statement appears
below hereby constitutes Frank Garcia, Eric Mandelbaum and Bradley Nullmeyer, or
any of them (with the full power and authority of each of them to act alone), as
his true and lawful attorney-in-fact and agent, with full power of substitution,
to sign on his behalf individually and in the capacity stated below and to
perform any acts necessary to be done in order to file all amendments and
post-effective amendments to this Registration Statement, and any and all
instruments or documents filed as a part of or in connection with this
Registration Statement or the amendments thereto, and each of the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent, or his
substitute, shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Frank Garcia Senior Vice President (Principal Financial January 12, 2001
--------------------------- and Accounting Officer)
Frank Garcia
/s/ Dwight Jenkins Director January 12, 2001
---------------------------
Dwight Jenkins
/s/ Dean A. Christiansen Director January 12, 2001
---------------------------
Dean A. Christiansen
/s/ Bradley Nullmeyer Director January 12, 2001
---------------------------
Bradley Nullmeyer
</TABLE>
II-5
<PAGE>
EXHIBITS INDEX
Exhibit No. Description of Exhibit
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Formation of the Depositor, incorporated by
reference herein to Exhibit 3.1 to Registration Statement
333-74847
3.2 Limited Liability Company Agreement of the Depositor,
incorporated by reference herein to Exhibit 3.2 to
Registration Statement 333-74847
4.1 Form of Trust Agreement (including form of Certificates)*
4.2 Form of Pooling and Servicing Agreement*
4.3 Form of Indenture (including form of Notes)*
4.4 Form of International Swap Dealers Association Inc. Master
Agreement with attached schedule to the Master Agreement*
5.1 Opinion of Schulte Roth & Zabel LLP with respect to
legality*
8.1 Opinion of Schulte Roth & Zabel LLP with respect to tax
matters*
23.1 Consent of Schulte Roth & Zabel LLP (included in Exhibit
5.1)
24.1 Power of Attorney (included on signature page of original
filing)*
99.1 Form of Administration Agreement*
</TABLE>
--------------------
* Filed herewith.
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as...................................'SS'
The registered trademark symbol shall be expressed as...................... 'r'
The copyright symbol shall be expressed as................................. 'c'
