<PAGE> 1
As filed with the Securities and Exchange Commission on August 6, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ORIX Credit Alliance Receivables Trust 1999-A
(Issuer of the Notes)
ORIX Credit Alliance Receivables Corporation II
(Depositor of the Trust described herein)
(Exact name of Registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 6150 22-3669361
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 1999-A
300 LIGHTING WAY
SECAUCUS, NEW JERSEY 07096
(201) 601-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 1999-A
C/O JOSEPH J. MCDEVITT, JR.
ORIX CREDIT ALLIANCE, INC.
300 LIGHTING WAY
SECAUCUS, NEW JERSEY 07096
(201) 601-9000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID M. HUGGIN, ESQ. PAUL MURPHY, ESQ.
SULLIVAN & CROMWELL MOORE & VAN ALLEN, PLLC
125 BROAD STREET 100 NORTH TRYON STREET
NEW YORK, NEW YORK 10004 CHARLOTTE, NORTH CAROLINA 28202
(212) 558-4000 (704) 331-3510
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED TRANSFER TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
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,
check the following box. [ ]
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 the delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
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TITLE OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED(1) AGGREGATE PRICE PER UNIT(2) AGGREGATE OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1 Receivable-Backed Notes $1,000,000 100% $1,000,000 $ 278
- ---------------------------------------------------------------------------------------------------------------------------------
Class A-2 Receivable-Backed Notes $1,000,000 100% $1,000,000 $ 278
- ---------------------------------------------------------------------------------------------------------------------------------
Class A-3 Receivable-Backed Notes $1,000,000 100% $1,000,000 $ 278
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Class A-4 Receivable-Backed Notes $1,000,000 100% $1,000,000 $ 278
- ---------------------------------------------------------------------------------------------------------------------------------
Class B Receivable-Backed Notes $1,000,000 100% $1,000,000 $ 278
- ---------------------------------------------------------------------------------------------------------------------------------
Class C Receivable-Backed Notes $1,000,000 100% $1,000,000 $ 278
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,000,000 100% $6,000,000 $1,668
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</TABLE>
(1) The amount of Notes being registered represents the maximum aggregate
principal amount of Notes currently expected to be offered for sale.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(a).
------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 6, 1999
PRELIMINARY PROSPECTUS
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 1999-A
RECEIVABLE-BACKED NOTES, SERIES 1999-A
<TABLE>
<CAPTION>
<S> <C>
ORIX CREDIT ALLIANCE ORIX CREDIT ALLIANCE, INC.,
RECEIVABLES CORPORATION II, AS SERVICER
AS TRUST DEPOSITOR
</TABLE>
------------------------
We are offering the following six classes of Receivable-Backed Notes,
Series 1999-A:
<TABLE>
<CAPTION>
FIRST UNDERWRITING
CLASS OF INITIAL AGGREGATE PAYMENT STATED MATURITY PRICE TO PUBLIC DISCOUNT
NOTES PRINCIPAL AMOUNT COUPON RATE DATE DATE PER NOTE PER NOTE
- -------- ----------------- ----------- -------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $-- --% 10/15/99 -- --% --%
A-2 $-- --% 10/15/99 -- --% --%
A-3 $-- --% 10/15/99 -- --% --%
A-4 $-- --% 10/15/99 -- --% --%
B $-- --% 10/15/99 -- --% --%
C $-- --% 10/15/99 -- --% --%
</TABLE>
The total price to the public is $--. The total underwriting discount is
$--. The total proceeds to the trust is $--.
YOU SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" ON PAGE -- OF THIS PROSPECTUS.
The notes are not obligations of and will not represent interests in, and
are not guaranteed or insured by, the trust depositor, the owner trustee, the
indenture trustee, ORIX Credit Alliance, Inc. or any of their respective
affiliates, or any governmental agency.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
FIRST UNION CAPITAL MARKETS CORP.
The date of this prospectus is September --, 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Important Notice about Information
Presented in this Prospectus........... 1
Summary.................................. 2
Risk Factors............................. 9
The Absence of Existing Markets for the
Notes May Limit Your Ability to
Resell the Notes.................... 9
Prepayments on the Contracts May Cause
an 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 the Repayment.................... 9
The Price at Which You Can Resell Your
Notes May Decrease if the Ratings of
Your Notes Change................... 9
The Subordination of the Class A-2
Notes, Class A-3 Notes, Class A-4
Notes, Class B Notes and the Class C
Notes is a Limited Form of Credit
Enhancement......................... 10
Limited Assets Secure the Notes;
Noteholders Will Have No Recourse to
the Originator, Servicer or their
Affiliates in the Event
Delinquencies and Losses Deplete the
Trust's Assets...................... 10
Because Disproportionate Amounts of
Contracts Relate to -- States,
Adverse Events in Those States and
Surrounding Regions May Cause
Increased Defaults and
Delinquencies....................... 10
Because Disproportionate Amounts of
Contracts Relate to Equipment Used
in Particular Industries, Adverse
Economic Conditions in Those
Industries May Cause Increased
Defaults and Delinquencies.......... 10
Even if We Repossess and Sell 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............................ 10
Servicer's Retention of Contract Files
May Hinder Our Ability to Realize
the Value of Equipment Securing the
Contracts........................... 11
Failure to Record Assignment of
Perfected Security Interest May
Hinder Our Ability to Realize the
Value of Equipment Securing the
Contracts........................... 11
Repurchase Obligation of Trust
Depositor and Originator Provides
You Only Limited Protection Against
Liens on the Contracts.............. 11
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
If a Bankruptcy Court Rules that the
Transfer of Contracts from the
Originator to the Trust Depositor
was not a True Sale then Payments on
the Contracts Could Be Reduced or
Delayed............................. 12
Insolvency of the Trust Depositor or
the Trust Could Delay or Reduce
Payments to You..................... 12
Proceeds From Required Sale of the
Contracts Following Trust Depositor
Bankruptcy May Not Be Sufficient to
Repay the Notes in Full............. 12
End-User Bankruptcy May Reduce or Delay
Collections on the Contracts........ 13
Transfer of Servicing May Delay
Payments to Noteholders Due to
Contract Processing Delays.......... 13
Year 2000 Issues May Impact ORIX Credit
Alliance's Ability to Service the
Contracts........................... 13
Book-Entry Registration Will Result in
Your Inability to Exercise Directly
Your Rights as a Noteholder......... 13
Use of Proceeds.......................... 14
Calculation of Contract Principal
Balance................................ 14
Composition of the Contracts............. 14
Distribution of the Contracts by
Contract Rate....................... 15
Distribution of the Contracts by
Payment Frequency................... 15
Distribution of the Contracts by State
in Which Obligors Are Located....... 16
Distribution of the Contracts by
Equipment Type...................... 17
Distribution of the Contracts by
Original Principal Balance.......... 18
Distribution of the Contracts by
Current Principal Balance........... 18
Distribution of the Contracts by
Original Contract Term.............. 19
Distribution of the Contracts by
Remaining Months to Stated
Maturity............................ 19
Delinquency and Loss Information......... 20
Definition of Delinquency for the
Contracts Transferred to the Trust..... 22
The Contracts............................ 22
End-User Contracts..................... 22
Conditional Sale Agreements............ 23
Leases................................. 23
Secured Promissory Notes............... 25
Equipment.............................. 25
Contract Files......................... 25
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
How Collections on the Contracts are
Treated............................. 25
Prepayment and Yield Considerations...... 25
Weighted Average Life.................... 33
ORIX Credit Alliance, Inc. .............. 36
General................................ 36
Credit Approval, Collection and
Review Process...................... 36
Terms of Contracts.................. 37
Recourse Provisions................. 38
Extension/Revision Procedures....... 38
Pre-Litigation Workout/Judgment
Recovery.......................... 38
Legal Proceeding....................... 38
Assessment of Year 2000 Readiness
Disclosure.......................... 39
Mainframe Systems and
Applications...................... 39
Personal Computer and Network
Applications...................... 39
Third-Party Compliance.............. 39
Contingency Plans................... 40
Cost................................ 40
The Trust................................ 40
The Trust Depositor...................... 41
Description of the Notes and Indenture... 41
General................................ 42
Interest and Principal................. 42
Amounts Available for Payments on the
Notes............................... 42
Allocations............................ 43
Prior to an Event of Default........ 43
Following an Event of Default....... 44
Reserve Fund........................... 49
Collection Account and Collection
Period.............................. 49
Events of Default...................... 51
Remedies After Events of Default....... 52
The Indenture Trustee.................. 52
Governing Law.......................... 53
Amendments............................. 53
Servicing Compensation and Payment of
Expenses............................ 54
Optional Termination................... 54
Reports................................ 55
List of Noteholders.................... 56
Administration Agreement............... 56
Book-Entry Registration................ 56
Issuance of Certificated Notes at a
Later Date.......................... 59
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Certificates......................... 60
The Transfer and Servicing Agreement..... 60
Termination of Trust................... 60
Conveyance of the Contracts............ 61
Representations and Warranties;
Definition of Eligible Contracts.... 61
Remedies for Breaches of
Representations and Warranties;
Definition of Ineligible
Contracts........................... 64
Concentration Amounts; Definition of
Excess Contract..................... 64
Material Modifications to Contracts.... 65
Substitute Contracts................... 66
Definition of Defaulted Contracts...... 66
Indemnification........................ 67
Servicing Standard and Servicer
Advances............................ 67
Servicer Resignation................... 68
Servicer Default....................... 68
Evidence as to Compliance.............. 69
Amendments............................. 70
The Owner Trustee...................... 70
Material Federal Income Tax
Considerations......................... 71
General................................ 71
Classification of the Notes and the
Trust............................... 72
General Tax Treatment of Noteholders... 72
United States Holders............... 72
Payments of Interest................ 73
Purchase, Sale and Retirement of the
Notes............................. 73
Backup Withholding and Information
Reporting......................... 73
United States Alien Holders......... 73
Backup Withholding and Information
Reporting......................... 74
State and Local Tax Considerations..... 74
New Jersey Tax Considerations....... 74
Other States........................ 75
ERISA Considerations..................... 75
Prohibited Transactions................ 75
Plan of Distribution..................... 77
General................................ 77
Rating of the Notes...................... 78
Legal Matters............................ 79
Experts.................................. 79
Report of Independent Accountants........ F-1
Balance Sheet............................
Index of Terms...........................
</TABLE>
<PAGE> 5
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
Within the period during which there is an obligation to deliver a
prospectus, the underwriter will, at your request, promptly deliver to you, or
cause to be delivered to you, without charge, a paper copy of this prospectus.
No dealer, salesman or other person is authorized to give any information
or to make any representation not contained in this prospectus. If anyone makes
such a representation to you, you should not rely on it.
This prospectus does not constitute an offer to sell or a solicitation of
any offer to buy any security other than the notes offered by this prospectus,
nor does it constitute an offer to sell or a solicitation of any offer to buy
any of the notes to any person in any jurisdiction in which the person making
such offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such an offer or solicitation to such person.
<PAGE> 6
SUMMARY
The following is only a summary of the terms of the notes. It does not
contain all the information that may be important to you. You should read this
entire prospectus. In addition, you may wish to read the documents governing the
transfer 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" on page 11 for a discussion of factors you should consider before
making an investment in the notes.
OBJECTIVE..................... The trust will issue notes to investors. The
notes will be secured by commercial finance
contracts acquired by the trust depositor from
the originator.
THE TRUST..................... ORIX Credit Alliance Receivables Trust 1999-A,
a Delaware business trust to be established
pursuant to a Trust Agreement to be dated as of
September 15, 1999. The Trust's offices will be
in care of -- Bank, as owner trustee, at --,
Wilmington, Delaware 198--, telephone number
(302) --.
THE ORIGINATOR................ The contracts are originated by ORIX Credit
Alliance, Inc. either directly from end-users
of financed equipment or indirectly from
vendors, that is manufacturers or dealers in
the financed equipment who assign their
contracts with end-users to ORIX Credit
Alliance, Inc.
THE TRUST DEPOSITOR........... ORIX Credit Alliance Receivables Corporation
II. The trust depositor is a wholly owned,
limited purpose subsidiary of ORIX Credit
Alliance, Inc. The trust depositor's principal
executive offices are located at 300 Lighting
Way, Secaucus, New Jersey 07096-1525, telephone
(201) 601-9000.
THE SERVICER.................. ORIX Credit Alliance, Inc.
THE INDENTURE TRUSTEE......... -- Bank
THE TRUST'S ASSETS
A. THE CONTRACTS............ The trust's assets will primarily consist of
the contracts. The contracts consist of
installment loan and installment sale
contracts, finance leases and title retention
and other security agreements with companies.
The contracts have financed equipment purchased
for commercial purposes. The equipment is
typically "low-obsolescence," "multiple-use"
capital equipment. It is used in industries and
businesses such as trucking and transportation,
construction and road building, wood and pulp,
machine shop, crane and crane rental and
printing, publishing and photoengraving, among
others.
Most of the contracts provide for a series of
scheduled payment installments calculated to
amortize fully the principal balance of the
contract over its term at the contract rate.
The principal balance of a contract is the sum
of the total scheduled remaining amounts of
principal payable to the originator by an
obligor under a contract, exclusive of finance
charges. The initial principal amount is
typically the amount advanced to fund the
1
<PAGE> 7
equipment purchased and is in most instances
less than the cost to the obligor of the
financed equipment.
As of September 1, 1999, approximately --% by
aggregate outstanding principal balance of the
contracts had customized payment schedules and
balloon payments. Customized payment contracts
are obligations of obligors who have seasonal
downtimes or variations in cash flow typically
arising from weather conditions or industry
characteristics. During such downtimes, the
contract payment schedules may omit or reduce
required payments for generally up to three
months per year. The scheduled payments are at
higher amounts to assure that the contract does
not extend beyond a term appropriate for the
creditworthiness of the obligor and to meet the
originator's yield requirements. Balloon
contracts provide for a series of scheduled
payments over the term of the contract and a
larger amount, generally up to 30% of the
original principal balance, at the end of the
contract. The monthly payment includes the
amount necessary to amortize the non-balloon
payment portion of the contracts over the term
of the contract plus interest on the balloon
portion of the contract.
On the closing date ORIX Credit Alliance, Inc.
will transfer the contracts and security
interests in the related equipment to the trust
depositor. The trust depositor will then
transfer them to the trust on the same date.
The contracts have been selected on a random
basis based on criteria specified in the
transfer and servicing agreement.
None of the obligors on the contracts are
located outside of the United States and its
territories. As of September 1, 1999, contracts
of any single obligor or commonly controlled
group of obligors do not constitute more than
approximately --% of the aggregate outstanding
principal balance of the contracts, and no more
than --% of the aggregate outstanding principal
balance of the contracts relates to obligors
located in the same state.
As of September 1, 1999, no contract has any
scheduled payments that are more than 60 days
delinquent. A contract is considered delinquent
if anything less than each full payment is
received by its contractual due date.
See "The Transfer and Servicing
Agreement -- Representations and Warranties;
Definition of Eligible Contracts" and "The
Contracts" and "Composition of the Contracts".
2
<PAGE> 8
As of September 1, 1999, the contracts had the
following characteristics:
<TABLE>
<S> <C>
Number of contracts........................ --
Aggregate contract outstanding principal
balance.................................. $ --
Average contract outstanding principal
balance.................................. $ --
Weighted average contract rate............. --%
Weighted average original term............. -- months
Range......................................
----- months
Weighted average remaining term............ -- months
Range......................................
----- months
</TABLE>
Changes in characteristics of the contracts
between September 1, 1999 and the closing date
will not affect more than 5.00% of the
aggregate outstanding principal balance of the
contracts.
For further information regarding the
contracts, see "Composition of the Contracts"
and "The Contracts", as well as "The Transfer
and Servicing Agreement -- Representations and
Warranties; Definition of Eligible Contracts"
and "-- Concentration Amounts; Definition of
Excess Contracts".
We may replace a contract that is part of the
trust's assets with a substitute contract:
- if we subsequently determine that a
contract was not eligible to be sold to
the trust at the time of its sale to the
trust;
- if the terms of such contract are to be
subsequently amended in a manner not
permitted by the transfer and servicing
agreement;
- if such contract is subject to a
casualty loss;
- if we did not remove and replace that
contract, the obligor or equipment
concentrations of contracts would exceed
the limits described in "The Transfer
and Servicing Agreement -- Concentration
Amounts; Definition of Excess
Contracts"; or
- if such contract is prepaid.
See "The Transfer and Servicing
Agreement -- Substitute Contracts". The
substitute contracts will have been originated
under the same credit criteria and policies as
the contracts they replace.
B. RESERVE FUND............. On the closing date the trust depositor will
establish in bank accounts in the name of the
indenture trustee a reserve fund. This fund
provides you with limited protection in the
event collections from obligors on the
contracts are insufficient to make payments on
the notes. We cannot assure you, however, that
this protection will be adequate to prevent
shortfalls in amounts available to make payment
on the notes. The initial balance of
3
<PAGE> 9
the reserve fund will be $--, which will equal
--% of the original contract pool balance.
Additional deposits will be made out of
collections on the contracts to this fund in
subsequent months, if necessary, to maintain
the required amount in the fund. If, on any
payment date, the amounts available for
distribution exceed the amounts needed to pay
amounts owed to the servicer and to pay
interest and principal on the notes, the excess
will be deposited into this fund. However, the
amount deposited in the reserve fund shall not
exceed the amount needed to increase the
reserve fund balance to an amount equal to the
lesser of --% of the original pool balance and
the outstanding principal amount of the notes.
Investment earnings on amounts held in the
reserve fund will be available for distribution
to you.
If on any payment date, collections on the
contracts are less than the amount needed to
pay interest on the notes, the indenture
trustee will withdraw funds from the reserve
fund to pay the interest. Additionally, if
collections on the contracts are sufficient to
pay current interest but not principal on the
notes, we will withdraw funds from the reserve
fund.
If on any payment date, the aggregate amounts
on deposit in the collection account and the
reserve fund are greater than or equal to the
sum of (i) the entire outstanding note
principal balance, (ii) the interest accrued
thereon, (iii) any accrued and unpaid servicing
fee and (iv) unreimbursed servicer advances,
the amount on deposit in the reserve fund will
be deposited in the collection account and used
to repay the notes in full.
The conditions under which we will withdraw
amounts from the reserve fund are more
specifically described in the "Description of
the Notes and Indenture -- Allocations" and
"-- Reserve Fund".
TERMS OF THE NOTES............ The basic terms of the notes will be as
described below. See "Description of the Notes
and Indenture". We will pay principal and
interest due on the notes using:
- collections of payments due under the
contracts held by the trust;
- earnings on amounts held in the
collection account;
- late charges relating to a contract if
the late charges were included in the
contract's terms as of the date the
contract was purchased by the trust;
- amounts earned on amounts held in the
reserve fund;
- amounts received upon the prepayment or
purchase of contracts or liquidation of
the contracts and disposition of the
related equipment upon defaults under
contracts;
- amounts received from vendor recourse,
if any; and
4
<PAGE> 10
- amounts in the reserve fund more
specifically described in "Description
of Notes and Indenture -- Reserve Fund".
See "Description of the Notes and
Indenture -- Amounts Available for Payments on
the Notes".
You may purchase the notes in minimum
denominations of $1,000, and in integral
multiples of $1,000 in excess of the minimum
denominations. We will offer the notes only in
book-entry form.
A. EVENTS OF DEFAULT........ Events of default with respect to the notes
include:
- failure to pay accrued interest on any
payment date,
- failure to pay outstanding principal on
the maturity date,
- breach of representations and warranties
with respect to the contracts which are
materially incorrect and which have a
material adverse effect on the
noteholders, and
- the occurrence of insolvency events with
respect to the trust depositor or the
trust.
See "Description of the Notes and
Indenture -- Events of Default".
B. INTEREST................. On a payment date, we will first repay any
outstanding servicer advances. Second, we will
pay the servicer's monthly servicing fee.
Third, we will pay interest on the notes at the
rates specified on the cover of this prospectus
in the following order:
<TABLE>
<CAPTION>
CLASS OF NOTES RECEIVING INTEREST PAYMENT
NOTES PRIOR TO SPECIFIED CLASS
-------- -------------------------------------
<S> <C>
A-1, A-2,
A-3, A-4........... None
B.................. Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes
C.................. Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes,
Class B Notes
</TABLE>
See "Description of the Notes and
Indenture -- Allocations".
We will calculate interest on the Class A-1
Notes on the basis of actual days elapsed over
a year of 360 days. We will calculate interest
on all other notes on the basis of a year of
360 days consisting of twelve 30-day months.
C. PRINCIPAL................ On a payment date, after we pay interest on the
notes, we will pay principal on the notes in
the following order:
<TABLE>
<CAPTION>
CLASS OF NOTES RECEIVING PRINCIPAL PAYMENT
NOTES PRIOR TO SPECIFIED CLASS
-------- -----------------------------------------------
<S> <C>
A-1 None
A-2 Class A-l Notes
</TABLE>
5
<PAGE> 11
<TABLE>
<CAPTION>
CLASS OF NOTES RECEIVING PRINCIPAL PAYMENT
NOTES PRIOR TO SPECIFIED CLASS
-------- -----------------------------------------------
<S> <C>
A-3 Class A-1 Notes, Class A-2 Notes
Class B Notes and Class C Notes will receive
principal payments prior to Class A-3 Notes on
any payment date on which the outstanding
principal amount of the Class A-2 Notes is
greater than $0.
A-4 Class A-1 Notes, Class A-2 Notes, Class A-3
Notes
Class B Notes and Class C Notes will receive
principal payments prior to Class A-4 Notes on
any payment date on which the outstanding
principal amount of the Class A-3 Notes is
greater than $0.
B Class A-1 Notes, Class A-2 Notes
Class A-3 Notes will receive principal payments
prior to Class B Notes after the outstanding
principal amount of the Class A-1 Notes and
Class A-2 Notes is reduced to $0.
Class A-4 Notes will receive principal payments
prior to Class B Notes only after the
outstanding principal amount of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes is
reduced to $0.
C Class A-l Notes, Class A-2 Notes, Class B Notes
Class A-3 Notes will receive principal payments
prior to Class C Notes only after the
outstanding principal amount of the Class A-1
Notes and Class A-2 Notes is reduced to $0.
Class A-4 Notes will receive principal payments
prior to Class C Notes only after the
outstanding principal amount of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes is
reduced to $0.
</TABLE>
See "Description of the Notes and
Indenture -- Allocations".
The amount of principal paid on a Class A-1
Note prior to its stated maturity date will be
based on the amount that the aggregate
principal balance of the contracts has declined
during the most recent full collection period.
Each collection period is approximately a
month.
After the Class A-1 Notes have been paid in
full, the amount of principal paid on any other
class of notes will be the amount necessary to
reduce the outstanding principal of that class
of notes to an amount equal to a specified
percentage of the aggregate principal balance
of the contracts as of the related
determination date. The percentage used is the
ratio of the initial principal amount of such
class of notes to the original pool balance of
the contracts minus the initial principal
amount of the Class A-1 Notes.
6
<PAGE> 12
Following an event of default, we will not make
principal payments in the order described
above. Instead, we will pay principal on the
notes in the following order:
- outstanding principal of Class A-l Notes
- outstanding principal of Class A-2
Notes, Class A-3 Notes and Class A-4
Notes
- outstanding principal of Class B Notes
- outstanding principal of Class C Notes
See "Description of the Notes and
Indenture -- Allocations" and "-- Events of
Default".
D. PAYMENT DATES............ You will receive distributions of interest and
principal on the 15th day of each month, or if
that day is not a business day, the next
business day.
E. STATED MATURITY DATE..... The notes will mature on the date shown on the
cover of this prospectus, except that if the
day is not a business day, then the stated
maturity date will be the next business day.
F. OPTIONAL REDEMPTION...... If the aggregate outstanding principal balance
of the contracts at the time is less than or
equal to 10% of the initial aggregate principal
balance of the contracts as of September 1,
1999, the trust may redeem all, but not less
than all, of the outstanding notes. If the
trust does redeem all of the outstanding notes,
the redemption price will be equal to the
unpaid principal amount of the notes plus
accrued and unpaid interest through the date of
redemption.
SERVICING; SERVICING FEE...... The servicer will be responsible for servicing,
managing and administering the contracts and
related interests, and enforcing and making
collections on the contracts. See "The Transfer
and Servicing Agreement -- Servicing Standard
and Servicer Advances".
The servicer will be entitled to receive a
monthly fee equal to the product of:
(1) one-twelfth of 1.25% and
(2) the aggregate outstanding principal
balance of the contracts in the trust
as of the beginning of the related
collection period.
The fee is payable out of amounts we receive on
the contracts.
See "Description of the Notes and
Indenture -- Servicing Compensation and Payment
of Expenses" and "The Transfer and Servicing
Agreement".
MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS.............. In the opinion of Sullivan & Cromwell, federal
tax counsel to the trust depositor, for federal
income tax purposes, the notes offered by this
prospectus will be characterized as debt, and
the
7
<PAGE> 13
trust will not be characterized as an
association or a publicly traded partnership
taxable as a corporation. You, by accepting a
note, agree to treat the note as indebtedness.
See "Material Federal Income Tax
Considerations".
ERISA CONSIDERATIONS.......... Subject to the considerations discussed under
"ERISA Considerations", the notes will be
eligible for purchase by some employee benefit
plans. Any benefit plan fiduciary considering
purchase of the notes should, however, consult
with its counsel regarding the consequences of
its purchase under ERISA and the Internal
Revenue Code. See "ERISA Considerations".
RATING........................ We will not issue the notes unless they receive
ratings from the following rating agencies as
set forth below:
<TABLE>
<CAPTION>
CLASS MOODY'S STANDARD &
OF INVESTORS POOR'S FITCH
NOTE SERVICE RATINGS GROUP IBCA, INC.
----- --------- ------------- ----------
<S> <C> <C> <C>
A-1 P-1 A-1+ F1+/AAA
A-2 Aaa AAA AAA
A-3 Aaa AAA AAA
A-4 Aaa AAA AAA
B A2 A A
C Baa2 BBB BBB
</TABLE>
A rating is not a recommendation to purchase,
hold or sell notes since a rating does not
address market price or suitability for a
particular investor. A rating may be subject to
revision or withdrawal at any time by the
assigning rating agency. See "Rating of the
Notes".
8
<PAGE> 14
RISK FACTORS
You should carefully consider the following risk factors before you invest
in the notes.
THE ABSENCE OF EXISTING MARKETS 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 underwriter may assist
in resales of the notes but it is 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.
PREPAYMENTS ON THE CONTRACTS MAY CAUSE AN 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 THE REPAYMENT
The terms of the contracts typically permit prepayment. Where prepayments
are permitted, obligors are typically required to pay a premium as a condition
to prepayment. Prepayments may cause us to pay principal on the notes sooner
than you expected. Similarly, upon the occurrence of an event of default, you
may also receive principal on the notes sooner than you expected. See
"Description of the Notes and Indenture -- Events of Default" and "Prepayment
and Yield Consideration". You may not be able to reinvest those distributions of
principal 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. The rate of early terminations of contracts
due to prepayments, including defaults, is influenced by various factors
including:
- changes in customer requirements;
- the level of interest rates;
- the level of casualty losses; and
- the overall economic environment.
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.
THE PRICE AT WHICH YOU CAN RESELL YOUR NOTES MAY DECREASE IF THE RATINGS OF YOUR
NOTES CHANGE
Moody's Investors Service, Standard & Poor's Ratings Group and Fitch IBCA,
Inc. are the rating agencies rating the notes. At any time, a rating may be
lowered or withdrawn entirely by a rating agency rating the notes. In the event
that the rating initially assigned to any note is subsequently lowered or
withdrawn for any reason, you may not be able to resell your notes without a
substantial discount. For more detailed information regarding the ratings
assigned to any class of the notes, see "Rating of the Notes."
THE SUBORDINATION OF THE CLASS A-2 NOTES, CLASS A-3 NOTES, CLASS A-4 NOTES,
CLASS B NOTES AND THE CLASS C NOTES IS A LIMITED FORM OF CREDIT ENHANCEMENT
We will pay interest and principal on some classes of notes prior to paying
interest and principal on other classes of notes. See "Description of the Notes
and Indenture--Allocations". 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
notes which receive payments prior to those subordinated classes.
The more senior classes of notes could lose the credit enhancement provided
by the more subordinate classes and the reserve fund if delinquencies and
defaults on the contracts increase and if the collections
9
<PAGE> 15
on the contracts and amounts in the reserve fund are insufficient to pay even
the more senior classes of notes.
LIMITED ASSETS SECURE THE NOTES; NOTEHOLDERS WILL HAVE NO RECOURSE TO THE
ORIGINATOR, SERVICER OR THEIR AFFILIATES IN THE EVENT DELINQUENCIES AND LOSSES
DEPLETE THE TRUST'S ASSETS
The trust is a limited purpose trust with limited assets. Moreover, you
have no recourse to the general credit of the servicer, originator, the owner
trustee, the indenture trustee or their affiliates. Therefore, you must rely
solely upon the contracts for payment of principal and interest on the notes. If
payments on the contracts are delinquent or are insufficient to make payments on
the notes, no assets other than the reserve fund will be available to make
payments on the notes. Similarly, in the event that contracts become defaulted
contracts, the proceeds from the sale of the equipment securing the contracts
may be insufficient to make payments on the notes. There can be no assurance
that the delinquency and loss experience of the contracts will be comparable to
the information set forth in "Delinquency and Loss Information".
BECAUSE DISPROPORTIONATE AMOUNTS OF CONTRACTS RELATE TO -- STATES, ADVERSE
CONDITIONS IN THOSE STATES AND SURROUNDING REGIONS MAY CAUSE INCREASED DEFAULTS
AND DELINQUENCIES
If adverse economic conditions were particularly severe in the geographic
regions in which 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 trust may
differ from what you may have expected, and you may experience delays or
reductions in payments you expected to receive. As of September 1, 1999,
approximately --% of the aggregate principal balance of the contracts held by
the trust related to obligors located in , --% in
, --% in and --% in . No other
state accounts for more than 5.00% of the contracts. The contracts in those
states represent --% of the aggregate principal balance of the contracts held by
the trust. An example of an adverse condition is if there were a substantial
downturn and declining prices in the wood and pulp business in particular
states, this could reduce revenues for obligors in those states and ultimately
reduce the associated obligors' ability to make timely payments on their related
contracts.
BECAUSE DISPROPORTIONATE AMOUNTS OF CONTRACTS RELATE TO EQUIPMENT USED IN
PARTICULAR INDUSTRIES, ADVERSE ECONOMIC CONDITIONS IN THOSE INDUSTRIES MAY CAUSE
INCREASED DEFAULTS AND DELINQUENCIES
If the industries in which there is a substantial concentration of obligors
experience adverse events or economic conditions, the overall timing and amount
of collections on the contracts held by the trust may differ from what you may
have expected. This could result in delays or reduced payments to you. As of
September 1, 1999, contracts constituting approximately --% of the aggregate
principal balance of the contracts held by the trust relate to equipment used in
the trucking and transportation industry, --% relate to the construction and
road building business, --% relate to the wood and pulp business, --% relate to
the machine shop business and --% relate to the crane and crane rental business.
A reduction in the demand for trucking and transportation services may
consequently cause an increase in delinquencies and defaults on contracts with
obligors associated with the trucking and transportation industry. A decrease in
the demand for new construction and road building could reduce revenues in the
construction and road building business and this may consequently increase
delinquencies and defaults on the related contracts. No other industry accounts
for more than 5.00% of the aggregate principal balance of the contracts held by
the trust.
EVEN IF WE REPOSSESS AND SELL 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 expected to be paid on that contract will be the
income and proceeds from the sale of any related repossessed equipment and a
deficiency judgment, if any, against the obligor under the defaulted contract as
well as, to the extent available, vendor recourse. See "The Transfer and
Servicing Agreement --
10
<PAGE> 16
Definition of Defaulted Contracts". Since the market value of the equipment may
decline faster than the contract outstanding principal balance, the servicer may
not recover the entire amount due on the contract, might not receive any
recoveries on the equipment and the obligor may be unable to pay any deficiency
judgment. The reserve fund is 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 we currently
anticipate.
SERVICER'S RETENTION OF CONTRACT FILES MAY HINDER OUR ABILITY TO REALIZE THE
VALUE OF EQUIPMENT SECURING THE CONTRACTS
To facilitate servicing and reduce administrative costs, the servicer will
retain possession of the documents evidencing the contracts held by the trust.
Because the documents evidencing the contracts will remain in servicer's
possession, if a subsequent purchaser were able to take physical possession of
the documents without knowledge of their assignment, that purchaser could have a
security interest in the contracts senior to the trust's security interest. In
the event that we must rely upon repossession and sale of the related equipment
securing defaulted contracts to recover principal and interest due on the
defaulted contracts, our ability to realize upon the equipment may be limited
due to the existence of a third party's senior security interest in those
contracts. Also, the physical possession of the documents by such a subsequent
purchaser could limit the trust's ability to enforce and receive payments on the
contracts. In any such event, distributions to you could be delayed or reduced.
FAILURE TO RECORD ASSIGNMENT OF PERFECTED SECURITY INTEREST MAY HINDER OUR
ABILITY TO REALIZE THE VALUE OF EQUIPMENT SECURING THE CONTRACTS
In connection with the conveyance of the contracts to the trust, security
interests in the equipment securing the contracts have been assigned by the
originator to the trust depositor and will be assigned by the trust depositor to
the trust. Due to the administrative burden and expense associated with amending
and paying the filing fee for the assignment of approximately -- Uniform
Commercial Code financing statements in -- states where equipment is located, we
will not file any assignments of the UCC financing statements evidencing the
assignment of the security interests in the equipment to the trust depositor,
the trust or the indenture trustee. Because neither the trust depositor's,
trust's, owner trustee's or indenture trustee's name appears on the UCC
financing statements, the originator or servicer could inadvertently release the
security interest in the equipment securing a contract. In such event, we would
not have a perfected security interest in the equipment. Without a perfected
security interest, we may not be able to fully realize the value of any
repossessed equipment if the related contract becomes a defaulted contract. It
has been the general policy of the originator to file or cause to be filed UCC
financing statements with respect to the equipment relating to the contracts.
REPURCHASE OBLIGATION OF TRUST DEPOSITOR AND ORIGINATOR PROVIDES YOU ONLY
LIMITED PROTECTION AGAINST LIENS ON THE CONTRACTS
Federal or state law may grant liens on a contract that have priority over
the trust's interest. To the extent a lien having priority over the trust's lien
exists with respect to a contract and/or the related equipment, the trust's
interest in the asset will be subordinate to such lien. In the event the
creditor associated with such lien exercises its remedies on its security
interest it is unlikely that, after the senior creditor is repaid, sufficient
cash proceeds from the contract and related equipment will be available to pay
the contract outstanding principal balance to the trust. An example of a lien
arising under federal or state law is a tax or other government lien on property
of the originator or the trust depositor arising prior to the time a contract is
conveyed to the trust. The tax lien may have priority over the interest of the
trust in the contract.
Under the transfer and servicing agreement, the originator will warrant to
the trust that the contracts transferred thereunder will be transferred free and
clear of the lien of any third party. The originator and the trust depositor
also will jointly and severally warrant to the trust that they will not sell,
pledge, assign, transfer or grant any lien on the contracts. In the event that
such warranties are not true with respect to
11
<PAGE> 17
any contract, the trust depositor and the originator are required under the
transfer and servicing agreement to repurchase the contract. There can be no
assurance that the trust depositor or originator will be able to repurchase a
contract at the time we request it.
IF A BANKRUPTCY COURT RULES THAT THE TRANSFER OF CONTRACTS FROM THE ORIGINATOR
TO THE TRUST DEPOSITOR WAS NOT A TRUE SALE THEN PAYMENTS ON THE CONTRACTS COULD
BE REDUCED OR DELAYED
If the originator became a debtor in a bankruptcy case and creditors of the
originator, or the originator acting as a debtor-in-possession or a bankruptcy
trustee, were to assert that the transfer of the contracts from the originator
to the trust depositor was ineffective to remove such contracts from the
originator's estate, the distribution of proceeds of the contracts to the trust
might be subject to the automatic stay provisions of the United States
Bankruptcy Code. This would delay the distribution of those proceeds for an
uncertain period of time. Furthermore, if the bankruptcy court rules in favor of
the creditor or originator, reductions in payments under the contracts to the
trust could occur. In either case, distributions to you then could be delayed or
reduced. 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 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 were to file for
reorganization under Chapter 11 of the Bankruptcy Code. In the transfer and
servicing agreement, the originator will warrant to the trust depositor that the
conveyance of the contracts to the trust depositor is a valid sale and transfer
of the contracts to the trust depositor. In addition, the originator and the
trust depositor have agreed that they will each treat the transactions described
in this prospectus as a sale of the contracts to the trust depositor. The
originator will take all actions that are required under applicable law to
perfect the trust depositor's ownership interest in the contracts sold by the
originator.
INSOLVENCY OF THE TRUST DEPOSITOR OR THE TRUST COULD DELAY OR REDUCE PAYMENTS TO
YOU
If the trust depositor were to become a debtor in a bankruptcy case and
creditors of the trust depositor, or the trust depositor acting as a
debtor-in-possession, were to assert that the sale of the contracts to the trust
was ineffective to remove such contracts from the trust depositor's estate, then
delays in payments under the contracts to the trust could occur or, reductions
in the amount of payments under the contracts to the trust could result.
Distributions to you then could be delayed or reduced. The trust depositor will
warrant in the transfer and servicing agreement that the conveyance of the
contracts to the trust is a valid sale of the contracts to the trust. The trust
depositor will also warrant that the security interest in the contracts granted
by the trust to the indenture trustee is a valid and duly perfected security
interest. The trust depositor will also agree to take all actions that are
required under applicable law to perfect the trust's and the indenture trustee's
respective interests in the contracts. In the event the trust depositor becomes
subject to insolvency proceedings, the trust, the trust's interest in the
trust's assets and the trust's obligation to make payments on the notes might
also become subject to the insolvency proceedings. We believe that the trust
will be considered bankruptcy remote from the originator. However, no law firm
in this transaction will be rendering an opinion to that effect.
PROCEEDS FROM REQUIRED SALE OF THE CONTRACTS FOLLOWING TRUST DEPOSITOR
BANKRUPTCY MAY NOT BE SUFFICIENT TO REPAY THE NOTES IN FULL
If the trust depositor is bankrupt or insolvent, then an event of default
would occur with respect to the notes. Under the indenture and the transfer and
servicing agreement, and assuming the trust was not then a debtor in a
bankruptcy case, the indenture trustee would be required to sell the interests
in the contracts. If the sum of the proceeds of the sale of the contracts and
the proceeds of any collections on the contracts is insufficient to pay you in
full, then you may suffer losses on your investment in the notes.
12
<PAGE> 18
END-USER BANKRUPTCY MAY REDUCE OR DELAY COLLECTIONS ON THE CONTRACTS
Bankruptcy and insolvency laws could affect your interests in contracts
with bankrupt end-user obligors if those laws result in any of the contracts
being written off as uncollectible or result in delay in payments due on any
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 and the reserve fund are insufficient to cover losses to the trust.
State laws impose requirements and restrictions relating to foreclosure sales
and obtaining deficiency judgments following foreclosure sales. In the event
that you must rely on repossession and disposition of equipment to recover
amounts due on defaulted contracts, the amounts due may not be realized due to
these requirements and restrictions. 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 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.
TRANSFER OF SERVICING MAY DELAY PAYMENTS TO NOTEHOLDERS DUE TO CONTRACT
PROCESSING DELAYS
If ORIX Credit Alliance, Inc. were to cease acting as servicer, delays in
processing payments on the contracts and information in respect thereof could
occur and result in delays in payments to you.
YEAR 2000 ISSUES MAY IMPACT ORIX CREDIT ALLIANCE'S ABILITY TO SERVICE THE
CONTRACTS
If ORIX Credit Alliance, Inc., as servicer, does not have computerized
systems that are Year 2000 compliant by the Year 2000, its ability to service
the contracts may be materially and adversely affected. Similarly, if the
indenture trustee does not have computerized systems that are Year 2000
compliant by the Year 2000, its ability to make distributions to you may be
materially and adversely affected. The "Year 2000" issue concerns the potential
exposures related to the automated generation of business and financial
misinformation resulting from the application of computer programs which have
been written using two digits to identify a year in the date field rather than
four. These programs could fail or produce erroneous results during the
transition from the Year 1999 to the Year 2000.
ORIX Credit Alliance, Inc. has taken significant steps to address the Year
2000 issue, but ORIX Credit Alliance, Inc. continues to bear some risk related
to the Year 2000 issue and could be materially adversely affected if its own
remediation and contingency planning efforts fall behind schedule or if other
entities not affiliated with it do not appropriately address their own Year 2000
compliance issues. These other entities include those providing contingency
plans or outsourced technology services such as mainframe and application
support, as well as borrowers and power companies. Due to this uncertainty, ORIX
Credit Alliance, Inc. is unable to represent that there will be no material
adverse consequences related to the Year 2000 issue; however, it believes that
it is doing what is reasonably necessary to provide the expertise, resources,
assessments and corrective procedures for the Year 2000 issues which could have
a material adverse impact on its operations or financial condition. See "ORIX
Credit Alliance, Inc. -- Assessment of Year 2000 Readiness Disclosure".
BOOK-ENTRY REGISTRATION WILL RESULT IN YOUR INABILITY TO EXERCISE DIRECTLY YOUR
RIGHTS AS A NOTEHOLDER
The notes will be registered in the name of Cede & Co., as nominee of The
Depositary Trust Company. As a result, unless and until definitive notes are
issued, you will not be recognized by the trust, the owner trustee or the
indenture trustee as a noteholder. You will only be able to exercise the rights
of noteholders indirectly, through DTC, Euroclear or Cedelbank and their
respective participating organizations. You will receive reports and other
information provided for in the indenture only to the extent provided by DTC,
Euroclear or Cedelbank. If you are a beneficial owner of the book-entry notes,
your ability to pledge your notes, and the liquidity of your notes in general,
may be limited due to the fact that you will not have a physical note. In
addition, you may experience delays in receiving payments on your notes.
13
<PAGE> 19
USE OF PROCEEDS
In consideration of the trust depositor's transfer of the contracts to the
trust, the trust will transfer the net proceeds from the sale of the notes to
the trust depositor. The trust depositor will acquire the contracts on the
closing date from the originator.
CALCULATION OF CONTRACT PRINCIPAL BALANCE
As used in this prospectus, the principal balance of a contract as of any
date indicated refers to the sum of the total remaining payments due from the
obligor to the originator that were, at the time of origination, designated as
principal payments. These principal payments represent the unpaid portion of the
original amount financed. This amount excludes all payments relating to finance
charges.
COMPOSITION OF THE CONTRACTS
On or about September --, 1999, the trust depositor will transfer to the
trust the contracts as of September 1, 1999 and may from time to time substitute
contracts as of the applicable cutoff dates under the transfer and servicing
agreement. The contracts were selected on a random basis from ORIX Credit
Alliance, Inc.'s portfolio of contracts based on the criteria described in the
transfer and servicing agreement. See "The Transfer and Servicing
Agreement -- Representations and Warranties; Definition of Eligible Contracts"
and "-- Concentration Amounts; Definition of Excess Contracts." The originator
will represent that all of the contracts transferred to the trust relate to
commercial financings, rather than to consumer leases or consumer loans or
financings. No selection procedures believed by the trust depositor to be
adverse to you were used in selecting the contracts for transfer to the trust
under the transfer and servicing agreement.
The composition and distribution of the contracts by contract rate, payment
frequency, geographic distribution, type of equipment, original principal
balance, current principal balance, original term and remaining term are set
forth in the following tables and are reported as of September 1, 1999. For
further information regarding the contracts, see "The Contracts".
As the obligors pay amounts owed by them under the contracts, the aggregate
principal balance of all of the contracts held by the trust will decrease. This
decrease in the principal balance of the contracts is referred to as
amortization. The rate at which the principal balance of each contract is
reduced may vary from contract to contract. The variance will depend in large
part on the contract terms and the manner in which the obligor makes its
payments. As a result, the statistical distribution of the contracts held by the
trust, including the concentration of obligors in any one state or of the
contracts with respect to any one equipment type will vary as the contract
balances amortize.
While reading the tables you should note that:
- Classification by equipment type is based on ORIX Credit Alliance, Inc.'s
customary procedures for determining obligor equipment type.
- Percentages and amounts set forth in the following tables may not total
due to rounding.
- The final scheduled payment on the contract with the latest maturity or
expiration is on or prior to --, 200--.
Some of the contracts intended, as of September 1, 1999, to be transferred
to the trust may be determined not to meet the eligibility requirements and
those contracts may not be transferred to the trust on the closing date for the
transfer of the contracts to the trust. While the statistical distribution of
the characteristics as of the closing date for the final pool of contracts will
vary somewhat from the statistical distribution of the characteristics as of
September 1, 1999 as presented in this prospectus, the variance will not be
material. Changes in the characteristics of the contracts between September 1,
1999 and the closing date will not affect more than 5.00% of the aggregate
current principal balance of the contracts.
14
<PAGE> 20
The information presented in the following tables is as of September 1,
1999. The percentages and balances set forth in each of the following tables may
not total due to rounding.
<TABLE>
<S> <C>
NUMBER OF CONTRACTS......................................... --
AGGREGATE CONTRACT OUTSTANDING PRINCIPAL BALANCE............ $ --
AVERAGE CONTRACT OUTSTANDING PRINCIPAL BALANCE.............. $ --
WEIGHTED AVERAGE CONTRACT RATE.............................. --%
WEIGHTED AVERAGE ORIGINAL TERM.............................. --
(RANGE) (IN MONTHS).........................................
-----
WEIGHTED AVERAGE REMAINING TERM............................. --
(RANGE) (IN MONTHS).........................................
-----
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY CONTRACT RATE
AS OF SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
CONTRACT RATE RANGE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
7.00% to 7.99%............................ -- % $ %
8.00% to 8.99%............................
9.00% to 9.99%............................
10.00% to 10.99%..........................
11.00% to 11.99%..........................
12.00% to 12.99%..........................
13.00% to 13.99%..........................
14.00% and over........................... % $ %
-- ------ -- -------
TOTAL........................... 100.00% $ $100.00%
== ====== == =======
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY PAYMENT FREQUENCY
AS OF SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
PAYMENT FREQUENCY CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Monthly................................... -- % $ %
- Each month.........................
- Customized(1)......................
Quarterly.................................
Semiannually..............................
Annually..................................
-- ------ -- -------
TOTAL........................... 100.00% $ 100.00%
== ====== == =======
</TABLE>
- ---------------
(1) Customized payment contracts are obligations of obligors who have seasonal
downtimes or variations in cash flow typically arising from weather
conditions or industry characteristics. During such downtimes, the contract
payment schedules may omit or reduce required payments for generally up to
three months per year. The scheduled payments are at higher amounts to
assure that the contract does not extend beyond a term appropriate for the
creditworthiness of the obligor and to meet the originator's yield
requirements.
15
<PAGE> 21
DISTRIBUTION OF THE CONTRACTS BY STATE IN WHICH OBLIGORS ARE LOCATED
AS OF SEPTEMBER 1, 1999
(ORDERED BY PERCENTAGE OF AGGREGATE PRINCIPAL BALANCE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
STATE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
............................... % $ %
-------- ------ -------- ------
TOTAL..................... 100.00% $ 100.00%
======== ====== ======== ======
</TABLE>
16
<PAGE> 22
DISTRIBUTION OF THE CONTRACTS BY EQUIPMENT TYPE
AS OF SEPTEMBER 1, 1999
(ORDERED BY PERCENTAGE OF AGGREGATE PRINCIPAL BALANCE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
EQUIPMENT TYPE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Trucks, Commercial Trailers and
Vehicles.......................... % $ %
Construction and Road Building
Equipment.........................
Wood and Pulp Industries............
Machine Shop........................
Cranes and Crane Rental Equipment...
Asphalt and Cement Equipment........
Printing, Publishing and
Photoengraving....................
Insurance...........................
Manufacturing Equipment.............
Industrial Maintenance and
Service...........................
Materials Processing and Handling...
Surface Mining......................
Automated Business Machines and
Computers.........................
Restaurant Equipment................
Other...............................
-------- ------ -------- -------
TOTAL..................... 100.00% $ 100.00%
======== ====== ======== =======
</TABLE>
17
<PAGE> 23
DISTRIBUTION OF THE CONTRACTS BY ORIGINAL PRINCIPAL BALANCE
AS OF SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
ORIGINAL GROSS NUMBER OF OF NUMBER AGGREGATE AGGREGATE
PRINCIPAL BALANCE CONTRACTS OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- --------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
1,000-9,999......................... % $ %
10,00-24,999........................
25,00-49,999........................
50,00-99,999........................
100,000-149,999.....................
150,000-199,999.....................
200,000-249,999.....................
250,000-299,999.....................
300,000-349,999.....................
350,000-399,999.....................
400,000-499,999.....................
500,000-599,999.....................
600,000-699,999.....................
700,000-799,999.....................
800,000-899,999.....................
900,000-999,000.....................
1,000,001-1,250,000.................
-------- ------ -------- -------
TOTAL..................... 100.00% $ $100.00%
======== ====== ======== =======
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY CURRENT PRINCIPAL BALANCE
AS OF SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
NUMBER PERCENTAGE PERCENTAGE OF
CURRENT PRINCIPAL OF OF NUMBER AGGREGATE AGGREGATE
BALANCE CONTRACTS OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- --------- ------------ ----------------- ------------------
<S> <C> <C> <C> <C>
1,000-9,999......................... % $ %
10,00-24,999........................
25,00-49,999........................
50,00-99,999........................
100,000-149,999.....................
150,000-199,999.....................
200,000-249,999.....................
250,000-299,999.....................
300,000-349,999.....................
350,000-399,999.....................
400,000-499,999.....................
500,000-599,999.....................
600,000-699,999.....................
700,000-799,999.....................
800,000-899,999.....................
900,000-999,000.....................
1,000,001-1,250,000.................
-------- ------ -------- -------
TOTAL..................... 100.00% $ $100.00%
======== ====== ======== =======
</TABLE>
18
<PAGE> 24
DISTRIBUTION OF THE CONTRACTS BY ORIGINAL CONTRACT TERM
AS OF SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE PERCENTAGE OF
ORIGINAL TERM NUMBER OF NUMBER OF PRINCIPAL AGGREGATE
(MONTHS) CONTRACTS CONTRACTS BALANCE PRINCIPAL BALANCE
- ------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
13-24............................... % $ %
25-36...............................
37-48...............................
49-60...............................
61-72...............................
73-84...............................
-------- ------ ------- ------
TOTAL:.................... 100.00% $ 100.00%
======== ====== ======= ======
</TABLE>
DISTRIBUTION OF THE CONTRACTS BY REMAINING MONTHS TO STATED MATURITY
AS OF SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
REMAINING TERM NUMBER OF NUMBER OF AGGREGATE AGGREGATE
(MONTHS) CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1-12................................ % $ %
13-24...............................
25-36...............................
37-48...............................
49-60...............................
61-72...............................
73-84...............................
-------- ------ ------- ------
TOTAL:.................... 100.00% $ 100.00%
======== ====== ======= ======
</TABLE>
19
<PAGE> 25
DELINQUENCY AND LOSS INFORMATION
The originator treats a contract as delinquent if the obligor does not make
a scheduled payment at the time or in the amount required by the contract terms.
Contract terms require payment by the obligor by each contractual payment due
date.
The following tables set forth the originator's delinquency and loss
experience on its aggregate equipment lease and loan portfolio. Not all of the
contracts in the originator's aggregate portfolio will be transferred to the
trust. Therefore, the data in the following tables includes delinquency and loss
experience for all contracts owned by ORIX Credit Alliance, Inc. (including its
wholly owned subsidiaries), including contracts being transferred to the trust
depositor and the trust. The delinquency and loss experience set forth in the
following tables is described in terms of gross receivables and repossessed
assets. The contract information is calculated based on the entire receivable
due, including the principal balance and all finance charges.
The data presented in the following tables and the period to period
discussion below reflect historical results and there is no assurance that the
delinquency or loss experience of the contracts will be similar to that set
forth below.
CONTRACT PORTFOLIO
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
AS AT
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998 MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1997
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT................. $2,322,826 75.2% $2,129,197 76.6% $2,440,277 79.3% $2,128,275 79.1% $2,176,347 78.1%
PAST DUE (1):
1-30 days............... $ 429,386 13.9 424,020 15.3 404,199 13.1 363,940 13.5 404,626 14.5
31-60 days.............. 189,368 6.1 148,680 5.3 151,344 4.9 137,717 5.1 125,529 4.5
61-90 days.............. 59,381 1.9 29,017 1.0 26,169 0.8 16,236 0.6 20,760 0.7
91-120 days............. 28,303 0.9 12,965 0.5 9,957 0.3 10,354 0.4 12,988 0.5
121-180 days............ 24,537 0.8 11,652 0.4 18,209 0.6 9,056 0.3 13,675 0.5
Over 180 days........... 35,934 1.2 24,116 0.9 28,571 0.9 23,573 0.9 32,084 1.2
---------- ---------- ---------- ---------- ----------
GROSS RECEIVABLES....... $3,089,735 100% $2,779,647 100% $3,078,726 100% $2,689,151 100% $2,786,009 100%
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) The delinquency analysis is prepared on a contractual basis. Accordingly,
the entire contract, including principal and all earned and unearned finance
charges, is considered delinquent if any portion of a payment due has not
been made by its contractual payment due date, subject to any grace periods
permitted by the contract or required by law. Any cash collected on a
delinquent account is applied against the earliest amount due. Therefore, an
account classified as delinquent may be a paying account.
20
<PAGE> 26
CONTRACT PORTFOLIO
CREDIT/LOSS REPOSSESSION EXPERIENCE(1)
(DOLLARS IN MILLIONS)
FOR THE
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998 MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1997
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
AVERAGE GROSS PORTFOLIO
OUTSTANDING DURING THE
PERIOD................. 3,084,231 2,734,399 2,883,939 2,737,580 2,714,777
REPOSSESSIONS AS A
PERCENT OF AVERAGE
GROSS PORTFOLIO
OUTSTANDING............ 0.77% 0.60% 0.73% 0.62% 0.78%
NET LOSSES
AS A PERCENT OF
LIQUIDATIONS(2)(3)(4)... 0.62% 0.57% 0.67% 0.61% 0.63%
NET LOSSES AS A PERCENT
OF AVERAGE GROSS
PORTFOLIO
OUTSTANDING(2)(3)...... 0.30% 0.30% 0.33% 0.33% 0.30%
</TABLE>
- ---------------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract, including unearned finance and
other charges.
(2) A portion of the contracts provide for full or partial recourse to vendor
assignors. Approximately 11%, 12%, and 13% of the aggregate principal
amounts of the contracts acquired during the years ended March 31, 1999,
1998 and 1997, respectively, provide for full or partial recourse to vendor
assignors.
(3) Net losses are equal to the aggregate of the principal balances, or portions
thereof, of all contracts (plus accrued but unpaid interest thereon) which
are determined to be uncollectible in the period, less any recoveries on
contracts charged off in the period or any prior periods or any amounts
recovered from vendor assignors through recourse arrangements, excluding any
losses resulting from repossession expenses.
(4) Liquidations represent a reduction in the outstanding balances of the
receivables as a result of cash payments.
The net loss figures above reflect the fact that ORIX Credit Alliance, Inc.
had full or partial recourse to assignors on a portion of the contracts. In the
event of an assignor's bankruptcy, a bankruptcy trustee or the assignor as a
debtor in possession might attempt to characterize recourse sales of contracts
as loans to the assignor secured by the contracts; such an attempt, if
successful, could result in payment delays or losses on the affected contracts.
THREE MONTHS ENDED JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30, 1998
The amounts over 90 days past due, as a percentage of total gross
receivables, increased 1.1% to 2.9% at June 30, 1999 from 1.8% at March 31,
1999. Repossessed receivables at June 30, 1999 increased 0.04% as a percentage
of gross receivables to 0.77% from 0.73% at March 31, 1999.
The amounts over 90 days past due, as a percentage of total gross
receivables, increased 0.2% to 1.8% at June 30, 1998 from 1.6% at March 31,
1998. Repossessed receivables at June 30, 1998 decreased 0.02% as a percentage
of gross receivables to 0.60% from 0.62% at March 31, 1999.
Net losses as a percentage of liquidations increased 0.05% to 0.62% for the
three months ended June 30, 1999 when compared to the three months ended June
30, 1998. Net losses as a percentage of the average gross portfolio outstanding
was 0.30% for both of the three months ended June 30, 1999 and 1998.
During May and June 1999, ORIX Credit Alliance, Inc. implemented plans
which consolidated its middle market branch network into six divisional
operating centers. During this transition, employees,
21
<PAGE> 27
including those with collection duties, were relocated from the branches to
these operating centers. Consequently, much of the company's efforts were
focused on physically moving branch office operations to new locations and, as
expected, there was a deterioration in past due delinquency statistics. This
major cost-cutting project is now complete and we believe that past due
delinquency statistics will improve to lower levels as collection employees
refocus on their normal responsibilities.
TWELVE MONTHS ENDED MARCH 31, 1999 VERSUS TWELVE MONTHS ENDED MARCH 31, 1998
The amounts over 90 days past due, as a percentage of total gross
receivables, increased 0.2% to 1.8% at March 31, 1999 from 1.6% at March 31,
1998. Repossessed receivables at March 31, 1999 increased 0.11% as a percentage
of gross receivables to 0.73% from 0.62% at March 31, 1998. Net losses as a
percentage of liquidations increased 0.06% to 0.67% for the twelve months ended
March 31, 1999 from 0.61% for the twelve months ended March 31, 1998. Net losses
as a percentage of the average gross portfolio outstanding was 0.33% for both of
the twelve months ended March 31, 1999 and 1998. We believe that stability in
delinquency and loss experience is a result of continued favorable economic
conditions and consistent application of credit standards on the part of the
originator.
TWELVE MONTHS ENDED MARCH 31, 1998 VERSUS TWELVE MONTHS ENDED MARCH 31, 1997
The amounts over 90 days past due, as a percentage of total gross
receivables, decreased 0.5% to 1.6% at March 31, 1998 from 2.1% at March 31,
1997. Repossessed receivables at March 31, 1998 decreased 0.16% as a percentage
of gross receivables to 0.62% from 0.73% at March 31, 1997. Net losses as a
percentage of liquidations decreased 0.02% to 0.61% for the twelve months ended
March 31, 1998 from 0.63% for the twelve months ended March 31, 1997. Net losses
as a percentage of the average gross portfolio outstanding increased 0.03% to
0.33% for the twelve months ended March 31, 1999 from 0.30% for the twelve
months ended March 31, 1998. We believe that stability in delinquency and loss
experience is a result of continued favorable economic conditions and consistent
application of credit standards on the part of the originator.
DEFINITION OF DELINQUENCY FOR THE CONTRACTS TRANSFERRED TO THE TRUST
As of September 1, 1999 no contract sold to the trust was delinquent on any
scheduled payments for more than 60 days. Delinquent contract balances are
monitored on a contractual basis. The total outstanding contract balance,
including unearned finance charges, is considered delinquent if anything less
than each full payment is received by the contractual due date.
There are no non-performing contracts included in the contracts sold to the
trust. For a definition of defaulted contracts, see "The Transfer and Servicing
Agreement -- Definition of Defaulted Contracts".
THE CONTRACTS
The trust will be entitled to all collections on account of the contracts
and related equipment. However, the trust will not be entitled to the Excluded
Amounts. See "Description of the Notes and Indenture -- Amounts Available for
Payment on the Notes". All of the contracts are commercial contracts.
END-USER CONTRACTS
The following discussion describes the end-user contracts. All of the
end-user contracts in respect of equipment to be included from time to time in
the trust are of one of the following types:
- conditional sale agreements;
- leases; and
- secured promissory notes;
22
<PAGE> 28
There is no limit on the number of contracts which may consist of any of the
foregoing types. Each contract must be an eligible contract as of the applicable
cutoff date. In order for a contract to be eligible to be transferred to the
trust and to be a trust asset it must have the characteristics which are more
fully described in "The Transfer and Servicing Agreement -- Representatives and
Warranties; Definition of Eligible Contracts".
A portion of the end-user contracts included in the pool of contracts being
transferred to the trust will consist of end-user contracts originated by
vendors (equipment manufacturers or dealers) and assigned to the originator
under individual assignments from vendors. Vendor assignments are typically made
without recourse against the vendor for end-user defaults. Additionally, each
vendor assignment of a contract will contain typical vendor representations,
warranties and covenants. In the event of a breach by the vendor of such
representations, warranties or covenants, the originator will either pursue
repurchase or replacement of the contracts and financed equipment by the vendor
or a contract damage payment from the vendor.
CONDITIONAL SALE AGREEMENTS
The originator offers financing for equipment under conditional sale
agreements assigned to the originator by vendors. Most of the conditional sale
agreements transferred to the trust will consist of either the originator's
standard pre-printed form, or of the vendors' standard, pre-printed forms. These
forms have been reviewed and approved for use by the originator. The conditional
sale agreement sets forth the description of each item financed thereunder and
the schedule of installment payments. Most of the financings under conditional
sale agreements are fixed rate and are for a one- to seven-year term. Most of
the payments under conditional sale agreements are due monthly. Conditional sale
agreement terms include the following:
- a grant by the end-user of a security interest in any related equipment
which is then assigned by the vendor to the originator;
- the end-user is required to maintain the equipment, keep it free and
clear of liens and encumbrances and pay all taxes related to the
equipment;
- no modification or disposal of the equipment without the originator's
consent;
- the equipment is sold "as is";
- the end-user's indemnity against liabilities arising from the use,
possession or ownership of the equipment;
- the end-user's unconditional obligation to pay the installment payments
required under the terms of the agreement; and
- may allow prepayment of the obligation upon the payment, where allowed by
applicable law, of a prepayment premium.
The conditional sale agreement also requires each end-user to maintain
insurance for the benefit of the originator as a loss payee; 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. These modifications must either be approved
by the originator's legal department and/or management, depending on the type of
modification, before the originator will agree to accept an assignment of the
conditional sale agreement from a vendor.
LEASES
The originator, either directly or by assignment from vendors, offers
financing of equipment under leases. Leases may consist of individual lease
agreements each relating to a single, separate transaction or may consist of
individual transactions written under and 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 being
leased or financed and the schedule of related rental
23
<PAGE> 29
payments, are 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 or schedule incorporates the master
lease agreement by reference and is treated by the originator as a separate
lease. Each lease is originated in the ordinary course of business by either the
originator or a vendor. The vendor assigns leases to the originator through a
vendor finance agreement or vendor assignment.
The initial terms of most of the leases transferred to the trust range from
one to seven years. Each lease provides for the periodic payment by the end-user
of rent in advance or arrears, usually monthly or quarterly. The periodic
payments represent the amortization, usually on a level basis, of the total
amount that an end-user is required to pay throughout the term of a lease.
The leases to be transferred to the trust are "net leases" under which the
end-user assumes responsibility for the items financed thereunder, including
operation, maintenance, repair, insurance and the payment of all sales and use
and property taxes relating to such financed item during the lease term. The
originator or vendor is named as loss payee on insurance policies covering the
equipment. The end-user further agrees to indemnify the lessor for any
liabilities arising out of the use or operation of the item financed by the
end-user. In most leases, the lessor is also authorized to perform the
end-user's obligations under the leases 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 the originator is the lessor, the lease
contains no express or implied warranties with respect to the items financed
thereunder other than an implied warranty of quiet enjoyment. If a vendor is the
lessor, the lease or a related agreement may contain representations and
warranties relating to the items financed thereunder in addition to a warranty
of quiet enjoyment; however, the end-user agrees not to assert any warranty
claims against any assignee of the vendor, including the originator, by way of
setoff, counterclaim or otherwise, and further agrees that it may only bring
such claims against the vendor. All leases of equipment require the end-user to
maintain, at its expense, casualty insurance covering damage to or loss of the
equipment during the lease term.
The leases are intended for security as defined in Section 1-201(37) of the
New Jersey Uniform Commercial Code. Under leases intended for security, 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 such leases depend on the terms of the
related individual lease agreement or master lease agreement supplement or
schedule. Those terms provide for the purchase of the equipment at a specified
nominal price (in each case less than $102.00).
End-users under a lease are either prohibited from altering or modifying
the equipment or may alter or modify the equipment only to the extent the
alterations or modifications are readily removable without damage to the
equipment.
The standard terms and conditions of a lease or a master lease agreement
may be modified at the inception of a lease at the request of the end-user. The
modifications must be approved by the originator's legal department and/or
management, depending on the type of modification, before the originator will
agree to enter into the lease or accept an assignment of the lease from a
vendor. Common permitted modifications include, but are not limited to, the
following:
- 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;
24
<PAGE> 30
- 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 such assignment
or sublease; and
- extended grace periods for late payments of rent.
SECURED PROMISSORY NOTES
The originator also provides direct initial financing or refinancing of new
or existing equipment under secured promissory notes, which consist of an
installment note and a separate security agreement or a self-contained
integrated document containing both a promissory note and security agreement. In
an initial financing transaction, the originator pays to the vendor the purchase
price for the equipment and in a refinancing transaction, the originator pays
off an end-user's existing financing source. In the case of a refinancing
transaction, upon payment to the existing financing source, the originator
obtains a release of the other party's lien on the financed equipment. In either
case, the originator records its own lien against the financed equipment and
takes possession of the secured promissory note, which constitutes chattel paper
under the Uniform Commercial Code. In either case, the transaction is documented
as a direct loan by the originator to the end-user of the equipment using a
secured promissory note. Except for the lack of references to "sale" or
"purchase" of equipment, the terms and conditions contained in a secured
promissory note are substantially similar to those contained in a conditional
sale agreement.
EQUIPMENT
The end-user contracts cover a wide variety of new and used equipment. Some
examples of the types of equipment are: trucks, commercial trailers and other
commercial vehicles, construction and road building equipment, wood and pulp
industrial equipment, machine shop equipment and cranes and crane rental
equipment. The security interests of the originator in the equipment subject to
an end-user contract will be transferred to the trust.
CONTRACT FILES
The originator will indicate in its books and records, including the
appropriate computer files relating to the contracts, that the contracts have
been transferred to the trust for the benefit of the holders of the notes and
certificates. The originator will also deliver to the indenture trustee a
computer file or microfiche or written list containing a true and complete list
of all contracts which have been transferred to the trust, identified by account
number and by the contract outstanding principal balance as of the applicable
cutoff date.
HOW COLLECTIONS ON THE CONTRACTS ARE TREATED
All collections received with respect to the contracts will be allocated as
described in "Description of the Notes and Indenture -- Allocations".
Prepayments will be treated as though they were received on the last day of the
collection period in which they are actually received for purposes of
calculating amounts available for distribution to you. Payments of principal on
the contracts made in advance of their due date will be treated as though they
were received on the last day of the collection period in which such principal
payments were actually received. Each collection period coincides with a
calendar month.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the notes, the aggregate amount of each
interest payment on the notes and the yield to maturity of the notes are
directly related to the rate of payments on the underlying contracts. 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 specified at present. Any payments
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
25
<PAGE> 31
prepayment on a contract, if the contract is not replaced by the trust depositor
with a comparable substitute contract as described under "The Transfer and
Servicing Agreement -- Substitute Contracts", will shorten the weighted average
remaining term of the contracts and the weighted average life of the notes.
In general, the rate of payments on the contracts may be influenced by a
number of other factors, including general economic conditions. The rate of
principal payments with respect to any class of notes may also be affected by
any repurchase by the trust depositor of contracts under the transfer and
servicing agreement. Under the transfer and servicing agreement, the trust
depositor and the originator must repurchase contracts if there is:
- a breach of representation or warranty as to the contracts which causes
such contract to be ineligible to be a trust asset; or
- the exercise by the trust depositor of its repurchase option when the
aggregate principal balance of the contracts is less than 10% of the
aggregate principal balance of the contracts as of September 1, 1999, the
initial cutoff date.
Further, the servicer may permit the obligor under a contract to make an
optional prepayment in an amount which is less than the amount sufficient to
repay the portion of such contract, together with accrued interest, so long as
the trust is indemnified for any such insufficiency by the vendor or the
originator. In the case of contracts which must be removed from the trust assets
due to their failure to have the characteristics set forth in the transfer and
servicing agreement or which are Excess Contracts, the rate of prepayment would
also be influenced by the trust depositor's decision not to repurchase those
contracts and instead, to accept substitute contracts. See "The Transfer and
Servicing Agreement -- Substitute Contracts". In the event of a repurchase, the
repurchase price will decrease the aggregate principal balance of the contracts,
leading to a principal repayment and causing the corresponding weighted average
life of the notes to decrease. See "Risk Factors -- Prepayments on the Contracts
May Cause an 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 the
Repayment".
A higher than anticipated rate of prepayment will reduce the aggregate
principal balance of the contracts more quickly than expected and thereby result
in an increase in the rate at which principal is paid to you and reduce the
aggregate interest payments you may have expected to receive on the notes.
The effective yield will depend upon, among other things, the amount of and
rate at which principal is paid to you. You will bear any reinvestment risks
resulting from a faster or slower incidence of prepayment of contracts. The
reinvestment risks include the risk that interest rates may be lower at the time
you receive payments from the trust than interest rates would otherwise have
been had the prepayments not been made or had the prepayments been made at a
different time.
The following chart sets forth the percentage of the initial principal
amount of the Class A-l Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class B Notes and Class C Notes which would be outstanding on the
distribution dates set forth below assuming an annual constant prepayment rate
of 0.00%, 5.00%, 10.00%, 15.00%, 20.00% and 25.00%, respectively. Such
information is hypothetical and is set forth for illustrative purposes only. The
annual constant prepayment rate assumes that a fraction of the outstanding
contracts is prepaid on each distribution 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 annual constant prepayment rate
for the contracts. The annual constant prepayment rate measures prepayments
based on the outstanding principal balances of the contracts, after the payment
of all payments scheduled to be made under the terms of the contracts during
each collection period. The annual constant prepayment rate further assumes that
all contracts are the same size and amortize at the same rate and 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 as of September 1, 1999, assumes that the trust depositor exercises its
option to cause a redemption of the notes when the aggregate principal balance
of the contracts is less than 10% of the aggregate principal balance of the
contracts as of
26
<PAGE> 32
September 1, 1999, and assumes the closing date for the transfer of the
contracts to the trust is September --, 1999. These tables are based upon the
outstanding principal balance. In addition, it is assumed for the purposes of
these tables only, that the trust issues the notes in the following amounts and
at the following interest rates:
<TABLE>
<CAPTION>
CLASS INITIAL PRINCIPAL AMOUNT INTEREST RATE
- ----- ------------------------ -------------
<S> <C> <C>
A-1 $-- --%
A-2 $-- --%
A-3 $-- --%
A-4 $-- --%
B $-- --%
C $-- --%
</TABLE>
PERCENTAGE OF THE INITIAL CLASS A-1 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing.............................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
10/15/1999...........................
11/15/1999...........................
12/15/1999...........................
01/15/2000...........................
02/15/2000...........................
03/15/2000...........................
04/15/2000...........................
05/15/2000...........................
06/15/2000...........................
07/15/2000...........................
08/15/2000...........................
09/15/2000...........................
10/15/2000...........................
11/15/2000...........................
12/15/2000...........................
01/15/2001...........................
02/15/2001...........................
03/15/2001...........................
04/15/2001...........................
05/15/2001...........................
06/15/2001...........................
07/15/2001...........................
08/15/2001...........................
09/15/2001...........................
10/15/2001...........................
11/15/2001...........................
12/15/2001...........................
01/15/2002...........................
02/15/2002...........................
03/15/2002...........................
04/15/2002...........................
</TABLE>
27
<PAGE> 33
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/15/2002...........................
06/15/2002...........................
07/15/2002...........................
08/15/2002...........................
09/15/2002...........................
10/15/2002...........................
11/15/2002...........................
12/15/2002...........................
Weighted Average Life (Years)........
To Call:........................... -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
</TABLE>
PERCENTAGE OF THE INITIAL CLASS A-2 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing.............................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
10/15/1999...........................
11/15/1999...........................
12/15/1999...........................
01/15/2000...........................
02/15/2000...........................
03/15/2000...........................
04/15/2000...........................
05/15/2000...........................
06/15/2000...........................
07/15/2000...........................
08/15/2000...........................
09/15/2000...........................
10/15/2000...........................
11/15/2000...........................
12/15/2000...........................
01/15/2001...........................
02/15/2001...........................
03/15/2001...........................
04/15/2001...........................
05/15/2001...........................
06/15/2001...........................
07/15/2001...........................
08/15/2001...........................
09/15/2001...........................
10/15/2001...........................
11/15/2001...........................
12/15/2001...........................
01/15/2002...........................
02/15/2002...........................
03/15/2002...........................
04/15/2002...........................
</TABLE>
28
<PAGE> 34
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/15/2002...........................
06/15/2002...........................
07/15/2002...........................
08/15/2002...........................
09/15/2002...........................
10/15/2002...........................
11/15/2002...........................
12/15/2002...........................
Weighted Average Life (Years)........
To Call:........................... -- yrs -- yrs -- yrs -- yrs --yrs -- yrs
</TABLE>
PERCENTAGE OF THE INITIAL CLASS A-3 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing.............................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
10/15/1999...........................
11/15/1999...........................
12/15/1999...........................
01/15/2000...........................
02/15/2000...........................
03/15/2000...........................
04/15/2000...........................
05/15/2000...........................
06/15/2000...........................
07/15/2000...........................
08/15/2000...........................
09/15/2000...........................
10/15/2000...........................
11/15/2000...........................
12/15/2000...........................
01/15/2001...........................
02/15/2001...........................
03/15/2001...........................
04/15/2001...........................
05/15/2001...........................
06/15/2001...........................
07/15/2001...........................
08/15/2001...........................
09/15/2001...........................
10/15/2001...........................
11/15/2001...........................
12/15/2001...........................
01/15/2002...........................
02/15/2002...........................
03/15/2002...........................
04/15/2002...........................
</TABLE>
29
<PAGE> 35
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/15/2002...........................
06/15/2002...........................
07/15/2002...........................
08/15/2002...........................
09/15/2002...........................
10/15/2002...........................
11/15/2002...........................
12/15/2002...........................
Weighted Average Life (Years)........
To Call:........................... -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
</TABLE>
PERCENTAGE OF THE INITIAL CLASS A-4 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing.............................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
10/15/1999...........................
11/15/1999...........................
12/15/1999...........................
01/15/2000...........................
02/15/2000...........................
03/15/2000...........................
04/15/2000...........................
05/15/2000...........................
06/15/2000...........................
07/15/2000...........................
08/15/2000...........................
09/15/2000...........................
10/15/2000...........................
11/15/2000...........................
12/15/2000...........................
01/15/2001...........................
02/15/2001...........................
03/15/2001...........................
04/15/2001...........................
05/15/2001...........................
06/15/2001...........................
07/15/2001...........................
08/15/2001...........................
09/15/2001...........................
10/15/2001...........................
11/15/2001...........................
12/15/2001...........................
01/15/2002...........................
02/15/2002...........................
03/15/2002...........................
04/15/2002...........................
</TABLE>
30
<PAGE> 36
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/15/2002...........................
06/15/2002...........................
07/15/2002...........................
08/15/2002...........................
09/15/2002...........................
10/15/2002...........................
11/15/2002...........................
12/15/2002...........................
Weighted Average Life (Years)........
To Call:........................... -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
</TABLE>
PERCENTAGE OF THE INITIAL CLASS B NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing.............................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
10/15/1999...........................
11/15/1999...........................
12/15/1999...........................
01/15/2000...........................
02/15/2000...........................
03/15/2000...........................
04/15/2000...........................
05/15/2000...........................
06/15/2000...........................
07/15/2000...........................
08/15/2000...........................
09/15/2000...........................
10/15/2000...........................
11/15/2000...........................
12/15/2000...........................
01/15/2001...........................
02/15/2001...........................
03/15/2001...........................
04/15/2001...........................
05/15/2001...........................
06/15/2001...........................
07/15/2001...........................
08/15/2001...........................
09/15/2001...........................
10/15/2001...........................
11/15/2001...........................
12/15/2001...........................
01/15/2002...........................
02/15/2002...........................
03/15/2002...........................
04/15/2002...........................
</TABLE>
31
<PAGE> 37
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/15/2002...........................
06/15/2002...........................
07/15/2002...........................
08/15/2002...........................
09/15/2002...........................
10/15/2002...........................
11/15/2002...........................
12/15/2002...........................
Weighted Average Life (Years)........
To Call:........................... -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
</TABLE>
PERCENTAGE OF THE INITIAL CLASS C NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing.............................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
10/15/1999...........................
11/15/1999...........................
12/15/1999...........................
01/15/2000...........................
02/15/2000...........................
03/15/2000...........................
04/15/2000...........................
05/15/2000...........................
06/15/2000...........................
07/15/2000...........................
08/15/2000...........................
09/15/2000...........................
10/15/2000...........................
11/15/2000...........................
12/15/2000...........................
01/15/2001...........................
02/15/2001...........................
03/15/2001...........................
04/15/2001...........................
05/15/2001...........................
06/15/2001...........................
07/15/2001...........................
08/15/2001...........................
09/15/2001...........................
10/15/2001...........................
11/15/2001...........................
12/15/2001...........................
01/15/2002...........................
02/15/2002...........................
03/15/2002...........................
04/15/2002...........................
</TABLE>
32
<PAGE> 38
<TABLE>
<CAPTION>
0% 5% 10% 15% 20% 25%
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
05/15/2002...........................
06/15/2002...........................
07/15/2002...........................
08/15/2002...........................
09/15/2002...........................
10/15/2002...........................
11/15/2002...........................
12/15/2002...........................
Weighted Average Life (Years)........
To Call:........................... -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
</TABLE>
WEIGHTED AVERAGE LIFE
If the trust depositor does not exercise its option to cause a redemption
of the notes when the aggregate principal balance of the contracts is less than
10% of the aggregate principal balance of the contracts as of September 1, 1999,
the average life of each class of notes would be as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE
ASSUMING 0% ASSUMING 5% ASSUMING 10% ASSUMING 15% ASSUMING 20% ASSUMING 25%
ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT
CLASS PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE
- ----- --------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A-1 -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
A-2 -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
A-3 -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
A-4 -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
B -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
C -- yrs -- yrs -- yrs -- yrs -- yrs -- yrs
</TABLE>
The weighted average life of a note is determined by:
-- multiplying the amount of each cash distribution in reduction of the
outstanding principal amount of such class of notes, by the number of
years from the closing date of the transfer of the contracts to the
trust to the respective note payment date on which such class of notes
is repaid in full;
-- adding the results; and
-- dividing the sum by the initial principal amount of such class of notes.
The following shows the scheduled cashflows (including both principal and
finance charges) from the contracts:
<TABLE>
<CAPTION>
COLLECTION PERIOD SCHEDULED CASHFLOW
- ----------------- ------------------
<S> <C>
September -- 1999........................................... $--
October -- 1999.............................................
November -- 1999............................................
December -- 1999............................................
January -- 2000.............................................
February -- 2000............................................
March -- 2000...............................................
April -- 2000...............................................
May -- 2000.................................................
June -- 2000................................................
July -- 2000................................................
</TABLE>
33
<PAGE> 39
<TABLE>
<CAPTION>
COLLECTION PERIOD SCHEDULED CASHFLOW
- ----------------- ------------------
<S> <C>
August -- 2000..............................................
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............................................
January -- 2004.............................................
February -- 2004............................................
March -- 2004...............................................
April -- 2004...............................................
May -- 2004.................................................
June -- 2004................................................
July -- 2004................................................
</TABLE>
34
<PAGE> 40
<TABLE>
<CAPTION>
COLLECTION PERIOD SCHEDULED CASHFLOW
- ----------------- ------------------
<S> <C>
August -- 2004..............................................
September -- 2004...........................................
October -- 2004.............................................
November -- 2004............................................
December -- 2004............................................
January -- 2005.............................................
February -- 2005............................................
March -- 2005...............................................
April -- 2005...............................................
May -- 2005.................................................
June -- 2005................................................
July -- 2005................................................
August -- 2005..............................................
September -- 2005...........................................
October -- 2005.............................................
November -- 2005............................................
December -- 2005............................................
</TABLE>
35
<PAGE> 41
ORIX CREDIT ALLIANCE, INC.
GENERAL
ORIX Credit Alliance, Inc. is a major provider in the United States of
financing to middle-market end-users of capital equipment. The company finances
equipment for middle-market end-users of income-producing and labor-saving
equipment principally through fixed-rate installment sale financing and full
pay-out leasing programs.
ORIX Credit Alliance, Inc. was originally organized in Delaware in 1963 and
in 1985 was reincorporated in New York. The company is wholly-owned by and the
only operating subsidiary of ORIX Commercial Alliance Corporation, an indirect
wholly-owned subsidiary of ORIX Corporation, a Japanese corporation with
activities in the non-bank finance and leasing business throughout the world. At
July 1, 1999, ORIX Credit Alliance, Inc. had approximately 600 full-time
employees. The company's executive office is located at 300 Lighting Way,
Secaucus, New Jersey 07096-1525 (telephone: (201) 601-9000).
ORIX Credit Alliance, Inc. conducts its middle-market business through six
full-service divisional operating centers located throughout the United States
and one in Canada. Each center is responsible for business development, credit
approval within designated limits and portfolio administration within its
assigned geographic area. These centers are responsible for the management of
over 100 salespeople based in approximately 50 major cities, with each center
responsible for those salespeople working within its assigned coverage area. The
company's division managers have, on average, approximately 18 years experience
with the company. All contracts information is entered into the company's
management information system from these divisional centers. The company's home
office has the capability of retrieving all accounting information the moment it
is entered into the system at a division center.
In addition to its divisional operating centers, ORIX Credit Alliance, Inc.
(including its wholly owned subsidiaries) operates four specialty branches that
include its "small ticket", insurance agency, premium finance and secured asset
based lending operations.
Set forth below is summary financial information with respect to ORIX
Credit Alliance, Inc.
<TABLE>
<CAPTION>
AS AT JUNE 30 AS AT MARCH 31,
---------------- --------------------------
1999 1998 1999 1998 1997
------ ------ ------ ------ ------
(IN BILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS.................................. $2.683 $2.355 $2.623 $2.271 $2.352
TOTAL LIABILITIES............................. $2.252 $1.957 $2.198 $1.884 $1.977
TOTAL STOCKHOLDERS' EQUITY.................... $0.431 $0.398 $0.425 $0.387 $0.375
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL
QUARTER ENDED
JUNE 30, FOR THE FISCAL YEAR ENDED MARCH 31,
-------------- -----------------------------------
1999 1998 1999 1998 1997
----- ----- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES.................................. $67.6 $62.3 $249.2 $259.4 $248.3
NET INCOME...................................... $11.3 $11.1 $ 38.7 $ 49.3 $ 47.3
</TABLE>
ORIX Credit Alliance, Inc. will not be obligated with respect to the notes
or the certificates except to the limited extent described herein.
CREDIT APPROVAL, COLLECTION AND REVIEW PROCESS
The primary responsibilities for credit approval, monitoring, review and
collections are placed with the credit officers in the divisional operations
center that approved the credit. Generally, credit officers at a center are most
familiar with an individual customer's credit profile and most knowledgeable
concerning the collateral securing the loan. ORIX Credit Alliance, Inc.
generally evaluates applications on the basis of the collateral being financed
and the cash flow and general creditworthiness of the obligor, as well as
assignor recourse where applicable. The company considers obsolescence,
depreciation, secondary
36
<PAGE> 42
marketability, installation and transportation costs and environmental factors
in evaluating collateral. Traditional credit criteria, adjusted for specific
industries, are used to evaluate obligors. All contracts originated or purchased
by ORIX Credit Alliance, Inc. conform to the company's underwriting standards.
Each divisional operating center has at least two credit officers
authorized to make credit decisions, both of whom are necessary in the approval
process. Each person with credit authority has an assigned credit limit, which
is used in conjunction with at least one other person having credit authority at
that center, to determine the maximum credit that can be approved by them.
In all cases, credit limits apply to the total obligor exposure, and not to
individual transactions. Any two credit officers may together approve a
transaction in the amount of the lesser of: (i) twice the credit authority of
the credit officer with the lower credit authority or (ii) the credit authority
of the credit officer with the higher credit authority. For example, if
individual A and individual B had credit authorities of $100,000 and $300,000,
respectively, they could jointly approve a $200,000 transaction. The maximum
credit authority for any one obligor at any center is $2 million. For certain
industries or transaction types that are deemed to involve more risk, center
credit authority is reduced. Transactions from $2 million to $15 million require
home office approvals depending on total exposure as do transactions below $2
million involving certain industries or transaction types that are deemed to
involve more risk. Transactions in excess of $15 million must be approved by
ORIX Corporation.
Once a transaction is funded, the company's divisional operating centers
are responsible for collecting funds, maintaining the integrity of the portfolio
and working with troubled accounts to maximize collections of delinquent or
non-accrual loans. In some cases, center personnel may implement a revised
payment schedule consistent with the company's criteria (by rewriting or
extending the contract generally at the same or higher interest rate) and
reflecting the customer's present ability to pay.
In addition to center level monitoring of individual accounts, the
company's home office senior management analyze reports generated for each
center to track the overall credit quality of the company's portfolio. The
company's systems are capable of generating daily reports by center to track
contracts, invoices, collections, collateral, and a variety of other financial
data. Senior management periodically visit center offices to review the status
of problem accounts, review credit files, and check adherence to the company's
policies and procedures. To supplement these procedures, credit and operational
audits are conducted, including regular on-site visits by the company's internal
audit department, designed to ensure that credit quality remains consistent with
senior management's expectations. The internal audit department is directly
responsible to the audit committee of the company's board of directors.
As servicer, ORIX Credit Alliance, Inc. will continue to apply the
processes described above to the management of the contracts that have been sold
to the trust.
Terms of Contracts.
ORIX Credit Alliance, Inc. offers a variety of repayment schedules tailored
to the applicant's anticipated cash flows, such as annual, semi-annual,
quarterly and monthly payments. The contracts, including the contracts being
transferred to the trust, are normally amortized with equal monthly payments but
some contracts provide for a large, lump-sum payment (a "balloon") of principal
at maturity. Also, a customized payment schedule, under which payments for
generally up to three months per year may be reduced or eliminated to coincide
with slow work periods, can be selected by the obligor at the time the contract
is originated, in which case the twelve annual payments are replaced with larger
less frequent payments. As of September 1, 1999 approximately --% of the
contracts to be transferred to the trust contain customized payment schedules.
The maximum amount that the company will finance under a contract varies
based on the obligor's credit history, the type of equipment financed, whether
the equipment is new or used, the payment schedule and the length of the term of
the contract. The amount financed is calculated as a percentage of the value of
the related equipment. For new equipment, such value is based on the selling
price of the related equipment. The value of used equipment is based on the
"as-is" value of the related equipment
37
<PAGE> 43
reported in the most recent edition of applicable industrial guidebooks or, if
such information is unavailable, on the company's management's best estimate
based on its experience with equipment of such type.
Obligors are required to obtain and maintain physical damage insurance
covering the financed equipment. The company verifies insurance coverage on the
equipment at the time the contract is originated and is required to be named as
the payee on the insurance policy. Insurers are requested to notify the company
ten days prior to a cancellation of coverage or a change in payee. Under the
transfer and servicing agreement, the servicer is not obligated to obtain
substitute coverage in the event of a cancellation or lapse of coverage, but may
elect to do so.
At the origination of a contract, the principal balance will in almost all
instances be less than the cost of the financed equipment to the obligor.
However, values of the financed equipment are subject to variation caused by a
variety of factors, including depreciation, market conditions, obsolescence and
wear and tear. There can be no assurance that the payout schedules under the
contracts, including the contracts being transferred to the trust, will in all
instances result in the outstanding principal balance of a contract being less
than the value of the related financed equipment.
Recourse Provisions.
Each contract, including the contracts being transferred to the trust,
represents a full recourse obligation of the named obligor. Frequently, the
contracts are also fully guaranteed by the principal(s) of the obligor and/or
affiliated entities. In addition, some of the contracts are entitled to full or
partial recourse to the originating assignor. Recourse to these assignors varies
among contracts from full to limited. Limited recourse may be keyed to fixed
dollar amounts or to a percentage of the contract's balance and may or may not
require that the financed equipment be recovered and/or sold prior to payment.
Recourse from an originating assignor may, in certain instances, have the
benefit of security in the form of deposits, reserves, holdbacks from the
assignor or rights to the assignor's portion of future payments.
Extension/Revision Procedures.
Contracts may be extended or revised when payment delinquencies result from
temporary interruptions in an obligor's cash flow or where other factors justify
an extension. Extensions of existing contracts are considered a new extension of
credit and appropriate credit approvals as outlined above are required. A
contract may be extended by the divisional operating center (subject to the
center's credit limits) for various reasons including, but not limited to,
seasonal/weather problems, a labor strike or other unscheduled work stoppage or
the rescheduling of a balloon maturity payment. ORIX Credit Alliance, Inc.
charges obligors an amount which is generally equal to interest accrued on the
unpaid balance of the contract during the period that payments are not required
to be made as a result of the extension. The transfer and servicing agreement
will permit the servicer to extend or revise contracts in accordance with its
customary practices. See "The Transfer and Servicing Agreement-Material
Modifications to Contracts".
Pre-Litigation Workout/Judgment Recovery.
ORIX Credit Alliance, Inc. has a pre-litigation workout department to
reduce costs and expenses associated with the rehabilitation of problem
accounts. When litigation becomes necessary, the company's legal staff initiates
legal claims against an obligor and forwards judgments received against obligors
to the company's judgment recovery team. The judgment recovery team's objective
is to continuously search for hidden assets of obligors and to collect on
court-awarded judgments at the earliest possible time.
Legal Proceedings.
ORIX Credit Alliance, Inc. is not subject to any legal proceedings that its
management believes could have a material adverse impact on its operations or
its consolidated financial condition.
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<PAGE> 44
Year 2000 Readiness Disclosure.
The Year 2000 ("Y2K") issue stems from original computer programming
practices that used two digits instead of four digits to express the year. For
those systems designed using these practices, the new year could be interpreted
to be "1900" instead of "2000" when computer clocks move from "99" to "00".
There is general agreement that the Year 2000 issue can negatively affect any
computer technology, platform or system in the world.
Failure to properly address this problem, as it relates to internal
systems, could have an adverse effect on ORIX Credit Alliance, Inc., including
the inability, for a period of time, to be able to properly bill customers,
collect and apply payments and produce accurate financial data. The failure of
third parties on which the company relies for products and services to
successfully correct this situation could also have a disruptive impact on the
company's ability to operate in its normal manner. Such a failure could affect,
among other things, the collectibility of the company's contracts portfolio.
ORIX Credit Alliance, Inc. has addressed these issues as follows. A Y2K
project team was formed in 1997. This team reviewed all areas of the company's
operations for potential Y2K concerns. Based on this review, a project plan
detailing the steps needed to be performed and the critical dates for such
performance was developed. The project team meets bi-weekly to monitor progress
and periodic reports are made to the electronic data processing steering
committee, which consists of the chief executive officer, the chief operating
officer, the chief financial officer, the treasurer and the controller.
The company's Y2K remediation efforts have been organized into three
general areas: mainframe systems and applications, personal computer and network
applications and third-party compliance. The following is a summary of the
company's status in each of these areas:
Mainframe Systems and Applications.
A new single production RISC-based AS/400 is now in place and running
parallel to the company's two CISC-based AS/400's. Code conversion is currently
100% complete. Unit conversion testing is currently 98% complete and is expected
to be 100% complete by August 31, 1999. User acceptance testing is also underway
and is expected to be completed during September 1999.
Personal Computer and Network Applications.
ORIX Credit Alliance, Inc. is completing the introduction of CA-NET as a
wide area network ("WAN") based "front-end" information processing system.
Operating in a WindowsNT environment, the system is currently installed in the
six divisional operating centers and the Canadian subsidiary. It is expected
that the WAN will be 100% operational by September 30, 1999. This process will
also bring all necessary hardware and vendor software into compliance.
Third-Party Compliance.
Confirmation of Y2K compliance is progressing as follows for the following
areas:
- Facilities compliance (100% complete)
- Outside vendor compliance (100% complete)
- Customer compliance (100% complete)
- Financed equipment compliance (100% complete)
Although the company has confidence in its Y2K efforts, there are no
assurances that every system and every vendor/supplier will be Year 2000 ready.
Even though the company has been diligent in making inquiries of third parties
as to their Y2K readiness, the company has no means of verifying the accuracy of
all responses. Furthermore, the company's own remediation procedures could be
hampered by unexpected disruptions and delays outside the company's control.
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<PAGE> 45
Contingency Plans.
The company is developing detailed contingency plans that will assist in
resuming operations and continuing to operate normally during a potential
disruption caused by the century date change. The detailed project plan has been
designed to provide adequate room for small, unexpected delays and disruptions.
In addition, the company will retain additional resources beyond project
completion in order to repair any systems that fail unexpectedly. The
contingency plans also include various workarounds and alternate procedures,
including the utilization of backup computer files and printouts and alternative
vendors/suppliers and service providers. These Y2K contingency plans are being
developed in addition to the company's existing business recovery plans.
Cost.
It is expected that the final Y2K project cost, which commenced in early
1997, will approximate $2,500,000. This cost estimate is based on the company's
current projections of the costs to be incurred in order to complete the project
plan. In the event that the company has to make use of its contingency plans,
this total cost is likely to increase.
The above Y2K information is deemed to be a "Year 2000 Readiness
Disclosure" as defined in the Year 2000 Information and Readiness Disclosure Act
and is subject to the terms thereof. All Y2K information is provided for
information purposes and may not be taken as form of covenant, warranty,
representation or guarantee of any kind.
THE TRUST
The trust was organized on August --, 1999 as a business trust under the
laws of the State of Delaware under the trust agreement. The trust was formed
solely for the purpose of effectuating the transactions described in this
prospectus. Prior to formation, the trust had no assets or obligations and no
operating history. Upon formation, the trust will not engage in any business
activity other than:
(1) acquiring, managing and holding the contracts and related
interests described in this prospectus,
(2) issuing the notes and certificates,
(3) making distributions and payments on the notes and certificates,
and
(4) engaging in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the above listed
activities or are incidental to those activities.
As a consequence, we do not expect to have any source of capital resources
other than the assets that will be transferred to the trust as described in this
prospectus. As of the date of this prospectus, neither the trust depositor nor
the trust is subject to any legal proceedings.
We will initially be capitalized with $--, representing the principal
balance of the certificates. These certificates will be sold to the trust
depositor. If the issuance and sale of the notes and the certificates had taken
place on September 1, 1999, our capitalization would consist solely of the notes
with an aggregate principal amount of $-- and certificates with a $-- balance.
We will use the proceeds from the initial sale of the notes and the certificates
to purchase the contracts from the trust depositor pursuant to the transfer and
servicing agreement.
The servicer will service the contracts pursuant to the transfer and
servicing agreement, and will be compensated for acting as the servicer. See
"Description of the Notes and Indenture-Servicing Compensation and Payment of
Expenses". To facilitate servicing and to minimize administrative burden and
expense, the servicer will be appointed custodian for the contracts by the owner
trustee.
The trust depositor has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, with
respect to the notes offered by this prospectus. For
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<PAGE> 46
further information, you should read the registration statement. The
registration statement may be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at the following
locations:
<TABLE>
<CAPTION>
<S> <C> <C>
450 Fifth Street, N.W. Citicorp Center Seven World Trade Center
Room 1024 500 West Madison, Suite 1300
Washington, D.C. 20549 Suite 1400 New York, New York 10048
Chicago, Illinois 60661
</TABLE>
You may obtain copies of the registration statement for a fee from the
Public Reference Branch of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Securities and Exchange Commission
also maintains a public access site on the internet through the World Wide Web
at which you may view reports, information statements and other information,
including all electronic filings, regarding the trust depositor and the trust.
The internet address of the World Wide Web site is http://www.sec.gov. The
servicer, on behalf of the trust, will also file or cause to be filed with the
Securities and Exchange Commission the periodic reports required under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Copies of those reports can
be obtained as described above.
THE TRUST DEPOSITOR
The trust depositor is a wholly owned bankruptcy-remote subsidiary of ORIX
Credit Alliance, Inc. The trust depositor was formed solely for the purpose of
acquiring from the originator contracts as well as other financial assets and
conveying or depositing the same into trusts or other securitization vehicles.
As a bankruptcy-remote entity, the trust depositor's operations will be
restricted so that it does not engage in business with, or incur liabilities to,
any other entity other than the indenture trustee and other trustees and agents
on behalf of other investors in nonrecourse, asset-backed financings. The
restrictions are intended to prevent the trust depositor from engaging in
business with other entities which may bring bankruptcy proceedings against the
trust depositor. The restrictions are also intended to reduce the risk that the
trust depositor will be consolidated into the bankruptcy proceedings of any
other entity.
The trust depositor will have no other assets available to pay amounts
owing under the indenture except the trust's assets, including the contracts and
the security interests in the equipment, the proceeds of the contracts and
earnings on the amounts on deposit in the collection account and with respect to
the reserve fund. The trust depositor's address is 300 Lighting Way, Secaucus,
New Jersey 07096-1525, and its phone number is (201) 601-9000.
DESCRIPTION OF THE NOTES AND INDENTURE
The statements under this caption describe all of the material terms of the
notes and an indenture, dated as of September 15, 1999, between the trust and
the indenture trustee. However, these statements are summaries. For a more
detailed description of the terms of the notes, you should read the transfer and
servicing agreement and the indenture, the forms of which have been filed as
exhibits to the registration statement of which this prospectus is a part.
Unless and until definitive notes are issued under the limited
circumstances described therein, all references to actions taken by noteholders
shall, in the case of the book-entry notes, refer to actions taken by DTC,
Euroclear or Cedelbank, as applicable, upon instructions from their respective
participants, and all references herein to distributions, notices, reports and
statements to noteholders shall, in the case of the book-entry notes, refer to
distributions, notices, reports and statements to DTC or Cede & Co., Euroclear
or Cedelbank, as applicable, as the registered holder of the book-entry notes,
as the case may be, for distribution to beneficial owners in accordance with
their respective procedures.
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<PAGE> 47
GENERAL
The offered notes will consist of six classes, the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and
the Class C Notes. The notes will be issued under the indenture.
The notes will be available for purchase in minimum denominations of $1,000
and in integral multiples of $1,000 in book-entry form. The Class A-l Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C
Notes will initially be represented by one or more certificates registered in
the name of the nominee of The Depository Trust Company, except as set forth
below. Payments on the notes will be made as described below to the noteholders
in whose names the notes were registered at the close of business on the day
immediately preceding the day on which such payments will be made. However, the
final payment on the notes offered hereby will be made only upon presentation
and surrender of the notes. All payments with respect to the principal of and
interest on the notes will be made in immediately available funds. See
"-- Book-Entry Registration".
The indenture trustee will be granted a first priority lien on the trust's
assets to secure the notes; provided, that distributions on the notes will be
allocated as provided in "-- Allocations". The notes are nonrecourse obligations
of the trust only and do not represent interests in or obligations of the
originator, the servicer or the trust depositor, or any affiliate of such
persons.
INTEREST AND PRINCIPAL
Interest on the notes will be payable on the 15th day of each calendar
month, or if that day is not a business day, the next business day, beginning on
October 15, 1999 until the notes have been paid in full or have matured.
Interest on the notes will be paid at the respective rates specified on the
cover of this prospectus. Interest on each class of notes will accrue at the
interest rate specified for the class, for the period from and including the
most recent date on which interest has been paid. However, in the case of the
initial interest payment date, interest will accrue from the closing date for
the initial transfer of the contracts to the trust to but excluding the
following payment date. The interest will accrue on the outstanding principal
amount of the notes as of the first day of the interest accrual period.
The stated maturity dates of the notes are specified on the cover of this
prospectus. However, if all payments on the contracts are made as scheduled,
final payment with respect to the notes would occur prior to stated maturity.
Prior to the respective stated maturity dates, amounts to be applied in
reduction of the outstanding principal amount of any note, including the payment
of the Class A Principal Payment Amount, Class B Principal Payment Amount or
Class C Principal Payment Amount payable on any payment date, will not be due
and payable, although the failure of the trust depositor or servicer to remit
any amounts available for payment on the notes will, after the applicable grace
period, constitute an event of default under the indenture. See "-- Events of
Default".
We will pay interest and principal on the notes using amounts representing
primarily collections of payments due under the contracts and amounts received
upon prepayment or purchase of the contracts or liquidation of the contracts and
disposition of the related equipment upon defaults thereunder, but only after we
use those amounts to repay servicer advances and servicing fees. See "-- Amounts
Available for Payments on the Notes" and "The Transfer and Servicing
Agreement -- Servicing Standard and Servicer Advances".
AMOUNTS AVAILABLE FOR PAYMENTS ON THE NOTES
As of any payment date which shall be the 15th day of each calendar month
or, if such day is not a business day, the next business day, the amounts
available for payment of interest and principal consist of:
- except for Excluded Amounts, all amounts on deposit in the collection
account as of the third business day immediately preceding the payment
date on account of scheduled payments due on or before, and prepayments
received on or before, the last day of the immediately preceding
collection period;
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<PAGE> 48
- recoveries on account of previously defaulted contracts received during
the preceding collection period, including proceeds of repossessed
equipment or other security or other property, insurance proceeds,
amounts representing late fees unrelated to servicer advances and
penalties and amounts, if any, subsequently received from the related
vendor, net of reimbursable collection and liquidation expenses.
Collection and liquidation expenses are reimbursable to the servicer only
to the extent recoveries on a contract provide funds sufficient, after
payment of all principal and finance charges due with respect to such
contract, to cover related collection and liquidation expenses incurred
by the servicer;
- amounts held from time to time in the collection account, together with
investment earnings credited to the collection account and the reserve
fund;
- late charges relating to a contract received during the preceding
collection period, provided that the late charges were included in the
contract's terms as of the applicable cutoff date;
- funds on deposit in the reserve fund in the amount specified in "Reserve
Fund"; and
- proceeds of any of the above items.
Each collection period for purposes of determining the amounts available
for distribution on the notes coincides with the calendar month.
Amounts available for distribution to you will not include any amounts
payable on an account of the equipment which exceeds the sum of the scheduled
payments, late charges and expenses described above payable under the related
contract.
Prepayments on the contracts which are treated as available amounts are:
- optional prepayments which are partial and full prepayments, which the
servicer has received, and expressly permitted the related obligor to
make, in advance of its scheduled due date;
- payments upon repurchases by the originator through the trust depositor
as a result of the breach of representations and warranties or covenants
in the transfer and servicing agreement; and
- payments upon an optional termination of the trust.
If the servicer permits an obligor to prepay a contract in an amount less
than its principal balance plus accrued, unpaid interest at the discount rate,
the originator of the contract will make up the difference.
"Excluded Amounts" means:
- collections on deposit in the collection account or otherwise received by
the servicer on or with respect to the contracts or related equipment,
which collections are attributable to any taxes, fees or other charges
imposed by any governmental authority;
- collections representing reimbursements of insurance premiums or payments
for services that were not financed by the originator;
- other non-contract charges reimbursable to the servicer in accordance
with the servicer's customary policies and procedures;
- collections with respect to repurchased or expired contracts; and
- provided that servicer advances were made, late charges relating to
advanced amounts.
ALLOCATIONS
Prior to an Event of Default.
On each payment date prior to the occurrence of an event of default under
the indenture, the servicer shall instruct the indenture trustee to withdraw,
and on the payment date the indenture trustee shall
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<PAGE> 49
withdraw, from the collection account the amounts needed to make the following
payments. See "-- Amounts Available for Payment on the Notes" and "-- Events of
Default". The payments listed below will be made only to the extent there are
sufficient amounts available on the payment date. We will make payments on the
15th day of each calendar month, or if such day is not a business day, the next
business day, in the following order of priority:
FIRST, to the servicer, reimbursement for the amount of any scheduled
payments on the contracts which were not received when due and which the
servicer advanced for deposit in the collection account;
SECOND, to the servicer, its monthly servicing fee for the preceding
monthly period, which includes the amounts payable for the fees and expenses of
the indenture trustee and the owner trustee;
THIRD, to the holders of the notes, the amounts specified in the following
table and in the order set forth in the following table:
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ----------------- -----------------
<C> <S>
A-1, A-2, A-3 and A-4 Interest accrued on the Class A-l Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes at their respective
interest rates for the period from and including the most
recent date on which interest has been paid to, but
excluding, the current interest payment date.
B Interest accrued on the Class B Notes at the Class B Note
interest rate for the period from and including the most
recent date on which interest has been paid to, but
excluding, the current interest payment date.
C Interest accrued on the Class C Notes at the Class C Note
interest rate for the period from and including the most
recent date on which interest has been paid to, but
excluding, the current interest payment date.
A-1 The Class A Principal Payment Amount, until the outstanding
principal of the Class A-l Notes is reduced to $0.
A-2 - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes is reduced to $0.
- Class A Principal Payment Amount less the amount needed to
reduce the outstanding principal of the Class A-1 Notes to
$0, on subsequent payment dates until the outstanding
principal of the Class A-2 Notes is reduced to $0.
A-3 - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes and Class A-2 Notes is
reduced to $0.
- Class A Principal Payment Amount less the amount needed to
reduce the outstanding principal of the Class A-1 Notes and
Class A-2 Notes to $0, on subsequent payment dates until
the outstanding principal of the Class A-3 Notes is
reduced to $0.
A-4 - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes, Class A-2 Notes and Class
A-3 Notes is reduced to $0.
- Class A Principal Payment Amount less the amount needed to
reduce the outstanding principal amount of the Class A-1
Notes, Class A-2 Notes and Class A-3 Notes to $0, on
subsequent payment dates until the outstanding principal
of the Class A-4 Notes is reduced to $0.
B - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes is reduced to $0.
- Class B Principal Payment Amount, on subsequent payment
dates until the outstanding principal of the Class B Notes
is reduced to $0.
C - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes is reduced to $0.
- Class C Principal Payment Amount, on subsequent payment
dates until the outstanding principal of the Class C Notes
is reduced to $0.
A-2 - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes is reduced to $0.
- Additional Principal, on subsequent payment dates until
the outstanding principal of the Class A-2 Notes is reduced
to $0.
</TABLE>
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<PAGE> 50
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ----------------- -----------------
<C> <S>
A-3 - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes and Class A-2 Notes is
reduced to $0.
- The excess of Additional Principal over the amount needed
to reduce the outstanding principal of the Class A-2 Notes
to $0, on subsequent payment dates until the outstanding
principal of the Class A-3 Notes is reduced to $0.
A-4 - $0, prior to the payment date on which the outstanding
principal of the Class A-1 Notes and Class A-2 Notes and
Class A-3 Notes is reduced to $0.
- The excess of Additional Principal over the amount needed
to reduce the outstanding principal of the Class A-2 Notes
and Class A-3 Notes to $0, on subsequent payment dates
until the outstanding principal of the Class A-4 Notes is
reduced to $0.
B - $0, prior to the payment date on which the outstanding
principal of the Class A-4 Notes is reduced to $0.
- The excess of Additional Principal over the amount needed
to reduce the outstanding principal of the Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes to $0, on subsequent
payment dates until the outstanding principal of the Class
B Notes is reduced to $0.
C - $0, prior to the payment date on which the outstanding
principal of the Class B Notes is reduced to $0.
- The excess of Additional Principal over the amount needed
to reduce the outstanding principal of the Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes and Class B Notes to $0,
on subsequent payment dates until the outstanding
principal of the Class C Notes is reduced to $0.
</TABLE>
FOURTH, to the extent that any amounts remain after allocating the amounts
available for distribution on the notes, the indenture trustee will deposit into
the reserve fund an amount, if any, which, when so deposited, causes the balance
in the reserve fund to equal the Required Reserve Amount; and
FIFTH, any excess shall be paid to the holder of the certificates.
The indenture trustee will distribute available amounts on each note within
each class of notes based on the outstanding principal amount of the note
relative to the aggregate outstanding principal amount of that class of notes.
Following an Event of Default.
On the third business day prior to each payment date after the occurrence
of an event of default under the indenture, the servicer shall instruct the
indenture trustee to withdraw, and on the payment date the indenture trustee
will follow the instructions to withdraw, from the collection account the
amounts needed to make the following payments. See "-- Amounts Available for
Payment on the Notes" and see "-- Events of Default." The payments listed below
will be made only to the extent there are sufficient amounts available on such
payment date. We will make payments on the 15th day of each calendar month, or
if such day is not a business day, the next business day, in the following order
of priority:
FIRST, pay to the indenture trustee or the owner trustee, the amount of any
unpaid fees, expenses, late charges or other losses;
SECOND, pay to the noteholders, reimbursement for any indemnity payments
noteholders may have elected to make to the indenture trustee;
THIRD, to the servicer, its monthly servicing fee for the preceding monthly
period together with any amounts in respect of the servicer's fee that were due
in respect of prior monthly periods that remain unpaid;
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<PAGE> 51
FOURTH, to the holders of the notes the amounts specified in the following
table and in the order set forth in the following table:
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
- ----------------- -----------------
<S> <C>
A-1, A-2, A-3 and A-4 Interest accrued on the Class A-l Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes at their respective
interest rates for the period from and including the most
recent date on which interest has been paid to, but
excluding, the current interest payment date.
B Interest accrued on the Class B Notes at the Class B Note
interest rate for the period from and including the most
recent date on which interest has been paid to, but
excluding, the current interest payment date.
C Interest accrued on the Class C Notes at the Class C Note
interest rate for the period from and including the most
recent date on which interest has been paid to, but
excluding, the current interest payment date.
A-1 Outstanding principal of the Class A-l Notes.
A-2, A-3 and A-4 Outstanding principal of the Class A-2 Notes, Class A-3
Notes and Class A-4 Notes, pro rata according to the
outstanding principal for each class of notes.
B Outstanding principal of the Class B Notes.
C Outstanding principal of the Class C Notes.
</TABLE>
FIFTH, any excess shall be paid to the holder of the certificates.
The terms used in describing the calculation of interest and principal
payments and allocations on the notes are defined as follows:
"Additional Principal" means, with respect to a date on which principal is
to be paid,
(1) if the Class B Target Investor Principal Amount and the Class C
Target Investor Principal Amount exceed the Class B Floor and the Class C
Floor, respectively, an amount of $0; or
(2) if any of the conditions in clause (1) are not satisfied, an
amount equal to the excess, if any, of
(A) the Monthly Principal Amount, over
(B) the sum of the Class A Principal Payment Amount, Class B
Principal Payment Amount and Class C Principal Payment Amount for such
payment date.
"Class A Percentage" means approximately --%, which is the ratio of:
(1) the sum of the initial principal amount of the Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes to
(2) the Original Pool Balance minus the initial principal amount of
the Class A-l Notes.
"Class A Principal Payment Amount" means, with respect to a date on which
principal is to be paid,
(1) while all or any portion of the Class A-1 Notes remain outstanding
after giving effect to payments on such day, the Monthly Principal Amount;
(2) on the payment date on which the outstanding principal of the
Class A-l Notes is reduced to $0, the sum of:
(A) the amount necessary to reduce the outstanding principal of the
Class A-l Notes to $0; and
(B) the amount necessary to reduce the sum of the outstanding
principal amount of the Class A-2 Notes, Class A-3 Notes and Class A-4
Notes to the Class A Target Investor Principal Amount; or
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<PAGE> 52
(3) on any subsequent payment dates, the amount necessary to reduce
the sum of outstanding principal amount of the Class A-2 Notes, Class A-3
Notes and Class A-4 Notes to the Class A Target Investor Principal Amount.
"Class A Target Investor Principal Amount" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class A Percentage and
(2) the Pool Balance as of the last day of the immediately preceding
completed collection period.
"Class B Floor" means, with respect to a date on which principal is to be
paid,
(1) --% of the Original Pool Balance plus
(2) the Cumulative Loss Amount as of such payment date, minus
(3) the sum of
(A) the outstanding principal amount of the Class C Notes as of the
immediately preceding payment date after giving effect to all principal
payments made on such prior payment date,
(B) the Overcollateralization Balance as of the immediately
preceding payment date and
(C) the amount on deposit in the reserve fund after giving effect
to amounts to be withdrawn on such payment date.
"Class B Percentage" means approximately --%, which is the ratio of:
(1) the initial principal amount of the Class B Notes to
(2) the Original Pool Balance minus the initial principal amount of
the Class A-l Notes.
"Class B Principal Payment Amount" means, with respect to a date on which
principal is to be paid,
(1) while there is outstanding principal on the Class A-l Notes, $0;
and
(2) after the outstanding principal amount of the Class A-l Notes is
reduced to $0, the amount necessary to reduce the aggregate outstanding
principal amount of the Class B Notes to the greater of:
(A) the Class B Target Investor Principal Amount; or (B) the Class
B Floor.
"Class B Target Investor Principal Amount" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class B Percentage and
(2) the Pool Balance as of the last day of immediately preceding
completed collection period.
"Class C Floor" means, with respect to a date on which principal is to be
paid,
(1) --% of the Original Pool Balance plus
(2) the Cumulative Loss Amount as of such payment date, minus
(3) the sum of
(A) the Overcollateralization Balance as of the immediately
preceding payment date and
(B) the amount on deposit in the reserve fund after giving effect
to amounts to be withdrawn on such payment date; provided, however, that
if the outstanding principal amount of the Class B Notes is less than or
equal to the Class B Floor on such payment date, the Class C Floor will
equal the outstanding principal amount of the Class C Notes utilized in
the calculation of the Class B Floor for such payment date.
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"Class C Percentage" means approximately --%, which is the ratio of:
(1) the initial principal amount of the Class C Notes to
(2) the Original Pool Balance minus the initial principal amount of
the Class A-1 Notes.
"Class C Principal Payment Amount" means, with respect to a date on which
principal is to be paid,
(1) while there is outstanding principal on the Class A-1 Notes, $0;
and
(2) after the outstanding principal amount of the Class A-1 Notes is
reduced to $0, the amount necessary to reduce the aggregate outstanding
principal amount of the Class C Notes to the greater of:
(A) the Class C Target Investor Principal Amount; or (B) the Class
C Floor.
"Class C Target Investor Principal Amount" means, with respect to a date on
which principal is to be paid, an amount equal to the product of:
(1) the Class C Percentage and
(2) the Pool Balance as of the last day of immediately preceding
completed collection period.
"Cumulative Loss Amount" means, with respect to a date on which principal
is to be paid, an amount equal to the excess, if any, of
(1) the total of:
(A) the outstanding principal amounts of all of the notes as of the
immediately preceding payment date after giving effect to all principal
payments made on such date, plus
(B) the Overcollateralization Balance as of the immediately
preceding payment date, minus
(C) the lesser of
(1) the Monthly Principal Amount; and
(2) the amounts available for distribution on the notes after
paying all amounts owing to the servicer and all interest due on the
notes on such payment date, over
(2) the Pool Balance as of the last day of the immediately preceding
completed collection period.
"Monthly Principal Amount" means, with respect to any payment date, an
amount equal to the excess, if any, of:
(1) the total of:
(A) the outstanding principal amounts of all of the notes as of the
immediately preceding payment date after giving effect to all principal
payments made on such date, plus
(B) the Overcollateralization Balance as of the immediately
preceding payment date, over
(2) the Pool Balance as of the last day of the collection period
completed immediately prior to such date.
"Original Pool Balance" means the aggregate principal balance of the
contracts transferred to the trust as of September --, 1999.
"Overcollateralization Balance" means with respect to a payment date, an
amount equal to the excess, if any, of:
(1) the Pool Balance as of the last day of the collection period
completed immediately prior to such date, over
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(2) the sum of the outstanding principal amount of all of the notes as
of such date after giving effect to all principal payments made on such
date.
"Pool Balance" means, with respect to any payment date, an amount equal to
the aggregate remaining principal balance of the contracts at the end of the
related collection period (after giving effect to defaulted contracts, prepaid
contracts and contracts subject to a warranty event).
RESERVE FUND
The reserve fund will be an account held in the name of the indenture
trustee on behalf of you. On the closing date for the transfer of the contracts
to the trust, the reserve fund balance will be $--. On any payment date, after
distributing the available amounts to the servicer and noteholders as described
in "-- Allocations", we will deposit the remaining available amounts into the
reserve fund until the amounts in the reserve fund equal the Required Reserve
Amount.
"Required Reserve Amount" means with respect to a payment date, an amount
equal to the lesser of --% of the Original Pool Balance and the outstanding
principal amount of the notes as of the last day of the immediately preceding
completed collection period.
Amounts in the reserve fund will be invested in investments deemed to be
eligible investments for funds held in the collection account. See
"-- Collection Account and Collection Period". Earnings on the eligible
investments will be treated as amounts available for distribution to the
noteholders and the holder of the certificates.
If on any payment date, there are excess available amounts remaining after
we pay the servicer and noteholders and increase the reserve fund balance to the
Required Reserve Amount as described in "-- Allocations", we will distribute
such excess to the holder of the certificates. Upon any such distributions to
the holder of the certificates, you will have no further rights in, or claims
to, such amounts.
We will allocate amounts withdrawn from the reserve fund as described in
"-- Allocations". Upon making these payments in full, the funds on deposit in
the reserve fund in excess of the Required Reserve Amount shall be paid to the
holder of the certificates.
The servicer may, from time to time after the date of this prospectus
request each rating agency that rated the notes to, at the request of the trust
depositor, approve a formula for determining the Required Reserve Amount that is
different from the formula described above and would result in a decrease in the
amount of the Required Reserve Amount or the manner by which the reserve fund is
funded. If each rating agency delivers a letter to the indenture trustee and the
owner trustee to the effect that the use of the new formulation will not result
in a qualification, reduction or withdrawal of its then-current rating of any
class notes then the Required Reserve Amount will be determined using the new
formula. The transfer and servicing agreement will accordingly be amended to
reflect the new calculation without your consent.
COLLECTION ACCOUNT AND COLLECTION PERIOD
The servicer, for your benefit, shall cause to be established an account
referred to as the "collection account" maintained in the name of the indenture
trustee, with an office or branch of a depository institution or trust company,
which may be the indenture trustee, organized under any state laws or laws of
the United States of America and located in the state designated by the
servicer. This account will be a non-interest bearing segregated corporate trust
account bearing a designation clearly indicating that the funds deposited in the
account are held in trust for the benefit of the noteholders.
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At all times such depository institution or trust company shall have the
following characteristics and the amounts in the collection account will be
invested in the following eligible investments:
ELIGIBLE DEPOSITORY INSTITUTION OR TRUST COMPANY
- - the corporate trust department of the indenture trustee or
- - a depository institution organized under any state laws or the laws of the
United States of America or the District of Columbia or any domestic branch of
a foreign bank,
(1) (A) which has either
(i) a long-term unsecured debt rating acceptable to the rating agencies
rating the notes or
(ii) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the rating agencies,
(B) the parent corporation of which has either
(i) a long-term unsecured debt rating acceptable to the rating agencies
rating the notes or
(ii) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the rating agencies or
(C) is otherwise acceptable to the rating agencies rating the notes and
(2) whose deposits are insured by the Federal Deposit Insurance Corporation.
ELIGIBLE INVESTMENTS
- - obligations fully guaranteed by the United States of America;
- - demand deposits, time deposits or certificates of deposit of depository
institutions or trust companies having commercial paper and short-term
unsecured debt obligations, other than such obligation whose rating is based
on the credit of another person, with the highest rating from each rating
agency rating the notes;
- - commercial paper or other short-term obligations having the highest rating
from each rating agency rating the notes at the time the trust purchased it;
- - demand deposits, time deposits and certificates of deposit which are fully
insured by the FDIC;
- - notes or banker's acceptance issued by any depository institution or trust
company having commercial paper and short-term unsecured debt obligations,
other than such obligation whose rating is based on the credit of another
person, with the highest rating from each rating agency rating the notes;
- - money market funds which have the highest rating from, or have otherwise been
approved in writing by, each rating agency rating the notes;
- - time deposits with an entity, the commercial paper of which has the highest
rating from the rating agency rating the notes;
- - eligible repurchase agreements; and
- - any other investments approved in writing by the rating agencies.
Funds in the collection account may be invested in debt obligations of ORIX
Credit Alliance, Inc. or its affiliates so long as the obligations qualify as
the above described eligible investments.
Any earnings, net of losses and investment expenses, on funds in the
collection account will be held in that account and be treated as amounts
available for distribution to you. The servicer will have the revocable power to
instruct the indenture trustee to make withdrawals and payments from the
collection account for the purpose of carrying out its duties under the transfer
and servicing agreement.
If any institution at which any of the collection account is established
ceases to be an eligible institution as described above, the servicer shall,
within ten business days after receiving notice of that fact, establish a
replacement account at another institution meeting the above eligibility
requirements.
Each collection period begins on the first day of a calendar month and ends
on and includes the last day of the calendar month.
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EVENTS OF DEFAULT
Allocations of amounts of payments to you will be made as described above
under " -- Allocations; Prior to an Event of Default" unless and until an event
of default has occurred, in which case allocations of amounts will be made as
described above under " -- Allocations; Following an Event of Default".
An "event of default" refers to any of the following events:
- failure to pay the full amount of accrued interest on any note on a
payment date;
- failure to pay the then outstanding principal amount of any note, if any,
on its related maturity date of the note;
- (1) failure on the part of the originator to make any payment or deposit
required under the transfer and servicing agreement within three business
days after the date the payment or deposit is required to be made, or
(2) failure on the part of the originator, the trust depositor, the trust,
the indenture trustee or the owner trustee to observe or perform any other
covenants or agreements in the transfer and servicing agreement or the
indenture, which failure has a material adverse effect on the noteholders
and which continues unremedied for a period of 60 days after written
notice; provided, there is no 60-day cure period if the originator does
not accept reassignment of ineligible contracts as required by the
transfer and servicing agreement, and further provided that only a five
day cure period shall apply in the case of a failure by the originator,
the indenture trustee or the owner trustee to comply with their respective
covenants not to grant a security interest in or otherwise intentionally
create a lien on the contracts;
- any representation or warranty made by the originator, the trust
depositor, the indenture trustee or the owner trustee in the transfer and
servicing agreement or any information required to be given by the
originator or the trust depositor to the indenture trustee to identify
the contracts was incorrect in any material respect when made and
continues to be incorrect in any material respect for a period of 60 days
after written notice and as a result of which the noteholders' interests
are materially and adversely affected; provided, however, that an event
of default shall not be deemed to occur under the transfer and servicing
agreement if the originator has repurchased the related contracts through
the trust depositor during such period under the terms of the transfer
and servicing agreement;
- the occurrence of any of the following events with respect to the trust
depositor or the trust:
(1) a court files a decree or order for relief against the party in an
involuntary case under the Bankruptcy Code of the United States or
any other liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar debt or relief laws affecting the rights of
creditors; provided that, in the case of any such proceeding
instituted against any of these parties, either such proceedings
shall remain undismissed or unstayed for a period of 60 days, or any
actions sought in such proceeding (including an order for relief
against, or the appointment of a receiver, trustee, custodian or
other similar official for, such party or any substantial part of
such party's property) shall occur,
(2) the party commences a voluntary case under any insolvency law,
(3) the party consents to a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official taking possession of any
substantial part of its property,
(4) the party makes a general assignment for the benefit of creditors, or
(5) the party fails to pay its debts as those debts become due;
- the trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
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In the case of any event described above, an event of default with respect
to the notes will be deemed to have occurred; provided the event of default
(unless it occurs under any of the five bankruptcy or insolvency events
described above) may be waived if the Required Holders provide written notice to
the indenture trustee, the trust depositor and the servicer of the waiver. In
the event the servicer, the owner trustee and the indenture trustee has actual
knowledge of an event of default, it will be required to notify, among others,
the trust depositor, the originator, the servicer and the owner trustee.
"Required Holders" means:
(1) prior to the payment in full of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes and Class A-4 Notes outstanding, holders of Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
respectively, evidencing more than 66 2/3% of the aggregate of principal
amount of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class
A-4 Notes voting as a single class, and
(2) from and after the payment in full of the Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes outstanding, holders of
Class B Notes evidencing more than 66 2/3% of the aggregate principal
amount of the Class B Notes outstanding, and
(3) from and after the payment in full of the Class B Notes
outstanding, holders of Class C Notes evidencing more than 66 2/3% of the
aggregate principal amount of the Class C Notes outstanding.
If events relating to the bankruptcy or insolvency of the trust depositor
occur on the day of such event, the trust depositor will promptly give notice to
the indenture trustee of the event, and the indenture trustee will, unless
notified to the contrary by the Required Holders, promptly act to sell, dispose
of or otherwise liquidate the contracts in a commercially reasonable manner and
on commercially reasonable terms. The proceeds from any transfer, disposition or
liquidation of contracts will be deposited in the collection account and
allocated as described in the transfer and servicing agreement and in
" -- Allocations". If the proceeds of any collections on contracts in the
collection account allocated to noteholders of any class is not sufficient to
pay the principal amount of the notes of the class in full, those noteholders
will incur a loss.
REMEDIES AFTER EVENTS OF DEFAULT
If an event of default relating to bankruptcy or insolvency as described
under the heading "Events of Default" has occurred, then the unpaid principal of
the notes, together with interest accrued but unpaid and all other amounts due
to you under the indenture, shall immediately become due and payable.
If an event of default other than the event of default relating to
bankruptcy or insolvency as described under the heading "Events of Default"
occurs, the Required Holders may waive the event of default by sending a written
notice of the waiver to the indenture trustee, the servicer and the trust
depositor. If the Required Holders do not waive the event of default then the
unpaid principal of the notes, together with interest accrued but unpaid and all
other amounts due to you under the indenture, shall immediately and without
further act become due and payable.
THE INDENTURE TRUSTEE
The indenture trustee with respect to the notes is -- Bank. ORIX Credit
Alliance, Inc. and its affiliates may from time to time enter into banking and
trustee relationships with the indenture trustee and its affiliates. ORIX Credit
Alliance, Inc. and its affiliates may hold notes in their own names; however,
any notes so held shall not be entitled to participate in any decisions made or
instructions given to the indenture trustee by the noteholders as a group.
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The indenture trustee's responsibilities will be ministerial in nature,
consisting principally of:
- the distribution of monies as required by the transfer and servicing
agreement;
- the authentication and registration of transfer of notes under the
indenture; and
- the delivery of information received from the trust depositor.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the trust's assets may at the time be located, the indenture
trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the trust's assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the indenture trustee
will be conferred or imposed upon and exercised or performed by the indenture
trustee and the separate trustee or co-trustee jointly. In any jurisdiction in
which the indenture trustee will be incompetent or unqualified to perform as
required by the indenture, all rights, powers, duties and obligations conferred
or imposed upon the indenture trustee will be conferred or imposed upon such
separate trustee or co-trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the indenture trustee.
The indenture trustee may resign at any time, in which event a successor
indenture trustee which meets the requirements of Section 310(a) of the Trust
Indenture Act of 1939, as amended, will be appointed by the servicer. The
servicer may also remove the indenture trustee if the indenture trustee ceases
to be eligible to continue as the trustee under the indenture. In such
circumstances, a successor indenture trustee which meets the requirements of
Section 310(a) of the Trust Indenture Act will be appointed by the servicer. Any
resignation or removal of the indenture trustee and appointment of a successor
indenture trustee does not become effective until acceptance of the appointment
by the successor indenture trustee.
GOVERNING LAW
The indenture will be governed by the laws of the State of New York.
AMENDMENTS
The owner trustee, the trust depositor, and the indenture trustee, with the
written consent of the Required Holders represented thereby, may execute a
supplement to the indenture for the purpose of adding provisions to, or changing
or eliminating provisions of, the indenture. Additionally, the indenture
trustee, with the written consent of the Required Holders represented thereby,
may consent to or execute a written amendment of or supplement to, or waiver or
consent under, the transfer and servicing agreement. But, in each case the
consent of each noteholder is required to:
(1) reduce the amount or extend the time of payment of any amount
owing or payable under any note,
(2) increase or reduce the interest payable on any note,
(3) alter or modify the provisions of the transfer and servicing
agreement with respect to the order of priorities in which collections on
the contracts shall be paid to noteholders or with respect to the amount or
timing of payments on the notes,
(4) reduce, modify or amend any indemnities in favor of any noteholder
or in favor of or to be paid by the trust depositor, or alter the
definition of "Indemnitees" to exclude any noteholder, except as consented
to by each person adversely affected by the change,
(5) make any interest or principal payable in a currency other than
U.S. dollars,
(6) modify, amend or supplement the provisions of the transfer and
servicing agreement relating to amendments, waivers and supplements to the
indenture, the transfer and servicing agreement or any other document, or
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(7) modify the definition of Required Holders or the percentage of
noteholders required to make any modification of the indenture.
However, only the consent of the affected holder shall be required for any
decrease in an amount of or the rate of interest payable on the note or any
extension for the time of payment of any amount payable under the note.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicer's compensation with respect to its servicing activities and
reimbursement for its expenses will be a servicing fee calculated monthly in
conjunction with the collection periods for the notes. The servicer's monthly
fee will be an amount equal to the product of
(1) one-twelfth,
(2) 1.25% and
(3) the Pool Balance as of the beginning of the related collection
period.
The servicer's fee will be funded from payments due under the contracts and
amounts received upon the prepayment or purchase of contracts or liquidation of
the contracts and disposition of the related equipment upon defaults thereunder.
See "--Amounts Available for Payments on the Notes". The servicer's monthly fee
will be paid on the 15th day of each calendar month from the collection account
or, if such day is not a business day, the next business day. See
" -- Allocations" above.
The servicer will pay from its servicing compensation some of the expenses
incurred in connection with servicing the contracts including, without
limitation:
- expenses related to the enforcement of the contracts except that if a
defaulted obligor under a contract is required to pay the costs of
enforcement and the servicer recovers excess funds sufficient, after
payment of all principal and finance charges due with respect to such
contract, to pay any of such costs, servicer will be reimbursed for such
costs out of such excess;
- payment of the fees and disbursements of the indenture trustee and owner
trustee and independent accountants; and
- any fees which are not expressly stated in the transfer and servicing
agreement to be payable by the trust, you or the trust depositor.
However, the servicer will not pay federal, state, local and foreign
income, franchise or other taxes based on income, if any, or any interest or
penalties on such income, imposed upon the trust.
In the event that ORIX Credit Alliance, Inc. is acting as servicer and
fails to pay the fees and disbursements of the indenture trustee or owner
trustee, the trustee will be entitled to receive the portion of the servicer's
monthly servicing fee that is equal to those unpaid amounts. In no event will
you be liable to the indenture trustee or owner trustee for the servicer's
failure to pay those amounts.
OPTIONAL TERMINATION
If the aggregate principal balance of the contracts is less than 10% of the
initial aggregate principal balance of the contracts as of September 1, 1999,
the trust depositor will have the option to use the trust to purchase without
penalty all, but not less than all, of the remaining outstanding notes and
certificate. The trust depositor will exercise this option only on a payment
date for the notes and upon payment of the full redemption price to the
indenture trustee. The redemption price will be equal to the sum of the
outstanding principal amount of the notes and certificate, together with accrued
interest through the date of redemption. Following any redemption, you will have
no further rights with respect to the trust's assets.
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REPORTS
No later than the second business day prior to each payment date, the
servicer will forward to the indenture trustee, the owner trustee, each rating
agency rating the notes and First Union Capital Markets Corp. a monthly report
prepared by the servicer setting forth information with respect to the trust and
the notes and certificate, including:
(1) the aggregate principal balance of the contracts
(A) as of the end of the related collection period and
(B) as of the end of the second collection period preceding such
interest and principal payment date;
(2) the Class A Principal Payment Amount, Class B Principal Payment
Amount, Class C Principal Payment Amount and Additional Principal including
the calculations utilized in the determination of those principal payment
amounts;
(3) the aggregate principal balance of contracts held by the trust
which were 31, 61 and 91 days or more delinquent as of the end of such
collection period;
(4) the aggregate principal balance of contracts that became defaulted
contracts during such collection period and cumulatively for each preceding
collection period;
(5) the monthly servicing fee for the related collection period;
(6) the amounts available for distribution to the holders of the notes
with respect to the related collection period, including the calculation of
those amounts;
(7) the total amount distributed on the notes;
(8) the amount allocable to principal on each class of the notes;
(9) the amount allocable to interest on each class of the notes;
(10) any servicer advances; and
(11) the balance in the reserve fund.
On each payment date, the indenture trustee (or an agent on its behalf),
will forward to each noteholder of record a copy of the monthly report.
The servicer will forward to the indenture trustee, the owner trustee, each
rating agency rating the notes and First Union Capital Markets Corp. (a) within
120 days after each calendar quarter, commencing with the quarter ending
December 31, 1999, the unaudited quarterly financial statement of the servicer
and (b) within 120 days after each fiscal year of the servicer, commencing with
the fiscal year ending March 31, 2000, the audited annual financial statement of
the servicer, together with the related report of the independent accountants to
the servicer. On the payment date following the receipt of each such financial
statements and report, the indenture trustee will forward to each noteholder of
record a copy of such financial statements and report.
On or before January 31 of each calendar year, commencing January 31, 2000,
the indenture trustee will furnish or cause to be furnished to each person who
at any time during the preceding calendar year was a noteholder of record, a
statement containing the information required to be provided by an issuer of
indebtedness under the Internal Revenue Code of 1986, as amended for such
preceding calendar year or the applicable portion of the year during which you
were a noteholder, together with such other customary information as is
necessary to enable you to prepare your tax returns. See "Material Federal
Income Tax Considerations".
As long as the notes remain in book-entry form, periodic reports,
containing information concerning the trust, the contracts, the notes and the
certificate, will be prepared by the servicer and sent on behalf of the trust to
Cede & Co., as nominee of DTC, and the Euroclear System or Cedel Bank, S.A. as
registered
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holders of the notes. These reports will be made available by DTC, Euroclear or
CEDEL and its participants to holders of interests in the notes as required by
the rules, regulations and procedures creating and affecting DTC, Euroclear and
CEDEL, respectively. See "-- Book -- Entry Registration" and "-- Reports". These
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles or that have been examined and reported
upon by, with an opinion expressed by, an independent or certified public
accountant. Upon the issuance of fully registered, certificated notes, these
reports will be sent to each registered noteholder.
LIST OF NOTEHOLDERS
If the notes are subsequently issued in fully registered, certificated
form, the indenture trustee will afford you access during normal business hours
to the current list of noteholders for purpose of communicating with other
noteholders with respect to their rights under the indenture, the transfer and
servicing agreement or the notes. The indenture trustee will provide this list
upon written request of any noteholder or group of noteholders of record holding
notes evidencing not less than 10% of the aggregate unpaid principal amount of
the notes. While the notes are held in book-entry form, holders of beneficial
interests in the notes will not have access to a list of other holders of
beneficial interests in the notes, which may impede the ability of such holders
of beneficial interests to communicate with each other. See "-- Book-Entry
Registration" below.
ADMINISTRATION AGREEMENT
ORIX Credit Alliance, Inc., in its capacity as administrator, will enter
into an administration agreement. ORIX Credit Alliance, Inc. will agree, to the
extent provided in the administration agreement, to provide the notices and to
perform other administrative obligations required to be provided or performed by
the trust or the owner trustee under the indenture.
ORIX Credit Alliance, Inc., as the administrator agrees to perform the
accounting functions of the trust which the owner trustee is required to perform
under the Trust Agreement, including but not limited to:
- maintaining the books of the trust;
- filing tax returns for the trust; and
- delivering tax related reports to you, except for Form 1099s.
However, the indenture trustee shall retain responsibility for distributing to
you Form 1099s and the owner trustee shall retain responsibility for
distributing the Schedule K-1s. As compensation for the performance of the
administrator's obligations under the Administration Agreement and as
reimbursement for its expenses, ORIX Credit Alliance, Inc., as the administrator
will be entitled to a monthly administration fee, which fee will be paid by the
servicer.
BOOK-ENTRY REGISTRATION
You may hold your notes through DTC in the United States or Cedel Bank,
society anonyme 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 Section 17A of the Exchange Act. 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
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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, all notes deposited with DTC will be
registered 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 such 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 will not be entitled to receive a physical note representing such
person's 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, and 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 such
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 such payments will be forwarded to
Cede as nominee of DTC. You will not be recognized by the indenture trustee as a
noteholder, as such term is used in the indenture. You will be permitted to
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, 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 such notes, may be limited due to
the absence of physical notes for such notes.
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 will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payments by DTC participants to noteholders
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name" and will be the responsibility of such DTC
participant and not of DTC, the indenture trustee, the owner trustee, 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 such payments to direct
participants shall be the responsibility of DTC and disbursement of such
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 holdings, from the direct participant or
indirect participant through which the noteholder entered into the transaction.
Transfers of ownership interests in the notes are to be accomplished by entries
made on the books of DTC's participants acting on behalf of noteholders.
Noteholders will not receive physical notes representing their ownership
interest in notes, except in the event that use of the book-entry system for the
notes is discontinued.
DTC will not comment or vote with respect to the notes. DTC has advised us
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 us 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
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take such action only at the direction of and on behalf of direct participants
whose holdings include undivided interests that satisfy such 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 such 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 Certificated Notes at a Later Date".
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but neither we
nor the trust depositor take any responsibility for the accuracy of this
information.
Cedel and Euroclear will hold omnibus positions on behalf of the
participants in the Cedel and Euroclear systems, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the books of
their respective depositaries which in turn will hold such positions in
customers' securities accounts in the depositaries' names on the books of DTC.
Cedel is incorporated under the laws of Luxembourg as a professional
depositary. Cedel 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. Transactions may be
settled in Cedel in any of 38 currencies, including United States dollars. Cedel
provides to its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depositary, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel's participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations and may include the underwriters. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel participant,
either directly or indirectly.
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. Transactions may now be
settled in any of 35 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York, under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation. All operations are conducted by Euroclear's operator
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. Euroclear
participants include banks, securities brokers and dealers and other
professional financial intermediaries and may include the underwriter. 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, it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with Euroclear operator are
governed by the Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System
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and applicable Belgian law. Those Euroclear Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held 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 Cedel's participants and Euroclear's participants will comply with their
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel or Euroclear, on the other, will be effected in DTC under DTC
rules through the relevant European international clearing system through its
Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such 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. Cedel participants and Euroclear participants may not deliver
instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Cedel 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 such credits or any transactions in
such securities settled during such processing day will be reported to the
relevant Cedel participant or Euroclear participant on such business day. Cash
received in Cedel or Euroclear as a result of transfers of securities by or
through a Cedel participant or a Euroclear participant to a DTC participant will
be received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
Except as required by law, none of the originator, the owner trustee, the
Trust 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 such
beneficial ownership interests.
ISSUANCE OF CERTIFICATED NOTES AT A LATER DATE
The notes will be issued in fully registered, certificated form to
beneficial owners or their nominees rather than to DTC or its nominee, only if:
(1) we advise the indenture trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository
with respect to such notes, and we or the indenture trustee are unable to
locate a qualified successor or
(2) we elect to terminate the book-entry system.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the indenture trustee is required to 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 such fully
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registered, certificated notes, and the indenture trustee will recognize the
holders of such fully registered, certificated notes as noteholders under the
indenture.
Additionally, upon the occurrence of any such event described above,
distribution of principal of and interest on the notes will be made by the
indenture trustee 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 10 days' notice to noteholders for such class, however,
the final payment on any note will be made only upon presentation and surrender
of such Note at the office or agency specified in the notice of final
distribution to noteholders. The final payment will be made in this manner
whether the notes are fully registered, certificated notes or the note for such
class registered in the name of Cede & Co. representing the notes of such class.
Fully registered, certificated notes of each class will be transferable and
exchangeable 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 such class.
No service charge will be imposed 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.
THE CERTIFICATES
On the closing date for the sale of the notes, we will also issue the
certificates with an initial certificate balance of $--. The certificates will
not bear interest and shall have the right to monies in the reserve fund and to
funds remaining after the payment of all principal and interest on the notes.
The certificates will represent a fractional undivided beneficial equity
interest in the trust and will be issued under the trust agreement.
The certificates are not being offered and sold by this prospectus. The
trust depositor is expected initially to retain the certificates, although it
may transfer the certificates at some later date in a transaction separate from
this offering provided the owner trustee and indenture trustee receive an
opinion of independent counsel that such transfer will not cause the trust to
become a taxable entity or otherwise adversely affect the noteholders.
Distributions with respect to the certificates will be subordinated to the
rights of the noteholders to the extent described in "Description of the Notes
and Indenture -- Allocations".
THE TRANSFER AND SERVICING AGREEMENT
The following is a summary of all of the material terms of the transfer and
servicing agreement dated as of September 15, 1999 among the trust depositor,
the originator, the trust and the indenture trustee. You should read the
transfer and servicing agreement, the form of which was filed as an exhibit to
the registration statement of which this prospectus is a part.
TERMINATION OF TRUST
Unless the trust depositor instructs the owner trustee otherwise, the trust
will terminate only on the earliest to occur of
(1) the day following the day on which the aggregate principal amount
of all notes is zero; provided, that the trust depositor shall have
delivered a written notice to the owner trustee electing to terminate the
trust, or
(2) if the contracts are sold, disposed of or liquidated following the
occurrence of events relating to bankruptcy or insolvency, immediately
following such transfer, disposition or liquidation. Upon termination of
the trust, all right, title and interest in the trust's assets (other than
amounts in accounts maintained by the trust for the final payment of
principal and interest to the holders of the
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notes and certificate) will be conveyed and transferred to the holder of
the certificate and any permitted assignee.
CONVEYANCE OF THE CONTRACTS
The contracts and security interests in the equipment will be transferred
to the trust by the trust depositor as required by the transfer and servicing
agreement. The originator has sold, transferred, assigned, set over and
otherwise conveyed to the trust depositor, without recourse all of the
originator's right, title and interest in and to:
- the contracts, including any substitute contracts, and all monies due or
to become due in payment of the contracts on or after the related cutoff
date, including all scheduled payments thereunder due on or after the
cutoff date;
- any prepayment amounts, any payments in respect of a casualty or early
termination, and any recoveries on the contracts but excluding any
scheduled payments due prior to the related cutoff date, any scheduled
payments due after the cutoff date but received on or prior to the cutoff
date and any Excluded Amounts;
- the security interest in the related equipment, including all proceeds
from any sale or other disposition of the equipment;
- any documents delivered to the trust depositor or held by the servicer on
its behalf with respect to each contract;
- all payments made or to be made in the future with respect to each
contract and the obligor thereunder and under any other guarantee or
similar credit enhancement with respect to the contracts;
- all payments made with respect to each contract under any insurance
policy covering physical damage to the related equipment; and
- all income and proceeds of the foregoing.
As of the initial cutoff date or any subsequent cutoff date for substitute
contracts, the trust depositor will transfer and assign the assets described in
the previous seven bullet points to the trust for the benefit of the noteholders
and the trust will grant a lien on the same in favor of the indenture trustee.
Prior to the conveyance of any contracts to the trust depositor, the
originator indicated in its books and records, including the computer files
relating to the contracts, that the contracts have been transferred to the trust
depositor. Prior to each transfer of any assets to the trust, the trust
depositor will file UCC financing statements reflecting the conveyance of the
assets described in the previous seven bullet points to the trust and the grant
of a lien on those assets to the indenture trustee. The trust depositor will
mark its books and records, including the appropriate computer files relating to
the contracts, to indicate that the contracts have been conveyed to the trust.
The trust will give the indenture trustee a list of the contracts transferred to
the trust, identified by account number and by the contract outstanding
principal balance as of the related cutoff date.
REPRESENTATIONS AND WARRANTIES; DEFINITION OF ELIGIBLE CONTRACTS
The originator will make the following representations and warranties in
the transfer and servicing agreement with respect to each contract as of
September 15, 1999. Similarly, the originator will make or be deemed to have
made those representations and warranties with respect to each substitute
contract which may be transferred as of its related cutoff date, including that:
(1) the contract is valid and 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, and the contract contains a clause that
has the effect
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of unconditionally obligating the obligor to make periodic contract
payments (including taxes, if any) to the assignee of the contract,
notwithstanding any rights the obligor may have against the assignor;
(2) the contract is noncancellable by the obligor;
(3) all payments payable under the contract are absolute, unconditional
obligations of the obligor and the contract does not provide for offset for any
reason;
(4) the contract requires the obligor to maintain the equipment in good
working order, to bear all the costs of operating the equipment, including
taxes, if any, and insurance relating thereto;
(5) the contract, at the time it was made, did not violate the laws of the
United States or any state, except for any violations which do not materially
and adversely affect the collectibility of the contracts taken as a whole;
(6) the contract requires that (a) the obligor will obtain insurance and
list ORIX Credit Alliance, Inc. as the loss payee in an amount not less than the
outstanding principal balance of the contract; or (b) in the event of a casualty
loss, the servicer may require the obligor (i) to pay at a minimum the
outstanding principal balance of the contract or (ii) to replace the equipment
with like equipment in good repair, acceptable to servicer, at the obligor's
expense;
(7) the contract has been transferred to the trust depositor free and
clear of any liens (except for permitted liens) and is assignable without prior
written consent of the obligor; the originator has transferred its security
interest in the financed equipment interest to the trust depositor, free and
clear of adverse claims, except permitted liens;
(8) the contract has an original maturity of not greater than 84 months;
(9) the contract is a U.S. dollar-denominated obligation and, at
inception, the obligor and the associated equipment were located in the United
States and, to the best of the originator's knowledge, continue to be located in
the United States;
(10) the contract is not a consumer contract;
(11) the contract is not subject to any guaranty by the originator;
(12) no adverse selection procedure was used in selecting the contract for
transfer to the trust depositor;
(13) the obligor has represented to the originator or vendor that it has
accepted the equipment, where applicable;
(14) the obligor is not, to the originator's knowledge, subject to
bankruptcy or other insolvency proceedings;
(15) the contract is not a defaulted contract;
(16) the contract is not more than 60 days past due;
(17) the information with respect to the contract is, to the best of the
originator's knowledge, true and correct in all material respects;
(18) no provision of the contract has been waived, altered or modified in
any way, except by instruments or documents contained in the files relating to
the contract;
(19) all filings necessary to evidence the conveyance or transfer of the
contract to the trust depositor have been made in all appropriate jurisdictions;
(20) the contract does not contain any other restriction on the transfer or
assignment of the contract other than those as to which a consent or waiver of
such restriction has been obtained prior to the date on which the contract was
sold to the trust;
(21) the obligor is not the United States or any state or local
government or any agency, department, subdivision or instrumentality of any
such government;
(22) the originator has obtained a first priority perfected security
interest (subject to permitted liens) in the equipment related to the
contracts;
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(23) the contract, if a lease, has a purchase option amount of no
greater than $101;
(24) other customary provisions for this type of transaction.
These representations and warranties will be reaffirmed by the originator
when it transfers a substitute contract to the trust depositor. A contract which
satisfies all of the above representations and warranties shall be deemed an
"eligible contract". Contracts with respect to which the representations in
clauses (8) and (15) are not true shall also be eligible contracts if the trust
depositor shall have received confirmation from each rating agency rating the
notes that the discrepancy will not result in a downgrading of the existing
ratings on the notes. In addition, the originator will represent and warrant to
the trust depositor that it has validly sold and assigned to the trust depositor
all right, title and interest of the originator in the related contracts and the
proceeds of the contracts.
Permitted liens on the contracts consist of:
(1) liens for state, municipal and other local taxes but only if
(a) such taxes shall not at the time be due and payable or
(b) the trust depositor shall currently be contesting the validity
of those liens in good faith by appropriate proceedings;
(2) liens in favor of the trust depositor created under the transfer
and servicing agreement and transferred to the trust under the transfer and
servicing agreement;
(3) liens in favor of the trust created under the transfer and
servicing agreement; and
(4) liens in favor of the indenture trustee created under the transfer
and servicing agreement and the indenture.
Permitted liens on the equipment securing the contracts consist of:
(1) materialmen's, warehousemen's, mechanics' and other liens arising
by operation of law in the ordinary course of business for sums not due or
sums which are being contested in good faith;
(2) liens for state, municipal and other local taxes if:
(A) such taxes shall not at the time be due and payable or
(B) the trust depositor shall currently be contesting the validity
of those liens in good faith by appropriate proceedings;
(3) liens in favor of the trust depositor and transferred to the trust
under the transfer and servicing agreement;
(4) liens in favor of the trust created under the transfer and
servicing agreement;
(5) liens in favor of the indenture trustee created under the transfer
and servicing agreement and the indenture;
(6) other liens which are subordinate to the prior payment of the
contracts on terms described in the transfer and servicing agreement; and
(7) liens granted by the end-users or vendors which are subordinate to
the interest of the trust in the equipment.
The trust depositor will represent and warrant in the transfer and
servicing agreement that:
(1) the transfer of the contracts is a valid transfer, transfer and
assignment to the trust of all right, title and interest of the trust
depositor in the contracts;
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(2) all filings necessary to evidence the conveyance or transfer of
the contracts to the trust have been made in all appropriate jurisdictions;
(3) that each contract is an eligible contract;
(4) that each end-user contract is an eligible contract; and
(5) that the security interest granted on the related contracts by the
trust to the indenture trustee is effective to create in favor of the
indenture trustee a lien on the contracts and that the lien has been duly
perfected.
None of the indenture trustee, the trust, the owner trustee or any of them
in their individual capacities, shall make or be deemed to have made any
representations or warranties, express or implied, regarding the trust's assets
or the transfers of those assets by the originator, the trust depositor or the
trust.
REMEDIES FOR BREACHES OF REPRESENTATIONS AND WARRANTIES; DEFINITION OF
INELIGIBLE CONTRACTS
Under the terms of the transfer and servicing agreement, each contract must
be an eligible contract as of its date of transfer to the trust. The indenture
trustee shall reassign any contract to the trust depositor, and the originator
will be concurrently obligated to purchase from the trust depositor, such
contract transferred by the originator no later than 90 days after the
originator becomes aware, or receives written notice from the servicer or the
trust depositor, of the breach of any representation or warranty made by the
originator in the transfer and servicing agreement. That transfer and repurchase
of the contract is required only if the breach of the representation or warranty
by the originator materially adversely affects the interests of the trust
depositor or the trust or their successors or assigns in such contract or the
documents relating to such contract, which breach has not been cured or waived
in all material respects. This purchase obligation will constitute the sole
remedy against the originator and the trust depositor available to you for a
breach of a representation or warranty under the transfer and servicing
agreement made by the originator with respect to that contract.
An ineligible contract shall be reassigned to the trust depositor and the
trust depositor shall make a deposit in the collection account in immediately
available funds in an amount equal to the contract outstanding principal balance
of the ineligible contract together with accrued interest and any outstanding
servicer advances on the contract. Any amount deposited into the collection
account in connection with the reassignment of an ineligible contract shall be
considered payment in full of the ineligible contract, and that amount shall be
treated as an amount available for distribution to you. In the alternative, the
trust depositor may instead obtain a substitute contract and convey the
substitute contract to the trust in replacement for the affected ineligible
contract. We will release by the ineligible contract and the trust depositor
will reconvey it to the originator. See "-- Substitute Contracts".
CONCENTRATION AMOUNTS; DEFINITION OF EXCESS CONTRACT
In addition to the representations and warranties made by the originator
and the trust depositor with respect to the contracts as described above under
"-- Representations and Warranties; Definition of Eligible Contracts", the trust
depositor will represent and warrant as of September --, 1999 as follows:
(1) the aggregate principal balance of all end-user contracts which
finance, lease or are related to -- equipment will not exceed --% of the
aggregate principal balance of the contracts;
(2) the aggregate principal balance of all end-user contracts with
obligors who comprise the -- largest obligors (measured by aggregate
principal balance) does not exceed --% of the aggregate principal balance
of the contracts;
(3) the aggregate principal balance of all end-user contracts with
obligors located in a single State of the United States does not exceed --%
of the aggregate principal balance of the contracts; and
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(4) the obligor under each contract is not the United States or any
state or local government or any agency, department, subdivision or
instrumentality of any such government.
On the date a substitute contract is added to the trust's assets the trust
depositor will make the foregoing representations and warranties as of the
initial closing date of the transfer of the contracts to the trust. We will
treat the substitute contract as though it, and not the replaced contract, was
included in the contracts on the initial closing date; however, the principal
balance of such substitute contract shall be equal to its principal balance as
of the actual cutoff date.
If there is a breach of any of the foregoing representations or warranties
(an "Excess Contract"), which breach has not been cured or waived in all
material respects, the removal of which shall remedy such breach, the servicer
will select a contract, and the indenture trustee shall reassign such contract
to the trust depositor, and the originator will be obligated to purchase such
contract from the trust depositor. Such purchase shall occur no later than 90
days after the trust depositor or the originator becomes aware, or receives
written notice from the servicer or the trust depositor, of such breach. This
purchase obligation will constitute the sole remedy against the originator and
trust depositor available to you for a breach of one of the foregoing
representations or warranties.
An Excess Contract shall be reassigned to the trust depositor and the trust
depositor shall make a deposit in the collection account in immediately
available funds in an amount equal to the principal balance of the Excess
Contract together with accrued interest and any outstanding servicer advances on
the contract. Any amount deposited into the collection account in connection
with the reassignment of an Excess Contract shall be considered payment in full
of the Excess Contract and shall be treated as an amount available for
distribution to you. In the alternative, the trust depositor may instead cause
the originator to convey to the trust depositor a substitute contract in
replacement for the Excess Contract, which shall thereupon be deemed released by
the trust and reconveyed through the trust depositor to the originator. See
"-- Substitute Contracts".
MATERIAL MODIFICATIONS TO CONTRACTS
Under the terms of the transfer and servicing agreement, the servicer may
vary the provisions of a contract, some of which constitute material
modifications. Under the transfer and servicing agreement, only the following
modifications are permitted:
- except as provided below, waivers and other modifications that:
(1) conform with the servicer's customary and usual credit and collection
practices, and
(2) do not have the effect of accelerating, delaying, reducing or
extending the dates for scheduled payments for the contract; however,
the rating agencies may waive this requirement;
- to the extent consistent with the servicer's customary and usual credit
and collection practices, the servicer may grant extensions or
adjustments on any contract; provided, however, that if the servicer (i)
extends a contract by more than three months in any calendar year, (ii)
extends a contract more than twice in the life of such contract, (iii)
reduces the frequency of periodic payments under a contract, (iv) reduces
the unpaid principal balance or the rate of interest with respect to a
contract, or (v) extends a contract in a manner that is inconsistent with
the servicer's customary and usual credit and collection practices, the
servicer shall purchase the affected contract within five business days
by either (a) depositing the unpaid principal balance of the contract
(plus any outstanding servicer advances and accrued and unpaid interest)
in the collection account, or (b) transferring a substitute contract to
the trust in exchange for such contract;
- waivers of any late payment charge and other service fees that may be
collected in the ordinary course of servicing the contract;
- waivers that permit prepayment of a contract that is not otherwise
prepayable by its terms. The prepayment may include, without limitation,
a full or partial buy out of the equipment which is the subject of the
contract, or an equipment upgrade. In the event of an early termination
of a contract
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which has been prepaid in full, the trust depositor will have the option
to cause the trust to reinvest the proceeds of the contract in one or
more contracts having similar characteristics to the terminated contract.
See " -- Substitute Contracts". The servicer is not authorized to permit
an early termination of a contract, without the addition to the trust of
a substitute contract, unless the amount to be prepaid, whether by the
related obligor, or through a combination of payments from the related
obligor and from the originator or servicer, on such terminated contract
is equal at least to the then outstanding contract principal balance of
the contract, plus accrued and unpaid interest; or
- waivers that release or subordinate the trust's interest in a portion of
the equipment and/or any additional collateral that is specifically
identified in the contract documents, and/or release obligors,
guarantors, and assignors of a contract, provided that immediately
thereafter the related contract continues to meet the servicer's
customary and usual underwriting standards and the remaining portion of
the equipment and/or any additional collateral that is specifically
identified in the documents for such contract is equal in value, as
determined in accordance with the servicer's normal valuation procedures,
to at least 120% of the outstanding principal balance of such contract.
The servicer shall, in accordance with its customary and usual credit and
collection policies, have the right to release or subordinate ORIX Credit
Alliance, Inc.'s interest in additional collateral (which does not
include the financed equipment) if such additional collateral is not
specifically identified in the contract documents.
Non-material adjustments or modifications in contract terms may be effected by
the servicer on behalf of the trust without your consent and without affecting
the status of the contract as part of the trust.
SUBSTITUTE CONTRACTS
In the event we subsequently determine that (i) a contract has become
subject to a casualty loss, a materially modified contract, or a defaulted
contract or (ii) a contract has become a prepaid contract, a contract that is
not an eligible contract or an Excess Contract, the originator will have the
option to substitute for that contract another contract having similar
characteristics. See " -- Remedies for Breaches of Representations and
Warranties; Definition of Ineligible Contract," " -- Concentration Amounts;
Definition of Excess Contracts" and " -- Material Modifications to Contracts".
The ability to substitute contracts under category (i) is subject to an overall
limit of an aggregate amount not to exceed --% of the Original Pool Balance.
The substitute contract will have (a) an aggregate principal balance equal
to or greater than that of the contract being substituted, (b) a similar
weighted average life and (c) a yield of greater than or equal to --%. In
addition, (1) either the final payment on the substitute contract will be on or
prior to 2006 or, to the extent the final payment on such contract is due after
2006, only scheduled payments due on or prior to such date may be included in
the aggregate principal balance of the contracts for the purpose of making any
calculation under the indenture or the transfer and servicing agreement and (2)
the substitution will not result in a violation of the concentration limits
applicable to the contract pool owned by the trust.
DEFINITION OF DEFAULTED CONTRACTS
A contract will automatically be deemed to be a defaulted contract on the
earlier occurrence of either (1) or (2) below:
(1) a full contractual payment has not been received from the obligor
or the vendor, if there is vendor recourse, for 180 days or a shorter
period as the originator may determine consistent with its collection
policy; or
(2) if at any time the servicer determines, under its customary and
usual practices, that the contract is not collectible after taking into
account any available vendor recourse.
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The current policy of the servicer with respect to writing off contracts is
described in "ORIX Credit Alliance, Inc. -- Credit Approval, Collection and
Review Process" above.
Upon classification as a defaulted contract, the servicer shall accelerate
all payments due thereunder or take any other action as the servicer reasonably
believes will maximize the amount of recoveries and shall otherwise follow its
customary and usual collection procedures, which may include the repossession
and transfer of any related equipment or other security on behalf of the trust.
INDEMNIFICATION
The transfer and servicing agreement provides that the servicer will
indemnify the trust depositor, the trust, the owner trustee, and the indenture
trustee from and against any loss, liability, expense, damage or injury suffered
or sustained arising out of the servicer's actions or omissions with respect to
the trust.
Under the transfer and servicing agreement, the trust depositor has agreed
to be liable directly to an injured party for the entire amount of any losses,
claims, damages or liabilities arising out of or based on the arrangement
created by the transfer and servicing agreement as though such agreement created
a partnership under the New Jersey Uniform Limited Partnership Act in which the
trust depositor was a general partner. However, the trust depositor is not
liable to you for any losses, claims, damages or liabilities incurred by you in
your capacity as an investor in the notes. In the event a successor servicer is
appointed, the successor servicer will indemnify and hold harmless the trust
depositor for any losses, claims, damages and liabilities of the trust depositor
as described in this paragraph arising from the actions or omissions of the
successor servicer. Except as provided in the preceding paragraph, the transfer
and servicing agreement provides that none of the trust depositor, the servicer
or any of their directors, officers, employees or agents will be under any other
liability to the trust, the owner trustee, the indenture trustee, the
noteholders or any other person for any action taken, or for refraining from
taking any action, in good faith under the transfer and servicing agreement.
However, none of the trust depositor, the servicer or any of their directors,
officers, employees or agents will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
In addition, the transfer and servicing agreement provides that the
servicer is not under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its servicing responsibilities under the
transfer and servicing agreement. The servicer may, in its sole discretion,
undertake any legal action which it may deem necessary or desirable for the
benefit of the noteholders with respect to the transfer and servicing agreement
and the rights and duties of the parties thereunder.
SERVICING STANDARD AND SERVICER ADVANCES
The servicer is responsible for servicing, collecting, enforcing and
administering the contracts in a manner consistent with its customary and usual
procedures for servicing contracts comparable to the contracts. Although ORIX
Credit Alliance, Inc. has the right to delegate its servicing duties to a sub-
servicer, it remains liable for the performance or non-performance of those
duties.
If the servicer determines that any scheduled payment with respect to any
contract which was due during the collection period was not received in full
prior to the end of that collection period, the servicer has the right, in its
sole discretion, to elect, but is not obligated, to advance the unpaid scheduled
payment. The servicer shall be entitled to reimbursement of the servicer
advances from subsequent payments on or with respect to the contract, including
collections of any prepayment amount, amounts deposited in the collection
account for the repurchase of ineligible contracts or recoveries with respect to
the contract, and, if the servicer determines that its advances will not be
recovered from the contracts to which its advances were related, from other
contracts included in the trust.
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SERVICER RESIGNATION
The servicer may not resign from its obligations and duties under the
transfer and servicing agreement, except upon determination that its duties are
no longer permissible under applicable law. No such resignation will become
effective until a successor to the servicer has assumed the servicer's
responsibilities and obligations under the transfer and servicing agreement.
Assuming that the action complies with the transfer and servicing agreement
(1) any person into which ORIX Credit Alliance, Inc. or the servicer
may be merged or consolidated;
(2) any person resulting from any merger or consolidation to which
ORIX Credit Alliance, Inc. or the servicer is a party; or
(3) any person succeeding to the business of ORIX Credit Alliance,
Inc. or the servicer
will be the successor to ORIX Credit Alliance, Inc., as the servicer, under the
transfer and servicing agreement.
SERVICER DEFAULT
In the event of any servicer default, either the indenture trustee or the
Required Holders, by written notice to the servicer and the owner trustee, and
to the indenture trustee, if given by the noteholders, may terminate all of the
rights and obligations of the servicer, as servicer, under the transfer and
servicing agreement. If the indenture trustee within 60 days of receipt of the
termination notice is unable to obtain bids from eligible servicers and the
servicer delivers an officer's certificate to the effect that the servicer
cannot in good faith cure the servicer default which gave rise to the
termination notice, then the indenture trustee shall offer the trust depositor
the right at its option to accept retransfer of the trust's assets on the
following note interest and principal payment date. The purchase price for the
retransfer of the trust's assets shall be equal to the sum of the aggregate
principal amount of all notes and certificate on such payment date plus accrued
and unpaid interest at the applicable interest rate through the date of the
retransfer. The purchase price may also include interest on interest payments
that were due but not paid when due.
The indenture trustee shall, as promptly as possible after giving a
termination notice, appoint a successor servicer and if no successor servicer
has been appointed by the indenture trustee and has accepted the appointment by
the time the servicer ceases to act as servicer, all rights, authority, power
and obligations of the servicer under the transfer and servicing agreement shall
pass to and be vested in the indenture trustee. Prior to any appointment of the
successor, the indenture trustee will seek to obtain bids from potential
servicers meeting the eligibility requirements set forth in the transfer and
servicing agreement to serve as a successor servicer for servicing compensation
not in excess of the servicing fee "Description of the Notes and
Indenture -- Servicing Compensation and Payment of Expenses". The rights and
interest of the trust depositor under the transfer and servicing agreement as
holder of the certificate will not be affected by the termination or appointment
of a successor to the servicer.
A "servicer default" refers to any of the following events:
(a) any failure by the servicer to make any payment, transfer or
deposit or to give instructions or notice to the owner trustee or the
indenture trustee as required by the transfer and servicing agreement on or
before the date occurring two business days after the date the payment,
transfer, deposit, or the instruction or notice or report is required to be
made or given, as the case may be, under the terms of the transfer and
servicing agreement; or
(b) failure on the part of the servicer duly to observe or perform in
any material respect any other covenants or agreements of the servicer set
forth in the transfer and servicing agreement which
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has a material adverse effect on the noteholders, which continues
unremedied for a period of 30 days after the first to occur of:
(1) the date on which written notice of such failure requiring the
same to be remedied shall have been given to the servicer by the
indenture trustee or to the servicer and the indenture trustee by the
noteholders or the indenture trustee on behalf of the holders of notes
aggregating not less than 25% of the principal amount of any class of
notes adversely affected thereby and
(2) the date on which the servicer becomes aware of the failure and
such failure continues to materially adversely affect the noteholders
for such period; or
(c) any representation, warranty or certification made by the servicer
in the transfer and servicing agreement or in any certificate delivered
under the transfer and servicing agreement shall prove to have been
incorrect when made, which has a material adverse effect on the noteholders
and which continues to be incorrect in any material respect for a period of
30 days after the first to occur of:
(1) the date on which written notice of such incorrectness
requiring the same to be remedied shall have been given to the servicer
and the owner trustee by the indenture trustee, or to the servicer, the
owner trustee and the indenture trustee by noteholders or by the
indenture trustee on behalf of holders of notes aggregating not less
than 25% of the principal amount of any class adversely affected thereby
and
(2) the date on which the servicer becomes aware of the
incorrectness, and such incorrectness continues to materially adversely
affect such holders for such period; or
(d) any event relating to bankruptcy, insolvency or receivership shall
occur with respect to the servicer; provided that, in the case of any such
proceeding instituted against the servicer (but not instituted by the
servicer), either such proceedings shall remain undismissed or unstayed for
a period of 60 days, or any actions sought in such proceeding (including an
order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, the servicer or any substantial
part of the servicer's property) shall occur; or the servicer shall take
any corporate action to authorize any of the actions set forth above.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of five business days or
referred to under clause (b) or (c) for a period of 60 days, in addition to any
period provided in clause (a), (b) or (c), shall not constitute a servicer
default until the expiration of such additional five business days or 60 days,
respectively, if such delay or failure could not be prevented by the exercise of
reasonable diligence by the servicer and such delay or failure was caused by an
act of God or other events beyond servicer's control. Regardless of whether the
events described in clause (a)-(d) have occurred, the servicer is required to
use its best efforts to perform its obligations in a timely manner as required
by the transfer and servicing agreement. The servicer shall provide the owner
trustee, the indenture trustee and the trust depositor prompt notice of such
failure or delay by it, together with a description of its efforts to perform
its obligations. The servicer shall immediately notify the indenture trustee in
writing of any servicer default.
If an event relating to bankruptcy, insolvency or receivership occurs with
respect to the servicer and no other event which would result in a servicer
default has occurred, an unpaid creditor of the servicer or a representative of
creditors of the servicer, such as a trustee in bankruptcy, or the servicer
acting as a debtor-in-possession, would have the power to prevent either the
indenture trustee or the noteholders from appointing a successor servicer.
EVIDENCE AS TO COMPLIANCE
The transfer and servicing agreement provides that on or about July 31 of
each calendar year the servicer will cause a firm of nationally recognized
independent public accountants to furnish a report to the effect that such firm
has applied the procedures agreed upon with the servicer and examined documents
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and records relating to the servicing of the related contracts and shall report
thereon as provided in the transfer and servicing agreement. Those accountants
may also render other services to the servicer or the trust depositor.
The transfer and servicing agreement provides for delivery to the indenture
trustee and each rating agency rating the notes on or before June 30 of each
calendar year of a statement signed by an officer of the servicer to the effect
that, to the best of the officer's knowledge, the servicer has performed its
obligations in all material respects under the transfer and servicing agreement
throughout the preceding year or, if there has been a default in the performance
of any obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the
indenture trustee may be obtained by a request in writing delivered to the
indenture trustee.
AMENDMENTS
The transfer and servicing agreement may be amended from time to time by
agreement of the owner trustee, the indenture trustee, the servicer and the
trust depositor without your consent, to cure any ambiguity or to add any
consistent provisions; provided, we obtain an opinion of counsel stating that
the amendment does not adversely affect in any material respect the interests of
any noteholder or holder of the certificate.
The transfer and servicing agreement may also be amended from time to time
by the trust depositor, the servicer, the indenture trustee and the owner
trustee with the consent of the noteholders holding notes evidencing not less
than 66 2/3% of the principal amount of the notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the transfer and servicing agreement or of modifying in any manner your rights.
No amendment, however, may
(1) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any note without the consent
of each noteholder affected thereby; or
(2) change the definition of or the manner of calculating the "Class
A-1 Principal Payment Amount", the "Class A-2 Principal Payment Amount",
the "Class A-3 Principal Payment Amount", the "Class A-4 Principal Payment
Amount", the "Class B Principal Payment Amount", the "Class C Principal
Payment Amount", the "Additional Principal", the "Required Holders", the
amounts available for distribution to noteholders or the principal amount
of the notes without the consent of each noteholder and holder of the
certificate; or
(3) reduce the aforesaid percentage required to consent to any
amendment without the consent of each holder of the security affected
thereby; or
(4) modify, amend or supplement the provisions of the transfer and
servicing agreement relating to the allocation of collections on the
contracts without the consent of each noteholder; or
(5) make any security issued by the trust payable in money other than
U.S. dollars without the consent of each holder of the security affected
thereby.
Promptly following the execution of an amendment that requires the consent
of any noteholder, the owner trustee will furnish written notice of the
substance of such amendment to each affected noteholder.
THE OWNER TRUSTEE
-- will be the owner trustee under the transfer and servicing agreement.
ORIX Credit Alliance, Inc. and its affiliates may from time to time enter into
banking and trustee relationships with the owner trustee and its affiliates.
ORIX Credit Alliance, Inc. and its affiliates may hold notes in their own names;
however,
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any notes so held shall not be entitled to participate in any decisions made or
instructions given to the owner trustee by the noteholders as a group.
For purposes of meeting the legal requirements of any jurisdictions in
which any part of the trust's assets may at the time be located, the owner
trustee will have the power to appoint a co-trustee or separate trustee of all
or any part of the trust's assets. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon the owner trustee will
be conferred or imposed upon and exercised or performed by the owner trustee and
the separate trustee or co-trustee jointly. In any jurisdiction in which the
owner trustee will be incompetent or unqualified to perform specific acts, all
rights, powers, duties and obligations conferred or imposed upon owner trustee
will be conferred or imposed upon the separate trustee or co-trustee who shall
exercise and perform those rights, powers, duties and obligations solely at the
direction of the owner trustee.
The owner trustee may resign at any time, in which event a successor owner
trustee will be appointed as provided in the transfer and servicing agreement.
The servicer may also remove the owner trustee if the owner trustee ceases to be
eligible to continue as the owner trustee under the transfer and servicing
agreement. In such circumstances, a successor owner trustee will be appointed as
provided in the transfer and servicing agreement. Any resignation or removal of
the owner trustee and appointment of a successor owner trustee does not become
effective until acceptance of the appointment by the successor owner trustee.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This section describes the material United States federal income tax
consequences of owning the notes we are offering. It is the opinion of Sullivan
& Cromwell, special tax counsel to the trust depositor. It applies to you only
if you acquire notes in the offering and you hold your notes as capital assets
for tax purposes. This section does not apply to you if you are a member of a
class of holders subject to special rules, such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person that owns notes that are a hedge or that are hedged against
interest rate risks,
- a person that owns notes as part of a straddle or conversion transaction
for tax purposes, or
- a person whose functional currency for tax purposes is not the U.S.
dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning these
notes in your particular circumstances under the Code and the laws of any other
taxing jurisdiction.
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CLASSIFICATION OF THE NOTES AND THE TRUST
In connection with the issuance of the notes, Sullivan & Cromwell has
delivered its opinion that, for federal income tax purposes, under existing law
the 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, Sullivan & Cromwell 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 Sullivan &
Cromwell does not foreclose the possibility of a contrary determination by the
IRS or by a court of competent jurisdiction, or of a contrary position by the
IRS or Treasury Department in regulations or rulings issued in the future.
Although it is the opinion of Sullivan & Cromwell 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 Sullivan &
Cromwell, the IRS successfully asserted that one or more of the notes did not
represent debt for federal income tax purposes, such 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 the 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. Such treatment may have adverse federal income tax consequences for
some noteholders. For example:
(1) income to some tax-exempt entities, including pension funds, may
constitute "unrelated business taxable income,"
(2) income to foreign holders is often subject to U.S. tax and U.S.
tax return filing and withholding requirements,
(3) individual holders might be subject to limits 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
United States Holders.
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a note and you
are:
-- a citizen or resident of the United States,
-- a domestic corporation,
-- an estate whose income is subject to United States federal income tax
regardless of its source, or
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-- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this section does not apply to you and
you should refer to "-- United States Alien Holders" below.
PAYMENTS OF INTEREST. You will be taxed on any interest on your note as
ordinary income at the time you receive the interest or when it accrues,
depending on your method of accounting for tax purposes.
PURCHASE, SALE AND RETIREMENT OF THE NOTES. Your tax basis in your note
will generally be the U.S. dollar cost, as defined below, of your note. You will
generally recognize gain or loss on the sale or retirement of your note equal to
the difference between the amount you realize on the sale or retirement and your
tax basis in your note. Capital gain of a noncorporate United States holder is
generally taxed at a maximum rate of 20% where the property is held more than
one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING. In general, if you are a
noncorporate United States holder, we and other payors are required to report to
the Internal Revenue Service all payments of principal and interest on your
note. In addition, the proceeds of the sale of your note before maturity within
the United States will be reported to the Internal Revenue Service.
Additionally, backup withholding at a rate of 31% will apply to any payments if
you fail to provide an accurate taxpayer identification number, or you are
notified by the Internal Revenue Service that you have failed to report all
interest and dividends required to be shown on your federal income tax returns.
UNITED STATES ALIEN HOLDERS.
This subsection describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are the beneficial owner of
a note and are, for United States federal income tax purposes:
-- a nonresident alien individual,
-- a foreign corporation,
-- a foreign partnership, or
-- an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a
note.
If you are a United States holder, this section does not apply to you.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a United States alien
holder of a note:
- we and other payors will not be required to deduct United States
withholding tax from payments of principal and interest to you if, in the
case of interest:
1. you do not actually or constructively own 10% or more of the total
combined voting power the trust,
2. you are not a controlled foreign corporation that is related to the
trust through stock ownership, and
a. you certify to us or a U.S. payor, under penalties of perjury,
that you are not a United States holder and provide your name
and address, or
b. a non-U.S. securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business and holds the note
certifies to us or a U.S. payor under penalties of perjury that
a similar statement has been received from you by it or by a
similar financial institution between it and you and furnishes
the payor with a copy thereof, and
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-- no deduction for any United States federal withholding tax will be
made from any gain that you realize on the sale or exchange of your
note.
Further, a note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's gross
estate for United States federal estate tax purposes if:
-- the decedent did not actually or constructively own 10% or more of the
total combined voting power of the trust at the time of death, and
-- the income on the note would not have been effectively connected with
a United States trade or business of the decedent at the same time.
If you receive a payment after December 31, 2000, recently finalized
Treasury regulations will apply. Under these final withholding regulations,
after December 31, 2000, you may use an alternative method to satisfy the
certification requirement described above. Additionally, if you are a partner in
a foreign partnership, after December 31, 2000, you, in addition to the foreign
partnership, must provide the certification described above, and the partnership
must provide certain information, including a United States taxpayer
identification number. The Internal Revenue Service will apply a look-through
rule in the case of tiered partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING.
You are generally exempt from backup withholding and information reporting
with respect to any payments of principal or interest made by us and other
payors provided that you provide the certification described under "-- United
States Alien Holders", and provided further that the payor does not have actual
knowledge that you are a United States person. See "-- United States Alien
Holders" above for a discussion of the rules under the final withholding
regulations. We and other payors, however, may report payments of interest on
your notes on Internal Revenue Service Form 1042-S.
In general, payment of the proceeds from the sale of notes to or through a
United States office of a broker is subject to both United States backup
withholding and information reporting. If, however, you are a United States
alien holder, you will not be subject to information reporting and backup
withholding if you certify as to your non-United States status, under penalties
of perjury, or otherwise establish an exemption. Payments of the proceeds from
the sale by a United States alien holder of a note made to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, information reporting, but not backup withholding, may
apply to a payment made outside the United States of the proceeds of a sale of a
note through an office outside the United States if the broker is:
-- a United States person,
-- a controlled foreign corporation for United States tax purposes,
-- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period, or
-- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year:
-- one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership, or
-- such foreign partnership is engaged in a United States trade or
business unless the broker has documentary evidence in its records
that you are a non-U.S. person and does not have actual knowledge
that you are a U.S. person, or you otherwise establish an exemption.
STATE AND LOCAL TAX CONSIDERATIONS
NEW JERSEY TAX CONSIDERATIONS. The principal place of business of the
servicer is in the State of New Jersey and some of the activities to be
performed by servicer in collecting and servicing the contracts
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will also take place there. Also, the obligors on certain of the contracts will
be located in New Jersey. In the opinion of Riker, Danzig, Scherer, Hyland &
Perretti, special New Jersey tax counsel to the trust, the trust will be
classified as a partnership for purposes of New Jersey taxation and, thus, will
not be subject to New Jersey Corporation Income Tax or New Jersey Corporation
Business Tax. Noteholders that are not otherwise subject to New Jersey taxation
on income will not become subject to New Jersey tax as a result of their
ownership of notes.
OTHER STATES.
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, other than with respect to the State of New Jersey. ACCORDINGLY, IT IS
RECOMMENDED THAT EACH PROSPECTIVE INVESTOR CONSULT A TAX ADVISOR 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 ("ERISA"), as amended,
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 such
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 plans exempt from taxation under the Internal Revenue Code. 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 4975 of the Internal Revenue
Code, and assets of such plans may be invested in the notes, subject to the
provisions of other applicable federal and state law.
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 plan.
PROHIBITED TRANSACTIONS
In addition, Section 406 of ERISA and Section 4975 of the Internal Revenue
Code prohibit parties in interest and disqualified persons with respect to
ERISA-regulated plans and plans exempt from taxation under the Internal Revenue
Code from engaging in some transactions involving such plans or "plan assets" of
such plans, unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Internal Revenue Code 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 such prohibited transactions. The trust
depositor, the underwriters, the servicer, the indenture trustee or the 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 such 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 trust
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 such assets; or
75
<PAGE> 81
(b) has authority or responsibility to give, or regularly gives,
investment advice with respect to such assets pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such assets and that such advice will be based on
the particular needs of the plan; or
(c) is an employer of employees covered under the plan unless such
investment is made through an insurance company general or pooled separate
account or a bank collective investment fund and a prohibited transaction
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; or PTCE 84-14, which exempts transactions effected on behalf of a Plan
by a "qualified professional asset manager."
Due to the complexity of these rules and the penalties imposed, any plan
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.
76
<PAGE> 82
PLAN OF DISTRIBUTION
GENERAL
Under the terms of an underwriting agreement dated September --, 1999 for
the sale of the notes offered by this prospectus, the trust depositor has agreed
to sell to First Union Capital Markets Corp. as the underwriter and the
underwriter has agreed to purchase from the trust depositor, the principal
amount of the notes set forth below.
<TABLE>
<CAPTION>
INITIAL AGGREGATE UNDERWRITING
CLASS OF NOTES PRINCIPAL AMOUNT DISCOUNT PER NOTE
- -------------- ----------------- -----------------
<S> <C> <C>
A-1 $ -- --%
A-2 $ -- --%
A-3 $ -- --%
A-4 $ -- --%
B $ -- --%
C $ -- --%
</TABLE>
In the underwriting agreement, the underwriter has agreed, subject to the
terms and conditions set forth in the agreements, to purchase all the notes
offered by this prospectus if any of the notes are purchased.
The underwriter has advised the trust and the trust depositor that the
underwriter proposes initially to offer the notes of each of the following
classes to the public at the prices set forth on the cover page hereof and to
dealers at those prices less a selling concession not in excess of the following
percentages of the principal amounts of the notes:
<TABLE>
<CAPTION>
SELLING CONCESSION (AS A PERCENTAGE OF THE
CLASS OF NOTES PRINCIPAL AMOUNT OF THE CLASS OF NOTES)
- -------------- ------------------------------------------
<S> <C>
A-1 -- %
A-2 -- %
A-3 -- %
A-4 -- %
B -- %
C -- %
</TABLE>
Additionally, the underwriter may allow and the dealers may reallow a
concession not in excess of the following percentages of the principal amounts
of the notes:
<TABLE>
<CAPTION>
REALLOWANCE CONCESSION (AS A PERCENTAGE OF
CLASS OF NOTES THE PRINCIPAL AMOUNT OF THE CLASS OF NOTES)
- -------------- -------------------------------------------
<S> <C>
A-1 -- %
A-2 -- %
A-3 -- %
A-4 -- %
B -- %
C -- %
</TABLE>
The expenses of the offering of the notes are estimated to be approximately
$--.
The underwriting agreement provides that ORIX Credit Alliance, Inc. and the
trust depositor, jointly and severally, will indemnify the underwriter of the
notes against some civil liabilities, including liabilities under the Securities
Act of 1933, as amended, or contribute to payments the underwriters may be
required to make.
There is currently no secondary market for the notes and you should not
assume that one will develop. The underwriter currently expects, but is not
obligated, to make a market in the notes. You
77
<PAGE> 83
should not assume that any such market will develop, or if one does develop,
that it will continue or provide sufficient liquidity.
Until the distribution of the notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the underwriter to bid for and
purchase the notes. As an exception to these rules, the underwriter is permitted
to engage in some transactions that stabilize the price of the notes. These
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the notes.
Some of the persons participating in this offering may engage in
transactions that affect the price of the notes. These transactions may include
the purchase of the notes to cover syndicate short positions. If the underwriter
creates a short position in the notes in connection with the offering, i.e., if
it sells more notes than are set forth on the cover page of this prospectus, the
underwriter may reduce that short position by purchasing such classes of notes
in the open market. In general, purchases of a security to reduce a short
position could cause the price of the security to be higher than it might be in
the absence of such purchases.
Neither the originator nor the underwriter makes any representations or
prediction as to the direction or magnitude of any effect that the transactions
described above, if engaged in, may have on the prices of the notes. In
addition, neither the originator nor the underwriter makes any representation
that the underwriter will engage in those transactions or that those
transactions, once commenced, will not be discontinued without notice.
In the ordinary course of its business, the underwriter and its affiliates
have engaged and may engage in commercial banking and investment banking
transactions with ORIX Credit Alliance and its affiliates.
RATING OF THE NOTES
It is a condition to the issuance of the notes that they receive the
following ratings from the following rating agencies:
<TABLE>
<CAPTION>
STANDARD & POOR'S
CLASS MOODY'S INVESTORS SERVICE RATINGS GROUP FITCH IBCA, INC.
- ----- ------------------------- ----------------- ----------------
<S> <C> <C> <C>
Class A-1 Notes P-1 A-1+ F1+/AAA
Class A-2 Notes Aaa AAA AAA
Class A-3 Notes Aaa AAA AAA
Class A-4 Notes Aaa AAA AAA
Class B Notes A2 A A
Class C Notes Baa2 BBB BBB
</TABLE>
The rating will reflect only the views of the rating agencies and will be
based primarily on the subordination of some classes of notes to other classes
of notes as described in this prospectus, as well as the value and
creditworthiness of the contracts and equipment. The ratings are not a
recommendation to purchase, hold or sell the notes, since the ratings do not
comment as to market price or suitability for a particular investor. Each rating
may be subject to revision or withdrawal at any time by the assigning rating
agency. There is no assurance that any rating will continue for any period of
time or that it will not be lowered or withdrawn entirely by the rating agency
if, in its judgment, circumstances so warrant. A revision or withdrawal of the
rating may have an adverse affect on the market price of the notes. The rating
of the notes addresses the likelihood of the timely payment of interest and the
ultimate payment of principal on the notes as required by their terms. The
rating does not address the rate of prepayments that may be experienced on the
contracts and, therefore, does not address the effect of the rate of prepayments
on the return of principal to you.
78
<PAGE> 84
LEGAL MATTERS
Sullivan & Cromwell, New York, New York will provide a legal opinion
relating to the notes in its capacity as special counsel to the trust, the trust
depositor, the originator, the servicer and the administrator. --, Wilmington,
Delaware will provide a legal opinion relating to the notes in its capacity as
special Delaware legal counsel to the trust. Riker, Danzig, Scherer, Hyland and
Perretti, Morristown, New Jersey will provide a legal opinion relating to New
Jersey tax matters in its capacity as special New Jersey tax counsel to the
trust. Other legal matters for the underwriters will be passed upon by Moore &
Van Allen, PLLC, Charlotte, North Carolina.
EXPERTS
The balance sheet and footnote of ORIX Credit Alliance Receivables Trust
1999-A as of September --, 1999 included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report on page -- and are included in
this prospectus in reliance upon the authority of Arthur Andersen LLP as experts
in giving said reports.
79
<PAGE> 85
REPORT OF INDEPENDENT ACCOUNTANTS
TO ORIX CREDIT ALLIANCE RECEIVABLES TRUST 1999-A:
We have audited the accompanying balance sheet of ORIX Credit Alliance
Receivables Trust 1999-A (a Delaware Trust) as of inception, August 5, 1999.
This financial statement is the responsibility of the Company'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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of ORIX Credit Alliance Receivables
Trust 1999-A as of inception, August --, 1999, in conformity with generally
accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
New York, New York
September --, 1999
F-1
<PAGE> 86
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 1999-A
BALANCE SHEET AS OF SEPTEMBER --, 1999
<TABLE>
<S> <C>
Assets -- Cash........................................ $ 0
Beneficial Equity..................................... $ 0
Liabilities........................................... $ 0
</TABLE>
NOTES TO THE BALANCE SHEET
ORIX Credit Alliance Receivables Trust 1999-A (the "Trust") is a limited
purpose business trust established under the laws of the State of Delaware and
was formed on August --, 1999 by ORIX Credit Alliance Receivables Corporation II
(the "Trust Depositor"), and -- Bank (the "Owner Trustee") pursuant to the Trust
Agreement dated as of August --, 1999 between the Trust Depositor and the Owner
Trustee. The activities of the Trust are limited by the terms of the Trust
Agreement to acquiring, owning and managing lease, installment sales and loan
contracts and related assets, issuing and making payments on notes and
subordinate securities and other activities related thereto. Prior to and
including September --, 1999, the Trust did not conduct any activities.
The Trust Depositor will pay all fees and expenses related to the
organization and operations of the Trust (including any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Trust). The Trust Depositor has also agreed to indemnify the trustees, the
underwriter and certain other persons.
F-2
<PAGE> 87
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Principal........................................
Class A Percentage..........................................
Class A Principal Payment Amount............................
Class A Target Investor Principal Amount....................
Class B Floor...............................................
Class B Percentage..........................................
Class B Principal Payment Amount............................
Class B Target Investor Principal Amount....................
Class C Floor...............................................
Class C Percentage..........................................
Class C Principal Payment Amount............................
Cumulative Loss Amount......................................
Excess Contract.............................................
Excluded Amounts............................................
Monthly Principal Amount....................................
Original Pool Balance.......................................
Overcollateralization Balance...............................
Pool Balance................................................
Required Holders............................................
Required Reserve Amount.....................................
Substitute Contract.........................................
WAN.........................................................
Y2K.........................................................
</TABLE>
<PAGE> 88
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE SECURITIES OFFERED BY THIS PROSPECTUS, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER THIS PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$--
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 1999-A
$ -- -- % CLASS A-1 RECEIVABLE-BACKED NOTES, SERIES 1999-A
$ -- -- % CLASS A-2 RECEIVABLE-BACKED NOTES, SERIES 1999-A
$ -- -- % CLASS A-3 RECEIVABLE-BACKED NOTES, SERIES 1999-A
$ -- -- % CLASS A-4 RECEIVABLE-BACKED NOTES, SERIES 1999-A
$ -- -- % CLASS B RECEIVABLE-BACKED NOTES, SERIES 1999-A
$ -- -- % CLASS C RECEIVABLE-BACKED NOTES, SERIES 1999-A
ORIX CREDIT ALLIANCE RECEIVABLES CORPORATION II,
AS TRUST DEPOSITOR
ORIX CREDIT ALLIANCE, INC.,
AS SERVICER
----------------
PROSPECTUS
----------------
FIRST UNION CAPITAL MARKETS CORP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $1,668
Printing and Engraving Expenses.............................
Trustee's Fees and Expenses.................................
Legal Fees and Expenses.....................................
Blue Sky Fees and Expenses..................................
Accountants' Fees and Expenses..............................
Rating Agency Fees..........................................
Miscellaneous Fees..........................................
Total............................................. $
</TABLE>
- ---------------
* All amounts except the SEC Registration Fee are estimates of expenses incurred
or to be incurred in connection with the issuance and distribution of the
Notes in an aggregate principal amount assumed for these purposes to be equal
to $6,000,000 of Notes registered hereby.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes said corporation to buy directors'
and officers' liability insurance. Such indemnification is not exclusive of any
other right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
Pursuant to agreements which the Registrant may enter into with
underwriters or agents (forms of which will be included as exhibits to this
registration statement), officers and directors of the Registrant, and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against certain liabilities, including liabilities under the Securities
Act of 1933, as amended, arising from information which has been or will be
furnished to the Registrant by such underwriters or agents that appears in the
registration statement or any prospectus.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Inapplicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the trust depositor*
3.2 Bylaws of the trust depositor*
4.1 Form of Trust Agreement (including form of certificate)*
4.2 Form of Indenture (including form of notes)*
5.1 Opinion of Sullivan & Cromwell*
5.2 Opinion of --, special Delaware counsel*
</TABLE>
I-1
<PAGE> 90
<TABLE>
<C> <S>
8.1 Tax opinion of Sullivan & Cromwell (included in Exhibit
5.1)*
8.2 Tax opinion of Riker, Danzig, Scherer, Hyland and Perretti*
10.1 Form of Transfer and Servicing Agreement*
10.2 Form of Administration Agreement*
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)*
23.2 Consent of ', special Delaware counsel (included in Exhibit
5.2)*
23.3 Consent of Riker, Danzig, Scherer, Hyland and Perretti
(included in Exhibit 8.2)*
23.4 Consent of Arthur Andersen LLP*
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of indenture trustee*
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statements
Balance Sheet of ORIX Credit Alliance Receivables Trust 1999-A
ITEM 17. EXHIBITS AND FINANCIAL STATEMENTS
The undersigned Registrant hereby undertakes:
(a) That 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 provisions described
under Item 14 above, 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 Securities Act of 1933 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 connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
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.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(c) That, 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 securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(d) 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; and
I-2
<PAGE> 91
(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.
(e) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
I-3
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Secaucus,
State of New Jersey, on August 6, 1999.
ORIX CREDIT ALLIANCE RECEIVABLES TRUST
1999-A
By: ORIX CREDIT ALLIANCE RECEIVABLES
CORPORATION II, as trust depositor
By: /s/ JOSEPH J. MCDEVITT
------------------------------------
Name: Joseph J. McDevitt
Title: President
ORIX CREDIT ALLIANCE RECEIVABLES
CORPORATION II
By: /s/ JOSEPH J. MCDEVITT
------------------------------------
Name: Joseph J. McDevitt
Title: President
I-4
<PAGE> 93
POWER OF ATTORNEY
The undersigned directors and officers of ORIX Credit Alliance Receivables
Corporation II do hereby constitute and appoint Philip D. Cooper, Joseph J.
McDevitt, Hal B. Parkerson and Martin Rothman and any of them, with full power
of substitution, our true and lawful attorneys-in-fact and agents to do any and
all acts and things in our name and behalf in our capacities as directors and
officers, and to execute any and all instruments for us and in our names in the
capacities indicated below which such person may deem necessary or advisable to
enable the registrants to comply with the Securities Act of 1933 (the "Act"), as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this registration statement, including
specifically, but not limited to, power and authority to sign for us, or any of
us, in the capacities indicated below and any and all amendments (including
pre-effective and post-effective amendments or any other registration statement
filed pursuant to the provisions of Rule 462(b) under the Act) hereto; and we do
hereby ratify and confirm all that such person or persons shall do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Act, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PHILIP D. COOPER Chairman and Chief Executive August 6, 1999
- --------------------------------------------------- Officer and Director (Principal
Name: Philip D. Cooper Executive Officer)
/s/ JOSEPH J. MCDEVITT President, Chief Operating August 6, 1999
- --------------------------------------------------- Officer, Chief Financial
Name: Joseph J. McDevitt Officer and Director (Principal
Financial and Accounting
Officer)
/s/ SANDY KALLICK Senior Executive Vice President August 6, 1999
- --------------------------------------------------- and Director
Name: Sandy Kallick
Executive Vice President, August , 1999
- --------------------------------------------------- Secretary and Director
Name: Hal B. Parkerson
/s/ MARTIN ROTHMAN Executive Vice President, August 6, 1999
- --------------------------------------------------- Treasurer, Assistant Secretary
Name: Martin Rothman and Director
</TABLE>
I-5
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of the trust depositor*
3.2 Bylaws of the trust depositor*
4.1 Form of Trust Agreement (including form of certificates)*
4.2 Form of Indenture (including form of notes)*
5.1 Opinion of Sullivan & Cromwell*
5.2 Opinion of --, special Delaware counsel*
8.1 Tax opinion of Sullivan & Cromwell (included in Exhibit
5.1)*
8.2 Tax opinion of Riker, Danzig, Scherer, Hyland and Perretti *
10.1 Form of Transfer and Servicing Agreement*
10.2 Form of Administration Agreement*
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)*
23.2 Consent of --, special Delaware counsel (included in Exhibit
5.2)*
23.3 Consent of Riker, Danzig, Scherer, Hyland and Perretti
(included in Exhibit 8.2)
23.4 Consent of Arthur Andersen LLP*
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of indenture trustee*
</TABLE>
- ---------------
* To be filed by amendment.
