<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Registration Nos. 333-43312 and
333-43312-01
PROSPECTUS
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 2000-B
RECEIVABLE-BACKED NOTES, SERIES 2000-B
<TABLE>
<S> <C>
ORIX CREDIT ALLIANCE ORIX CREDIT ALLIANCE, INC.,
RECEIVABLES 2000-B CORPORATION, AS SERVICER
AS TRUST DEPOSITOR
</TABLE>
$315,458,950
(approximate)
------------------------
We are offering the following six classes of Receivable-Backed Notes,
Series 2000-B:
<TABLE>
<CAPTION>
INITIAL AGGREGATE FIRST UNDERWRITING
CLASS OF PRINCIPAL AMOUNT PAYMENT STATED MATURITY PRICE TO PUBLIC DISCOUNT
NOTES (APPROXIMATE) COUPON RATE DATE DATE PER NOTE PER NOTE
-------- ----------------- ----------- ------------------ ------------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $ 96,381,428 6.758180% September 15, 2000 September 15, 2001 100.00000% 0.135%
A-2 $ 48,507,758 6.97% September 15, 2000 October 15, 2002 99.99482% 0.225%
A-3 $112,075,114 7.05% September 15, 2000 July 15, 2004 99.99389% 0.300%
A-4 $ 44,227,662 7.14% September 15, 2000 September 15, 2007 99.98251% 0.400%
B $ 9,511,325 7.31% September 15, 2000 May 15, 2008 99.99034% 0.500%
C $ 4,755,663 7.63% September 15, 2000 August 15, 2008 99.99058% 0.750%
<CAPTION>
NET PROCEEDS
TO THE TRUST
DEPOSITOR
CLASS OF (BEFORE
NOTES EXPENSES)
-------- ------------
<S> <C>
A-1 $ 96,251,313
A-2 $ 48,396,103
A-3 $111,732,041
A-4 $ 44,043,016
B $ 9,462,850
C $ 4,719,547
</TABLE>
The total price to the public is $315,440,487. The total underwriting
discount is $835,617. The total proceeds to the trust is $314,604,870.
YOU SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" BEGINNING ON PAGE 10 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 SECURITIES, INC.
The date of this prospectus is August 24, 2000.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Important Notice about Information
Presented in this Prospectus............. i
Summary.................................... 1
Risk Factors............................... 10
The Absence of Existing Markets for the
Notes May Limit Your Ability to Resell
the Notes.............................. 10
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..... 10
The Price at Which You Can Resell Your
Notes May Decrease if the Ratings of
Your Notes Change...................... 10
The Subordination of the 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................................. 11
Because Disproportionate Amounts of
Contracts Relate to Four States,
Adverse Conditions in Those States and
Surrounding Regions May Cause Increased
Defaults and Delinquencies............. 11
Because Disproportionate Amounts of
Contracts Relate to Equipment Used in
Particular Industries, Adverse Economic
Conditions in Those Industries Have
Caused and May Continue to Cause
Increased Defaults and Delinquencies... 11
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................. 12
Servicer's Retention of Contract Files
May Hinder Our Ability to Realize the
Value of Equipment Securing the
Contracts.............................. 12
Failure to Record Assignment of Perfected
Security Interest May Hinder Our
Ability to Realize the Value of
Equipment Securing the Contracts....... 12
Repurchase Obligation of Trust Depositor
and Originator Provides You Only
Limited Protection Against Liens on the
Contracts.............................. 12
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................................ 13
Insolvency of the Trust Depositor or the
Trust Could Delay or Reduce Payments to
You.................................... 13
Proceeds From Required Sale of the
Contracts Following Trust Depositor
Bankruptcy May Not Be Sufficient to
Repay the Notes in Full................ 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
End-User Bankruptcy May Reduce or Delay
Collections on the Contracts........... 14
Transfer of Servicing May Delay Payments
to Noteholders Due to Contract
Processing Delays...................... 14
Book-Entry Registration Will Result in
Your Inability to Exercise Directly
Your Rights as a Noteholder............ 14
Use of Proceeds............................ 14
Calculation of Contract Principal
Balance.................................. 14
Composition of the Contracts............... 15
Distribution of the Contracts by Contract
Interest Rate.......................... 16
Distribution of the Contracts by Payment
Frequency.............................. 17
Distribution of the Contracts by State in
Which Obligors Are Located............. 18
Distribution of the Contracts by Obligor
Industry............................... 19
Distribution of the Contracts by Original
Principal Balance...................... 19
Distribution of the Contracts by Current
Principal Balance...................... 19
Distribution of the Contracts by Original
Contract Term.......................... 20
Distribution of the Contracts by
Remaining Months to Stated Maturity.... 20
Distribution of the Contracts by New/Used
Equipment Financed..................... 20
Delinquency and Loss Information........... 21
Contract Portfolio Delinquency
Experience............................. 21
Contract Portfolio Credit/Loss
Repossession Experience................ 22
Definition of Delinquency for the Contracts
Transferred to the Trust................. 23
The Contracts.............................. 23
End-User Contracts....................... 24
Conditional Sale Agreements.............. 24
Leases................................... 25
Secured Promissory Notes................. 26
Equipment................................ 26
Contract Files........................... 26
How Collections on the Contracts are
Treated................................ 26
Prepayment and Yield Considerations........ 27
Percentage of the Initial Class A-1 Notes
Principal Amount at the Annual Constant
Prepayment Rates Set Forth Below......... 28
Percentage of the Initial Class A-2 Notes
Principal Amount at the Annual Constant
Prepayment Rates Set Forth Below......... 29
Percentage of the Initial Class A-3 Notes
Principal Amount at the Annual Constant
Prepayment Rates Set Forth Below......... 30
Percentage of the Initial Class A-4 Notes
Principal Amount at the Annual Constant
Prepayment Rates Set Forth Below......... 31
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Percentage of the Initial Class B Notes
Principal Amount at the Annual Constant
Prepayment Rates Set Forth Below......... 32
Percentage of the Initial Class C Notes
Principal Amount at the Annual Constant
Prepayment Rates Set Forth Below......... 33
Weighted Average Life...................... 34
ORIX Credit Alliance, Inc. ................ 37
Equipment Finance Business............... 37
Ancillary Businesses..................... 37
Summary Financial Data................... 38
Management............................... 38
Credit Approval, Collection and
Review Process......................... 40
Terms of Contracts..................... 41
Recourse Provisions.................... 41
Extension/Revision Procedures.......... 42
Pre-Litigation Workout/Judgment
Recovery............................ 42
Legal Proceedings...................... 42
The Trust.................................. 43
General.................................. 43
Termination of Trust..................... 43
Other Information........................ 43
The Trust Depositor........................ 44
Description of the Notes and Indenture..... 44
General.................................. 45
Interest and Principal................... 45
Amounts Available for Payments on the
Notes.................................. 45
Allocations.............................. 47
Prior to an Event of Default........... 47
Following an Event of Default.......... 48
Reserve Fund............................. 52
Spread Fund.............................. 52
Collection Account and Collection
Period................................. 53
Events of Default........................ 55
Remedies After Events of Default......... 56
The Indenture Trustee.................... 56
Governing Law............................ 57
Amendments............................... 57
Servicing Compensation and Payment of
Expenses............................... 58
Optional Redemption...................... 59
Mandatory Redemption..................... 59
Reports.................................. 59
List of Noteholders...................... 60
Administration Agreement................. 60
Book-Entry Registration.................. 61
Issuance of Certificated Notes at a Later
Date................................... 64
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Certificates........................... 64
The Transfer and Servicing Agreement....... 65
Conveyance of the Contracts.............. 65
Representations and Warranties;
Definition of Eligible Contracts....... 65
Remedies for Breaches of Representations
and Warranties; Definition of
Ineligible Contracts................... 68
Concentration Amounts; Definition of
Excess Contract........................ 69
Material Modifications to Contracts...... 70
Substitute Contracts..................... 71
Definition of Defaulted Contracts........ 71
Indemnification.......................... 71
Servicing Standard and Servicer
Advances............................... 72
Servicer Resignation..................... 72
Servicer Default......................... 73
Evidence as to Compliance................ 74
Amendments............................... 74
The Owner Trustee........................ 75
Material Federal Income Tax
Considerations........................... 76
General.................................. 76
Classification of the Notes and the
Trust.................................. 76
General Tax Treatment of Noteholders..... 77
United States Holders.................. 77
Payments of Interest................... 77
Purchase, Sale and Retirement of the
Notes............................... 77
Backup Withholding and Information
Reporting........................... 77
United States Alien Holders............ 78
Backup Withholding and Information
Reporting........................... 79
State and Local Tax Considerations......... 79
New Jersey Tax Considerations............ 79
Other States............................. 79
Legal Investment........................... 79
ERISA Considerations....................... 80
Prohibited Transactions.................. 80
Plan of Distribution....................... 81
General.................................. 81
Rating of the Notes........................ 82
Legal Matters.............................. 83
Experts.................................... 83
Index of Terms............................. 84
Report of Independent Public Accountants... F-1
ORIX Credit Alliance Receivables Trust
2000-B Balance Sheet as of August 17,
2000..................................... F-2
Notes to the Balance Sheet................. F-2
</TABLE>
<PAGE> 4
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.
i
<PAGE> 5
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" beginning on page 10 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 2000-B,
a Delaware business trust, was established
pursuant to the trust agreement dated as of
August 17, 2000. The Trust's offices will be in
care of The Bank of New York (Delaware), as
owner trustee, at 502 White Clay Center,
Newark, Delaware 19714-6973, telephone number
(302) 283-8079.
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. ORIX Credit Alliance, Inc.'s
principal executive offices are located at 300
Lighting Way, Secaucus, New Jersey 07096-1525,
telephone (201) 601-9000.
THE TRUST DEPOSITOR........... ORIX Credit Alliance Receivables 2000-B
Corporation. 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) 601-0220.
THE SERVICER.................. ORIX Credit Alliance, Inc.
THE INDENTURE TRUSTEE......... The Bank of New York, a New York state banking
corporation.
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
1
<PAGE> 6
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
equipment purchased and is in most instances
less than the cost to the obligor of the
financed equipment.
As of August 1, 2000, approximately 12.50% 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 from ORIX Credit Alliance, Inc.'s
portfolio of contracts that meet the
eligibility 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 August 1, 2000, contracts of
any single obligor or commonly controlled group
of obligors do not constitute more than
approximately 1.0% of the aggregate outstanding
principal balance of the contracts, and no more
than 9.31% of the aggregate outstanding
principal balance of the contracts relates to
obligors located in the same state.
As of August 1, 2000, 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> 7
As of August 1, 2000, the contracts had the
following characteristics:
<TABLE>
<S> <C>
Number of contracts........................ 4,683
Aggregate contract outstanding principal
balance.................................. $317,044,171
Average contract outstanding principal
balance.................................. $67,701
Weighted average contract rate............. 10.23%
Weighted average original term............. 50.94 months
Range...................................... 9-84 months
Weighted average remaining term............ 42.42 months
Range...................................... 5-84 months
</TABLE>
Changes in characteristics of the contracts
between August 1, 2000 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 Contract".
The trust depositor may replace a contract that
is part of the trust's assets with a substitute
contract or contracts:
- if the trust depositor subsequently
determines 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 the trust depositor 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 Contract";
- if such contract is prepaid; or
- if such contract becomes a defaulted
contract.
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
3
<PAGE> 8
available to make payment on the notes. The
initial balance of the reserve fund will be
approximately $4,731,885, which will equal 1.5%
of the original principal balance of the notes.
Additional deposits will be required to be made
in subsequent months out of available
collections on the contracts to this fund (a)
to increase the reserve fund to an amount equal
to the greater of (i) 3% of the outstanding
principal of the notes and (ii) the lesser of
(A) 1% of the initial principal of the notes
and (B) the outstanding principal of the notes
and (b) in subsequent months thereafter, 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 the indenture trustee 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 required above. 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 and amounts, if any, on deposit in
the spread fund are less than the amount needed
to pay interest on or principal of the notes
then due, the indenture trustee will withdraw
funds from the reserve fund to pay the interest
and principal due.
The conditions under which we will withdraw
amounts from the reserve fund are more
specifically described in "Description of the
Notes and Indenture -- Allocations" and
"-- Reserve Fund".
C. SPREAD FUND................ On the closing date the trust depositor will
establish an additional bank account, the
spread fund, in the name of the indenture
trustee to hold available funds whenever a
spread event exists. A spread event will exist
if any of the following occurs and is
continuing: (a) ORIX Credit Alliance, Inc. is
no longer the servicer, (b) the average monthly
rate of delinquencies on contracts in excess of
90 days over any three consecutive months
exceeds 5% of the aggregate outstanding
principal balance of the contracts or (c) the
cumulative net loss percentage with respect to
the contracts exceeds a specified "loss trigger
percentage" (initially 1.00%) that will be
increased over time.
Notwithstanding the foregoing: (i) the spread
event referred to in clause (b) above may be
cured on any distribution date if the
three-month delinquency percentage for the
preceding two collection periods is less than
or equal to 5% for each of such periods and
(ii) the spread event referenced in clause (c)
may be cured if the cumulative net loss
percentage is less than the associated loss
trigger percentage for that period. Amounts
that may be held in this fund provide you with
additional 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
additional protection will be adequate to
prevent shortfalls in amounts available to make
4
<PAGE> 9
payment on the notes. If on any payment date, a
spread event exists and the amounts available
for distribution exceed the amounts needed to
pay amounts owed to the servicer (including
amounts due to the indenture trustee) to pay
interest and principal on the notes and to make
any required deposits to the reserve fund, the
excess will be deposited into the spread fund.
Investment earnings on amounts held in the
spread 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 and principal due on the notes and
make all required deposits to the reserve fund,
the indenture trustee will withdraw funds from
the spread fund to pay the interest and
principal and make such deposits. If on any
subsequent payment date, no spread event
continues to exist, amounts in the spread fund
will be distributed in the same order of
priority as are amounts in the collection
account.
The calculations related to a spread event and
the conditions under which we will withdraw
amounts from the spread fund are more
specifically described in the "Description of
the Notes and Indenture -- Allocations" and
"-- Spread 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 and the spread fund (if
any);
- 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;
- amounts in the reserve fund more
specifically described in "Description
of the Notes and Indenture -- Reserve
Fund"; and
- amounts in the spread fund more
specifically described in "Description
of the Notes and Indenture -- Spread
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
5
<PAGE> 10
minimum denominations; provided, however, that
one note of each class will be available for
purchase in an incremental denomination of less
than $1,000. 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 continues unremedied for
a period of sixty days, 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, if a
successor servicer is being appointed, we will
pay the indenture trustee's costs and expenses
associated with that appointment (which will
not in the aggregate exceed $100,000). Third,
we will pay the servicer's monthly servicing
fee (which includes therein amounts due to the
indenture trustee and the owner trustee).
Fourth, 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>
6
<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.
7
<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
- pro rata, to the 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 15% of the initial aggregate principal
balance of the contracts as of August 1, 2000,
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
and the amount of any servicer advances made
and not reimbursed.
G. MANDATORY REDEMPTION....... If on any payment date, the aggregate amounts
on deposit in the collection account, the
reserve fund and the spread 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 (including therein amounts
owed to the indenture trustee) and (iv)
unreimbursed servicer advances, the amounts on
deposit in the reserve fund and the spread fund
will be deposited in the collection account and
used to redeem the notes in full. 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 1.00% and
8
<PAGE> 13
(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. Amounts payable to the indenture
trustee and owner trustee are included in such
fee.
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 will be
characterized as debt, and the 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
NOTE SERVICE, INC. RATINGS GROUP FITCH, 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".
9
<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 some of the contracts permit prepayment. Where prepayments are
permitted, obligors may be 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
Considerations". 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, Inc., Standard & Poor's Ratings Group and Fitch,
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 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 and the spread fund if
delinquencies and defaults on the contracts increase and if the collections on
the contracts and amounts in the reserve fund and the spread fund are
insufficient to pay even the more senior classes of notes.
10
<PAGE> 15
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 and amounts held in the reserve fund and the spread
fund (if any) 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 and spread fund (if any) 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 FOUR 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 are substantial concentrations 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 August 1, 2000,
approximately 9.31% of the aggregate principal balance of the contracts held by
the trust related to obligors located in California, 8.20% to obligors in
Florida, 7.91% to obligors in New Jersey and 6.68% to obligors in New York. No
other state accounts for more than 5.00% of the aggregate principal balance of
the contracts. The contracts in these four states represent in the aggregate
approximately 32.10% 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 HAVE
CAUSED AND MAY CONTINUE TO CAUSE INCREASED DEFAULTS AND DELINQUENCIES
If 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
August 1, 2000, contracts constituting approximately 49.67% of the aggregate
principal balance of the contracts held by the trust relate to equipment used in
the trucking industry, 27.04% relate to the construction and road building
business and 5.73% relate to the wood and pulp business. For example, the
current rise in fuel costs is affecting the cash flows of our transportation
customers by hurting their ability to meet their installment obligations to us.
In addition, an economic downturn in the logging industry is also negatively
impacting our wood and pulp industries portfolio. In the future, a reduction in
the demand for trucking and transportation services may consequently cause an
additional increase in delinquencies and defaults on contracts with obligors
associated with the trucking and transportation industry. A decrease in the
demand in the new construction and road building industry or the wood and pulp
industry could reduce revenues in the construction and road building industry or
the wood and pulp industry, as the case may be, and this may consequently
further 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.
11
<PAGE> 16
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 -- 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 and the spread fund
are intended to make up for deficiencies in the proceeds and recoveries on the
contracts. However, this protection is limited and could be depleted if those
deficiencies are larger than 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 the 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 more than 4,600 Uniform
Commercial Code financing statements in 47 states and the District of Columbia
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. In
addition, certificates or filings with respect to any titled equipment which
name the originator as lienholder will not be amended to evidence 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 or
on the title registrations, as applicable, 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 and, in the case of titled equipment,
to have its lienholder status noted on the certificate of title, 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 and/or the related
equipment 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
12
<PAGE> 17
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 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 the trust requests
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 its transfer
agreement with the trust depositor, 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.
13
<PAGE> 18
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.
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.
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
Depository 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 Clearstream Luxembourg
(formerly 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 Clearstream Luxembourg or by directly
contacting the indenture trustee and providing proof of ownership or beneficial
interest. 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.
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.
14
<PAGE> 19
COMPOSITION OF THE CONTRACTS
On the closing date the trust depositor will transfer to the trust the
contracts as of August 1, 2000 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 a pool of contracts that met the eligibility
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
Contract." 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 originator will
sell the contracts to the trust depositor on the closing date under a separate
transfer 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 August 1, 2000. 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 obligor industry is based on ORIX Credit Alliance,
Inc.'s customary procedures for determining obligor industry.
- 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 August 15, 2007.
Some of the contracts intended, as of August 1, 2000, 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
August 1, 2000 as presented in this prospectus, the variance will not be
material. Changes in the characteristics of the contracts between August 1, 2000
and the closing date will not affect more than 5.00% of the aggregate principal
balance of the contracts.
The information presented in the following tables is as of August 1, 2000.
The percentages and balances set forth in each of the following tables may not
total due to rounding.
<TABLE>
<S> <C>
NUMBER OF CONTRACTS......................................... 4,683
AGGREGATE CONTRACT OUTSTANDING PRINCIPAL BALANCE............ $317,044,171
AVERAGE CONTRACT OUTSTANDING PRINCIPAL BALANCE.............. $67,701
WEIGHTED AVERAGE CONTRACT RATE.............................. 10.23%
WEIGHTED AVERAGE ORIGINAL TERM.............................. 50.94 MONTHS
(RANGE) (IN MONTHS)......................................... 9-84 MONTHS
WEIGHTED AVERAGE REMAINING TERM............................. 42.42 MONTHS
(RANGE) (IN MONTHS)......................................... 5-84 MONTHS
</TABLE>
15
<PAGE> 20
DISTRIBUTION OF THE CONTRACTS BY CONTRACT INTEREST RATE
AS OF AUGUST 1, 2000
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
CONTRACT INTEREST RATE RANGE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
8.501%- 9.000%........................... 160 3.42% $ 15,187,989 4.79%
9.001%- 9.500%........................... 719 15.35 59,591,068 18.80
9.501%-10.000%........................... 1,191 25.43 90,325,840 28.49
10.001%-10.500%........................... 793 16.93 55,749,013 17.58
10.501%-11.000%........................... 599 12.79 40,186,748 12.68
11.001%-11.500%........................... 311 6.64 19,932,565 6.29
11.501%-12.000%........................... 206 4.40 9,597,738 3.03
12.001%-12.500%........................... 163 3.48 7,946,879 2.51
12.501%-13.000%........................... 173 3.69 6,955,262 2.19
13.001%-13.500%........................... 114 2.43 4,031,747 1.27
13.501%-14.000%........................... 69 1.47 2,454,414 0.77
14.001%-14.500%........................... 50 1.07 1,746,107 0.55
14.501%-15.000%........................... 41 0.88 1,048,169 0.33
15.001%-15.500%........................... 41 0.88 1,116,672 0.35
15.501%-16.000%........................... 32 0.68 776,783 0.25
Greater Than 16%.......................... 21 0.45 397,178 0.13
----- ------ ------------ -------
TOTAL........................... 4,683 100.00% $317,044,171 100.00%
===== ====== ============ =======
</TABLE>
16
<PAGE> 21
DISTRIBUTION OF THE CONTRACTS BY PAYMENT FREQUENCY
AS OF AUGUST 1, 2000
Constant monthly payment contracts generally provide for regular monthly
payments by obligors of a constant fixed amount. Skip payment contracts are used
for 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 omit required payments for generally
up to three months per year. Other customized payment contracts provide for
payment schedules that may entail various combinations of skip payments, reduced
payments and balloon payments to match anticipated variations in obligors' cash
flows. Balloon payment contracts generally provide for regular monthly payments
by obligors of a smaller fixed amount than a constant monthly payment rate would
require but also provide for a larger balloon payment at the end of the contract
term. Scheduled payments on balloon contracts, skip contracts and other
customized contracts are at 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.
<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>
Constant Monthly Payments................. 4,320 92.25% $277,397,859 87.50%
Skip Payments............................. 158 3.37 19,537,198 6.16
Other Customized Payments................. 127 2.71 10,773,880 3.40
Balloon Payments.......................... 78 1.67 9,335,234 2.94
----- ------ ------------ ------
TOTAL(1)........................ 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
17
<PAGE> 22
DISTRIBUTION OF THE CONTRACTS BY STATE IN WHICH OBLIGORS ARE LOCATED
AS OF AUGUST 1, 2000
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
STATE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
----- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama............................. 140 2.99% $ 11,168,845 3.52%
Arizona............................. 63 1.35 3,705,028 1.17
Arkansas............................ 40 0.85 2,816,776 0.89
California.......................... 504 10.76 29,514,194 9.31
Colorado............................ 28 0.60 3,231,172 1.02
Connecticut......................... 70 1.49 5,074,796 1.60
Delaware............................ 40 0.85 2,455,648 0.77
District of Columbia................ 12 0.26 485,289 0.15
Florida............................. 378 8.07 26,001,106 8.20
Georgia............................. 169 3.61 14,182,146 4.47
Idaho............................... 22 0.47 884,591 0.28
Illinois............................ 222 4.74 11,542,534 3.64
Indiana............................. 169 3.61 9,831,027 3.10
Iowa................................ 13 0.28 783,021 0.25
Kansas.............................. 16 0.34 1,159,131 0.37
Kentucky............................ 85 1.82 4,678,077 1.48
Louisiana........................... 24 0.51 2,195,317 0.69
Maine............................... 53 1.13 3,307,768 1.04
Maryland............................ 142 3.03 10,067,388 3.18
Massachusetts....................... 160 3.42 9,360,373 2.95
Michigan............................ 48 1.02 2,852,552 0.90
Minnesota........................... 19 0.41 1,438,559 0.45
Mississippi......................... 76 1.62 5,171,113 1.63
Missouri............................ 38 0.81 2,473,551 0.78
Montana............................. 3 0.06 227,690 0.07
Nebraska............................ 7 0.15 505,430 0.16
Nevada.............................. 23 0.49 1,366,911 0.43
New Hampshire....................... 89 1.90 4,025,656 1.27
New Jersey.......................... 353 7.54 25,070,607 7.91
New Mexico.......................... 25 0.53 2,125,058 0.67
New York............................ 306 6.53 21,175,925 6.68
North Carolina...................... 125 2.67 7,463,926 2.35
North Dakota........................ 3 0.06 366,693 0.12
Ohio................................ 189 4.04 11,569,443 3.65
Oklahoma............................ 29 0.62 2,693,992 0.85
Oregon.............................. 109 2.33 9,787,776 3.09
Pennsylvania........................ 103 2.20 7,252,928 2.29
Rhode Island........................ 35 0.75 1,925,263 0.61
South Carolina...................... 81 1.73 5,148,968 1.62
Tennessee........................... 141 3.01 10,135,328 3.20
Texas............................... 175 3.74 12,518,836 3.95
Utah................................ 15 0.32 912,691 0.29
Vermont............................. 27 0.58 2,214,474 0.70
Virginia............................ 126 2.69 9,447,775 2.98
Washington.......................... 84 1.79 5,657,728 1.78
West Virginia....................... 80 1.71 9,118,759 2.88
Wisconsin........................... 20 0.43 1,693,511 0.53
Wyoming............................. 4 0.09 258,804 0.08
----- ------ ------------ ------
TOTAL(1).................. 4,683 100.00% $317,044,171 100.0%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
18
<PAGE> 23
DISTRIBUTION OF THE CONTRACTS BY OBLIGOR INDUSTRY
AS OF AUGUST 1, 2000
(ORDERED BY PERCENTAGE OF AGGREGATE PRINCIPAL BALANCE)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
OBLIGOR INDUSTRY CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Trucking............................ 2,709 57.85% $157,480,091 49.67%
Construction and Road Building...... 1,114 23.79 85,715,258 27.04
Wood and Pulp Industries............ 223 4.76 18,155,857 5.73
Machine Shop........................ 214 4.57 14,884,536 4.69
Cranes and Crane Rental............. 90 1.92 14,723,283 4.64
Other............................... 333 7.11 26,085,146 8.23
----- ------ ------------ ------
TOTAL(1).................. 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
DISTRIBUTION OF THE CONTRACTS BY ORIGINAL PRINCIPAL BALANCE
AS OF AUGUST 1, 2000
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
ORIGINAL GROSS NUMBER OF NUMBER OF AGGREGATE AGGREGATE
PRINCIPAL BALANCE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 1,000-$ 20,000................. 263 5.62% $ 3,024,627 0.95%
$ 20,001-$ 40,000................. 926 19.77 21,059,669 6.64
$ 40,001-$ 60,000................. 967 20.65 35,698,949 11.26
$ 60,001-$ 80,000................. 659 14.07 31,916,364 10.07
$ 80,001-$ 100,000.................. 642 13.71 44,253,301 13.96
$100,001-$ 250,000.................. 992 21.18 104,721,413 33.03
$250,001-$ 500,000.................. 185 3.95 46,792,550 14.76
$500,001-$1,000,000................. 42 0.90 22,502,284 7.10
Greater Than $1,000,000............. 7 0.15 7,075,013 2.23
----- ------ ------------ ------
TOTAL(1).................. 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
DISTRIBUTION OF THE CONTRACTS BY CURRENT PRINCIPAL BALANCE
AS OF AUGUST 1, 2000
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
CURRENT PRINCIPAL NUMBER OF NUMBER OF AGGREGATE AGGREGATE
BALANCE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ 1,000-$ 20,000................. 878 18.75% $ 11,492,569 3.62%
$ 20,001-$ 40,000................. 1,259 26.88 37,151,823 11.72
$ 40,001-$ 60,000................. 797 17.02 39,234,448 12.38
$ 60,001-$ 80,000................. 478 10.21 33,497,462 10.57
$ 80,001-$ 100,000.................. 505 10.78 45,028,158 14.20
$100,001-$ 250,000.................. 622 13.28 88,927,404 28.05
$250,001-$ 500,000.................. 109 2.33 36,907,955 11.64
$500,001-$1,000,000................. 33 0.70 22,213,686 7.01
Greater Than $1,000,000............. 2 0.04 2,590,666 0.82
----- ------ ------------ ------
TOTAL(1).................. 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
19
<PAGE> 24
DISTRIBUTION OF THE CONTRACTS BY ORIGINAL CONTRACT TERM
AS OF AUGUST 1, 2000
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
ORIGINAL TERM NUMBER OF NUMBER OF AGGREGATE AGGREGATE
(MONTHS) CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1-12............................... 23 0.49% $ 1,117,659 0.35%
13-24............................... 240 5.12 7,998,506 2.52
25-36............................... 979 20.91 54,260,953 17.11
37-48............................... 1,414 30.19 92,399,045 29.14
49-60............................... 1,879 40.12 140,105,936 44.19
61-72............................... 124 2.65 12,462,765 3.93
73-84............................... 24 0.51 8,699,307 2.74
----- ------ ------------ ------
TOTAL:(1)................. 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
DISTRIBUTION OF THE CONTRACTS BY REMAINING MONTHS TO STATED MATURITY
AS OF AUGUST 1, 2000
<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............................... 455 9.72% $ 9,246,927 2.92%
13-24............................... 867 18.51 30,147,201 9.51
25-36............................... 1,153 24.62 67,847,489 21.40
37-48............................... 996 21.27 85,609,092 27.00
49-60............................... 1,175 25.09 112,511,146 35.49
61-72............................... 17 0.36 4,428,731 1.40
73-84............................... 20 0.43 7,253,584 2.29
----- ------ ------------ ------
TOTAL:(1)................. 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
DISTRIBUTION OF THE CONTRACTS BY NEW/USED EQUIPMENT FINANCED
AS OF AUGUST 1, 2000
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF AGGREGATE AGGREGATE
NEW/USED EQUIPMENT CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------ --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
New Equipment....................... 2,636 56.29% $178,846,758 56.41%
Used Equipment...................... 1,832 39.12 114,279,718 36.05
Mixed (New and Used)................ 215 4.59 23,917,694 7.54
----- ------ ------------ ------
TOTAL:(1)................. 4,683 100.00% $317,044,171 100.00%
===== ====== ============ ======
</TABLE>
---------------
(1) Amounts in columns may not total due to rounding.
20
<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 and affiliated trusts), 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.
The data presented in the following tables as at and for the three months
ended June 30, 2000 and June 30, 1999 are derived from unaudited financial
information of ORIX Credit Alliance, Inc. The data presented in the following
tables as at and for the twelve months ended March 31, 2000, March 31, 1999 and
March 31, 1998 are derived from audited financial information of ORIX Credit
Alliance, Inc.
CONTRACT PORTFOLIO
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
AS OF
<TABLE>
<CAPTION>
JUNE 30, 2000 JUNE 30, 1999 MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 1998
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT.............. $2,832,347 74.7% $2,709,980 75.3% $2,860,719 76.0% $2,724,249 79.7% $2,435,695 79.4%
PAST DUE (1):
1-30 days............ 535,513 14.1 504,739 14.0 513,291 13.6 441,796 12.9 415,112 13.5
31-60 days........... 256,688 6.8 224,815 6.2 260,021 6.9 165,520 4.8 152,558 5.0
61-90 days........... 52,929 1.4 68,481 1.9 40,487 1.1 27,302 0.8 18,461 0.6
91-120 days.......... 28,227 0.7 30,239 0.8 19,055 0.5 10,320 0.3 11,659 0.4
121-180 days......... 32,748 0.9 25,258 0.7 22,627 0.6 18,359 0.5 9,134 0.3
Over 180 days........ 53,767 1.4 36,680 1.0 46,852 1.2 29,423 0.9 23,573 0.8
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
GROSS
RECEIVABLES(2)..... $3,792,219 100.0% $3,600,192 100.0% $3,763,052 100.0% $3,416,969 100.0% $3,066,192 100.0%
========== ===== ========== ===== ========== ===== ========== ===== ========== =====
</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.
(2) Amounts in columns may not total due to rounding.
21
<PAGE> 26
CONTRACT PORTFOLIO
CREDIT/LOSS REPOSSESSION EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
FOR THE
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 MARCH 31, 2000 MARCH 31, 1999 MARCH 31, 1998
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
AVERAGE GROSS OWNED AND
MANAGED PORTFOLIO
OUTSTANDING DURING THE
PERIOD.................... $3,777,636(3) $3,508,581 $3,590,011 $3,241,581 $2,941,565
AVERAGE REPOSSESSIONS AS A
PERCENT OF AVERAGE GROSS
PORTFOLIO
OUTSTANDING(2)............ 1.06% 0.68% 0.83% 0.62% 0.66%
NET LOSSES AS A PERCENT OF
LIQUIDATIONS(4)(5)(6)..... 1.10% 0.49% 0.76% 0.57% 0.58%
NET LOSSES AS A PERCENT OF
AVERAGE GROSS OWNED
PORTFOLIO
OUTSTANDING(2)(4)(5)...... 0.52% 0.25% 0.39% 0.30% 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 for the owned and managed portfolio.
(2) Annualized.
(3) Excludes secured asset-based loans of $252.6 million at June 30, 2000.
(4) A portion of the contracts provides for full or partial recourse to vendor
assignors. Approximately 14%, 11%, and 12% of the aggregate principal
amounts of the contracts acquired during the years ended March 31, 2000,
1999 and 1998, respectively, provide for full or partial recourse to vendor
assignors.
(5) 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 assignor through recourse arrangements, excluding any
losses resulting from repossession expenses.
(6) 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.
The delinquency and loss information set forth above includes receivables
purchased by ORIX Credit Alliance, Inc. as part of its rediscount operation from
other commercial finance companies. As of June 30, 2000, approximately $115.4
million of net receivable contracts (or approximately 3.8% of total net
receivable contracts) were attributable to such rediscount operations. None of
these receivable contracts are included in the contracts that will be
transferred to the trust. For information regarding a recent development
regarding these purchased receivables, see "ORIX Credit Alliance,
Inc. -- Ancillary Businesses."
THREE MONTHS ENDED JUNE 30, 2000 VERSUS THREE MONTHS ENDED JUNE 30, 1999
The amounts over 90 days past due, as a percentage of total gross
receivables, increased to 3.0% at June 30, 2000 from 2.5% at June 30, 1999.
Average repossessions as a percentage of average gross
22
<PAGE> 27
portfolio for the three months ended June 30, 2000 increased to 1.06% from 0.68%
for the three months ended June 30, 1999.
Net losses as a percentage of liquidations increased to 1.10% for the three
months ended June 30, 2000 when compared to 0.49% for the three months ended
June 30, 1999. Net losses as a percentage of the average gross owned portfolio
outstanding increased to 0.52% for the three months ended June 30, 2000 from
0.25% for the three months ended June 30, 1999.
The negative portfolio trends relate primarily to two industries. Rising
fuel costs are affecting the cash flows of our transportation customers which,
in turn, affects their ability to meet their installment obligations to us. We
are also seeing negative trends in our wood and pulp industries portfolio as a
result of an economic downturn in the logging industry.
TWELVE MONTHS ENDED MARCH 31, 2000 VERSUS TWELVE MONTHS ENDED MARCH 31, 1999
The amounts over 90 days past due, as a percentage of total gross
receivables, increased to 2.3% at March 31, 2000 from 1.7% at March 31, 1999.
Average repossessions as a percentage of average gross portfolio outstanding for
the twelve months ended March 31, 2000 increased to 0.83% from 0.62% for the
twelve months ended March 31, 1999. Net losses as a percentage of liquidations
increased to 0.76% for the twelve months ended March 31, 2000 from 0.57% for the
twelve months ended March 31, 1999. Net losses as a percentage of the average
gross owned portfolio outstanding increased to 0.39% for the twelve months ended
March 31, 2000 from 0.30% for the twelve months ended March 31, 1999.
The negative portfolio trends relate primarily to two industries. Rising
fuel costs are affecting the cash flows of our transportation customers which,
in turn, affects their ability to meet their installment obligations to us. We
are also seeing negative trends in our wood and pulp industries portfolio as a
result of an economic downturn in the logging industry.
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 to 1.7% at March 31, 1999 from 1.5% at March 31, 1998.
Average repossessions as a percentage of average gross portfolio outstanding for
the twelve months ended March 31, 1999 decreased to 0.62% from 0.66% for the
twelve months ended March 31, 1998. Net losses as a percentage of liquidations
decreased to 0.57% for the twelve months ended March 31, 1999 from 0.58% for the
twelve months ended March 31, 1998. Net losses as a percentage of the average
gross owned portfolio outstanding was 0.30% for both of the twelve months ended
March 31, 1999 and 1998. We believe that stability in delinquency and loss
experience during this period was 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 August 1, 2000 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
Payments on the Notes". All of the contracts are commercial contracts.
23
<PAGE> 28
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.
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 -- Representations 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 at times 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.
24
<PAGE> 29
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 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
25
<PAGE> 30
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;
- 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.
26
<PAGE> 31
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 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 15% of the
aggregate principal balance of the contracts as of August 1, 2000, 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 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%, 9.00%, 12.00%, 15.00% and 18.00%, 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
27
<PAGE> 32
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 August 1, 2000, 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 15% of the aggregate principal
balance of the contracts as of August 1, 2000, and assumes the closing date for
the transfer of the contracts to the trust is August 31, 2000. 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 $ 96,381,428 6.758180%
A-2 $ 48,507,758 6.97%
A-3 $112,075,114 7.05%
A-4 $ 44,227,662 7.14%
B $ 9,511,325 7.31%
C $ 4,755,663 7.63%
</TABLE>
PERCENTAGE OF THE INITIAL CLASS A-1 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% CPR 9% CPR 12% CPR 15% CPR 18% CPR
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing.................................. 100.00% 100.00% 100.00% 100.00% 100.00%
09/15/2000............................... 90.98 88.47 87.59 86.67 85.73
10/15/2000............................... 82.69 77.83 76.12 74.36 72.55
11/15/2000............................... 74.19 67.12 64.65 62.12 59.51
12/15/2000............................... 65.63 56.51 53.34 50.10 46.77
01/15/2001............................... 57.10 46.08 42.26 38.37 34.40
02/15/2001............................... 49.00 36.20 31.79 27.31 22.75
03/15/2001............................... 41.03 26.57 21.63 16.61 11.51
04/15/2001............................... 32.94 16.98 11.55 6.05 0.49
05/15/2001............................... 24.59 7.27 1.41 0.00 0.00
06/15/2001............................... 16.29 0.00 0.00 0.00 0.00
07/15/2001............................... 8.00 0.00 0.00 0.00 0.00
08/15/2001............................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (Years) to
Call:............................... 0.49yr 0.39yr 0.37yr 0.34yr 0.32yr
</TABLE>
28
<PAGE> 33
PERCENTAGE OF THE INITIAL CLASS A-2 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% CPR 9% CPR 12% CPR 15% CPR 18% CPR
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing.................................. 100.00% 100.00% 100.00% 100.00% 100.00%
09/15/2000............................... 100.00 100.00 100.00 100.00 100.00
10/15/2000............................... 100.00 100.00 100.00 100.00 100.00
11/15/2000............................... 100.00 100.00 100.00 100.00 100.00
12/15/2000............................... 100.00 100.00 100.00 100.00 100.00
01/15/2001............................... 100.00 100.00 100.00 100.00 100.00
02/15/2001............................... 100.00 100.00 100.00 100.00 100.00
03/15/2001............................... 100.00 100.00 100.00 100.00 100.00
04/15/2001............................... 100.00 100.00 100.00 100.00 100.00
05/15/2001............................... 100.00 100.00 100.00 91.69 80.68
06/15/2001............................... 100.00 95.85 84.33 72.75 61.10
07/15/2001............................... 100.00 78.56 66.43 54.27 42.07
08/15/2001............................... 99.59 61.63 48.97 36.32 23.66
09/15/2001............................... 84.74 45.21 32.11 19.04 6.01
10/15/2001............................... 70.09 29.21 15.73 2.33 0.00
11/15/2001............................... 55.43 13.43 0.00 0.00 0.00
12/15/2001............................... 41.12 0.00 0.00 0.00 0.00
01/15/2002............................... 27.08 0.00 0.00 0.00 0.00
02/15/2002............................... 13.99 0.00 0.00 0.00 0.00
03/15/2002............................... 1.13 0.00 0.00 0.00 0.00
04/15/2002............................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (Years) to
Call:............................... 1.29 yrs 1.06yrs 1.00yr 0.94yr 0.89yr
</TABLE>
29
<PAGE> 34
PERCENTAGE OF THE INITIAL CLASS A-3 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% CPR 9% CPR 12% CPR 15% CPR 18% CPR
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Closing................................. 100.00% 100.00% 100.00% 100.00% 100.00%
09/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
10/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
11/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
12/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
01/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
02/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
03/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
04/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
05/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
06/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
07/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
08/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
09/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
10/15/2001.............................. 100.00 100.00 100.00 100.00 95.24
11/15/2001.............................. 100.00 100.00 99.85 93.94 88.08
12/15/2001.............................. 100.00 99.22 93.15 87.16 81.24
01/15/2002.............................. 100.00 92.81 86.68 80.63 74.67
02/15/2002.............................. 100.00 86.86 80.66 74.57 68.59
03/15/2002.............................. 100.00 81.08 74.85 68.74 62.75
04/15/2002.............................. 94.91 75.36 69.12 63.02 57.07
05/15/2002.............................. 89.20 69.62 63.41 57.35 51.45
06/15/2002.............................. 83.48 63.96 57.80 51.80 45.99
07/15/2002.............................. 77.79 58.40 52.31 46.41 40.69
08/15/2002.............................. 72.16 52.97 46.98 41.19 35.59
09/15/2002.............................. 66.66 47.73 41.85 36.18 30.73
10/15/2002.............................. 61.18 42.58 36.83 31.31 26.01
11/15/2002.............................. 55.84 37.62 32.02 26.66 21.52
12/15/2002.............................. 50.68 32.87 27.43 22.23 17.27
01/15/2003.............................. 45.71 28.35 23.08 18.05 13.27
02/15/2003.............................. 41.19 24.25 19.13 14.26 9.65
03/15/2003.............................. 36.84 20.34 15.38 10.68 6.24
04/15/2003.............................. 32.55 16.54 11.75 7.23 2.96
05/15/2003.............................. 28.22 12.75 8.16 3.82 0.00
06/15/2003.............................. 23.96 9.08 4.69 0.55 0.00
07/15/2003.............................. 19.74 5.50 1.32 0.00 0.00
08/15/2003.............................. 15.74 2.14 0.00 0.00 0.00
09/15/2003.............................. 11.92 0.00 0.00 0.00 0.00
10/15/2003.............................. 8.12 0.00 0.00 0.00 0.00
11/15/2003.............................. 4.42 0.00 0.00 0.00 0.00
12/15/2003.............................. 0.89 0.00 0.00 0.00 0.00
01/15/2004.............................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (Years) to
Call:................................. 2.39yrs 2.09yrs 2.00yrs 1.90yrs 1.82yrs
</TABLE>
30
<PAGE> 35
PERCENTAGE OF THE INITIAL CLASS A-4 NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% 9% 12% 15% 18%
CPR CPR CPR CPR CPR
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Closing...................................... 100.00% 100.00% 100.00% 100.00% 100.00%
09/15/2000................................... 100.00 100.00 100.00 100.00 100.00
10/15/2000................................... 100.00 100.00 100.00 100.00 100.00
11/15/2000................................... 100.00 100.00 100.00 100.00 100.00
12/15/2000................................... 100.00 100.00 100.00 100.00 100.00
01/15/2001................................... 100.00 100.00 100.00 100.00 100.00
02/15/2001................................... 100.00 100.00 100.00 100.00 100.00
03/15/2001................................... 100.00 100.00 100.00 100.00 100.00
04/15/2001................................... 100.00 100.00 100.00 100.00 100.00
05/15/2001................................... 100.00 100.00 100.00 100.00 100.00
06/15/2001................................... 100.00 100.00 100.00 100.00 100.00
07/15/2001................................... 100.00 100.00 100.00 100.00 100.00
08/15/2001................................... 100.00 100.00 100.00 100.00 100.00
09/15/2001................................... 100.00 100.00 100.00 100.00 100.00
10/15/2001................................... 100.00 100.00 100.00 100.00 100.00
11/15/2001................................... 100.00 100.00 100.00 100.00 100.00
12/15/2001................................... 100.00 100.00 100.00 100.00 100.00
01/15/2002................................... 100.00 100.00 100.00 100.00 100.00
02/15/2002................................... 100.00 100.00 100.00 100.00 100.00
03/15/2002................................... 100.00 100.00 100.00 100.00 100.00
04/15/2002................................... 100.00 100.00 100.00 100.00 100.00
05/15/2002................................... 100.00 100.00 100.00 100.00 100.00
06/15/2002................................... 100.00 100.00 100.00 100.00 100.00
07/15/2002................................... 100.00 100.00 100.00 100.00 100.00
08/15/2002................................... 100.00 100.00 100.00 100.00 100.00
09/15/2002................................... 100.00 100.00 100.00 100.00 100.00
10/15/2002................................... 100.00 100.00 100.00 100.00 100.00
11/15/2002................................... 100.00 100.00 100.00 100.00 100.00
12/15/2002................................... 100.00 100.00 100.00 100.00 100.00
01/15/2003................................... 100.00 100.00 100.00 100.00 100.00
02/15/2003................................... 100.00 100.00 100.00 100.00 100.00
03/15/2003................................... 100.00 100.00 100.00 100.00 100.00
04/15/2003................................... 100.00 100.00 100.00 100.00 100.00
05/15/2003................................... 100.00 100.00 100.00 100.00 0.00
06/15/2003................................... 100.00 100.00 100.00 100.00 0.00
07/15/2003................................... 100.00 100.00 100.00 0.00 0.00
08/15/2003................................... 100.00 100.00 0.00 0.00 0.00
09/15/2003................................... 100.00 0.00 0.00 0.00 0.00
10/15/2003................................... 100.00 0.00 0.00 0.00 0.00
11/15/2003................................... 100.00 0.00 0.00 0.00 0.00
12/15/2003................................... 100.00 0.00 0.00 0.00 0.00
01/15/2004................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (Years) to Call:....... 3.38yrs 3.04yrs 2.96yrs 2.88yrs 2.71yrs
</TABLE>
31
<PAGE> 36
PERCENTAGE OF THE INITIAL CLASS B NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% CPR 9% CPR 12% CPR 15% CPR 18% CPR
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Closing................................. 100.00% 100.00% 100.00% 100.00% 100.00%
09/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
10/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
11/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
12/15/2000.............................. 100.00 100.00 100.00 100.00 100.00
01/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
02/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
03/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
04/15/2001.............................. 100.00 100.00 100.00 100.00 100.00
05/15/2001.............................. 100.00 100.00 100.00 98.03 95.42
06/15/2001.............................. 100.00 99.02 96.29 93.55 90.79
07/15/2001.............................. 100.00 94.92 92.05 89.17 86.28
08/15/2001.............................. 99.90 90.91 87.91 84.92 81.92
09/15/2001.............................. 96.39 87.02 83.92 80.83 77.74
10/15/2001.............................. 92.92 83.23 80.04 76.87 73.71
11/15/2001.............................. 89.44 79.50 76.23 73.00 69.79
12/15/2001.............................. 86.05 75.89 72.57 69.29 66.05
01/15/2002.............................. 82.73 72.38 69.03 65.72 62.46
02/15/2002.............................. 79.63 69.12 65.73 62.40 59.13
03/15/2002.............................. 76.58 65.96 62.55 59.21 55.93
04/15/2002.............................. 73.53 62.83 59.42 56.08 52.82
05/15/2002.............................. 70.41 59.69 56.29 52.98 49.75
06/15/2002.............................. 67.28 56.60 53.22 49.94 46.76
07/15/2002.............................. 64.16 53.55 50.22 46.99 43.86
08/15/2002.............................. 61.08 50.58 47.30 44.13 41.07
09/15/2002.............................. 58.07 47.71 44.50 41.39 38.41
10/15/2002.............................. 55.07 44.90 41.75 38.73 35.83
11/15/2002.............................. 52.15 42.18 39.12 36.18 33.37
12/15/2002.............................. 49.33 39.58 36.61 33.76 31.04
01/15/2003.............................. 46.61 37.11 34.22 31.47 28.85
02/15/2003.............................. 44.14 34.87 32.06 29.40 26.87
03/15/2003.............................. 41.76 32.73 30.01 27.44 25.01
04/15/2003.............................. 39.41 30.65 28.02 25.55 23.21
05/15/2003.............................. 37.03 28.57 26.06 23.69 0.00
06/15/2003.............................. 34.70 26.57 24.16 21.90 0.00
07/15/2003.............................. 32.40 24.61 22.31 0.00 0.00
08/15/2003.............................. 30.21 22.76 0.00 0.00 0.00
09/15/2003.............................. 28.12 0.00 0.00 0.00 0.00
10/15/2003.............................. 26.04 0.00 0.00 0.00 0.00
11/15/2003.............................. 24.01 0.00 0.00 0.00 0.00
12/15/2003.............................. 22.08 0.00 0.00 0.00 0.00
01/15/2004.............................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (Years) to
Call:................................. 2.34yrs 2.05yrs 1.97yrs 1.89yrs 1.79yrs
</TABLE>
32
<PAGE> 37
PERCENTAGE OF THE INITIAL CLASS C NOTES PRINCIPAL AMOUNT
AT THE ANNUAL CONSTANT PREPAYMENT RATES SET FORTH BELOW
<TABLE>
<CAPTION>
0% CPR 9% CPR 12% CPR 15% CPR 18% CPR
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing................................... 100.00% 100.00% 100.00% 100.00% 100.00%
09/15/2000................................ 100.00 100.00 100.00 100.00 100.00
10/15/2000................................ 100.00 100.00 100.00 100.00 100.00
11/15/2000................................ 100.00 100.00 100.00 100.00 100.00
12/15/2000................................ 100.00 100.00 100.00 100.00 100.00
01/15/2001................................ 100.00 100.00 100.00 100.00 100.00
02/15/2001................................ 100.00 100.00 100.00 100.00 100.00
03/15/2001................................ 100.00 100.00 100.00 100.00 100.00
04/15/2001................................ 100.00 100.00 100.00 100.00 100.00
05/15/2001................................ 100.00 100.00 100.00 98.03 95.42
06/15/2001................................ 100.00 99.02 96.29 93.55 90.79
07/15/2001................................ 100.00 94.92 92.05 89.17 86.28
08/15/2001................................ 99.90 90.91 87.91 84.92 81.92
09/15/2001................................ 96.39 87.02 83.92 80.83 77.74
10/15/2001................................ 92.92 83.23 80.04 76.87 73.71
11/15/2001................................ 89.44 79.50 76.23 73.00 69.79
12/15/2001................................ 86.05 75.89 72.57 69.29 66.05
01/15/2002................................ 82.73 72.38 69.03 65.72 62.46
02/15/2002................................ 79.63 69.12 65.73 62.40 59.13
03/15/2002................................ 76.58 65.96 62.55 59.21 55.93
04/15/2002................................ 73.53 62.83 59.42 56.08 52.82
05/15/2002................................ 70.41 59.69 56.29 52.98 49.75
06/15/2002................................ 67.28 56.60 53.22 49.94 46.76
07/15/2002................................ 64.16 53.55 50.22 46.99 43.86
08/15/2002................................ 61.08 50.58 47.30 44.13 41.07
09/15/2002................................ 58.07 47.71 44.50 41.39 38.41
10/15/2002................................ 55.07 44.90 41.75 38.73 35.83
11/15/2002................................ 52.15 42.18 39.12 36.18 33.37
12/15/2002................................ 49.33 39.58 36.61 33.76 31.04
01/15/2003................................ 46.61 37.11 34.22 31.47 28.85
02/15/2003................................ 44.14 34.87 32.06 29.40 26.87
03/15/2003................................ 41.76 32.73 30.01 27.44 25.01
04/15/2003................................ 39.41 30.65 28.02 25.55 23.21
05/15/2003................................ 37.03 28.57 26.06 23.69 0.00
06/15/2003................................ 34.70 26.57 24.16 21.90 0.00
07/15/2003................................ 32.40 24.61 22.31 0.00 0.00
08/15/2003................................ 30.21 22.76 0.00 0.00 0.00
09/15/2003................................ 28.12 0.00 0.00 0.00 0.00
10/15/2003................................ 26.04 0.00 0.00 0.00 0.00
11/15/2003................................ 24.01 0.00 0.00 0.00 0.00
12/15/2003................................ 22.08 0.00 0.00 0.00 0.00
01/15/2004................................ 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (Years) to Call:.... 2.34yrs 2.05yrs 1.97yrs 1.89yrs 1.79yrs
</TABLE>
33
<PAGE> 38
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
15% of the aggregate principal balance of the contracts as of August 1, 2000,
the average life of each class of notes would be as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE AVERAGE LIFE
ASSUMING 0% ASSUMING 9% ASSUMING 12% ASSUMING 15% ASSUMING 18%
ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT ANNUAL CONSTANT
CLASS PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE PREPAYMENT RATE
----- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
A-1 0.49yr 0.39yr 0.37yr 0.34yr 0.32yr
A-2 1.29yrs 1.06yrs 1.00yr 0.94yr 0.89yr
A-3 2.39yrs 2.09yrs 2.00yrs 1.90yrs 1.82yrs
A-4 3.99yrs 3.74yrs 3.65yrs 3.55yrs 3.46yrs
B 2.55yrs 2.28yrs 2.19yrs 2.11yrs 2.04yrs
C 2.55yrs 2.28yrs 2.20yrs 2.12yrs 2.04yrs
</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>
August -- 2000.............................................. $11,383,452.98
September -- 2000........................................... 10,603,460.09
October -- 2000............................................. 10,742,666.99
November -- 2000............................................ 10,723,206.17
December -- 2000............................................ 10,628,063.90
January -- 2001............................................. 10,142,601.94
February -- 2001............................................ 9,961,067.77
March -- 2001............................................... 9,997,709.65
April -- 2001............................................... 10,193,744.41
May -- 2001................................................. 10,071,814.79
June -- 2001................................................ 9,991,203.91
July -- 2001................................................ 9,859,355.69
August -- 2001.............................................. 9,631,733.71
September -- 2001........................................... 9,459,119.66
October -- 2001............................................. 9,399,720.46
November -- 2001............................................ 9,152,039.42
December -- 2001............................................ 8,945,310.73
January -- 2002............................................. 8,392,292.25
February -- 2002............................................ 8,209,322.59
March -- 2002............................................... 8,173,883.68
April -- 2002............................................... 8,268,563.46
May -- 2002................................................. 8,219,099.24
June -- 2002................................................ 8,132,592.07
July -- 2002................................................ 7,998,515.49
August -- 2002.............................................. 7,781,663.04
</TABLE>
34
<PAGE> 39
<TABLE>
<CAPTION>
COLLECTION PERIOD SCHEDULED CASHFLOW
----------------- ------------------
<S> <C>
September -- 2002........................................... 7,704,148.38
October -- 2002............................................. 7,475,376.76
November -- 2002............................................ 7,211,306.79
December -- 2002............................................ 6,920,041.04
January -- 2003............................................. 6,329,313.58
February -- 2003............................................ 6,080,205.12
March -- 2003............................................... 5,961,708.53
April -- 2003............................................... 5,974,082.66
May -- 2003................................................. 5,837,906.50
June -- 2003................................................ 5,736.235.93
July -- 2003................................................ 5,437,029.51
August -- 2003.............................................. 5,184,091.92
September -- 2003........................................... 5,114,839.76
October -- 2003............................................. 4,946,804.70
November -- 2003............................................ 4,713,559.36
December -- 2003............................................ 4,428,051.49
January -- 2004............................................. 4,051,732.06
February -- 2004............................................ 3,742,578.23
March -- 2004............................................... 3,670,486.82
April -- 2004............................................... 3,538,181.30
May -- 2004................................................. 3,335,982.48
June -- 2004................................................ 3,113,838.88
July -- 2004................................................ 3,098,739.11
August -- 2004.............................................. 2,784,712.09
September -- 2004........................................... 2,890,791.83
October -- 2004............................................. 2,642,946.40
November -- 2004............................................ 2,259,577.35
December -- 2004............................................ 1,997,359.00
January -- 2005............................................. 1,774,872.09
February -- 2005............................................ 1,674,055.27
March -- 2005............................................... 1,354,283.41
April -- 2005............................................... 1,146,943.40
May -- 2005................................................. 959,794.46
June -- 2005................................................ 562,727.88
July -- 2005................................................ 345,839.69
August -- 2005.............................................. 220,153.52
September -- 2005........................................... 205,610.52
October -- 2005............................................. 199,760.52
November -- 2005............................................ 197,457.52
December -- 2005............................................ 179,273.72
January -- 2006............................................. 179,273.72
February -- 2006............................................ 174,413.72
March -- 2006............................................... 174,413.72
April -- 2006............................................... 172,124.72
May -- 2006................................................. 172,124.72
June -- 2006................................................ 329,451.72
July -- 2006................................................ 131,819.89
August -- 2006.............................................. 126,177.89
September -- 2006........................................... 108,713.73
October -- 2006............................................. 95,390.72
November -- 2006............................................ 89,136.72
December -- 2006............................................ 79,669.72
</TABLE>
35
<PAGE> 40
<TABLE>
<CAPTION>
COLLECTION PERIOD SCHEDULED CASHFLOW
----------------- ------------------
<S> <C>
January -- 2007............................................. 73,252.72
February -- 2007............................................ 73,252.72
March -- 2007............................................... 61,397.61
April -- 2007............................................... 49,071.96
May -- 2007................................................. 23,273.96
June -- 2007................................................ 8,023.96
July -- 2007................................................ 8,023.96
August -- 2007.............................................. 8,023.96
</TABLE>
36
<PAGE> 41
ORIX CREDIT ALLIANCE, INC.
EQUIPMENT FINANCE BUSINESS
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 in the United States 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 June 30, 2000, ORIX Credit Alliance, Inc. had
approximately 625 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 19 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.
ANCILLARY BUSINESSES
ORIX Credit Alliance, Inc. (including its wholly owned subsidiaries)
conducts several ancillary businesses that complement its middle market
equipment finance business. These include its rediscount, insurance agency, and
secured asset based lending operations.
Through the rediscount operation, it purchases equipment receivable
contracts from small to mid-size finance and leasing companies. As of June 30,
2000, total net receivable contracts attributable to such rediscount operation
were approximately $115.4 million.
In October 1999, a commercial finance company, which earlier in 1999 had
sold to ORIX Credit Alliance, Inc. receivable contracts it continued to service,
failed to remit current collections of approximately $5.1 million. In October
1999, ORIX Credit Alliance, Inc. took over servicing these accounts directly. An
involuntary bankruptcy petition was filed against this commercial finance
company by ORIX Credit Alliance, Inc. and two other creditors in December 1999,
and in January 2000, the commercial finance company was declared a Chapter XI
bankrupt. A liquidation plan is being formulated by the unsecured creditors'
committee, of which ORIX Credit Alliance, Inc. is a member.
As of June 30, 2000, the receivable contracts purchased from this
commercial finance company aggregated approximately $56.1 million, net of
unearned finance charges and the aforementioned collections. ORIX Credit
Alliance, Inc. charged earnings in the fiscal year ended March 31, 2000 for a
total of $7.7 million. This represents ORIX Credit Alliance, Inc.'s best
estimate of the ultimate cost and losses to be attributable to this matter.
None of the receivable contracts purchased from this commercial finance
company or otherwise related to ORIX Credit Alliance Inc.'s rediscount or small
ticket operations are included in the contracts that will be transferred to the
trust.
The insurance agency operation includes placement of physical damage
coverage and credit life insurance in connection with equipment being financed
and represented $0.2 million of revenues for the
37
<PAGE> 42
calendar quarter ended June 30, 2000. The asset based lending operation
commenced in February 1999. It includes loans secured by business receivables
and inventory and represented approximately $252.6 million of loan receivables
at June 30, 2000. Among other things, it purchases, by assignment, interests in
syndicated loans.
In an effort to reduce costs and maximize efforts in its most profitable
businesses, on August 1, 2000 ORIX Credit Alliance, Inc. announced that it will
close its small ticket operation, which generally financed equipment with
purchase prices under $15,000 and, at June 30, 2000, had $102.7 million in
assets, and had $17.4 million in revenues and $1.9 million in net operating
income for the fiscal year ended March 31, 2000; it is estimated that closing
this operation will result in a charge of approximately $1.5 million. ORIX
Credit Alliance, Inc. also intends to either sell or close its insurance premium
finance operation, which had $25.8 million in assets on June 30, 2000, and had
$2.7 million in revenues and $0.1 million in net operating income for the fiscal
year ended March 31, 2000.
SUMMARY FINANCIAL DATA
Set forth below is summary financial information with respect to ORIX
Credit Alliance, Inc. The data presented in the following tables as at and for
the three months ended June 30, 2000 and June 30, 1999 are derived from
unaudited financial statements of ORIX Credit Alliance, Inc. The data presented
in the following tables as at and for the twelve months ended March 31, 2000,
March 31, 1999 and March 31, 1998 are derived from audited financial statements
of ORIX Credit Alliance, Inc.
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF MARCH 31,
---------------- --------------------------
2000 1999 2000 1999 1998
------ ------ ------ ------ ------
(IN BILLIONS) (IN BILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS.................................. $3.237 $2.683 $3.121 $2.623 $2.271
TOTAL LIABILITIES............................. $2.789 $2.252 $2.681 $2.198 $1.884
TOTAL STOCKHOLDERS' EQUITY.................... $0.448 $0.431 $0.440 $0.425 $0.387
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30, FOR THE FISCAL YEAR ENDED MARCH 31,
-------------------- -----------------------------------
2000 1999 2000 1999 1998
------- ------- --------- --------- ---------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES................................ $77.6 $67.6 $279.7 $249.2 $259.4
NET INCOME.................................... $ 7.7 $11.3 $ 34.1 $ 38.7 $ 49.3
</TABLE>
ORIX Credit Alliance, Inc. will not be obligated with respect to the notes
or the certificates except to the limited extent described herein.
MANAGEMENT
The senior management of ORIX Credit Alliance, Inc. are:
Jay Holmes, Chairman of the Board, President and Chief Executive Officer
Mr. Holmes, age 54, was appointed Chairman, President and Chief Executive
Officer, effective June 19, 2000. Mr. Holmes joined ORIX Credit Alliance, Inc.
after nearly two years as President and Chief Executive Officer of Transamerica
Equipment Financial Services, a Chicago based provider of equipment financing
and leasing for middle-market companies in the United States and selected
foreign countries. He previously held senior positions in Heller Financial,
Inc., Chrysler Capital Corporation, Citicorp Industrial Credit and Westinghouse
Credit Corporation. He has 28 years of commercial finance experience. Mr. Holmes
graduated from West Virginia Wesleyan College in 1968 with a bachelors degree in
economics.
Sandy Kallick, Senior Executive Vice President and Chief Operating Officer
Mr. Kallick, age 48, joined ORIX Credit Alliance, Inc. in 1980 as an
accounting supervisor in the Chicago branch and was promoted to Operations
Manager the following year. In 1987, he became the branch manager of the
California branch. In 1992, he was appointed division manager. In 1997,
38
<PAGE> 43
Mr. Kallick joined the home office staff. Mr. Kallick has held various
officerships, currently is Senior Executive Vice President, and is on the Board
of Directors where he serves on the Executive, Audit, Employee Benefits,
Employee Incentive Savings Plan and Employee Retirement Plan Committees. Mr.
Kallick attended the University of Illinois, where he majored in business.
John H. Moss, Director and Vice Chairman of the Board
Mr. Moss, age 63, was appointed in January 2000 to the Board of Directors
of ORIX Credit Alliance, Inc. and served as Vice Chairman during the transition
following the retirement of Philip D. Cooper, the former Chairman of the Board,
President and Chief Executive Officer. He became President and Chief Executive
Officer of ORIX USA Corporation ("ORIX USA") and a member of its Board of
Directors in December 1999. In January 2000, Mr. Moss was also elected to the
boards of ORIX Commercial Alliance Corporation and ORIX Business Credit, Inc.
Prior to joining ORIX USA, Mr. Moss had been President and Chief Executive
Officer of Sanwa Business Credit Corporation ("SBCC") from January 1997. He
joined SBCC in 1991 as executive vice president and chief credit officer
responsible for that company's risk management division and credit process. Mr.
Moss has an extensive background in risk/portfolio management, with expertise in
corporate finance and credit. Before joining SBCC, Mr. Moss had more than 27
years of experience in the banking industry of which 22 years were with
Citicorp. His key assignments included: vice president/area manager overseeing
Citibank's largest international banking and loan production office; senior
credit officer for a $3 billion commercial loan portfolio; and regional
executive at Citicorp/Citibank, supervising the corporate finance business for
25 midwestern states for non-investment grade and private corporations. Mr. Moss
also spent five years at Merrill Lynch Private Capital. He opened, staffed and
managed the San Francisco office. He was responsible for merchant banking
transactions for very high net worth individuals. This included identifying and
developing clients, lending money and creating fee-generating business for
Merrill Lynch. Mr. Moss received his undergraduate degrees in industrial
engineering and history from Yale University and his MBA from the University of
Chicago.
Thomas A. Janci, Executive Vice President and Division Manager
Mr. Janci, age 54, joined ORIX Credit Alliance, Inc. in 1968 in the
accounting department of the Chicago office, and worked in various capacities in
that office, including sales. In 1976, he opened the branch in Pittsburgh,
Pennsylvania, which he managed until 1989. In 1989, he became the branch manager
in Concord, California. In 1991, he was appointed division manager. Mr. Janci
has held various officerships and currently serves as Executive Vice President.
Mr. Janci attended Syracuse University and served as an interpreter for the U.S.
Air Force during the years 1963-1967.
Mark S. Lasher, Executive Vice President and Division Manager
Mr. Lasher, age 58, began his career with ORIX Credit Alliance, Inc. in
1969 on the accounting staff of the home office. He subsequently filled various
functions in the home office and at branches advancing to become branch manager
of the Orangeburg, New York branch in 1976. In 1988, he was appointed division
manager. Mr. Lasher has advanced through various officerships and is currently
an Executive Vice President and a member of the Board of Directors, serving on
the Executive Committee. Previously he worked as a public accountant from 1965
to 1968 having graduated from Pace University with a degree in Business
Administration. He was on active duty with the United States Armed Forces in
1963 followed by six years of United States National Guard duty.
Joseph J. McDevitt, Jr., Executive Vice President, Chief Financial Officer
and Treasurer
Mr. McDevitt, age 53, joined ORIX Credit Alliance, Inc. in 1993 to assume
responsibility for funding and cash management operations. From 1968 to 1981, he
had been a certified public accountant with Deloitte & Touche. In 1981, he
joined Mack Financial Corporation as Controller and served in that capacity for
five years. From 1986 until joining ORIX Credit Alliance, Inc., he served as
Assistant Treasurer of Mack Trucks, Inc. and Treasurer of Mack Financial
Corporation. He is on the Board of Directors where he serves on the Executive,
Employee Incentive Savings Plan and Employee Retirement Plan Committees and is
responsible for overseeing all financial operations. Mr. McDevitt received a
Bachelor of Science degree in Economics from Villanova University. He is also an
alumnus of the
39
<PAGE> 44
Graduate School of Credit and Financial Management conducted at Dartmouth
College by the National Association of Credit Managers. Mr. McDevitt served in
the United States Army Reserve from 1968 to 1974.
Hal B. Parkerson, Executive Vice President and General Counsel
Mr. Parkerson, age 53, joined ORIX Credit Alliance, Inc. in 1989 as a Vice
President and subsequently became a Senior Vice President in the Law Department.
After graduating from law school, he practiced at the firm of Dewey Ballantine
and later was the General Counsel of Chrysler Capital Corporation and Equilease
Corporation. He serves on the Board of Directors and is a member of its
Executive and Employee Benefits Committees. He is admitted to the Bar in the
states of New York and Pennsylvania and has an undergraduate degree in
accounting from Emory University and a law degree from Columbia University. He
is a member of the Association of Commercial Finance Attorneys, the New York
State Bar Association and the Association of the Bar of The City of New York.
Robert J. Salge, Executive Vice President and Senior Loan Officer
Mr. Salge, age 62, began his career with ORIX Credit Alliance, Inc. in 1968
after twelve years in commercial banking. He initially worked on the president's
staff where he established ORIX Credit Alliance, Inc.'s first Treasury
Department. In 1970 he joined home office new business operations and eventually
became its operations manager. From 1977 to 1981 he rejoined the president's
staff and was involved mostly in senior credit administration. He was
subsequently the initial branch manager of the rediscount branch. In September
1991 he became senior loan officer. He is on the Board of Directors serving on
its Employee Benefits Committee. Mr. Salge received a Bachelor of Science degree
from St. Peter's College and attended the New York University Graduate School of
Business Administration. He served in the United States Army Reserve and was
part of the "Berlin Wall" reserve activation in 1961.
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 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 $2.5 million. For certain
industries or transaction types that are deemed to involve more risk, center
credit authority is reduced. Transactions from $2.5 million to $15 million
require home office approvals depending on total exposure as do transactions
below $2.5 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
40
<PAGE> 45
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 August 1, 2000, approximately 12.50% of the
contracts to be transferred to the trust contained 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 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
41
<PAGE> 46
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 a party to various legal proceedings, many of
which are initiated as part of efforts to collect overdue accounts. Of the
active litigation matters, approximately 110 involve actions in which ORIX
Credit Alliance, Inc. is a defendant or a counterclaim defendant. Of these
litigation matters, many result from being served in connection with a
foreclosure action by another lienholder where it holds a lien or has filed a
judgment. ORIX Credit Alliance, Inc. is also a party to various litigation
matters which seek a recovery against it. These actions often fall into
categories commonly described as lender liability cases and employment
litigation.
ORIX Credit Alliance, Inc. is a party to a lawsuit, filed in 1996, in which
three former customers have asserted claims against it on behalf of themselves,
and are seeking to assert claims as a class action (that is, the three customers
contend that they can represent a large group of former customers in asserting
claims against it). Those three customers allege that ORIX Credit Alliance, Inc.
has acted improperly in its financing practices and they claim that they, as
well as the other customers that they seek to represent, are entitled to
compensatory and punitive damages from ORIX Credit Alliance, Inc. ORIX Credit
Alliance, Inc. has denied engaging in the pattern of wrongful conduct alleged in
the lawsuit and ORIX Credit Alliance, Inc.'s management also believes that it
has substantive defenses to the legal points raised in the lawsuit. The court
has dismissed many of the claims raised by the three customers in the lawsuit,
including the claims that had provided the primary basis for their assertion
that they could represent a class of other customers. The court has not,
however, yet had occasion to rule on whether the case can be maintained as a
class action. ORIX Credit Alliance, Inc. is vigorously defending against this
lawsuit.
On the subject of employment litigation pending against ORIX Credit
Alliance, Inc., ORIX Credit Alliance, Inc. is a defendant in a lawsuit brought
by a former executive who alleges age discrimination and breach of contract in
connection with the termination of his employment. It is vigorously defending
against this lawsuit.
42
<PAGE> 47
Although the ultimate outcome of various lawsuits cannot be accurately
assessed, especially where a case is in its early stages, the management of ORIX
Credit Alliance, Inc. believes that none of these proceedings, either
individually or together, will have a material adverse impact on its operations
or its consolidated financial condition.
THE TRUST
GENERAL
The trust is organized as a business trust under the laws of the State of
Delaware under a trust agreement dated as of August 17, 2000. 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 $1,585,221, 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 August 1, 2000, our capitalization would consist solely of the
notes with an aggregate principal amount of $315,458,950 and certificates with a
$1,585,221 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
indenture trustee.
TERMINATION OF TRUST
The trust will terminate only on the earlier 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, promptly
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 notes and certificate)
will be conveyed and transferred to the holder of the certificates and any
permitted assignee.
OTHER INFORMATION
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 further information, you
should read the registration statement. The registration statement may be
43
<PAGE> 48
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) 601-0220.
DESCRIPTION OF THE NOTES AND INDENTURE
The statements under this caption describe all of the material terms of the
notes and an indenture, to be dated as of the closing date, 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 Clearstream Luxembourg, 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 Clearstream Luxembourg, 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.
44
<PAGE> 49
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; provided, however, that
one note of each class will be issued in an incremental denomination of less
than $1,000. 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
September 15, 2000, 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 page 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 page 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 (which includes
amounts owed to the indenture trustee). 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
45
<PAGE> 50
before, and prepayments received on or before, the last day of the
immediately preceding collection period;
- 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;
- investment earnings credited to the collection account, the reserve fund
and the spread fund (if any);
- 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";
- funds on deposit in the spread fund as specified in "-- Spread 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 previous 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;
- liquidation proceeds from the sale, lease or re-lease of the equipment,
proceeds of related insurance policies and net recoveries with respect to
any defaulted contracts; 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 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; and
- collections with respect to repurchased or expired contracts.
46
<PAGE> 51
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 withdraw, from the
collection account the amounts needed to make the following payments. See
"-- Amounts Available for Payments 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, if a successor servicer were being appointed, to the indenture
trustee, the costs and expenses associated with the appointment of such
successor servicer and the transition relating thereto (which amount shall not,
taken in the aggregate with all other amounts withdrawn for such purpose, exceed
$100,000);
THIRD, to the servicer, its monthly servicing fee for the preceding monthly
period, which includes the amounts payable for the fees, expenses and indemnity
payments, if any, due and payable to the indenture trustee and the owner
trustee;
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
----------------- -----------------
<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.
</TABLE>
47
<PAGE> 52
<TABLE>
<CAPTION>
CLASS OF NOTE
RECEIVING PAYMENT AMOUNT TO BE PAID
----------------- -----------------
<C> <S>
- 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.
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, 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>
FIFTH, to the holders of the notes, to the extent there are available
amounts (including all collections through the determination date and amounts in
the reserve fund) sufficient to pay in full the remaining outstanding principal
of all of the notes;
SIXTH, 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;
SEVENTH, if a spread event exists, to the extent that any amounts remain
after allocating the amounts available for payments described above, the
indenture trustee will deposit such remaining amounts into the spread fund;
EIGHTH, to the indenture trustee and the owner trustee, any remaining
amounts payable to them, respectively; and
NINTH, 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
48
<PAGE> 53
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 Payments on the Notes" and "-- 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, the amount of (a) any unpaid fees,
expenses (including legal fees and expenses) and indemnity payments; and (b) if
a successor servicer were being appointed, to the indenture trustee, the costs
and expenses associated with the appointment of such successor servicer and the
transition relating thereto (which amounts described in (a) and (b) shall not,
taken in the aggregate with all other amounts withdrawn for such purpose, exceed
$100,000);
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;
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, pay to the indenture trustee all amounts due it and not paid
pursuant to clause FIRST by reason of the limitation in such clause; and
SIXTH, 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 92.8161%, 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
49
<PAGE> 54
(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
(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) 1.625% 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 4.3103%, 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 the immediately preceding
completed collection period.
"Class C Floor" means, with respect to a date on which principal is to be
paid,
(1) 0.700% of the Original Pool Balance plus
50
<PAGE> 55
(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.
"Class C Percentage" means approximately 2.1552%, 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 the 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 the closing date.
51
<PAGE> 56
"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
(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 $4,731,885. On any payment date,
after distributing the available amounts to the servicer, the indenture trustee,
the owner trustee and the 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 greater of (a) 3.00% of the outstanding principal amount of the
notes as of the last day of the immediately preceding completed collection
period and (b) the lesser of (I) 1.00% of the initial principal amount of the
notes and (II) the outstanding principal amount of the notes as of such last day
of the immediately preceding completed collection period.
If on any payment date, collections on the contracts and amounts, if any,
in the spread fund are less than the amount needed to pay interest or principal
due on the notes, the indenture trustee will withdraw funds from the reserve
fund to pay the interest and principal.
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" and no spread event
exists, 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 unless a spread event exists.
SPREAD FUND
The spread fund will be an account held in the name of the indenture
trustee on behalf of you that will hold available funds when a spread event
exists.
A spread event means the occurrence of one or more of the following: (a)
ORIX Credit Alliance, Inc. is no longer the servicer (other than in the
circumstances that permit a successor servicer by merger or acquisition as set
forth under "The Transfer and Servicing Agreement -- Servicer Resignation"); (b)
the three-month delinquency percentage calculated on the related distribution
date is greater than 5.00%;
52
<PAGE> 57
or (c) the cumulative net loss percentage on the related determination date
exceeds the loss trigger percentage set forth below:
<TABLE>
<CAPTION>
LOSS TRIGGER
COLLECTION PERIOD PERCENTAGE
----------------- ------------
<S> <C>
1(st) through, and including, the 11(th) collection
period: 1.00%
12(th) through, and including, the 17(th) collection
period: 1.25%
18(th) through, and including, the 23(rd) collection
period: 1.50%
24(th) collection period ongoing: 2.00%
</TABLE>
Notwithstanding the foregoing: (i) the spread event referred to in clause
(b) above may be cured on any distribution date if the three-month delinquency
percentage for the preceding two collection periods is less than or equal to 5%
for each of such periods and (ii) the spread event referenced in clause (c) may
be cured if the cumulative net loss percentage is less than the associated loss
trigger percentage for that period. The three-month delinquency percentage means
with respect to any distribution date commencing with the third distribution
date, the percentage equivalent of a fraction, (a) the numerator of which is the
sum of the monthly delinquency percentages for such distribution date and the
two immediately preceding distribution dates, and (b) the denominator of which
is three. The monthly delinquency percentage means with respect to any
distribution date, the percentage equivalent of a fraction, (a) the numerator of
which is the aggregate contract principal balance of all contracts which are
more than 90 days delinquent as of the last day of the immediately preceding
collection period, and (b) the denominator of which is the pool balance as of
the last day of the immediately preceding collection period. The cumulative net
loss percentage means with respect to any distribution date, the percentage
equivalent of a fraction, (a) the numerator of which is the cumulative net
losses of all contracts as of the last day of the immediately preceding
collection period, and (b) the denominator of which is the original pool
balance.
Amounts in the spread 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.
We will allocate amounts withdrawn from the spread fund as described in
"--Allocations". If on any payment date, there are excess available amounts
remaining after we pay the servicer, the indenture trustee, the owner trustee
and the noteholders and increase the reserve fund balance to the Required
Reserve Amount as described in "--Allocations" and no spread event exists, we
will distribute such excess as provided under "--Allocations". Upon any such
distributions, you will have no further rights in, or claims to, such amounts.
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.
53
<PAGE> 58
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
and which have a rating acceptable to the rating agencies.
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 and which have a rating acceptable to the rating agencies;
- notes or bankers' 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 which have a rating acceptable to the rating
agencies; 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, reserve fund or
spread fund 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.
54
<PAGE> 59
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 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; and
- the trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
55
<PAGE> 60
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 with
respect to the trust depositor or the trust 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 or a
responsible officer of the owner trustee or of 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 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 give
notice thereof promptly to the holders of the notes and, upon being notified in
writing 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 are 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 of the trust
depositor or the trust 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 The Bank of New York.
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.
56
<PAGE> 61
The indenture trustee's responsibilities will be ministerial in nature,
consisting principally of:
- the distribution of monies as required by the indenture or 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 trust. The trust 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 trust. 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, without
the written consent of the Required Holders represented thereby, may execute an
amendment of or a supplement to the indenture to, among other things, cure any
ambiguity, to correct or supplement any provision in the indenture which may be
inconsistent with any other provision in the indenture or to make any other
provisions with respect to matters or questions arising under the indenture;
provided that such action shall not adversely affect the interests of the
holders of the notes in any material respect as evidenced by an opinion of
counsel. Additionally, the indenture trustee, with the written consent of the
Required Holders represented thereby, may consent to or execute an amendment of
or supplement to, or waiver or consent under, the indenture. 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) permit the creation of any lien on the contracts senior to or on a
parity with the lien of the indenture or permit the termination or
derogation of the lien of the indenture,
57
<PAGE> 62
(7) 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
(8) modify the percentage of noteholders required to make any
modification of the indenture or to direct the indenture trustee to sell or
liquidate the contracts.
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) 1.00% and
(3) the Pool Balance as of the beginning of the related collection
period.
The servicer's fee (which prior to an event of default includes the
indenture trustee's fee, expenses and indemnity payments, if any) 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, prior to an event of default, of the fees, expenses (including
legal fees and expenses) and disbursements of the indenture trustee and
the 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 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, expenses (including legal fees and expenses) and
disbursements of the indenture trustee and the owner trustee, the indenture
trustee and the owner trustee will be entitled to receive the portion of the
servicer's monthly servicing fee that is equal to those unpaid amounts.
In the event prior to an event of default a successor servicer shall be
appointed or the indenture trustee shall serve as successor servicer, an
additional amount will be payable to the indenture trustee to the extent
necessary to cover additional costs and expenses related to the transition to
the successor servicer, provided that the cumulative aggregate amount of such
payments shall not exceed $100,000. After an event of default, such amount will
be included with other payments due the indenture trustee and all such payments
will be subject to an overall limitation of $100,000 until the notes are paid in
full.
58
<PAGE> 63
OPTIONAL REDEMPTION
If the aggregate principal balance of the contracts is less than 15% of the
initial aggregate principal balance of the contracts as of August 1, 2000, 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 and the amount of any servicer advances
made and not reimbursed. Following any redemption, you will have no further
rights with respect to the trust's assets.
MANDATORY REDEMPTION
If on any payment date, the aggregate amounts on deposit in the collection
account, the reserve fund and the spread 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 (including therein
amounts owed to the indenture trustee) and (iv) unreimbursed servicer advances,
the amounts on deposit in the reserve fund and the spread fund will be deposited
in the collection account and used to redeem the notes in full. The redemption
price will be equal to the unpaid principal amount of the notes plus accrued and
unpaid interest through the date of redemption.
REPORTS
No later than the third 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 Securities, Inc. 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;
(11) the balances in the reserve fund and the spread fund; and
(12) the three-month delinquency percentage and the cumulative net
loss percentage.
59
<PAGE> 64
On each payment date, the indenture trustee (or an agent on its behalf)
will forward or make available 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 Securities, Inc. (a) within 120
days after each calendar quarter, commencing with the quarter ending September
30, 2000, 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, 2001, 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 February 28 of each calendar year, commencing February 28,
2001, 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 provided by the servicer 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 Clearstream
Luxembourg as registered holders of the notes. These reports will be made
available by DTC, Euroclear or Clearstream Luxembourg and its participants to
holders of interests in the notes as required by the rules, regulations and
procedures creating and affecting DTC, Euroclear and Clearstream Luxembourg,
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
and upon prior written notice to the current list of noteholders for the 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
60
<PAGE> 65
- 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 Clearstream
Banking, society anonyme ("Clearstream Luxembourg") (formerly Cedelbank) 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
underwriter offering the notes to you, securities brokers and dealers, banks,
trust companies and clearing corporations, and may include other organizations.
Indirect access to the DTC system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly.
To facilitate subsequent transfers, 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 & Co. 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 your
interest in a class of notes. As long as the notes are registered in the name of
Cede & Co., any action to be taken by you or any other noteholders will be taken
by DTC upon instructions from DTC's participants, and all distributions,
notices, reports and statements to noteholders will be delivered to Cede & Co.,
as the registered holder of the notes, for distribution to noteholders in
compliance with DTC's 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 & Co. 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
61
<PAGE> 66
indenture trustee, the owner trustee or the originator, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the indenture trustee,
disbursement of 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 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.
Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf
of the participants in the Clearstream Luxembourg and Euroclear systems,
respectively, through customers' securities accounts in Clearstream Luxembourg'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.
Clearstream Luxembourg advises it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream Luxembourg holds securities
for its participating organizations ("Clearstream Participants") and facilitates
the clearance and settlement of securities transactions between Clearstream
Participants through electronic book-entry changes in accounts of Clearstream
Participants, thereby eliminating the need for physical movement of
certificates. Clearstream Luxembourg provides to Clearstream Participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Clearstream Luxembourg interfaces with domestic markets in several countries. As
a professional depositary, Clearstream Luxembourg is subject to regulation by
the Luxembourg Monetary Institute. Clearstream 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 underwriter. Indirect access to Clearstream
Luxembourg is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream Participant, either directly or indirectly.
62
<PAGE> 67
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") 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. 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
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 the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law.
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
Participants, and has no record of or relationship with persons holding through
Euroclear Participants.
Transfers between direct participants will comply with DTC's rules.
Transfers between Clearstream Participants and Euroclear 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 Clearstream Luxembourg or Euroclear, on the other, will be effected in
DTC under DTC's 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. Clearstream Participants and Euroclear
Participants may not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Clearstream
Luxembourg 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 Clearstream Participant or Euroclear Participant on
such business day. Cash received in Clearstream Luxembourg or Euroclear as a
result of transfers of securities by or through a Clearstream Participant or a
Euroclear Participant to a DTC participant will be received with value on the
DTC settlement date but will be available in the relevant Clearstream Luxembourg
or Euroclear cash account only as of the business day following settlement in
DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Clearstream Luxembourg and Euroclear,
63
<PAGE> 68
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 trust will issue
such fully 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 wire transfer or 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 is 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, 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 $1,585,221. 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".
64
<PAGE> 69
THE TRANSFER AND SERVICING AGREEMENT
The following is a summary of all of the material terms of the transfer and
servicing agreement to be dated as of the closing date 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.
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 equipment and 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 the
closing date. Similarly, the originator will make or be
65
<PAGE> 70
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 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 continue to be located in the United States;
(10) there is not more than one "secured party's original" counterpart of
the contract;
(11) the contract is not a consumer contract or a "consumer lease" as
defined in Section 2A-103(1)(e) of the UCC; and, if such contract is a lease, it
is a lease intended for security within the meaning of Section 1-201(37) of the
UCC;
(12) the contract is not subject to any guaranty by the originator, nor has
the originator established any specific credit reserve with respect to the
related obligor;
(13) the contract was either originated by, or purchased in a true sale
transaction, by the originator in the ordinary course of its business in
accordance with its customary underwriting practices and credit policies and no
adverse selection procedure was used in selecting the contract for transfer to
the trust depositor;
(14) the obligor has represented to the originator or vendor that it has
accepted the equipment where the contract relates to equipment being currently
acquired;
(15) the obligor is not, to the originator's knowledge, subject to
bankruptcy or other insolvency proceedings;
(16) the contract is not a defaulted contract;
(17) the contract is not more than 60 days past due;
66
<PAGE> 71
(18) the information with respect to the contract and the equipment, where
the contract relates to equipment being currently acquired, is, to the best of
the originator's knowledge, true and correct in all material respects;
(19) 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;
(20) all filings necessary to evidence the conveyance or transfer of the
originator's ownership interest in the contract, and the originator's
corresponding interest in the related equipment, to the trust depositor, have
been made in all appropriate jurisdictions; provided, that (i) UCC financing
statement filings with respect to equipment which name the originator as secured
party have not been amended to indicate either the trust depositor or the trust
as an assignee and (ii) filings or registrations with respect to any title
registry for any equipment which name the originator as lienholder have not been
amended to indicate either the trust depositor or the trust as an assignee;
(21) 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;
(22) the obligor is not the United States or any state or local government
or any agency, department, subdivision or instrumentality of any such
government;
(23) the originator has obtained a first priority perfected security
interest (subject to permitted liens) in the equipment related to the contracts;
(24) the contract, if a lease, has a purchase option amount of no greater
than $102;
(25) if the contract is a lease of equipment subject to certificate of
title statutory requirements, the title is held either in the name of the lessee
and the certificate of title indicates the originator as lienholder or in the
name of the originator as lessor;
(26) the obligor under the contract is required either to maintain casualty
insurance or to self-insure with respect to the related equipment in accordance
with the originator's customary underwriting requirements;
(27) the contract constitutes "chattel paper" as defined under the UCC; and
(28) other customary provisions for this type of transaction.
These representations and warranties will be reaffirmed by the originator
with respect to substitute contracts 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". 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 contracts, the proceeds of the contracts and the related
security interest in the financed equipment.
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.
67
<PAGE> 72
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;
(7) liens granted by the end-users or vendors which are subordinate to
the interest of the trust in the equipment; and
(8) liens on items of equipment the acquisition of which was not
specifically financed by the contract unless such equipment is specifically
identified as a financed item in the contract.
The trust depositor will represent and warrant in the transfer and
servicing agreement that:
(1) the transfer of the contracts is a valid transfer and assignment
to the trust of all right, title and interest of the trust depositor in the
contracts;
(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; and
(4) 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. Unless a
substitute contract is assigned by the trust depositor to the indenture trustee,
the indenture trustee shall reassign any contract to the trust depositor, upon
the written request of the owner trustee, the trust depositor or the originator,
and the originator will be concurrently obligated to purchase from the trust
depositor, such contract transferred by the originator no later than the next
succeeding determination date 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 and the originator's right to provide a substitute contract will
constitute the only remedies against the originator
68
<PAGE> 73
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 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 the closing date as follows:
(1) the aggregate principal balance of all end-user contracts which
finance, lease or are related to the trucking industry will not exceed 54%
of the aggregate principal balance of the contracts;
(2) the aggregate principal balance of all end-user contracts with
obligors who comprise the ten largest obligors (measured by aggregate
principal balance) does not exceed 10% of the aggregate principal balance
of the contracts;
(3) the aggregate principal balance of all full and partial recourse
contracts from any single vendor or affiliated group of vendors will not
exceed 1.5% of the aggregate principal balance of the contracts;
(4) the aggregate principal balance of all contracts of each obligor
or affiliated group of obligors shall not exceed 1.5% of the aggregate
principal balance of the contracts; and
(5) the aggregate principal balance of all end-user contracts with
obligors located in a single State of the United States does not exceed 12%
of the aggregate principal balance of the contracts.
On the date a substitute contract is added to the trust's assets the trust
depositor will make with respect to the substitute contract the foregoing
representations and warranties (except those made under (5)) 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 will, upon the written
direction of the servicer, 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 the next determination date
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
69
<PAGE> 74
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 no later than the next
succeeding determination date by either (a) depositing the unpaid
principal balance of the contract (plus any related unreimbursed servicer
advances (unless the servicer waives and releases its rights with respect
to such unreimbursed 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 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.
70
<PAGE> 75
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 or contracts having
similar characteristics. See "-- Remedies for Breaches of Representations and
Warranties; Definition of Ineligible Contracts," "-- Concentration Amounts;
Definition of Excess Contract" and "-- Material Modifications to Contracts". Our
ability to substitute contracts is limited in the aggregate with respect to
category (i) to 10% of the original pool balance and with respect to category
(ii) to 20% of the original pool balance; provided, however, that no
substitution of contracts with respect to category (ii) contracts may be made
prior to the time the Class A-1 Notes are paid in full.
The substitute contracts 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 weighted average yield (annual percentage rate
or APR) of greater than or equal to the yield (APR) on the contract being
replaced. In addition, (1) the final payment on the substitute contract will be
made on or prior to August 15, 2007 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) any portion of a contractual payment has not been received from
the obligor 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.
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
71
<PAGE> 76
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 to elect,
but is not obligated, to advance the unpaid scheduled payment if it reasonably
believes that the advance will be reimbursed by the related obligor. 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.
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 by acquisition or transfer to the business
of ORIX Credit Alliance, Inc. or the servicer
will be permitted to be the successor to ORIX Credit Alliance, Inc., as the
servicer, under the transfer and servicing agreement. ORIX Credit Alliance, Inc.
is required to notify the rating agencies and the indenture trustee within 30
days of the completion of any such merger, consolidation or succession but is
not required to get the consent of either the rating agencies or the holders of
the notes.
72
<PAGE> 77
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. The indenture trustee is entitled to receive upon
reasonable notice after the end of any collection period a copy of the
servicer's computer records related to the contracts. 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, unless at the time it would be
contrary to law for the indenture trustee to act in such capacity. 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. See "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 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
73
<PAGE> 78
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 the servicer's control. Regardless of whether
the events described in clauses (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 June 30 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
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 July 31 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
74
<PAGE> 79
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
The Bank of New York (Delaware) will be the owner trustee under the trust
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, 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 the 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.
75
<PAGE> 80
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.
CLASSIFICATION OF THE NOTES AND THE TRUST
In connection with the issuance of the notes, Sullivan & Cromwell have
delivered their 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 have 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 that 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 classes of the notes
did not represent debt for federal income tax purposes, such notes would be
treated as equity interests in the trust. As a result, the trust would be
classified as either a partnership or as a publicly traded partnership. If the
trust were classified as a partnership other than a publicly traded partnership,
the trust itself would not be subject to United States federal income tax.
Similarly, the publicly traded partnership rules provide an exception to the
general rule that for federal
76
<PAGE> 81
income tax purposes a publicly traded partnership is treated as a corporation in
cases where at least 90% of the gross income of the publicly traded partnership
consists of certain specified types of "qualifying income." Interest income such
as the income earned by the trust from the contracts and from the reserve fund
and the spread fund will be considered qualifying income under the publicly
traded partnership rules for Unites States federal income tax purposes.
Consequently, even if the trust were classified as a publicly traded
partnership, the trust itself would not be subject to United States federal
income tax. If the trust is classified as either a partnership or a publicly
traded partnership, holders of notes that were determined to be equity interests
in the partnership or publicly traded 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 treatment of the notes as indebtedness
for United States 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
-- 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
77
<PAGE> 82
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
-- 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. The Internal Revenue Service will apply a
look-through rule in the case of tiered partnerships.
78
<PAGE> 83
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 the servicer in collecting and servicing the contracts 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 not be subject to
New Jersey Corporation Income Tax or New Jersey Corporation Business Tax and
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.
LEGAL INVESTMENT
The Class A-1 Notes will be an "eligible security" within the meaning of
Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended.
79
<PAGE> 84
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 underwriter, 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 underwriter, 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
(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."
80
<PAGE> 85
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.
PLAN OF DISTRIBUTION
GENERAL
Under the terms of an underwriting agreement for the sale of the notes
offered by this prospectus, the trust depositor has agreed to sell to First
Union Securities, Inc., 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 $ 96,381,428 0.135%
A-2 $ 48,507,758 0.225%
A-3 $112,075,114 0.300%
A-4 $ 44,227,662 0.400%
B $ 9,511,325 0.500%
C $ 4,755,663 0.750%
------------
$315,458,950
============
</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 0.081 %
A-2 0.135 %
A-3 0.180 %
A-4 0.240 %
B 0.300 %
C 0.450 %
</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 0.0405 %
A-2 0.0675 %
A-3 0.0900 %
A-4 0.1200 %
B 0.1500 %
C 0.2250 %
</TABLE>
The expenses of the offering of the notes, exclusive of underwriting
discounts and commissions, are estimated to be approximately $696,284.
81
<PAGE> 86
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 underwriter 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 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, Inc. 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, INC. RATINGS GROUP FITCH, 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
82
<PAGE> 87
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.
LEGAL MATTERS
Sullivan & Cromwell, New York, New York, will provide a legal opinion
relating to the notes in their capacity as special counsel to the trust, the
trust depositor, the originator, the servicer and the administrator. Riker,
Danzig, Scherer, Hyland and Perretti, Morristown, New Jersey, will provide a
legal opinion relating to New Jersey tax matters in their capacity as special
New Jersey tax counsel to the trust. Other legal matters for the underwriter
will be passed upon by Moore & Van Allen, PLLC, Charlotte, North Carolina.
EXPERTS
The balance sheet of ORIX Credit Alliance Receivables Trust 2000-B as of
August 17, 2000 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 F-1 and are included in this
prospectus in reliance upon the authority of Arthur Andersen LLP as experts in
giving said report.
83
<PAGE> 88
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Principal........................................ 49
Class A Percentage.......................................... 49
Class A Principal Payment Amount............................ 50
Class A Target Investor Principal Amount.................... 50
Class B Floor............................................... 50
Class B Percentage.......................................... 50
Class B Principal Payment Amount............................ 50
Class B Target Investor Principal Amount.................... 50
Class C Floor............................................... 50
Class C Percentage.......................................... 51
Class C Principal Payment Amount............................ 51
Class C Target Investor Principal Amount.................... 51
Cumulative Loss Amount...................................... 51
Excess Contract............................................. 69
Excluded Amounts............................................ 46
Monthly Principal Amount.................................... 51
Original Pool Balance....................................... 51
Overcollateralization Balance............................... 52
Pool Balance................................................ 52
Required Holders............................................ 56
Required Reserve Amount..................................... 52
</TABLE>
84
<PAGE> 89
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ORIX CREDIT ALLIANCE RECEIVABLES TRUST 2000-B:
We have audited the accompanying balance sheet of ORIX Credit Alliance
Receivables Trust 2000-B (a Delaware Trust) as of August 17, 2000. 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 auditing standards generally
accepted in the United States. 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 financial statement. 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 2000-B as of August 17, 2000, in conformity with accounting principles
generally accepted in the United States.
/S/ ARTHUR ANDERSEN LLP
New York, New York
August 18, 2000
F-1
<PAGE> 90
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 2000-B
BALANCE SHEET AS OF AUGUST 17, 2000
<TABLE>
<S> <C>
Assets -- Cash........................................ $ 0
===
Liabilities........................................... $ 0
Beneficial Equity..................................... 0
---
Total Liabilities and Equity................ $ 0
===
</TABLE>
NOTES TO THE BALANCE SHEET
ORIX Credit Alliance Receivables Trust 2000-B (the "Trust") is a limited
purpose business trust established under the laws of the State of Delaware and
was formed by ORIX Credit Alliance Receivables Corporation 2000-B (the "Trust
Depositor"), and The Bank of New York (Delaware) (the "Owner Trustee") pursuant
to the Trust Agreement dated as of August 17, 2000 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 August 17, 2000, 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> 91
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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.
$315,458,950
(APPROXIMATE)
ORIX CREDIT ALLIANCE RECEIVABLES TRUST 2000-B
$ 96,381,428 6.758180% CLASS A-1 RECEIVABLE-BACKED NOTES, SERIES 2000-B
$ 48,507,758 6.97% CLASS A-2 RECEIVABLE-BACKED NOTES, SERIES 2000-B
$112,075,114 7.05% CLASS A-3 RECEIVABLE-BACKED NOTES, SERIES 2000-B
$ 44,227,662 7.14% CLASS A-4 RECEIVABLE-BACKED NOTES, SERIES 2000-B
$ 9,511,325 7.31% CLASS B RECEIVABLE-BACKED NOTES, SERIES 2000-B
$ 4,755,663 7.63% CLASS C RECEIVABLE-BACKED NOTES, SERIES 2000-B
ORIX CREDIT ALLIANCE RECEIVABLES 2000-B CORPORATION,
AS TRUST DEPOSITOR
ORIX CREDIT ALLIANCE, INC.,
AS SERVICER
----------------
PROSPECTUS
----------------
FIRST UNION SECURITIES, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
